• August 2016 Due Dates

    29 July 2016
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    August is here, which means there are due dates you need to know about. We have both individual and business due dates in the following:

    August 2016 Individual Due Dates

    August 10 – Report Tips to Employer

    If you are an employee who works for tips and received more than $20 in tips during July, you are required to report them to your employer on IRS Form 4070 no later than August 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

    August 2016 Business Due Dates

    August 1 – Self-Employed Individuals with Pension Plans 

    If you have a pension or profit-sharing plan, this is the final due date for filing Form 5500 or 5500-EZ for calendar year 2015.

    August 1 – Social Security, Medicare and Withheld Income Tax

    File Form 941 for the second quarter of 2016. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until August 10 to file the return.

    August 1 – Certain Small Employers

    Deposit any undeposited tax if your tax liability is $2,500 or more for 2016 but less than $2,500 for the second quarter.

    August 1 – Federal Unemployment Tax

    Deposit the tax owed through June if more than $500.

    August 1 – All Employers

    If you maintain an employee benefit plan, such as a pension, profit-sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar year 2015. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year-ends.

    August 10 – Social Security, Medicare and Withheld Income Tax

    File Form 941 for the second quarter of 2016. This due date applies only if you deposited the tax for the quarter in full and on time.

    August 15 – Social Security, Medicare and Withheld Income Tax

    If the monthly deposit rule applies, deposit the tax for payments in July.

    August 15 – Non-Payroll Withholding

    If the monthly deposit rule applies, deposit the tax for payments in July.

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  • July 2016 Due Dates

    1 July 2016
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    Here are the individual and business due dates you need to pay attention to this month:

    July 2016 Individual Due Dates

    July 1 – Time for a Mid-Year Tax Check Up

    Time to review your 2016 year-to-date income and expenses to ensure estimated tax payments and withholding are adequate to avoid underpayment penalties.

    July 11 – Report Tips to Employer

    If you are an employee who works for tips and received more than $20 in tips during June, you are required to report them to your employer on IRS Form 4070 no later than July 11. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.
    July 2016 Business Due Dates

    July 1 – Self-Employed Individuals with Pension Plans

    If you have a pension or profit-sharing plan, you may need to file a Form 5500 or 5500-EZ for calendar year 2015. Even though the forms do not need to be filed until August 1, you should contact this office now to see if you have a filing requirement, and if you do, allow time to prepare the return.

    July 15 – Non-Payroll Withholding

    If the monthly deposit rule applies, deposit the tax for payments in June.

    July 15 – Social Security, Medicare and Withheld Income Tax

    If the monthly deposit rule applies, deposit the tax for payments in June.

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  • Don’t Have a Retirement Plan? Maybe a SEP Is the Answer.

    12 March 2016
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    In a crunch? The year-end period is probably a very busy time if you are like many small business owners. You can’t close your books and determine your business’s profit until after the close of the year, and if this has been a good year, you may want to establish a retirement plan and make a contribution for 2015.

    There are a number of retirement plan options available, including Keogh plans and 401(k)s. However, a simplified employee pension plan (SEP) may be your best option. Unlike with a Keogh plan, you don’t have to scramble to get a SEP established before year-end.

    The reason a SEP is “simplified” is that its retirement contributions are deposited into an IRA account under the control of the SEP participant, thus eliminating most of the employer’s administrative duties. That is why these plans are sometimes referred to as SEP-IRAs.

    SEPs function much like Keogh plans, and they allow tax-deductible contributions for both employees and self-employed individuals. For an employee, the maximum contribution for 2015 is the lesser of 25% of that employee’s compensation or $53,000. These contributions are excluded from the employees’ wages and are not subject to withholding for income tax or FICA. A self-employed person can contribute 25% of his or her compensation after deducting the employer’s contribution, which boils down to the smallest of 20% of the business’ net profit or $53,000. Each year, the employer can specify a compensation amount between zero and 25% (not exceeding the maximums for the year).

    SEPs are a great option for startups and other small businesses that have unpredictable income and that may be leery of the long-term contribution matches required with other types of retirement plans. SEPs are also a great option for self-employed individuals with no employees, as the contributions are based upon net profits, allowing the business owner to select the maximum percentage while knowing that the required contribution will be small in low-income years.

    Except for when employees are covered by collective bargaining agreements, an employer that elects to make a SEP contribution for the year must contribute to an employee’s retirement account if the employee is at least 21 years of age, has worked for the employer in at least three of the prior five calendar years, and has compensation for the year of at least $600.

    Another advantage of SEP plans is that contributions are allowed after the account owner has reached the age of 70½—the age limit for traditional, non-SEP IRA contributions. This is true even though individuals must begin the required minimum distributions (RMDs) from the SEP once age 70½ is reached.

    As with all traditional IRAs and qualified plans, distributions from a SEP are taxable and subject to a 10% early withdrawal penalty if withdrawn before age 59½.

    To set up a SEP plan, you can adopt the IRS model plan by using Form 5305-SEP. This form is completed and retained for your records (not filed with the IRS). You can also open one with a financial institution. It may be prudent to adopt whatever plan is offered by the financial institution you’ll be dealing with to ensure that all plan requirements are met. If using a financial institution’s plan, be sure to discuss the plan’s fees.

    A SEP may be the best option for your business’s retirement fund. Please call Dagley & Co. for more information on how a SEP plan might work for your particular business structure or to determine whether other options should be considered.

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  • Breaking News: IRS Releases Pension Limits For 2016

    4 November 2015
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    You’ve heard it once, and you’re hearing it again: Saving for retirement is one of the most important things a person should do. Contributing to tax-advantaged retirement plans while you are working is one of the best ways to build up that nest egg. That said, the tax law doesn’t allow unlimited annual contributions to these plans.

    If you have been wondering how much you can contribute to your retirement plans in 2016, the IRS has released the inflation-adjusted limits for next year’s contributions. Since inflation has been low this past year (according to the government’s calculation), most limits won’t increase over what they were in 2015, but some of the AGI phaseout thresholds that work to reduce allowable contributions will change. Here’s a review of the 2016 numbers:

    For 401(k) plans, the maximum contribution will be $18,000 again. If you are age 50 or over, that limit is increased by a so-called “catch-up” contribution to a maximum of $24,000, the same as in 2015. These limits also apply to 403(b) tax sheltered annuities and 457 deferred compensation plans of state and local governments and tax-exempt organizations.

    Traditional IRA and Roth IRA contributions are limited to a combined total of $5,500 ($6,500 if you are age 50 or over), also unchanged from 2015. However, both types of IRAs have certain income (AGI) limitations.

    When you are an “active participant” in another qualified plan, the traditional IRA contributions are only deductible by lower-income individuals, and the deductibility phases out for unmarried tax filers with AGIs between $61,000 and $70,999. For married joint filers the phaseout range is between $98,000 and $117,999. The phaseout of traditional IRA contributions starts at $0 AGI for married individuals filing separately and tops out at $10,000—essentially, MFS filers rarely qualify to contribute to an IRA if they or their spouses also participate in an employer’s plan. For married couples in which one spouse is an active participant and the other is not, the phaseout AGI limitation for the non-active participant spouse has gone up by $1,000 and is between $184,000 and $193,999.

    Roth IRA contributions are never tax deductible, although they do enjoy tax-free accumulation. However, the contribution limits are phased out for unmarried taxpayers with AGIs between $117,000 and $131,999. For married joint filers the phaseout range is between $184,000 and $193,999. Each of these amounts reflects a $1,000 increase for 2016. Married individuals filing separately are not allowed Roth IRA contributions if their AGI is $10,000 or more. The AGI phaseouts will limit the contributions you can make to a Roth IRA even if you do not participate in an employer’s plan or other qualified plan. Unlike traditional IRAs, contributions to which cannot be made after you reach age 70½, contributions can be made to a Roth IRA as long as you have earned income of an equal amount.

    If you are self-employed and have a self-employed retirement plan (SEP), the maximum contribution is the lessor of $53,000 (the same limit as for 2015) or 20% of the net earnings from self-employment; contributions are allowed regardless of age. If your retirement plan is a profit-sharing Keogh plan, the limitations are the same. For defined benefit plans the amount contributed can’t create an annual benefit in excess of the greater of $210,000 or 100% of your average compensation for the highest 3 years.

    Simple IRA or Simple 401(k) plan contribution limits will be $12,500 or $15,500 for those ages 50 or over. These amounts are unchanged from 2015.

    If have questions or would like to discuss your retirement contribution options, please get in touch with us at Dagley & Co! You’ll find our information at the bottom of this page.

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  • Small Business Owners: Remember To Plan For Your Retirement!

    10 August 2015
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    Though your retirement may be years away, and it may not be the most pressing issue on your mind these days, don’t forget your retirement contributions, especially because there are often some generous government incentives to take advantage of.

    There are a variety of retirement plans available to small businesses that allow the employer and employee a tax-favored way to save for retirement. Contributions made by the owner on his or her own behalf and for employees can be tax-deductible. Furthermore, the earnings on the contributions grow tax-free until the money is distributed from the plan. Here are some retirement plan options:

    • Simplified Employee Pension Plan (SEP). This plan was designed to avoid the complications of a qualified plan. Contributions to the plan are held in the beneficiaries’ IRA accounts; hence, the title “simplified.” Deductible contributions for 2015 are limited to the lesser of 25% of the participant’s compensation (up to $265,000) or $53,000. A SEP can be established and funded after the close of the year.
    • Qualified Plan (Keogh). Generally, the rules surrounding a Keogh are more complex. This type of plan may include a discretionary contribution profit sharing plan or a mandatory contribution money purchase plan, or a combination of these. SEP plans are favored over Keogh plans by most self-employed individuals. For 2015, deductible contributions are limited to the lesser of 25% of the participant’s compensation (up to $265,000) or $53,000. These plans must be established before the end of the tax year, but contributions can be made afterwards.
    • Savings Incentive Match Plan for Employees (SIMPLE Plan). Under this plan, the business owner takes a deduction, and employees receive a salary deferral. For 2015, the contribution limit is $12,500 (per employer or employee), with an additional catch-up contribution limit of $3,000 for participants aged 50 or older. The employer can match the contribution up to 3% of compensation or make a non-elective contribution of 2% of compensation.
    • Individual 401(k) Plan. The individual 401(k) plan is similar to the traditional 401(k) plan with added benefits for the small business owner. For 2015, the owner can contribute and deduct up to 25% of compensation plus an additional $18,000 salary deferral, up to a $53,000 maximum $59,000 for those who are age 50 and over). For employees, the contribution and salary deferral limit is $18,000, with an additional $6,000 catch-up contribution available to those aged 50 or over. Employers can match employee contributions.

    If you choose to establish a new qualified pension plan for your business, you may be entitled to the “small employer pension startup credit.” The credit is equal to 50% of administrative and retirement-related education expenses for the plan for each of the first three plan years, with a maximum credit of $500 for each year. Plan-related expenses in excess of the amount of the credit claimed are generally deductible as ordinary expenses of the business.

    The first credit year is the tax year that includes the date the plan becomes effective, or, electively, the preceding tax year. Examples of qualifying expenses include the costs related to changing the employer’s payroll system, consulting fees, and set-up fees for investment vehicles.

    If you would like assistance in selecting a retirement plan for your business or to explore all of the tax benefits relevant to your particular situation, please get in touch with Dagley & Co.

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