October 30, 2018 § Leave a comment
The Tax Cuts and Jobs Act implemented significant changes to meals and entertainment and how they are taxed for organizations. Check out this video by Nick Finkenauer, CPA, as he explains the changes that were made and how they could impact you.
October 29, 2018 § Leave a comment
Well, it is that time again! Not just for Holiday parties and Christmas shopping, but more importantly, it’s time to do your tax planning! Why, you may ask? Well, here are the top five reasons I recommend planning to my clients.
- The Tax Cuts and Jobs Act (TCJA) – The TCJA was signed into law in December of 2017 and has many changes for both businesses and individuals. Reduced tax rates, changes in depreciation choices, the Qualified Business Income(QBI) deduction, standard versus itemized deduction changes for individuals – all parts of the TCJA. By planning now you can learn which of these changes will affect you and give you time to adjust what you have been doing to what makes the most sense so you can reduce your tax bill and your payments. Do you need to make a change in your salary or withholding? Should you buy that piece of equipment this year? Planning can help you make these decisions.
- Eliminate the surprises – Some surprises are great, but finding out that you owe hundreds or even thousands of dollars by April 15th would not be one of them for most of us. By knowing this in November or December, you can eliminate the shock and also make some adjustments which leads us to #3.
- Reduce or eliminate penalties – So if you owe money for your taxes, the next question I would ask is will you be subject to an underpayment penalty for not paying your taxes during 2018 or can you wait until April 15, 2019 to pay the balance owed? If you owe over $1,000, there are two exceptions that will keep you from owing a penalty. First, you have paid in 90% of the tax you owed for the current year OR you paid in 100% of your prior year’s tax liability (110% if your adjusted gross income was over $150,000 last year). If you meet either of these exceptions, you are not subject to an underpayment penalty and you can wait and pay in the amount owed by April 15, 2019. As you can see, the first exception requires that you are estimating your tax liability during the current year to be sure you are paying in the 90% so most people I know take advantage of the second exception by paying in what are called “safe harbor” estimates since they are based on the prior year liability which is a known amount and can be easily and exactly calculated. Using the safe harbor this year is a bit trickier due to the changes that are coming from the TCJA so planning can be helpful to see that you are where you need to be.
- Time Value of Money – If you have overpaid substantially, you may want to skip your 4th quarter estimate or you may want to adjust your withholding down so that you get back that extra tax in November and December instead of waiting until March or April. If you owe, it allows you to decide when to pay in the additional amount to keep penalties down, but hold on to your funds until needed.
- Be Prepared Earlier – Doing a projection now will get you situated so that when January comes and you get your tax documents in the mail, you will have already accumulated much of the other information that you need for your taxes. It will help you to have your accounting information for your business reconciled and recorded through much of the year. Also, by preparing a projection, you have time to talk to your CPA and ask questions about your taxes so that you have more information and knowledge on what is important for your tax situation and what you need to accumulate. You will be able to complete accumulating your tax info and be ready to get your taxes done first when your accountant is fresh and eager to get started.
Take a moment now and consider if any of these reasons make sense to you and if they do, give your CPA or tax accountant a call. It may be the best gift you have given yourself in a long time!
Kathi Koenig, Partner
October 25, 2018 § Leave a comment
This summer, we competed in the Des Moines Corporate Games, and for the second year in a row, we won the title of Division 4 Champions. Many associates participated in 25 events throughout the summer to gain this title. These events were not only a great chance to spend time with coworkers outside of work, but it also gave everyone an opportunity to participate in events they may never have participated in before. The Des Moines Corporate Games is just one example of how employers can help promote wellness in the workplace.
According to Mayo Clinic, there are several benefits to regular physical activity: improved moods, boosted energy, better sleep patterns, and it helps combat health conditions and diseases. Therefore, it is in the employer’s best interest to promote an active lifestyle and the employees’ best interest to engage in an active lifestyle. Besides participating in Des Moines Corporate Games, what are some other ways to promote wellness in the workplace?
- Offer a discount/reimburse to employees for a gym membership. This will encourage employees to join a gym and hopefully start living a more active life style.
- Get up and move throughout the day. Many people who work in an office are stuck sitting down for several hours a day. Simply getting up and stretching can help improve energy and attentiveness. Another option would be taking the stairs instead of the elevator or join a few employees for a quick walk over your lunch break.
- Inform employees of the importance of living an active lifestyle. Bringing in a guest speaker, perhaps a physical therapist, for a lunch and learn can be a great way to inform people of the benefits of exercise. Also, sending out a monthly newsletter with health benefits of exercises or an article with stretches, that can be done at your desk or in your office, can give employees ideas of ways they can be more active.
- Offer wellness screenings at your office. If the health screening is done at your office, it is very convenient and likely for employees to participate. This can help detect potential health concerns and allow the employees to take action and possibly change their lifestyle.
- Sign up for events together. Like I mentioned earlier, the Des Moines Corporate games is a great way to gather employees and participate in events together. Another option would be to sign up for a 5K walk/run together. As a firm, we participated in Iowa’s Healthiest State Annual walk, where people from all 99 counties in Iowa walked.
Katie Fevold, CPA, Senior Accountant
October 23, 2018 § Leave a comment
Wendy Moran, CPA, Assurance Partner continues her #RevRec series for the new Revenue Recognition Guidance that is required for all non-public companies for years beginning after December 15, 2018. This video explains step 5 of the new guidance – recognize revenue when or as performance obliations are satisfied.
October 19, 2018 § Leave a comment
I recently read a statistic that in a survey of 1,000 professionals 94% worked at least 50 hours a week, and approximately half worked more than 65 hours in their average work week. The article went on to describe the typical American professional as harried and burnt-out and while I have certainly seen (and at times even experienced) this overworked exhaustion, the article gave me pause. Have you ever noticed that the most successful people seem to be “doing it all”? How do they do it? As a professional, mom, wife, daughter, sister, friend, volunteer and marathon runner the demands on my time can feel endless and I’m sure most of you feel the same way. As I reflected this, I compiled a few lessons that have helped me feel more successful over years of running (literally and figuratively!).
- Preparation is key but be flexible. When I am training for a marathon I write down all of my training runs for each day, months before the race. The goal, of course, is to stick to the plan exactly as written but life happens – events come up, it rains on your long run day, that new client meeting didn’t go as well as you had anticipated – so, always have a backup schedule. If you are willing to be flexible, you will be more productive when things don’t go exactly as planned.
- Set realistic goals. It is okay to start small! Most people don’t become Olympic marathoners or even CEOs overnight. It takes time and hard work to build up to your end goal.
- Nothing lasts forever. Inevitably, in marathons and in life, there will be struggles but if you are prepared and keep working hard, you come out on the other side before you know it. The fatigue wears off, the economy turns around, you get that new account.
- Follow someone who is better than you. Running may be an individual sport but no one ever succeeds completely alone. Find a friend, mentor or peer who is faster, smarter, more tenacious than you and learn from them.
- Celebrate your successes. It is easy to want to move on to the next best thing after you’ve completed a goal but take some time to slow down and celebrate what you’ve just accomplished.
So, how do we succeed when it feels like we’re always on the run? My friends, it’s all about perspective.
Michelle Leonard, CPA, Manager
McGowen, Hurst, Clark & Smith, P.C.
October 16, 2018 § Leave a comment
Our #RevRec series with Wendy Moran, CPA, Assurance Partner, continues with an explanation of the fourth step of the new Revenue Recognition Guidance this is required for all non-public companies for years beginning after December 15, 2018. In this video, Wendy discusses step four – allocating the transaction price to the performance obligations.
October 9, 2018 § Leave a comment
It has become normal to live paycheck to paycheck with monthly debt payments consuming a greater share of your take-home pay. Debt payments have become a part of our lives whether it’s for a home, vehicle, student loans, or other debt. What would your life look like with no payments? Wouldn’t it be nice to invest in your future instead of paying for past purchases?
There are many ways you can improve your personal financial picture through tax and financial planning. However, I’d like to focus on one of the biggest purchases you’ll make in your lifetime. Your home and the mortgage that comes along with it.
You search Zillow, find your dream home, your offer is accepted, and a lender approves you for a mortgage. All you need now is to rent a moving truck and tune-in to HGTV for decorating ideas. For the rest of the article I’m going to assume you purchased a $375,000 home, put $75,000 down to avoid private mortgage insurance (smart), and took out a $300,000 mortgage at 4.75% with a 30-year term.
Things are going great in your new home. You’ve met the neighbors, unpacked most boxes, and just received the first mortgage statement in the mail. Your first payment due is $1,565 with roughly 75% of that going to the bank in the form of interest. After the first 12 payments, you’ve paid $14,150 in interest and reduced your loan by roughly $4,630. Over the course of the 30-year loan you’ll give the bank close to $263,400 in interest and pay $563,400 in total (187.8% of the original loan balance).
Let’s say you took out a 15-year mortgage instead with a 4.25% interest rate. Rates are lower due to the reduction in risk that the lender assumes with the shorter payback period. The mortgage payment is now $2,257 ($692 more), but you’ll save yourself $157,155 in interest and eliminate 15 years of payments.
What if you stayed with your 30-year mortgage but added $500 to your monthly principal payment (for a total payment of $2,065)? The additional $500 per month in principal payments would cut 12 years off the loan and reduce your interest paid by $116,000. You now own your home outright and no longer have a mortgage payment. The amount you were paying towards the mortgage is now available to invest, spend or give however you’d like.
What if you invested the same $2,065 each month over the remainder of the original 30-year note (12 years) in an investment earning a 7% annual return? At the end of those 12 years you’d have over $466,000 in that investment. That’s a $582,000 swing if you consider the $116,000 you would have paid in interest.
Now consider the tax deductibility of mortgage interest. The reality is most taxpayers will no longer benefit from tax deductibility of mortgage interest under the new Tax Cuts and Jobs Act law. The Tax Policy Center estimates that only 10.9% of taxpayers will be able to itemize deductions for 2018, down from 26.4% in 2017.
Some would argue that you should invest excess funds instead of paying extra on your mortgage since you can “earn a greater return”. Market returns are not guaranteed and investing involves risk. However, paying additional principal on your mortgage yields a guaranteed return in a shorter loan payback period, reduction of total interest paid, and a quicker path to owning your home outright.
Should you stop everything and pay off your home as quickly as possible? It depends. In our profession, there is no one-sized-fits-all answer. I’m simply trying to illustrate how you can improve your financial picture by being intentional and telling your money where to go instead of wondering where it went. You determine what your dreams and goals are, and we can help you develop a plan on how to get there.
Michael Jensen, CPA, CFP®, Manager