AccuBiz Provides Insight in Response to New Tax Changes for 2016; Encourages Particular Attention to Cash Flow for Business Owners

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While it’s too late to make plans that impact the 2015 tax return, Doerhoff suggests some ways to plan ahead for the 2016 tax return season:

"The problem comes in the future when the business has to show $90,000 in profit to pay off the loan and gets no tax deduction,” Doerhoff states.

Bert Doerhoff CPA, founder of AccuBiz, responds to new income tax rules that impact many people for the tax year 2016. While it’s too late to make plans that impact the 2015 tax return, Doerhoff suggests some ways to plan ahead for the 2016 tax return season:    

Affordable Care Act penalties: For 2016, there is an increased penalty for not having health insurance. The penalty is currently $285 per adult, or 2 percent of income above the filing limit for 2015. In 2016, those penalties get much steeper, costing taxpayers $695 or 2.5 percent of income above the filing limit. The maximum family penalty for 2016 is $2,085, up from $975 in 2015.

Tax brackets: Tax brackets go up slightly, rising roughly 0.4 percent.

Head of household standard deduction: Standard deductions remain the same, except for head of household filers, who will see an increase of $500 to $9,300.

Personal exemptions: Personal exemptions for 2016 are increased by $50, so the total amount for a personal exemption is $4,050.

Contribution limits to HSAs increase: The amount that can be contributed to a pre-tax HSA account for medical expenses increase by $100 for families, bringing the total to $6,750. Individual limits remain the same.

The Earned Income Credit increases: There will be a modest increase, with families with three or more children receiving a maximum credit of $6,269, while families with two children receive a maximum of $5,572.

Other changes are here to stay, such as the ability to deduct equipment in full, when there is a purchase up to $500,000 in equipment for a business. Permanent tax rules allow taxpayers to plan ahead for managing their personal and small business taxes. However, Doerhoff cautions taxpayers to carefully determine how much of the equipment cost should be written off.

Cash flow is a key area Doerhoff encourages business owners to pay particular attention to doing tax planning. “Many business owners ignore that part of tax planning. If the business buys $100,000 of equipment this year and deducts the entire cost but only pays $10,000 down things look great. The tax deduction generally saves about 1/3 of the cost of the purchase so all of a sudden the business paid $10,000 cash and saved $33,000 in tax. The problem comes in the future when the business has to show $90,000 in profit to pay off the loan and gets no tax deduction,” he says.

About Bert Doerhoff:

Bert Doerhoff, CPA, works closely with small business owners to minimize income tax and fill the gaps so the owner has more time to work on the customer centered core services. Doerhoff and his team can outsource all functions of an accounting department, from bookkeeping to CFO services. The CPA firm has multiple QuickBooks advisors to help clients maximize the benefits provided by their accounting system. Doerhoff is co-author of Six Steps to Small Business Success available on Amazon. Contact Bert Doerhoff, CPA, by email at bdcpa(at)AccuBiz(dot)net; by phone at (573) 634-4006; or learn more at http://www.AccuBiz.net.

Contact:
Bert Doerhoff, CPA
AccuBiz
1301 Southwest Blvd.
Jefferson City, MO 65109
bdcpa(at)AccuBiz(dot)net
573-634-4006

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Lynette Saxton
AccuBiz
+1 (816) 396-8575 Ext: 505
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Bert Doerhoff,CPA
AccuBiz
573-634--4006
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@BertDoerhoffCPA
since: 02/2010
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