Would an adoption assistance program suit your company?
There’s no one-size-fits-all benefits package for today’s businesses. The optimal combination of tax-friendly fringe benefits depends on various factors, including the size and demographics of your workforce. One option to consider, if you haven’t already, is an adoption assistance program.
Purpose and covered expenses
The purpose of adoption assistance programs is to provide participants with payments or reimbursements for qualified adoption expenses. Under the Internal Revenue Code, such programs must adhere to formal, written plan documents that specify the terms under which payments or reimbursements will be provided.
Adoption assistance programs are generally funded by employers. Because of the relatively limited number of potential participants, they’re often offered as a menu item in cafeteria plans.
To qualify for favorable tax treatment, program benefits must be provided, as mentioned, under a written plan document. In addition, all eligible employees must be notified about the program’s existence — even if they’re unlikely to be interested in participating. Businesses can’t set up programs to discriminate in favor of owners, officers or highly paid employees.
Qualified adoption expenses must be “reasonable and necessary” and meet other requirements. Some expenses typically covered under an adoption assistance program include:
- Adoption agency fees,
- Court costs,
- Attorneys’ fees,
- Travel costs (including meals and lodging), and
- Additional expenses incurred to adopt a foreign child.
Programs may set annual or lifetime limits on the dollar amount of benefits that participants can receive.
Tax and nontax advantages
Normally, taxpayers can claim a credit for qualified adoption expenses on their federal tax returns, up to a stated annual limit. Although the credit isn’t available for payments or reimbursements received through an employer’s adoption assistance program, qualified adoption expenses reimbursed through an eligible program are tax-free to employees up to the program’s stated limit.
Let’s back up. Under the Internal Revenue Code, an employee can exclude from tax up to a maximum of $16,810 in eligible adoption expenses in 2024. This amount is exempt from income tax withholding and “FICA” tax (payroll tax under the Federal Insurance Contributions Act). In 2024, FICA tax is 6.2% on the first $168,600 of wages along with a 1.45% Medicare tax. These rates also apply to the employer’s share of FICA tax. (Note: There’s no exclusion for federal unemployment tax under the Federal Unemployment Tax Act, commonly referred to as “FUTA.”)
However, you may establish your own annual limits on qualified adoption expense payments or reimbursements under the program (and in the plan document) that are less than the federal maximum exclusion amount — for instance $5,000 or $10,000. If you choose this option, a portion of the benefits that participants receive may be subject to taxes. Also, you’re responsible for reporting payment or reimbursement amounts to participating employees on their Forms W-2, “Wage and Tax Statement.”
Bear in mind that businesses can’t claim a tax credit for paying or reimbursing adoption expenses. However, as with other fringe benefits, companies generally can deduct expenses incurred to launch and administer the program.
There are also nontax advantages to adoption assistance programs. Many companies add them to their cafeteria plan menu to help attract a wider array of job candidates. Programs that make adoption more affordable can also increase staff loyalty and enhance your employer brand as a family-friendly business that respects work-life balance.
One option among many
Again, an adoption assistance program represents just one type of fringe benefit among many possibilities. But if it’s something that your employees would value — and that would likely draw quality job candidates in your industry — you should probably take a closer look. We can help you assess the costs, potential advantages and risks, and tax impact of any fringe benefit your business is considering.
© 2024
The possible tax landscape for businesses in the future
Get ready: The upcoming presidential and congressional elections may significantly alter the tax landscape for businesses in the United States. The reason has to do with a tax law that’s scheduled to expire in about 17 months and how politicians in Washington would like to handle it.
How we got here
The Tax Cuts and Jobs Act (TCJA), which generally took effect in 2018, made extensive changes to small business taxes. Many of its provisions are set to expire on December 31, 2025.
As we get closer to the law sunsetting, you may be concerned about the future federal tax bill of your business. The impact isn’t clear because the Democrats and Republicans have different views about how to approach the various provisions in the TCJA.
Corporate and pass-through business rates
The TCJA cut the maximum corporate tax rate from 35% to 21%. It also lowered rates for individual taxpayers involved in noncorporate pass-through entities, including S corporations and partnerships, as well as from sole proprietorships. The highest rate today is 37%, down from 39.6% before the TCJA became effective.
But while the individual rate cuts expire in 2025, the law made the corporate tax cut “permanent.” (In other words, there’s no scheduled expiration date. However, tax legislation could still raise or lower the corporate tax rate.)
In addition to lowering rates, the TCJA affects tax law in many other ways. For small business owners, one of the most significant changes is the potential expiration of the Section 199A qualified business income (QBI) deduction. This is the write-off for up to 20% of QBI from noncorporate entities.
Another of the expiring TCJA business provisions is the gradual phaseout of first-year bonus depreciation. Under the TCJA,100% bonus depreciation was available for qualified new and used property that was placed in service in calendar year 2022. It was reduced to 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026 and 0% in 2027.
Potential Outcomes
The outcome of the presidential election in three months, as well as the balance of power in Congress, will determine the TCJA’s future. Here are four potential outcomes:
- All of the TCJA provisions scheduled to expire will actually expire at the end of 2025.
- All of the TCJA provisions scheduled to expire will be extended past 2025 (or made permanent).
- Some TCJA provisions will be allowed to expire, while others will be extended (or made permanent).
- Some or all of the temporary TCJA provisions will expire — and new laws will be enacted that provide different tax breaks and/or different tax rates.
How your tax bill will be affected in 2026 will partially depend on which one of these outcomes actually happens and whether your tax bill went down or up when the TCJA became effective years ago. That was based on a number of factors including your business income, your filing status, where you live (the SALT limitation negatively affects taxpayers in certain states), and whether you have children or other dependents.
Your tax situation will also be affected by who wins the presidential election and who controls Congress because Democrats and Republicans have competing visions about how to proceed. Keep in mind that tax proposals can become law only if tax legislation passes both houses of Congress and is signed by the President (or there are enough votes in Congress to override a presidential veto).
Look to the future
As the TCJA provisions get closer to expiring, and the election gets settled, it’s important to know what might change and what tax-wise moves you can make if the law does change. We can answer any questions you have and you can count on us to keep you informed about the latest news.
© 2024
Do you owe estimated taxes? If so, when is the next one due?
Federal estimated tax payments are designed to ensure that certain individuals pay their fair share of taxes throughout the year. If you don’t have enough federal tax withheld from your paychecks and other payments, you may have to make estimated tax payments. This is the case if you receive interest, dividends, self-employment income, capital gains, a pension or other income that’s not covered by withholding.
Individuals must pay 25% of a “required annual payment” by April 15, June 15, September 15, and January 15 of the following year, to avoid an underpayment penalty. If one of those dates falls on a weekend or holiday, the payment is due on the next business day.
So the third installment for 2024 is due on Monday, September 16 because the 15th falls on a Sunday. Payments are made using Form 1040-ES.
The amount due
The required annual payment for most individuals is the lower of 90% of the tax shown on the current year’s return or 100% of the tax shown on the return for the previous year. However, if the adjusted gross income on your previous year’s return was more than $150,000 ($75,000 if you’re married filing separately), you must pay the lower of 90% of the tax shown on the current year’s return or 110% of the tax shown on the return for the previous year.
Most people who receive the bulk of their income in the form of wages satisfy these payment requirements through the tax withheld by their employers from their paychecks. Those who make estimated tax payments generally do so in four installments. After determining the required annual payment, divide that number by four and make four equal payments by the due dates.
But you may be able to use the annualized income method to make smaller payments. This method is useful to people whose income flow isn’t uniform over the year, perhaps because of a seasonal business. For example, if your income comes exclusively from a business operated in a resort area during June, July, and August, no estimated payment is required before September 15.
The underpayment penalty
If you don’t make the required payments, you may be subject to an underpayment penalty. The penalty equals the product of the interest rate charged by the IRS on deficiencies, times the amount of the underpayment for the period of the underpayment.
However, the underpayment penalty doesn’t apply to you if:
- The total tax shown on your return is less than $1,000 after subtracting withholding tax paid;
- You had no tax liability for the preceding year, you were a U.S. citizen or resident for that entire year, and that year was 12 months;
- For the fourth (January 15) installment, you file your return by that January 31 and pay your tax in full; or
- You’re a farmer or fisherman and pay your entire estimated tax by January 15, or pay your entire estimated tax and file your tax return by March 1.
In addition, the IRS may waive the penalty if the failure was due to casualty, disaster or other unusual circumstances and it would be inequitable to impose the penalty. The penalty can also be waived for reasonable cause during the first two years after you retire (and reach age 62) or become disabled.
We can help
Contact us if you need help figuring out your estimated tax payments or you have other questions about how the rules apply to you.
© 2024
Businesses should stay grounded when using cloud computing
For a couple decades or so now, companies have been urged to “get on the cloud” to avail themselves of copious data storage and a wide array of software. But some businesses are learning the hard way that the seemingly sweet deals offered by cloud services providers can turn sour as hoped-for cost savings fail to materialize and dollars left on the table evaporate into thin air.
Unclaimed discounts
One source of the trouble was revealed in a report entitled 2024 Effective Savings Rate Benchmarks and Insights, released earlier this year by cloud solution provider ProsperOps.
After analyzing $1.5 billion worth of Amazon Web Services (AWS) bills submitted to hundreds of organizations over a 12-month period, the report writers found that more than half of those organizations neglected to claim discounts baked into their cloud computing deals. As a result, the organizations paid full on-demand rates for “compute” services, such as data processing and computer memory, resulting in unnecessarily high costs.
The predicament reveals a key risk of cloud computing arrangements — particularly with major providers such as AWS, Microsoft Azure and Google Cloud: They’re complicated. Among the chief advantages of the cloud is that it’s scalable; companies can expand or diminish their computing services as their needs dictate. But with scalability, and other cloud functions, comes intense billing complexity that makes it difficult to control costs.
Best practices
So, what can your business do to ensure high cloud costs don’t rain on your parade? Here are a few best practices:
Know what you’re getting into. Just as you would for any other business contract, be sure you, your leadership team and your professional advisors thoroughly review and approve the terms of a cloud services agreement. Generally, the more predictable the pricing, the better.
Get familiar with your bill. Cloud computing invoices can be just as complex as the contracts, if not more so. Dedicate the time and resources to training yourself and other pertinent staff members to be able to read and understand your bill. If something seems inaccurate or difficult to understand, contact your provider for clarification.
Identify discounts … and claim them! If there’s one clear lesson from the aforementioned report, it’s that discounts matter and you should do everything in your power not to leave them on the table. Customers often have three types of savings “levers” to choose from: commitment-based discounts, volume-based discounts and enterprise discount programs.
Learn as much as you can about those offered by your provider. Then use carefully identified metrics to determine eligibility for discounts and claim them when you qualify. Many cloud computing platforms have built-in dashboards that enable you to visualize various metrics. Or you may be able to access a third-party dashboard via a web browser.
Review overall usage. At least once a year, take a broad look at precisely how you’re using the cloud. You may be able to scale down and save money. Also look for unused resources. If you’re paying for a service or certain type of software that you’re not using, ask your provider to discontinue it.
Find the savings
For many types of businesses, cloud computing has become a mission-critical resource. Whether this describes your company or you’re just using the cloud for efficiency and convenience, it likely represents a significant expense that you should manage carefully. Our firm can help you assess the costs — and identify the potential savings — of your current cloud computing arrangement or a prospective one.
© 2024
Understanding taxes on real estate gains
Let’s say you own real estate that has been held for more than one year and is sold for a taxable gain. Perhaps this gain comes from indirect ownership of real estate via a pass-through entity such as an LLC, partnership or S corporation. You may expect to pay Uncle Sam the standard 15% or 20% federal income tax rate that usually applies to long-term capital gains from assets held for more than one year.
However, some real estate gains can be taxed at higher rates due to depreciation deductions. Here’s a rundown of the federal income tax issues that might be involved in real estate gains.
Vacant land
The current maximum federal long-term capital gain tax rate for a sale of vacant land is 20%. The 20% rate only hits those with high incomes. Specifically, if you’re a single filer in 2024, the 20% rate kicks in when your taxable income, including any land sale gain and any other long-term capital gains, exceeds $518,900. For a married joint-filing couple, the 20% rate kicks in when taxable income exceeds $583,750. For a head of household, the 20% rate kicks when your taxable income exceeds $551,350. If your income is below the applicable threshold, you won’t owe more than 15% federal tax on a land sale gain. However, you may also owe the 3.8% net investment income tax (NIIT) on some or all of the gain.
Gains from depreciation
Gain attributable to real estate depreciation calculated using the applicable straight-line method is called unrecaptured Section 1250 gain. This category of gain generally is taxed at a flat 25% federal rate, unless the gain would be taxed at a lower rate if it was simply included in your taxable income with no special treatment. You may also owe the 3.8% NIIT on some or all of the unrecaptured Section 1250 gain.
Gains from depreciable qualified improvement property
Qualified improvement property (QIP) generally means any improvement to an interior portion of a nonresidential building that’s placed in service after the date the building is placed in service. However, QIP does not include expenditures for the enlargement of the building, elevators, escalators or the building’s internal structural framework.
You can claim first-year Section 179 deductions or first-year bonus depreciation for QIP. When you sell QIP for which first-year Section 179 deductions have been claimed, gain up to the amount of the Section 179 deductions will be high-taxed Section 1245 ordinary income recapture. In other words, the gain will be taxed at your regular rate rather than at lower long-term gain rates. You may also owe the 3.8% NIIT on some or all of the Section 1245 recapture gain.
What if you sell QIP for which first-year bonus depreciation has been claimed? In this case, gain up to the excess of the bonus depreciation deduction over depreciation calculated using the applicable straight-line method will be high-taxed Section 1250 ordinary income recapture. Once again, the gain will be taxed at your regular rate rather than at lower long-term gain rates, and you may also owe the 3.8% NIIT on some or all of the recapture gain.
Tax planning point: If you opt for straight-line depreciation for real property, including QIP (in other words, you don’t claim first-year Section 179 or first-year bonus depreciation deductions), there won’t be any Section 1245 ordinary income recapture. There also won’t be any Section 1250 ordinary income recapture. Instead, you’ll only have unrecaptured Section 1250 gain from the depreciation, and that gain will be taxed at a federal rate of no more than 25%. However, you may also owe the 3.8% NIIT on all or part of the gain.
Plenty to consider
As you can see, the federal income tax rules for gains from sales of real estate may be more complicated than you thought. Different tax rates can apply to different categories of gain. And you may also owe the 3.8% NIIT and possibly state income tax, too. We will handle the details when we prepare your tax return. Contact us with questions about your situation.
© 2024
New option for unused funds in a 529 college savings plan
With the high cost of college, many parents begin saving with 529 plans when their children are babies. Contributions to these plans aren’t tax deductible, but they grow tax deferred. Earnings used to pay qualified education expenses can be withdrawn tax-free. However, earnings used for other purposes may be subject to income tax plus a 10% penalty.
What if you have a substantial balance in a 529 plan but your child doesn’t need all the money for college? Perhaps your child decided not to attend college or received a scholarship. Or maybe you saved for private college, but your child attended a lower-priced state university.
What should you do with unused funds? One option is to pay the tax and penalties and spend the money on whatever you wish. But there are more tax-efficient options, including a new 529-to-Roth IRA transfer.
Nuts and bolts
Beginning in 2024, you can transfer unused funds in a 529 plan to a Roth IRA for the same beneficiary, without tax or penalties. These rollovers are subject to several rules and limits:
- Transfers have a lifetime maximum of $35,000 per beneficiary.
- The 529 plan must have existed for at least 15 years.
- The rollover must be through a direct trustee-to-trustee transfer.
- Transferred funds can’t include contributions made within the preceding five years or earnings on those contributions.
- Transfers are subject to the annual limits on contributions to Roth IRAs (without regard to income limits).
For example, let’s say you opened a 529 plan for your son after he was born in 2001. When your son graduated from college in 2023, there was $30,000 left in the account. In 2024, under the new option, you can begin transferring funds into your son’s Roth IRA. Since the 529 plan was opened at least 15 years ago (and no contributions were made in the last five years), the only restriction on rollover is the annual Roth IRA contribution limit. Assuming your son hasn’t made any other IRA contributions for 2024, you can roll over up to $7,000 (if your son has at least that much earned income for the year).
If your son’s earned income for 2024 is less than $7,000, the amount eligible for a rollover will be reduced. For example, if he takes an unpaid internship and earns $4,000 during the year from a part-time job, the most you can roll over for the year is $4,000.
A 529-to-Roth IRA rollover is an appealing option to avoid tax and penalties on unused funds, while helping the beneficiaries start saving for retirement. Roth IRAs are a great savings vehicle for young people because they’ll enjoy tax-free withdrawals decades later.
Other options
Roth IRA rollovers aren’t the only option for avoiding tax and penalties on unused 529 plan funds. You can also change a plan’s beneficiary to another family member. Or you can use 529 plans for continuing education, certain trade schools, or even up to $10,000 per year of elementary through high school tuition. In addition, you can withdraw funds tax-free to pay down student loan debt, up to $10,000 per beneficiary.
It’s not unusual for parents to end up with unused 529 funds. Contact us if you have questions about the most tax-wise way to handle them.
© 2024
Applying for a commercial loan with confidence
Few and far between are businesses that can either launch or grow without an infusion of outside capital. In some cases, that capital comes in the form of a commercial loan from a bank or some other type of lender.
If you and your company’s leadership team believe a loan will soon be necessary, it’s important to approach the endeavor with confidence. That starts with having valid, well-considered strategic reasons for borrowing. From there, you need to engage your bank or a prospective lender with a strong air of professionalism and certainty.
Essential questions
First, familiarize yourself with how the process works. It’s essentially built on four basic questions:
- How much money do you want?
- How do you plan to use the loan proceeds?
- When do you need the funds?
- How soon can you repay the loan?
Your loan officer will also likely ask about your business’s previous sources of financing. So, be ready to explain how you’ve financed your company to date. Methods may include personal cash infusions, forgone salaries and sweat equity, as well as any equity contributions from friends, family members and outside investors.
Loan products
As you’re probably aware, banks and lenders offer a variety of commercial loan products. Another way of expressing confidence is to know what you want. Common options include:
Lines of credit. One of these gives you access to an agreed-upon amount of funds that you can draw on as needed. As is the case with a credit card, you pay interest only on the outstanding balance.
Traditional term loans. These are what most people likely envision when they see the term “commercial loan.” You receive a lump sum with repayment terms, which include a payment schedule and interest rate.
Asset-based loans. True to the name, asset-based loans typically fund equipment purchases or plant expansions. The length of the loan is usually tied to the life of the asset being financed, and that asset is usually pledged as collateral.
Supporting documents
No matter the product, banks and lenders want to work with serious borrowers who are deeply knowledgeable about the financial condition and projected performance of their businesses. To this end, don’t go into the initial meeting empty-handed. Prepare a comprehensive loan application package that includes:
- A “statement of purpose” explaining your strategic plans for the funds,
- Your business plan,
- Three years of financial statements, if available,
- Three years of business tax returns, if available,
- Personal financial statements and tax returns for all owners,
- Appraisals of any assets pledged as collateral, and
- Carefully prepared, reasonable financial projections.
Remember that most loan officers have been around the block. They know how to critically evaluate financial documents and prospective borrowers’ underlying assumptions. As much as possible, support your case with market research and data. Be confident — but realistic — about your strengths and market opportunities, as well as forthcoming about the challenges you’ll likely face in accomplishing your strategic objectives.
If your bank or lender finds your business a viable borrower, your application will be given to an underwriting committee or department. Underwriters will have greater confidence in your financial statements if they’re prepared by a CPA and conform to U.S. Generally Accepted Accounting Principles. Professionally prepared financial projections are also recommended.
Shop around
Underwriters don’t approve every loan application, so don’t give up if a bank or lender turns you down. In fact, it’s a good idea to shop around. For help preparing to apply for a commercial loan and managing the approval process, contact us.
© 2024
Better tax break when applying the research credit against payroll taxes
The credit for increasing research activities, often referred to as the research and development (R&D) credit, is a valuable tax break available to certain eligible small businesses. Claiming the credit involves complex calculations, which we’ll take care of for you.
But in addition to the credit itself, be aware that there are two additional features that are especially favorable to small businesses:
- Eligible small businesses ($50 million or less in gross receipts for the three prior tax years) may claim the credit against alternative minimum tax (AMT) liability.
- The credit can be used by certain smaller startup businesses against their Social Security payroll and Medicare tax liability.
Let’s take a look at the second feature. The Inflation Reduction Act (IRA) has doubled the amount of the payroll tax credit election for qualified businesses and made a change to the eligible types of payroll taxes it can be applied to, making it better than it was before the law changes kicked in.
Election basics
Subject to limits, your business can elect to apply all or some of any research tax credit that you earn against your payroll taxes instead of your income tax. This payroll tax election may influence you to undertake or increase your research activities. On the other hand, if you’re engaged in — or are planning to undertake — research activities without regard to tax consequences, you could receive some tax relief.
Many new businesses, even if they have some cash flow, or even net positive cash flow and/or a book profit, pay no income taxes and won’t for some time. Thus, there’s no amount against which business credits, including the research credit, can be applied. On the other hand, any wage-paying business, even a new one, has payroll tax liabilities. Therefore, the payroll tax election is an opportunity to get immediate use out of the research credits that you earn. Because every dollar of credit-eligible expenditure can result in as much as a 10-cent tax credit, that’s a big help in the start-up phase of a business — the time when help is most needed.
Eligible businesses
To qualify for the election a taxpayer must:
- Have gross receipts for the election year of less than $5 million, and
- Be no more than five years past the period for which it had no receipts (the start-up period).
In making these determinations, the only gross receipts that an individual taxpayer considers are from the individual’s businesses. An individual’s salary, investment income or other income aren’t taken into account. Also, note that an entity or individual can’t make the election for more than six years in a row.
Limits on the election
The research credit for which the taxpayer makes the payroll tax election can be applied against the employer portion of Social Security and Medicare. It can’t be used to lower the FICA taxes that an employer withholds and remits to the government on behalf of employees. Before a provision in the IRA became effective for 2023 and later years, taxpayers were only allowed to use the payroll tax offset against Social Security, not Medicare.
The amount of research credit for which the election can be made can’t annually exceed $500,000. Prior to the IRA, the maximum credit amount allowed to offset payroll tax before 2023 was only $250,000. Note, too, that an individual or C corporation can make the election only for those research credits which, in the absence of an election, would have to be carried forward. In other words, a C corporation can’t make the election for the research credit to reduce current or past income tax liabilities.
These are just the basics of the payroll tax election. Keep in mind that identifying and substantiating expenses eligible for the research credit itself is a complex task. Contact us about whether you can benefit from the payroll tax election and the research tax credit.
© 2024
A job loss is bad but the tax implications could make it worse
Unemployment has been holding steady recently at 3.7%. But there are still some people losing their jobs — particularly in certain industries including technology and media. If you’re laid off or terminated from employment, taxes are likely the last thing on your mind. However, there are tax implications due to your altered employment circumstances.
Depending on your situation, the tax aspects can be complex and require you to make decisions that may affect your tax bill for this year and for years to come. Be aware of these three areas.
1.Unemployment and payments from your former employer
Many people are surprised to find out that federal unemployment compensation is taxable. (Some states exempt unemployment comp from state tax.) In addition, payments from a former employer for any accumulated vacation or sick time are taxable. Although severance pay is also taxable and subject to federal income tax withholding, some elements of a severance package may get special treatment. For example:
- If you sell stock acquired by way of an incentive stock option (ISO), part or all of your gain may be taxed at lower long-term capital gain rates rather than at ordinary income tax rates, depending on whether you meet a special dual holding period.
- If you received — or will receive — what’s commonly referred to as a “golden parachute payment,” you may be subject to an excise tax equal to 20% of the portion of the payment that’s treated as an “excess parachute payment” under very complex rules, along with the excess parachute payment also being subject to ordinary income tax.
- The value of job placement assistance you receive from your former employer usually is tax-free. However, the assistance is taxable if you had a choice between receiving cash or outplacement help.
2.Health insurance costs
Under the COBRA rules, employers that offer group health coverage generally must provide continuation coverage to most terminated employees and their families. While the cost of COBRA coverage is usually expensive, the amount of any premium you pay for insurance that covers medical care is an eligible medical expense for tax purposes. That means it’s deductible if you itemize deductions and if your total medical expenses exceed 7.5% of your adjusted gross income.
If your former employer pays some of your medical coverage for a period of time after termination, you won’t be taxed on the value of the benefit.
3.Retirement plan balance
Employees whose employment is terminated may need tax planning help to determine the best option for amounts they’ve accumulated in retirement plans sponsored by former employers, such as a 401(k) plan. In many cases, a direct, tax-free rollover to an IRA is the best move. You may also choose to leave the account in your previous employer’s 401(k) plan (although the employer may elect to distribute the funds to you). Or, if you get a new job, you may want to transfer the money in the account with your former employer to your new employer’s 401(k) plan.
If you’re under age 59½, and make withdrawals from your former company’s plan or IRA to supplement missing income, you may owe an additional 10% penalty tax unless you qualify for an exception.
If a distribution from the retirement plan includes employer securities in a lump sum, the distribution is taxed under the lump-sum rules, except that “net unrealized appreciation” in the value of the stock isn’t taxed until the securities are sold or otherwise disposed of in a later transaction.
Further, any loans you’ve taken out from your former employer’s retirement plan, such as a 401(k)-plan loan, may be required to be repaid immediately, or within a specified period. If they aren’t, they may be treated as if the loan is in default. If the balance of the loan isn’t repaid within the required period, it will typically be treated as a taxable deemed distribution.
If you need assistance, contact us. We can help you navigate the best path forward during this transition period.
© 2024
Empower your sellers with sales enablement
The driving revenue force of just about every kind of business is sales. But all too often, once a sales team is up and running, it’s left to its own devices to maintain its strengths, develop new skills and upgrade its technology. This can produce mixed results — some sales departments are remarkably self-sufficient while others could really use more organizational support.
To remove the guesswork, many of today’s businesses are investing in sales enablement. This is an enterprise-wide, collaborative and continuous approach to empowering the sales department to do its best work.
Pillars of the concept
Wait a minute, you might say, isn’t sales enablement just another name for sales training? No, not entirely.
Training is certainly a part of the equation. A sales enablement program will involve ongoing training on the latest sales techniques, changes in the marketplace, the company’s latest products or services, and so forth. But this training doesn’t occur haphazardly — it’s regularly scheduled and typically segmented into easily digestible learning modules, generally a more effective approach than overloading sales reps with info on a sales retreat or in sporadic seminars.
There are several other pillars of sales enablement as well. One is content. Under their programs, many companies build a library of materials that features items such as:
- Books and articles on best practices,
- Customer testimonials,
- Product “spec sheets,” slide decks and demos, and
- Reports and spreadsheets with the latest competitive intelligence.
Another key feature of a sales enablement program is coaching. This may involve engaging outside consultants to provide coaching services to sales reps or developing internal mentoring or partnering.
Technology is also central to sales enablement. Most programs involve regular discussions with the leadership team and IT department about what tools could best serve the sales team. Notably, there are multiple software platforms on the market focused on sales enablement that can help businesses set up and manage their programs. Some customer relationship management software offers help in this area, too.
Benefits in the offing
There’s a reason sales enablement has caught on with many different types of companies. There are significant benefits in the offing.
First, a well-designed program can get new hires up to speed much more quickly than a more casual, ad hoc approach to “rookie” training. And for fully onboarded and seasoned employees, sales enablement can save time and effort by providing easy access to the relevant and up-to-date data, content and tools that support their activities. Ultimately, it can boost productivity for the whole team and, thereby, revenue for the business.
Also, the ongoing training and coaching features of sales enablement help sales reps keep their skills sharp and their knowledge growing. The aforementioned learning modules, webinars, podcasts, quizzes and other learning formats may give them an edge over competitors with less educational support.
There’s the engagement factor, too. A sales enablement program communicates to new hires, as well as established reps, that the organization fully supports them. As word gets around, you may attract stronger job candidates and enjoy better employee retention rates.
A major initiative
As the saying goes, nothing worth doing is easy. To implement and run a successful sales enablement program, you’ll need to invest considerable time and resources. And before any of that, you’ll need to set clear, measurable objectives — as well as a reasonable budget. For help with the financial side of planning a major initiative like this, contact us.
© 2024