7 Ways to Start 2025 with Fresh Finances

4 min read

Here we are in yet another new year. The obligations and celebrations are over. Chances are, you’ve spent a fair amount over the holidays and might need a plan to help kickstart 2025 with some actionable financial goals. Here are a few ideas.

Create a Budget

there are many good ones out there. In fact, there’s a TikTok trend called loud budgeting, where people openly discuss their financial goals on social media – why they do or don’t want to buy something. If this is your thing and it helps you stay on track, go for it! If not, a good old-fashioned planner works just as well.

Bucket Your Money

This is the next step after the aforementioned. Split your money into categories: food, rent/ mortgage, utilities, medical, entertainment, vacation, etc. Apps can help you parse out these groups. You might also set up separate banking accounts for some of the necessities so you’ll know to leave them alone and not dip into them, tempting as it may be.

Set Up Auto-Drafts

Let’s say you’re saving for your child’s college fund or a down payment on a car. When you create an auto-draft for a certain amount, you’ll never miss that deposit. If you need to tweak the amount during the year, do it. Here’s the bottom line: 1) You’ll learn to live on less, and 2) you’ll be on the way to making your dreams come true.

Look for Savings Deals

Don’t just settle for the interest rate your current bank is offering. There are many options out there to grow your money. But first, do you want to lock into a fixed rate? This can be useful for long-term goals, such as buying a property. Or do you want an easy-to-access account with the ability to withdraw cash for emergencies or short-term needs like birthday or wedding gifts? Shop around.

Cancel Seldom-Used Subscriptions

Scour your bank statement. Do you need all those online magazine subscriptions? How about newsletters you pay for – the ones you rarely read? Purge your subscriptions, then see how much you’ll save. If you’re so inclined, you could put these dollars toward a gym membership. January is when all the specials appear: zero joining fees, if not a seriously cut rate.

Start a Savings Challenge

Try putting away a small amount every month. Get in the habit of emptying your pockets or coin purse. Safeguard your coins in a mason jar, and then transfer them monthly into your savings account. The next month, increase how much you contribute. Pennies, nickels, dimes, and quarters add up! After a year, you might be surprised how much you’ve saved.

Decide on Goals

These can be small or large. It’s up to you. Spend some time thinking about what’s important. Do you want to remodel your house? Contribute to a beloved charity or cause? One resource you might want to consider setting up is an emergency spending pot. This is essential and sometimes overlooked. Regardless of what you decide, figure out your parameters: how much to set aside, how often, and by when. Having financial targets gives you something to look forward to. Best of all, when you achieve your goal, it’s an awesome feeling.

More often than not, New Year’s resolutions center on getting physically fit. But if you stay the course with your finances, you’ll most definitely be, wait for it … fiscally fit!

Sources

10 things you can do right now to start 2025 with fresh finances

https://www.msn.com/en-us/money/personalfinance/10-things-you-can-do-right-now-to-start-2025-with-fresh-finances/ar-AA1vnhyg

Powell CPA PLLC

7 Ways to Start 2025 with Fresh Finances

January 1, 2025 · Blog, Tip of the Month

4 min read

7 Ways to Start 2025 with Fresh Finances Here we are in yet another new year. The obligations and celebrations are over. Chances are, you’ve spent a fair amount over the holidays and might need a plan to help kickstart 2025 with some actionable financial goals. Here are a few ideas.

Create a Budget

This one never gets old. Why? It’s one of the keys to successful budgeting. You can set up a budget for the year that includes essentials, entertainment, and nice-to-haves, aka your Wish Farm. Then place it in your planner or app – there are many good ones out there. In fact, there’s a TikTok trend called loud budgeting, where people openly discuss their financial goals on social media – why they do or don’t want to buy something. If this is your thing and it helps you stay on track, go for it! If not, a good old-fashioned planner works just as well.

Bucket Your Money

Set Up Auto-Drafts

Look for Savings Deals

Cancel Seldom-Used Subscriptions

Start a Savings Challenge

Decide on Goals

More often than not, New Year’s resolutions center on getting physically fit. But if you stay the course with your finances, you’ll most definitely be, wait for it … fiscally fit!

Sources

10 things you can do right now to start 2025 with fresh finances

https://www.msn.com/en-us/money/personalfinance/10-things-you-can-do-right-now-to-start-2025-with-fresh-finances/ar-AA1vnhyg

Disclaimer

Calculating the CAC Payback Period

4 min read

The CAC Payback Period looks at how a business needs to recover its investment in attracting new customers. It is especially crucial for companies that are in industries with large marketing and sales costs. It’s an important metric because it helps businesses measure their performance in a number of ways.

First, it shows how well a business is managing its budget. Based on the resulting figure of the CAC Payback Period, the shorter the time required to break even on its customer acquisition costs, the more efficient a company is with its sales and marketing expenses. If, however, the result is high, this signals the company is doing something wrong and needs to analyze its current approach.

Running this analysis can also identify a company’s financial perils. The more prolonged the CAC Payback Period, the more likely a company might be facing cash flow concerns. Whether it is caused by overall economic conditions or industry or company-specific challenges, this is another reason for a company to run the numbers to see how it can mitigate or turn around the costs associated with acquiring customers.

The calculation also can help a business determine if it is able to expand to new products and markets and scale up existing product lines. The shorter the time needed to acquire new customers, the more likely a business can grow.

When investors and lenders analyze a company’s financials, including this metric, the more efficient a company is, and the more likely it will attract investors or have lenders offer favorable financing terms.

How to Calculate the CAC Payback Period

This scenario looks at $300,000 in customer acquisition costs, such as marketing, sales, etc., for a three-month period. The company obtained 1,000 new customers and is expected to gain $200,000 in new monthly recurring revenue (MRR), with an estimated gross margin of 60 percent.

First Step: Calculate the CAC by dividing Sales and Marketing Expenses by the new customers (1,000). It’s expressed as follows:

CAC = Sales and Marketing Expenses/Number of New Customers

CAC = $300,000/1,000 = $300 per customer

Second Step: This is to determine the monthly recurring revenue (MRR) per customer. The new MRR amount is divided by the number of newly acquired customers. It’s calculated as follows:

MRR = $200,000/1,000 = $200 per customer

Third Step: Determine the gross margin or how much remains from revenue after subtracting direct costs. In this case, we’ll use 60 percent.

Fourth (and Final) Step: This step determines how many months it will take to recoup the customer acquisition costs from the profits generated by the newly acquired customer. It’s calculated as follows:

CAC Payback Period = $300/($200 x 0.60) = 2.5

Based on the resulting 2.5 figure, it takes, on average, 2.5 months of profit from the newly acquired customers to pay for the customer’s acquisition cost.

Understanding CAC Payback Period Efficiency

If it’s less than 12 months, it’s favorable. This implies a business has an efficient approach to profitability and growth. However, it’s not a hard and fast rule because the repayment time frame can fluctuate based on the economy and the business operations. If a company is a low-margin business or industry (e-commerce, groceries, etc.), a far tighter payback time frame would be necessary to be viable.

There are many factors that can affect this company-specific measurement, such as the industry or sector, current economic conditions, or the business’ approach to gaining new customers. If a company has a shorter CAC Payback Period in an industry that has a generally accepted longer one, this can imply that the company is more efficient in its operations.

This metric is another tool in a financial analyst’s toolbox that can measure and identify efficiency (or lack thereof) and help put businesses back on track for greater financial health.

How Reporting Might be Less Complex in 2025

4 min read

A Dec. 3 proposal from FASB’s Accounting Standards Update (ASU) might provide some flexibility for private businesses and select nonprofits. “Financial Instruments – Credit Losses (Topic 326)” looks at measuring credit losses for contract assets and accounts receivable for these entities.

When it comes to determining projected credit losses for current accounts receivables and current contract assets, businesses face immense resource needs and reporting requirements, including for assets acquired prior to the publication dates of financial statements.

With public comments being received through Jan. 17, 2025, industry professionals have reported that when it comes to gauging projected credit losses for current contract assets and current accounts receivable, there’s a massive undertaking and validation necessary for assets collected prior to financial statement issuance dates. Industry professionals argue that being able to factor in collections post-balance sheet date in calculating expected credit losses would reduce the complexity for preparers, whereas, for third parties, including investors and others who utilize financial statements, it would provide them with valuable data.

FASB proposed an amendment to ASC 326 207 to allow private companies and certain not-for-profit entities to employ a more flexible and efficient way to better gauge their projected credit losses for current contract assets and accounts receivable that originate from transaction accounts under ASC 606.

Working with the Private Company Council (PCC) to look at stakeholders’ concerns that estimating projected credit losses can be exorbitant and complicated for financial proceedings, FASB is soliciting comments on whether or not to expand the scope of entities included for ASU standards, along with different asset classes.

Current Criteria

According to ASC 326-20, when expected credit losses are estimated by entities, an entity must evaluate their ability to garner cash flows via the lens of contemporary economic circumstances, rational and documented projections, and past losses. Past losses may need to be fine-tuned to approximate project credit losses if past circumstances change from present conditions or from well-ground estimates and documented projections. Another consideration when formulating credit loss projections is that entities aren’t required to factor in collections obtained post-balance sheet date.

Proposed Additions

When it comes to the proposed additions, FASB speaks to a practical expedient and an accounting policy election. The practical expedient concerns an entity’s well-grounded, data-dependent projections. If an entity chooses the practical expedient, it would be able to factor in collection activity beyond the balance sheet date when projecting expected credit losses.

Practical Expedient

To formulate projections that are rational and based on verified accounting details, this so-called practical expedient can be chosen by the entity that assumes its present balance sheet conditions will last for the entire projection time frame. Choosing a practical expedient also implies that an entity’s accounting policy will factor in collection activity past its balance sheet date when gauging expected credit losses. Specifically, under 326-20-30-10C for the practical expedient, during the projection time frame, an entity will maintain the exact circumstances of the balance sheet throughout the rational and data-based projection period.

If a business, for example, has determined a particular client is facing monetary challenges, it would account for its client’s financial issues through projections of estimated expected credit losses for said client, even though it has not impacted the business’ historical loss experience or if the business is up to date as of the balance sheet date.

Accounting Policy Election

Per 326-20-30-10E, when a practical expedient from 326-20-30-10C through 30-10D is chosen by entities for their accounting policy election when projecting credit losses, it signals that the entity factors in collection activity after the balance sheet date, but prior to the date of financial statement issuance. If an entity uses one or both of the practical expedient and/or accounting policy elections, disclosure is mandatory.

Conclusion

Lastly, such advice would be administered on a forward-looking basis, and both of these entities (PCC and FASB) will make the ultimate findings and guidelines of the implementation dates once industry professionals’ comments are considered. However, entities will likely be able to utilize these guidelines sooner.

For eligible companies, these standards could provide greater flexibility and the ability to divert resources to more productive allocations.

What is Innocent Spouse Relief?

4 min read

The word “innocent” in innocent spouse relief can be misleading. It doesn’t imply you’re perfect or blameless – it’s more about whether you knew or should have known about the tax issue. The IRS defines “innocence” in a specific way, and it hinges on the concept of reasonable ignorance. In short, the issue isn’t one of morality; it’s about whether you could have reasonably been unaware of a tax problem.

Innocent spouse relief allows you to avoid being held responsible for tax debts, penalties, and interest stemming from a joint tax filing. In the case that a spouse (or ex-spouse) made an error that led to a tax issue, regardless of intention, you may not have to shoulder the burden. Say your income wasn’t reported, excessive deductions were claimed, or tax fraud was committed. If you meet the IRS criteria, you can request relief by submitting Form 8857.

Qualifications for Innocent Spouse Relief

To qualify, you must meet several conditions.

Joint Tax Return: The tax liability must arise from a joint return. When you file together, both spouses are equally responsible for any tax issues that arise.
Tax Underreporting: The tax issue must stem from underreported income or an incorrect claim for deductions or credits. This could involve unreported income (like from offshore accounts) or fraudulent deductions made by your spouse.
Lack of Knowledge: You must show that, at the time of filing, you were unaware of the problem and had no reason to suspect it.
Unfair Responsibility: Lastly, it must be deemed unjust to hold you liable. The IRS looks at factors such as whether you benefited from the underreported taxes (e.g., through extravagant spending) or if you’ve divorced.

What Doesn’t Qualify for Innocent Spouse Relief?

Not all cases involving a spouse’s financial mismanagement qualify for relief. The IRS may reject your claim in the following situations:

Awareness of the Mistake: If you knew about the issue or should have known, you won’t be eligible for relief. Simply stating that you didn’t read the return won’t suffice. The IRS expects you to recognize obvious errors if you have access to the relevant information.
Divorce Doesn’t Automatically Provide Relief: Divorce alone doesn’t eliminate your liability for tax debt. Joint returns create shared responsibility, and being separated or divorced doesn’t mean the IRS will automatically release you from this obligation. You must prove your innocence through the relief process.
Disagreements Over Personal Spending: If your spouse’s spending decisions are something you disagree with, the IRS will not consider it a tax issue unless it involves unreported income or fraudulent deductions. The IRS focuses on tax matters, not marital conflicts over financial choices.

Pros and Cons of Filing

Advantages include:

Avoid Financial Hardship: Tax liabilities, along with interest and penalties, can be overwhelming. Innocent spouse relief can protect you from these financial burdens.
Clear Your Name: If you’ve been unfairly tied to a tax issue you didn’t cause, the relief process can help remove you from the responsibility.
Peace of Mind: Successfully claiming relief can bring emotional relief, especially if you’ve gone through a challenging marriage.

Potential drawbacks are:

No Guarantee of Approval: The IRS does not grant relief easily. You’ll need to provide strong evidence, and the process can be lengthy and difficult.
Time Limitations: You generally must apply for relief within two years of the IRS starting collection efforts. Missing this deadline could result in losing the opportunity for relief.
Invasive Process: The IRS will closely examine your financial and personal life, including details about your marriage and finances, which could feel intrusive if you value your privacy.
Possible Strain on Relationships: If you’re still married, filing for relief could cause tension, as it might be seen as blaming your spouse for the tax issue.

Conclusion

To request innocent spouse relief, you’ll need to file Form 8857. Be prepared to provide details about the tax years involved, explain why you didn’t know about the issue, and any supporting documents (like bank statements, emails, or divorce decrees.

After submitting the form, the IRS will notify your spouse or ex-spouse, who will have a chance to respond by a specific date.

Energy Tax Credit Changes For 2025

3 min read

The coming shakeup of the executive branch, along with Republican control of both houses of Congress, means tax changes are highly likely in 2025 and beyond. Positioning for new and amended tax provisions is already off to the races.

Regardless of the political landscape, on rare occasions, some measures have broad bipartisan support. One such bill is called the Methane Reduction and Economic Growth Act. It proposes adding a new credit for sequestering “qualified” methane from mining activities.

Looking Ahead To 2025

Proponents of the Methane Reduction and Economic Growth Act hope the tax credit will have a beneficial economic impact and create jobs. The idea is to capture and utilize the methane for productive industrial uses or as an alternative for heating buildings. The methane emitted by mines that qualify have long lifespans, with some abandoned mines emitting methane for up to 100 years. The long lifespan of the methane source is hoped to support the significant capital investment required to get the process up and running.

There is also significant potential for job creation in areas most impacted by the shutdown of coal-fired power plants, which in turn devastated the coal mining industry. The concept of using mine methane as an energy source could support rural American jobs.

Landscape and Potential for the Credit

There is a lot of mine methane to capture, with most not currently being captured. The U.S. government estimates abandoned coal mines produce about 237,000 metric tons annually. This methane has many potential uses, including hydrogen production.

Details on the New Subsection

The new section of 45Q credits would be based on the quantity of qualified methane that is sequestered. The captured methane must then be sent to the pipeline and used for producing heat or electricity. To be considered “qualified methane,” it must be captured from certain types of mines, including closed, abandoned, and surface mines. Finally, the methane captured must have otherwise been sent into the atmosphere if it had not been for the capture equipment activity.

Only qualified facilities may obtain the credit. Among other factors, the taxpayer needs to capture a minimum of 2,500 metric tons of methane each year to qualify. There are a lot more technical regulatory requirements related to the specific nature of methane capture, but those are beyond the scope of this article.

Conclusion

Typically, tax bills are split down the aisle based on political partisanship. This makes the passage of tax legislation difficult at best due to competing interests and a divided government. The tax credits related to methane capture, however, appear to be unusually bipartisan in nature. This is due to the unique intersection of democratic support from an environmental and climate perspective, meeting with Republican interest to support economic development in rural coal mining areas where the industry has been devastated. Put these two interests together, and you have the makings for a widely supported bipartisan bill that is very likely to pass.

5 New Year’s Financial Resolutions You Can Actually Keep

3 min read

Yep, it’s the end of another year! Chances are, you didn’t keep every resolution you made last year, for example, those goals about working out. (No shame here; we all do this!) However, the good news is that your fiscal goals can be a bit easier to achieve. Here are a few financial resolutions that are no-brainers, simple, and, best of all, no sweat.

Get a snapshot of your net worth. This is critical. Sit down and calculate this. When you know how much you have in terms of assets and liabilities, you can more easily determine where you need to make changes to your budget. For instance, this might be spending less on dining out and stocking more away in savings and investments. Understanding how much you have to work with is the first step to reaching your goals.

21 months without interest. If you find yourself using credit cards more than you like, another way to get a handle on this is to use cash when you’re out at stores and restaurants. Seeing the dollars actually leaving your hands as opposed to just swiping your plastic might give you a needed dose of reality.

Update your savings goals. If you want to easily increase your savings, choose an amount and have it auto-drafted from your paycheck or checking account into your savings every month. This way, you’ll learn to live on the amount you have left. When you never see the amount you’re tucking away, you won’t miss it.

Review and reset your investments. Take some time to pull together all your assets: IRAs, retirement accounts, and employer 401(k) plans. If you can contribute more to any of these, all the better. For 401(k)s, the IRS just announced a cost-of-living adjustment for retirement plans and IRAs – the 401(k) contribution limit for 2025 is $23,500, up from $23,000 in 2024. However, individual retirement account (IRA) contributions will continue to be $7,000 in 2025, the same as in 2024. If you’re over 50, here’s some good news: You’ll be able to make even larger catch-up contributions than other workers because of a provision in Secure 2.0, a federal retirement law. Beginning in 2025, employees aged 60, 61, 62, or 63 who participate in workplace retirement plans can make catch-up contributions of up to $11,250.

Take a look at your credit report. This is key. You’re entitled to one free credit report a year from each of the three credit agencies, so doing this is easy peasy. Pull up your report and give it a look-see. If you see anything negative, take action to repair it. If there are any errors, correct them asap. To get started, go to AnnualCreditReport.com.

While there are many other money-related resolutions you can make, starting with ones that take minimal effort while yielding maximum results is a good place to begin, not to mention, a great way ease into the new year.

Sources

https://www.investopedia.com/articles/pf/06/newyear.asp

https://www.investopedia.com/the-irs-revealed-2025-changes-to-retirement-401k-and-ira-contributions-8738507

Powell CPA PLLC

5 New Year’s Financial Resolutions You Can Actually Keep

December 1, 2024 · Blog, Tip of the Month

3 min read

5 New Year's Financial Resolutions Yep, it’s the end of another year! Chances are, you didn’t keep every resolution you made last year, for example, those goals about working out. (No shame here; we all do this!) However, the good news is that your fiscal goals can be a bit easier to achieve. Here are a few financial resolutions that are no-brainers, simple, and, best of all, no sweat.

Pay off credit cards. This might well be an ongoing task, but the end of the year is a great time to take a breath, make a plan, and hit the ground running in the new year. If you have high-interest cards, look for limited-time, lower-interest and/or zero-interest cards. Some lenders will even give you as long as 21 months without interest. If you find yourself using credit cards more than you like, another way to get a handle on this is to use cash when you’re out at stores and restaurants. Seeing the dollars actually leaving your hands as opposed to just swiping your plastic might give you a needed dose of reality.

Sources

https://www.investopedia.com/articles/pf/06/newyear.asp

https://www.investopedia.com/the-irs-revealed-2025-changes-to-retirement-401k-and-ira-contributions-8738507

Disclaimer

Understanding Carbon Accounting

3 min read

Also known as greenhouse gas (GHG) accounting, carbon accounting is a way for managers and analysts to measure a company’s total carbon emissions.

It’s a comprehensive approach to analyze how a company uses energy for its buildings, offices, conveyances and production processes. Carbon accounting examines firsthand, secondhand and tertiary energy uses.

Environmental, Social & Governance

Looking at ESG standards (Environmental, Social & Governance), it’s not only becoming encouraged, it’s becoming required for businesses, especially for publicly traded businesses. Whether it’s the U.S. Securities and Exchange Commission (SEC) or other governmental agencies in the global economy, these administrative organizations are mandating emission declarations for businesses to account for their carbon emissions. It’s also necessary for third parties (lenders, potential and current investors) to review and analyze a company’s current and past performance, along with industry comparisons.

It’s important to distinguish the differences between carbon and GHG accounting. Carbon accounting only looks at carbon dioxide emissions, while GHG looks at the broader category and illustrates why doing so is important. Businesses look at nitrous oxide and hydrofluorocarbons (HFCs), for example, when accounting for GHGs. However, such measurement is based on the so-called carbon dioxide equivalent or C02e. This helps standardize GHGs into the C02e standard for carbon accounting, giving government and interested parties the ability to measure across a universal standard. Two common uses for this standard are for carbon offsets and credits.

Calculating Emissions

1. Scope 1 factors in emissions from the company’s directly controlled or owned assets. Examples include factories, production, conveyances, etc.

2. Scope 2 looks at what the business uses in regard to climate-controlled services for their factories, offices, etc. It also looks at the company’s contracts with power suppliers.

3. Scope 3 factors in indirect emissions the business may incur. This includes commercial commuting activities, investing, how assets are disposed of, etc.

According to the SEC, Scope 3 emissions must include those “upstream and downstream activities in a company’s value chain” if they’re necessary for investor consideration or if the business has pledged to meet certain metrics for Scope 3 levels.

From there, a business’ activity metrics are calculated according to governmental and industry standards, such as the U.S. Environmental Protection Agency, ISO Standard 14064, or The Climate Registry’s General Reporting Protocol, etc. Businesses’ results are presented against past results, where they discuss how they will improve their efficiency internally and work with their supply chain partners.

Compliance

While compliance is one important reason, third-party audiences, such as family offices, institutional money managers, lenders, etc., are equally as important. Asset managers and family offices, for example, look for ESG or environmentally friendly investments to attract retail or “smart-money” investors. Similarly, activist investors, especially those looking to make companies more environmentally friendly, can look at companies to see how their carbon emissions stack up against their industry and overall commercial peers.

Another consideration is that by meeting regulatory or industry requirements and meeting ESG standards, businesses could qualify for preferential or market rates for funding from the debt markets.

Conclusion

The more companies are well-versed in this type of accounting, the better they will meet government and investor expectations.

Making Pensions Equitable, Protecting Foster Kids, Mail-in Votes and Tracking Government Spending

3 min read

All bills not enacted by the end of the 118th congressional session on Jan. 3, 2025, will expire.

Social Security Fairness Act of 2023 (HR 82) – This bill, with 330 bipartisan sponsors and a similar bill in the Senate, was introduced by Rep. Garret Graves (R-LA) on Jan. 9, 2023. It passed in the House on Nov. 12 of this year and is likely to pass in the Senate before the year’s end. The purpose of the bill is to eliminate the government pension offset that reduces Social Security benefits for individuals who receive other benefits, such as a pension from a state or local government. In the private sector, this would have a similar effect to withholding Social Security from people who have a 401(k). The bill would also repeal provisions that reduce Social Security benefits for spouses and widows/ers who receive their own government pensions. The provisions of the bill would be retroactive to the beginning of 2024.

BOLIVAR Act (HR 825) – This legislation prohibits the head of an executive agency to enter into a contract for the procurement of goods or services with any person that has business operations with the Maduro regime in Venezuela. The act was introduced on Feb. 2, 2023, by Rep. Michael Waltz (R-OH). It passed in the House on Nov. 18, and its fate currently lies with the Senate.

Vote by Mail Tracking Act (HR 5658) – This bill would require mail-in ballots to use the Postal Service barcode and an Official Election Mail logo. It passed in the House on Nov. 18 and is under consideration in the Senate. The bill was introduced by Rep. Katie Porter (D-CA) on Sept. 21, 2023.

Find and Protect Foster Youth Act (S 1146) – This act was introduced on March 30, 2023, by Sen. John Cornyn (R-TX). It would amend a provision of the Social Security Act to require the Department of Health and Human Services to eliminate obstacles to identifying and responding to reports of missing foster care children. Furthermore, it would assist in the assessment and screening of children who are at risk of becoming victims of sex trafficking, as well as identify best practices for effective interventions. The bipartisan bill passed in the House on Nov. 18 and is currently in the Senate.

Billion Dollar Boondoggle Act of 2023 (S 1228) – This bill was introduced by Sen. Joni Ernst (R-IA) on April 25, 2023. The bill would require the director of the Office of Management and Budget to submit an annual report to Congress detailing projects that are over budget and behind schedule. This is a bipartisan bill that has passed in both the Senate and the House, but on July 22, the House made changes and sent it back to the Senate, where it currently resides.

Rural Broadband Protection Act of 2024 (S 275) – Introduced by Sen. Shelley Moore Capito (R-WV) on Feb. 7, 2023, this bill would require the Federal Communications Commission (FCC) to vet applicants for funding of affordable broadband deployment in high-cost areas (including rural communities). The FCC would mandate a process, including a detailed proposal with technical capabilities to provide competitive awards for implementing the broadband network services. The FCC would then assess proposals in line with well-established technical standards. The bill passed the Senate on Sept. 25 and is currently with the House.

Common Business Accounting Calculations

3 min read

No matter the type of business or industry, being able to analyze and deduce patterns is essential to discovering a business’ financial health. Here are four commonly used calculations to help internal and external stakeholders determine an organization’s ability to manage its finances.

Break-Even Analysis

This formula analyzes fixed costs versus the profitability a business earns for every extra item it creates and sells.

Businesses that have smaller thresholds to meet their fixed costs to realize profitability have an easier break-even point to meet and exceed. Once the fixed costs threshold is satisfied and sales revenue outpaces variable costs, a business will know when it hits the break-even point.

Break Even Point (BEP) = Total Fixed Costs/(Price Per Unit – Variable Cost Per Unit)

This takes the total fixed costs divided by the price per individual unit minus each unit’s variable cost.

Examples of fixed costs are rent, taxes, insurance and wages. Examples of variable costs are raw materials, production supplies, utilities and packaging.

Another way to determine a company’s break-even point is as follows:

Contribution Margin = Item Price – Variable Cost Per Unit

This is illustrated by: $55 = ($85 – $30)

The item’s priced at $85, with a variable cost of $30, the contribution margin is $55 of how much revenue a company earns to pay for the remaining fixed costs.

Cash Ratio Formula

The cash ratio formula offers one way to look at a company’s liquidity position by comparing a company’s cash and cash equivalents to its current liabilities or debts due within the next 12 months. It shows how well positioned a business is (or is not) able to pay debts due within 12 months, and to satisfy the near-term obligations of its long-term debt.

It’s an important ratio that lenders look at when evaluating a company’s loan application. Instead of including assets such as accounts receivables, it factors in a business’ ability to take care of its financial obligations. It’s thought of as being a more real world look at how financially stable a business is.

It’s calculated as follows: Cash Ratio: Cash + Cash Equivalents/Current Liabilities.

Gross Profit Margin

This is defined as all income minus the cost of goods sold (COGS). COGS is comprised of expenses attributable to the creation of products, which include input materials and salaries for workers to produce such goods. However, it excludes expenses for taxes, overhead, debt, asset acquisitions, etc., among others. Another way to explain this calculation is to ask how much a business retains as profit once production costs are accounted for.

It’s calculated as follows: Gross Profit Margin = [(Net Sales – Cost of Goods Sold)/(New Sales)] x 100

Debt-to-Equity (D/E) Ratio

This is used to determine how much debt or financial leverage a company has on its books. It tells internal stakeholders and external parties what percentage of debt a company is using to operate compared to the business’ available operating reserves. This ratio contrasts a business’ complete financial obligations against its shareholder equity. Its primary use is to see how extensively it uses debt to operate.

It’s calculated as follows: Debt/Equity Ratio = Total Liabilities/Total Shareholders’ Equity.

While these calculations may seem straightforward, these are only a few examples of how businesses can calculate and analyze a company’s position – be it the owner, an employee or an outside lender or investor.

Tax Planning 2024

4 min read

Personal Income Tax Planning Strategies for Year-End 2024

As 2024 draws to a close, it’s the perfect time to review your personal income tax situation and implement strategies to minimize your tax liability for the year. Proactive year-end tax planning can lead to significant savings, as well as ensure that you take full advantage of tax credits, deductions and other opportunities available to you.

1. Maximize Contributions to Retirement Accounts

One of the most effective ways to reduce your taxable income is by contributing to tax-advantaged retirement accounts. In 2024, you may contribute up to $23,000 to a 401(k) or similar employer-sponsored plan, with an additional $7,500 catch-up contribution if you’re over age 50. These contributions are made pre-tax, meaning they reduce your taxable income for the year, potentially lowering your tax bill.

Similarly, if you’re eligible, consider contributing to an IRA. For 2024, the maximum contribution limit for a traditional IRA and/or Roth IRA is $7,000 ($8,000 if you’re 50 or older). Contributions to a traditional IRA may be tax-deductible depending on your income and whether you or your spouse are covered by an employer-sponsored retirement plan. If you’re not eligible for deductions due to income limits, consider a Roth IRA, where contributions are made after-tax, but qualified withdrawals in retirement are tax-free.

2. Take Advantage of Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)

If your employer offers a Flexible Spending Account (FSA), use the remainder of your FSA funds before they expire. FSAs allow you to put away pre-tax money to cover medical expenses, and the limit for 2024 is $3,200. Depending on your employer’s plan, unused funds may be forfeited after the year-end, although some plans may offer a grace period or carryover option for a small portion of the balance.

For those eligible for a Health Savings Account (HSA), contributing the maximum allowable amount can provide immediate tax savings. For 2024, the HSA contribution limit is $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up contribution for individuals age 55 or older.

3. Harvest Capital Losses

If you’ve realized capital gains in 2024, it may be beneficial to offset those gains with capital losses. Known as tax-loss harvesting, this strategy involves selling investments that have declined in value to realize losses, which can be used to offset your capital gains. If your capital losses exceed your gains, you can use the remaining losses to offset up to $3,000 of ordinary income ($1,500 if married and filing separately).

Make sure to consider the “wash sale” rule, which disallows a deduction if you buy the same or substantially identical security within 30 days of selling at a loss. This rule is meant to prevent taxpayers from selling assets for tax benefits and then repurchasing the same assets immediately.

4. Bunch Charitable Contributions

If you’re planning to make charitable donations, consider bunching your contributions into one year to exceed the standard deduction threshold. This strategy allows you to itemize deductions for one year by making larger charitable contributions in a single year while taking the standard deduction in the following year. The standard deduction for 2024 is $29,200 for married couples filing jointly and $14,600 for single filers, which means if your itemized deductions do not exceed these amounts, you may benefit from grouping two or more years’ worth of charitable donations into one year.

5. Review Your Tax Withholding

As the year ends, review your tax withholding to ensure you’re not over- or under-paying throughout the year. If you’ve had a major life change in 2024, such as marriage, divorce, a child or a new job, adjusting your withholding can prevent underpayment penalties or a large tax bill. You can use the IRS Tax Withholding Estimator tool to assess whether your withholding is on track or, if necessary, submit a new Form W-4 to adjust your withholding for the final paychecks of the year.

6. Plan for Estimated Taxes if Self-Employed

For self-employed individuals, it’s important to ensure you’ve made sufficient estimated tax payments throughout the year. If you expect to owe additional taxes for 2024, you may want to increase your final estimated payment by Jan. 15, 2025, to avoid penalties. You can calculate your estimated tax liability using Form 1040-ES.

Conclusion

Tax planning is an essential part of personal finance. With 2024 coming to an end, it’s the right time to review your finances and take advantage of available tax-saving opportunities. By maximizing retirement account contributions, considering tax-loss harvesting and utilizing other year-end strategies, you can minimize your tax burden and keep more of your hard-earned income. Be sure to consult with a tax professional to tailor these strategies to your unique financial situation and ensure you’re in the best possible position for the year ahead.

Powell CPA PLLC

7 Ways to Start 2025 with Fresh Finances

Powell CPA PLLC

Calculating the CAC Payback Period

Powell CPA PLLC

How Reporting Might be Less Complex in 2025

Powell CPA PLLC

What is Innocent Spouse Relief?

Powell CPA PLLC

Energy Tax Credit Changes For 2025

Powell CPA PLLC

5 New Year’s Financial Resolutions You Can Actually Keep

Powell CPA PLLC

Understanding Carbon Accounting

Powell CPA PLLC

Making Pensions Equitable, Protecting Foster Kids, Mail-in Votes and Tracking Government Spending

Powell CPA PLLC

Common Business Accounting Calculations

Powell CPA PLLC

Tax Planning 2024

Author: Service2Client

7 Ways to Start 2025 with Fresh Finances

Calculating the CAC Payback Period

How Reporting Might be Less Complex in 2025

What is Innocent Spouse Relief?

Energy Tax Credit Changes For 2025

5 New Year’s Financial Resolutions You Can Actually Keep

Understanding Carbon Accounting

Making Pensions Equitable, Protecting Foster Kids, Mail-in Votes and Tracking Government Spending

Common Business Accounting Calculations

Tax Planning 2024

Client Login

HOURS

CONTACT