Tax Planning for 2017

Want to talk to a CPA about how to handle a big windfall in 2017?  Estimate what you’ll pay in taxes if you exercise those stock options? Do normal, intelligent tax planning?

Unhappily, 2017 is not a normal year.  Donald Trump and the Republican party campaigned on the promise to make major changes in the tax policy.

The victors in the election campaigned on the promise that they would cut the top tax rates.

They wanted to simplify the tax code, too. What “simply” means is not certain, but Mr. Trump’s proposal included the idea of limiting some long-cherished deductions.  Charitable deductions would be capped at $100,000 per person, for example.

Man stares into a crystal ball to see the futureUnfortunately for planning purposes, we do not know yet if cutting the tax rates and adoption of the other plans put forth by Mr. Trump will be done all in 2017. Moreover, the campaign promises of the Republicans in Congress differ from what Mr. Trump said he wanted to do.

Which changes will pass? When? What other ideas will be implemented?

Our crystal ball is cloudy!

Realistically, the answers to these questions will develop during 2017.

Unfortunately, actions that Congress takes in December will affect the financial actions you had to take in January.

What we — and all other tax professionals — can do now is:

  1. Advise you what the tax consequences of your actions would be if the 2016 laws remain in place.
  2. Advise you what the tax consequences of your actions will be as individual changes are made to the tax laws in 2017.
  3. Speculate along with you about what other tax law changes may be made and what the effects of those changes will be.

Speculating is not a comforting alternative to solid, professional planning.  But, it is all we all can do until the ultimate shape and scope of tax law changes is known for sure.

American Flag with What's Next

We suggest that if you can postpone making major financial decisions that might be impacted by new tax rules, do put off taking any action until Congress acts!  Unless you have need for the cash generated by the exercising of stock options, for example, consider delaying exercising the options for a while.

Most years we suggest that you contact us early in the year to talk about potential major financial decisions.

In 2017, we will still be happy to talk with you and give you general advice. As the year progresses, it’s likely that we will be able to give tax planning advice with increasing certainty.


How Your CPA Has Fun

Young  Business People
A Team Planning the Business’ Future

Too much of the time business owners and key employees are completely busy getting the day’s work done.  Filling orders, talking to customers, selling, ordering, and going to the bank can be all consuming.

In those situations, the business owners are working IN their business.  To be successful, they need to dedicate some time to work ON their business.

By working on their business, I mean that the owners and key personnel should reserve some hours to think strategically about what they want their company to look like in a year and in five years.  They should analyze what’s working in their business, what isn’t working, and what they know about their competition.

Geoffrey and I recently finished a strategic planning session with a business that included all of the key team members.  It was intense, illuminating, and very fun.

The chemistry in the client’s company was good.  That doesn’t mean that the business is perfect or that every employee loves every other employee. But, the key people were all dedicated to the business’ success. They had ideas.  They were invested.  The business is set to change for the better because of the time we spent together.

When we talk about “strategic planning” or “business development” too often we make the process sound like taking medicine.  It’s good for you, but not very pleasant.

But when they are conducted right, strategic planning sessions are meaningful, rewarding, and enjoyable.  Releasing the ideas that have been rattling around the back of your head feels good. Making decisions, creating action schedules, and sharing your vision with the people you work is real progress toward growing your business.

Geoffrey and I like conducting strategic planning sessions, too.  We get to learn about our clients, their motivations and personal goals.   Not that we don’t love spreadsheets and filling in tax forms, but helping people define their own version of financial success and helping make plans to attain it is simply better!

For more information on Sterck Kulik O’Neill’s Business Consulting and Strategic Plan Services, visit our website, or phone us at 415.433.4500.

San Francisco Business Tax Deadline is Just 10 Days Away

If you operate a business in San Francisco the deadline for filing and paying the second installment of your 2014 estimated Payroll and Gross Receipts tax is due on July 31, 2014.  You can file online with the City.

San Francisco Tax Collector's Logo

There are two components to the tax and estimated payment – a payroll tax expense and a gross receipts tax.

You are only required to make estimated tax payments if your taxable payroll is greater than $260,000 or your gross receipts are greater than $1,000,000.

You can use the safe-harbor payment by paying in 26% of your 2013 San Francisco payroll tax liability (there was no Gross Receipts Tax in 2013 so that portion is $0). However, keep in mind that if you use the safe-harbor calculations you may have an over or underpayment when the return is due in February 2015.

The final estimate is due on October 31st. The return and final payment for 2014 is due on the last day of February, 2015.

The process for Gross Receipts Tax is fairly complex and the San Francisco Tax Assessor’s office is overwhelmed with inquiries. If you need assistance Sterck Kulik O’Neill can help you work your way through the details.

Why People Like Visiting Accountants As Much As Seeing Their Dentist

Accounting Services chart
Are you getting what you want from your CPA?

As we started talking to a business owner about growing his business earlier this month, he was surprised that I was interested and skilled in helping him re-engineer his operations.  The conversation reminded me about the limited things most people think accountants do.

It’s not the clients’ fault!  Many accounting firms keep themselves busy filling out forms and producing standard financial reports. We do a lot of this compliance-type work, too.

But, when business owners see their CPA only for boring, or pain-producing, numbers sessions filled with technical financial terms and spreadsheets, they are not getting full value from their accountant. They certainty aren’t going to want to call the accountant for advice.

Accounting would be unrewarding for me if all we did was report on what had happened in a business’ or a person’s financial life. Focusing on the past and completing mandatory forms isn’t that interesting for me nor particularly valuable for a client.

I like using the numbers we discover as tools to help a business owner grow their company, become more profitable, or improve their quality of life.  The business’ numbers can be used to spotlight areas of opportunity or to warn about potential weaknesses before those dangers actually impact the bottom line.

I enjoy talking with clients about their personal passion which pushed them into starting their business.  As they tell their stories, we learn together what makes their business unique, what they do better than anyone else, and where they want to take their company.

As we focus on plans for strategic growth, talk about their unique selling proposition, and discuss marketing, pricing, and cash flow for expansion, I feel like our accounting services are truly helping the client’s business.  We’re moving from compliance, through data analysis, to actual knowledge, and wisdom.  We are working together to use information which the owner can rely on.  That’s fun!  And, valuable!

The accounting field has many practitioners who seemed to have picked the profession because they are more comfortable with numbers and rules than they are with people and personal initiative.  There’s nothing wrong with going into accounting because you’re better with spreadsheets than networking.  But, that’s not why Geoffrey Kulik, our team members, and I decided to provide independent accounting services.

My passion is helping small businesses and their owners define and achieve financial success.  It’s exciting and energizing work!

Notes to a Client Who Received an Audit Notice from the IRS

We’re talking to an increasing number of people who have received IRS audit notices.  Most have found us on the Internet after they’ve opened the mail from the IRS.

Here’s an example of what we told someone with a fairly complex return when he’d asked us to help.  We’re not panicked, but we know audits are serious business.  See what you think…

Dear xxxxx:

The notice that you received from the IRS is likely the most skimpy one I have ever seen.  It’s overly vague!  While it sounds like a good thing, it leaves far too much open than I like.  For this reason, if I had handled this case, I would have pushed back a bit so as to limit the scope of the audit so that the scope does not “creep” too far out of control.  Right now EVERYTHING is connected to the items on the IRS notice.   Who wants the IRS to look at everything?  Right?

Here is how I would proceed if we worked together:

  • We set an appointment to go over the return together
  • Please bring your 2009 return with you
  • Also, bring or send me the depreciation schedules to support the depreciation taken on the properties in your Schedule E’s.
  • I would prepare a Power of Attorney (POA) one for each you and your wife to sign.  The IRS just changed their procedures and even though you filed a joint return, they need a separate Power of Attorney forms signed by each of you.  I don’t get this logic but…… oh well!
  • After our meeting I would call the IRS auditor and provide him the POA and proceed to discuss your matters freely and specifically to narrow the scope of the audit as best I can.
  • At some point, I would have you complete an information questionnaire as the auditor will want background about what you do.  More on this as we work together.
  • I would provide you with an engagement letter and request a retainer of $4,000 and ask that this retainer be replenished once used.  During our phone call, I estimated that this matter would range from $5 – $10K and I still feel this way.  My some miracle it could be less than $5K  but at the same time, if the details are many, it could exceed $10K.  We would be in constant contact with one another so that there is no surprise as we work on the case.
  • I would call you after my discussion with the Revenue Agent and provide you with a specific list of details needed.
  • At the same time, I would introduce you to another team member in my office who would be in charge of organizing your material in a way that facilitates the work necessary to bring you matter to a close.
  • Once the material is captured, I will meet with the auditor and present the information.  If this can be done in one meeting we would be lucky.  It is likely to take two – maybe more but two could do it.

The secret to success is preparation, preparation, preparation.

You may elect o be present at the examination by the IRS agent, but I recommend against it.  While your information looks stellar, you could innocently say something that could set off fireworks. That would not be good.

Finally, there is a benefit in closing an audit with no changes.   If you are successful in achieving this, it is less likely that there will be future audits.

Why We Appreciate Client Referrals So Much

San Francisco accountant Charles SterckSterck Kulik O’Neill is very appreciative when its clients recommend the firm to their friends and co-workers.

We say, “Thank you!” for suggesting that your friends trust their accounting work to us!

Why do we like clients referrals so much?

  • Clients already know our firm’s strengths and focus.  When they match us up with someone they know, they’ve already decided that we might be a good fit for what their friends need.
  • Referred clients are more likely to be ready for accounting services.  They have had a chance to talk to our client about what services are available.  They’ve made a decision that what we do will help them achieve financial success.
  • Referred clients are more likely to be active in their community and have successful businesses.  Just the fact that they knew someone to ask for a recommendation shows that they are engaged and involved.  That social interaction is good for business, and bodes well for the potential client.
  • When clients refer people to us, we feel validated.  You don’t suggest that your friends use a bad service or product. So, when someone tells us that Sally Jones suggested that they call us, we are happy to know that Sally thinks highly of the work we do for her.  We like the external sign that we are doing a good job.

Although the push for individual income tax preparation has not even started for 2012, already people are calling into our office are asking if we’re “accepting” new clients.   We don’t often say, “Yes, please refer your friends to us.”  But,  if you know someone who needs business development, accounting, or tax help, please tell them about us.  We’re not just accepting new clients, we’re welcoming them!


New Year’s Special: Pay and Save!

San Francisco Charles Sterck on Lowering TaxesIf you owe your CPA, pay your account balance this week and save on your taxes!

Well, it’s not just your accountant’s bill.  For many businesses and individuals it makes sense to pay as many bills as you can before the new year.

Most small businesses are on a cash basis. That means that you have to pay an invoice in order to count it as an expense against the business’ income.  And, most small businesses use the calendar year to record income and expenses.

Usually it makes sense to pay as many bills as you can this year so that the net income you report to the government is as low as possible.  A lower income results in lower taxes.

The same rule is also usually true for individuals.  If you can, you should pay property taxes, January’s home mortgage, and accelerate other tax-deductible payments into 2011.  The more deductions you accumulate in 2011, the less you will owe in April, 2012.

On the other hand, if you expect for you or your business to earn a lot more in 2012 than you did in 2011, you might want to push your tax-deductible expenses into 2012.  (You still should pay your CPA now, of course.)

The rules are somewhat complex, and you should contact a tax professional to see what the best course of action is for you. Everyone, though, should look at their tax situation THIS WEEK.

You need to act before New Year’s if you want most of the available deductions. Most people have until April 17, 2012 to fund their 2011 IRA retirement contribution, but all other options run out at midnight December 31st.

So, sit down.  Go over your business and personal bills. Make a pile of those invoices that have tax consequences, and decide whether you want to pay them now or next year.  Make your electronic bill payment, charge your credit card, or write the check and mail it.  Today!

For information on last-minute planning for your specific situation, please phone Sterck Kulik O’Neill at 415.433.4500.

3 Things to Do By October 17th if You Haven’t Filed Your 2010 Taxes

Time’s up if you asked for an extension to file your taxes back in April.  If you weren’t ready to file April 18th (April 15th was a holiday in some areas, so the deadline shifted to Monday), then this coming Monday is your new deadline.

This time, though, there are no extensions. You MUST file your 2010 taxes by Monday or your return will be delinquent.

(You don’t want the IRS to consider you delinquent. When your tax filing status goes delinquent, the Feds will charge you penalties and interest, and payment deals you’ve made with them in the past may be thrown out. The IRS does not have a sense of humor about tax payers going delinquent.  They will suspect the worst of you, and they’ll act on their suspicions!)

Our firm is getting a flurry of last-minute calls from people panicked because they waited until now to file their return.  Some of the callers are still waiting for information from partnerships or other sources of income, but most of the folks just put filing taxes out of their mind.

If you haven’t filed your 2010 taxes yet, here are our suggestions on what to do to make the deadline:

  1. If you have a simple situation file online, maybe for free.  If your return is simple, there are commerical and government sites that will do your taxes for free.  See the Consumer Reports article from earlier this year… the links in it that I checked today are still working.
    Most people who have waited until now to file, have more income and some complex things going on so that free filing is not available to them. The commerical services that offer free services to low-income filers, also have paid programs for people with complex returns.
    Check out the commerical sites, and let them walk you through the return.
  2. If you have a more complex situation and need automated resources, find a DVD of commerical 2010 tax software, and prepare the taxes on your computer.We haven’t formally tested any of the major programs, but from what we’ve seen, they do an excellent job in getting the math right, and they also have interview-like Q&A’s that will suggest deductions and other tax-saving measure.
    The 2010 programs issued in the spring, still should be good.  Make sure that you check for update to download any fixes they’ve discovered over the months!
  3. If you want to meet with someone face-to-face to go over issues, call a Certified Public Accountant local to you.  At this time, most CPA’s are offering most callers appointments after October 17th.  Fortunately, you can book an appointment with a CPA for later in the month and still avoid being delinquent.
    To avoid going delinquent, submit the best Form 1040 that you can by Monday.  If you are missing hard data for a line, make your best estimate.  You may find places to comment that what you’ve written down is your best estimate.
    File your best tax estimate with the Federal and state authorities by October 17th.  Then when you meet with the CPA, you will have them refile your completed taxes as an amended return.  Even if you were significantly mistaken in your initial tax filing, you’ll be much better off than if you didn’t file at all.

Whatever you do between now an Monday night, don’t panic!

The IRS isn’t going to come for your retirement fund Tuesday morning because you failed to submit your return on Monday.  You won’t need to run to a defense attorney or to Canada.

But, still… don’t go delinquent.  You don’t have to!

We’ll Help You Achieve Financial Success!

San Francisco accounting firm logo

San Francisco Accountants Sterck Kulik O'Neill logoSterck Kulik O’Neill is jumping into the blogosphere to give our clients and community an additional way to receive support in their efforts to achieve financial success. And, we also want to have some fun!

Our San Francisco CPA website will remain more formal, structured, and encyclopedic in describing the professional accounting services available to businesses and individuals.

This blog will be a forum for our thoughts on the business development, accounting, tax, and financial worlds that we work in.  We’ll be less formal, and what we write will reflect the opinions of the individual authors and won’t be the official opinion of the firm.

Please comment in public or send email with your idea on what you like, don’t like, and what you think we should write about!