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What comes to most people's minds when they start thinking about tax deadlines?  Well, the infamous April 15th, of course!  Unfortunately, by the time April 15th comes around, it is too late to take advantage of most tax planning strategies.  The majority of financial transactions affecting taxable income must be complete prior to year-end (December 31st for most individuals and calendar-year entities).  There are many tax saving strategies that can be implemented near year-end with a small amount of assistance from your trusted accountants at BSH.  Some examples of transactions with which we can help you include the following: Calculating employee / owner bonuses Determining whether or not your business should make major asset purchases Advising whether or not to sell appreciated or depreciated investments Ensuring the timing of your charitable contributions maximizes tax savings If you are interested in letting us help you with your year-end tax strategies, please contact us by December 1st to schedule an appointment.  We are eager to save you money!

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Before filing W-2 Wage and Tax Statements with the Social Security Administration, employers may want to verify that employee names and Social Security numbers match Social Security's records. Making sure up front that this information is correct could save time-consuming correspondence later on and reduce the number of W-2C's that have to be prepared. The Social Security Administration offers two online verification options. Employers can either: Input up to 10 names and Social Security numbers (per screen) and receive the results right away; or Use a spreadsheet software program to create a "Social Security Number Verification Service" file containing up to 250,000 names and Social Security numbers for verification. Employers using the second option must put the information in a specified format. Results will usually be received on the next government business day after the spreadsheet file is uploaded.
If your company has a 401(k) retirement savings plan, you know how hard it can be to increase plan participation. Some employees think they can't afford to save for retirement. Others don't understand the benefits of participating. Still others simply don't bother to join the plan. Adding an automatic enrollment feature is one approach that employers are using to boost participation. The Pension Protection Act of 2006 contains some provisions designed to encourage automatic 401(k) enrollment. How It Works With automatic enrollment (sometimes called "negative election"), a preset percentage of an employee's pay is deferred to the plan through payroll withholding as soon as the employee becomes eligible for plan participation — unless the employee elects to receive cash (opts out) or elects to have another amount contributed. For example, let's say a plan provides for an automatic enrollment contribution of 3% of pay. The employer would notify employees of the arrangement and of their right to choose not to contribute or to choose a different deferral percentage. Absent an election to the contrary, eligible employees would be automatically enrolled at 3%. If desired, the plan could also provide for automatic increases in the contribution percentage at preset intervals.     Are all salaried employees automatically exempt from overtime pay under federal government regulations? No they are not. Employers cannot distinguish exempt employees from nonexempt employees based only on whether the employee is a salaried or hourly employee. Various other factors, such as the employee's job duties, also affect the determination. Incentives in the New Law The 2006 pension law provides several incentives for sponsoring employers to adopt automatic enrollment in their 401(k) plans. These include: Elimination of conflicts with state laws on wage withholding without employee consent; "Safe harbor" rules that would allow a complying plan to avoid nondiscrimination testing with lower employer contributions than are required under the current law's safe harbor matching arrangement; Additional time to test for discrimination and, if needed, make corrective distributions if the safe harbor is not used; and Fiduciary liability relief with respect to default investments. These changes apply to plan years beginning on or after January 1, 2008. If you believe automatic enrollment could enhance your company's plan, it could be a good time for you to look into it.
As the 2006 tax year winds down, consider the timing of any bonuses you're planning to give to higher income employees. You may be able to reduce your — and your employees' — FICA taxes. Background Once wages surpass the Social Security wage base ($94,200 for 2006 and $97,500 for 2007), employees no longer owe the Social Security portion of the FICA tax (6.2%). (The Medicare portion of 1.45% applies to all wages.) Since employers pay matching FICA taxes, they also pay less tax. Strategies Pay bonuses in 2006 to employees whose earnings have surpassed the Social Security wage base. Shift bonus payments to early 2007 for employees whose earnings are unlikely to surpass the Social Security wage base in 2006 but may surpass it in 2007.
Although the end of the year tends to be a busy time, finding room in your schedule for some late-year planning could lead to tax savings. Here are just a few of the many strategies that might be helpful. Project AMT. State income taxes, unreimbursed employee business expenses, and several other items are potentially deductible for regular tax purposes, but not for alternative minimum tax (AMT) purposes. If a tax projection indicates that AMT will not apply for 2006 but could apply for 2007, accelerating expenses that aren't allowed for AMT purposes into 2006 can be a smart strategy. Review expenses. The high cost of health care may mean you have enough medical expenses to gain a deduction for the amount in excess of 7.5% of your adjusted gross income. If so, consider paying late-year medical and dental bills that aren't due until 2007 in 2006. Time bonus payments. In 2006, the 6.2% Social Security payroll tax is due on the first $94,200 of earnings. If you have a business and plan to distribute year-end bonuses to higher paid employees, watching your timing could result in payroll tax savings — for you and your employees. Example. Greg's 2006 salary, not counting the $20,000 bonus you want to give him, will come to $95,000, and he intends to retire next March. You decide to pay the bonus in 2006 because it won't be subject to Social Security taxes, whereas all of Greg's 2007 earnings are likely to be taxable. This timing decision will save both you and Greg your respective shares of the Social Security tax on the $20,000. For late-year hires, delaying a bonus payment until 2007 could be the better strategy. Example. You hired Naomi this fall at a starting salary of $95,000, and you expect her to gross $30,000 in 2006, with bonus. You decide to hold off on making the bonus payment until 2007, when Naomi's earnings are likely to exceed the Social Security wage base. For help with your tax planning, please contact us.