Don’t Take the Bait; Avoid Phishing Emails by Data Thieves

Experienced Small Business Accountant  - With the approach of the holidays and the 2018 filing season, the IRS, state tax agencies and the nation’s tax industry urge people to be on the lookout for new, sophisticated email phishing scams that could endanger their personal information and next year’s tax refund.

The most common way for cybercriminals to steal bank account information, passwords, credit cards or Social Security numbers is to simply ask for them. Every day, people fall victim to phishing scams that cost them their time and their money.

Those emails urgently warning users to update their online financial accounts – they’re fake. That email directing users to download a document from a cloud-storage provider? Fake. Those other emails suggesting the recipients have a $64 tax refund waiting at the IRS or that the IRS needs information about insurance policies – also fake. So are many new and evolving variations of these schemes.

The Internal Revenue Service, state tax agencies and the tax community -- partners in the Security Summit -- are marking “National Tax Security Awareness Week” with a series of reminders to taxpayers and tax professionals. In part two, the topic is avoiding phishing scams.

Phishing attacks use email or malicious websites to solicit personal, tax or financial information by posing as a trustworthy organization. Often, recipients are fooled into believing the phishing communication is from someone they trust. A scam artist may take advantage of knowledge gained from online research and earlier attempts to masquerade as a legitimate source, including presenting the look and feel of authentic communications, such as using an official logo. These targeted messages can trick even the most cautious person into taking action that may compromise sensitive data.   The scams may contain emails with hyperlinks that take users to a fake site. Other versions contain PDF attachments that may download malware or viruses.

Some phishing emails will appear to come from a business colleague, friend or relative. These emails might be an email account compromise. Criminals may have compromised your friend’s email account and begin using their email contacts to send phishing emails.

Not all phishing attempts are emails – some are phone scams. One of the most common phone scams is the caller pretending to be from the IRS and threatening the taxpayer with a lawsuit or with arrest if payment is not made immediately, usually through a debit card.

Phishing attacks, especially online phishing scams, are popular with criminals because there is no fool-proof technology to defend against them. Users are the main defense. When users see a phishing scam, they should ensure they don’t take the bait.

Here are a few steps to take:

• Be vigilant; be skeptical. Never open a link or attachment from an unknown or suspicious source. Even if the email is from a known source, approach with caution. Cybercrooks are adept at mimicking trusted businesses, friends and family. Thieves may have compromised a friend’s email address or they may be spoofing the address with a slight change in text, such as name@example.com vs narne@example.com. In the latter, merely changing the “m” to an “r” and “n” can trick people.
• Remember, the IRS doesn't initiate spontaneous contact with taxpayers by email to request personal or financial information. This includes text messages and social media channels. The IRS does not call taxpayers with threats of lawsuits or arrests. No legitimate business or organization will ask for sensitive financial information via email. When in doubt, don’t use hyperlinks and go directly to the source’s main web page.
• Use security software to protect against malware and viruses. Some security software can help identity suspicious websites that are used by cybercriminals.
• Use strong passwords to protect online accounts. Each account should have a unique password. Use a password manager if necessary. Criminals count on people using the same password repeatedly, giving crooks access to multiple accounts if they steal a password. Experts recommend a password have a minimum of 10 digits, including letters, numbers and special characters. Longer is better.
• Use multi-factor authentication when offered. Some online financial institutions, email providers and social media sites offer multi-factor protection for customers. Two-factor authentication means that in addition to entering your username and password, you must enter a security code generally sent as a text to your mobile phone. Even if a thief manages to steal usernames and passwords, it’s unlikely the crook would also have a victim’s phone.
• The IRS, state tax agencies and the tax industry are working together to fight against tax-related identity theft and to protect taxpayers.

If you have questions, ABA Tax Accounting is always here. Please do not hesitate to call me, if you have any other questions or need further guidance. Call us for a free consultation at 651-300-4777.

Steps to Keep Online Data Safe

Experienced Small Business Accountant  ― During the holiday shopping season, shoppers are looking for the perfect gifts. At the same time, criminals are looking for sensitive data. This data includes credit card numbers, financial accounts and Social Security numbers. Cybercriminals can use this information to file a fraudulent tax return.

Anyone with an online presence can do a few simple things to protect their identity and personal information. Following these eight steps can also help taxpayers protect their tax return and refund in 2018:

• Shop at familiar online retailers. Generally, sites with an “s” in “https” at the start of the URL are secure. Users can also look for the “lock” icon in your browser’s URL bar. That said, some criminals may get a security certificate, so the “s” may not always mean a site is legitimate. 
• Avoid unprotected Wi-Fi. Users should not do online financial transactions when using unprotected public Wi-Fi. Unprotected public Wi-Fi hotspots may allow thieves to view transactions.
• Learn to recognize and avoid phishing emails that pose as a trusted source. These emails can come from a source that looks like a legitimate bank or even the IRS. These emails may include a link that takes the user to a fake website. From there, the thieves can steal usernames and passwords.
• Keep a clean machine. This includes computers, phones and tablets. Users should install security software to protect against malware that may steal data. This software also protects against viruses that may damage files.
• Use passwords that are strong, long and unique. Experts suggest a minimum of 10 characters. Use a combination of letters, numbers and special characters. Use a different password for each account.
• Use multi-factor authentication when available. Some financial institutions, email providers and social media sites allow users to set their accounts for multi-factor authentication. This means users may need a security code, usually sent as a text to their mobile phone, in addition to a username and password.
• Sign up for account alerts. Some financial institutions will send email or text alerts to an account holder when there is a withdrawal or change to their accounts. Generally, people can check their account profile to see what added protections may be available.
• Encrypt sensitive data and protect it with a password. People who keep financial records, tax returns or any personal information on their computer should protect this data. Users should also back up important data to an external source. When disposing of a computer, mobile phone or tablet, people should make sure they wipe the hard drive of all information before trashing. 

If you have questions, ABA Tax Accounting is always here. Please do not hesitate to call me, if you have any other questions or need further guidance. Call us for a free consultation at 651-300-4777.

Donations May Cut Tax Bills

Experienced Small Business Accountant  ― The Internal Revenue Service reminds taxpayers looking to maximize their tax savings before the end of the year to consider charitable giving. Many taxpayers may already be planning on doing so for #GivingTuesday on Nov. 28. Giving money or goods to a tax-exempt charity before Dec. 31 can usually be deducted on that year’s federal income tax return. Taxpayers are urged to consider the following before donating:

Only Donations to Eligible Organizations are Tax-Deductible.

The IRS Select Check tool on IRS.gov is a searchable online database that lists most eligible charitable organizations. Churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in this database.

Itemize to Claim Charitable Donations

Charitable deductions are not available to individuals who choose the standard deduction. Only taxpayers who itemize using Form 1040 Schedule A can claim deductions for charitable contributions. Tax preparation software usually alerts taxpayers to the tax savings options available if itemized deductions exceed the standard deduction. The IRS.gov website can help you answer the question, “Should I itemize?”

Get Proof of Monetary Donations

A bank record or a written statement from the charity is needed to prove the amount and date of any donation of money. Money donations can include various forms apart from cash such as check, electronic funds transfer, credit card and payroll deduction. Taxpayers using payroll deductions should retain a pay stub, a Form W-2 wage statement or other proof showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

Donating Property

For donations of clothing and other household items the deduction amount is normally limited to the item’s fair market value. Clothing and household items must be in good or better condition to be tax-deductible. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with their tax return.

Donors must get a written acknowledgement from the charity for all gifts worth $250 or more. It must include, among other things, a description of the items contributed. Special rules apply to cars, boats and other types of property donations. The IRS.gov website has information to help you determine the value of donated property.

Note Any Benefit in Return

Donors who get something in return for their donation may have to reduce their deduction. Benefits can include merchandise, meals, tickets to an event or other goods and services. A donation acknowledgment must state whether the organization provided any goods or services in exchange for the gift along with a description and estimated value of those goods or services.

Older IRA Owners Have a Different Way to Give

IRA owners age 70½ or older can transfer up to $100,000 per year to an eligible charity tax-free. The transfer can count as their required minimum distribution for the year. Funds must be transferred directly by the IRA trustee to the eligible charity. For details, see Publication 590-B.

Good Records

The type of records a taxpayer needs to keep depends on the amount and type of the donation. An additional reporting form is required for many property donations and an appraisal is often required for larger donations of property. Visit IRS.gov for more information.

If you have questions, ABA Tax Accounting is always here. Please do not hesitate to call me, if you have any other questions or need further guidance. Call us for a free consultation at 651-300-4777.

Things to Remember about Hobby Income and Expenses

Experienced Small Business Accountant -  From scrapbooking to glass blowing, many Americans enjoy hobbies that are also a source of income. A taxpayer must report income on their tax return even if it is made from a hobby. 

However, the rules for how to report the income and expenses depend on whether the activity is a hobby or a business. There are special rules and limits for deductions taxpayers can claim for hobbies. Here are five things to consider:

• Determine if the activity is a business or a hobby. If someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, not to make a profit. Taxpayers should consider nine factors (listed below) when determining whether their activity is a business or a hobby, and base their determination on all the facts and circumstances of their activity. For more about ‘not-for-profit’ rules, see Publication 535, Business Expenses. 
• Allowable hobby deductions. Taxpayers can usually deduct ordinary and necessary hobby expenses within certain limits:
• Ordinary expense is common and accepted for the activity.
• Necessary expense is appropriate for the activity. 
• Limits on hobby expenses.  Taxpayers can generally only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income. 
• How to deduct hobby expenses.  Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type. See Publication 535 for the rules about how to claim them on Schedule A, Itemized Deductions.

Question - How do you distinguish between a business and a hobby?

Answer

In making the distinction between a hobby or business activity, take into account all facts and circumstances with respect to the activity. No one factor alone is decisive. You must generally consider these factors to establish that an activity is a business engaged in making a profit:

• Whether you carry on the activity in a businesslike manner.
• Whether the time and effort you put into the activity indicate you intend to make it profitable.
• Whether you depend on income from the activity for your livelihood.
• Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
• Whether you change your methods of operation in an attempt to improve profitability.
• Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
• Whether you were successful in making a profit in similar activities in the past.
• Whether the activity makes a profit in some years and how much profit it makes.
• Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

You may find more information on this topic in section 1.183-2 (b) of the Federal Tax Regulations.

If you have questions regarding your small business accounting, ABA Tax Accounting is always here. Please do not hesitate to call me, if you have any other questions or need further guidance. Call us for a free consultation at 651-300-4777.

Things to Do When an IRS Letter Arrives

IRS Audit Representation – The IRS mails millions of letters to taxpayers every year for many reasons. Here are seven simple suggestions on how individuals can handle a letter or notice from the IRS:

1. Don’t panic. Simply responding will take care of most IRS letters and notices.
2. Read the entire letter carefully. Most letters deal with a specific issue and provide specific instructions on what to do.
3. Compare it with the tax return. If a letter indicates a changed or corrected tax return, the taxpayer should review the information and compare it with their original return.
4. Only reply if necessary. There is usually no need to reply to a letter unless specifically instructed to do so, or to make a payment.
5. Respond timely. Taxpayers should respond to a letter with which they do not agree. They should mail a letter explaining why they disagree. They should mail their response to the address listed at the bottom of the letter. The taxpayer should include information and documents for the IRS to consider. The taxpayer should allow at least 30 days for a response. When a specific date is listed in the letter, there are two main reasons taxpayers should respond by that date:
1. To minimize additional interest and penalty charges.
2. To preserve appeal rights if the taxpayers doesn’t agree. 
6. Don’t call. For most letters, there is no need to call the IRS or make an appointment at a taxpayer assistance center. If a call seems necessary, the taxpayer can use the phone number in the upper right-hand corner of the letter. They should have a copy of the tax return and letter on hand when calling.  
7. Keep the letter. A taxpayer should keep copies of any IRS letters or notices received with their tax records. 

If you have questions regarding your small business accounting, ABA Tax Accounting is always here. Please do not hesitate to call me, if you have any other questions or need further guidance. Call us for a free consultation at 651-300-4777.

Get More Small Business Funding

Experienced Tax Accountant – If your business is up and running but needs more capital, you can rely on familiar options. However, funding an existing business still requires slightly different preparation.

Prepare to request more funding

Anyone who gives you funds wants to feel confident that their investment will pay off. Prepare a business case and financial statements to convince lenders, crowdfunders, or investors to fund your small business.

Make your business case

You’ll need to make a solid business case for more funding. Produce a short statement with the total requested amount and specific reasons for it.

Maybe your business is cyclical — like construction or education — and could use funding to get through expected slow periods. Or maybe it needs capital to invest in new machinery or launch a product line. Whatever the reason, update your business plan to include this stage of funding.

A business case should give assurances that new funds won’t be mismanaged. Include descriptions of your management team to highlight their skills and expertise.

Prepare financial statements

Display that your business is doing well with financial history statements. Show how your business has grown by reporting revenue, expenses, and profit over time. If you don’t have a history of positive growth, explain why more funding will allow you turn it around.

Prove you’re financially responsible with a business credit report. If you’ve already applied for a DUNS number, you can get a business credit report from Dun & Bradstreet. Review your business credit file to make sure it’s accurate before sharing it.

Determine how much your company is worth today by performing a business valuation. This is the same process you’d go through if you were planning to sell your business. Valuation methods vary, but you can do a self-evaluation or seek out a qualified business appraiser.

Show how your business will grow in the future with a forecast. Your business forecast can be based on intuitive judgement, quantitative analysis, or both. Show your projected revenue and expenses, and clearly explain how you arrived at those estimations.

Choose your funding source

Get loans, credit, or crowdfunding

Additional funding options for existing business are similar to funding options for a new business. You’ll have the same general set of options, which include small business loans, credit cards, and crowdfunding.

Existing businesses have the advantage of an established financial history with credit reports, business bank accounts, and internal financial reports. Lenders, investors, and even crowdfunders can use that information when they decide whether to fund your business.

Sell ownership in your company

If you decide to sell an ownership stake of your company, your business structure will determine your options. Remember, whenever you sell ownership in your company, you dilute the ownership of current owners.

An LLC or a partnership can accept new members and give them a percentage of ownership in exchange for a capital investment. Just make sure you comply with your articles of organization and operating or partnership agreements. Then notify your state as necessary. Some states may require your LLC to be dissolved and re-formed with new membership.

Corporations can sell shares of the company, so long as it’s done in compliance with your articles of incorporation and bylaws. Again, notify your state if necessary.

Use Lender Match to find lenders who offer SBA-guaranteed loans

If you have trouble getting a traditional business loan, look into SBA-guaranteed loans. When a bank thinks your business is too risky to lend money, the SBA may guarantee your loan — that way the bank has less risk and could be more willing.

Use Lender Match to find lenders who offer SBA-guaranteed loans.

If you have questions regarding your small business accounting, ABA Tax Accounting is always here. Please do not hesitate to call me, if you have any other questions or need further guidance. Call us for a free consultation at 651-300-4777.

Taxpayers Should do an End-of-Year Withholding Check-up

Experienced Tax Accountant – As the end of the year approaches, the IRS encourages taxpayers to consider a tax withholding checkup. When taxpayers take a close look to make sure the right amount of tax is withheld now, they can avoid an unexpected tax bill next year.

Here are five examples of taxpayers who would benefit from a withholding check-up:

1. Taxpayers who received large tax refunds in past years - When a taxpayer has too much tax withheld from their paycheck, they pay too much tax during the year. They can change their withholding to have money upfront rather than waiting for a bigger refund.
2. Taxpayers who owed taxes in years past - Taxpayers with too little tax withheld might owe money. Under-withholding can lead to both a tax bill and an additional penalty.
3. People with a second job - This includes people who work in the sharing or ‘gig’ economy. Taxpayers who work more than one job should check the total amount of taxes they have withheld and make adjustments as necessary. This will ensure their withholding covers the total amount of the taxes they owe, based on their combined income from all their jobs.
4. Taxpayers who make estimated tax payments - Some taxpayers make quarterly estimated tax payments throughout the year. This includes self-employed individuals, partners, and S corporation shareholders.  If these taxpayers also work for an employer, they can often forgo making these quarterly payments by instead having more tax taken out of their pay.
5. People with a new job - Taxpayers who start a new job should check their withholding to make sure they are having enough taxes withheld. Their total withholding should cover the income tax owed from their new and old jobs combined.

To make sure their employer withholds the right amount of tax, employees can adjust their Form W-4, Employee’s Withholding Allowance Certificate. In many cases, this is all they need to do. The employer uses the form to figure the amount of federal income tax to be withheld from pay. This takes time, so taxpayers should make adjustments as soon as possible so the changes can take affect during the final pay periods of 2017.

If you have questions regarding your small business accounting, ABA Tax Accounting is always here. Please do not hesitate to call me, if you have any other questions or need further guidance. Call us for a free consultation at 651-300-4777.

Manage your finances

Small Business Accounting - Accounting for revenue and expenses can help keep your business running smoothly. Make sure you maintain proper bookkeeping and have a basic knowledge of business finances.

Start with a balance sheet

The balance sheet is the foundation of managing your finances. It operates as a snapshot of your business financials. It helps you keep track of your capital and provide a cash flow projection for future years.

A balance sheet will help you account for costs like employees and supplies. It will also help you track assets, liabilities, and equity. You can get insights by separating and analyzing segments of your business, like comparing online sales to face-to-face sales.

Cost-benefit analysis (CBA)

Looking closely at money-in and money-out helps maintain a sustainable balance between profit and loss. From development and operations to recurring and nonrecurring costs, it’s important to categorize expenses in your balance sheet. Then, you can use a cost-benefit analysis to weigh the strengths and weaknesses of a business decision, and put potential recurring benefits and cost reductions in context.

A CBA is a technique for making non-critical choices in a relatively quick and easy way. It simply involves adding money in benefits and money in costs over a specified time period, before subtracting costs from benefits to determine success in terms of dollars. This can come in handy with hiring another employee or an independent contractor.

For example, let’s say you’re deciding whether to add outdoor seating for your sausage themed restaurant, Haute Dog. You estimate outdoor seating would add $5,000 in extra profit from sales each year. But, the outdoor seating permit costs $1,000 each year, and you’d also have to spend $2,000 to buy outdoor tables and chairs. Your cost-benefit analysis shows that you should add outdoor seating, because the new benefits ($5,000 in new sales) outweigh the new costs ($3,000 in permitting and equipment expenses).

Pick a method of accounting

Businesses often use either the accrual or cash methods of recording purchases. The accrual method puts transactions on the books immediately upon completing the sale. The cash method only records this once payment has been received.

For example, if you make a sale in January and receive the $200 payment in February, an accrual method would allow you to record that on January’s books, while the cash method would require that payment to land on February’s books.

Method	Pros	Cons
Accrual	Creates immediate snapshot.	More complex to manage.
	Can reduce tax burden.	Potentially deceiving figures.
Cash	Shows cash flow clearly.	Limits predictive value.
	Easier to understand.	Less long-term clarity.

                       

GAAP

There are many strategies for preparing financial statements for a small business. Generally accepted accounting principles, known as GAAP or “Gap,” provides a common a way to standardize financial reporting using the accrual method. Private companies aren’t required to follow GAAP. The Financial Accounting Standards Board (FASB) maintains GAAP in the United States.

Get accounting help

You might want to get help with your accounting. Consider hiring a public accountant (CPA), bookkeeper, or using an online service.

A CPA will typically cost more than online services, but can normally offer more tailored service for your specific business needs. A bookkeeper can provide basic day-to-day functions at a lower cost, but won’t possess the formal accounting education of a CPA.

Ensure that someone can manage the following:

• Accounts receivable
• Accounts payable
• Available cash
• Bank reconciliation
• Payroll

Manage business credit

Establishing and managing business credit can help your company secure financing when you need it, and with better terms. Business credit can be crucial for negotiating supply agreements and protecting against business identity theft.

These five steps can lay the groundwork to sound financial planning. 

1. Determine whether you have business credit on file with Dun & Bradstreet
2. Establish a business credit history by using lines of credit associated with your business
3. Pay bills on time and understand other factors that influence your credit rating
4. Keep your credit files current and monitor for ratings changes
5. Know your customers' and vendors' credit standing

Knowing your customers’ credit standing gives you a window into consumer patterns, and that can affect your marketing and sales strategy. You may not need to conduct credit checks, but there are credit evaluation tools available for small business. Customer behavior also impacts your business’s cash flow, which affects planning for future supplies, hiring employees, and expanding your business.

If you have questions regarding your small business accounting, ABA Tax Accounting is always here. Please do not hesitate to call me, if you have any other questions or need further guidance. Call us for a free consultation at 651-300-4777.

Is it really the IRS calling?

Experienced Small Business Accountant -  Many taxpayers have encountered individuals impersonating IRS officials – in person, over the telephone and via email. Don’t get scammed. We want you to understand how and when the IRS contacts taxpayers and help you determine whether a contact you may have received is truly from an IRS employee.

The IRS initiates most contacts through regular mail delivered by the United States Postal Service.

However, there are special circumstances in which the IRS will call or come to a home or business, such as when a taxpayer has an overdue tax bill, to secure a delinquent tax return or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations.

If you have questions regarding your small business accounting, ABA Tax Accounting is always here. Call us for a free consultation at 651-300-4777

ABA Insurance Advisors Blog

ABA Insurance Advisors Blog

Year-End Tax Planning Strategies for Businesses

Experienced Small Business Accountant - There are a number of end of year tax planning strategies that businesses can use to reduce their tax burden for 2017. Here are a few of them:

Deferring Income

Businesses using the cash method of accounting can defer income into 2018 by delaying end-of-year invoices, so payment is not received until 2018. Businesses using the accrual method can defer income by postponing delivery of goods or services until January 2018.

Purchase New Business Equipment

Section 179 Expensing. Business should take advantage of Section 179 expensing this year for a couple of reasons. First, is that in 2017 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to a maximum of $510,000 for the first $2,030,000 million of property placed in service by December 31, 2017. Keep in mind that the Section 179 deduction cannot exceed net taxable business income. The deduction is phased out dollar for dollar on amounts exceeding the $2.03 million threshold and eliminated above amounts exceeding $2.5 million.

Bonus Depreciation. Businesses are able to depreciate 50 percent of the cost of equipment acquired and placed in service during 2015, 2016 and 2017. However, the bonus depreciation is reduced to 40 percent in 2018 and 30 percent in 2019.

Qualified property is defined as property that you placed in service during the tax year and used predominantly (more than 50 percent) in your trade or business. Property that is placed in service and then disposed of in that same tax year does not qualify, nor does property converted to personal use in the same tax year it is acquired.

Note: Many states have not matched these amounts and, therefore, state tax may not allow for the maximum federal deduction. In this case, two sets of depreciation records will be needed to track the federal and state tax impact.

Timing. If you plan to purchase business equipment this year, consider the timing. You might be able to increase your tax benefit if you buy equipment at the right time. Here's a simplified explanation:

Conventions. The tax rules for depreciation include "conventions" or rules for figuring out how many months of depreciation you can claim. There are three types of conventions. To select the correct convention, you must know the type of property and when you placed the property in service.

The half-year convention: This convention applies to all property except residential rental property, nonresidential real property, and railroad gradings and tunnel bores (see mid-month convention below) unless the mid-quarter convention applies. All property that you begin using during the year is treated as "placed in service" (or "disposed of") at the midpoint of the year. This means that no matter when you begin using (or dispose of) the property, you treat it as if you began using it in the middle of the year.

Example: You buy a $40,000 piece of machinery on December 15. If the half-year convention applies, you get one-half year of depreciation on that machine.

The mid-quarter convention: The mid-quarter convention must be used if the cost of equipment placed in service during the last three months of the tax year is more than 40 percent of the total cost of all property placed in service for the entire year. If the mid-quarter convention applies, the half-year rule does not apply, and you treat all equipment placed in service during the year as if it were placed in service at the midpoint of the quarter in which you began using it.

The mid-month convention: This convention applies only to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month.

Other Year-End Moves to Take Advantage Of

Small Business Health Care Tax Credit. Small business employers with 25 or fewer full-time-equivalent employees (average annual wages of $52,400 in 2017) may qualify for a tax credit to help pay for employees' health insurance. The credit is 50 percent (35 percent for non-profits).

Business Energy Investment Tax Credit. Business energy investment tax credits are still available for eligible systems placed in service on or before December 31, 2021, and businesses that want to take advantage of these tax credits can still do so.

Business energy credits include geothermal electric, large wind (expires in 2019), and solar energy systems used to generate electricity, to heat or cool (or to provide hot water for use in) a structure, or to provide solar process heat. Hybrid solar lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible; however, passive solar and solar pool-heating systems excluded are excluded. Utilities are allowed to use the credits as well.

Repair Regulations. Where possible, end of year repairs and expenses should be deducted immediately, rather than capitalized and depreciated. Small businesses lacking applicable financial statements (AFS) are able to take advantage of de minimis safe harbor by electing to deduct smaller purchases ($2,500 or less per purchase or per invoice). Businesses with applicable financial statements are able to deduct $5,000. Small business with gross receipts of $10 million or less can also take advantage of safe harbor for repairs, maintenance, and improvements to eligible buildings. Please call if you would like more information on this topic.

Partnership or S-Corporation Basis. Partners or S corporation shareholders in entities that have a loss for 2017 can deduct that loss only up to their basis in the entity. However, they can take steps to increase their basis to allow a larger deduction. Basis in the entity can be increased by lending the entity money or making a capital contribution by the end of the entity's tax year.

Caution: Remember that by increasing basis, you're putting more of your funds at risk. Consider whether the loss signals further troubles ahead.

Section 199 Deduction. Businesses with manufacturing activities could qualify for a Section 199 domestic production activities deduction. By accelerating salaries or bonuses attributable to domestic production gross receipts in the last quarter of 2017, businesses can increase the amount of this deduction. Please call to find out how your business can take advantage of Section 199.

Retirement Plans. Self-employed individuals who have not yet done so should set up self-employed retirement plans before the end of 2017.

Dividend Planning. Reduce accumulated corporate profits and earnings by issuing corporate dividends to shareholders.

Tip: Year-end is the best time for business owners to meet with their accountants to budget revenues and expenses for the following year.

If you need help developing a budget for your business, don't hesitate to call.

Call ABA Tax Accounting First

These are just a few of the year-end planning tax moves that could make a substantial difference in your tax bill for 2017. If you'd like more information about tax planning for 2018, please call to schedule a consultation to discuss your specific tax and financial needs, and develop a plan that works for your business.

If you have questions regarding your small business accounting, ABA Tax Accounting is always here. Call us for a free consultation at 651-300-4777.