Tax Update: July 2018

Trending In Tax

U.S. Supreme Court kills Quill physical presence
Economic sales tax nexus laws permitted by the Court; physical presence sales tax nexus is no longer the Constitutional standard. Writing for the majority, Justice Kennedy, who also sat on the Quill court in 1992, noted that the Quill decision was, “flawed on its own terms,” for several reasons. The Quill decision, “created rather than resolved market distortions,” meaning that sellers essentially could take advantage of a judicially-created tax shelter by limiting physical presence in a state. Similarly, sellers were incentivized by avoiding such physical presence.
Tax Reform
Tax reform, retirement plans and business ownership
Business owners need to consider the impact tax reform has on the benefits of retirement plan contributions. For employees, the differences are typically minimal, however the affect on owners may not readily be seen at first glance. The qualified business income, or section 199A deduction, is a complex change in the tax law that needs substantial further guidance from the IRS—and the details of which are too complex for a discussion here. However, when looked at simply, it provides owners of certain pass-through businesses as well as sole-proprietors a 20 percent deduction against their qualified business income.

remote seller uses laptop to determine sales tax nexus under Quill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

4 Key Takeaways from Insero’s Tax Reform Update Seminars

The Tax Cuts and Jobs Act (TCJA) of 2017 is ushering in some of the most significant tax changes in three decades. In anticipation of these changes, Insero recently held a series of Tax Reform Update seminars. If you weren’t able to attend, here are a few of the key takeaways:

 

1. Entity Selection

 

If your business is currently an S corporation or an LLC, changing to a C corporation would allow you to capture the benefits of the new lower corporate tax rate (21% vs. 34% in 2017). If your business is currently a C corporation, changing to an S corporation would allow you to benefit from the new “Qualified Business Deduction”, which is 20% of “Qualified Business Income” (QBI).

While there is no “one size fits all” solution, here are some things to keep in mind:

Tax Rate Analysis

When considering the new 21% tax rate, a pass-through entity is no longer a “no-brainer” in many situations. You’ll want to consider the personal tax rate, taking Qualified Business Income (QBI) in to account. For some existing C corporations, a flat 21% may actually result in a tax increase. Here are some key questions for business owners:

  • Does the business owner require or want access to business cash? If so, when and how much?
  • Will the corporation be reinvesting its profits?
  • What are forecasted profits?
  • What is the business owner’s sell window?
  • What is the perceived ability to sell stock?

Qualified Business Income

New Code Section 199A provides for a deduction equal to 20% of the QBI of pass through entities, including sole proprietorships. There are many limitations, pitfalls, traps, details, and unknowns associated with this deduction, so it is very important that business owners discuss the impact on their business with their service providers. QBI is defined as income or loss from a “qualified” trade or business from US source operations (not foreign). It is NOT wages, salary, guaranteed payments, or investment income. A “qualified” business or trade is defined in the negative, as anything that is not a “specified service business” (SSB). An SSB is one that involves the performance of activities including health, law, accounting, actuarial sciences, performing arts, consulting, athletics, financial services, investment management, or any business whose principal asset is the reputation or skill of one or more of it’s employees. This is by no means a comprehensive list, and the new law leaves much to be defined, so we recommend you discuss your specific situation with your accountant to determine if your business qualifies.

 

2. Accounting Methods

 

Depreciation

Assets placed in service after September 27, 2017 now qualify for 100% bonus depreciation until 2022. This now includes used property and pretty much anything other than buildings such as office equipment, machinery, fleet vehicles, and many leasehold improvements. For property placed in service in taxable years beginning after December 31, 2017, the Section 179 Deduction limit is now $1,000,000 (up from $5,000 previously) with phase-out over $2,500,000 (up from $2,000,000). Bonus Depreciation and Section 179 are NOT the same, so we recommend you discuss the differences and benefits with your accountant.

A Cost Segregation Study (CSS) is another option for new buildings (within the past seven to eight years depending on size) and is essentially depreciation on steroids. If you have recently built or purchased any new buildings in the past several years, a CSS could provide your business with valuable tax deductions and increase tax flow.

Cash Method vs. Accrual Method

Under the TCJA, businesses can now use the cash method of accounting, even if you have inventory. You must still “account” for the inventory, but not receivables and payables. C Corporations now have the expanded ability to use the cash method as well. Depending on your type of business and business operations, this may be beneficial and can possibly exist for retroactive tax planning.

 

3. Personal Taxation

 

There have been sweeping changes to nearly all facets of personal taxation. There are still seven tax brackets, but each bracket rate has been reduced by two to four percentage points and each bracket has been “elongated”, i.e. a lower rate will apply to more taxable income. The standard deduction has also increased for all taxpayers, while State and Local Tax (SALT) Deductions have been limited to a total of $10,000 (including Income and Property Tax). In addition, the Alternative Minimum Tax (AMT), while not repealed, has been declawed.

What does this mean? New York State Taxpayers with between $100,000 and $150,000 or over $700,000 in taxable income may feel these changes the most. Why? The old AMT and Standard Deduction usually (not always) precluded the benefit of the SALT deductions. However, lower rates will somewhat mitigate this issue.

 

4. NYS Response to Federal Tax Reform

 

The Employer Opt-In Compensation Tax program. The idea here is for employers to voluntarily pay a compensation-based tax, for which certain employees would then receive a NYS credit. Presumably, then, the employer would reduce the gross pay of its employees, so that both the employer and the employee stay “whole” on cash flow basis. Essentially the program converts the SALT deduction to less gross income. The program leaves many questions unanswered, which will be interesting to learn about as it is implemented.

What can you do? Get a projection of your 2018 taxable income and tax so that you are not surprised next April, one way or the other. There are very few generalizations that can be made about the overall effect of these changes. The only way to know for sure is to look at your specific situation and put pencil to paper (or fingers to keyboard). Above all, it is important that you get your service provider team on board for any major changes, whether now or in the future. We can work together with your attorneys, investment advisors, and bankers to develop a tax strategy tailored to your specific business situation. Click here to contact us today.

 

Want to learn more?

Save the date for one of Insero’s Annual Tax Update seminars:

December 11, 2018 in Rochester

December 13, 2018 in Ithaca

Click Here to Sign Up for Email Reminders

Green Tax Reform Binder with information on the Tax Cuts and Jobs Act of 2017

Get timely updates delivered straight to your inbox, subscribe to Insero’s Tax Update Newsletter today!

Disclaimer

Tax Alert: Responding to South Dakota v. Wayfair

The U.S. Supreme Court has issued its highly anticipated decision in South Dakota v. Wayfair, overruling Quill’s physical presence sales tax nexus standard. This decision will have significant implications for almost all industries, but especially consumer products (retailers) and industrial products.

With a new sales tax nexus standard established, more states will require all retailers that sell within their borders to collect that state’s sales tax. About a dozen states have already addressed economic nexus laws or regulations.

The Wayfair case moved through the court system at a blistering pace. Even with a decision from the nation’s highest court, very little is settled. Under the U.S. Constitution, Congress may have the authority to implement a remote seller solution or codify the physical presence standard into federal law. Whether Congress takes up the issue is a “wait-and-see” proposition.

However, Wayfair has created many more questions than answers. Adapting your business to the new sales and use tax landscape will take time, even though you may need to react quickly.

To learn more, please read RSM’s alert, U.S. Supreme Court kills Quill physical presence or contact us directly to discuss how Wayfair may affect your business.

 

Supreme Court of the United States building in Washington, DC, SCOTUS has issued decision in South Dakota v. Wayfair

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
https://rsmus.com/what-we-do/services/tax/state-and-local-tax/sales-and-use-tax/u-s–supreme-court-kills-quill-physical-presence.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Tax Update: June 2018

Tax Reform
The tax implications of foreign-derived intangible income
Multinational automakers and suppliers may be able to reduce their tax rate by capitalizing on their foreign-derived income. As part of H.R. 1, commonly known as the Tax Cuts and Jobs Act, Congress added a section that effectively establishes a new preferential tax rate by which automakers and suppliers, organized as domestic C corporations, can generate income derived from qualifying foreign sales, licensing, leasing and service activities.
Update on uncertainties in new tax law
A look into how to deal with the various tax risks associated with the uncertainty of the Tax Cuts and Jobs Act. Many taxpayers and their advisors are frustrated by the uncertainties created by a number of new provisions of the Tax Cuts and Jobs Act of 2017. Some uncertainties are unavoidable – such as whether the new 20 percent pass-through deduction and other individual provisions will be made permanent, or whether the 21 percent corporate tax rate, theoretically ‘permanent,’ will be increased by a later Congress.
Trending In Tax
Fulfillment by Amazon is a game changer: Is your business prepared?
While Fulfillment by Amazon (FBA) can provide advantages to consumer products businesses there are key areas you should address to ensure success. Amazon FBA is fast becoming a growing customer for both branded and private label businesses. According to Fortune, Amazon more than doubled the total items it delivered for third-party sellers to two billion in 2016 from the year prior. Active sellers using FBA rose more than 70 percent, and these numbers are expected to continue to rise. Amazon FBA could be a great opportunity to market and sell your products to millions of consumers, without the uncertainty of chargebacks and discounts encountered when selling to traditional bricks-and-mortar and online retailers.

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Tax Update: May 2018

Tax Reform
Tax reform provides incentive for S corps to reexamine owner comp
Increasing wages to maximize 20 percent pass-through deduction must be reconciled with reasonable compensation rules. Under the Tax Cuts and Jobs Act (TCJA) enacted in December of 2017, a new deduction emerged for owners of pass-through businesses (such as S corporations) engaged in activities other than certain prohibited services.
Real estate investors: The impact of tax reform
What the new U.S. tax plan will mean for your bottom line and how it will affect investors. In this Privcap Q&A, RSM tax partner Don Susswein and senior manager Andrew Cohen discuss U.S. tax reform and how it will affect real estate investors.
Meals and entertainment expenses after tax reform
The deduction for meals and entertainment (M&E) expenses has been one of the most broadly applicable opportunities for significant tax savings; however, after tax reform, there are some misconceptions regarding how to apply the rules and what opportunities remain. Companies should review the tax treatment of their M&E expenses to comply with the changes of expenses to 0, 50 and 100 percent deductible.
Trending In Tax
U.S. Supreme Court hears arguments on Quill challenge
U.S. Supreme Court hears oral arguments on challenge to Quill’s sales tax physical presence nexus standard; decision expected in June.

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Tax Update: April 2018

Tax Reform
Re-evaluating your choice of entity after tax reform
This recorded webcast explores how tax reform impacts your entity structure from a federal, international, and state and local perspective.
Trending In Tax
South Dakota v. Wayfair: What to know and how to prepare
South Dakota v. Wayfair could have significant implications for the sales and use taxability and compliance of remote transactions.
Full expensing of stepped-up tax basis? It depends
Availability of full expensing for stepped-up basis in assets after an M&A transaction may depend on acquisition structure.
Tax Court rules family office activities as trade or business services
Lender Management, LLC versus Commissioner court case coupled with the 2017 Tax Act have family offices revisiting how they are structured.

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Tax Update: March 2018

What does the Tax Cuts and Jobs Act mean for pass-through entities?
Listen to our recorded webcast on the impact on pass-through entities.

Tax reform impact on executives of alternative investment funds
Learn how the recent tax reform affects executives, founders and general partners of alternative investment fund structures.

Meals and entertainment expenses after tax reform
Employers must change their systems and processes for the new rules.

Wealth transfer planning after TCJA: If not now, when?
The stars are aligned for wealth transfer, but the sooner the better.

Use stat sampling to increase meals and entertainment deductions
Statistical sampling eases the burden of identifying eligible M&E expenses through three-year extrapolation of expenses.

Navigating multistate unemployment tax reporting and remittance
Businesses with multistate employees should understand the reporting and remittance nuances of a complex unemployment taxing regime.

India proposes draft Master File and CbC reporting rules

Now is the time to know what an ESOP is

Bobbleheads spring into Ohio sales and use tax

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Tax Update: February 2018

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

TAX REFORM

The Tax Cuts and Jobs Act: Corporate tax considerations
Listen to our recorded webcast on the impact on corporate entities.

What does the Tax Cuts and Jobs Act mean for pass-through entities?
Join RSM on Feb. 14 as our presenters review key provisions of the Act and their potential impact on pass-through entities.

TRENDING IN TAX

Business planning: Why conduct a multiyear strategic financial plan
Learn how a comprehensive business plan helps company leaders define long-term objectives and the steps to take to achieve them.

Foreign indirect tax resource center
Managing indirect tax for electronically supplied services.

Meals and entertainment expenses after tax reform
Employers must change their systems and processes for the new rules.

Top 6 considerations for successful employee repatriation
Successfully repatriating employees needs thorough planning to ensure ongoing satisfaction for organizations as well as their expatriates.

New pass-through rules cut taxes for entrepreneurs large and small
Thousands of small and middle market businesses may see unexpectedly large tax cuts as a result of the Tax Cuts and Jobs Act.

 

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.

Tax Update: January 2018

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

TAX REFORM

Tax reform: Key provisions of the Tax Cuts and Jobs Act
Listen to our recorded webcast for highlights on tax reform.

The Tax Cuts and Jobs Act: Corporate tax considerations
New corporate tax rules provide benefits, take away significant deductions and generally adds complexity to the corporate tax system.

TRENDING IN TAX

Indiana-based online participant revenue properly sourced out of state
State erred by sourcing an online university’s revenue based on market sourcing rather than the location of its income-producing activities.

Key tax issues for real estate investors under new tax legislation
For real estate investors and businesses, the final tax reform bill makes several significant changes compared to prior law.

OEMs and suppliers may have unknown state tax exposure
Auto manufacturers and their suppliers may be unaware of state and local tax exposures created by their business activities.

DowDuPont receives IRS approval on spin-off issue
Analysis of shareholders’ ownership overlap with “net decrease” methodology avoids gain under section 355(e) for three spin-offs.

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.

Tax Update: December 2017

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

TAX REFORM

Tax Reform update
Visit our resource center to get the latest updates on tax reform.

How pass-through tax reform proposals differ in House and Senate
House and Senate proposals to reduce taxes on pass-through income differ dramatically. Here are some illustrations.

TRENDING IN TAX

Considering global expansion? It helps to have the right partner
Global expansion can be the right answer for many companies looking to grow. (Video).

Reimagine your corporate tax function
This e-book explores the resource management challenges facing tax directors and how to establish a successful co-sourcing approach.

Economic sales and use tax nexus laws
Economic sales and use tax nexus laws are gaining momentum as states make a direct challenge to traditional physical presence standards.

Dutch propose sweeping business tax changes
The Dutch government has proposed reducing its corporate and withholding taxes along with other significant changes.

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.

Page 1 of 13123...Last »