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The firm has over 50 professionals on staff, all with four-year degrees in Accounting. They are energetic people with proven track records who repeatedly deliver high-quality, responsive and timely service. Professional memberships include New York State Society of Certified Public Accountants (NYSSCPA) and American Institute of Certified Public Accountants (AICPA). Associate memberships include both the Independent Bankers Association of New York State (IBANYS) and the Community Bankers Association of New York State (CBANYS). The firm is also a member of numerous local chambers of commerce, including the Syracuse, Cayuga County and Mohawk Valley chambers. |
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| Q: If I ask my employees to work late, and I pay for their dinner, is it deductible? | |||
| A: Tax laws provide for the deduction of most business-related expenditures that are considered "ordinary and necessary." For employers, this is a fairly low hurdle to clear as long as the expenditure was made in relation to a business event.
The Internal Revenue Code states that overtime meals provided on the business premises of, and for the convenience of, the employer will not be taxable to the employee. While the deductibility to the employer of these overtime-related meal costs is not specifically addressed in the Code, they can be assumed to be deductible as ordinary and necessary business expenses. As a rule of thumb, the issue of deductibility for the employer of extra-workday expenses generally depends on the reason for and the timing of the expenses. Providing meals for employees working overtime will usually generate a deductible expense for an employer; however, providing lunches for workers who spend their lunch hour at a department meeting generally will not. |
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| Q: My friend's business recently underwent an IRS audit. How do I avoid the same fate? | |||
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A: The best defense is always a good offense…translation: take steps to avoid an audit in the first place. This old adage applies to how you approach the tax return preparation process throughout the year.
While the odds of your tax return being audited remain very low, it does happen to even the most diligent taxpayers. If the IRS contacts you about an examination, take a deep breath, relax and contact the office as soon as possible for additional assistance and guidance. |
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| Q: Employee handbooks: Are they for my business? | |||
| A: As your small business grows and you hire more employees, you may want to consider developing an employee handbook to provide your employees with standards and guidelines, as well as to avoid any future conflicts. Just as a business plan can help guide a company to success, a well-written employee handbook can serve as a roadmap for your employees' successes. An effective handbook can also result in increased efficiency and a sense of purpose among your employees, as well as protect your company from any potential future litigation. Here are some examples of topics to consider including: company overview, standards of conduct, benefits, employment policies and disclaimers emphasizing that the handbook is not a contract but a general guide, and can be changed by the company at any time. If you have any apprehension about how your employee handbook may be interpreted, it may be wise to have an attorney review it for any glaring potential problems. |
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| Q: I have a home office…should I have a separate phone line? | |||
| A: To maintain a professional appearance, it is critical to have a dedicated business line that is answered only by you -- not others in the household -- and is used strictly for business. An added benefit: while you cannot deduct the costs of basic charges related to your personal phone line, all charges related to your separate business line can be deducted if you are eligible for a home office deduction. | |||
| Q: Medical Reimbursement Plans: The Prescription for Major Tax Savings | |||
| A: Okay, this is a long one, but it's worth the read - trust me $$$$$$. Most self-employed business owners already know they can deduct 45% of their health insurance premiums as an "above the line" deduction on their tax returns, which reduces their adjusted gross income (AGI). The remaining portion of the premium cost is allowed as an itemized deduction, subject to a phase out equal to 7.5% of the taxpayer's AGI. Other medical expenses subject to the same phase out include co-pays, prescriptions, eyeglasses and contacts, non-covered medical expenses, and a whole list of other out-of-pocket expenses. More often than not, the phase out "wipes out" all of the possible medical deductions, leaving the taxpayer with absolutely no tax benefit.
The Tax Reform Act of 1997 increases the deduction for health insurance premiums from the current 45% to 100% by the year 2007. Quite a long time to wait, but still a welcome tax break for the self-employed. There is, however, an even greater tax break available to self-employed business owners who are married and employ their spouse. Tucked away deep inside the Internal Revenue Code (almost as if not to be found) is a provision under Section 105 referred to as a Medical Reimbursement Plan. For self-employed business owners who have a spouse that helps in the business (or could help in the business), this tax break could save thousands of dollars in taxes. What's so nice about this tax provision is that it allows the self-employed to deduct a full 100% of the health insurance premiums and all of the other medical expenses mentioned above as a business expense on their Schedule C. This means that in addition to reducing regular taxes, it also reduces self-employment taxes. Here is how it works: For this example, let's assume that the husband is the business owner. The husband hires his spouse to perform administrative services in the business. The husband, as a thoughtful employer, offers to reimburse the spouse for all of the medical expenses that the spouse incurs during the year (for her and her entire family). The husband just happens to be in her family, but that's all right since the spouse is being treated as a bona-fide employee. The husband reimburses the spouse for medical insurance premiums, co-pays, and other out-of-pocket expenses (even dental can be included). While the net effect of this transaction is merely a transfer of funds from the husband (as the employer) to the spouse (as an employee), this transaction accomplished a major tax miracle. It made it possible for the self-employed husband to legally write-off 100% of his family's medical insurance premiums and other costs as an "employee benefit plan" deduction on Schedule C of his tax return. More good news, the reimbursed expenses are not considered taxable income to the spouse. Depending on the tax bracket you're in, this could effectively be the same as having Uncle Sam pay for about half of your medical bills! In order for this tax strategy to work, the spouse working as an employee must be treated like an actual employee. Therefore, the compensation for services must not only be legitimate, but reasonable for the services being performed. As with any employee, the business owner must file payroll tax returns and issue the employee-spouse a W-2 form at the end of the year. This may require a little more paperwork, but the tax savings will usually be more than worth it. This tax law was written for employers who want to pay a non-taxable fringe benefit to their employees. As such, the employer who wishes to implement such a strategy has to offer the same benefit to other employees, who might not be family members. However, the eligibility requirements could be set up in a manner that makes it difficult for non-family employees to qualify. The best time to set up such a plan is before hiring non-family employees. While this tax strategy is relatively easy to set up and administer, it does require proper planning in order to avoid violating any plan provisions that would diminish or eliminate the potential tax savings. Because every business is unique, you may want discuss this tax strategy with an accountant or financial advisor before implementing it. |
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