New York City CPA Accountant
Foreign Bank Account Reporting – IRS Priority List
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.
Section 179 for NYC Business Owners
Section 179 allows a business to deduct the total cost for qualified leased, financed, or purchased equipment in the year it was purchased instead of depreciating the cost over the life of the equipment. Typically, however, Congress waits until after the first of the year to renew this section which can hurt small business owners and manufacturers as well as farmers, dentists, and medical providers.
Very often, Congress doesn’t get around to renewing tax breaks, such as Section 179, until well after the end of the year. Then they make it retroactive. This creates all sorts of issues for businesses who attempt to plan purchases with tax breaks in mind. Often, small businesses will miss out on the tax altogether.
While tax breaks such as Section 179 are typically renewed each year, it isn’t a given. That means businesses as well as farmers and even those in the medical profession won’t know if they are allowed to deduct $25,000 or $500,000. The final approved amount depends on whether or not the larger deductions are renewed. If not, the limit reverts to the original $25,000.
This can make a buying decisions difficult. For example if a farmer needs to buy a new combine, the farmer is looking at an investment of up to half a million dollars. If Section 179 isn’t renewed at the higher levels, this investment may need to be reconsidered. The same goes for medical or manufacturing equipment.
Still, for a small business, even the limit of $25,000 can make a tremendous difference. As off-the-shelf software also qualifies for this deduction, a small business could update their software to enhance efficiency therefore increasing their bottom line.
Tax planning is a critical component of a successful company. That’s why it is so important for Congress to act quickly and in a timely manner, so small businesses can plan for the next year while they still have the time to implement smart decisions. Small businesses are the backbone of this county and do drive the economy, and Congress shouldn’t forget that.
If you are seeking to minimize your taxes legally, then call Mark Feinsot CPA at 212-631-0320. Our initial consultation is free.
Mark E Feinsot CPA is a leading New York City CPA firm servicing all types of businesses and high net worth individuals.
Craft Brewery Sells for $1 Billion
When a craft brewery that most of us have never heard of sells for $1 billion dollars, then you realize that it’s no longer a tiny niche business.
Craft beer accounted for 11% of U.S. beer sales in 2014 and market share is rapidly increasing. Just this week, the owner of Corona and Modelo, Constellation Brands in Upstate NY, purchased Ballast Point for roughly $1 billion.
Ballast Point started selling beer commercially in 1996 and growing at a rate of 80% over the past two years. According to Brewer’s Assn, it is the 31st largest craft brewer in the country. Ballast Point is available for sale in 30 states and Sculpin IPA is their hot seller. Overall, Ballast Point produces approximately 300,000 barrels annually and the sale does not include Ballast Point Spirits, which makes rums and whiskeys.
To put this into perspective, Constellation Brands will be paying 20 times Ballast’s revenue in 2014. And if Ballast’s revenue increases 100% in 2015, then the multiple is 10 times revenue, which is still a stiff premium.
And while demand for craft brews explodes, demand for watered down national brands like Bud, Miller, and Coors is flat which is creating a trend towards consolidation. For example, AB InBev’s takeover of SABMiller for $107B.
While the acquisition of craft brews is nothing new, the valuation on this purchase is eye opening.
Mark E. Feinsot, CPA is a New York City CPA Firm servicing business owners that would like to eventually sell their business for more than $1B. If you are searching for an accountant to help with your new growth phase, call 212-631-0320 and ask for Mark Feinsot. Our initial consultation is free.
Tax Rules – Converting Residence to Rental Property
If you’ve made the decision to rent your primary residency instead of selling it, there are tax implications to be aware of. The tax code in this area can be complex, so it’s important to understand the rules and regulations upfront before you take the plunge.
First off, a residence is considered primary when you live in it full-time and it is not rented out for more than two weeks in any given year. Conversely, a residence is considered rental property if you use it personal use for no more than two weeks of the year or 10% of the days it is rented.
Tax Implications
Once you have converted your primary residency to a rental property, you will be required to report any rental income as taxable income. On the reverse side, you will also be able to deduct expenses for repairing the property as well as general maintenance.
In addition, the IRS does allow you to use depreciation of the property to offset income received on the property as well as taking other deductions such as property taxes, insurance, mortgage interest, utilities, and association fees.
Any costs over the amount of the total rental income cannot be deducted unless you meet the following conditions:
- You actively participate in all real estate activities for the property
- Your adjusted gross income is under $100K for the year
- Your total losses for all real estate activity does not exceed $25K for the year
The basis for depreciation for rental property is the lower of your adjusted basis – capital improvements plus purchase price – or the fair market value. The property must be depreciated over a 27.5 year period. Also, you are only allowed to depreciate the portion of the residency that is used for income generation.
If you’d like to avoid tax consequences and are looking to hire a CPA, call us at 212-631-0320 and ask for Mark Feinsot. We are a New York City CPA Firm with two convenient offices in Midtown.
SBA Halts Loan Guarantees for Small Businesses
The U.S. Small Business Administration said it reached the $18.75 billion cap for its main loan guarantee program on Thursday, forcing it to halt the funding of new loans with more than two months left in the fiscal year.
SBA spokesman Miguel Ayala said the capacity for fiscal 2015 was exceeded by stronger-than-anticipated demand for the government-guaranteed 7(a) program loans made by banks to small businesses.
As the agency neared the cap, lenders submitted a crush of $3 billion in loan applications already in July, including $1.7 billion this week alone. The July figure is more than five times the agency’s recent monthly volume, Ayala said.
The strong demand, which has been building all year, is a sign of an improved economy in which small firms want to expand and need capital, particularly in poorer communities, Ayala said.
The agency’s loan guarantee capacity would normally be reset under a new cap at the Oct. 1 start to the next fiscal year but a two-month halt in lending could slow job growth in the sector of the economy that creates the most net new jobs.
