Tax and Financial News for November 2016

End of 2016 Means the End of Tax Breaks – Maybe

For a number of years, Congress created significant uncertainty by waiting until the eleventh hour to renew or extend numerous tax provisions. In response to the frustration expressed by both individual taxpayers and the business community, Congress passed the Protecting Americans from Tax Hikes (PATH) Act last year. PATH made a number of tax provisions permanent; however, more than a few were simply extended for another year – and now that year is almost up. Below are a number of provisions set to expire at the end of this year if Congress doesn’t take action.

Mortgage insurance premiums

Taxpayers can currently deduct mortgage interest subject to certain limits. Mortgage insurance premiums are deductible until the phase out for taxpayers with Adjusted Gross Income (AGI) of more than $100,000 ($50,000 if married filing separately) and becomes completely unavailable once a taxpayer’s AGI exceeds $109,000, ($54,500 if married filing separately).

Medical expense deduction

The threshold for medical expense deductions was increased from 7.5 percent up to 10 percent of AGI in 2010 as a way to help pay for the Affordable Care Act. Older taxpayers, those 65 or older, were allowed to still deduct medical expenses at the lower 7.5 percent of AGI but only through the end of 2016.

Currently, there is a bill in the House of Representatives that would permanently roll back the increased thresholds for all taxpayers, including preventing those 65 or older from facing expiration of their exemption.

Tuition and fees deduction

The tuition and fees deduction gives taxpayers an alternative tax break to the commonly claimed American Opportunity Tax Credit or the Lifetime Learning Credit. Unlike these two credits, the tuition and fees deduction is not a credit, but a deduction used in calculating a taxpayer’s AGI. As a result, it is subject to different rules and restrictions than the related credits.

The tuition and fees deduction actually expired after 2014. The PATH act retroactively brought it back to life through 2015 and until the end of 2016; however, now that we are nearing 2017, its expiration looms large again.

While it is certainly possible that this is deduction will be extended before the year end, there are no guarantees. Taxpayers can safeguard against this potential expiration by paying tuition for the spring semester in December instead of waiting until the beginning of 2017.

Discharge of indebtedness on principal residence

Mortgage related debt forgiveness is at a low level compared to the years following the recent financial crisis. Regardless of how much of this type of activity there is, we need to remember that the IRS considers debt that is forgiven and no longer needs to be paid back as income. The qualified principal residence indebtedness exclusion allows up to $2 million of debt forgiven to be excluded from income.

You can secure this tax break if you are in negotiations for a workout with a lender on or before Dec. 31, 2016. The transaction also needs to be completed during 2017 in order to qualify.

Conclusion

As you can see, while the PATH Act secured a number of tax breaks and created increased certainty for taxpayers, there are still many items up in the air as we near year’s end. Be on the lookout for developments with these items in the news or take advantage of the strategies discussed above to secure the tax break you can. Always consult with a professional for the most up-to-date advice.

 

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General Business News for November 2016

Branding Considerations: What goes into the Naming Process?

One of the first steps in conceptualizing and building a business is branding. An important component in branding a business is creating a name that makes a great first and lasting impression. For many startups, especially in the Internet Age, it’s critical to get the name right the first time around, especially when domain names and social media platforms are fiercely competitive.

Important Considerations During Branding

When it comes to naming your business, there are different routes you can take to develop your brand. The first way a company can name itself is by using a descriptive name. As the designation implies, the business’ name gives readers a clear and succinct description of the company’s products or services. A second approach to naming a business organization is to use an acronym. Whether it’s GE for General Electric or IBM for International Business Machines, an acronym can become more well-known than a company’s full name. Benefits of this approach include easier ability for individuals to remember, pronounce and even trademark the name.

Another approach is to create a new word for a businesses’ name. Whether it’s a name for a search engine, such as MetaCrawler or Excite, or a social media platform such as Twitter or Facebook, new names don’t have any background. This can be advantageous because it won’t have any negative connotations; however, there will be no initial consumer or user association of a company’s products or services.

Companies that choose this route have great potential for the business’ name to be associated well with the performance of the company’s products or services. One example from the past is MetaCrawler. The name implied using an expansive search engine to gather information. If a search engine company similar to this one exceeded their expectations, users would be more likely to become loyal if the search engine performed well. Similarly, businesses may pay and add larger advertising campaigns on social media platforms if they provide clear instructions on best practices to target customers based on relevant demographics, geography and interests.    

Naming for the Digital Age

When it comes to reaching customers through the Internet and social media, there are some unique considerations. With the advent of search engine optimization, using a search term such as “Security” as part of a company name might provide more competition for a business to rank on the first or second page of search engine results. As more and more people use voice assistants versus typing search terms, voice processing technology can struggle with users who mispronounce a brand name borrowed from a foreign phrase or a last name that’s not pronounced as written.  

Additional Considerations

Don’t forget to consider the color of the text. Depending on a brand’s mission and intended audience, red is known to create an environment with more energy, while green text may create feelings of positivity and balance. Another suggestion to create instant brand name recognition includes a consistent style for the company’s logo, especially with fonts and colors. The greater the consistency with which a company presents itself, the faster and more easily recognizable a name and logo becomes.

Making a name for a business is an important part of the branding process. No matter the business environment, making a good first impression with a business’ name is the first step in maintaining a lasting impression with customers and clients.

 

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What’s New in Technology for November 2016

Technology: Handling Negative Online Reviews

If you have a business that deals with the public, it is almost inevitable that you’ll get a negative online review at some point. To a small business owner, a highly critical review can be alarming, especially if the business is local and has a relatively small base of potential clients. If you are providing a specialized service (e.g. high-end wedding planning, special event catering, etc.) personal referrals and word-of-mouth carry much more weight than they might for a business with high volume and a varied base of customers.

Your reputation is the most precious commodity you have. Like it or not, we live in a digital world, and it is a good idea to be prepared to handle online reviews. Here are some steps to take to safeguard your good name.

1. Time is of the essence. Know what is being said about your company on influential sites as soon as possible. If your business attracts the attention of reviewers on the bigger sites – Google, Yelp, Trip Advisor, etc. – consider investing in a service that can monitor multiple platforms in real time and will alert you when reviews appear online.
2. Stay focused and calm when you see a negative review. It is very difficult (read: almost impossible) to persuade a review site to remove a negative post unless it comes from a competitor and you are able to prove it. Most sites will not arbitrate disputes between companies and customers; they will leave reviews up whether they are good, bad or indifferent.
3. The sheer number of reviews and reviewers works in your favor. If you spot a bad review or two, encourage your repeat (happy) customers to write something with a different perspective. Along with your customer comment card and/or usual feedback mechanism, ask customers to review you on Yelp and/or other popular sites.
4. Reply to all comments – not just the negative ones. Remember, you are managing your online reputation, not putting out fires. An acknowledgement or thank you for a compliment is just as important to your overall image as a measured response to a customer complaint.
5. If you are replying to a bad review, make sure your response is polite, constructive and professional. If this is difficult because you are too angry, delegate the task to someone who can write well without succumbing to put-downs or sarcasm. Try to approach the criticism as an opportunity to identify a need for change. If you are genuine and helpful and offer a way to resolve problems, you take the sting out of the criticism and demonstrate to other customers that you are a caring, respectful business owner.
6. If you discover a genuine mistake and realize that the customer’s complaint is legitimate, own up to it as quickly as possible. Everyone – no matter how committed to customer service – drops the ball once in a while. The willingness to step up, apologize and offer to set things right publicly demonstrates that your company is committed to providing good service.

Make sure your employees know that you value an open and honest approach to customer communications. Don’t fear bad reviews or let a negative comment create a disproportionate amount of distress in your company. View criticism as a chance to fix problems in a timely manner and to demonstrate a true commitment to customer care.