Newsletter – December 2016

Article Highlights:

  • Holiday Season Charity Gifts
  • Long-form Itemization Required
  • Documentation for Taxes
  • Monetary Donations
  • Property Donations
  • Charity Scams
  • Qualified Charities Only
  • Disaster Scams
  • ID Thieves

The holiday season is the favorite time of the year for charities to solicit donations. It is also the time of year when scammers show up in force, pretending to be legitimate charities in hopes of swindling you. It is also a festive and very busy time of the year, and you may inadvertently overlook the documentation needed to verify your generosity for tax purposes. Here are some tips for charitable giving.

Documentation – To claim a charitable deduction, you must itemize your deductions; if you don’t, there is no need to keep any records of your donations. There are two types of charitable gifts: monetary and property.

Monetary donations include those made by cash, check, credit card, or other means. This type of contribution is only deductible if the donor maintains a record of the contribution in the form of either a bank record (such as a cancelled check) or a written communication from the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution, and the amount of the contribution. In addition, if the contribution is $250 or more, the donor must also get an acknowledgment from the charity for each deductible donation. Keep in mind that dropping cash in a holiday donation kettle without any documentation is not deductible.

Non-cash holiday contributions to organizations such as Toys for Tots and to seasonal food drives by recognized charities are also deductible. The deductible amount is the fair market value (FMV) of the items at the time of the donation, and you must document your donation with a detailed list of what was given and the name of the charity receiving the gift. Where the FMV of your gifts is $250 or more, you must also obtain an acknowledgment from the charity for each deductible donation. When gifts of property are $500 or more, there are additional record keeping requirements, so please call for details if you plan to make gifts of this value.

Watch Out for Charity Scams – To avoid scammers getting your charitable donations, make sure you are contributing to a legitimate charity and not to a bunch of crooks who work overtime during the holidays to trick you out of money.

Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations.

When in doubt, you should take a few extra minutes to ensure your gifts are going to legitimate charities. IRS.gov has a search feature—Exempt Organizations Select Check—that allows you to find legitimate, qualified charities to which donations may be tax deductible.

Disaster Scams – In the wake of significant natural disasters, such as Hurricane Matthew, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists use a variety of tactics including contacting people by telephone or email to solicit money or financial information, and they may even set up phony websites that claim to solicit funds on behalf of disaster victims.

Watch Out for ID Thieves – Don’t give out personal financial information such as your Social Security number or passwords to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money. Using a credit card to make legitimate donations is quite common, but please be very careful when you are speaking with someone who called you; don’t give out your credit card number unless you are certain the caller represents a legal charity.

Don’t be a victim; make sure you are donating to recognized charities. Deductions to charities that are not legitimate are not tax deductible. If you have questions, please give this office a call.


De Minimis Expense Election Required Before Year End

Article Highlights:

  • Accounting Procedure
  • $2,500 De Minimis Expensing
  • Annual Election

Small businesses can adopt an accounting procedure that allows them to expense, rather than to capitalize, the purchase (cost) of tangible business property.  Generally, the maximum that can be expensed under this provision is whatever amount the business decides between $1 and $2,500 per item or per invoice. So if you have not adopted the accounting procedure, you have until December 31, 2016, to do so for 2017. (The rules require that the accounting procedure be in place as of the beginning of the business’s tax year.) In addition, and even if your business may have already adopted an accounting procedure, an annual election is required to be included with your 2017 tax return to apply the accounting procedure to 2017. This can be used for computers, printers, tools, etc., rather than the Sec 179 expense allowance, which recaptures as income if the item is disposed of early. 

If you need assistance developing a de minimis expense accounting procedure and making the election to apply that procedure for 2017, please give this office a call.

10 Insane (But True) Ways to Grow Small Business Profits 

When you were a kid, you imagined becoming an entrepreneur — a dream that turned into reality a few years ago when you started your first small business and began enjoying the freedom of being your own boss. But, since then, your profits haven’t grown at the rate you’d hoped they would. If you can relate to this scenario, you’re not alone. Thankfully, many proven methods exist to help small businesses increase revenues, cut costs and improve their bottom line. If you’re ready to take your company to a new level of success, consider implementing one or more of the following insane (but true) ways to grow small business profits.

Eliminate Low-Margin Clients, Products or Services

To boost your small business profits, ask yourself the following questions:

What clients, products or services generate the most money and offer the greatest growth potential right now?

What clients, products or services generate the least profit and provide the least growth potential currently?

After analyzing your findings, eliminate low-margin clients, products and services. With the saved time and money, focus on the higher-producing areas of your business. Purging clients, products or services from your company might be painful at first. However, this practice will likely slash stress and pay dividends in the long run.

Embrace Technology

Embrace technology, automate and go paperless. Besides helping the environment, you’ll probably save a ton of money. In addition to cutting costs on paper, you’ll also spend less money on printer maintenance and toner as well as file cabinets and binders.

Increase Conversion Rates Through A/B Testing

Regardless of what type of small business you have, turning more shoppers into buyers will improve your bottom line. To increase conversion rates, consider implementing A/B testing. Also referred to as split testing, A/B testing utilizes two distinct sales pages in order to ascertain which page converts more effectively. Depending on the nature of your business, converting might equate to a customer buying a product or a client purchasing a service.

Experiment With Pricing

Raising prices while adding value can perhaps be the simplest way to improve small business profits. However, you risk losing bargain-oriented customers. Fortunately, for many people, price isn’t the most important factor when purchasing products and services. Lowering prices with the express intent of selling more products or services can also be a winning strategy.

Increase Average Lifetime Value of Each Client

Repeat customers can help your small business survive during stagnant economic times. Besides searching for effective ways to attract new customers, focus on increasing the average lifetime value of each client. You can accomplish this important task by:

  • Offering loyal customers a product or service upgrade
  • Providing customers with something your competitors don’t offer them
  • Being more convenient than your competitors
  • Looking for ways to solve problems for your customers
  • Providing stellar customer service
  • Reduce Churn Rates

Churn refers to when a client ends his or her relationship with a business. A high churn rate will negatively impact your ability to grow your small business profits. To reduce churn rates:

  • Establish customer expectations and strive to meet or exceed them
  • Make your first impression a great one
  • Listen to your clientele
  • Closely monitor external environment changes
  • Speed Up Product or Service Delivery

Speeding up the delivery of your products and services is another ingenious way to improve profits. Fast deliveries make customers happy and encourage repeat business. Decreasing the amount of time projects sit in limbo will also save money.

Bundle Products or Services

Do you offer products or services that naturally fit together? Providing customers with product or service bundles is a great way to increase both your revenues and your bottom line. For example, an accounting firm might bundle bookkeeping, tax preparation and consulting services.

Expand to a New Geographic Market

If you’ve saturated your current geographic market, consider expanding to a new one. Obviously, the costs of such an undertaking must be analyzed. But the long-term benefits of tapping into new geographic markets might make the venture worthwhile.

Provide Maintenance Contracts

Do you want to generate a steady income stream for an extended period of time? Think about charging customers an ongoing fee in exchange for maintenance contracts. You can even offer discounts to customers who sign longer contractual agreements. When developing maintenance contacts, clearly list the products or services customers can expect to receive.

For some professionals, growing small business profits seems like an impossibility. Dealing with saturated markets and a sluggish economy can dampen the outlook of even an eternally optimistic business owner. If you’re struggling to improve the bottom line of your small business, consider adhering to one or more of these strategies.

December 2016 Individual Due Dates

December 1 – Time for Year-End Tax Planning

December is the month to take final actions that can affect your tax result for 2016. Taxpayers with substantial increases or decreases in income, changes in marital status or dependent status, and those who sold property during 2016 should call for a tax planning consultation appointment.

December 12 – Report Tips to Employer

If you are an employee who works for tips and received more than $20 in tips during November, you are required to report them to your employer on IRS Form 4070 no later than December 12. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

December 31 – Last Day to Make Mandatory IRA Withdrawals

Last day to withdraw funds from a Traditional IRA Account and avoid a penalty if you turned age 70½ before 2016. If the institution holding your IRA will not be open on December 31, you will need to arrange for withdrawal before that date.

December 31 – Last Day to Pay Deductible Expenses for 2016

Last day to pay deductible expenses for the 2016 return (doesn’t apply to IRA, SEP or Keogh contributions, all of which can be made after December 31, 2016). Taxpayers who are making state estimated payments may find it advantageous to prepay the January state estimated tax payment in December (Please call the office for more information).

December 31 –  Caution! Last Day of the Year

If the actions you wish to take cannot be completed on the 31st or a single day, you should consider taking action earlier than December 31st.

December 2016 Business Due Dates


December 1 – Employers

During December, ask employees whose withholding allowances will be different in 2017 to fill out a new Form W4 or Form W4(SP).  

December 15 – Social Security, Medicare and Withheld Income Tax

If the monthly deposit rule applies, deposit the tax for payments in November.

December 15 – Nonpayroll Withholding

If the monthly deposit rule applies, deposit the tax for payments in November.

December 15 – Corporations

The fourth installment of estimated tax for 2016 calendar year corporations is due.

December 31 – Last Day to Set Up a Keogh Account for 2016

If you are self-employed, December 31 is the last day to set up a Keogh Retirement Account if you plan to make a 2016 Contribution. If the institution where you plan to set up the account will not be open for business on the 31st, you will need to establish the plan before the 31st. Note: there are other options such as SEP plans that can be set up after the close of the year. Please call the office to discuss your options.

December 31 – Caution! Last Day of the Year

If the actions you wish to take cannot be completed on the 31st or a single day, you should consider taking action earlier than December 31st.

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