Defer tax with a Section 1031 exchange, but new limits apply this year
Normally when appreciated business assets such as real estate are sold, tax is owed on the appreciation. But there’s a way to defer this tax: a Section 1031 “like kind” exchange where, instead of selling appreciated property, you exchange it solely for property of a “like kind.” Virtually any type of real estate will qualify as long as it’s business or investment property. But the Tax Cuts and Jobs Act generally eliminates this favorable tax treatment for personal property. Considering a like-kind exchange? READ MORE +
The pass-through provisions of the TCJA: The devil is in the details
The Tax Cuts and Jobs Act established a deduction based on a noncorporate owner’s qualified business income (QBI). It’s available to individuals who own interests in pass-through business entities. READ MORE +
Don’t forget: 2017 tax filing deadline for pass-through entities is March 15
The federal income tax filing deadline for calendar-year partnerships, S corporations and LLCs treated as partnerships or S corporations for tax purposes is March 15, about a month earlier than the deadline for personal returns. If you haven’t filed your partnership or S corporation return yet, you may be thinking about an extension. An extension can be tax-smart if you’re missing critical documents or an unexpected life event is preventing you from devoting sufficient time to your return now. But there are additional considerations. READ MORE +
Sec. 179 expensing provides small businesses tax savings on 2017 returns — and more savings in the future
If you purchased qualifying business property by Dec. 31, 2017, you may be able to take advantage of Sec. 179 expensing on your 2017 tax return. Sec. 179 allows eligible taxpayers to deduct the entire cost of qualifying new or used depreciable property and most software in Year 1, subject to various limitations. For tax years that began in 2017, the maximum Sec. 179 deduction is $510,000. For the 2018 tax year, the Tax Cuts and Jobs Act increases the maximum Sec. 179 deduction to $1 million. READ MORE +
Auditing work in progress
Auditors closely evaluate how you report work in progress (WIP) inventory. Why? WIP relies on management’s estimates. Inexperienced or dishonest managers sometimes inflate these estimates, which makes the company appear healthier than it really is. Auditors consider whether allocations of materials, labor and overhead cost appear reasonable. They also monitor how revenue is being recognized based on product sales or the completion level of outstanding work. We can help you make reliable estimates and understand how to report WIP and revenue with confidence. READ MORE +
Got multiple locations? Expect auditors to keep a close eye on inventory
Misstated inventory has played a key role in countless frauds. An infamous example is the scam that happened at drugstore chain Phar-Mor in the 1990s. These types of cases have taught CPAs to be diligent when auditing inventory, especially for clients with multiple locations. Nowadays, expect auditors to 1) review your inventory manual, 2) conduct in-depth analytical procedures, 3) engage in physical inventory counts, and 4) scrutinize general ledger entries. Contact us to discuss how we plan to evaluate your inventory during the coming audit season. READ MORE +
Why you may want to accelerate your property tax payment into 2017
Accelerating deductible expenses, such as property tax on your home, into the current year typically is a good idea. Why? It will defer tax, which usually is beneficial. Prepaying your property tax (by Dec. 31) may be especially beneficial this year, because proposed tax legislation might reduce or eliminate the benefit of the property tax deduction beginning in 2018. But it’s still uncertain what the final legislation will contain and whether it will be passed and signed into law this year. We can help you determine the best strategy for your specific situation. READ MORE +
Could the AMT boost your 2017 tax bill?
A fundamental tax planning strategy is to accelerate deductible expenses into the current year. This typically will defer (and in some cases permanently reduce) tax. But there are exceptions. One is if the additional deductions this year trigger the alternative minimum tax (AMT). Complicating matters for 2017 is possible tax reform that could repeal the AMT for 2018 and beyond but also limit the benefit of some deductions and eliminate others, making it less desirable to defer expenses to 2018. We can help you determine the best strategies for your situation. READ MORE +
2017 might be your last chance to hire veterans and claim a tax credit
With Veterans Day on Nov. 11, it’s an especially good time to think about how we can support our veterans. One way businesses can do so is to hire them. An added bonus is that the Work Opportunity tax credit (WOTC) can save tax when you hire from “target groups,” including certain veterans. But it could be repealed as part of tax reform. So you may want to consider hiring veterans before year end. The credit amount depends on the target group, wages paid and hours worked. It ranges from $2,400 to $9,600 per hire. READ MORE +
The ins and outs of tax on “income investments”
All “income investments” (those that pay dividends or interest) aren’t alike when it comes to taxes. Qualified dividends are taxed at your favorable long-term capital gains rate rather than your higher ordinary-income rate. Interest generally is taxed at ordinary-income rates. So stocks paying qualified dividends might be more attractive tax-wise than CDs and bonds. But there are exceptions. For example, some dividends aren’t qualified and are subject to ordinary-income rates, and municipal bond interest is generally tax-free. Contact us for more details. READ MORE +
Intellectual Property and Transfer Pricing Implications of Changing Global Taxation Policies
In October 2015, the OECD issued a report on its G-20 BEPS Project (Base Erosion and Profit Shifting) – which focused on providing governments with solutions for closing the gaps in existing international tax and transfer pricing rules that allow corporate profits to “disappear”, or be artificially shifted to low/no tax environments where little or no economic activity takes place. Much of BEPS centers on intellectual property (IP)-intensive industries. READ MORE +
Strong internal controls help reduce restatements
Financial restatements among public companies are at the lowest level in 15 years. A recent study by research firm Audit Analytics attributes the decrease, in large part, to stronger internal controls. If you want to beef up your company’s controls, consider following the framework published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Auditors use COSO’s framework to evaluate their clients’ internal controls. Our audit team can help you turn the framework’s abstract concepts into actionable items. Contact us for details. READ MORE +
2017 Q4 tax calendar: Key deadlines for businesses and other employers
Here are a few key tax-related deadlines for businesses and other employers during Quarter 4 of 2017. OCT. 16: If calendar-year C corp. that filed an extension, file a 2016 income tax return. OCT. 31: Report income tax withholding and FICA taxes for Q3 2017 (unless eligible for exception). DEC. 15: If calendar-year C corp., pay fourth installment of 2017 estimated income taxes. Contact us for more about the filing requirements and to ensure you’re meeting all applicable deadlines. READ MORE +
GAAP vs. tax-basis reporting: Choosing the right model for your business
Most U.S. businesses use Generally Accepted Accounting Principles (GAAP) to report their financial results. However, some businesses use tax-basis reporting to save time and money. Key differences between these two frameworks can potentially lead to apples-to-oranges comparisons. For example, tax law tends to favor accelerated gross income recognition and depreciation deductions, and not allow taxpayers to deduct other business expenses until the amounts are known. Contact us to discuss the optimal reporting model for your business. READ MORE +
Reasons to outsource payroll and obtain a service audit report
This Labor Day, do two favors for your employees. First, minimize payroll reporting and expense reimbursement errors by switching to an outside payroll company. Second, protect employees’ personal data by obtaining a copy of the payroll provider’s SAS 70 service audit report. These audits evaluate the payroll provider’s controls. If your payroll provider doesn’t have a service audit report, contact us. We can discuss the adequacy of controls with your service provider and plan our financial statement audit accordingly. READ MORE +
How Much is Artificial Intelligence Worth?
Recent breakthroughs and disruptive technologies have made the valuation of emerging companies challenging. The one “looming” question from founders of these companies is: “What is my company really worth?” Or, if you are an investor, “What will I pay for a slice of the multi-trillion-dollar tech sector?” A third perspective might reflect a strategic partner evaluating an acquisition or joint venture opportunity. READ MORE +
4 tough questions to ask before expanding to a new location
When a business reaches a certain level of success, adding another location might seem like a no-brainer. But be careful. First ask yourself some tough questions about whether that new location will grow your company or stretch it too thin. For example, is there a solid strategic plan driving the expansion? Can your current location sustain its success while you set up shop elsewhere? Is the proposed location already overrun with competitors? Are there other, less risky ways to grow? We can help you analyze your financials to answer these questions and many more. READ MORE +
Listening to your customers by tracking lost sales
“Sorry, we can’t help you.” How many times a year do your salespeople say this? Putting a number on lost sales can tell you much about what your customers want. Start by having sales staff log every customer request. Then develop a report that lays out key information, such as estimated potential purchases, lost sales and lost gross profit. Last, run the report monthly and discuss it with your management team to determine your best strategic opportunities. We can assist you in creating a lost sales tracking system that best suits your company’s distinctive needs. READ MORE +
3 midyear tax planning strategies for business
It’s unclear whether tax reform will be passed this year, so let’s look at three midyear business tax strategies inspired by the last major tax law, the PATH Act of 2015: 1) Buy equipment. The PATH Act preserved generous limits for the Section 179 expensing election and the availability of bonus depreciation. 2) Ramp up research. After years of uncertainty, the PATH Act made the research credit permanent. 3) Hire workers from “target groups.” The PATH Act extended the Work Opportunity credit for such hires through 2019. Contact us for details on these breaks. READ MORE +
Make sure your company is prepared for any disaster
What could shut down your company? A fire or flood? Maybe a hacker’s attack? Every business needs a disaster recovery plan that targets specific threats to its operations. Describe your risks in detail and create safeguards against them, such as identifying alternative suppliers and engaging an emergency IT service. Also, appoint and train an employee to speak on your company’s behalf and facilitate postcrisis communication. Review the plan at least annually and keep it fresh in employees’ minds. We can help identify cost-effective ways to safeguard your company. READ MORE +
How to Effectively Navigate Intellectual Property Tax Planning
Intellectual property (IP) is often considered a critical strategic component of growing a business. While intangible, IP rights can be one of the most important assets your business owns. Understanding the legal and tax implications of IP business transactions can be daunting; and many experts consider that an understatement. READ MORE +
Fine-tuning your company’s compensation strategy
As a company evolves, so must its compensation strategy. Business growth, economic changes or the rise of a tough competitor can all spur the need. Consider the going market rates for your positions, using available data and even a consultant’s input. Then group together similarly valued jobs to establish a competitive salary range consisting of a minimum, maximum and midpoint. The midpoint is particularly important because it’s your guideline for slotting positions into the right ranges. For help specific to your company’s needs, please contact us. READ MORE +
What might happen if a 15% business tax rate becomes law?
President Trump has proposed a 15% federal income tax rate on business income — whether it’s earned by a traditional C corporation or by a pass-through entity such as an S corporation, limited liability company (LLC), partnership or sole proprietorship. If the 15% rate becomes law, what new tax planning opportunities might be opened up? And what limitations might Congress impose on that ultra-low 15% rate to prevent too much tax revenue leakage? READ MORE +
2017 Q3 tax calendar: Key deadlines for businesses and other employers
Here are a few key tax-related deadlines for businesses and other employers during Quarter 3 of 2017. JULY 31: Report income tax withholding and FICA taxes for Q2 2017 (unless eligible for exception). File a 2016 calendar-year retirement plan report or request an extension. SEPT. 15: If calendar-year partnership or S corp. that filed an extension, file a 2016 income tax return. If calendar-year C corp., pay third installment of 2017 estimated income taxes. Contact us for more about the filing requirements and to ensure you’re meeting all applicable deadlines. READ MORE +
Do you know the tax implications of your C corp.’s buy-sell agreement?
Will your C corp.’s buy-sell agreement produce adverse tax consequences? In a redemption (the company buys back a departing owner’s shares), share value may rise without boosting owners’ basis, increasing tax if shares are later sold. In a cross-purchase (owners buy back the shares), basis increases. But if owners are required to buy back shares and the company buys them instead, it may be a taxable dividend. A hybrid agreement naming the company as a party to the transaction and allowing but not requiring owners to buy back shares may be the answer. We can help. READ MORE +
What are the most tax-advantaged ways to reimburse employees’ education expenses?
What are the most tax-advantaged ways to reimburse employees’ education expenses? One option is the working condition fringe benefit. It allows you to exclude reimbursements of job-related education costs from employees’ wages. This means employees don’t have to pay tax on them and you don’t have to withhold income tax or withhold or pay payroll taxes on them. Another option is an educational assistance program, which allows the same tax treatment but can also cover reimbursements for non-job-related education up to $5,250 annually. Contact us to learn more. READ MORE +
A refresher on tax-related ACA provisions affecting businesses
Now that the Affordable Care Act (ACA) repeal and replace bill has been withdrawn, it’s a good time to review a few tax-related ACA provisions affecting businesses: 1) Qualifying small employers can claim a credit for a portion of health insurance premiums. 2) Applicable large employers not offering full-time employees health coverage that meets certain standards risk penalties. 3) Employers must withhold an additional 0.9% Medicare tax once an employee’s pay for the year exceeds $200,000. Have questions about the ACA’s tax impact on your business? Contact us! READ MORE +
The Section 1031 exchange: Why it’s such a great tax planning tool
Like many business owners, you might also own highly appreciated business real estate. Under a Sec. 1031 “like-kind” exchange, you can defer gains on real property used in a business if, instead of selling it, you exchange it solely for property of a “like kind.” Virtually any type of real estate will qualify as long as it’s business or investment property. It’s rare for two owners to simply swap properties. You’ll likely have to execute a “deferred” exchange, in which you engage a qualified intermediary. The rules are complex, so contact us for details. READ MORE +
Can the WOTC save tax for your business?
Employers that hire individuals who are members of a “target group” may be eligible for the Work Opportunity tax credit (WOTC). If you made qualifying hires in 2016 and obtained proper certification, you can claim the WOTC on your 2016 tax return. Whether or not you’re eligible for 2016, keep the WOTC in mind in your 2017 hiring, because the credit is also available for 2017. READ MORE +
What can a valuation expert do for your succession plan?
Most business owners spend a lifetime building their business. And when it comes to succession, they face the difficult decision of whether to sell, dissolve or transfer the business to family members (or a nonfamily successor). Many complicated issues are involved, including how to divvy up business interests, allocate value and tackle complex tax issues. READ MORE +
IFRS vs. GAAP: Some public companies want a choice
U.S. public companies are required to report their financial results using U.S. Generally Accepted Accounting Principles (GAAP). But, since 2007, hundreds of foreign companies listed on U.S. stock markets have been able to report financial results using International Financial Reporting Standards (IFRS) instead of GAAP. The Securities and Exchange Commission (SEC) is currently considering a proposal that, if approved, would allow domestic companies to supplement their GAAP results with IFRS results. READ MORE +
Transfer Pricing and Micro-Multinationals
There is a growing phenomenon in business called “micro-multinationals” and a vexing international tax issue around “transfer pricing” that goes with them. The Marks Paneth global network is a multi-lingual and multi-disciplinary team of experienced professionals who can work with you to get started by designing an efficient transfer pricing model and pricing methodology that aligns with your business. READ MORE +
Are you ready for the new revenue recognition rules?
While the FASB has postponed the effective date for the new principles-based, revenue guidance by one year, companies that report comparative results can’t delay any longer. Learn how to start the implementation process now. READ MORE +
Using independent contractors? Protect your business with these tips
Many businesses use independent contractors to keep payroll taxes and fringe benefit costs down. But using outside workers may result in other problems. The IRS often questions businesses about whether workers should be classified as employees or independent contractors for federal employment tax purposes. READ MORE +
The Benefits of 401(k) Plans for Startups.
While many small business owners may consider offering a 401(k) plan, many decide against it based on uncertainty over costs, a cumbersome set-up process and the administrative burden that is required to run it. READ MORE +
Avoiding the US Sales Tax Trap
UK and European companies that do business in the US or set up US operations are frequently puzzled by US sales and use taxes. Sales and use taxes are transactions taxes that are imposed on ultimate customers at a state and local level. The amounts and rules vary from state to state and locality to locality. Sales and use taxes are not like European value added tax (VAT). VAT is a tax imposed on each level of a transactional chain but then recoverable in many circumstances except by the ultimate retail customer. READ MORE +
Can Your Company Cash in on the Modified R&D Tax Credit?
The IRS section 41 tax credit for research and development (R&D) is now permanent. With this change there are big potential benefits to start-ups and small business who could not previously take advantage of this credit. If you are a start-up company with annual gross receipts of less than $5 million, you can apply up to $250,000 of your R&D credit against your payroll tax liability. The modification of the R&D tax credit was part of the 2015 PATH (Protecting Americans from Tax Hikes) act and allows companies to free up cash flow to invest in their businesses. READ MORE +
Tax Considerations for Start-Ups (Part 2)
In the excitement of raising money from investors then launching, a new start-up business ,many founders and stakeholders are focused on refining the product / service offering, acquiring customers, making sales and making the business profitable. But founders should be both mindful and vigilant about meeting all their tax liabilities. Not doing so could result in extremely unpleasant consequences, including stiff fines from federal, state and local tax authorities. Here’s an overview of the business owner’s role / responsibility, and a list of tax-related issues that should be considered by savvy founders, ideally with the help of a qualified CPA. READ MORE +
Are You Thinking of Doing Business in the US?
For many individuals, entrepreneurs and companies it’s about achieving and living the ‘American dream’. Being successful in the US is well on the way to being successful globally. To what extent is this true, and how easy is it to ‘crack’ America? READ MORE +
Transfer Pricing is Good.
You are a non-US based firm and you’ve taken the plunge by deciding to set up your business in the US. Now you are designing your business model and your budget for the next few years. High on your “to do” list is estimating sales revenue, marketing, wages and office space and other expenses so that you can determine the potential profitability or loss of your business globally. The difficult task is then to determine how much of this profit or loss is taxed in each country where you are operating. READ MORE +
Businesses Coming to the US. What you don’t know can cost your company plenty!
Start-ups coming to the US from abroad, even if just to “test the waters” of doing business in the US, need to be wary of the complex US tax landscape – on a Federal and State level. Poor planning or lack of understanding of the laws, may cause an unsuspecting Start-up to cross the line and actually “start to do business” in the US. Then, failure to take simple actions like filing tax returns (even without profits) or collecting sales tax can result in huge tax liabilities! READ MORE +
Corporate Structuring is Good
US venture capitalists historically insisted that they would only invest in an early-stage UK or other non-US company if the company “flipped” its corporate structure and installed a US (typically Delaware) holding company above the startup’s existing top company. For a variety of reasons this historical view is changing. Many US investors increasingly are open to the idea of investing in UK (and often Irish) holding companies without the “Delaware flip.” READ MORE +
Year End Tax Planning Tips for Emerging Growth Companies
During the holidays you often hear the saying “It is better to give than to receive” but we don’t think this should apply to having your company make unnecessary tax payments to the IRS, state or local tax authorities. Many emerging growth companies don’t have revenue in their first year or two of operations as they create a viable product, solicit customers and work to raise money from angels and venture capital firms. READ MORE +
Take Advantage of Tax Incentives to Enhance Your ROI.
Small businesses have been the growth engine of the US economy since the last recession. Congress has helped fuel that engine with provisions in the IRS tax code that can reward people who start and invest in certain types of small businesses. The exemption for Qualified Small Business Stock (QSBS) is an often overlooked, but potentially big tax break for both founders and those investing in small businesses. READ MORE +
Can Founders Really Scale…or Not?
Back in May of 2014 Forbes’ Entrepreneurs Blog addressed an interesting question: “Founders Can’t Scale: Fact or Fiction?” Forbes opened this article with the statement “There is a belief in the business world that founders can’t scale. Put another way, a company’s growth curve will eventually outstrip the capabilities of its founder’s ability to remain CEO.” READ MORE +
Play Smart Offense to take full advantage of tax benefits and increase current or future cash inflow
Smart tax planning is not always about safeguarding against risks and avoiding penalties. If done the right way, you will hear “the crack of the bat” in terms of improving your cash inflows now, and into the future. READ MORE +