contact@sourcedatl.com | Welch Financial Advisors Skip to primary navigation Skip to content Skip to footer Welch Financial Advisors Header Right View CecilyWelchCPA’s profile on Facebook View cecilywelchcpa’s profile on Twitter View cecilywelch’s profile on LinkedIn Main navigation Home About Services Blog Contact contact@sourcedatl.com GSCPA Welcomes New Board Member, Cecily VM Welch, CPA July 18, 2018 by contact@sourcedatl.com Leave a Comment Cecily VM Welch, CPA, is owner of Welch Financial Advisors, LLC. Cecily started her career as an internal auditor at Honeywell where she audited several international locations. She then transitioned to financial consulting with PriceWaterhouse and specialized in taxation at midsize and small firms in Georgia before starting her own firm in 2013. She has worked 25 years in both private and public accounting. Cecily joined The Georgia Society of CPAs in 2001 and has been an active member. In May of this year, she was on a panel of speakers as part of the AICPA Accounting Scholars Leadership Workshop (ASLW), which is a program for minority accounting students who plan to pursue the CPA credential. She is also the past-chair of GSCPA’s Tax Task Force and has served on this task force for many years. In additional to her involvement with GSCPA, she is a past subgroup chair on the IRS Advisory Council (SBSE Subgroup) and is an AICPA CPA Ambassador. Cecily graduated from North Carolina A&T State University with a bachelor’s in science in accounting and from the University of Wisconsin with an MBA. Filed Under: Uncategorized Plain Speak Explanation: DEPRECIATION RULES, I JUST RIGHT IT OFF RIGHT? May 2, 2018 by contact@sourcedatl.com Leave a Comment From conversations with several business clients, the depreciation rules have gotten so complicated that they just ignore them and leave it to us accountants to figure out. Each year there have been laws that update, change, or sunset the thresholds and/or the expensable amounts. It’s very difficult to keep up with the figures or why it matters. Head’s up, for those tax accountants reading this, this explanation won’t appease your technical knowledge, it’s just an overview and doesn’t cover the nuances Below is a basic overview of how the rules work and why these are special depreciation rules, meaning, in order to get an expense deduction, appropriate purchases still have to be capitalized. Recall the basic rule of items purchased that last more than 1 year, this hasn’t changed. In general, these items must be capitalized. Meaning, they get listed on an asset schedule and the expense gets spread over several years depending on IRS defined depreciable lives. For purposes of this ‘explanation on how it works’ we’ll assume a company purchases a $500,000 piece of equipment. And we’ll assume it gets depreciated (expensed on the P&L) over 5 years on a straight-line basis per ‘regular’ depreciation rules, so $100,000 depreciation per year. Further, assume the business has total income of $20M and total expenses of $19,800,000. Therefore, ignoring the new piece of equipment, the business has net income of $200,000. *One of the stipulations on Section 179 is that it can not create a loss for the business. Therefore, even if the threshold for maximum Sec 179 deduction is $1M (which it currently is) it is limited. And no, it doesn’t carry forward to the next year for the business. In the above example, only $200,000 Section 179 was taken, leaving $800,000 “on the table”. But this just goes away, it does not mean the next year the company has $1,800,000 of Section 179 they can use. Next year they still just have the $1M The above example seems pretty straight forward, however, we are talking about tax law here. Therefore, there are a lot of caveats and considerations about how/when/amount of the above items. The thresholds for if your company qualifies to use any of these special depreciation rules, what these rules can be applied on, and the amount that is allowable has changed each year – sometimes retroactively. For example, the amount of Section 179 deduction an individual taxpayer can take on their personal tax return is limited. This was more of a problem in prior years, i.e. prior to 2008 Section 179 deduction was limited to $125K per taxpayer. Therefore, if a taxpayer had ownership in 3 companies that each took $100K, then although they received $300k of Section 179 deduction, they were only allowed $125K on their tax return. Further, if an asset is sold prior to the ‘regular depreciable life’ then it’s a deduction that has to be recaptured. Section 179 has been changed by the following law changes (6 of which occurred at or after the end of the year it impacted): • ′Economic Stimulus Act of 2008′ (signed 02-13-2008) • ′American Recovery and Reinvestment Act of 2009′ (signed 02-17-2009) • ′Hiring Incentives to Restore Employment Act of 2010′ (signed 03-18-2010) • ′Small Business Jobs and Credit Act of 2010′ (signed 09-27-2010) • ′Tax Relief, Unemployment Insurance Reauthorization, Job Creation Act′ (signed 12-17-2010) • ′The American Taxpayer Relief Act of 2012′ (signed 01-2-2013) • ′The Tax Extenders Bill′ (signed 12-19-2014) • ′The Protecting Americans from Tax Hikes Act of 2015′ (signed 12-17-2015) • ′The Tax Cuts and Jobs Act′ (signed 12-22-2017) The list of Section 168 (bonus depreciation) changes is nearly as extensive. Sometimes it has allowed a 50% deduction or 30% deduction, and currently it’s a 100% deduction (effective Sept 27, 2017). No, I can’t explain why the TJCA retroactively created a 100% deduction effective 9/27/17 – but that’s what the law is. You can see by the above why businesses like the depreciation acceleration provisions. It allows the business to expense items in the current year when typical rules have the expense spread over several years. However, it is also very important that you use a tax professional who understands these rules to help your business plan for the year. Please note, this overview is not designed to be a commercial for my profession, us accountant’s didn’t come up with these rules, we just have figure them out. The complexity and constant changes frustrate us as well, because it makes it difficult to help our clients plan or predict financial outcomes. Has to be said, the above general information is not to be interpreted as specific tax advice and before implementing any tax strategies, consult your own tax advisor. Filed Under: Uncategorized As you prepare your taxes don’t forget to… April 5, 2018 by contact@sourcedatl.com Leave a Comment Dear Business Clients, During our time working together, we went over a number of tax-related topics. However, with it being a new tax year and with a new tax law among us, I thought it would be prudent to go over some of these topics again. Keep reading for a quick refresher. 1099s/ W-9 Now that we’ve gone through the 1099 cycle, it’s a good time remind you to obtain a W-9 form from any vendors, contractors, etc. before you pay them this year. This is the tax law, but unfortunately, it’s an area of tax law that businesses have neglected. Because of this, the IRS has increased scrutiny in this area and the penalties for not filing 1099’s when required are getting pretty steep. The only way to determine if a person, vendor or will need a 1099 is by having a W- 9 on file. The intricacies for when or if a 1099 is required isn’t as straightforward as we would like it to be; therefore do not make assumptions. For all people, vendors or contractors you pay in 2018, please get a completed and signed W-9 from them, and put it in a file (and send to your bookkeeper/accountant). If your business does not want to get W-9’s then you can choose to ONLY pay expenses (all expenses) via credit or debit card, Square or PayPal. If your business pays expenses in any other way such as checks, ACH or cash, get a W-9. Other Annual Compliance If you have not renewed your state registration for your business yet, be sure to do so as soon as possible. Georgia business owns can do so online at https://ecorp.sos.ga.gov/. The deadline is April 1. You also need to renew your business license, which should not be confused with the state registration. Your city or county typically administers the business license. If you are renewing your licenses, you probably received the renewal in the mail Some counties will let you renew online. Also remember that license renewals are county specific, and dates, process and the cost can differ. Additionally, be sure to complete your Business Personal Property Tax (BPPT) return for your respective county. Like the business license, you should have received your BPTT return renewal information in the mail. Similarly to how you pay a vehicle tax based on its value every year at renewal, business have to do the same for their business property they own. This involves items like desks, inventory and computers. To be honest, this does not make sense to me. Is this required for home-based businesses for those with a storefront? If so, then I’ve never did it as I imagine many others have not either. This is also an ideal time to check if you have any other tax filing requirements based on your facts and circumstances and if you’re meeting those obligations (sales tax, payroll tax, etc.). New Tax Law—Some changes to make immediately If you do your own bookkeeping, it would be prudent to create a new account called “Entertainment” in order to comply with the new tax law. This would be separate from the old “Meals and Entertainment” expense category. Under the new law, Entertainment is not deemed deductible and thus needs to be separately reported in the financial records. Please note that yes, we, the IRS, I, etc. know that entertainment expenses can be legitimate business expenses. That’s irrelevant—the law is not questioning if it’s a business expense, just that even if it’s a legitimate business expense, it’s not a tax deduction anymore. Also note, there are still many aspects of the new law that are unclear. If you do a search you’ll find multiple analysis that state different conclusions. That’s because the IRS nor Congress has had time to get into the details. For example: are meals still deductible when you take clients out? Great question. But truthfully, no one knows yet (there is commentary saying yes, commentary saying no), but none of it is authoritative. So still track all business expenses and activity. Once rules of the new law are more fully vetted by Congress and the IRS, more guidance will be available. In meantime, we do know that nothing is deductible if it isn’t properly tracked and substantiated, so please continue to do this. Remember that state tax law varies tremendously. Some states adopt part, all, or none of the new tax law. So, as you’re considering business operations, recognize that state laws can be very different from federal law and also very different from their neighboring states. If your business is operating as a partnership (it’s an LLC, LP, LLP, etc.) then it would behoove you to meet with a business attorney who is familiar with the recent changes to partnership audit tax law. Since this wasn’t a change that occurred in the December 2017 Tax Cuts and Jobs Act, a lot of businesses aren’t aware that partnership tax law was changed back in 2015 (with an effective date of January 2018). There are some changes to your partnership agreement that should be made (i.e. there’s no longer something called a ‘Tax Matters Partner’) and it’s even more critical now to seriously think about who or how the business will be represented if it is ever audited. General things to remember When it comes to substantiating expenses, remember you need BOTH the proof of payment (credit card or bank statement) and the receipt for that expense. This is often hard for new business owners to remember, but yes, both are necessary. The easiest way to remember this requirement is imagine your purchases at Amazon. The credit card statement will just say “Amazon”. The IRS (nor your accountant) has any idea if it’s for a business expense or not and how it should be categorized. The purchase could be a desk for your office or sports equipment for your son, the only way to know this is via the receipt. Given how critical it is to keep receipts, and because receipts now fade, I strongly recommend businesses invest in a scanner or consistently use a receipt storage software that you can take a picture of receipts and categorize. As business owners, you should be aware that you might get more pressure from your employees for reimbursement of more expenses. From an employee’s financial management perspective, it’s always better to get reimbursed for expenses versus deducting them. For example, if a business trip costs, $100, it’s better to get the money back from the employer rather than taking a $100 $100 non- reimbursed expense deduction on the tax return that would yield a savings of only $30 to $40. However, with small businesses and certain business models it is very difficult to reimburse employees for all expenses associated with doing their job well, so the ability to potentially deduct those expenses offered at least some relief for the employee. The new tax law changes this: there is no ability to deduct unreimbursed employee expenses going forward. Therefore, employers should be prepared for employees to want to discuss reimbursable and non-reimbursable expenses policies at the company. You’ve heard Welch Financial Advisors mention on several occasions that, yes, the financial and tax compliance piece of business ownership is very time consuming and can be feel burdensome. However, keeping accurate books and records is a basic expectation of a true business (from a bank’s perspective if you want a loan, from the IRS’s perspective, if you’re under audit). Recall, without accurate books and records and without operating like a business, the IRS has reclassified many businesses’ “activities” as a hobby and thus disallowed nearly all expense deductions. From their perspective, a true business does these things so they can run their business (identify profitable clients from non-profitable clients, identify profitable product lines, make hiring and firing decisions, etc.). The fact that these results end up on a tax return is just a byproduct of something the business should be doing anyway. I hope you find the above items helpful, and please contact Welch Financial Advisors for specific advice and specific steps as it relates to your business. The above general information is not to be interpreted as specific tax advice and before implementing any tax strategies, consult your own tax advisor. Filed Under: Uncategorized Footer Social View hh’s profile on Facebook View hh’s profile on Twitter View hh’s profile on LinkedIn © 2022 Welch Financial Advisors. Site managed by Red One Menu Home About Services Blog Contact