Wishing you a happy holiday season and a prosperous new year,
from our team to yours!
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Let's Be Frank: Year-End Bonus Time
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Frank J. Pedicini, CPA
Year-end is a time for Christmas parties, annual reviews and compensation adjustments, and in some cases, year-end bonuses. The year-end bonus check isn’t just for employees. Business owners can use this as part of their year-end tax planning. Paying taxes through withholding payments on a year-end bonus check is an effective way for a business owner to mitigate a situation whereby he/she has been late on estimates or possibly has not paid any estimated taxes during the year. Unlike quarterly estimated payments, tax withholding payments – no matter when made during the year – are treated as if they have been paid in evenly throughout the year. This is an effective way to avoid late payment, interest, and penalty assessments.
The year-end bonus check is also a great way to account for the personal usage of a company automobile by simply subjecting the amount deemed to represent your personal usage to income tax and including that amount on the bonus check at year end.
Don’t forget that contributions to a 401(k) plan can be up to 100% of compensation. 2017 limits are $18,000 for employee deferrals with a catch-up contribution of $6,000 for those over 50 years old. The maximum 401(k) deferral can be made as part of one year-end bonus check.
Check with your tax advisor to see if any of these options might be advantageous for you.
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Mike De Stefano, Principal
Here’s some useful, straight talk the MAD DOG way…
If you are applying for a mortgage, or know of anyone that is, it is obviously far more difficult and frustrating a process than it was several years ago. Generally, here are things you will need
: 30 days worth of pay stubs, 60 days worth of bank statements and 2 years worth of W-2’s and tax returns. You also may need to complete IRS Form 4506T – this form is used to verify that the tax returns you gave the potential lender were the same ones given to the IRS. For real. As, or if, the loan
process starts to drag out before being finalized, you may be asked for current check stubs. Borrowers need a solid credit history….for conventional financing you probably need a credit score of 680 or higher, depending on the down payment, and 640 or higher for government financing. Be ready to document a minimum of 2 years of job history. You also need a debt-to-income ratio of 45% or lower. The mortgage originators and bank loan officers end up getting crucified by potential borrowers because they are out in front of the borrower asking for all this stuff – usually because an underwriter in a back room somewhere is asking for this load of info/documentation. So….the best item needed in the process is
patience.
Let’s talk more about credit cards….here are some common myths and facts regarding credit card scores.
- MYTH: You have to stay in debt to have a good credit score. FACT: Your scores will be better if you pay off credit cards in full. The people with the best scores tend to be those who keep their card debt below 10%-15% of their available credit limits – or, even better, pay off their cards in full each month. Along these same lines, closing an unused credit card can actually hurt you. Say you have 3 cards. Each have a $6,000 limit. So, you have a total of $18,000 in available credit. On these cards you rack up a total of $2,700 in charges for the month. You pay the $2,700 off in full. You have used a total of 15% of your available credit…that is good. If you closed one of the cards, you have now charged 22.5% of your available credit…not as good.
- MYTH: It’s not important to order your credit report. FACT: Credit reports often contain errors, some of which compound over time. One in four consumers finds an error on their report significant enough to affect their scores. Count me in the “one” category.
- MYTH: If you co-sign a student or other loan, it doesn’t affect your credit. FACT: Payment information on co-signed loans can be reported for both borrowers, regardless of who pays. Remember, when you co-sign a loan, you’re not just vouching for the borrower. You’re agreeing to be responsible for the debt in the event the borrower can’t or won’t pay.
- MYTH: You can hide credit card debt by transferring balances to low-interest cards. FACT: Scorers and lenders look at your total debt, not the interest you pay on it.
Almost all
of the larger banks used to process the transaction amounts that were the largest first….then work their way down to the smallest….that came in overnight. That way, they could nail you for more overdraft checks/transactions and charge you more fees! After much consumer screaming, most banks switched to posting the day’s transactions chronologically, instead of from largest to smallest, causing fewer overdrafts. Make sure your bank follows this policy….just ask them.
In dog years, I have now passed over the 350-year-old marker! In human years, here are some useful Financial Milestones in your life:
- Age 55 – If you are 55 or older, and lose or leave your job, you can take a distribution from your 401(k) and pay only income taxes on the distribution – but avoid the 10% early withdrawal penalty. It’s called “separation from service”.
- Age 59 ½ - Whatever type of retirement account you have – IRA, 401(k), 403(b), SEP, or SIMPLE – you can begin making withdrawals penalty-free. You pay income tax on the earnings. For a Roth IRA, contributions and earnings can be withdrawn penalty-free and tax-free if you have had the account at least 5 years.
- Age 62 – Unless you are disabled, this is the earliest age you can start collecting Social Security benefits. They are at a reduced amount because you have not reached your full retirement age (between 66 and 67 depending on the year you were born).
- Age 65 – You are now eligible for Medicare.
- Age 66-67 – Full retirement age – can collect full Social Security monthly benefit. Basically, you need to decide at what age to start collecting SS benefits. You will have a good idea, based on your financial situation, when you get there.
- Age 70 ½ - You are now required to begin taking withdrawals from your retirement accounts, with 2 exceptions. If you are still working, you do not have to deduct from your 401(k). You are never required to take minimum distributions from a Roth IRA.
Going back to my cage…..don’t forget to give me some great holiday meal scraps from your table….bark at you soon.
Mike
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DMS Named to
Weatherhead 100 for Second Consecutive Year
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DMS Management Solutions is proud to be recognized once again by the Weatherhead School of Management at Case Western Reserve University as one of the region’s fastest-growing companies. For the second year in a row, DMS has been named a Weatherhead 100 “Upstart” winner.
DMS continues to grow because of the range of services we offer, our team of professionals who provide those services, and our loyal clients who refer us. We thank you for your support and partnership!
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Profit First Professional
Profit First is a book written by Mike Michalowicz which details a disciplined approach to cash management in your business.
Mike has begun the certification program to become a Certified Profit First Professional. This is a 6-9 month training and learning program for accountants who look to drive profitability for their clients. Currently there are less than 200 PFPs world-wide – and DMS is committed to being able to provide assistance to any of our clients that wish to implement the Profit First guidelines and program outlined in the book in their business.
Please reach out to Mike or your DMS Manager if you are interested in learning more. Stay tuned for Mike’s journey toward PFP status.
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Three Takeaways from QuickBooks Connect 2017
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Maria Angotti, QuickBooks Certified ProAdvisor, attended the 2017 QuickBooks Connect
conference in San Jose, California in mid-November.
QuickBooks Connect
is “a multi-day event that brings entrepreneurs, small businesses, accountants & developers together to grow, learn
& connect with each other.” Here are three of Maria’s biggest takeaways from the event.
1) QuickBooks Online is growing. Business owners are using iPads, mobile phones and computers to do invoicing, billing, run reports, or even pay employees online. For the first quarter ending 10/31, Intuit increased total QuickBooks Online subscribers 56 percent to 2.55 million subscribers.
2) Apps, apps, and more apps. From employee time tracking to CRM to sales automation, there’s an app for that – that integrates with QuickBooks. Some apps are QBO (QuickBooks Online) only, some integrate with the desktop version, some apps will work with both. Many give 30-day free trials. Check out the list at
https://appcenter.intuit.com/appcard/allapp
3) QuickBooks Connect is a must-attend event and I plan to return in 2018. From outstanding keynote speakers to informational breakout sessions to connection opportunities, the conference allows me to bring lots of valuable information back to DMS clients who use QuickBooks.
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QuickBooks Tips and Tricks: Advice from a ProAdvisor
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Maria Angotti, the Director of Operations
QuickBooks
is a tool widely used by many accountants, bookkeepers and CFOs. It allows businesses to stay organized by keeping everything in one place. From QuickBooks, clients are able to track transactions, develop invoices and run reports that provide valuable insights on the where a company’s finances stand. But are you using QuickBooks to the fullest?
What many users don’t realize is the full extent of QuickBooks capabilities. “With all of my clients, I encourage them to use the job costing functionality,” Maria said. Maria explains utilizing the items list allows her clients to accurately see the cost of jobs. The reporting capabilities are another valuable function.
“You can put notes in your reports and save them for later review. You can then email the reports with the notes. Also, with the time profitability report, clients can see how well their items are doing and track inventory, all in QuickBooks.”
While many of Maria’s clients use QuickBooks, most do not use the full functionality for payables and receivables. The software can also memorize reports and transactions by importing data from banks, eliminating the need to enter reoccurring transactions manually.
Other notable features in the new
QuickBooks Desktop 2017
include improved productivity and reporting. Users are now able to schedule and automatically send reports and also seamlessly find documents with autofill searches.
As a certified QuickBooks ProAdvisor,
Maria
is always looking for new ways to help her customers get the most out of QuickBooks and save them time. To become a ProAdvisor, one must pass the certification exam and pay a fee. The fee gets you the current version of the QuickBooks products. The more years that you pass the certification exam, the larger the discount you receive for Intuit’s products. The exam ensures the advisors fully understand the new updates and functionality of the software.
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A final word from Mike De Stefano, Principal
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In order to better serve our clients, we will be sending out some quick bullet-item type email correspondence intermittently, between issues of our DMS Digest newsletter. As we see information that is pertinent on subjects such as tax, payroll, legal issues or deadlines, we will shoot you a quick reminder. Information we think is useful will be sent your way.
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Happy Holidays from your team at DMS!
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