Wheeler Ugly Sweater and Cube Decorating Contest

Wheeler Accountants got into the holiday spirit this year! We had a great turn out for our annual Ugly Sweater contest and this year we also decorated our work areas. It was great seeing all of the holiday spirit at Wheeler. This made the judging decision difficult so this year we had a winner and a runner up. Congratulations to Staff Accountant, Yesica Morales on winning the best ugly sweater two years in a row. She also did a great job on her cube decorations. Congratulations to our runner up Firm Administrator, Linda Lloyd, aka Mrs. Claus.

Five Common Budgeting Errors & How to avoid them

When it comes to creating a budget, it’s essential to estimate your spending as realistically as possible. Here are five budget-related errors commonly made by small businesses and some tips for avoiding them.

  1.  Not Setting Goals. It’s almost impossible to set spending priorities without clear goals for the coming year. It’s important to identify, in detail, your business and financial goals and what you want or need to achieve in your business.
  2.  Underestimating Costs. Every business has ancillary or incidental costs that don’t always make it into the budget–for whatever reason. A good example of this is buying a new piece of equipment or software. While you probably accounted for the cost of the equipment in your budget, you might not have remembered to budget time and money needed to train staff or for equipment maintenance.
  3.  Forgetting about Tax Obligations. While your financial statements may seem adequate, don’t forget to set aside enough money for tax (e.g., sales and use tax, payroll tax) owed to state, local, and federal entities. Don’t make the mistake of thinking this is “money in the bank” and use it to pay for expenses you can’t really afford or worse, including it in next year’s budget and later finding out that you don’t have the cash to pay for your tax obligations.
  4.  Assuming Revenue Equals Positive Cash Flow. Revenue on the books doesn’t always equate to cash in hand. Just because you’ve closed the deal, it may be a long time before you are paid for your services and the money is in your bank account. Easier said than done, perhaps, but don’t spend money that you don’t have.
  5.  Failing to Adjust Your Budget. Don’t be afraid to update your forecasted expenditures whenever new circumstances affect your business. Several times a year you should set aside time to compare budget estimates against the amount you actually spent, and then adjust your budget accordingly.

Please call our office at 408-252-1800 if you need assistance setting up a budget to meet your business financial goals.

Flexible Spending Accounts (FSAs)

Flexible Spending Accounts or FSAs provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, now is when many employers are offering employees the option to participate during the 2018 plan year.

Interested employees who wish to contribute to an FSA during the new year must make this choice again for 2018, even if they contributed in 2017. Self-employed individuals are not eligible.

An employee who chooses to participate can contribute up to $2,650 during the 2018 plan year (up from $2,600 in 2017). Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee’s FSA.

Throughout the year, employees can then use funds to pay qualified medical expenses not covered by their health plan, including co-pays, deductibles and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids. Interested employees should check with their employer for details about eligible expenses and claim procedures.

Under the use or lose provision, participating employees must often incur eligible expenses by the end of the plan year, or forfeit any unspent amounts. But under a special rule, employers may, if they choose, offer participating employees more time through either the carryover option or the grace period option.

Under the carryover option, an employee can carry over up to $500 of unused funds to the following plan year–for example, an employee with $500 of unspent funds at the end of 2018 would still have those funds available to use in 2019. Under the grace period option, an employee has until 2 1/2 months after the end of the plan year to incur eligible expenses–for example, March 15, 2019, for a plan year ending on December 31, 2018. Employers can offer either option, but not both, or none at all.

Employers are not required to offer FSAs. Accordingly, interested employees should check with their employer to see if they offer an FSA. Please call if you have any questions about how FSA contributions affect your taxes.

Take Retirement Plan Distributions by December 31

Taxpayers born before July 1, 1947, generally must receive payments from their individual retirement arrangements (IRAs) and workplace retirement plans by December 31.

Known as required minimum distributions (RMDs), typically these distributions must be made by the end of the tax year, in this case, 2017. The required distribution rules apply to owners of traditional, Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs but not Roth IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2017 RMD, this amount is on the 2016 Form 5498 normally issued to the owner during January 2017.

A special rule allows first-year recipients of these payments, those who reached age 70 1/2 during 2017, to wait until as late as April 1, 2018, to receive their first RMDs. What this means that those born after June 30, 1946, and before July 1, 1947, are eligible. The advantage of this special rule is that although payments made to these taxpayers in early 2018 can be counted toward their 2017 RMD, they are taxable in 2018.Continue reading

Retirement Contributions Limits Announced for 2018

Cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for the tax year 2018 have been announced by the IRS. Here are the highlights:

In general, income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the saver’s credit all increased for 2018. In addition, the contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,000 to $18,500. However, contribution limits for SIMPLE retirement accounts for self-employed persons remains unchanged at $12,500.

Traditional IRAs

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions; however, if during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-out amounts of the deduction do not apply. Here are the phase-out ranges for 2018:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $63,000 to $73,000, up from $62,000 to $72,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $101,000 to $121,000, up from $99,000 to $119,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $189,000 and $199,000, up from $186,000 and $196,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

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Business Tax Provisions: the Year in Review

Whether you file as a corporation or sole proprietor here’s what business owners need to know about tax changes for 2017.

Standard Mileage Rates 
The standard mileage rates in 2017 are as follows: 53.5 cents per business mile driven, 17 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.

Health Care Tax Credit for Small Businesses 
Small business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $52,000 (adjusted annually for inflation). In 2017 this amount is $52,400.

In 2017 (as in 2016, 2015, and 2014), the tax credit is worth up to 50 percent of your contribution toward employees’ premium costs (up to 35 percent for tax-exempt employers). For tax years 2010 through 2013, the maximum credit was 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities.Continue reading

2017 Annual Volunteer Day

On December 5, 2017, Wheeler Accountants spent the day helping a local non-profit that makes a big impact on the community.  This is an annual event that is looked forward to across the office, and is coordinated by our in house Events Committee.

The year, Wheeler chose to volunteer at ConXion to Community, a wonderful organization that makes a big impact in our community.  The mission of ConXion is to create new opportunities through education, workforce development and social services to create a better community. They offer a wide variety of community assistance programs, including at risk youth and adult education. The Organization has a large building that needs maintenance. Learn more about ConXion by visiting their website (www.conxion.org/).

Per the Organization, “so much was accomplished during the volunteer day.”

The Wheeler team split up into four groups to tackle tasks that ConXion had assigned. One team cleaned out the side yard to help drain ground water surge and rain water. This helps prevent leaks through the floors of the building. A second team tackled the front yard, and helped make some safety improvements by clearing the fire hydrant of ivy! A third team worked in the main hall to put up a Christmas tree and other decorations for the upcoming toy drive. The fourth and final team – the painters- did a great job painting walls in the facility to help the Organization look much more professional, per Patrick at ConXion.

After Wheeler did their hard work, they enjoyed pizza and bowling.  Another Volunteer Day on the books, and already looking forward to next year!

In Lieu of Holiday Cards

In lieu of a holiday card to our clients and partners, the members of our firm donate to a charity of their choice, and Wheeler Accountants provide a matching contribution.  Some very worthy organizations that have received contributions this year are Humane Society of Silicon Valley, Second Harvest of Santa Cruz County, The Bridge School, and Supernova, to name a few.

Tax Reform

Now that it appears congress is on the cusp of (finally) formalizing a comprehensive tax reform package for 2018, we are getting some clarity on what many of the final provisions of the bill are looking like. Many taxpayers are expected to see a decrease in overall tax rates starting with the 2018 tax year. Additionally, some deductions are being greatly modified or eliminated which puts many of us in a position to make choices before the end of the year on how to best position ourselves to avoid losing deductions by making payments in the correct year. The interesting thing about this bill is that different taxpayers will be affected in wildly different ways. There will be winners and there will be losers. Each situation is unique. Though we are running out of time, we are assisting clients as best we can right now. Please do reach out to your Wheeler Accountants advisor for specific tax advice applicable to your situation.Continue reading