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2018 – 01/12 – How financial statements can be used to value private businesses

How much is your business worth? The answer lies in your financial statements. The balance sheet serves as the basis for the cost approach, though adjustments may be needed to align the book values of assets and liabilities with their fair market values. Likewise, the income statement and statement of cash flows can be used to derive value from 1) discounting techniques under the income approach, and 2) pricing multiples under the market approach. Contact our experienced financial pros for help calculating an estimate of value that you can count on.

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Reminder – Forms W-2 and 1099 Due Date

We would like to remind you January 31, 2018 is the due date for payroll and information returns.  Forms W-2 and 1099s are to be distributed to your employees and contractors by this day.  These forms along with Form W-3 are due to the government on the same day. 

If you need our assistance with form preparation we are asking you to get your information to us by Monday January 22, 2018.  Make sure you have updated addresses for employees and contractors, along with SSN or EINs.  Please do not hesitate to contact us with any questions.

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2018 – 01/08 – New tax law gives pass-through businesses a valuable deduction

Owners of “pass-through” businesses may see some major (albeit temporary) relief under the Tax Cuts and Jobs Act (TCJA) in the form of a new deduction for a portion of qualified business income (QBI). For tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026, owners of entities such as sole proprietorships, partnerships, S corporations and LLCs generally can deduct 20% of QBI, subject to restrictions that can apply at higher income levels. More rules and limits apply; careful planning will be necessary to gain maximum benefit. Contact us for details.

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2018 – 01/05 – Income statement items warrant your auditor’s attention

During your financial statement audit, we assess whether the amounts reported on your income statement capture financial performance during the reporting period. This requires us to focus on three main components: 1) revenue, 2) cost of goods sold, and 3) operating expenses. Each component requires a different audit approach, depending on the level of complexity, possible effects on balance sheet items and the potential for manipulation by dishonest employees. Contact us for more information on how we plan to test and verify these accounts this audit season.

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Tax Cuts and Jobs Act – Changes for Businesses

On Friday, December 22, 2017, the Tax Cuts and Jobs Act was signed into law. The following tax law changes are effective for tax years beginning after December 31, 2017, unless otherwise noted.

INCOME TAX FOR BUSINESSES

There are several provisions pertaining to businesses that we believe will be of interest to you as follows.

  • The corporate tax rate has been reduced to a flat 21% and the corporate alternative minimum tax has been repealed;
  • The maximum amount a taxpayer can immediately expense for qualified property (Sec. 179) has been increased to $1,000,000 and the phase-out threshold amount is increased to $2.5 million;
  • A 100% first-year deduction for qualified property (increased from 50% deduction) for property placed in service after September 27, 2017 and before January 1, 2023;
  • The deduction for domestic production activities has been repealed ;
  • The deduction of 50% of expenses relating to entertainment has been repealed;
  • Net operating losses can no longer be carried back but can be carried forward indefinitely and the deduction is limited to 80% of taxable income.

 

While this summary is not comprehensive, we hope it will help you understand upcoming changes to your tax liability. As always, we are available to discuss your circumstances and how this new law may affect you.

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2017 – 12/26 – Tax Cuts and Jobs Act: Key provisions affecting individuals

On December 20, Congress completed passage of the Tax Cuts and Jobs Act. The new law means substantial changes for individual taxpayers. For example, it reduces tax rates for most brackets, nearly doubles the standard deduction and expands the child tax credit. And it provides alternative minimum tax (AMT) and estate tax relief. But it also reduces or eliminates many tax breaks. Most changes affecting individuals are only temporary, generally applying for 2018 through 2025. If you have questions or would like to discuss how you might be affected, contact us.

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The TCJA temporarily expands bonus depreciation

The Tax Cuts and Jobs Act (TCJA) enhances some tax breaks for businesses while reducing or eliminating others. One break it enhances — temporarily — is bonus depreciation. While most TCJA provisions go into effect for the 2018 tax year, you might be able to benefit from the bonus depreciation enhancements when you file your 2017 tax return.

Pre-TCJA bonus depreciation

Under pre-TCJA law, for qualified new assets that your business placed in service in 2017, you can claim a 50% first-year bonus depreciation deduction. Used assets don’t qualify. This tax break is available for the cost of new computer systems, purchased software, vehicles, machinery, equipment, office furniture, etc.

In addition, 50% bonus depreciation can be claimed for qualified improvement property, which means any qualified improvement to the interior portion of a nonresidential building if the improvement is placed in service after the date the building is placed in service. But qualified improvement costs don’t include expenditures for the enlargement of a building, an elevator or escalator, or the internal structural framework of a building.

TCJA expansion

The TCJA significantly expands bonus depreciation: For qualified property placed in service between September 28, 2017, and December 31, 2022 (or by December 31, 2023, for certain property with longer production periods), the first-year bonus depreciation percentage increases to 100%. In addition, the 100% deduction is allowed for not just new but also used qualifying property.

The new law also allows 100% bonus depreciation for qualified film, television and live theatrical productions placed in service on or after September 28, 2017. Productions are considered placed in service at the time of the initial release, broadcast or live commercial performance.

Beginning in 2023, bonus depreciation is scheduled to be reduced 20 percentage points each year. So, for example, it would be 80% for property placed in service in 2023, 60% in 2024, etc., until it would be fully eliminated in 2027.

For certain property with longer production periods, the reductions are delayed by one year. For example, 80% bonus depreciation would apply to long-production-period property placed in service in 2024.

Bonus depreciation is only one of the business tax breaks that have changed under the TCJA. Contact us for more information on this and other changes that will impact your business.

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Scharf Pera & Co., PLLC merges with Brian Boswell CPA, PLLC

Scharf Pera & Co., PLLC can be found in this week’s Charlotte Business Journal in an article about our recent merger with Brian Boswell CPA, PLLC.

Check out the article for more info, and also see below for the text of a letter sent out to our clients announcing the move.

We are pleased to announce the merger of Scharf Pera & Co., PLLC with the firm of Brian Boswell CPA, PLLC effective January 1, 2016.   We will continue to practice as Scharf Pera & Co., PLLC at our office located at 4600 Park Road, Suite 112, Charlotte, NC. We welcome Brian and his staff to our “family”.

Brian is originally from California and graduated from California State University – Sacramento and previously worked with GreerWalker LLP, Deloitte & Touche, and Peter Bell CPA before starting his own firm in 2010. Brian specializes in income tax compliance and planning for businesses and individuals. Throughout his career he has consulted with entrepreneurs and business professionals to proactively provide general business advice and guidance on various complex tax situations.

Thanks to clients and friends like you, Scharf Pera & Co., PLLC has had the opportunity to provide professional tax, accounting and auditing services in the Charlotte area since 1977. We are always here to answer your questions and provide guidance and advice. We appreciate your support as we continue to grow and strive to improve our client service to you.

All of us at Scharf Pera & Co., PLLC thank you for your business and wish you a happy and prosperous 2016!

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New law allows revocation of passports for delinquent taxpayers

On December 4, President Obama signed into law the Fixing America’s Surface Transportation (FAST) Act. While the main purpose of the legislation is to provide funding through 2020 for highways and other transportation projects, the bill also contains several new provisions designed to recover unpaid taxes, including requirements that the Internal Revenue Service (IRS) use private debt collection agencies and that the U.S. State Department refrain from issuing or renewing passports for certain taxpayers with outstanding tax debts in excess of $50,000.

For more information, visit our “Tax Guide Online” website and click on the “What’s New” button, where we provide details about this update.

We encourage you to visit our website today and often throughout the year. If you have questions on these or other topics, please contact us. We look forward to hearing from you!

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Two year end tax updates

First, the IRS has released mileage rates for 2016. The business rate has decreased from 57.5 cents to 54 cents; the moving and medical rate is decreasing from 23 to 19; and the charitable rate will stay at 14 cents.

Second, Congress has come to an agreement on a tax extenders bill. While Congress waiting until the end of the year to pass this bill is nothing new, there’s some good news this time around: many provisions will be renewed for multiple years, and a few (including the increased Section 179 deduction) will be made permanent. It’s important to note that this isn’t a done deal, but many Hill watchers expect the bill to be passed in its present form.

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