Weekly Tax Tips July 15th

Weekly Tax Tips

July 15, 2024

Effective financial management is crucial for growing your business while cutting taxes. Integrating tax planning into your budgeting process can ensure that your funds are used efficiently, fostering both growth and tax savings.

Start by developing a comprehensive budget that outlines your income and expenses. This serves as the foundation for your financial strategy. Within this budget, allocate funds for essential operations, investments, and contingencies. However, a key aspect often overlooked is incorporating tax planning into this budgeting process.

Tax planning involves analyzing your financial situation from a tax perspective to minimize liabilities. Begin by identifying all available tax deductions and credits your business qualifies for, such as deductions for business expenses, depreciation on assets, and tax credits for certain activities like research and development. Incorporate these potential savings into your budget to understand their impact on your overall financial picture.

Consider the timing of income and expenses. Accelerating expenses or deferring income to the following year can help manage taxable income. For instance, if you anticipate higher earnings in the current year, consider purchasing necessary equipment or prepaying expenses to reduce taxable income.

Additionally, explore tax-advantaged accounts and investments. Contributing to retirement plans like 401(k)s or SEP IRAs not only prepares for the future but also provides immediate tax benefits. Including these contributions in your budget ensures you maximize these advantages.

Regularly review and adjust your budget to reflect changes in tax laws and financial circumstances. Consult with a tax professional to stay informed about new opportunities and ensure compliance with regulations. By integrating tax planning into your budgeting process, you create a proactive financial management strategy that supports growth and optimizes tax savings. This approach not only enhances your bottom line but also positions your business for sustained success.

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Sterling Foundation Management was founded in 1998 as the first nationwide firm dedicated to creating and managing private foundations for high net worth individuals and families. Since then, Sterling has grown to serve thousands of families in virtually every area where the concerns of high net worth families intersect with philanthropy.

Sterling works with clients to create and manage a wide range of entities, including tax-exempt trusts, private foundations, public charities, private operating foundations, and supporting organizations. In addition, Sterling offers sophisticated strategic planning as well as our donor advised fund.

We have extensive experience and expertise in tax and estate planning that we frequently bring to the table where our services complement those of a client’s professional team which may include attorneys, CPAs, insurance professionals, investment advisors and others.

Sterling is also the preeminent provider of secondary planning services for charitable remainder trusts. We have worked with thousands of families who have had a charitable remainder trust that was no longer a great fit for the family’s changed circumstances. These changes range from the birth of children and grandchildren to the death of spouses, from financial opportunity to financial stress, and from divorce to remarriage. We invented and developed the market for the sale of CRT income interests and developed the CRT rollover technique to meet our clients’ changing needs. Sterling does not offer tax or legal advice.

A new overtime rule goes into effect today (as of this writing on July 1, 2024). The salary threshold for who qualifies for overtime pay just got a big fat increase, meaning more of your employees now qualify for more pay.

How big of an increase? Near 65 percent above the current threshold by January 1, 2025.

Are your eyebrows raised yet? Read on…

Effective July 1, 2024, the Department of Labor has implemented a significant change to overtime rules for salaried workers. This update means potentially more employees in your small business could now be eligible for overtime pay.

Feeling overwhelmed? Don't worry. I can help you navigate this change. But the changes go into effect immediately, so don’t bookmark this one for future reading.

If you want the official rule, here it is.

But here's a (much shorter) breakdown so you know the basics:

The Big Change
Previously, salaried workers making above a certain threshold were exempt from overtime pay. Now, that threshold has increased, meaning more employees qualify for overtime.

The Salary Shift
Before the update, salaried workers earning more than $35,568 annually (684 per week) were generally exempt from overtime. Now, that threshold has jumped to $43,888 per year (844 per week). This means employees making under this new limit may qualify for overtime if they work more than 40 hours a week.

Job Duties Still Matter
The same rules for overtime exemption still apply. So not all salaried workers under the new threshold automatically get overtime. It also depends on their job duties.

Exempt Duties: Employees with primarily managerial, executive, or certain professional duties are generally exempt from overtime pay, even if their salary falls below the new threshold.

Non-Exempt Duties: If an employee spends a significant portion of their time performing tasks typically done by hourly workers (such as data entry, assembling products, or making sales calls), they're likely considered non-exempt. These employees may now qualify for overtime pay if their salary is under the new threshold.

What Didn’t Change
The new rule doesn't change the overtime pay rate itself, which is still time-and-a-half (1.5 times the employee's regular rate) for any hours worked over 40 in a workweek. But with more employees potentially eligible, keeping track of overtime becomes even more important.

More Changes to Come
This is just the first phase. On January 1, 2025, the Department of Labor will implement a second, even higher threshold based on a different calculation method. This new threshold will be around $58,656 annually (1,128 per week).

Another important thing to know is that these salary thresholds won't stay static. The Department of Labor has set up a system for automatic adjustments every three years based on current wage data. This means the minimum salary for overtime exemption will continue to increase in the future.

Legal Challenges on the Horizon
It's important to note that this new overtime rule is facing lawsuits from business groups who argue it will be too burdensome for employers. The outcome of these lawsuits could potentially delay or modify the changes. We'll keep you updated on any developments.

This is just a glimpse into the new overtime landscape, with more changes sure to come. There are additional details and nuances to consider in order to stay in compliance. But, as always, we'll help you stay informed and compliant, so you can focus on what matters most – running your successful small business.

Questions? You can find some answers from the DOL here. My team can also help make sure your payroll procedures are up-to-date so you can confidently navigate these changes. Reach out to set up a time here:
410-721-6000

Weekly Tax Tips July 15th

Weekly Tax Tips

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