2018 – 01/19 – Footnote disclosures are critical to transparent financial reporting
Do you read the fine print in financial statement footnotes? It’s often worth the effort. Comprehensive disclosures contain a wealth of valuable information and can reveal hidden risk factors, such as unreported or contingent liabilities, related-party transactions, accounting changes (including justification and impact) and significant events that could have an adverse effect on future performance. Contact us to discuss concerns that arise when reviewing your company’s footnotes or the disclosures made by publicly traded competitors and potential M&A targets.
2018 – 01/16 – Personal exemptions and standard deductions and tax credits, oh my!
The Tax Cuts and Jobs Act, in addition to generally reducing individual tax rates, eliminates personal exemptions, increases the standard deductions and expands the child credit. For some taxpayers, a higher standard deduction may compensate for lost exemptions and even provide additional tax savings. But for those with many dependents or who itemize deductions, these changes might result in a higher tax bill, depending in part on how much they can benefit from child credit enhancements. These changes are just the tip of the iceberg. Contact us to learn more.
2018 – 01/22 – Meals, entertainment and transportation may cost businesses more under the TCJA
The Tax Cuts and Jobs Act (TCJA) curtails business deductions for meals, entertainment and transportation. Under the TCJA, deductions for business-related entertainment expenses, once 50% deductible, are disallowed. Meal expenses related to business travel are still 50% deductible, but the 50% rule now also applies to meals provided on an employer’s premises for its convenience. The TCJA also eliminates employer deductions for providing employee transportation fringe benefits, such as parking allowances and mass transit passes. Contact us for more details.
Effective Date of New Roth Conversion Recharacterization Prohibition Clarified:
Prior to enactment of the Tax Cuts and Jobs Act (TCJA), a taxpayer could convert a traditional IRA into a Roth IRA, pay tax on the conversion, and then later decide to reconvert the Roth IRA back into a traditional IRA. Recharacterizations were permitted for trustee-to-trustee transfers through the extended due date, including extensions, of the taxpayer’s tax return, among other requirements. Under the TCJA, the reconversion of a Roth IRA back into a traditional IRA is no longer permitted. The IRS has clarified in a Frequently Asked Question (FAQ) posted to the IRS website that reconversions back into a traditional IRA will be permitted through October 15, 2018. A Roth IRA conversion made on or after January 1, 2018 cannot be recharacterized. See www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-recharacterization-of-roth-rollovers-and-conversions
2018 – 01/09 – Don’t be a victim of tax identity theft: File your 2017 return early
The IRS has announced that it will begin accepting 2017 income tax returns on January 29. Filing as close to that date as possible can help protect you from tax identity theft, an all-too-common scam in which thieves file bogus returns using victims’ Social Security numbers. Tax identity theft can cause big headaches and delay legitimate refunds. But if you file first, it will be the return filed by a potential thief that’s rejected, not yours. If you’re getting a refund, you’ll also benefit from getting it sooner. Contact us for help filing early.
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.
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.
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.
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.
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.