SHOULD YOU PAY MORE ATTENTION TO CASH FLOW IN YOUR BUSINESS?

In assessing their business, most owners focus on growth in sales and profits. Yet these do not guarantee business health and success. Another important gauge is cash flow.

BUSINESS TAX TIP: CALCULATE YOUR BASIS

It's important for S corporation shareholders to know their basis in the corporation. Basis is the key to determining whether current-year losses can be deducted by the shareholder or not. Losses in excess of basis are generally "suspended" for use in later years when the business has income. Basis is also important when shareholders plan to take nontaxable distributions. In cases where distributions exceed investment in the company, the distributions can be taxed as capital gain. Check your basis now to give yourself time to increase basis if necessary and avoid a tax surprise at year-end.

IRS ANNOUNCES 2016 HSA LIMITS

The 2016 inflation-adjusted amounts for health savings accounts (HSAs) have been released by the IRS. Individuals will be allowed to contribute up to $3,350, and contributions for family coverage will be limited to $6,750. As before, an individual aged 55 or older may contribute an additional $1,000. For 2016, a "high-deductible health plan" is one with an annual deductible of not less than $1,300 for individual coverage and $2,600 for family coverage.

IRS ISSUES REMINDER ON CHILD TAX CREDIT

Working parents should be aware that the child and dependent care tax credit is available to offset some of the expenses for child care. Six facts the IRS wants taxpayers to know about the credit:

● Children must be under age 13 to qualify for the credit.

● The credit applies whether the childcare provider is a sitter at home or a daycare facility.

● The credit applies for up to $3,000 of expenses for one child and up to $6,000 for two or more.

● The credit can be up to 35% of qualifying expenses, depending on your income.

● Overnight camps don't qualify; day camps do.

● Keep receipts for expenses, and get the employee ID number of the care giver.

SUMMERTIME TAX TIP

If you itemize your deductions, you can deduct the mortgage interest and property taxes paid for your vacation home. A boat or RV can qualify as a vacation home if it has sleeping quarters, cooking facilities, and a bathroom. If a retreat also serves as rental property, you can control your tax deductions by changing the number of days you use it for vacation.

EVERY ESTATE PLAN SHOULD HAVE THESE BASIC DOCUMENTS

Estate planning is not just a task for the wealthy. Even though federal tax implications kick in only if your estate exceeds $5,430,000, there are other issues that make estate planning important for most individuals.

ROTH IRAs: A SMART TAX IDEA FOR CHILDREN

Persuading your working children to make retirement contributions may not be easy, but investments in Roth IRAs may be the wisest possible use of their earnings.

UNDERSTAND THE PROS AND CONS OF DRIPS

Appropriately enough, investors may notice a slow trickle in earnings from "dividend reinvestment plans" (DRIPs). But, these investments may end up providing a steady stream of income over the long run.