Proactive Tax Strategies – Business

Presented by Marc Aarons 

We made it through another tax season, but that doesn’t mean our work is done! In fact, now is the perfect time for businesses to consider the practices that increase tax efficiency and augment readiness for any scrutiny, such as audits. 

Here are some key ways to increase tax efficiency: 

1. Receipt Management – Keeping track of receipts is vital for substantiating expenses for claiming deductions. Utilize digital tools to scan and store receipts. This not only reduces physical clutter but also makes it easier to retrieve specific documents when needed.
2. Deductible Expenses – Understand what expenses are deductible, and make sure that you are tracking throughout the year to minimize scrambling at year-end.
3. Mileage Tracking –  For business use of a vehicle, keep a detailed log of miles driven for business purposes, including dates, destinations, and purposes of the trips.
4. Meals and Entertainment – Business meals may be deductible under certain conditions, primarily if they are ordinary, necessary, and directly related to your business. Note that entertainment expenses are no longer deductible.
5. Home Office Deductions – If you use part of your home regularly and exclusively for business, you may be eligible for a home office deduction. Keep records of expenses related to this portion of your home.
6. Proactive Tax Planning – If applicable, ensure you’re making estimated tax payments throughout the year to avoid penalties. Additionally, remember that contributions to employee retirement plans can be a significant deduction. Evaluate your contributions to ensure they align with your financial goals and tax strategies.

Here are the types of documents you will need access to in the event of an audit:

• Bank Statements and Invoices – Keep all bank statements and match them with invoices and receipts. This helps verify the transactions recorded in your books.
• Employment Records – Maintain detailed records of employment taxes and filings. 
• Financial Statements – Regularly review and reconcile your financial statements, including profit-and-loss statements and balance sheets.

How We Can Help

Our firm is dedicated to supporting your business’s financial health year-round, not just during tax season. Whether it’s strategizing for tax reductions or preparing for potential audits, we’re here to provide advice tailored to the unique needs of your business.

Marc Aarons may be reached at 714-887-8000 or Email Marc

Money Managers inc. Website

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

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If you want a tax break and want to help a nonprofit, this may be a good move.

Provided by Marc Aarons at Money Managers, Inc.

Have you ever wanted to make a major charitable gift? Would you like a significant federal tax break in acknowledgment of that gift? If so, an IRA charitable rollover might be a good option.

If you are age 70½ or older and have one or more traditional IRAs, you may want to explore the potential of this tax provision. In the language of federal tax law, it is called a Qualified Charitable Distribution (QCD) – a direct transfer of up to $100,000 in IRA assets to a qualified charity.¹

An IRA charitable rollover may help you lower your adjusted gross income (AGI). That may be a goal in your tax strategy, especially if your AGI is large enough to position you for increased Medicare premiums, greater taxation of your Social Security benefits, or exposure to the 3.8% investment income tax and the Medicare surtax.

Up to $100,000 may be excluded from your gross income during the year in which you make the gift. The gifted amount also counts toward your Required Minimum Distribution (RMD).^1,2

By the way, this $100,000 annual QCD limit is per individual taxpayer. If you are married, you and your spouse may gift up to $200,000 in a year through IRA charitable rollovers. Imagine lowering your household’s AGI by as much as $200,000 in a tax year.²

The Internal Revenue Service will not let you claim the amount of a QCD as a deduction on Schedule A. (That would amount to a double tax break.)¹

You need not be rich to do this. When many people first learn about the IRA charitable rollover, they think it is only for multimillionaires. That is a misconception. Even if you do not think of yourself as wealthy, a QCD could prove a significant element in your tax strategy.

How does it work? Logistically speaking, an IRA charitable rollover has to unfold in a certain way. The custodian or trustee overseeing your IRA must either make the gift to the charity for you or give you a check made payable to the charity for the amount of the gift.²

Do not simply take a distribution from your IRA and then write a check to the charity. That does not qualify as a QCD. If you make this mistake, the money you have taken out of your IRA will simply be included in your gross income for the year, and you may not even be able to claim a charitable contribution deduction for your efforts.^2,3

An IRA owner must be age 70½ or older to do this; the gifted assets must come from an IRA, or multiple IRAs, and are subject to RMD rules. (SEPs and SIMPLE IRAs are ineligible if an employer contribution has been made for the particular year.)^1,2

The charity or nonprofit involved must pass muster with the I.R.S. It must be a public charity eligible for charitable contribution deductions; that is, it must qualify as 501(c)(3) eligible. It cannot be a donor-advised fund or a private foundation. The charity should provide you with a letter of acknowledgement of your gift, for federal tax purposes. If that letter is not quickly sent to you, be firm in requesting it. It should state that you have received no gift, reward, or benefit from the charity in exchange for your contribution.^2,3

If you pledge a donation to a qualified charity or nonprofit, an IRA charitable rollover can be used to satisfy your pledge.²

This tax break has been a boon to charities and IRA owners alike. Correctly performed, a charitable IRA rollover may help to lessen tax issues while benefiting qualified nonprofit organizations.

Marc Aarons may be reached at (714)887-8000 or Marc@OCMONEYMANAGERS.com

MMI Disclosure

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – investopedia.com/taxes/can-i-use-money-my-ira-donate-charity/ [11/21/18]

2 – forbes.com/sites/bobcarlson/2018/04/13/why-retirees-should-make-charitable-contributions-from-their-iras [4/13/18]

3 – forbes.com/sites/frankarmstrong/2018/10/19/tax-magic-for-seniors-the-qcd [10/19/18]

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