Month: November 2023

Preface: “Give thanks for a little, and you will find a lot.”–Hausa Proverb

What’s New in Tax Deductions and Credits for Tax Year 2023?

Credit: Benjamin Gelbart

Tax Year 2023 sees the continuation of the Tax Cuts and Jobs Act of 2017 (TCJA) and the end of COVID-related Tax Relief introduced in the Tax Relief Act of 2020 and the Consolidated Appropriations Act of 2021.

Among other things, this means no deductions are available for unreimbursed employee expenses or for non-business casualty loss outside of federally declared disasters. Moving expenses are only deductible for qualified active-duty members of the Armed Forces. Itemized deduction of state and local tax is still limited to $10,000. There is no deduction for charitable giving outside of itemized deductions.

Read blog here……

What’s New in Tax Deductions and Credits for Tax Year 2023

 

Preface: “Reflect upon your present blessings — of which every man has many — not on your past misfortunes, of which all men have some.” — Charles Dickens

Grateful Blessings This Thanksgiving Season

As Thanksgiving draws near, we find ourselves reflecting on the blessings we’ve received throughout the year, and at the forefront of those blessings is the privilege of serving clients like you. Our hearts are filled with gratitude for the trust and faith you’ve placed in Sauder & Stoltzfus.

During this season of giving thanks, we want to express our heartfelt appreciation for the opportunity to work alongside you in managing your financial stewardship. Your commitment to integrity and principled financial management aligns seamlessly with the values we hold dear.

As we gather with our loved ones to celebrate the abundance of God’s grace, we want to extend our warmest wishes to you and your family. May your Thanksgiving be a time of joy, reflection, and moments of profound gratitude for the blessings in your life.

Thank you for being an essential part of the Sauder & Stoltzfus family. We look forward to continuing our journey together and supporting you in your financial endeavors.

Wishing you a blessed and Happy Thanksgiving!

Preface: “Be the person your dog thinks you are.” – C.J. Frick

The Intersection of Pennsylvania Puppy Sales and Taxes

Credit: Benuel Glick, EA

Snapshot of Sales Tax History

The Attica region of Greece was imposing sales tax on certain good(s) as early as 415 BC., according to the book, Ancient Greece, by Matthew Dillon and Lynda Garland. Other literature has indicated that certain forms of sales tax were imposed much earlier perhaps during the middle to late Bronze Age. Scholars have also noted that sales tax was imposed in the Roman Republic during emporer Augustus’ rule. It is good to have some perspective on history less we mistakenly think sales and use tax is merely a modern concept. Although not a contemporary invention, it is alive and well in the United States of America today………     Sales Tax on Puppy Sales

Preface: “Do not save what is left after spending, but spend what is left after saving”. – Warren Buffett

Health Savings Accounts (HSAs) in a Nutshell

Credit: Benjamin Gelbart

A Health Savings Account (HSA) is a tax advantaged savings account available to taxpayers who participate in a High Deductible Health Plan (HDHP) and who are not enrolled in any other health insurance, including Medicare.

An HSA is an investment account similar to a retirement savings account or a college savings account. The money contributed to it is invested and the investments grow tax-free for the life of the account. Withdrawals from the account are also tax-free as long as they are used for the intended purpose of the account, which in the case of an HSA is qualified medical expenses.
Unlike money contributed to a Flexible Savings Accounts or cafeteria plan, funds in an HSA are never lost just because they are not used by a certain date.

While a taxpayer cannot open an HSA without having an HDHP, once money has been contributed to the HSA, it continues to be available for withdrawal and is tax-free if used for qualified medical expenses even after the taxpayer is no longer enrolled in the HDHP and is no longer eligible to make contributions. Nor is there any required minimum distribution. The funds may be used to cover qualified medical expenses originating at any date after the HSA was established and funded. HSAs can even be used to reimburse the taxpayer for expenses that have already been paid out of pocket.

The tax benefits of HSAs are threefold:
– Contributions are deducted from your taxable income.
– The contributions, once invested, grow tax-free.
– Withdrawals from the account are tax-free as long as they are used for qualified medical expenses.

HSAs come in two flavors: individual and family. The family HSA has a deductible, annual contribution limit, and annual withdrawal limit that are larger than those for an individual: For 2023:  Individual HSA
annual contribution limit $3,850 ($4,850 if age > 55) Deductible $1,500 withdrawal limit  $7,500.  Family HSA annual contribution limit $7,750 ($8,750 if age > 55)  Deductible $3,000 annual withdrawal limit $7,500.

Note that combined contributions of a married couple cannot exceed the family coverage limit.

Excess contributions are subject to an excise tax of 6%. This excise tax is avoided if the excess contribution is withdrawn before the end of the year. Non-qualified withdrawals are subject to ordinary income tax plus a 20% penalty. The penalty (but not the ordinary income tax) is waived for taxpayers who are disabled or are of age 65 or older.

Taxpayers who have an HDHP through their employer will usually have contributions to their HSA deducted automatically from their paychecks. The contributed amount will not be included in their taxable income. The total amount of contributions made in a tax year will appear on the taxpayer’s W-2 in Box 12 with the code “W.” Because this kind of contribution is done at the payroll level, it also reduces FICA (Social Security and Medicare) payroll tax.

Taxpayers may also make direct contributions to their HSAs, as long as the total amount of contributions does not exceed the annual limit. Direct contributions can then be deducted from taxable income at tax time.

Tax Strategy: Another way to contribute to an HSA is to roll over funds from an IRA. However, this can can be done only once in a taxpayer’s lifetime.

Preface: “It’s fine to celebrate success but it is more important to heed the lessons of failure.”- Bill Gates

Weighing the Pros and Cons of Purchasing an Existing Business 

Credit: Jim McKinley

Entrepreneurship can be a challenging journey, but buying an existing business can be a shortcut to success. No matter how tempting it may be to start a new business from scratch, buying an existing business is often the best option for entrepreneurs who want to hit the ground running. However, it’s important to weigh the pros and cons before you make a decision. This guide shared by Sauder & Stoltzfus explores both sides of the coin. 

Pros of Buying an Existing Business 

Established Customer Bases 

One of the biggest advantages of buying an existing business is that it already has an established customer base. This means that you don’t have to spend time building your customer base from scratch. Established businesses have loyal customers who know and trust the brand. This can save you a lot of time and money on marketing and advertising. 

Established Brand You Can Build Upon 

Another advantage of buying an existing business is that it already has an established brand. This means that you don’t have to spend time and money creating a new brand identity. You can build upon the existing brand and make it even stronger. 

Learn From the Mistakes of Others 

Before buying a small business, thorough preparation is key to ensure success and longevity. Start by conducting a comprehensive due diligence process to understand the business’s financial health, competitive landscape, and potential growth opportunities. Understanding why do small businesses fail can provide valuable insights into common pitfalls to avoid. For instance, poor cash flow management, lack of market demand, and inadequate business planning are frequent reasons for failure. Additionally, consult with professionals such as lawyers, business brokers, and Sauder & Stoltzfus to ensure you’re making informed decisions. By taking these steps, you can position yourself for a successful transition into small business ownership. 

Infrastructure in Place to Get Started 

Buying an existing business also means that there is already infrastructure in place. This can make it much easier to get started. For example, the business may already have an office, equipment, and employees. This can save you time and money on setting up a new business. 

Easily Promote a Change in Ownership 

When you buy an existing business, you can easily promote the change in ownership by using online tools to create content marketing posts and share them online. There are many online resources available that can help you with the process. 

Cons of Buying an Existing Business 

Higher Upfront Cost 

One of the biggest disadvantages of buying an existing business is that it has a higher upfront cost. You will likely have to pay more than you would if you were starting a new business from scratch. However, buying an existing business can be more profitable in the long run. 

Unforeseen Liabilities That Can Impact Profitability 

Another disadvantage of buying an existing business is that there may be unforeseen liabilities that can impact profitability. For example, the business may have outstanding debts or legal issues that you are not aware of. Credit reporting can be helpful. It’s important to do your due diligence and thoroughly research the business before making a purchase. 

Limit Your Flexibility In Making Changes 

Buying an existing business also means that you may be limited in making changes. The business already has established policies and procedures that may be difficult to change. This can be frustrating for entrepreneurs who want to put their own stamp on the business. 

Buying an existing business can be a great way to become an entrepreneur. It can save you time and money, and give you a head start in building a successful business. However, it’s important to weigh the pros and cons before making a decision. Consider the existing customer base, established brand, infrastructure in place, and the opportunity to hone your skills while running the business. At the same time, be aware of the higher upfront cost, unforeseen liabilities, and limitations on making changes. With careful consideration, you can make an informed decision that’s right for you and your business.