SOME QUICK AND EASY YEAR-END TAX STRATEGIES | Scolaro Fetter Grizanti & McGough, PC | Syracuse, NY
December 12, 2015
SOME QUICK AND EASY YEAR-END TAX STRATEGIES
By: Jeffrey M. Fetter
As difficult as it is to believe, we are coming up on another year end. Now is the time when we start thinking about taxes and wonder if there is anything that should be done before the end of the year to save on the amount due. In most cases, we think about those things, but may end up doing nothing because it may be too late to get it done; it takes too much time, too much paperwork, etc. Well, here are a few year-end items that don’t take a lot of time and can be easily accomplished:
- Make Additional HSA Contributions. If you are eligible for a Health Savings Account at any time during 2015, the tax law says you are treated as having been eligible for the entire year. What does this mean? It means that you can make an entire year’s deduction even though you may not have been participating for the entire year. If you are an individual participant, you can contribute up to $3,300 for the year and if a family participant, the contribution amount increases to $6,550. Because age has its benefits, if you are over 55, you get an additional contribution allowance of $1,000. And, best yet for those procrastinators, you can make the contribution any time before you file your 2015 income tax return.
- Make Annual Gifts for 2015. Anyone can make a gift to a person, or as many persons as they wish, of up to $14,000 without incurring a gift tax and without having to file a gift tax return (subject to a few limitations). A married couple can give a child $28,000 taking advantage of both parents’ gifting limits. With a gift, no one pays any taxes – gift or income taxes. Now, what if you make a gift in excess of $14,000 to an individual? Do you go to jail? Pay penalties? Neither. You can certainly make a gift of over $14,000 to anyone you wish, but now you must file a gift tax return and advise the IRS of your gift. No one pays taxes, but the IRS will take the amount of your gift, subtract the $14,000 that you could have gifted without a gift tax return, and the balance is then subtracted from your lifetime combined estate and gift tax exemptions – which this year is $5,430,000. For example, if you give your daughter $114,000 in 2015, the IRS will disregard the $14,000 and chip away at your lifetime exemption, leaving you with $5,330,000 in exemption for future gifting or to be used in the event of your death. With many taxpayers, there is little likelihood of having an estate in excess of the lifetime exemptions so gift away! But, if you are gifting by check, give it to the recipient and have him or her deposit it on or before December 31, 2015. It will raise fewer questions.
- Make Charitable Contributions or Pay Deductible Medical Bills. If you have deductible contributions or payments, make them prior to December 31st. Charitable contributions and medical expenses are deductible when paid or charged to your credit card accounts, not when you pay your bill. So, if you want to decrease your tax liability in 2015, but do not want to pay for it until 2016, you can use your credit cards as a tool for doing so. If you believe you will be in a higher bracket next year, you may want to consider waiting until 2016. But, in many cases, it is better to get it while you can.
- Withhold Sufficient Taxes. Watch out for penalties for failing to withhold sufficient taxes from your paycheck. It’s a good idea to do a trial tax return calculation to determine if you have withheld enough for purposes of paying your 2015 taxes for earned income (i.e., your paycheck).
- Take Required Minimum Distributions. If you are required to take required minimum distributions from your retirement plans or IRAs, make sure you take them. If you fail to take a required distribution, a penalty of up to 50% of the amount that should have been distributed can be assessed. If you turn 70 ½ in 2015, you can generally delay the first required withdrawal until 2016. The rule is the year after the year in which you turn 70 ½. But, be careful with that planning as well as it may require you to double up your withdrawal amount in 2016.
There are, of course, other tax-saving strategies that can be taken prior to the end of the year. If your trial tax return shows unexpected or unplanned tax liabilities, contact your accountant or tax preparer immediately and start out the New Year on a good note. Happy New Year!
By: Nicholas J. Graham, Esq. Limited Liability Companies ("LLC") have been authorized in New York since 1994. When the law was first enacted, an LLC could not have perpetual existence like corporations. This limitation was removed in 1997. If your LLC was established under the old New York State law that imposed a 30-year lifespan, it's crucial to be aware of the approaching expiration of your company's duration. Originally, LLCs in New York were required to specify a limited duration, commonly set at 30 years. Many of these companies are now reaching the end of this period and must take action to continue operating. Special attention should be given to LLC's formed between 1994 and 1997, as they were likely established with a 30-year lifespan. What Has Changed? The law in New York has evolved, and LLCs are no longer bound by the 30-year limit. Pursuant to NY LLC law §701(1), businesses now have the option to exist perpetually, providing greater flexibility and stability for long-term planning. However, this change is not automatic for existing LLCs that were originally set up with a 30-year term. What You Need to Do To ensure your LLC can continue its operations beyond the original 30-year term, you need to file an amended Articles of Organization with the New York Department of State. This amendment should update the duration of your LLC to perpetual, or to another term if desired. Steps to Amend Your Articles of Organization: Prepare the Amendment: Draft an amendment to your LLC's Articles of Organization. This document should clearly state the new duration of the LLC, typically set to "perpetual." File the Amendment: Submit the amended Articles of Organization to the New York Department of State. This can usually be done online or by mail. Ensure that you include the necessary filing fee. Update Internal Documents: Reflect the change in your LLC's operating agreement and any other internal documents to ensure consistency and compliance. Notify Members and Stakeholders: Inform all members and relevant stakeholders of the change to ensure everyone is aware of the updated status of the LLC. Why It Matters Failing to update your LLC’s duration could result in the automatic dissolution of the company once the original 30-year term expires. This could lead to significant disruptions in business operations and potential legal complications. By taking proactive steps to amend your Articles of Organization, you can ensure the continuity of your LLC and take advantage of the flexibility offered by the current laws. Need Assistance? The Scolaro Law Firm specializes in helping businesses navigate changes in regulatory requirements. If you need assistance with amending your Articles of Organization or have any questions regarding your LLC's status, please contact us. Our experienced team is here to provide the guidance and support you need to keep your business running smoothly. This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken.
By: Nicholas J. Graham, Esq. The SMB M&A series provides insights into buying and selling a small business. For business buyers looking to acquire a small business, securing the right financing is often a critical step. The U.S. Small Business Administration (SBA) offers two popular loan programs that can be invaluable in this process: the 7(a) loan and the 504 loan. These loans are available through local lenders and are partially guaranteed by the SBA, reducing the risk for lenders and making it easier for small businesses and entrepreneurs to obtain financing. Both programs provide favorable terms that can make acquiring a business more achievable. Here’s a closer look at how each can be used, with a particular focus on the flexibility of the 7(a) loan, as it is more commonly used for business acquisitions. The SBA 7(a) Loan Program The 7(a) loan program is the SBA’s most popular and flexible loan option. It is designed to help small businesses and entrepreneurs obtain financing when they might not be eligible for traditional financing options. Here are the key advantages and uses of the 7(a) loan for business acquisitions: 1. Broad Eligibility and Use of Funds: The 7(a) loan can be used for a variety of purposes, including purchasing a business which can include goodwill, buying out partners, acquiring real estate, and refinancing existing debt. This flexibility makes it an ideal choice for business acquisitions where the buyer may need to cover multiple types of expenses. 2. Favorable Terms and Conditions: 7(a) loans offer competitive interest rates, long repayment terms (up to 10 years for business acquisitions), and lower down payment requirements compared to conventional loans. These favorable terms can ease the financial burden on buyers and improve cash flow during the critical early stages of ownership. 3. Working Capital Inclusion: One significant advantage of the 7(a) loan is the ability to include working capital in the loan amount. This can provide new business owners with the necessary liquidity to manage day-to-day operations, especially important during the transition period post-acquisition. 4. Collateral Flexibility: While the SBA prefers loans to be fully collateralized, a 7(a) loan can still be approved even if sufficient collateral is not available. This can be a major benefit for buyers who have limited assets to pledge. The SBA 504 Loan Program The 504 loan program is another powerful financing tool, primarily focused on fixed assets such as real estate and equipment. It involves a partnership between the SBA, a Certified Development Company (“CDC”), and a private lender. Here’s how it works for business acquisitions: 1. Structured Financing: A 504 loan typically consists of three parts: a loan from a private sector lender covering 50% of the project cost, a loan from a CDC covering up to 40%, and a 10% down payment from the borrower. This structure can reduce the amount of equity the buyer needs to provide upfront. 2. Long-Term Fixed Rates: The 504 loan offers long-term fixed interest rates, which can provide stability and predictability for business owners. This is particularly beneficial when acquiring property as part of the business purchase. 3. Real Estate and Equipment Focus: While the 504 loan is less flexible than the 7(a) loan in terms of eligible uses, it is ideal for acquisitions that involve significant real estate or heavy equipment investments. The ability to finance these assets over a long term with a fixed rate can be a strategic advantage. Conclusion Navigating the complexities of financing a business acquisition can be challenging, but SBA loans offer valuable tools to help buyers achieve their goals. The 7(a) loan’s flexibility and broad eligibility make it a particularly attractive option, while the 504 loan’s fixed-rate, long-term structure provides stability for significant asset purchases. However, to truly capitalize on these advantages, it's essential to structure the transaction properly and adhere to all eligibility criteria and regulatory requirements. With careful planning and compliance, SBA loans can provide the financial support needed to successfully acquire and grow a business. If you’re considering buying a business and exploring SBA loan options, our experienced M&A team at Scolaro Fetter Grizanti & McGough, P.C. is here to help. Our team handles small business M&A transactions throughout New York State, Vermont, Pennsylvania and Florida. This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken.
