Tax Update: August 2018

Tax Reform
U.S. tax reform international implications
RSM’s Ramon Camacho and Ayana Martinez discuss the TCJA and BEPS with BEPS Global Currents.
Estate planning subsequent to the enactment of tax reform
Estate planning strategies to help minimize future estate, gift and generation-skipping taxes for estates in excess of the exemption. This article explores tips and traps associated with estate planning strategies to consider.

Trending in Tax

Frequently asked questions on country-by-country reporting
A guide for multinational corporations regarding country-by-country reporting questions and base erosion profit shifting. These regulations are based on model legislation from the Organisation for Economic Co-operation and Development (OECD) and are part of the project addressing base erosion and profit shifting (BEPS).

Stock options and section 409A: Frequently asked questions
An explanation of the section 409A considerations that companies need to be aware of when issuing stock options.

Economic Insight 

The Real Economy: Volume 44
In this issue we discuss the growing risk to key industries and the middle market economy. The hit to the economy caused by the taxes on imports and exports will spread asymmetrically across the industrial ecosystems that make up the domestic economy. Based on our conversation with officials in Washington, it is apparent that the middle market will bear a disproportionate burden of adjustments from trade tariffs and should prepare accordingly.

 

two people with laptops, pencils, and paper, planning for tax reform international implications

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.

Non-Profit Update: July/August 2018

New standards for nonprofits present their own challenges
New standards for nonprofit financial statements and revenue recognition will need to be implemented over the next two or three years.

How IT outsourcing strengthens security for nonprofits
The evolving complexity of strong cybersecurity underscores the value of an outsourcing partner dedicated to keeping cybercriminals out. It often requires just a series of emails to get senior finance executives to begin looking beyond their own IT departments to safeguard their businesses against cyber-hackers.

GDPR enforcement is here…is your organization prepared?
General Data Protection Regulation (GDPR) noncompliance could mean potentially significant fines and penalties. Organizations must know where they stand and how to react before it’s too late. The following infographic provides key insights into GDPR compliance requirements, helping your organization understand critical elements of the regulation.

Nonprofit tax reform resource center
The recently enacted Tax Cuts and Jobs Act has produced widespread tax law changes for exempt organizations. Learn more about the latest updates in our resource center. Our resource center features the latest in developments related to the potential effects of the new tax law for exempt organizations.

 

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 insights for non-profit organizations.

Audit & Accounting Update: July 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 financial reporting insights. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Substantial accounting changes for nonemployee share-based payments
We have prepared a summary of the accounting changes for nonemployee share-based payments resulting from the issuance of ASU 2018-07. The Financial Accounting Standards Board’s recently updated guidance to align nonemployee share-based payment accounting with employee share-based payment accounting will result in significant measurement changes.

Changes to revenue recognition in the construction industry
Our white paper assists in understanding the application of the new revenue recognition guidance to construction contracts and how a construction contractor could be significantly affected by the new guidance.

Leases: Impact of ASC 842 on the retail and restaurant sector
Our article discusses specific aspects of the new leasing standard that retailers and restaurant operators should consider. To understand these considerations the first step is to understand the full inventory of all contracts that would fall under the new definition of a lease. Understanding the financial reporting and operational impact is imperative also to the middle market.

Monitoring inflation when applying ASC 830
A framework is available to assist in the determination of whether a country’s economy should be considered highly inflationary. The determination of a highly inflationary economy begins by calculating the cumulative inflation rate for the three-year period that precedes the beginning of the reporting period, including interim reporting periods.

accounting achievement aerial

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

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: 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

Case Study: Non-Profit Improves Processes, Hires New CFO

Client: $4 million non-profit organization

Service: Non-Profit Outsource Accounting Services

 

Situation

When the Chief Financial Officer of a $4 million non-profit left abruptly, the board reached out to Insero & Co.’s Non-Profit Outsource Accounting Services Group for assistance. They had an immediate need for coverage, but also wanted to step back and figure out what would be best for the organization in the long run. This was especially important since the organization had experienced recent turnover of nearly all internal management roles, including the Executive Director. The board asked Insero to help evaluate the CFO position and make recommendations for process improvements, as well as hiring and pay structure for the accounting department.

 

Resolution

Insero’s Outsource Consultants were able to provide the organization with an interim CFO to fill the immediate needs of day to day operations, as well as a strategic planning partner to assess the current structure and provide guidance to the board. After an initial assessment, Insero was able to assist with the recruiting and placement of a new CFO as a direct hire. We also developed a six-month transition plan to support the new CFO, who attends all board meetings and delivers Finance and Board Packages, which have now been automated to print directly from QuickBooks.

Other process improvements included:

  • Grant management procedures
  • Month-end close process
  • Refining the annual budget process
  • Defining ownership roles within the organization

All of this was achieved at a fraction of the cost of the previous CFO’s salary and benefits.

executive director of a non-profit review financial data and process improvements with outsource consultants

Learn More

With over 40 years of experience working with non-profits, Insero’s specialists have the knowledge and capacity to help you with your organization’s needs. Our clients include foundations, arts and cultural organizations, chambers of commerce, social clubs, fraternities and sororities, housing assistance and development organizations, recreation facilities and programs, community support organizations, child care providers, and more. Learn more about our service offerings below: To learn more about how we can help your organization, contact us today.

 

Non-Profit Update: May/June 2018

Nonprofit tax reform resource center
The recently enacted Tax Cuts and Jobs Act has produced widespread tax law changes for exempt organizations. Learn more about the latest updates in our resource center.

Donor-advised funds: Accounting implications related to pledges
This article addresses the accounting implications related to a donor’s use of a donor-advised fund to service a pledge. According to the National Philanthropic Trust’s 2017 Donor-Advised Fund Report, there were approximately 285,000 individual donor-advised funds (DAFs) in 2016 with aggregate charitable assets of $85 billion.

Understanding and managing 2018’s key risks
RSM’s recent 2018 economic and risk webcast analyzed emerging economic and risk trends, and detailed four specific risks that your company will likely face this year. This infographic summarizes the webcast to help you understand new innovation, automation, cybersecurity, and data privacy risks and potential management responses.

Planned giving strategies: Strategies, tactics and tools
Once a nonprofit understands the charitable visions of its donors, it’s time to discuss strategies that will help the organization accomplish its goals.

On demand: Annual nonprofit accounting update webcast
Miss our webcast on Thursday, April 19? View the annual accounting update on demand, answer polling questions and complete the final exam to be eligible for CPE credit for this course.

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

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 insights for non-profit organizations.

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.

Audit & Accounting Update: May 17, 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 financial reporting insights. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Accounting

ASC 606 and certain transactions in collaborative arrangements
The FASB proposed guidance on whether certain transactions in collaborative arrangements should be accounted for under ASC 606.

Upcoming Webcasts

Revenue recognition: Key considerations for the business and professional services industry
Join RSM on May 22 at 2 p.m. ET as we share insights on how FASB ASC 606 affects the business and professional services industry.

Implementing the new revenue recognition standard in the manufacturing industry
Join RSM on May 23 at 2 p.m. ET as we share insights on implementing FASB ASC 606 in a manufacturing company.

Audit and Accounting Updates for Business Owners and Financial Professionals

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

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.

Audit & Accounting Update: May 10, 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 financial reporting insights. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Accounting

RSM whitepapers: Private companies and the new revenue guidance
Our whitepapers encourage private companies to consider the impact of ASC 606 and to start early in the implementation process.

Effective date reminder and updated whitepaper on ASU 2016-01
We recently updated our whitepaper on ASU 2016-01 to incorporate the clarifications brought forth by ASU 2018-03.

Staff interpretations of ASU 2017-12: Prepayable financial instruments
Recent FASB Staff interpretations address the scope of Accounting Standards Update 2017-12 for prepayable financial instruments.

Donor-advised funds: Accounting implications related to pledges
This article addresses the accounting implications related to a donor’s use of a donor-advised fund to service a pledge.

SEC

Cybersecurity risk management oversight tool
A recent CAQ tool provides questions board members can consider as they address cybersecurity risks and disclosures.

Upcoming Webcasts

Revenue recognition: Key considerations for the business and professional services industry
Join RSM on May 22 at 2 p.m. ET as we share insights on how FASB ASC 606 affects the business and professional services industry.

Audit and Accounting Updates for Business Owners and Financial Professionals

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

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.

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