New law provides a variety of tax breaks to businesses and employers

While you were celebrating the holidays, you may not have
noticed that Congress passed a law with a grab bag of provisions that provide
tax relief to businesses and employers. The “Further Consolidated
Appropriations Act, 2020” was signed into law on December 20, 2019. It makes
many changes to the tax code, including an extension (generally through 2020)
of more than 30 provisions that were set to expire or already expired.

Two other laws were passed as part of the law (The Taxpayer
Certainty and Disaster Tax Relief Act of 2019 and the Setting Every Community
Up for Retirement Enhancement Act).

Here are five highlights.

Long-term part-timers can participate in

Under current law, employers generally can exclude part-time
employees (those who work less than 1,000 hours per year) when providing a
401(k) plan to their employees. A qualified retirement plan can generally delay
participation in the plan based on an employee attaining a certain age or
completing a certain number of years of service but not beyond the later of
completion of one year of service (that is, a 12-month period with at least
1,000 hours of service) or reaching age 21.

Qualified retirement plans are subject to various other
requirements involving who can participate.

For plan years beginning after December 31, 2020, the new law
requires a 401(k) plan to allow an employee to make elective deferrals if the
employee has worked with the employer for at least 500 hours per year for at
least three consecutive years and has met the age-21 requirement by the end of
the three-consecutive-year period. There are a number of other rules involved
that will determine whether a part-time employee qualifies to participate in a
401(k) plan.

The employer tax credit for paid family and
medical leave is extended.

Tax law provides an employer credit for paid family and medical
leave. It permits eligible employers to claim an elective general business
credit based on eligible wages paid to qualifying employees with respect to
family and medical leave. The credit is equal to 12.5% of eligible wages if the
rate of payment is 50% of such wages and is increased by 0.25 percentage points
(but not above 25%) for each percentage point that the rate of payment exceeds
50%. The maximum leave amount that can be taken into account for a qualifying
employee is 12 weeks per year.

The credit was set to expire on December 31, 2019. The new law
extends it through 2020.

The Work Opportunity Tax Credit (WOTC) is

Under the WOTC, an elective general business credit is provided
to employers hiring individuals who are members of one or more of 10 targeted
groups. The new law extends this credit through 2020.

The medical device excise tax is repealed.

The Affordable Care Act (ACA) contained a provision that required
that the sale of a taxable medical device by the manufacturer, producer or
importer is subject to a tax equal to 2.3% of the price for which it is sold.
This medical device excise tax originally applied to sales of taxable medical
devices after December 31, 2012.

The new law repeals the excise tax for sales occurring after
December 31, 2019.

The high-cost, employer-sponsored health
coverage tax is repealed.

The ACA also added a nondeductible excise tax on insurers when
the aggregate value of employer-sponsored health insurance coverage for an
employee, former employee, surviving spouse or other primary insured individual
exceeded a threshold amount. This tax is commonly referred to as the tax on
“Cadillac” plans.

The new law repeals the Cadillac tax for tax years beginning
after December 31, 2019.

Stay tuned

These are only some of the provisions of the new law. We will be
covering them in the coming weeks. If you have questions about your situation,
don’t hesitate to contact us.

© 2019

5 ways to strengthen your business for the new year

The end of one year and the beginning of the next is a great
opportunity for reflection and planning. You have 12 months to look back on and
another 12 ahead to look forward to. Here are five ways to strengthen your
business for the new year by doing a little of both:

1. Compare 2019 financial performance to
Did you meet the financial goals you set at the beginning of
the year? If not, why? Analyze variances between budget and actual results.
Then, evaluate what changes you could make to get closer to achieving your
objectives in 2020. And if you did meet your goals, identify precisely what you
did right and build on those strategies.

2. Create a multiyear capital budget. Look
around your offices or facilities at your equipment, software and people. What
investments will you need to make to grow your business? Such investments can
be both tangible (new equipment and technology) and intangible (employees’
technical and soft skills).

Equipment, software, furniture, vehicles and other types of
assets inevitably wear out or become obsolete. You’ll need to regularly
maintain, update and replace them. Lay out a long-term plan for doing so; this
way, you won’t be caught off guard by a big expense.

3. Assess the competition. Identify
your biggest rivals over the past year. Discuss with your partners, managers
and advisors what those competitors did to make your life so “interesting.”
Also, honestly appraise the quality of what your business sells versus what
competitors offer. Are you doing everything you can to meet — or, better yet,
exceed — customer expectations? Devise some responsive competitive strategies
for the next 12 months.

4. Review insurance coverage. It’s
important to stay on top of your property, casualty and liability coverage.
Property values or risks may change — or you may add new assets or retire old
ones — requiring you to increase or decrease your level of coverage. A fire, natural
disaster, accident or out-of-the-blue lawsuit that you’re not fully protected
against could devastate your business. Look at the policies you have in place
and determine whether you’re adequately protected.

5. Analyze market trends.
Recognize the major events and trends in your industry over the past year.
Consider areas such as economic drivers or detractors, technology, the
regulatory environment and customer demographics. In what direction is your
industry heading over the next five or ten years? Anticipating and quickly
reacting to trends are the keys to a company’s long-term success.

These are just a few ideas for looking back and ahead to set a
successful course forward. We can help you review the past year’s tax,
accounting and financial strategies, and implement savvy moves toward a secure
and profitable 2020 for your business.

© 2019

Stretch your marketing dollars further with smart strategies

If your marketing budget is limited, there may be ways to make
that money go further. Smart strategies abound for small to midsize businesses.
Let’s look at a few ideas for stretching your marketing dollars a bit further.

Check out the big guys

Look to larger companies for ideas on how to improve and amp up
your marketing tactics. Big businesses use many different types of campaigns
and sometimes their big-budget approaches can be distilled down to lower-cost
alternatives. Think of it as a “competitive intelligence” effort with the
emphasis more on “intelligence” than “competitive.”

Maybe you can’t develop an app with a robust rewards system like
coffee giant Starbucks. But you could still come up with a loyalty reward
campaign using punch cards or some other mechanism.

Think local

If your company is one that depends on local customers or
clients, make sure you’re doing everything possible to target that audience.
Get hyperlocal! This approach tends to be particularly well-suited to
businesses that rely on foot traffic, but it can work for any company capable
of leveraging the distinctive aspects of its local community.

Don’t neglect the value of location-driven advertising, such as
signage on vehicles that travel locally. Increase your presence on social media
apps or pages focused on local communities. You may not want to blatantly
advertise there, but you could participate in discussions, answer questions,
and respond quickly to complaints or misinformation.

Go guerilla

This is perhaps the most creative way to engage in low-cost
marketing efforts. In short, guerilla marketing is putting your company’s brand
in the public eye in an unconventional way. It doesn’t always work but, when it
does, people will recognize and remember you for quite a while.

One example is using vacant space, generally in urban areas, to
put up marketing “graffiti.” (Obviously we’re talking about doing so legally.)
You might engage a budding art student to create an eye-catching display
featuring your logo and perhaps one of your products to draw attention. There
are also ways to execute digital
guerilla marketing, such as creating a viral video or humorous social media
account. Just be careful: such campaigns can often misfire and result in
embarrassing public relations incidents. Get plenty of outside advice,
including legal counsel.

Try some variety

Many businesses get so focused on one marketing approach that
they miss out on many other ways to attract the attention of new customers and
maintain visibility among existing ones. Remember, variety is the spice of life
— and it may not be as expensive as you think. We can assist you in assessing
the potential costs and likely success of any marketing effort you’re

© 2019

Wayfair revisited — It’s time to review your sales tax obligations

In its 2018 decision in South
Dakota v. Wayfair,
the U.S. Supreme Court upheld South Dakota’s
“economic nexus” statute, expanding the power of states to collect sales tax
from remote sellers. Today, nearly every state with a sales tax has enacted a
similar law, so if your company does business across state lines, it’s a good
idea to reexamine your sales tax obligations.

What’s nexus?

A state is constitutionally prohibited from taxing business
activities unless those activities have a substantial “nexus,” or connection,
with the state. Before Wayfair,
simply selling to customers in a state wasn’t enough to establish
nexus. The business also had to have a physical
presence in the state, such as offices, retail stores, manufacturing or
distribution facilities, or sales reps.

In Wayfair, the
Supreme Court ruled that a business could establish nexus through economic or
virtual contacts with a state, even if it didn’t have a physical presence. The
Court didn’t create a bright-line test for determining whether contacts are
“substantial,” but found that the thresholds established by South Dakota’s law
are sufficient: Out-of-state businesses must collect and remit South Dakota
sales taxes if, in the current or previous calendar year, they have 1) more
than $100,000 in gross sales of products or services delivered into the state,
or 2) 200 or more separate transactions for the delivery of goods or services
into the state.

Nexus steps

The vast majority of states now have economic nexus laws,
although the specifics vary:Many states adopted the same sales and transaction
thresholds accepted in Wayfair,
but a number of states apply different thresholds. And some chose not to impose
transaction thresholds, which many view as unfair to smaller sellers (an
example of a threshold might be 200 sales of $5 each would create nexus).

If your business makes online, telephone or mail-order sales in
states where it lacks a physical presence, it’s critical to find out whether
those states have economic nexus laws and determine whether your activities are
sufficient to trigger them. If you have nexus with a state, you’ll need to
register with the state and collect state and applicable local taxes on your
taxable sales there. Even if some or all of your sales are tax-exempt, you’ll
need to secure exemption certifications for each jurisdiction where you do
business. Alternatively, you might decide to reduce or eliminate your
activities in a state if the benefits don’t justify the compliance costs.

Need help?

Note: If you make sales through
a “marketplace facilitator,” such as Amazon or Ebay, be aware that an
increasing number of states have passed laws that require such providers to
collect taxes on sales they facilitate for vendors using their platforms.

If you need assistance in setting up processes to collect sales
tax or you have questions about your responsibilities, contact us.

© 2019

Does Your Accountant Ever Call You?

best tax accountants brightonThe world is a bit different now and the nature of tax, finance, and accounting is evolving rapidly. The role of the Certified Public Accountant (CPA) is changing. Taxpayers want value-driven relationships instead of transactional exchanges in the hurried weeks of tax filing season.

This begs the question – Does your accountant ever call you?

You may be asking, “Why should my accountant call me?” The answer is the accountant that calls you is proactively and strategically thinking about your tax planning. The accountant that isn’t calling is waiting for tax season to come so they can shuffle a few numbers, fill out a few forms, and get your return out the door along with several hundred others. Don’t get me wrong – tax compliance is important and essential. It’s a key part of what CPAs do but… it’s not the solution for reducing your tax bill.

How do you find tax savings? Tax-Planning.

Strategic tax planning and the execution of those plans over many years is the way to reduce your tax bill. Remember, taxes are something most people will have to pay, every year, for almost their entire lives. Also remember, all the money that you have to live on, invest, grow, and improve you and your family’s life is what is left AFTER taxes. Tax reduction over your lifetime is one of the keys to wealth building. The wealthy know this, and the Internal Revenue Code is designed to provide opportunities to those that seek them.

The accountant that calls you is the accountant that cares. If he or she can’t reach you by phone, they e-mail. If not e-mail, then mail. If not mail – carrier pigeon? I think you follow.

The point is that the modern CPA should be taking a proactive role in educating you on, and initiating, tax planning. They see you every year in the spring – but what about July or November? Mid-year conversations are the cornerstone of successful planning. Tax planning can be as simple as a 30-minute conversation to discuss a life event (baby on the way?) or a major transaction (how about that home sale you’re contemplating?). It can also be as detailed as multi-scenario tax projections to show you the exact impact of strategies, in dollars, over many years.

Get an accountant that cares enough to call. A good strategy can serve you for many years – a check in once or twice a year can be used to update that strategy as you go. No surprise tax bills, no missed opportunities after the close of the year – just life-long savings and more money in your pocket.

Want to learn more about working with a modern CPA who is focused on your strategic tax planning?

Contact us today using the form below:

2020 Q1 tax calendar: Key deadlines for businesses and other employers

Here are some of the key tax-related deadlines affecting
businesses and other employers during the first quarter of 2020. Keep in mind
that this list isn’t all-inclusive, so there may be additional deadlines that
apply to you. Contact us to ensure you’re meeting all applicable deadlines and
to learn more about the filing requirements.

January 31

  • File 2019 Forms W-2, “Wage and Tax Statement,” with the
    Social Security Administration and provide copies to your employees.
  • Provide copies of 2019 Forms 1099-MISC, “Miscellaneous
    Income,” to recipients of income from your business where required.
  • File 2019 Forms 1099-MISC reporting nonemployee
    compensation payments in Box 7 with the IRS.
  • File Form 940, “Employer’s Annual Federal Unemployment
    (FUTA) Tax Return,” for 2019. If your undeposited tax is $500 or less, you
    can either pay it with your return or deposit it. If it’s more than $500,
    you must deposit it. However, if you deposited the tax for the year in
    full and on time, you have until February 10 to file the return.
  • File Form 941, “Employer’s Quarterly Federal Tax
    Return,” to report Medicare, Social Security and income taxes withheld in
    the fourth quarter of 2019. If your tax liability is less than $2,500, you
    can pay it in full with a timely filed return. If you deposited the tax
    for the quarter in full and on time, you have until February 10 to file
    the return. (Employers that have an estimated annual employment tax
    liability of $1,000 or less may be eligible to file Form 944, “Employer’s
    Annual Federal Tax Return.”)
  • File Form 945, “Annual Return of Withheld Federal
    Income Tax,” for 2019 to report income tax withheld on all nonpayroll
    items, including backup withholding and withholding on accounts such as
    pensions, annuities and IRAs. If your tax liability is less than $2,500,
    you can pay it in full with a timely filed return. If you deposited the
    tax for the year in full and on time, you have until February 10 to file
    the return.

February 28

  • File 2019 Forms 1099-MISC with the IRS if 1) they’re
    not required to be filed earlier and 2) you’re filing paper copies.
    (Otherwise, the filing deadline is March 31.)

March 16

  • If a calendar-year partnership or S corporation, file
    or extend your 2019 tax return and pay any tax due. If the return isn’t
    extended, this is also the last day to make 2019 contributions to pension
    and profit-sharing plans.

© 2019

Adopting a child? Bring home tax savings with your bundle of joy

If you’re adopting a child, or you adopted one this year, there
may be significant tax benefits available to offset the expenses. For 2019,
adoptive parents may be able to claim a nonrefundable credit against their
federal tax for up to $14,080 of “qualified adoption expenses” for each adopted
child. (This amount is increasing to $14,300 for 2020.) That’s a
dollar-for-dollar reduction of tax — the equivalent, for someone in the 24%
marginal tax bracket, of a deduction of over $50,000.

Adoptive parents may also be able to exclude from their gross
income up to $14,080 for 2019 ($14,300 for 2020) of qualified adoption expenses
paid by an employer under an adoption assistance program. Both the credit and
the exclusion are phased out if the parents’ income exceeds certain limits, as
explained below.

Adoptive parents may claim both a credit and an exclusion for
expenses of adopting a child. But they can’t claim both a credit and an
exclusion for the same expense.

Qualified adoption expenses

To qualify for the credit or the exclusion, the expenses must be
“qualified.” These are the reasonable and necessary adoption fees, court costs,
attorney fees, travel expenses (including amounts spent for meals and lodging)
while away from home, and other expenses directly related to the legal adoption
of an “eligible child.”

Expenses in connection with an unsuccessful attempt to adopt an
eligible child can qualify. However, expenses connected with a foreign adoption
(one in which the child isn’t a U.S. citizen or resident) qualify only if the
child is actually adopted.

Taxpayers who adopt a child with special needs get a special tax
break. They will be deemed to have qualified adoption expenses in the tax year
in which the adoption becomes final in an amount sufficient to bring their
total aggregate expenses for the adoption up to $14,300 for 2020 ($14,080 for
2019). In other words, they can take the adoption credit or exclude
employer-provided adoption assistance up to that amount, whether or not they
had $14,300 for 2020 ($14,080 for 2019) of actual expenses.

Phase-out for high-income taxpayers

The credit allowable for 2019 is phased out for taxpayers with
adjusted gross income (AGI) of $211,160 ($214,520 for 2020). It is eliminated
when AGI reaches $251,160 for 2019 ($254,520 for 2020).

Taxpayer ID number required

The IRS can disallow the credit and the exclusion unless a valid
taxpayer identification number (TIN) for the child is included on the return.
Taxpayers who are in the process of adopting a child can get a temporary
number, called an adoption taxpayer identification number (ATIN), for the
child. This enables adoptive parents to claim the credit and exclusion for
qualified expenses.

When the adoption becomes final, the adoptive parents must apply
for a Social Security number for the child. Once obtained, that number, rather
than the ATIN, is used.

We can help ensure that you meet all the requirements to get the
full benefit of the tax savings available to adoptive parents. Please contact
us if you have any questions

© 2019

Medical expenses: What it takes to qualify for a tax deduction

As we all know, medical services and prescription drugs are expensive. You may be able to deduct some of your expenses on your tax return but the rules make it difficult for many people to qualify. However, with proper planning, you may be able to time discretionary medical expenses to your advantage for tax purposes.

The basic rules

For 2019, the medical expense deduction can only be claimed to the extent your unreimbursed costs exceed 10% of your adjusted gross income (AGI). You also must itemize deductions on your return.

If your total itemized deductions for 2019 will exceed your standard deduction, moving or “bunching” nonurgent medical procedures and other controllable expenses into 2019 may allow you to exceed the 10% floor and benefit from the medical expense deduction. Controllable expenses include refilling prescription drugs, buying eyeglasses and contact lenses, going to the dentist and getting elective surgery.

In addition to hospital and doctor expenses, here are some items to take into account when determining your allowable costs:

1. Health insurance premiums. This item can total thousands of dollars a year. Even if your employer provides health coverage, you can deduct the portion of the premiums that you pay. Long-term care insurance premiums are also included as medical expenses, subject to limits based on age.

2. Transportation. The cost of getting to and from medical treatments counts as a medical expense. This includes taxi fares, public transportation, or using your own car. Car costs can be calculated at 20¢ a mile for miles driven in 2019, plus tolls and parking. Alternatively, you can deduct certain actual costs, such as for gas and oil.

3. Eyeglasses, hearing aids, dental work, prescription drugs and professional fees. Deductible expenses include the cost of glasses, hearing aids, dental work, psychiatric counseling and other ongoing expenses in connection with medical needs. Purely cosmetic expenses don’t qualify. Prescription drugs (including insulin) qualify, but over-the-counter aspirin and vitamins don’t. Neither do amounts paid for treatments that are illegal under federal law (such as marijuana), even if state law permits them. The services of therapists and nurses can qualify as long as they relate to a medical condition and aren’t for general health. Amounts paid for certain long-term care services required by a chronically ill individual also qualify.

4. Smoking-cessation and weight-loss programs. Amounts paid for participating in smoking-cessation programs and for prescribed drugs designed to alleviate nicotine withdrawal are deductible. However, nonprescription nicotine gum and patches aren’t. A weight-loss program is deductible if undertaken as treatment for a disease diagnosed by a physician. Deductible expenses include fees paid to join a program and attend periodic meetings. However, the cost of food isn’t deductible.

Dependent expenses

You can deduct the medical costs that you pay for dependents, such as your children. Additionally, you may be able to deduct medical costs you pay for other individuals, such as an elderly parent. If you have questions about medical expense deductions, contact us.

2 valuable year-end tax-saving tools for your business

At this time of year, many business owners ask if there’s anything they can do to save tax for the year. Under current tax law, there are two valuable depreciation-related tax breaks that may help your business reduce its 2019 tax liability. To benefit from these deductions, you must buy eligible machinery, equipment, furniture or other assets and place them into service by the end of the tax year. In other words, you can claim a full deduction for 2019 even if you acquire assets and place them in service during the last days of the year.

The Section 179 deduction

Under Section 179, you can deduct (or expense) up to 100% of the cost of qualifying assets in Year 1 instead of depreciating the cost over a number of years. For tax years beginning in 2019, the expensing limit is $1,020,000. The deduction begins to phase out on a dollar-for-dollar basis for 2019 when total asset acquisitions for the year exceed $2,550,000.

Sec. 179 expensing is generally available for most depreciable property (other than buildings) and off-the-shelf computer software. It’s also available for:

  • Qualified improvement property (generally, any interior improvement to a building’s interior, but not for the internal structural framework, for enlarging a building, or for elevators or escalators),
  • Roofs, and
  • HVAC, fire protection, alarm, and security systems.

The Sec. 179 deduction amount and the ceiling limit are significantly higher than they were a few years ago. In 2017, for example, the deduction limit was $510,000, and it began to phase out when total asset acquisitions for the tax year exceeded $2.03 million.

The generous dollar ceiling that applies this year means that many small and medium sized businesses that make purchases will be able to currently deduct most, if not all, of their outlays for machinery, equipment and other assets. What’s more, the fact that the deduction isn’t prorated for the time that the asset is in service during the year makes it a valuable tool for year-end tax planning.

Bonus depreciation

Businesses can claim a 100% bonus first year depreciation deduction for machinery and equipment bought new or used (with some exceptions) if purchased and placed in service this year. The 100% deduction is also permitted without any proration based on the length of time that an asset is in service during the tax year.

Business vehicles

It’s important to note that Sec. 179 expensing and bonus depreciation may also be used for business vehicles. So buying one or more vehicles before December 31 may reduce your 2019 tax liability. But, depending on the type of vehicle, additional limits may apply.

Businesses should consider buying assets now that qualify for the liberalized depreciation deductions. Please contact us if you have questions about depreciation or other tax breaks.

Bridging the gap between budgeting and risk management

At many companies, a wide gap exists between the budgeting process and risk management. Failing to consider major threats could leave you vulnerable to high-impact hits to your budget if one or more of these dangers materialize. Here are some common types of risks to research, assess and incorporate into adjustments to next year’s budget:

Competitive. No business is an island (or a monopoly for that matter). The relative strength and strategies of your competitors affect how your company should shape its budget. For this reason, gathering competitive intelligence and acting accordingly is a must.

For example, if a larger competitor has moved into your market, you may need to allocate more funds for marketing and advertising. Then again, if a long-time rival has closed up shop, you might be able to keep those costs the same (or even lower them) and channel more money into production as business picks up.

Compliance. Although federal regulatory oversight has moderated under the current presidential administration, many industries remain subject to myriad rules and regulations. State governments have also been aggressive in their efforts to gather additional revenue through oversight.

Look into how compliance rules might change for your business next year. Could a planned strategic move subject you to additional or stricter regulations? Factor compliance risks into your budget, whether in the form of increased administrative requirements or costly penalties if you slip up.

Internal. The U.S. economy is considered relatively strong. But that doesn’t mean you should worry any less about what’s arguably the biggest internal risk to your budget: fraud. Employees may still have plenty of rationales for stealing from you and, perhaps disturbingly, a 2019 benchmarking report from the Association of Certified Fraud Examiners found that 58% of in-house fraud investigation teams had inadequate levels of antifraud staffing and resources.

If this year’s budget suffered from fraud losses, you’ll absolutely need to allocate more dollars to tightened internal controls. But doing so could be a good idea anyway to minimize the possibility that a fraudster will strike. And, of course, fraud isn’t the only internal risk to consider. Will your hiring costs rise in 2020 because of anticipated turnover or a need to increase staff size? Will training expenses go up because of a strategic initiative or new technology?

As the year winds down, business owners should be giving serious thought to their 2020 budgets based on financial reporting for the year. Our firm can help you undertake a sound budgeting process that includes the identification and assessment of specific threats.