Monthly Archives: February 2016
QuickBooks Certified ProAdvisors are accountants that have gone through a rigorous training process developed by Intuit, the company that developed QuickBooks. And at the end of this training, a series of tests must be passed in order to become certified.
Why Hire a Certified ProAdvisor?
A Certified ProAdvisor can provide accounting and tax assistance well beyond a technical staff person at Intuit. Often, they have extensive experience that can save you precious time and money rather than trying to figure out something yourself.
Second, a Certified ProAdvisor often knows what is currently available on the market today to solve your day-to-day challenges either with a QuickBooks product or another vendor that integrates with QuickBooks software. Surprisingly, there are many apps and software vendors that make QuickBooks operate more effectively and save you time.
And third, a Certified ProAdvisor will attend conferences to learn what changes are around the corner. For example, the cloud accounting changes to QuickBooks are rapidly changing so staying abreast of these changes will be key to better serving your business needs.
If you need more QuickBooks support and would like to minimize your taxes, call 212-631-0320 and ask for Mark.
If you have a foreign bank account that has not been reported to the IRS, then you could be facing serious civil penalties and even criminal penalties. These penalties fall under the Foreign Bank Account Report, FBAR violations.
To illustrate, the IRS Dirty Dozen tax scam list for 2016 clearly illustrates the emphasis placed upon hiding money or foreign bank accounts (see excerpt below).
The Internal Revenue Service today said avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.
“Our continued enforcement actions should discourage anyone from trying to illegally hide money and income offshore,” said IRS Commissioner John Koskinen. “We have voluntary options to help taxpayers get their taxes and filing obligations in order.”
Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 54,000 disclosures and we have collected more than $8 billion from this initiative alone. The IRS conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.
The IRS continues to beat this drum more aggressively each year. If you would like to discuss this situation, simply call 212-631-0320 and ask for Mark Feinsot.
Mark E Feinsot, CPA is a highly respected New York City CPA Accounting Firm. We have two midtown offices to better serve you. While we work with all types of business owners, we have additional expertise for High Net Worth Accounting, Aviation Accounting and Dental Practice Accounting.
For many businesses, profits vary from year to year. However, with proper planning, even a bad year can be helpful from a tax perspective. Where business deductions exceed gross income, a taxpayer may have a net operating loss (NOL) that can be used to offset income in another tax year, potentially generating a refund of previously paid taxes.
Who May Use an NOL?
NOLs are available to individual business owners, corporations, estates, and trusts. Partnerships and S corporations do not take NOL deductions, though their partners and shareholders may use “passed through” losses on their own returns.
How Is an NOL Applied?
The general rule is that a taxpayer may carry an NOL back two years and forward 20 years, though certain limited exceptions may apply. For example, an individual with an NOL that was caused by a casualty, theft, or disaster may use a three-year carryback period.
In general, the taxpayer will carry back an NOL to the earliest year it can be used and then carry it forward, year by year, until it is used up. The taxpayer may also elect to forego the two-year carryback and carry the loss forward for the 20-year period. However, the general preference is to use an NOL sooner rather than later because a dollar of tax saved today is generally worth more than a dollar saved in the future.
How Is an NOL Calculated?
Calculations of NOLs can be complicated. For example, a noncorporate taxpayer’s NOL is calculated without regard to any personal exemptions or NOLs from other years, and certain deductions for capital losses and nonbusiness items are limited.
If you are tired of overpaying taxes, call 212-631-0320 and ask for Mark Feinsot.
Depreciation deductions can be extremely valuable for a business. For example, in a recent court case, a federal judge ruled a company could begin taking its depreciation deductions for two buildings housing retail stores at a point prior to when they were “open for business.” The ruling allowed the company to show a loss for that tax year, which the company then used to offset income in earlier years and ultimately claim a total tax refund of over $2 million.*
Although this case involved a special 50% depreciation allowance made available by the Gulf Opportunity Zone Act of 2005, the fact remains that even regular depreciation deductions can significantly reduce a company’s tax bill.
If business property has a useful life greater than one year, the owner generally is prohibited from deducting the full cost of the property in the year it is placed in service. Instead, a portion of the cost may be deducted each year as depreciation. The depreciation rules apply to most types of tangible property, with notable exceptions being inventory and unimproved land.
Different schedules specify the proper depreciation calculations for different types of property. The most widely used schedules are set forth under the Modified Accelerated Cost Recovery System (MACRS). MACRS assigns property to a recovery class based on the property’s “class life.”
For example, office equipment is assigned to the seven-year MACRS class. Assume a business purchased a piece of equipment for $20,000 and placed it in service in 2012. The property would be in its fourth year of service in 2015. Applicable IRS tables indicate that the appropriate deduction percentage is 12.49% of the cost, so the business could deduct $2,498 for that equipment in 2015.**
Placed in Service
As the above-mentioned court decision suggests, the date property is placed in service can be an important consideration. Though the IRS has specific definitions for different types of assets, generally, property is first placed in service on the date the taxpayer first places it “in a condition or state of readiness and availability for a specifically defined function.”
Because the definition is broad, taxpayers sometimes litigate how it should be applied to specific situations. In the decision mentioned above, the key issue was the “placed-in-service” date of two buildings that would eventually be used as building supply stores. The IRS had argued that the “placed-in-service” requirement meant that the buildings had to be open for business for retail customers. The court disagreed, however, holding that the buildings were placed in service when they were substantially complete and limited certificates of occupancy had been issued so that workers could enter the buildings to install necessary racks and shelving.
Businesses may be able to benefit from the tax law’s Section 179 provisions to garner faster write-offs for some of their asset purchases. Currently, businesses will be allowed to expense up to $25,000 of qualifying property placed in service during the 2015 tax year, with that limit subject to further reduction once the amount placed in service exceeds $200,000.*** In addition, a current deduction may be available for certain limited amounts paid for property that the business expenses for financial accounting purposes. We can tell you more about these “de minimis safe harbor” regulations.
If you are tired of overpaying taxes and would like tax compliance help, call 212-631-0320 and ask for Mark.
Mark E. Feinsot CPA is a top rated New York City CPA Tax Accountant helping high net worth individuals and small business owners minimize their taxes while avoiding costly tax battles with the IRS and New York State. We provide additional expertise in aviation accounting for private plane owners, dental practice accounting and law firm accounting.
* Stine, LLC v. USA (DC LA, 1/27/2015)
** Calculation assumes the half-year depreciation convention.
*** Congress kept the Section 179 limit at $500,000 for 2014 in late-year extender legislation.
Buy or lease?
It’s a decision many small businesses face. Owning real estate certainly can have advantages, including the opportunity to build equity. But many small businesses in need of space choose the rental route instead.
Cash Flow Considerations
By leasing, a company can avoid taking on debt to acquire a property. Less debt on the balance sheet may allow the company to finance other things, such as receivables or inventory and equipment purchases. And the upfront cash commitment needed to enter a lease agreement may be much lower than the down payment required for a property purchase.
If your business is looking around for the right rental location, here are a few suggestions to keep in mind. Not all of these tips are appropriate for all businesses, but some may help you get a lead on a good spot — and a good deal.
- Find an eager landlord. Rental spots that have been on the market for a while could have some negative features, but they may be worth a look. If you find a location that suits you, you might also find a landlord who is anxious to negotiate.
- Think about the term. A long-term lease locks in your rental rate — and that can be an advantage if you expect the market to trend upward. But leasing for short periods is often less expensive than leasing for longer periods. If your business is in its formative years, significant changes may lie ahead, so a short-term arrangement could be more practical, too. Adding an “option to renew” clause can help keep your costs down and your options open.
- Divide and conquer. Could you make do with two smaller spaces instead of one large space? The more flexible you can be, the better your chances of finding a good deal.
- Check rental comps. Commercial property markets can be very localized. Rents may vary considerably between one locality and another just a few miles away. Unless you’re limited to a specific location, compare rates in several areas.
In New York City, the lease vs buy dilemma is understandably common.
If you are tired of overpaying taxes, call 212-631-0320 and ask for Mark Feinsot. We have two offices in Midtown Manhattan to better service you. Our initial consultation is free.
Mark E. Feinsot, CPA is a New York City CPA Accounting firm servicing all types of businesses and high net worth individuals. We are QuickBooks Certified ProAdvisors to better service small businesses. For additional expertise, we also specialize in dental practice accounting, law firm accounting, aviation accounting and high net worth accounting.