2014 Tax Changes: Part 2

2014 Tax Changes:  Part 2Continued from our April 21 post, we’re going to take a look at tax credits, exemptions and exclusions for 2014. Not every category has changed for 2014 from last year, but we’ve included those as well.

Earned Income Tax Credit:  The EITC for 2014 is $3,304 for married taxpayers filing jointly with one child; $5,460 for two children; $6,143 for three or more children; and $496 for couples without children.

Gift Tax Exclusion:  The annual exclusion for gifts is $14,000, the same as last year.

Flexible Spending Account Maximum:  The annual limit on employee contributions to an employer-sponsored FSA account is $2,500, the same as last year.

Individual Retirement Account Contributions Maximum:  The maximum for IRA contributions is $5,500 for contributors under the age of 50, $6,500 for those 50 and older. For more on IRA contributions and limits, see our April 8, 2014 blog post.

Federal Estate Tax Exemption:  The exclusion limit for estates in 2014 is $5,340,000, a $90,000 increase over the 2013 limit of $5,250,000.

For additional information, including 2014 tax tables, visit IRS Rev. Proc. 2013-35 online.

Have questions? Confused about how this impacts you? No problem. Synergetic Finance can help. Just give us a call at 206-386-5455 or email us, and our financial and tax planning experts will help you sort it out.

To your wealth,

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

Joe Maas

Sources:  Forbes and IRS

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2014 Tax Changes: Part 1

bigstock-financial-report-with-pen-27224012Now that you’ve filed your 2013 federal income taxes, or have at least requested an extension to file, let’s take a look at what’s different for 2014 from last year. Having a good understanding of the changes will help you plan for 2014.

Tax Rates:  Tax rates for 2014 have changed. View the updated tax rate in this Forbes article.

Standard Deductions:  Standard deductions increase to $6,200 for single taxpayers, $12,400 for married taxpayers filing joint returns and $9,100 for heads of household. In 2013, standard deductions were $6,100, $12,200 and $8,950, respectively.

Personal Exemptions:  For 2014, the personal exemption increases to $3,950, a $50 increase from 2013. Phase-outs for personal exemptions begins with an adjusted gross income, or AGI, of $254,200 for single taxpayers and $305,050 for married taxpayers filing joint returns. The exemption phases out completely at an AGI of $376,700 for single taxpayers and $427,550 for married taxpayers filing joint returns.

Alternative Minimum Tax Exemption:  The AMT exemption for 2014 is $52,800 (vs. $51,900 in 2013) for single taxpayers and $82,100 (vs. $80,800 in 2013) for married couples filing joint returns.

In our next post, we’ll look at some of the other 2014 tax credits, exemptions and exclusions. In the meantime, if you have questions about any of this information or want to discuss tax planning for 2014, please give us a call at 206-386-5455 or email us. One of our tax planning experts would be happy to help.

To your wealth,

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

Joe Maas

Sources:  Forbes and IRS

 

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What is the Business Exit Planning Process?

Exit Insight: Getting to "Sold!" by author Joseph M. MaasThe business exit planning process is the process of preparing a business for transition from the current owner to the next owner.

While this sometimes means the sale of the business to a third party with the intention of acquiring the cash value of the business the owner has created by building and growing the business, exit planning is not just about getting a business ready for sale a few months before the owner wants to retire. Rather, when done properly, the business owner is engaged with a carefully constructed multidisciplinary management plan that provides accountability through a clear, reasoned, and systematic structure for achieving financial goals.

The exit planning process requires the owner or owners to identify their long-term financial goals so the eventual sale of the business can meet those monetary goals. This means the current value of the business must be calculated so a business growth plan can be created that builds business value in accordance with a realistic timeline. The next step is following the plan so the business value is increased, usually by increasing economic benefits and reducing the many varieties of risk. Ultimately, the owner will leave the business, so a plan for transition must be in place to assure the safe and efficient progression.

Excerpt from pp. 3-4 of Exit Insight: Getting to “Sold!” by Joseph M. Maas, now available at Amazon

Copyright 2014 © Joseph M. Maas

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Book Launch: Exit Insight: Getting to “Sold!”

Exit Insight:  Getting to Sold by Joe MaasEvery day we see business owners who want to retire, sell their business or leave it to their kids, but they are usually not ready. They don’t know what their business is truly worth or how to smoothly transition out of the business.

In my new book Exit Insight: Getting to “Sold!”, published by Merrell Publishing Company, I offer a thorough case study and explain the principles behind it including business valuation, personal financial analysis and exit planning.

To use the book effectively, I recommend that you read the case study first. Then read about the principles that are applicable to your situation. For example, let’s say you want to focus on doing a thorough personal financial analysis. After you reading the Kendalls’ case study, flip to Step 2 which begins on 146. It covers goal setting, taxable and non-tax estate planning, insurance planning, tax planning, investment planning and real estate planning.

I’ll post insights from the book on our blogs periodically, but if you are ready to learn more about exit planning now, you can buy our book on Amazon here.

And as always, I welcome your feedback and questions. Call me at 206-386-5455 or email me. I’d love to help you on your path to getting to “sold!”

To your wealth,

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance
Author of Exit Insight: Getting to “Sold!”

Joe Maas

 

Posted in Business Owner, Business Valuation & Consulting, Estate Planning, Exit Planning, Real Estate Investment, Retirement Planning, Selling Your Business, Tax Planning | Tagged , , , , , , , , , , , , | Leave a comment

IRAs: 4 Early Withdrawal Rules

Retirement accounts, including traditional IRAs and Roth IRAs, are designed to help individuals save for retirement. In reality, however, sometimes people withdraw the money for other reasons. Here are some early withdrawal rules to keep in mind:

  1. If you take an early withdrawal from a traditional IRA with pre-tax dollars before you age 59 ½, you may be subject to a 10% early withdrawal penalty.
  2. Withdrawals are taxed as ordinary income and not as capital gains.
  3. If you roll over your account balance from one qualified retirement plan to another qualified retirement plan within 60 days, the transfer will not be subject to taxation or the early withdrawal penalty.
  4. There are some exceptions to the early withdrawal penalty. Contact us to see if this applies to your situation.

For additional information on IRS rules regarding early withdrawals, you can visit IRS publication 575 online or contact us. We can help you navigate the rules and determine how they apply to you.

To your wealth,

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

Joe Maas

 

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One week left to contribute to your IRA for 2013

bigstock-Taxes-390585One week from today is the big day – April 15 – or Tax Day, as some of us think of it. No one enjoys paying taxes, but there is good news here. You still have time to make a contribution to a traditional or Roth IRA if you are eligible.

To be eligible for a deduction, you must have been employed in 2013 and not covered by an employer-sponsored retirement plan. The limits are as follows:

Traditional IRA:

  • $5,500 limit, or
  • $6,500 if you were 50 or older by Dec. 31, 2013
  • Some restrictions apply based on your modified adjusted gross income and your marital status.

Roth IRA:

  • $5,500 limit, or
  • $6,500 if you were 50 or older by Dec. 31, 2013
  • Income limits are higher for Roth IRAs, but some restrictions apply.

If you have questions or want to set up an IRA to take advantage of the tax deductions, contact us today. We can tell you how much you are eligible to deduct.

To your wealth,

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

Joe Maas

 

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4 ways employers benefit from a 401(k) plan

401(k) plans offer numerous benefits to employers. Here are five ways that your company might benefit from starting a plan:

1)       If you are starting your company’s first 401(k) plan, you can receive up to $500/year tax credit for the first three years of the plan.

2)      Matching and profit sharing contributions are tax-deductible.

3)      Administrative fees for 401(k) plans are tax-deductible.

4)      Offering a 401(k) plan can help attract and retain valuable employees.

Want to learn more? We can tell you how a 401(k) plan can help your company minimize its taxes now. Call Synergetic Finance at 206-386-5455 or email us today to schedule a complimentary consultation.

To your wealth,

Joe Maas

Joe Maas, CFA, AVA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

 

 

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What is an ESOP?

Six Steps to Successful Financial PlanningAn ESOP is an Employee Stock Ownership Plan, a type of employee benefit plan, where an employer sets up a trust and contributes new shares of stock or cash to buy existing shares. Shares in the trust are then allocated to individual employees. When an employee leaves the company, he receives the stock and the company must buy the stock back from the employee at fair market value. If the company is privately held, an outside independent valuation is done to determine an appropriate price for the shares.

An ESOP has three uses:  (1) to buy the shares of an owner who is leaving the company, (2) to borrow money at a lower “after tax” cost, or (3) to create an employee benefit. It is typically available to all full-time employees who are 21 and older. Allocations are made based on a specific formula and a vesting schedule applies. Employees must be 100% vested within three to six years of being added to the plan.

ESOPs offer employers several major tax benefits, including:

  1. Contributions of stock are tax-deductible.
  2. Cash contributions are tax-deductible.
  3. The ESOP can borrow money to buy existing shares, new shares or treasury shares. Contributions used to repay an ESOP loan are tax-deductible.
  4. Sellers in a C corporation can get a tax deferral.
  5. In S corps, the percent of ownership held by an ESOP is not subject to income tax at the federal level.
  6. Dividends are tax-deductible.
  7. Employees do not pay tax on the contributions to an ESOP, but they will pay tax on the distribution.

As with every employee benefit plan, there are rules, regulations and limitations. To determine if an ESOP is right for your company, call Synergetic Finance at 206-386-5455 or email us today.

To your wealth,

Joe Maas

Joe Maas, CFA, AVA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance

Source:  The National Center for Employee Ownership

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Are you ready to sell? Part 3 of 3

(continued from March 9, 2014)

The Mindset

While the stars may align in terms of valuation and economy, it is important to not ignore the practical aspects of completing a transaction. Having the right mindset and being emotionally ready to sell require being in the right place so that the transition can occur. The soft characteristics are equally as important as the hard technical aspects, if not more so. These must come together to make the deal go through.

You may be needed to help transition the company to new owners, and the transaction may take longer than expected. And, if the transaction leads to retirement, how do you plan to spend your newfound time?  It may be hard to leave the company that you have spent so long building. Being truly ready requires preparing yourself, preparing your employees and creating the right exit at the right time for a smooth transition benefitting both the buyer and seller. These aspects are often overlooked, and expertise in this process is often why we are hired. The technicalities of a transaction are only part of the whole selling process.

Having a successful sale is not difficult if you are doing things right to complete the sale in an orderly fashion. It is important to value correctly, pay attention to the economy, and watch out for the subjective characteristics to help the deal go through. At the end of the day, a sale is about finding a buyer who matches what you are selling!

If you would like to further explore how a business valuation can help you or prepare for an M&A transaction, please call Synergetic Finance at 206-386-5455 or email us today.

To your success,

Mark Girourd answers: does my business need a valuation or an assessment?

Mark Girouard, MBA, AVA, CMA&A
Synergetic Finance

 

 

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Are you ready to sell? Part 2 of 3

(continued from March 3, 2014 blog post)

The Economy

While doing a formal business valuation report, one must analyze the local and national economy at the time of valuation. However, to apply this to a potential sale, it is important to go a step further and plan on how the economy fits in to a specific sales process or company life cycle. Selling a company in a good economic environment often results in a better valued transaction, all other things being equal.

Industries vary and grow differently depending on the state of the economy. To orchestrate the most successful transaction for your company, it is important to be patient for the times that allow for better selling environments.

We are often called upon to help our clients with strategic plans for the company to help them operate more efficiently in different economic environments. This results in illustrating lower risk to potential buyers due to the company’s ability to weather potential economic storms.

Consequently, we are also able to help plan a sale for a better economic time. The economy is always changing and it is important to make time your ally and not your enemy!

In our next post, we’ll talk about the mindset you need to have when preparing your company for sale.

To your success,

Mark Girourd answers: does my business need a valuation or an assessment?

Mark Girouard, MBA, AVA, CMA&A
Synergetic Finance

 

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