Managing Cash Flow – How to Stay Afloat

managing cash flow frederick md

If you are a business owner, you might find that managing your cash flow is sometimes a challenge. However, effective management of your cash flow is imperative to your business success. When you are trying to keep your business in operation without properly managing the cash flow, it is like saving a sinking ship. Even if you have success, you will constantly feel worn out.

Regardless of how long your business has been in operation, or what kind of business you run, maintaining proper cash flow is imperative for your overall success. If you have a new business startup, you will find that if you cannot properly manage cash flow during that first year of operation, you will most likely not be able to keep your business afloat another year.

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Hastily choosing an executor can lead to problems after your death

Choosing the right executor — sometimes known as a “personal representative” — is critical to the smooth administration of an estate. Yet many people treat this decision as an afterthought. Given an executor’s many responsibilities and complex tasks, it pays to put some thought into the selection.

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2019 Retirement Contribution Limits

2019 retirement contribution limits

The new year is underway, and you might be wondering about the retirement contribution limits for 2019. Because of cost-of-living adjustments (COLA), the dollar limitations for investing in pension plans and other retirement programs for the new year were adjusted accordingly.

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What is a Tax Treaty?

what is a tax treaty

You have probably heard mention of a tax treaty, but you might not be sure what one is or what it entails. Many countries have entered tax treaties with other countries to avoid or to mitigate double taxation. Depending on the agreement, it can cover a wide variety of tax topics, including inheritance taxes, value added taxes, income taxes, and other kinds of taxes. There are different kinds of tax treaties, such as bilateral treaties and multilateral treaties.

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How Am I Taxed If I Am A US Citizen Working Abroad?

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If you are a United States citizen who lives and works overseas, you might be wondering if you must pay U.S. income taxes or how you will be taxed. If you are a U.S. citizen or a resident alien who lives elsewhere in the world, regardless of where you live your income received from around the world is subject to U.S. income taxes. There might be exclusions or credits that apply. To learn more about these credits and exclusions, refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

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Tax-Treatment of Year-End Bonuses

tax treatment of year end bonuses

Many employers offer Christmas bonuses or year-end bonuses to motivate their employees. Depending on how the bonus gets paid to the employee, it can affect the employee’s tax return and the tax withholding process. One of the main questions both employers and employees face is – “Are bonuses treated as regular income or are they singled out to be treated differently for tax purposes?”

The Internal Revenue Services (IRS) categorizes different kinds of income and treats the different types of income differently. Bonuses are classified separately according to IRS guidelines. The IRS defines special wages as compensation paid in addition to the regular wages of the employee.

This compensation might include back pay, vacation pay, moving expenses, dismissal or severance pay, fringe benefits that are taxable, overtime, and bonuses. Because of this, bonuses aren’t treated like regular wages as far as withholding taxes when paying the bonus. There are two ways taxes are withheld from an employee bonus – either the aggregate method or the percentage method.

Using the Percentage Method

The IRS specifies that a “supplemental rate” at a flat 25 percent be applied to tax supplemental wages, such as bonuses. If a bonus is $5,000 then according to this rule, 25% of that amount, which would be $1,250 of it, should be sent straight to the IRS for taxes. When using this approach, the employee bonus is separated from the rest of the employee’s income and taxed directly. Often, employers use the percentage method because is it easier to use a uniform rate to tax the entire bonus.

Using the Aggregate Method

Use this approach when you pay the bonus along with the regular paycheck. As the employer, you will determine the withholding amount based on the IRS withholding tables for both amounts, subtracting what was withheld from the employee’s last paycheck then withholding the rest of the bonus amount. For example, if the employee’s regular paycheck is $2,800 and you gave the employee a $5,000 bonus, then you put it into a $7,800 lump sum, the aggregate method would be used for taxes.

How Do High-End Bonuses Mean Higher Taxes?

If the employee gets a high-end corporate bonus that exceeds $1 million, it is subject to higher taxes. The employer will be required to withhold 39.6% of the amount that exceeds $1 million plus the standard 25% for the amount below the $1 million thresholds.

In Conclusion

If you have questions about taxing employee bonuses, you should contact a tax professional at MKS&H. We would be happy to meet with you and discuss your needs and the best option for your business when it comes to employee bonuses and the tax process.

1099 Due Date is Approaching Fast

 

Now is the time to determine if you made any payments during the 2018 tax year that would require you to file Form 1099. If you paid $600 or more in compensation to a non-employee or an unincorporated business, you are most likely required to report the amount on a Form 1099. Generally, any person, including a corporation, partnership, individual estate, and trust which makes reportable transactions must file a Form 1099. The type of reportable transaction determines the specific Form 1099 which must be filed. One of the most common forms issued is Form 1099-MISC. Form 1099-MISC is required for each person to whom you have paid any of the following during the year: Read More

Succession Planning: I’m Almost Ready to Retire – What Now?

retirement succession planning maryland

If you own a business, your retirement planning involves much more than just putting away enough money to cover your expenses when you leave work. When retirement is only a few years away, you need to start identifying and developing new leaders who can replace you and other retiring managers. You should always ensure you have done appropriate succession planning so there will be capable, experienced people to take over new roles if a manager dies, becomes disabled, or leave. Read More

Act Now! Tax planning opportunities for 2018

As 2018 comes to an end, it’s time to think about year-end tax planning for 2018, and to plan ahead for 2019, especially with the new tax reform legislation passed by Congress last year.  This article highlights potential tax-savings opportunities and strategies for you to consider. Read More

Tax Planning for Small Business Owners

Nobody can force you to plan about taxes before the time comes for you to pay them. However, the cost of not planning ahead might even cost money in the long run and might even land you in prison for tax evasion. For small business owners, an accounting system that places taxation as a major concern can prevent them not just from paying the right amount of taxes but may even reduce them into a smaller amount.

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