Seven Business New Year’s Resolutions

Vowing to improve in 2022 

 

New Year’s resolutions are not just for individuals. Now is a good time for small business owners to take stock of their situation and vow to “do better” during the upcoming year. What sort of resolutions should you be making? The list will vary among business owners, but here are seven common ideas to consider.

 

1. Review your business plan more often. Typically, a small business owner will create an annual business plan, stick it in a drawer somewhere and not refer to it until the next year. Do not fall into this habit. Review the plan periodically—at least once a quarter—and make adjustments to accommodate for changes in circumstances.

 

2. Delegate, delegate, delegate. Are you often guilty of thinking you are the only one who can do a certain job? You could be stretching yourself too thin and the business, as well as your physical and mental well-being, may suffer for it. Farm out some of the work that does not require your special talents.

 

3. Add a business skill. If you are operating a successful business, you have undoubtedly learned some valuable skills along the way. But do not stop now. Broaden your horizons by learning “something new” in 2022. This can be beneficial in a multitude of ways and provide a competitive edge.

 

4. Keep promoting your business. Perhaps you have found a business niche where you have a healthy share of the market. That does not mean you can rest on your laurels and start coasting. Continue to market your business with an eye toward improving the bottom line. If necessary, call in outside help to coordinate activities.

 

5. Join a business group. There is real value in meeting with others in your industry or business leaders from nearby communities. It can help establish new contacts, renew old ones and expand your goals. Whether you are looking to network or generate new concepts, or both, you should make an effort to become more involved in groups of this nature.

 

6. Donate time or money (or both). Worthy charitable organizations can benefit from your expertise and generosity. Figure out what matters most to you and act accordingly. If the organization you are helping out is local, as is often the case, you are also sowing seeds of goodwill for your business when you “give back.” At the very least, step up your monetary donations to those in need.

 

7. Set ambitious goals you can reach. Planning for your business requires a delicate balance. On one hand, you want to go above and beyond what you have achieved in the past. On the other, you should be realistic about what you can accomplish in 2022. If you “over-reach” you may just end up frustrated and dissatisfied.

 

Finally, this is not really about business, but do not be “all work and no play.” Set aside time to be with your family and engage in personal pursuits. If you are consumed by your business, you will not be able to enjoy the fruits of your labor. Make time on your 2022 calendar for YOU.

 

 

How to Bunch Charitable Donations

Tax-smart strategy at year-end

 

Should you add to your charitable donations before the end of the year? From a tax perspective, it generally depends on whether you expect to itemize deductions this year or if you will be claiming the standard deduction. All other things being equal, it makes sense to “bunch” donations in the tax year it does you the most tax good.

 

For instance, if you will definitely be itemizing deductions in 2021, go right ahead and make extra donations in December. Conversely, if you are absolutely certain you will not be itemizing this year, you might postpone large donations to 2022.

 

Details: Generally, you can deduct the full amount of monetary contributions made to qualified charitable organizations, up to a stated limit for the year based on adjusted gross income (AGI). Any excess may be carried over for up to five years.

 

Under prior law, the annual limit was 60% of AGI for monetary donations made from 2018 through 2025. But Congress increased this limit to 100% of AGI for 2020 and subsequently extended it through 2021. This gives charitable donors plenty of flexibility.

 

Deductions are not automatic. You must provide a bank record or written word communication from a qualified charitable organization, showing the following.

 

·         The amount of the contribution;

 

·         The date the contribution was made; and

 

·         The name of the charitable organization receiving the contribution.

 

As a result, you probably cannot deduct the few dollar bills you toss into a kettle in front of a store around the holidays. Conversely, large donations may be substantiated by bank or credit card statements. Furthermore, you must secure a written acknowledgment from the charity for monetary gifts of $250 or more.

 

Make sure you obtain the required acknowledgment by the earlier of the date you file your 2021 tax return or the return due date (plus any extensions).

 

Note: For donations of appreciated property, deductions are limited to a lower threshold of 30% of AGI.  However, if you donate property that would have produced a long-term capital gain had you sold it instead—in other words, you have owned it more than one year—you can write off the property’s fair market value on the donation date. Otherwise, the deduction is limited to your basis (i.e., your cost) in the property.

 

In addition, the property must be used to further the charity’s tax-exempt function. For instance, if you donate a sculpture to a museum, it must be displayed where the public can easily view it.

 

Final words: If you do not expect to itemize in 2021, you can still salvage a smaller tax write-off. Congress recently authorized a deduction for monetary gifts made by non-itemizers of up to $300 per filer in 2020. This tax break was extended through 2021. Plus, the maximum deduction for non-itemizers was doubled to $600 for joint filers. At the very least, consider donations before the clock strikes midnight on December 31.

 

 

Can You Afford to Retire Early?

Answer key financial questions

 

If you are like many hard-working Americans, you may have visions of an early retirement, especially if you have built up a tidy nest egg. Although there are usually hurdles to overcome, the dream may become a reality, depending on your answers to the following questions.

 

Q. Are you financially ready to retire?

 

A. Some people begin planning for retirement when they are young, intending to call it quits before they hit their mid-to-late fifties. In that case, early retirement may be just what you are looking for. But if you have been putting off retirement planning, you may not be financially prepared to stop working right now.

 

Q. Will the money last through a long retirement?

 

A. If you plan to retire at age 55, it’s very possible you may have to depend on a fixed income for the next 25-30 years or even more. Consequently, you will have to consider how much income you will need during that time period and where it’s going to come from. If you feel that you currently have enough money to live on, ask yourself how it will hold up over time.

 

With the help of an experienced advisor, you can develop an investment program that, at the very least, keeps pace with inflation.

 

On the other hand, if it seems likely that you may be forced to tap into your company retirement plan before age 59½, you probably should avoid early retirement, absent other unusual circumstances. In general, tax-deferred assets, such as 401(k) plans and other employer-sponsored retirement plans, should be allowed to grow without interruption for as long as possible. What’s more, “raiding” a plan before age 59½ could result in a 10% tax penalty for early withdrawals (unless a special exception applies).

 

Q. What about the future?

 

A. Take time to imagine the kind of lifestyle you will be living as an early retiree. Will the loss of a regular paycheck force you to cut back on certain activities you have enjoyed, such as elaborate vacations? Does it mean possibly having to relocate to an area where the cost of living is less expensive? Will retirement bring you relief or a one-way ticket to boredom? These issues deserve serious consideration when making plans for retirement.

 

Know that you will likely face some difficult decisions. For instance, if early retirement will force you to change to a less satisfying lifestyle than what you have now, you might choose to keep working for a few extra years, maybe on just a part-time basis.

 

Practical advice: Typically, it will help to talk about your retirement plans with someone whom you trust. Do not hesitate to seek guidance from your professional advisors. They can help you arrive at a logical decision.

 

 

Watch Out for Signs of Fraud

Seven “red flags” to heed

 

Workplace fraud remains a legitimate threat, especially with more employees returning to work at business premises. It has been estimated by the U.S. Department of Commerce that employee theft of cash, property, and merchandise cost businesses as much as $50 billion a year. No business, regardless of size or nature, is immune.

 

Practical advice: Do not sit around waiting for fraud to endanger your small business. By identifying the areas where fraud may occur and taking steps to thwart it, you may be able to avoid common pitfalls that plague other employers. Be on the lookout for these warning signs that should set off alarms.

 

1. No division of accounting duties: The person in your organization who authorizes actions like invoicing and payroll should not be the one responsible for completing those payments. Those duties should be segregated and assigned to different employees. Also, a third party should maintain custody of cash accounts. In all cases, only rely on employees you trust.

 

2. Inadequate recordkeeping: To expose fraud and, most important, to be able to prove it, you must keep detailed records. For example, if proper accounting procedures are not put in place to cover cash disbursements, it will be difficult to detect instances of abuse.   

 

3. Unusual cash transactions: Any significant differences between expectations involving cash and actual receipts should be studied carefully. Do not wait to investigate once a pattern seems to be emerging. Frequently, an employee will try to embezzle funds by writing checks to himself or herself and signing the employer’s name on the checks. 

 

4. Lack of physical safeguards: Start with simple precautions such as sticking ID tags on computers or attaching expensive equipment so it cannot be moved easily. Always secure safes and other valuable data and records. Lock office doors after hours and limit access to sensitive areas whenever possible.

 

5. Suspicious documents: Be wary of invoices, purchase orders, checks, expense reports, time cards, etc. that do not pass the “smell test.”  In some companies, the fraudsters may even arrange for fictional employees to be paid salaries. Make sure that payment procedures are carefully followed.

 

6. Unreasonably high costs: It is not unusual for rising prices to occur due to inflation or other factors, but any increases should stay in line with industry standards. A classic example of fraud involves a kickback from a vendor or supplier.

 

7. Phony travel reimbursements: This is another area that is often ripe for abuse. It is easy for an employee to falsify these records if no one is paying close attention. Make sure that receipts coincide with all aspects of travel expense reports.

 

Reminder: It usually takes more than one person to stop fraud in its tracks. Bring other supervisory personnel into the loop.  The entire management team must remain vigilant in these efforts. Above all, do not ignore the warning signs discussed above.

 

 

Tax Changes in Infrastructure Law

 

On November 15, the president signed into law a new infrastructure bill allocating $1.2 trillion in funds to rebuilding roads and bridges, improving internet access and other infrastructure projects. The law also includes these tax–related provisions:

 

·         Elimination of the Employee Retention Credit (ERC) for wages paid after September 30, 2021 (except for eligible start-up companies);

 

·         New reporting requirements for crypto currency transactions totaling more than $10,000, effective January 1 2023 for returns filed in 2024;

 

·         Extension of certain disaster relief deadlines;

 

·         Extension of various highway-related taxes;

 

·         Extension and modification of certain superfund excise taxes; and

 

·         Authorization for private activity bonds for qualified broadband projects and carbon dioxide capture facilities.  

 

We will continue to watch out for new developments.

 

Facts and Figures

Timely points of particular interest

 

Retirement Plan Limits—The IRS recently released inflation-indexed figures for qualified retirement plans, like 401(k) plans, for the 2022 tax year. The annual deferral limit for 401(k) plans is increasing to $20,500 (up from $19,500 in 2021), plus you can add $6,500 (the same as in 2021) if you are age 50 or older. But the limit for IRA contributions for 2022 remains at $6,000 or $7,000 if you are age 50 or older

 

Gift Tax Exclusion—The IRS has announced a higher limit for the annual gift tax exclusion for 2022. This limit, which only increases in $1,000 increments, is rising from $15,000 recipient to $16,000 per recipient. If you “double up” your gifts, you can give a recipient $15,000 in late December and another $16,000 in early January with zero gift tax liability. And the maximum can be doubled again if your spouse joins in the gifts.

 

Happy Holidays—Our firm would like to wish you and your family a happy holiday season and a happy, healthy and prosperous New Year.