Reinforce protection of your company’s mobile devices
Whether it’s a smart phone, tablet or laptop, mobile devices
have become the constant companions of today’s employees. And this relationship
has only been further cemented by the COVID-19 pandemic, which has thousands
working from home or other remote locations.
From a productivity standpoint, this is a good thing. So many
tasks that once kept employees tied to their desks are now doable from anywhere
on flexible schedules. All this convenience, however, brings considerable risk.
Multiple
threats
Perhaps the most obvious threat to any company-owned mobile
device is theft. That could end a workday early, hamper productivity for days,
and lead to considerable replacement hassles and expense. Indeed, given the
current economy, thieves may be increasing their efforts to snatch easy-to-grab
and easy-to-sell technological items.
Worse yet, a stolen or hacked mobile device means thieves and
hackers could gain possession of sensitive, confidential data about your
company, as well as its customers and employees.
Amateur criminals might look for credit card numbers to
fraudulently buy goods and services. More sophisticated ones, however, may look
for Social Security numbers or Employer Identification Numbers to commit
identity theft.
5
protective measures
There are a variety of ways that businesses can reinforce
protections of their mobile devices. Here are five to consider:
1.
Standardize, standardize, standardize. Having a wide variety of
makes and models increases risk. Moving toward a standard product and operating
system will allow you to address security issues across the board rather than
dealing with multiple makes and their varying security challenges.
2.
Password protect. Make sure that employees use “power-on”
passwords — those that appear whenever a unit is turned on or comes out of
sleep mode. In addition, configure devices to require a power-on password after
15 minutes of inactivity and to block access after a specified number of
unsuccessful log-in attempts. Require regular password changes, too.
3. Set
rules for data. Don’t allow employees to store certain information, such as
Social Security numbers, on their devices. If sensitive data must be
transported, encrypt it. (That is, make the data unreadable using special
coding.)
4. Keep
it strictly business. Employees are often tempted to mix personal
information with business data on their portable devices. Issue a company
policy forbidding or severely limiting this practice. Moreover, establish
access limits on networks and social media.
5.
Fortify your defenses. Be sure your mobile devices have regularly
and automatically updated security software to prevent unauthorized access,
block spyware/adware and stop viruses. Consider retaining the right to execute
a remote wipe of an asset’s memory if you believe it’s been stolen or
hopelessly lost.
More than
an object
When assessing the costs associated with a mobile device,
remember that it’s not only the value of the physical item that matters, but
also the importance and sensitivity of the data stored on it. We can help your
business implement a cost-effective process for procuring and protecting all
its technology.
© 2020
Can investors who manage their own portfolios deduct related expenses?
In some cases, investors have significant related expenses, such
as the cost of subscriptions to financial periodicals and clerical expenses.
Are they tax deductible? Under the Tax Cut and Jobs Act, these expenses aren’t
deductible through 2025 if they’re considered expenses for the production of
income. But they are deductible if they’re considered trade or business
expenses. (For tax years before 2018, production-of-income expenses were
deductible, but were included in miscellaneous itemized deductions, which were
subject to a 2%-of-adjusted-gross-income floor.)
In order to deduct investment-related expenses as business
expenses, you must figure out if you’re an investor or a trader — and be aware
that it’s more advantageous (and difficult) to qualify for trader status.
To qualify, you must be engaged in a trade or business. The U.S.
Supreme Court held many years ago that an individual taxpayer isn’t engaged in
a trade or business merely because the individual manages his or her own
securities investments, regardless of the amount of the investments or the
extent of the work required.
However, if you can show that your investment activities rise to
the level of carrying on a trade or business, you may be considered a trader
engaged in a trade or business, rather than an investor. As a trader, you’re
entitled to deduct your investment-related expenses as business expenses. A
trader is also entitled to deduct home-office expenses if the home office is
used exclusively on a regular basis as the trader’s principal place of
business. An investor, on the other hand, isn’t entitled to home-office
deductions since the investment activities aren’t a trade or business.
Since the Supreme Court’s decision, there has been extensive
litigation on the issue of whether a taxpayer is a trader or investor. The U.S.
Tax Court has developed a two-part test that must be satisfied in order for a
taxpayer to be a trader. Under this two-part test, a taxpayer’s investment
activities are considered a trade or business only if both of the following
are true:
- The taxpayer’s trading is substantial (in other words,
sporadic trading isn’t a trade or business), and - The taxpayer seeks to profit from short-term market
swings, rather than from long-term holding of investments.
So, the fact that a taxpayer’s investment activities are
regular, extensive and continuous isn’t in itself sufficient for determining
that a taxpayer is a trader. In order to be considered a trader, you must show
that you buy and sell securities with reasonable frequency in an effort to
profit on a short-term basis. In one case, even a taxpayer who made more than
1,000 trades a year with trading activities averaging about $16 million
annually was held to be an investor because the holding periods for stocks sold
averaged about one year.
Contact us if you have questions about whether your
investment-related expenses are deductible. We can also help explain how to
help keep capital gains taxes low when you sell investments.
© 2020
Business website costs: How to handle them for tax purposes
The business use of websites is widespread. But surprisingly,
the IRS hasn’t yet issued formal guidance on when Internet website costs can be
deducted.
Fortunately, established rules that generally apply to the
deductibility of business costs, and IRS guidance that applies to software
costs, provide business taxpayers launching a website with some guidance as to
the proper treatment of the costs.
Hardware
or software?
Let’s start with the hardware you may need to operate a website.
The costs involved fall under the standard rules for depreciable equipment.
Specifically, once these assets are up and running, you can deduct 100% of the
cost in the first year they’re placed in service (before 2023). This favorable
treatment is allowed under the 100% first-year bonus depreciation break.
In later years, you can probably deduct 100% of these costs in
the year the assets are placed in service under the Section 179 first-year depreciation
deduction privilege. However, Sec. 179 deductions are subject to several
limitations.
For tax years beginning in 2020, the maximum Sec. 179 deduction
is $1.04 million, subject to a phaseout rule. Under the rule, the deduction is
phased out if more than a specified amount of qualified property is placed in
service during the year. The threshold amount for 2020 is $2.59 million.
There’s also a taxable income limit. Under it, your Sec. 179
deduction can’t exceed your business taxable income. In other words, Sec. 179
deductions can’t create or increase an overall tax loss. However, any Sec. 179
deduction amount that you can’t immediately deduct is carried forward and can
be deducted in later years (to the extent permitted by the applicable limits).
Similar rules apply to purchased off-the-shelf software.
However, software license fees are treated differently from purchased software
costs for tax purposes. Payments for leased or licensed software used for your
website are currently deductible as ordinary and necessary business expenses.
Was the
software developed internally?
An alternative position is that your software development costs
represent currently deductible research and development costs under the tax
code. To qualify for this treatment, the costs must be paid or incurred by
December 31, 2022.
A more conservative approach would be to capitalize the costs of
internally developed software. Then you would depreciate them over 36 months.
If your website is primarily for advertising, you can also currently
deduct internal website software development costs as ordinary and necessary
business expenses.
Are you
paying a third party?
Some companies hire third parties to set up and run their
websites. In general, payments to third parties are currently deductible as
ordinary and necessary business expenses.
What
about before business begins?
Start-up expenses can include website development costs. Up to
$5,000 of otherwise deductible expenses that are incurred before your business
commences can generally be deducted in the year business commences. However, if
your start-up expenses exceed $50,000, the $5,000 current deduction limit
starts to be chipped away. Above this amount, you must capitalize some, or all,
of your start-up expenses and amortize them over 60 months, starting with the
month that business commences.
Need
Help?
We can determine the appropriate treatment of website costs for
federal income tax purposes. Contact us if you have questions or want more
information.
© 2020