#WakeUpWednesday #TMG – Yearend Checklist and 2018 Planning with Managing Partner, Paul Talbert

As the New Year is nearly upon us and Talbert & Talbert clients are readying for yearend, Managing Partner Paul Talbert answered some questions offering his insight, advice and recommendations.

Q. Is there anything I or my company should be doing to better prepare for our yearend tax obligations before reviewing with Talbert & Talbert?

A. Once you have closed your books for the yearend, you should start by running a vendor report and identify all vendors that require a 1099. This should be an easy task provided that your Accounts Payable Manager has obtained a W-9 Form from all vendors that your business has paid out during the calendar year. If there are any missing W-9 Forms, you should request immediately, so that you are able to prepare your 1099-Misc and or 1099-Int before the due date of January 31st. In addition, if you are a C-Corp for tax purposes “file an 1120 Form” you should also prepare your 1099-DIV Form for all the dividends issued to your shareholders for the calendar year by January 31st. Upon completion of your 1099 Form filing, you should immediately start to prepare your 1096 Form filing to the IRS. This is a combined annual report of all the 1099 Forms of any one type that you have sent out to vendors and or shareholders that is due by February 28th.

If you have any questions please feel free to email us at [email protected]. In addition, below are a few web-links from the IRS with instructions of how to prepare for your 1099 and 1096 filings..

Q. What are you most looking forward to speaking with your clients about in 2018?

A. I am excited with the possibility of growth in the US economy for the coming 2018 year. There has been quite a bit of speculation coming out that with the possibility of a decrease in regulatory and tax burdens on US businesses, the US economy will grow faster than many would expect. With this in mind businesses and individuals can start to project additional funds that may become available for investments, which in turn could create additional growth and tax benefits.

See below a list of a few investments that could spur growth and tax benefits;

  • Capex “Capital Expenditures” (with the investment in certain types of Capex for your business, this could help your business run more efficiently and could allow for additional depreciation, “Sec. 179 and or Bonus Depreciation,” that can help reduce your annual income tax expenses).
  • Captive Insurance (with the investment in the creation and or the increase of funding set aside for the self-insurance of risk that your business takes on, this could result in additional revenue opportunities, cost saving and or tax saving benefits).
  • Expansion Opportunities (with the investment in opening additional offices and or business worksites, this could result in the creation of additional revenues from new customers, new partnerships, reduction of business costs and possible tax savings).

Please feel free to contact us at [email protected] for further information.

Q. What solutions or strategies exist in addition to the above that I can implement as employee incentives and personal wealth generation?

A. There are several solutions available through our network with the below strategies focused on the setting up of company sponsored retirement plans;

  • 401(k) – 2017 limit for employee contributions is $18,000 of deferred income, tax-free.  Catch-up contributions for qualified individuals (age 50 and up) can amount to an additional $6,000 for a total salary deferral of $24,000.  Employers may match, but not exceed a total participant contribution of $54,000.  In most cases, the fiscal yearend (December 31st) is the deadline to setup a new plan.
  • Profit Sharing – For tax deduction purposes, the company contribution cannot exceed 25% of the total compensation of all eligible employees. The maximum eligible compensation that can be considered for any single employee is $270,000 in 2017. However, the profit sharing plan is generally the most flexible qualified plan that is available. Company contributions to a profit sharing plan are usually made on a discretionary basis. Each year the employer decides the amount, if any, to be contributed to the plan. 
  • SEP IRA – 2017 limit for contributions is $54,000, tax-free and this plan is funded solely by the employer.  This is a great tool for a Self-employed individual or small business owner, including those with employees (sole proprietors and or partnerships), but employers must match their contributions across the board potentially making it quite expensive if you have employees.  The deadline to set this up is April 15th or later depending on any extensions you may have filed.
  • Simple IRA – similar to a 401k, a Simple IRA is a salary deferral plan, but with less administrative burden to the employer.  The 2017 limit for contributions is $12,500 of deferred income, tax free.  Catch-up contributions for qualified individuals (age 50 and up) can amount to an additional $3,000 for a total salary deferral of $15,500.  The deadline to setup a Simple IRA is October first of the year for which the plan is being established.  However, an exception is made for businesses established after October 1 in which case you are able to commence the plan as soon as administratively feasible.
  • Defined Benefits Plan – 2017 limit is $215,000 which is funded entirely by you as an employer. Instead of accumulating contributions and earnings in an individual account like defined contribution plans (profit sharing or 401(k)), a defined benefit plan promises your employee(s) a specific monthly benefit payable at the retirement age specified in the plan. Employers that want to contribute more than the annual defined contribution limit ($54,000 in 2017) may want to consider a defined benefit plan as contributions can be substantially higher, resulting in a faster accumulation of retirement funds.  This plan also offers flexibility in its structure allowing for you to choose how funds are allocated and distributed to employees. The plan must be set up by December 31st or the end of your fiscal year. 
  • Cash Balance Plan – 2017 limit is $215,000.  A cash balance plan is a type of defined benefit plan that resembles a defined contribution plan. For this reason, these plans are referred to as hybrid plans. A traditional defined benefit plan promises a fixed monthly benefit at retirement that is usually based upon a formula that takes into account the employee’s compensation and years of service. A cash balance plan looks like a defined contribution plan because the employee’s benefit is expressed as a hypothetical account balance instead of a monthly benefit. Each employee’s “account” receives an annual contribution credit, which is usually a percentage of compensation, and an interest credit based on a guaranteed fixed rate or some recognized index like the 30 year U.S. Treasury bond rate which could vary. The plan must be set up by December 31st or the end of your fiscal year. 

Please feel free to contact us at [email protected] for further information or details regarding the different investment vehicles.

As uniformly mentioned, please don’t hesitate to reach out with any questions you might have during this time.  With an extensive network and boots on the ground in three offices across the United States, the Talbert team is excited to help you reach your goals.  We hope you were able to find some of this information useful and look forward to continuing in educating our clients this New Year!

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