Archives for November 2012

Prosperity Amongst Holiday Spending: Reality or Myth?

Merry ChristmasNo one likes to be Scrooge during a time of celebration and festivities unless you are actually Scrooge. But as every person who has more than oneĀ friend in the world knows, when it comes time to show your appreciation and love during the expected gift-giving moments, your pocketbook begins to scream as its contents are unceremoniously yanked out with abandon.

Can you actually save money during the holidays or is this simply a myth? The following are ways to ensure your wallet is not overspent this year.

Decide in advance how much you can spend.

Making a budget sounds as appealing as watching someone else clip their toenails, but being thorough about your finances will only help you in the future.

When drafting your budget don’t forget to include everything including postage for the cards, holiday favors, home decorations and any other items included in the process of holiday celebrations.

Double-check your gift list

After making your budget, write down all the people you intend to buy gifts for and then go through the list again and decide how much you can spend on each person. If you find yourself over-budget, you may need to consider cutting names or amounts. Stick to your budget, no exceptions.

If you have a large family, talk to them about making a “secret Santa”
policy so everyone gets a gift without breaking the bank.

Credit Cards are Short-Term

Despite the reality of credit cards, this option is really the lesser of two options. Go for the ‘cash only’ approach. But if that is simply not possible, using your credit card as a short-term loan is also acceptable. The problem is that it is so easy to lose track and get out of control before realizing it. Choose the card with the lowest interest rate and keep track of how much you spend by recording all the receipts.

Cash Only

Sometimes it is easy to lose track of how much you’ve spent. Rather than poring over your receipts, withdraw cash and keep it in a “holiday” designated envelope. Once the money is gone, it’s over.

Look out for #1

Putting yourself on your shopping list is smart. You know, without a doubt, that impulses run high during the holidays. Account for the splurge up front and budget for it.

Economical Gifts

Are there people who didn’t make your gift list that you still want to express affection and appreciation for? There is always holiday baking being done. Make an extra batch and send it across the street to your neighbor. Offer to babysit, walk the dog, or take an elderly relative on an outing. The cost is negligible, but the gift is priceless.

Another option for friends and family who live far away is to send e-cards. They are free and are a fun way to show you’re thinking of them.

Wedding Plans

If you are planning a wedding for a different season, it is an excellent idea to search for the wedding party dresses during the winter season because it is the slowest time of year for bride apparel and you will often find excellent deals.

Vacations

During this time, resorts and cruise lines are really hurting for business. If you have always dreamed of a luxury getaway, this would be the time. Escape from all the strain and fluster of holiday shopping and have yourself a ‘merry little Christmas “somewhere else”.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Subtracting Holiday Bonuses From Company Accounts

As the holiday season comes around, businesses are providing year-end bonuses or holiday benefits to employees as an additional reward for hard work. The problem that many small businesses and companies face is accounting for the additional expense. Recognizing the appropriate accounting method is the key to providing bonuses and benefits during the holiday season.

Cash Bonus Accounting

The process of accounting for a cash bonus is relatively simple. Business owners or the appropriate department within a company must determine the bonus amount for each employee and record the bonus in a similar method as regular income.

Payroll departments or an outsourced service are informed of the bonus and make appropriate calculations for withheld amounts. The paycheck is then given to the employee through direct deposit or a check, depending on the normal method of payment.

The company accounting books will reflect the bonuses provided to employees as a company expense along with regular paychecks. Since the process of providing a cash bonus is similar to a regular paycheck, accounting for the special pay is not a complicated process.

Non-Cash Bonus Accounting

Although a cash reward or bonus is commonly provided to employees, a non-cash bonus is another option for business owners. Non-cash bonuses include the expenses of a company party, holiday hams given to employees or similar gifts that come from the company during the holiday season. Accounting for a non-cash bonus is a little more challenging because it is not subject to the same tax laws.

The appropriate way to add non-cash bonuses during the holiday season is through “de minimis” on IRS tax forms. It is included in the costs and expenses of a company, but employees are not taxed for the gift.

Any non-cash bonuses provided to employees are accounted as a company expense or liability. As a result, the business will pay less in taxes due to the increased expense from the holiday bonus.

Although the non-cash bonus is added as an expense to the company, employers need to use caution when providing de minimis bonuses. The IRS has limitations on the number and amount of rewards employers can offer. A large number of non-cash bonuses might result in paying more in taxes.

The holiday season is a time to offer bonuses and special perks to employees. The bonus is a motivation to continue working hard and is not difficult to add to company accounts. Bonuses for the holiday season are added to the company books as an expense, but the taxation requirements will vary based on the type of holiday benefit offered to employees.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Charitable Deductions: Individuals Going to the Limit

Charitable DedutionsThe leaves are changing and the weather is getting cooler, and people are starting to think about the upcoming holiday season. We all know it will be here before we know it, and it is the time to give to those less fortunate then us. Charitable giving by individual donors accounts for 75% of all US giving according to recent reports by Blackbaud Inc. and Atlas of Giving, national organization that provide analysis trends over charitable giving in the United States.

Charitable giving as defined by the IRS as a contribution or gift to, or for the use of the following:

  • A state, but only if the contribution is made exclusively for public purposes, such as a gift to reduce the public debt.
  • A corporation, trust community chest, fund, or foundation that is created or organized in the United States exclusively for religious, charitable, scientific, literary, educational purpose, to foster national or international amateur sports competition, for the prevention of cruelty to children or animals, for war veterans, an auxiliary unit or society of, or as a trust or foundation for an entity.
  • A cemetery company owned and operated for the benefit of its members or a corporation chartered solely for burial purposes.
  • A domestic fraternal society, order or association operating under the lodge system, but only if the contributions is exclusively used for purposes stated above.

Once you know to whom you want to give your donation, it is important to know how much you can deduct on your taxes. When giving charitable donation, if an individual gives 20% or less of their adjusted gross income then there is no limit considerations. Depending on the type of donation and organization, there may be a limit of 20%, 30% or 50%.

There are very stringent documentation rules that govern donations. You must have a record of the amount of the donation and how the donation was made, example: cash, noncash, or out-of-pocket expense. Some documentation that works is bank statements, credit card statements, written communication from the organization, payroll deduction record. These must have the amount donated and the name of the organization.

By knowing the legal restrictions and regulations governing charitable giving, the process is easier for everyone. Having a good, trusted financial advisor to help is always the best course of action when making large donations.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Defined Benefit Pension Plans

EmployeesSo what is a defined pension plan?

A defined pension plan is an employer commitment to pay its employee a specific benefit for life beginning at retirement. Typically, this monthly or quarterly check will continue until that person dies. Depending on the plan, other options that may be available, such as the survivor option, which allows a spouse to receive payment, or a lump sum payment.

What does this mean to you?

To determine how much an employer contributes, the most being $195,000, to an employee’s benefit plan the employer calculates the cost of future risks by taking into account the employee’s life expectancy, normal retirement age, possible changes to interest rates, annual retirement benefit amount, and potential employee turnover. Other factors that affect benefits are age, earnings, and years of service. This allows the employer to ensure that when the employee retires that there will be enough money to pay for the benefit promised.

When will an employee receive benefits?

That is what every worker wants to know. All vested (a specific number of years the employee has worked or contributed to the plan) employees will begin receiving benefits no later than 60 days after the end of the plan year if they have been on the plan for 10 years or they leave their employer. A retired employee that reaches the age of 65 or the specified age of retirement will also receive payments.

There are always some stipulations with any retirement plan. Some of them are:

  • Unless you have under $5000 vested, you cannot be forced to receive your benefits before you normal retirement age.
  • If you leave the company before retirement, your benefits are frozen and held in a trust until the age of retirement.

This all seems like a complicated system, and it can be, but just remember that a defined benefit plan represent an employer’s obligations to active and retired employees. It is your promise of retirement and the benefits that you will receive.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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