Welcome to Keller & Owens’ Blog. It brings you the latest tax and financial news that matter to your bottom line.

What You Need to Know About Hiring Seasonal Workers

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If summertime is a busy time for your business, you may be ready to hire seasonal workers. Here are tax rules to keep in mind.

  • Affordable Care Act exception. When you employ 50 or more full-time employees, you’re considered a “large employer” and are generally required to provide health insurance coverage or pay a penalty. However, the law provides an exception for seasonal workers, defined as those you employ for not more than 120 days during the prior calendar year. In general, your answer to two questions determines if you qualify for the exception. Did your workforce exceed 50 full-time employees for 120 days or fewer during the year? Were the employees in excess of 50 who were employed during that period seasonal workers? If both answers are yes, you’re generally not considered a large employer.
  • Employment taxes. Temporary workers are typically subject to the same employment tax rules as regular employees. You’ll generally have to withhold social security and Medicare taxes, as well as federal income tax from wages. You’ll also have to follow payroll tax deposit rules and employment return filing requirements.
  • Employment tax returns. Special filing rules may apply when you only hire employees at a specific season of the year, such as summertime. For each quarter that you pay wages, you can check the box for “seasonal employer” on Form 941, Employer’s Quarterly Federal Tax Return. By notifying the IRS of your seasonal status, you’re not required to file returns for quarters when you have no wages or tax liability.
  • Please contact us for more information about payroll tax rules, recordkeeping requirements, and documentation for seasonal employees. We’re here to make sure that your busy summer season goes smoothly.

Report Your Foreign Accounts by June 30

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If you hold foreign bank or financial accounts, or have signature authority over such accounts, and the total value of all your accounts exceeds $10,000 at any time during the calendar year, you may be required to file a Treasury Department report known as the FBAR. It’s easy to overlook this requirement because it’s separate from your federal income tax filing, with a different deadline and strict rules.

“FBAR” refers to Form 114, Report of Foreign Bank and Financial Accounts. Your 2015 Form 114 must be filed electronically with the Treasury Department no later than June 30, 2016. No filing extension is available. Contact us if you need details or assistance.

Keep Track of Summer Rental Income

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Are you thinking of signing up with one of those websites that link travelers to property owners with space to spare? If you plan to offer for rent all or part of your main home, establishing sound recordkeeping procedures from day one is a good idea.

In addition to a bookkeeping system to track the income and expenses related to your rental, a calendar detailing the days your home was rented will be useful at tax time. The reason? Deductible expenses may be limited when rented property is also your personal residence. Having a written record helps determine which tax-reporting rules apply.

For example, say you rent your primary home to a vacationer for 15 days or more during a year. All of the rental income is taxable. However, expenses such as interest, property taxes, utility costs, and depreciation are split between the time your property was rented for a fair rental price and the days you used it personally. The portion related to the rental is deductible up to the amount of your rental income.

What if you have rental expenses in excess of your rental income? You may be able to carry them forward to next year.

Different rules apply when your home is rented for less than 15 days, and when the property you offer for rent is your vacation home or timeshare. Please contact our office. We’ll help you plan a tax-efficient rental program.

 

Is This Insurance Missing From Your Financial Plan?

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What springs to mind when you hear “insurance?” Most likely, you think about auto, health, home, and life. But what if an illness or accident were to deprive you of your income? Even a temporary setback could create havoc with your finances. And statistics show that your chances of being disabled for three months or longer between ages 35 and 65 are almost twice those of dying during the same period.

Yet you may overlook disability insurance as part of your financial planning. Here’s how to fill that gap and get the right coverage to protect your financial well-being.

  • Scrutinize key policy terms. First, ask how “disability” is defined. Some policies use “any occupation” to determine if you are fit for work following an illness or accident. A better definition is “own occupation.” That way you receive benefits when you cannot perform the job you held at the time you became disabled.
  • Check the benefit period. Ideally, you want your policy to cover disabilities until you’ll be eligible for Medicare and social security.
  • Determine how much coverage you need. Tally the after-tax income you would have from all sources during a period of disability and subtract this sum from your minimum needs.
  • Decide what you can afford. Disability insurance can be expensive. You may opt to forego adding riders and options that boost premiums significantly. If your budget won’t support the ideal benefit payment, consider lengthening the elimination period. Just be sure that accumulated sick leave and savings will carry you until the benefits kick in.

Is Your Business Adequately Diversified?

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Is your business adequately diversified? Relying on too few customers, vendors, or key employees can leave you open to risks that can be catastrophic. Here’s what to consider.

Customers. Do you depend on just a few customers for the majority of your sales? What will happen to your business if your largest customer requests a major price reduction, starts buying from your competitor, or is bought out? Even if your company sells to many customers, you aren’t adequately diversified if most of them are in the same industry. This is known as concentration risk. Reduce it by targeting customers in different industries.

Vendors. How many suppliers do you rely on for the smooth operation of your business? Do you have a backup option if a key vendor raises prices, can’t provide enough product, or goes out of business?

Employees. Do you count on the skills and reliability of one key second-in-command person? What would happen if that individual suffered a family emergency and had to leave unexpectedly? Sharing information and allocating responsibilities among employees can keep the work flowing.

When your business is new, diversification may be difficult. But putting a plan in place to reduce your vulnerability to manageable risks is essential for your long-term success.