See “A Planning Introduction to the 2017 Tax Act – The Overview” which briefly discusses this topic and helps put it in an overall perspective within many of the major tax changes enacted in December. We indicated in that introduction that the new legislation tends to make tax planning more and more mathematical, and while that remark emphasizes alternatives and myriad tax rules, it is particularly true of the new Section 199A that we discuss here. This new law, this new concept, is effective after 2017. ((The final bill basically followed the Senate approach, with some rather significant modifications. See generally, Tax Cuts and Jobs Act, Conference Report to Accompany H.R. 1, 115th Cong., 1st Sess., House Report 115-466, December 15, 2017, which includes the text of the Act, the legislative histories of the House, Senate and Conference. Hereinafter, the Conf. Rep. For pagination cites see PDF version: … [Read more...] about A Planning Introduction to the 2017 Tax Act – The 20% of Business Income Deduction
Articles
Catastrophic Disasters –The CPA’s Expertise Can Help With Recovery And Planning
Introduction Our goal is to provide useful tax and financial information to those affected by major casualties and disasters, and their advisors. ((See generally these tax rules: Sections 139(c)’ and 165(c)’, 7508A. If you are a tax professional, see “Disaster Relief Resource Center for Tax Professionals,” https://www.irs.gov/tax-professionals/disaster-relief-resource-center-for-tax-professionals.)) We mention the effects of Hurricane Harvey in and around Houston beginning in August, 2017, and Hurricane Irma that hit Florida and its environs soon after, and then the terrible fires in Northern California in October. Catastrophic disasters have been ongoing. Harvey has been described as the worst flood disaster ever in the continental United States. Just in and around Houston, FEMA believes some 68,000 homes were flooded. ((“Spared from Harvey’s worst,” Ralph Vartabedian and Ben Welsh, Los Angeles Times, 11/19/17, p. A17.)) On the heels of Hurricane Harvey, there has been … [Read more...] about Catastrophic Disasters –The CPA’s Expertise Can Help With Recovery And Planning
Depreciation, Repairs, and Deducting Capital Expenditures
We focus on the most important concepts governing what distinguishes a fixed asset from an expense, tax depreciation rules and certain current incentives for writing off capital expenditures. Our focus is the big picture and major planning points when it comes to capital or near-capital expenditures and related expenses. We’ll begin with an emphasis on current deductions – business expenses and the election to expense capital expenditures provided by Section 179. The Relatively New Repair and Maintenance Regulations One doesn’t reach the depreciation details if an item qualifies as an ordinary and necessary business expense under Section 162. Is it an asset or business expense? The tax discussions following this question often focus on supplies, or repairs and maintenance. Generally, taxpayers need to capitalize (call an asset) payments to acquire, produce or improve tangible property but they have an immediate deduction for supplies or repairs and maintenance. There … [Read more...] about Depreciation, Repairs, and Deducting Capital Expenditures
The Private Foundation as a Charitable Lifestyle
You’re a busy business owner, investor or executive and would like your success to translate into significant charitable achievements. You would like your success to pour over and help others. You may be looking at retirement and considering a more hands-on approach to helping others, more of an active charitable lifestyle but perhaps not operating a charity. We trust this article will help you decide whether the private foundation is a vehicle suited to your philanthropic, business, tax and estate planning goals. We address the philanthropist, or potential philanthropist, but include their advisors. We will compare the private foundation with other approaches to charitable accomplishment. The rules are complex but a public charity generally receives at least one third of its support from the general public, whereas a private foundation’s support base is normally a limited number of donors. Its funding is usually provided by a donor or a family. ((Instructions to Form … [Read more...] about The Private Foundation as a Charitable Lifestyle
Net Operating Loss Carryback Repeal Isn’t Getting the Attention It Deserves
The changes being discussed are of such a magnitude that many taxpayers are filing extensions while their advisers ponder how 2016 tax elections may affect 2017. We focus here on one major provision that seems to be getting only a minor amount of attention. An important revenue raiser for the government in House Speaker Paul Ryan’s 2016 proposals is repeal of the net operating loss carryback. There is even some enhancement of the net operating loss as a carryforward – the ability to carry losses forward indefinitely with an increase in the actual loss for an interest factor. There is a new restriction on the net operating loss as a carryforward in that such loss couldn’t decrease income by more than 90%. While net operating losses could be carried forward, they couldn’t be carried back. The unfairness of eliminating the net operating loss carryback isn’t getting enough discussion. Current rules generally allow an NOL to carry back two years, three years in the … [Read more...] about Net Operating Loss Carryback Repeal Isn’t Getting the Attention It Deserves
A Guide to R&D Tax Rules
This article was first published in December 2016 on the CFO website. The tax rules governing research and development are complex, but they can yield significant benefits for a broad range of companies, not just those involved in scientific research. Developments in the tax benefits of R&D are such that all CFOs, controllers, tax directors, and accounting managers need to have a perspective on when and how the rules affect them. The R&D credit was made permanent in 2015, and President-elect Trump plans to retain this incentive. An important liberalization of the R&D credit rules aimed at benefiting small- and medium-sized businesses began in 2016, and also this year the IRS issued final R&D regulations for internal-use software. Deduction or Amortization Incentives In general this topic is about engineering and science, and perhaps patent law. For example, marketing and tax research are not R&D items, for our purposes. The rules can … [Read more...] about A Guide to R&D Tax Rules
Tips on Registering your Charity
This article was first published in December 2016 on the Planned Giving Design Center website. Download the article Watching charities is a necessary government function because, while rare, there's an occasional bad charity, and any number of charities whose activities may deserve occasional scrutiny. The first step in this process is requiring the charities to register with the state's group that monitors charities. Regulatory Scrutiny Grows Our purpose is to put this topic in some general perspective, making every effort to be brief with a topic that is inherently complex. There are about forty jurisdictions that may require registration. We look generally at such questions as when registration is required and the costs. There is soon to be a centralized, electronic place where the charity can register once and this gets sent to myriad jurisdictions. The vehicle is to be launched in upcoming months with some thirteen initial governmental participants. See "Simpler … [Read more...] about Tips on Registering your Charity
How to Choose a 401(k) Plan Auditor
CFOs must be careful in making this choice, because there may be issues of penalties and personal legal liability. For startup companies or others that are putting a 401(k) plan in place, the details may seem endless. Generally, audits of such plans with 100 or more participants are required as part of the Form 5500 filing for employee benefit plans. For 2015, the instructions for the form ran 82 pages. By comparison, the instructions for Form 1120 for corporate tax returns were only 26 pages. The regulatory environment, which effectively encompasses the IRS, the Department of Labor, and possibly state regulators, is a unique world with a stream of new regulations that may seem endless as well. The DoL looks at fiduciary standards, reporting and disclosure requirements, and its own meticulous rules. The Internal Revenue Service and its specialists are looking at the plan’s qualified status and potential tax issues. The regulators look at not only what’s in the plan, but … [Read more...] about How to Choose a 401(k) Plan Auditor
