More Tax Considerations

Posted on December 28, 2012 by in Blog, Planning, Strategy, Taxes

Here are a few more things to keep in mind as 2013 approaches:

  1. For capital gain property, taxpayers should set up a bookkeeping system now so that in 2013 they can begin to track both amounts that can increase the property’s basis and investment expenses that can reduce net gains.
  2. Taxpayers may want to consider, if possible, selling capital gain property in 2012, before the Medicare surtax applies.  This approach may be valuable if the taxpayer is facing large capital gains, such as from the sale of a principal residence above the $250,000/$500,000 exclusion amounts.
  3. Net investment income for purposes of the 3.8 percent Medicare surtax does not include distributions from qualified plans or IRAs, but those taxable distributions nevertheless do count towards the income threshold amount ($250,000, $200,000, or $125,000).
  4. Accelerating service-related income into 2012 may serve the dual benefit of avoiding the additional Medicare tax and any increase in the income tax rates as the result of sunsetting Bush-era tax rates.  Consideration should be given to ensuring that annual bonuses are paid out in 2012, as well as to electing to recognize income on stock based contingent compensation.  The employee’s control of an enterprise requires that a bonus or other form of contingent compensation be included in his income in the year it is authorized unless special facts indicate that payment is not fully possible or authorized in that year.
  5. Planning for the additional Medicare tax is complicated by the fact that it is imposed on the combined wages of the employee and his/her spouse.  Married couples who have filed joint returns in past years may want to explore the benefits, if any, of filing separate returns for 2013 and subsequent tax years if their combined incomes make them liable for the additional Medicare tax.
  6. For calendar year 2012, the payroll tax holiday applied for qualified wages up to the Social Security wage base ($110,100).  Accelerating any bonuses and employee recognition payments into 2012 for employees who will be below the $110,100 ceiling at year-end 2012 will potentially allow them to pocket two-percent more.  Self-employed individuals in a similar position should try to accelerate self-employment income into 2012.

Post-Election Issues – Employment

Posted on December 27, 2012 by in Blog

If my clients are any indication, one of the front-of-mind issues they’re thinking about after the election is what to do with their employees?  Many business owners are tired of being treated like the fourth branch of government, expected to bear more and more of the costs of unfunded social policies prescribed by the federal government.  Some business owners want to front-run the looming tax hikes in January and downsize their workforce or liquidate their company altogether.  Many are concerned about the consequences of the Affordable Care Act (“Obamacare”) and what it will mean for their company.  The following are some thoughts on issues employers should keep in mind if they’re embarking on a down-sizing program.

1.  Affordable Care Act – Obamacare.  While it is an incredibly tangled mass of new regulation, the immediate question facing smaller companies is do they need to downsize.  Companies with 50 or more full-time employees must provide health insurance for all workers by 2014 or face potentially severe penalties.  Various employers are seeking work-arounds including moving employees from full-time status to part-time status (cutting their hours).  If the twitterverse is any indication, many companies have also begun the process of getting under 50 employees with layoffs and firings announced today.

2.  Mass Layoffs. Small companies are not the only ones embarking on a down-sizing program.  Boeing (among others) announced large layoffs and facility closings today.  Larger companies who are using mass layoffs to prepare for what they see as a coming recession need to be aware of federally-mandated notice requirements.  The Worker Adjustment and Retraining Notification Act (WARN) requires “most employers with 100 or more employees to provide notification 60 calendar days in advance of plant closings and mass layoffs.  Employee entitled to notice under WARN include managers and supervisors, as well as hourly and salaried workers. WARN requires that notice also be given to employees’ representatives, the local chief elected official, and the state dislocated worker unit.”

3.  Litigation Climate.  Regardless of your reasons for firings or layoffs,  be prepared for potential litigation and/or EEOC claims.  As Bloomberg Businessweek noted earlier this year, wage and hour and overtime claim lawsuits have risen to a twenty-year high.  Often these claims result from employees seeking counsel after being laid-off. What then should an employer do?

  • Don’t retaliate.  Openly clashing with employees over their politics will invite claims.
  • Don’t discriminate.  Both state and federal law shield protected classes.
  • Seek advice.  Utilize your professional advisors to prepare a thought-out plan rather than acting too quickly.

This is the first of a series of posts designed to begin to give business owners guidance in the post-election world.  If you or your company would like a free consultation on these or any issues (particularly the impact of Obamacare), please contact me at

Social Media & Privacy in the Workplace

Posted on by in Blog

A recent Court of Appeals decision adds further weight to the idea that social media usage by employees is subject to employer oversight.  In Roberts v. Careflite; Texas Court of Appeal 2d District, NO. 02-12-00105-cv (Oct. 4, 2012) the Fort Worth court took up the issue of EMS employees posting comments about patients on an employee’s Facebook “wall”.  Janis Roberts posted that she wanted to slap a patient who had needed restraints during transport.  The EMS company’s compliance officer was notified of the comments and informed Roberts that the posts might violate both state law (regarding the reputation of EMS) and the company’s policies.  Roberts responded in an insubordinate manner and was later terminated.  Roberts sued the company claiming an invasion of privacy and violations of the National Labor Relations Act.

1.  Privacy Rights.  The district court judge ruled that “the subject of Roberts’s Facebook posting was not within the zone of her seclusion, solitude, and private affairs; and that as a matter of law, CareFlite’s acts were not highly offensive to a reasonable person.”  The Court of Appeals agreed, noting that Roberts did not produce evidence supporting her privacy claims.

2.  NLRB. Roberts had additionally argued that the company had violated National Labor Review Board standards because her Facebook posting fell within an employee’s right to comment on workplace conditions or engage in concerted activity.  The Court of Appeals found that her actions were not protected.

Cases such as these are instructive to employers. 

  • Evaluate your policies.  Make sure your company has clear policies in place setting out social media usage rules. 
  • Train on your policies.  Too often companies put a policy in place and then do not train employees on implementation and usage.
  • Companies in the healthcare industry should be particularly careful about discussing patient-related matters in any online venue.  As more young people enter the workforce, the usage of social media for ordinary “conversation” will continue to grow.  Many workers do not understand the lack of privacy social media provides and can put a company at risk by disclosing patient information.

If you or your company would like a free consultation on these or any issues, please contact me at

Tax Considerations

Posted on December 26, 2012 by in Blog, Planning, Strategy, Taxes

As we approach the end of the year,  here are a few tax considerations to keep in mind:

  1. For those in control of C corporations, declaring special dividends to be distributed before 2013 may prove particularly fruitful if top rates on dividends rise from 15 percent to 43.4 percent (39.6 percent plus the 3.8 percent Medicare surtax).
  2. As 2013 approaches, it may be valuable to consider tax loss harvesting strategies to offset current gains or to accumulate losses to offset future gains (which may be taxed at a higher rate).  The first consideration is to identify whether an investment qualifies for either short-term or long-term capital gains status, because taxpayers must first balance short-term gains with short-term losses.  The “wash sale rule” generally prohibits taxpayers from claiming a tax-deductible loss on a security if they repurchase the same or a substantially identical asset within 30 days of the sale.
  3. Both a higher potential capital gains rate and the 3.8 percent Medicare surtax (see, below) may be avoided by selling before the year-end 2012 and then immediately reinvesting.  To buy back the same or substantially similar securities both in kind and amount, of course, requires an upfront cost in finding the cash elsewhere to pay the tax or lowering the amount reinvested.
  4. Having a tax on NII is a “paradigm shift.” Traditionally, taxpayers want income to be passive, so that it is not subject to employment taxes, and want losses to be non-passive, so they can offset other non-passive income, such as wages.  With the new Medicare surtax on NII, taxpayers with higher incomes may want to demonstrate that income is from an active business, not a passive investment.
  5. Trusts and estates should make a point of distributing their net investment income to their beneficiaries rather than having it taxed to the trust or estate.  A trust’s NII will be taxed at a low threshold (less than $12,000), while the income received by a beneficiary is taxed only if the much higher $200,000/$250,000 thresholds are exceeded.  Trustees and beneficiaries should pay particular attention to this issue.
  6. It should also be noted that certain tax-favored income under other provisions of the tax code are provided no special breaks under 3.8 percent Medicare surtax.  For example, long-term capital gains are taxed at the same 3.8 percent rate as short-term capital gains.  Gain recognition does undergo a netting process, however, as explained above.


Tips to Relieve Workplace Stress

Posted on December 18, 2012 by in Blog, Human Resources

For millions of Americans, the workplace is a major source of stress in their lives.  Stress is a primary contributor of unproductive behavior.  It’s unrealistic to think you can control everything at work, but you can have some control on how you react to work stressors, and how they ultimately affect your health.  The holidays are around the corner, which often times places additional stress on individuals.  Following are a few tips to help tackle workplace stress:

  • Take mini breaks – if you have been sitting for more than two hours, get up and move around.  If you are able to get outside, enjoy the fresh air!
  • Get control of your schedule – Try not to have meetings scheduled back to back to allow you time to refresh before the next one.
  • Learn to say “no” – When other people’s expectations get too high, say “no” – know your limits!
  • Be positive!  Positive attitudes are contagious!
  • Driving to and from work, listen to something enjoyable and motivating.
  • Leave the office or your desk for lunch – a change in atmosphere can be refreshing.
  • Use your time off benefits – everyone needs a break from the demands of work.
  • Stretch!  Sit straight in your chair and raise your arms up and interlock your fingers.  Inhale and exhale deeply while stretching.

The goal of managing stress at work is not to get rid of it, but to get control of how it affects you.


Year End Tax Planning

Posted on December 14, 2012 by in Blog, Planning, Taxes

Year End Tax Planning: Preparing for the Tax Cliff by Steven F. Holub is a great article talking about where the country is headed with its tax laws.  The bush tax cuts are scheduled to expire at the end of 2012, causing tax rates to increase dramatically beginning in 2013.  A number of new tax provisions related to the health care law such as the 3.8% sur-tax on investment income, are also scheduled to be effective beginning in 2013.  It is not likely that there will be any significant legislation repealing the tax increases before they go into effect. 

A number of ways to reduce income that would be subject to the 3.8% tax on net investment income are explained in this article.  There are also a number of strategies for shifting income from 2013 to 2012, and shifting deductions from 2012 to 2013 to lower client’s taxes.  Because each client’s situation is different and difficult, CPAs can provide valuable tax planning to clients by running the numbers on different strategies and advising clients of the best options for their situation.  Gary Cooper is a CPA with Forward Results, and his firm specializes in tax planning and tax consultation.  It would be wise to set an appointment to determine your tax strategies for 2012 to 2013.

Managers and Time Management

Posted on December 11, 2012 by in Blog, Human Resources, Strategy

Who’s got the Monkey, by William Oncken, Jr. and Donald L. Wass, was originally written and published in the November/December 1974 issue of the Harvard Business Review.  This has been one of Harvard Business Review’s best-selling reprints, proving that the content is valuable and timeless. 

It is an excellent article related to delegation of authority and subordinates delegating up to their manager.  The manager can no longer get his job completed and does not have discretionary time for himself and his family.  The author’s recommendation at the end of the article to “get control over the timing and content of what you do” is appropriate advice for managing time. 

The first change to make is for the manager to enlarge his or her discretionary time, eliminating time imposed by subordinates.  The second is for the manager to use a portion of this new-found discretionary time to see to it that each subordinate actually has the initiative and applies it.  The third is for the manager to use another portion of the increased discretionary time to get and keep control of the timing and content of both boss-imposed and system-imposed time. 

All these steps will increase the manager’s leverage and enable the value of each hour spent in managing management time to multiply without their logical limit.  A manager can be overloaded with employee demands if he allows the employees to transfer their problems up the line.  The result for employees is boss-imposed time and decreased discretionary time.  This is a great article; I encourage you to read the whole thing.

Creating and Preserving Value Within the Business

Posted on December 7, 2012 by in Blog

How to Create and Preserve Value within the Business

1. First, you must create your exit plan. Based on a proven process, this requires learning certain owner skills and developing exit-based objectives with the help of a solid team of advisors. 

2. You must know the worth of your business; after all, much of your exit strategy is based on converting business value to something a bit more useful, cash. Consequently, it is essential to know what your business is worth as you begin to execute your exit plan. 

3. Every owner can preserve business value by learning how to avoid unnecessary litigation and other business hiccups by practicing preventative maintenance such as legal audits and other such methods. Owners should be introduced to the year-end review, the most effective way to use your advisory team and to keep your exit plan on track. A critical element in creating and preserving value in your business is knowing how to motivate and keep your key employees. 

4. Finally, familiarizing yourself with the basics of tax planning enables you to preserve value in your business by minimizing taxation. Forward Results is a collaborated group of professionals whose goal is to assist business owners with succession planning. This plan begins many years before the exit actually takes place. As a team of advisors, we will teach you techniques to increase business value over a period of time by implementing processes and procedures in all disciplines of business.