Top Tips to Prepare for Tax Season

Tax and Financial News for February 2017

Top Tips to Prepare for Tax Season

It’s here again, the most wonderful time of the year – tax season. Uncle Sam is the reason for the season, and the IRS is ready to give everyone a nice tax bill. Fortunately for you, we have the top tax tips, so you don’t end up with an excessive bill.

  1. Shield Your Personal Information – You can get an Identity Protection (IP) PIN from the IRS to help protect your identity. An IP PIN is a six-digit number that helps prevent fraudulent use of your Social Security number on federal income tax returns. The IP PIN itself changes every year, and you’ll receive notification in the mail of your new PIN every year.

    You can learn more about IP PINs here at the IRS’s website: https://www.irs.gov/individuals/get-an-identity-protection-pin

  2. Keep Your Check in Check – Are you getting a huge refund, or none at all? If you are at either extreme, then it’s high time you look at your withholdings and consider changes. You’ll need to get a new Form W-4 from your employer and complete it to make the changes. Remember that tax withholding is a lot like porridge – best served just right. Withhold too much, and you’re essentially giving the government an interest-free loan. Withhold too little, and you’ll end up not only owing money but potentially interest and perhaps even penalties.
  3. Maximize Retirement Plans – Are you offered a retirement plan where you work? If so, a smart tax step is to do whatever you can to maximum your contributions, especially if your employer matches your contribution. Not only are you giving up free money through the matched contributions, but you are missing out on the opportunity to build a tax-deferred nest egg.
  4. Are You a Globetrotter? – Do you have a foreign bank account anywhere outside the United States? Did you have more than $10,000 in that account – and by that, I mean ever at any point in time, not just at the end of the year?

    If you answered yes to both of these, then make sure you file what accountants colloquially refer to as an FBAR – or a foreign bank account reporting form. The new name for this form is FinCEN Report 114.

    It can get even more detailed from here. If you and your spouse held “specified foreign assets” of more than $100,000 on the last day of the tax year or more than $150,000 at any time during the year, then you’ll also need to file a Form 8937, Statement of Specified Foreign Financial Assets.

    There is a slew of other foreign account reporting requirements – for example, if you own an interest in a foreign business or are the beneficiary of a foreign trust. The penalties for noncompliance with foreign asset and account reporting can be high and repercussions severe.

  5. Clean Out the Closet – There’s a good chance you donated some old clothing, furniture or household items to charity. After all, noncash charitable donations are one of the most common deductions people take on Schedule A. Unfortunately, they are also one of the most abused – and the IRS knows it.

    Whether it’s because you moved or just wanted to declutter and simplify your life, the key is keeping good records. Deductions for donated items are limited to their fair market value and they must be in good condition; you don’t get a deduction for junk. The organization to which you donate should give you a receipt to prove your donation, but it also is a good idea to keep an itemized list of what you donated and even take pictures of the items, especially if the value is substantial.

Another tip: The IRS tends to scrutinize extra-large deductions. In other words, be careful when you claim a noncash charitable deduction that is a lot bigger than most people in similar situations. You can check out the IRS’s published statistics on Taxpayers with Noncash Charitable Contributions here: https://www.irs.gov/uac/soi-tax-stats-individual-statistical-tables-by-size-of-adjusted-gross-income

Conclusion

Keep these tips in mind to make tax season less taxing when you file. Remember, working with your accountant is the best way to minimize taxes and make sure you don’t pay a penny more than you should.

 

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General Business News for February 2017

Determining if an Advisory Board is Necessary (and How to Form One)

Whether it’s a newly formed company or an established one, getting an external perspective can be helpful to continued success, regardless of industry. What does an advisory board do and what are its primary attributes?

Advisory Board Purpose & Makeup

The primary purpose of an advisory board, which has no power to direct or authorize business decisions, is to guide a company’s executives and board of directors on a myriad of governmental, monetary and commerce topics.   

While each advisory board’s composition is unique to an entrepreneur’s needs, they often contain advisors with professional experience in employee management, sales and advertising, regulatory matters and taxation. In addition to these core members, advisory boards can include current and former business owners who are more seasoned in running a business. Members who are often from a completely different (and noncompetitive) industry offer a fresh perspective on bigger picture business decisions.

Defining the Advisory Board’s Priorities

Once members of an advisory board are selected and agree to their terms of service, understanding what the focus will be is the next step. As business challenges and direction can be one- or multidimensional, individual advisory board meetings might include specialized members related to a topic (legal and marketing or legal and accounting, etc.). If the focus is only on client feedback on the company’s product or service, obtaining insight from legal and accounting advisory board members may not be necessary.    

Setting Expectations

It’s a good idea to set expectations for all members of the advisory board. Apprising members of the business’ goals, along with no promises of being a part of management or having any level of legal responsibility is essential as members give external and non-binding guidance for the business’ actions.

Meeting Frequency

As advisory boards are not cast in one mold, the frequency and number of members attending generally varies. Formal advisory board meetings can occur on an annual, quarterly or monthly basis, oftentimes with a facilitator directly within or connected to the business under advisement. However, meetings also can be more informal, especially when it comes to issue-specific needs (marketing, regulatory, etc.), while the rest of the board is engaged less frequently.  

Payment Considerations

Depending on the initial setup, compensation varies with both tangible and intangible forms of compensation. Members benefit from an increased circle of business contacts.

When it comes to fees, members of the advisory board often are compensated similar to independent contractors. Members may be paid on a project or hourly fee basis. Advisors may agree to receive a percentage of equity in exchange for their informal advice. It’s common for advisors to receive payment in both forms. Payment also may vary based on the length of their commitment, which is typically a one-, two- or three-year term.

While there are many benefits to creating an advisory board, the true test for its effectiveness is how its focus and membership is tailored to the business’ near and long-term goals.

 

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What’s New in Technology for February 2017

Major Trends at CES

Industry gurus and eager consumers often face a tough task separating breakthrough trends from over-hyped gimmicks amidst the clamor and marketing frenzy that characterizes the annual Consumer Electronics Show (CES) in Las Vegas. Opinions vary concerning the products, but here are some of the categories that attracted significant interest at the show.

  • Virtual reality as a corporate tool. VR is not new, but after more than a few years large corporations like Boeing and Ford are beginning to recognize that virtual reality can deliver in the workplace as well as in the marketplace. Sales and marketing pros are increasingly excited about how VR can give potential customers a taste of new product lines. Experts also anticipate that companies will recognize the value of VR as a low-risk training tool to improve workplace health and safety. It’s been a long time coming, but new software upgrades and improved headset design have positioned VR to expand well beyond its gaming origins. Demos using VR in a business setting attracted major crowds at the show, with attendees eager to don headsets and try out industrial/business apps for themselves.
  • Artificial intelligence (AI) can now anticipate needs and voice recognition goes beyond mere dictation to allow users to access and link all the various applications – such as customer management and email – to service customers while on the move.  Experts believe we will see more anticipatory AI programs, such as automobile software that records driving routes and calendar information. They also can scan local traffic information to provide alternate route options to avoid traffic delays without the need for driver input.
  • Autonomous driving systems are designed to port airborne delivery drones and large delivery vehicles. It may take a few years for consumers to accept the idea, but transportation experts believe eventually we will see autonomous driving on major freight routes. In the meantime, expect to see more assisted-driving options in automobiles – programs that monitor for signs of driver inattention, issue suggestions for a rest break, and offer dashboard alerts for corrective action if the highway surface becomes slippery or hazardous. Think of these monitoring and driver-assistance programs as a precursor to self-driving vehicles by demonstrating how automation can support safer driving.
  • Inherent connectivity. Increasingly, consumers are becoming comfortable with the increased interconnectivity of the Internet.  No longer will we rely on our personal interaction with visible hardware to provide the technological support for our work and leisure time. As computers have shrunk in size, we have become used to the idea of computer capabilities being embedded into products ranging from phones to automobiles and appliances – capabilities that allow these products to communicate and respond without our prompting. We can expect to see this embedded computing power to improve efficiencies and make our work and home life smoother and more productive.