Category: Uncategorized

Preface: “It is really important that companies prioritize strategic financial planning because this empowers them to navigate economic challenges with foresight and resilience.” – Hendrith Vanlon Smith Jr.

Financial Foresight: How to Engineer a Future-Proof Business Model

Credit: Claire Wentz

In an ever-shifting business landscape, identifying and rectifying financial and operational weaknesses is beneficial and imperative for enduring success. This comprehensive guide from Sauder & Stoltzfus delves into eight pivotal strategies to help business owners effectively overcome the myriad challenges they face.

Use these tips to bolster your enterprise’s stability and growth potential. And remember to remain ever adaptable as you navigate the treacherous business terrain in the modern era.

Unveiling Financial Statement Insights
A detailed analysis of financial statements is more than a cursory glance at numbers; it’s a deep dive into the economic heartbeat of your business. By methodically examining these documents, you can uncover hidden issues, track financial trends, and identify areas ripe for improvement. This process is essential in building a solid financial foundation for your business.

The Digital Leap in Document Management
Embracing a digital documentation system marks a significant shift for any enterprise. Incorporating these tools streamlines workflow, helps you analyze costs, fortifies document security, expands accessibility, and more.
In an era where efficiency is paramount, you might want to try using a PDF file converter to simplify and accelerate document handling; doing so will keep your business agile and well-organized. This digital leap aligns with the demands of the modern business landscape and paves the way for a more sustainable and adaptable operational model.

Critical Examination of Cash Flow
Cash flow analysis is a crucial exercise for any business. Meticulously examining the inflows and outflows of cash helps you clearly understand your business’s liquidity position. This insight is vital for making informed decisions, ensuring financial health, and identifying potential risk areas before they become problematic.

The Power of Automation and AI
Integrating the latest, most powerful technologies into your business operations can revolutionize the way you work. Cutting-edge AI tools do more than just streamline processes; they drastically improve precision and efficiency.

Adopting automation and generative AI allows your business to transform, enabling more focused and effective strategic growth and decision-making. This integration not only propels your operations into the future but also unlocks new possibilities for innovation and competitive advantage.

Inventory Management: A Delicate Balance
Optimal inventory management is vital for maintaining both operational efficiency and financial equilibrium. Through consistent evaluations, you can steer clear of the common issues of overstocking or understocking, aligning your inventory precisely with market demand. Achieving this equilibrium is crucial not only for sustaining a streamlined and productive operation but also for minimizing unnecessary costs, thereby enhancing your business’s overall financial health.

Ensuring Timely Accounts Receivable
Vigilant monitoring of accounts receivable is essential for sustaining a stable cash flow, a critical component for any thriving business. You can quickly identify and rectify potential payment delays through diligent oversight, guaranteeing a regular and dependable flow of revenue. Such attentiveness contributes to the seamless operation of your business while fortifying its financial well-being and acting as a safeguard against unforeseen fiscal challenges.

Strategic Vendor Contract Analysis
Consistently re-evaluating and negotiating vendor contracts is a strategic approach that can result in substantial cost reductions and more favorable terms. This key element of vendor management directly impacts your financial outcomes, emphasizing the importance of securing the most advantageous deals possible. Engaging in regular contract analysis and negotiation provides immediate financial relief and paves the way for enduring fiscal benefits and solidifies beneficial partnerships with vendors.

Collaboration with CPA Firms for Enhanced Insight
Collaborating with a distinguished CPA firm like Sauder & Stoltzfus can infuse your financial strategy with priceless external proficiency. Such a partnership introduces a new viewpoint and enhances your ability to traverse intricate financial terrains with increased assurance and depth of understanding.

Operating from the expertise of an entrepreneur-centric CPA firm is crucial in honing your financial tactics. It also plays a key role in maintaining adherence to regulatory standards and safeguards your business against potential compliance issues.

Final Thoughts
In the ever-evolving landscape of today’s business world, proactively tackling financial and operational vulnerabilities is more than a mere necessity; it is a blueprint for achievement. Adopting these eight key strategies equips your business to navigate present challenges and excel in a competitive marketplace. Embracing these tactics will strengthen the core of your business, laying the groundwork for enduring growth and setting the stage for a future marked by resilience and prosperity.

 

As we approach the joyous season of Christmas and the dawn of a New Year, we want to extend our warmest greetings and heartfelt thanks for entrusting Sauder & Stoltzfus, CPA with your financial needs. It has been a privilege to serve you, and we are grateful for the blessings of your partnership.

Christmas is a time of reflection, gratitude, and the celebration of love and faith. In the spirit of this season, we want to express our sincere appreciation for the trust you have placed in us. Your support has been a source of inspiration, and we feel truly blessed to have clients like you.

May this Christmas bring you moments of joy, peace, and the warmth of family and friends. As we eagerly anticipate the New Year, we pray it unfolds with abundant blessings, prosperity, and opportunities for growth.

Thank you for choosing Sauder & Stoltzfus. We wish you a Merry Christmas filled with the love of Christ and a New Year filled with His grace, prosperity, and joy.

The Team at Sauder & Stoltzfus

Preface: “The art of living easily as to money is to pitch your scale of living one degree below your means.” – Sir Henry Taylor

2023 Tax Planning: Itemized Deductions

There are two ways you can take deductions on your federal income tax return: you can itemize deductions or use the standard deduction. Deductions reduce the amount of your taxable income.

The standard deduction amount varies depending on your income, age, whether or not you are blind, and your filing status. The amount is also adjusted annually for inflation.

Certain taxpayers cannot use the standard deduction:

• • • • A married individual filing separately whose spouse itemizes deductions.
      • An individual who files a tax return for a period of less than 12 months because of a change in his or her annual accounting period.
      • An individual who was a nonresident alien or a dual-status alien during the year. However, nonresident aliens who are married to a U.S. citizen or resident alien at the end of the year and who choose to be treated as U.S. residents for tax purposes can take the standard deduction.

 Itemized deductions include amounts you paid for state and local income or sales taxes, real estate taxes, personal property taxes, mortgage interest, and disaster losses from a Federally declared disaster. You may also include gifts to charity and part of the amount you paid for medical and dental expenses. You would usually benefit by itemizing if you:

• • • • Cannot use the standard deduction or the amount you can claim is limited
      • Had large uninsured medical and dental expenses
      • Paid interest or taxes on your home
      • Had large “other” deductions
      • Had large uninsured casualty or theft losses from a Federally declared disaster
      • Made large contributions to qualified charities

 The higher standard deduction under Tax Reform means fewer taxpayers are itemizing their deductions. However, taxpayers may have an opportunity to itemize this year by keeping these tips in mind:

Deducting state and local income, sales and property taxes. The deduction that taxpayers can claim for state and local income, sales and property taxes is limited. This deduction is limited to a combined, total deduction of $10,000. It is $5,000 if married filing separately. Any state and local taxes paid above this amount cannot be deducted.

Refinancing a home. The deduction for mortgage interest is also limited. It’s limited to interest paid on a loan secured by the taxpayer’s main home or second home. For homeowners who choose to refinance, they must use the loan to buy, build, or substantially improve their main home or second home, and the mortgage interest they may deduct is subject to the limits described in the next bullet under “buying a home.”

Buying a home. People who buy a new home this year can only deduct mortgage interest they pay on a total of $750,000 in qualifying debt for a first and second home ($375,000 if married filing separately). For existing mortgages, if the loan originated on or before December 15, 2017, taxpayers continue to deduct interest on a total of $1 million in qualifying debt secured by first and second homes.

Donating items and deducting money. Many taxpayers often find unused items in good condition they can donate to a qualified charity. These donations may qualify for a tax deduction. Taxpayers must have proof of all cash and non-cash donations.

Deducting mileage for charity. Driving a personal vehicle while donating services on a trip sponsored by a qualified charity could qualify for a tax break. Itemizers can deduct 14 cents per mile for charitable mileage driven in 2023.

If you have any questions related to itemized deductions or tax planning in general, please call our office.

Preface: “The best and most beautiful things in the world cannot be seen or even touched. They must be felt with the heart. Wishing you happiness.” — Helen Keller

Tax highlights for 2023 tax filing

Standard Deduction

The standard deduction is adjusted for inflation for 2023 as follows:
• Joint filers – $27,700
• Individual taxpayers – $13,850
• Heads of household – $20,800

Non-Profit Contributions

The tax provisions for above-the-line charitable deduction for non-itemizers introduced in 2020 was effective only for tax years 2020 and 2021. Unless modifications are introduced to 2023 tax codes, it is completely phased out for the 2023 tax year. Therefore, only taxpayers who are itemizing deductions can obtain charitable contribution benefits for taxes in 2023.

Mileage Rates

The 2023 mileage rate for business purposes is 65.5¢ per mile. The rate for miles driven for medical purposes or moving purposes for qualified active-duty members of the Armed Forces is 22¢ per mile. The rate for miles driven in service of charitable organizations is 14¢ per mile.
Gift and Estates Taxes

The annual gift tax exclusion for 2023 increases from $16,000 to $17,000 per taxpayer. So, an individual can give up to $17,000 ($34,000 with spouse) to each child, grandchild or any other taxpayer in 2023 without being required to file a gift tax return. The lifetime estate and gift tax exemption for 2023 increases from $12.06 million to $12.92 million ($25.84 million with spouse).

Capital Gain Tax Rates

For 2023, similar to prior years, a 0% long-term capital gain tax rate applies for individual taxpayers with up to $$44,624 of taxable earnings (joint filers up to $89,249). The capital gain rate jumps to 15% for income from $44,625 to $492,299 (joint filers $89,250 to $553,849. For income above those thresholds, the long-term capital gain rate is 20%.

A 3.8% surtax on net investment income continues in 2023 for individual taxpayers with Adjusted Gross Income (AGI) above $200,000 and joint filers with AGI above $250,000.

Child Tax Credit

The child tax credit remains $2,000 for each qualifying child who was under the age of 17 at the end of 2023. The Credit for Other Dependents remains $500 for each qualifying child who was 17 or 18 years old the end of 2023 or was a student not yet of age 24 at the end of that year, or was of any age but permanently and totally disabled. The $500 credit is also available for qualifying relatives whose gross income was less than $4,700.

Form 4029 Exemption

If a taxpayer with a valid Form 4029 leaves one 4029 exempt fellowship or conference and joins another 4029 exempt fellowship or conference, the IRS would like the taxpayer to file a new 4029. If the taxpayer is merely switching congregations within the same fellowship or conference, there is no need to file a new 4029. If you are 4029 exempt but are in a different fellowship or conference than when you originally applied for the exemption, then please file a new exemption if you wish to remain exempt.

Energy Efficient Home Improvement Credit

The Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit have been extended through 2023. Payments to install qualifying electric, water heating, or temperature control systems for your home that use solar, wind, geothermal, biomass, or fuel cell power qualify for an energy credit that has increased to 30% starting in 2023.

Educator Deductions

Teachers may claim an educator deduction for unreimbursed qualified classroom expenses up to $300 for 2023. For married couples filing jointly where both spouses are eligible educators, the $300 limit applies separately to each. An “eligible educator” is any taxpayer who is a kindergarten through 12th grade teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year. Homeschooling educational expenses do not qualify.

IRA Contributions, Allowable Deductions, and Required Minimum Distributions

The Contribution limit for Traditional and Roth IRAs in 2023 is $6,500 for taxpayers under the age of 50 at the end of 2023, and $7,500 for individuals age 50 and older. The limit is for the combined total of Traditional and Roth IRA contributions during the year.

Contributions allowed to Roth IRAs are reduced for single filers earning more than $138,000 and for married couples earning more than $218,000. The possibility of contributing to a Roth IRA is phased out completely for single filers earning more than $153,000 and for married couples earning more than $228,000.

While contributions to Roth IRAs are not deductible, contributions to Traditional IRA are usually fully deductible for taxpayers who are not enrolled in a job-related qualified retirement plan such as a 401(k).

For a taxpayer who is enrolled in a qualified plan, deductions for contributions to a traditional IRA will begin to phase out for a single filer who earns more than $73,000, and for a married filer who earns more than $116,000. The ability to deduct any part of a contribution to a Traditional IRA phases out completely for a taxpayer enrolled in a qualified plan filing single who earns more than $83,000, and married filing jointly who earns more than $136,000.

A married taxpayer filing jointly who is not enrolled in a qualified plan but whose spouse is, will have a limited ability to deduct contributions to a traditional IRA if the couple’s combined income is greater than $218,000. The non-participating spouse’s ability to deduct for Traditional IRA contributions phases out completely if the couple’s combined income is greater than $228,000

Required Minimum Distributions from Traditional IRAs now begin at age 73. Taxpayers born in 1950 or earlier who have money in a Traditional IRA will need to make the Required Minimum Distribution for tax year 2023. The penalty for not doing so is now 25% of the amount not distributed. This penalty can be reduced to 10% if the taxpayer withdraws all of the required amount within two years.
Research and Experimental Expenses

For 2023, tax laws will require businesses to amortize research and experimental payments. The amortization period is 5 years for domestic activities and 15 years for activities outside the U.S.

Adoption of a Child

For 2023, the adoption credit is available for up to $15,950 of qualified expenses. The full credit is available for a special-needs adoption, even if the adoption costs less. The credit begins to phase out for taxpayers with adjusted AGIs above $239,230 and is completely phased out at $279,230.

Student Loan Forgiveness

In June 2023, the U.S. Supreme Court struck down President Biden’s student loan debt forgiveness plan. However, some student loans are being forgiven under a number of other, less ambitious plans. The American Rescue Plan Act of 2021 excludes student loan forgiveness from taxable income through 2025.

Digital Assets

All taxpayers must state on Form 1040 whether they received, sold, or otherwise exchanged any digital assets during the year. This includes cryptocurrency, stablecoin, non-fungible tokens, and other digital assets. Such assets are taxed much the same as stocks and other capital assets. There is still no requirement for brokers to issue Form 1099-B for digital asset transactions.

Preface: The desire of gold is not for gold. It is for the means of freedom and benefit. –Ralph Waldo Emerson

Reporting and Taxation for Investors in Precious Metals

Credit: Benjamin Gelbart

The term “precious metals” generally means gold and silver, but also includes other metals such as platinum and titanium.

Investment grade precious metal that has been refined to high levels of purity is known as bullion. Bullion includes both coins and bars.
Sale of bullion is taxed as a capital gain or loss in a way similar to other investments like commodities or stocks. This means that you must report not when you buy, but when you sell the investment. If the amount of the sale is greater than the amount of your original purchase, you have a capital gain. If it is smaller, you have a capital loss.

When reporting the sale of precious metals, as with similar investments, you must include five data points:

1) A description of the asset
2) The original date of purchase
3) The cost or other basis of the purchase
4) The date of sale
5) Proceeds from the sale (net of transaction costs)

Gain on assets held for more than one year are considered long-term. Precious metals are considered collectibles, which means that their long-term gains cannot be taxed at more than 28%. Ordinary tax rates in 2023 range from 10% to 37% depending on your income. So the rate cap on long-term gains from collectibles will only make a difference to taxpayers whose total income is large enough to put them in a tax bracket of over 28%.
Gain on an asset held for a year or less is considered short-term and is in any case taxed at ordinary rates.

Note that all transactions that result in capital gains or losses should be reported. Despite any rumors you may have heard, there is no minimum threshold that would except you from having to report a capital transaction.
Exchange traded funds that hold precious metals are likewise considered collectibles for tax purposes. However, stock in companies than mine precious metals are not.

Another issue to consider when investing in precious metals is that certain types of coins, when sold in certain quantities greater than certain amounts, require that the seller issue a form 1099-B to report the sale. This is not an additional tax, it is just an additional filing requirement. The quantities that require the seller to issue a 1099-B differ depending on the type of coin or bar sold. When required, form 1099-B must be filed by January 31 following the year the sale is made.

The types of precious metals sales that would require you to issue a 1099-B are determined by the Commodity Futures Trading Commission. Experienced precious metals traders are also a good source of information on this topic and often maintain their own lists.

Note that whether or not the sale you make requires you to issue a 1099-B, it must in any case be reported on your income tax return.

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.