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PTO contribution arrangements can help prevent the year-end vacation-time scramble

From the Thanksgiving kick-off of the holiday season through December 31, many businesses find themselves short-staffed as employees take time off to spend with family and friends. But if you limit how many vacation days employees can roll over to the new year, you might find your workplace to be nearly a ghost town as employees scramble to use their time off rather than lose it.

A paid time off (PTO) contribution arrangement may be the solution. It allows employees with unused vacation hours to elect to convert them to retirement plan contributions. If the plan has a 401(k) feature, it can treat these amounts as a pretax benefit, similar to normal employee deferrals. Alternatively, the plan can treat the amounts as employer profit sharing, converting the excess PTO amounts to employer contributions.

A PTO contribution arrangement can be a better option than increasing the number of days employees can roll over. Why? Larger rollover limits can result in employees building up large balances that create a significant liability on your books.

To offer a PTO contribution arrangement, you simply need to amend your plan. However, you must still follow the plan document’s eligibility, vesting, rollover, distribution and loan terms, and additional rules apply.

To learn more about PTO contribution arrangements, including their tax implications, please contact us.

What Are You Trying to Accomplish with Your Money?

With the financial media bombarding us with investment ideas, we are flooded with tips on how to accumulate wealth. However, you should first decide what your money means to you. Do you know why you are investing, or are you using a haphazard strategy to try to achieve an unclear set of goals? We have found […]

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Reduce taxes on your investments with these year-end strategies


While tax consequences should never drive investment decisions, it’s critical that they be considered — especially by higher-income taxpayers, who may be facing the 39.6% short-term capital gains rate, the 20% long-term capital gains rate and the 3.8% net investment income tax (NIIT). Holding on to an investment until you’ve owned it more than one year […]

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Tax Advice for Military Families and Veterans

Members of the U.S. Armed Forces and veterans are required to pay taxes on their income like everyone else. But special rules sometimes apply. Here’s an overview of key tax benefits that the IRS provides to military personnel to thank them for risking their lives for our country. Combat Zone Exemption One of the most […]

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Write Off Business-Related Vehicle Expenses

Q.  I’m using my personal car in my business. How much can I deduct on my tax return for the vehicle expenses? A. There are two basic ways to write off expenses for business-related travel: The standard mileage method. This provides a basic deduction for mileage and provides built-in depreciation. For 2015, the mileage rate is 57.5 […]

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Protect your deduction: Verify that a charity is eligible to receive tax-deductible contributions before you donate

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Donations to qualified charities are generally fully deductible, and they may be the easiest deductible expense to time to your tax advantage. After all, you control exactly when and how much you give. But before you donate, it’s critical to make sure the charity you’re considering is indeed a qualified charity — that it’s eligible […]

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News on Social Security Benefits: Read All About It

The Social Security Administration (SSA) recently announced some important news. Rumors about a benefits freeze had surfaced in the summer. Finally, on October 15, the SSA formally announced that the consumer price index it uses to gauge inflation wasn’t high enough to trigger cost-of-living adjustments (COLAs) for the upcoming year. Although the announcement is generally good […]

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The 529 savings plan: A tax-smart way to fund college expenses

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If you’re saving for college, consider a Section 529 plan. Although contributions aren’t deductible for federal purposes, plan assets can grow tax-deferred. (Some states do offer tax incentives for contributing.) Distributions used to pay qualified expenses (such as tuition, mandatory fees, books, equipment, supplies and, generally, room and board) are income-tax-free for federal purposes and […]

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2015 Year-End Tax Planning Tips for Small Businesses

Virtually all small business owners are frustrated with our current tax system. In fact, five out of today’s Top 10 small business concerns relate to state and federal tax issues, according to the Small Business Problems and Priorities survey released by the National Federation of Independent Business (NFIB), a small business advocacy group. Small businesses […]

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IRS Announces Various Tax Benefit Increases for 2016

For tax year 2016, the IRS recently announced many annual inflation adjustments. IRS Revenue Procedure 2015-53provides details about these amounts. Because inflation is low, many of the amounts for 2016 will not change from 2015. For example, the elective deferrals to 401(k) and 403(b) plans will remain $18,000 next year. Other retirement plan contribution limits […]

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