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Trucking Toward State Tax Compliance: Is a VDA the Right Option?

Posted 2:59 PM by
Many companies struggle to determine if they have sufficient activity in a state, or nexus, to force them to file state tax returns. This can be especially difficult for transportation companies. One of the issues is whether driving more than a de minimis amount of miles through a state creates a tax filing obligation. 
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Social Security – The Road to Maximizing Benefits

Posted 1:23 PM by

With an aging workforce, drivers may be questioning when to take Social Security benefit payments and how the amounts are calculated. There are two basic steps in determining monthly benefits. The first step is computing the average indexed monthly earnings (AIME). The second step, incorporating AIME, is to determine the primary insurance amount (PIA), which is the basis needed to calculate Social Security benefits that are paid to retirees.  

The AIME calculation takes the highest 35 years of earnings and indexes them to reflect the changes in wage levels, ensuring that benefits will reflect the rise in the standard of living that occurred during a lifetime of working. The sum of those years is divided by 420 to determine the average monthly earnings. If there are less than 35 years of earnings, it may be beneficial to work enough additional years to have a full 35 years. Otherwise, non-earning years will be averaged in and will quickly decrease the AIME – and ultimately the retirement benefits.

Reviewing the annual Social Security statement for errors or omissions, and having them corrected before the statute of limitations runs out, is advised.

Increase for Delayed Retirement
 
Year of Birth*Yearly Rate of IncreaseMonthly Rate of Increase
1933 - 19345.50%11/24 of 1%
1935 - 19366.00%1/2 of 1%
1937 - 19386.50%13/24 of 1%
1939 - 19407.00%7/12 of 1%
1941 - 19427.50%5/8 of 1%
1943 or later8.00%2/3 of 1%
Note: If you were born on Jan. 1, you should refer to the rate of increase for the previous year


Once the AIME is established, the next step in determining the monthly benefit is calculating the PIA. The PIA is the sum of three separate portions of AIME, known as bend points, which depend on the year age 62 is reached. Assuming an individual reaches age 62 in 2015, and their AIME is $5,300, the monthly benefit is calculated as follows:

1.     90% of the first $826 of AIME = $743.40

2.     32% of AIME above $826 and through $4,980 = $1329.28

3.     15% of AIME above $4,980 = $48.00

The sum of the calculation ($2,120.68) is the monthly benefit. The maximum benefit cap is $2,663 in 2015. These benefits were never meant to provide full financial support upon retirement. The result of these bend points is that lower-wage earners receive a larger percentage of their pre-retirement income, while higher-wage earners receive a lower percentage of their pre-retirement income.

The monthly benefit will be affected by whether the retiree opts for early or delayed retirement. Full retirement age is based on the year of birth, which is age 67 for those born after 1959. Benefits can be claimed as early as age 62, but the monthly check will be cut by 25% - 30% for the remaining payment over life. If other income streams are available, a better option is to delay retirement benefits until age 70, when a delayed credit of up to 8% is applied, plus cost-of-living adjustments. It may also make sense to delay retirement if resulting higher income is anticipated to spike in the later years, which will increase the AIME resulting in higher benefits.

Usually, claiming benefits while still working and under the full retirement age is not beneficial. In 2015, the reduction is $1 for every $2 earned over the earnings limit of $15,720. At full retirement age, the reduction is $1 for every $3 in earnings above $41,880 before the birthday month. Also, all benefits received, regardless of early or delayed retirement, may be subject to income taxes. Married taxpayers with combined earnings between $32,000 and $44,000 are subject to as much as 50% of the benefits being taxable. Those with earnings above $44,000 will pay tax on 85% of the benefits received.  

A lower-earning spouse can claim a benefit, based on his or her work record at age 62, or the spouse can claim a “spousal” benefit, as long as the other spouse has started to collect benefits. If the lower earner is at full retirement age, the spousal benefit is 50% of the higher earner’s PIA. A higher earner at full retirement age who wants to maximize benefits by delaying to age 70 should file for benefits while having the spouse apply for a spousal benefit. The higher earning spouse should then request the Social Security Administration to suspend their benefits, while the spouse continues to receive a spousal benefit. The higher earning spouse can then continue to work and accrue delayed credits until reapplying.

About the Author
Troy Hogan is a director in Katz, Sapper & Miller's Business Advisory Group. Troy consults with clients to manage business concerns specific to the transportation industry and crafts solutions related to tax deferral, per diem, fuel tax credits, and entity restructuring. Connect with him on LinkedIn.

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Standards Updates - 4/14/15

Posted 3:42 PM by

Revenue Recognition Standard Potentially Delayed for a Year

The Financial Accounting Standards Board (FASB) has reached a decision to potentially delay the implementation of the new revenue recognition standard, Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09).

Under anticipated new guidance, ASU 2014-09 will become effective for public companies for annual reporting periods beginning after Dec. 15, 2017. Nonpublic companies will have to adopt the new standard for all annual reporting periods beginning after Dec. 15, 2018. The standard applies on a retroactive basis, so all periods presented will need to comply with the new revenue standards once adopted. The FASB has permitted early adoption for both public and nonpublic companies, but not before the original adoption date of public companies, which was for annual periods beginning after Dec. 15, 2016. 

Once issued, the proposed ASU will be open to public comment for 30 days.

 

Presentation of Debt Issue Costs

On April 7, 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, not as an asset. The ASU does not affect the recognition and measurement guidance related to debt issuance costs. The ASU should be applied on a retrospective basis, when comparative balance sheets are presented. 

ASU 2015-03 is effective for financial statements issued for fiscal years beginning after Dec. 15, 2015. Early adoption is permitted for financial statements that have not been previously issued.

About the Author
Amanda Horvath is a director in Katz, Sapper & Miller’s Audit and Assurance Services Group. Amanda provides a wide variety of services to KSM clients, including financial statement audits, reviews and consulting projects involving compliance and internal control issues. Connect with her on LinkedIn.



About the Author
Justin Hayes is a director in Katz, Sapper & Miller’s Audit and Assurance Services Group. Justin oversees audit and review engagements, and advises clients in accounting, reporting, compliance, and internal control matters. Connect with him on LinkedIn.

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Katz, Sapper & Miller and McLeod Software Announce Second Annual Trucking Operations Benchmarking Survey

Posted 1:39 PM by

Indianapolis, Ind.  The certified public accounting firm of Katz, Sapper & Miller (KSM) and McLeod Software announce the launch of their 2015 Trucking Operations Performance Benchmarking Survey. The survey is designed to answer the vital need in the trucking industry for solid and comprehensive benchmarking data.

A look at operating metrics

The benchmarking survey will examine several aspects that are common performance indicators for truckload carriers including:

  • People and headcount
  • Fuel consumption, expense, purchasing, and efficiency
  • Revenue miles, rates, and surcharges
  • Equipment counts and actual utilization
  • Safety profiles
  • Operating expenses

In exchange for participation in the study, each carrier will receive a copy of the final benchmarking report, to be delivered at the annual McLeod Users’ Conference taking place Oct. 4-6, 2015.

“Trucking is a highly competitive business and success hinges on the ability to improve,” said Tim Almack, partner-in-charge of KSM’s Transportation Services Group. “Carriers must analyze business performance in fine detail across the entire enterprise, determine where improvements can be made, and take the actions that boost the bottom line. Benchmarking data is critical to this effort, because without it, there is no way for carriers to obtain an objective view of their business practices.”

McLeod makes it easier to participate

“McLeod Software has developed a new report to help our customers generate the data needed to participate in this benchmark project,” said Mark Cubine, Vice President of Marketing for McLeod Software. “This report will run on version 10.0 or later of LoadMaster Enterprise, and it is available at no charge to McLeod customers.”

Carriers can participate in the survey in one of two ways:

  1. McLeod customers currently running LoadMaster Enterprise version 10.0 or later should contact their McLeod support account manager for access to a compatible survey reporting tool. 
  2. McLeod customers that are currently running an older version of LoadMaster Enterprise or carriers that are not McLeod customers should contact Tim Almack at 317.580.2068 or truckingbenchmark@ksmcpa.com to obtain the survey data collection document.

The deadline for submissions to be included in the 2015 benchmarking report is June 30, 2015.

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About Katz, Sapper & Miller
As one of the top 65 CPA firms in the nation, Katz, Sapper & Miller (KSM) has earned a reputation as a leader in the areas of accounting, tax and consulting services. KSM has provided tax and business consulting services to the trucking industry since its founding in 1942. Through the firm’s experience with 100-plus trucking and logistics clients throughout North America, KSM has become a national service provider to the trucking industry. Learn more at ksmcpa.com.

The firm provides additional services through KSM Transport Advisors, LLC (KSMTA), a part of the Katz, Sapper & Miller Network. KSMTA exclusively services the trucking industry, providing freight network engineering and profit improvement services. Learn more at ksmta.com.

About McLeod Software
Since 1985, McLeod Software has provided powerful transportation management and trucking software solutions to the trucking industry. These solutions, developed entirely by our company, are comprehensive and support integration with a broad array of complimentary logistics products.

We are the leader when it comes to software for trucking dispatch operations management, freight brokerage management, fleet management, document imaging, workflow, EDI, and business process automation solutions for trucking, freight brokerage, third party logistics, and shipper companies in the United States.

With an established base of more than 800 active customers throughout North America, McLeod Software is dedicated solely to the transportation industry. This focus means we have a deep understanding of the needs and intricate details involved in carrier, broker, and freight management businesses of all types. Learn more at McLeodSoftware.com.

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Planning for the Future Today – Succession Planning and Business Continuity

Posted 12:00 PM by

One of the most difficult business decisions and processes for trucking company owners is developing a succession plan, or determining the best timing for a sale to maximize value. Often owner concerns involve the welfare of employees, or the impact on the community home to the business. If transition to the next generation is the desire, issues related to equitability among children participating in the business with those pursuing other dreams can be challenging.

A study by the Business Enterprise Institute, Inc. found in 2012 41 percent of businesses were transitioned to key employees, co-owners, or Employee Stock Ownership Plans (ESOPs). While 29 percent were sold to third parties and 24 percent were transferred to children. Regardless of the potential acquirer of the family business, understanding and knowing the trucking company’s value is paramount.

Valuation professionals commonly use three approaches in determining an estimated value of closely held businesses.

1. The income approach, or discounted cash flow method, analyzes the projected free cash to be generated by the business. This cash stream is discounted to determine a value.

2. The market approach, or guideline public companies method, compares the target company with publicly-traded companies. The market approach will compare price to earnings, revenue and book of public companies in calculating the value of the closely held business.

3. Lastly, the asset approach is simply relying on the appraisal of the underlying assets as if the equipment is to be sold. The asset values can differ depending on if an orderly liquidation, or forced liquidation scenario is assumed.

Family succession of transferring leadership and ownership to the children usually works best when done over time. It is difficult to predict the future success of the business under the next generation without mentoring and time spent learning the business before the hand-off. Complete or partial transfers of ownership can be done through various tax strategies such as Grantor Retained Annuity Trust, Defective Grantor Trust and Family Limited Partnerships. If planned properly in advance, these strategies can minimize, or eliminate, estate and gift taxes.

Selling to an outside buyer can occur through an IPO in the public markets; however, for family-owned trucking companies this can be an expensive endeavor and usually only practical for the largest of the large privately-held carriers. Private buyers often fall into one of two categories; strategic buyers and financial buyers. A strategic buyer is often a competitor, or in the industry, and can justify a premium valuation for the business knowing savings and profit will be achieved through synergies and gains in market share. A financial buyer will be driven primarily on the investment return the business can generate. The financial buyer is capitalizing on ways to improve and increase the business valuation for a not so distant flip of the company.

An ESOP transaction is the sale of the company stock to a qualified pension plan. An ESOP allows trucking owners to reward employees and maintain jobs in the community in a tax efficient manner. Attributes of an ESOP candidate include capable management team, debt capacity and cash flow to support ESOP debt service, company size and motivation of tax advantages. Cash flow of a post-ESOP S-corporation is greatly improved since there is no federal tax on the ESOP-owned portion. A sale to an ESOP can be for 100 percent of the stock or a lesser percentage. An ESOP’s purchase price is often less than what a strategic or financial buyer can offer for the company since an ESOP can only pay what the business cash flow can service. However, because of advantageous tax treatment to the seller, after tax proceeds could be greater.

About the Author
Mark Flinchum is the partner-in-charge of Katz, Sapper & Miller’s ESOP Services Group. Mark counsels clients on the unique opportunities and potential tax benefits of creating an ESOP, and provides guidance throughout the many stages of an ESOP transaction. Connect with him on LinkedIn.

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Standards Updates - 2/24/15

Posted 1:00 PM by
 

Accounting Standards Update 2014-18
Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination

In its last Accounting Standards Update (ASU) for 2014, the Financial Accounting Standards Board (FASB) continued to provide alternatives for private companies with the Private Company Council (PCC) consensus, which describes an alternative that permits an entity to avoid separate recognition of certain intangible assets acquired in a business combination. ASU 2014-18 was issued in December 2014 to address concerns from users of private company financial statements indicating that the benefits of separate identification of certain intangible assets may not justify related costs.

A private company electing to apply the accounting alternative provided under ASU 2014-18 should no longer recognize customer-related intangible assets (unless they are capable of being sold or licensed independently from other assets of the business) or noncompete agreements separately from goodwill when accounting for a business combination. Thus, when elected, fewer intangible assets will be identified separately in the financial statements.

If this accounting alternative is elected, the entity must also adopt the private company alternative to amortize goodwill provided under ASU 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill. However, the accounting alternative described in ASU 2014-02 may be elected without applying ASU 2014-18.

The decision to elect the accounting alternative described in ASU 2014-18 must be made upon the occurrence of the first transaction within its scope in fiscal years beginning after Dec. 15, 2015. Early application is permitted for any financial statements not yet available for issuance.

 

Accounting Standards Update 2015-01
Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items
  

In January 2015, FASB issued ASU 2015-01 as part of its effort to reduce complexity in accounting standards. This update eliminates the concept of extraordinary items from accounting principles generally accepted in the United States (GAAP), thus simplifying income statement presentation requirements. Previously, entities were required to separately classify, present and disclose events and transactions meeting the criteria (both unusual in nature and infrequent of an occurrence) for extraordinary classification. ASU 2015-01 reduces complexity as preparers of financial statements will no longer need to assess events or transactions to determine whether they are or are not extraordinary items under GAAP.

Although the amendment eliminates the requirements for entities to consider if an event is extraordinary, there are presentation and disclosure requirements. Those events that are unusual in nature or occur infrequently, or both, are required to be presented as a separate component of income from continuing operations or disclosed in the notes to the financial statements.

The update is effective for fiscal years beginning after Dec. 15, 2015. The amendments may be applied prospectively or retrospectively for all prior periods presented. Early adoption is permitted.

 

Accounting Standards Update 2015-02
Consolidated (Topic 810): Amendments to the Consolidation Analysis
 

Stakeholders have expressed concerns to FASB that, in certain instances, GAAP would require a reporting entity to consolidate another entity, when the reporting entity does not have contractual rights providing the ability to act primarily on its own behalf, does not hold a majority of the entity’s voting rights, or is not exposed to a majority of the entity’s economic benefits or obligations, thus not providing useful information about the reporting entity’s results. To address those concerns, FASB previously issued an indefinite deferral for certain entities. ASU 2015-02, which was issued in February 2015, rescinds the deferral and makes changes to the consolidation guidance.

ASU 2015-02 affects reporting entities required to evaluate whether they consolidate certain legal entities and will require a reevaluation to determine what entities are consolidated. The ASU modifies the process used to evaluate whether limited partnerships and similar entities are variable interest entities (VIEs) or voting interest entities and affects the analysis performed by reporting entities regarding VIEs, particularly those with fee arrangements and related party relationships, and provides a scope exception for certain investment funds.

Limited Partnerships and Similar Legal Entities

Three main provisions of ASU 2015-02 affect limited partnerships and similar legal entities. The guidance adds a requirement that limited partnerships must provide partners with either substantive kick-out rights or substantive participating rights over the general partner to qualify as voting interest entities. The guidance also eliminates the presumption that a general partner should consolidate a limited partnership. Finally, for limited partnerships that do qualify as voting interest entities, a limited partner should consolidate when the partner has a controlling financial interest, which may be achieved through holding a limited partner interest that provides substantive kick-out rights.

Evaluating Fee Arrangements

Currently, six criteria are used to determine whether fees paid by an entity to a decision maker or service provider represent a variable interest in the entity. If the fees paid are determined to represent a variable interest, the reporting entity must evaluate whether the interest represents a controlling financial interest, and, if so, requires consolidation of the VIE. The update eliminates three of the six criteria used in this analysis. Additionally, the update specifies that some fees paid to a decision maker are excluded from the evaluation in determining whether the interest represents a controlling financial interest if the fees are both customary and commensurate with the level of effect required to provide the services.

Related Party Relationships

Under current GAAP, when no single party has a controlling financial interest in a VIE, interests held by a reporting entity’s related parties are treated as though they belong to the reporting entity when determining the primary beneficiary of the VIE. The ASU reduces this application by requiring that related party relationship first be considered indirectly on a proportionate basis, rather than in their entirety. After this assessment is performed the analysis is complete, except in two situations. The related party relationships would be considered in their entirety when entities under common control collectively have a controlling financial interest. If this is not applicable and substantially all the activities of the VIE are conducted on behalf of a single variable interest holder, excluding the decision maker, in the related party group, that single variable interest holder must consolidate the VIE.

Guidance related to situations in which power is shared between two or more related entities that hold variable interests in a VIE was not amended by this update.

The update is effective for public business entities for fiscal years beginning after Dec. 15, 2015, and all other entities for fiscal years beginning after Dec. 15, 2016. Early adoption is permitted. The amendments provided in the ASU may be applied using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or applied retrospectively.

 

New Web Page Focused on Benefits of GAAP  

The Financial Accounting Foundation (FAF), which oversees the Financial Accounting Standards Board and Government Accounting Standards Board, has launched a new Web page that focuses on the importance of GAAP: www.accountingfoundation.org/gaap. The page explores the benefits of GAAP for all types of entities, public companies, state and local governments, private companies, and not-for-profits, describing GAAP as “the grammar and the punctuation” determining the language of financial reporting. The site provides a resource to all stakeholders of financial statements, particularly those not familiar with the benefits of GAAP.

About the Author
Amanda Horvath is a director in Katz, Sapper & Miller’s Audit and Assurance Services Group. Amanda provides a wide variety of services, including financial statement audits, reviews and consulting projects involving compliance, and internal control issues. Connect with her on LinkedIn.

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IRS Simplifies Small Taxpayer Compliance with Repair Regulations

Posted 9:12 PM by
With Revenue Procedure 2015-20, the IRS on Friday backed away from their mandatory requirement that all taxpayers apply the TPRs to prior years.
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Affordable Care Act Updates

Posted 3:22 PM by
 

IRS offers relief of penalties associated with excess advance premium credit

The IRS has provided a procedure to help taxpayers avoid late payment penalties if they are unable to repay excess advance payments of the Affordable Care Act (ACA)'s premium credit for the 2014 tax year by the due date of their 2014 return. Taxpayers facing penalties for the underpayment of estimated taxes attributable to those excess payments can also get relief.

Taxpayers can qualify for these abatements if:

  1. They are otherwise current with their filing and payment obligations; and
  2. They report the amount of excess advance credit payments on their timely filed 2014 tax return, including extensions.

Taxpayers facing the late-payment penalty must also have a balance due for the 2014 tax year due to excess advance payments of the premium tax credit.

Taxpayers who are unable to repay the excess advance payments will receive a notice from the IRS in the mail. Taxpayers should write a letter to the address listed on the notice that contains the statement: “I am eligible for the relief granted under Notice 2015-9 because I received excess advance payment of the premium tax credit.”

To request an abatement of the underpayment of estimated tax penalty, taxpayers should check box A in Part II of Form 2210, complete page 1 of the form, and include the form with their return along with this statement: “Received excess advance payment of the premium tax credit.” Taxpayers do not need to complete any of the form’s other pages or calculate the penalty amount.

Individual Shared Responsibility Provision

Have you been wondering how the ACA will affect your 2014 tax return? For more than 100 million taxpayers the only additional step will be checking a box on Form 1040 indicating each member of their family had qualifying health coverage for the whole year. For those who had health coverage gaps or no coverage in 2014, however, it’s time to contact your tax professional.

For 2014, you may be exempt from the health coverage requirement if you meet certain criteria. Your tax professional can help you determine if you qualify for an exemption from the Individual Shared Responsibility provision.

It’s also important to correct the issue by enrolling in a qualifying health insurance program before the 2015 deadline. The open enrollment period for 2015 ends Feb. 15, and employers have until Feb. 2 to issue W-2s, so don’t wait until you receive your W-2 to talk with your tax professional or you could miss the deadline. The fee for not having health coverage is increasing from 1% of household income or $95 in 2014 to 2% of household income or $325 per person (maximum penalty per family is $975) in 2015.

Employers required to offer health plans or pay penalty

Originally, applicable large employers were required to comply with the Patient Protection and Affordable Care Act (ACA) after Dec. 31, 2013, but the IRS has delayed the tax for all employers until this year, 2015. For employers with 100 or more full-time equivalent employees, affordable minimum essential coverage must be offered to at least 70% percent of full-time employees in 2015 in order to avoid a penalty. Mid-sized employers (50-99) have until Jan. 1, 2016, to comply with the employer mandate without facing any Section 4890H penalties.

An applicable large employer must determine whether to “pay or play” (i.e., whether to offer a plan or not). This article is not focused on a pay or play analysis; rather, it is centered on a different and distinct excise tax. This excise tax is assessed if any employer, whether required or not, offers a group plan that does not provide for minimum essential coverage. The excise tax is $100 per day per individual to whom the failure relates.

Non-integrated health reimbursement arrangements are not considered to provide minimum essential coverage

A common plan offered by employers is a health reimbursement arrangement (HRA). An HRA is an arrangement that is funded solely by an employer which reimburses an employee for medical care expenses. HRAs are generally considered to be group health plans under the Internal Revenue Code. An HRA on its own does not constitute minimum essential coverage under the ACA even if the HRA reimburses for outside plans that would normally constitute minimum essential coverage. An employer may, however, offer an HRA in combination with other coverage and satisfy the requirement to offer minimum essential coverage. This is known as an integrated HRA.

In order for an HRA to be integrated, it must only be available to employees who are covered by the primary group health plan that is provided by the employer and satisfies the annual dollar limit prohibition. A plan violates the annual dollar limit prohibition if the plan sets a maximum dollar amount allowed for covered benefits.

The IRS issued guidance in Notice 2013-54 that explains that an HRA cannot be used in conjunction with the individual marketplace to comply with the employer mandate. Since an HRA is considered a group health plan, this arrangement will run afoul of the annual dollar limit prohibition. Employers offering a group health plan must provide minimum essential coverage or the employer will be subject to an excise tax of $100 per day per individual to whom the failure relates.

Employers should seriously consider the consequences of failing to offer a group health plan that constitutes minimum essential coverage. Both small and large employers should confirm with their benefits advisor that the plan(s) offered provides minimum essential coverage. If an employer fails to offer a group health plan that encompasses all of the minimum essential coverage requirements, the employer is subject to an excise tax of $100 per day per individual to whom the failure relates. In other words, an employer can face a maximum of $36,500 each year per employee for failing to offer a compliant group health plan.

In addition to non-integrated HRAs, there are a plethora of other mandates that can trigger the $100 per day per individual to whom the failure relates:











If an employer offers a plan that is not complaint with these requirements, there may be steps that can be taken to avoid or reduce potential excise tax. Contact your KSM advisor to review your specific situation and determine any corrective actions that may need to be taken.

If you have any questions concerning how these updates affect your tax situation, please contact your KSM advisor.

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The Advisor - Issue 2, 2014

Posted 10:50 PM by

In This Issue:

Managing Partner Message
It is always a pleasure to share some of the great happenings taking place at Katz, Sapper & Miller, none of which would be possible without the combination of talented, dedicated employees and wonderful clients. By David Resnick, CPA

Tax-Planning Pitfalls for Developers in Public-Private Partnerships
Public-private partnerships (P3) are a hot topic in real estate development. With many real estate developers and construction companies still experiencing a lack of liquidity coming out of the Great Recession, these cooperative agreements between government and private entities allow the building of many projects that would not happen otherwiseBy Chad Halstead, JD
 

Among economic incentives, tax increment financing (TIF) is a common financial tool of local governments to spur growth. Essentially, TIF provides upfront funding of development efforts, which are repaid by the resulting higher incremental future tax revenues. 

Amortization of Goodwill Is Back on the Table
Companies are finding opportunities for growth through acquisitions. Upon completing an acquisition, any unallocated acquisition price is presented on the balance sheet as “goodwill.” By Jason Patch, CPA

Weighing the Decision to Move to the Cloud
By now, everyone has heard about cloud computing and, likely, has at least considered use of the cloud for professional or personal needs. By Charlie Brandt

 

Katz, Sapper & Miller’s The Advisor is a bi-annual newsletter that focuses on business and tax solutions for today's entrepreneur.

 

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Congress Passes "Tax Extenders" Legislation

Posted 9:21 PM by

Yesterday, the Senate passed the Tax Increase Prevention Act of 2014, also known as the "tax extenders" legislation. This bill now goes to President Obama for signature.

The "tax extenders" legislation extends more than 50 expired tax provisions retroactively to the beginning of 2014. These provisions have only been extended for 2014.

Two of the most significant provisions that were extended are bonus depreciation and Section 179 expensing.

  • Bonus depreciation allows for taxpayers to claim an additional first-year depreciation deduction equal to 50% of the cost of new assets placed in service prior to January 1, 2015. In order to qualify for bonus depreciation, the asset placed in service must be a new piece of tangible property.
  • Section 179 allows for taxpayers to expense up to $500,000 of the cost of qualified assets with an overall investment limitation of $2 million. To qualify for Section 179 treatment the asset must be depreciable tangible property or computer software which was acquired for use in a trade or business. Assets must be placed in service prior to January 1, 2015.

Other key business provisions that have been extended include:

  • The research credit has been extended.
  • The Work Opportunity Credit has been extended for employees who began work for the employer before January 1, 2015.
  • For corporations that converted from C to S status, the built-in gain recognition period is five years.
  • For S corporations making charitable donations of appreciated property, a shareholder's basis is adjusted by the cost basis of the asset instead of the appreciated value.
  • Certain excise tax credits for alternative fuels have been extended.

Key individual provisions that have been extended include:

  • The deduction for state and local income taxes in lieu of deducting state income taxes.
  • The above-the-line deduction for qualifying tuition and fees for post-secondary education.
  • The $250 above-the-line deduction for teachers' classroom expenses.
  • The exclusion from income from cancellation of mortgage debt on a principal residence up to $2 million.
  • The ability to contribute required minimum distributions from IRAs, up to $100,000, directly to charitable organizations. These distributions are not taxable.

If you have any questions concerning how these and other provisions affect your tax situation, please contact your KSM advisor.

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