Project Tracking and Job Profitability

I love QBO’s new project tracking feature. It’s a great way to analyze profitability by job and record WIP at month end. It’s the most affordable basic job costing solution I have found for small businesses. Check it out here: QBO Project Tracking.

Try it before you buy it. If you are ready to get started with QBO, contact us for a lifetime discounted subscription, set up and ongoing technical support. We can also help you with app add-ons to customize your platform.

Penalty and Interest Relief Available from the Texas Comptroller for a Limited Time

Amnesty temporarily available.Texas Clearance Letter

Texas taxpayers, now is the perfect time to get caught up on past due reports without incurring penalties or interest. From May 1, 2018 to June 29, 2018, Texas taxpayers may qualify for amnesty from penalties and interest on past due state and local tax reports.

All state and local taxes and fees the Comptroller’s office administers, such as franchise and sales taxes, are eligible, with the exception of Public Utility Commission gross receipts assessments.

When?

Eligible reports must be filed before June 29, 2018.

Qualifications, rules and limits apply.

Consult your CPA to determine the qualifications, rules and limits that apply.

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.

Thank you, Santa!

Santa TrumpIt’s official. The new tax law has been signed. And it just keeps coming!

More goodies:

    • Bonus depreciation is doubled from 50% to 100%…and includes used assets…and is retroactive to September 27, 2017. Sniff. Somebody stop meh! #costsegregation #commercialrealestate #taxlosswithpositivecashflow

Capture

  • The Section 179 allowance is doubled from $500,000 to $1 million, and the phaseout threshold is increased from $2 million to $2.5 million.
  • The corporate version of the AMT is repealed.
  • The list of qualified higher education expenses for Section 529 plans is expanded to include tuition at an elementary or secondary public, private or religious school, for up to $10,000 per year. What? #misseditagain
  • The caps are raised on depreciation deductions for “luxury” cars.
  • A tax credit is available for businesses that offer paid financial leave to new parents. This one disappears in two years, so get busy kids.
  • the “Pease limitation” on itemized deductions is suspended.

Goodbye old friend:

  • The Section 199 deduction is repealed. Huh? This makes no sense.
  • The deduction for business-related entertainment is repealed. #goingtohavetoworkonthisone
  • bitmoji-20171223074011Deductions for business interest expenses are capped at 30% of AGI. Meh. Only affects the really big boys.
  • There is a new one-time repatriation tax of 15.5% for liquid assets and 8 % for illiquid assets on foreign earnings, along with a new system for international taxation in the works. Hmmm. Not sure where this is headed. Stay tuned.
  • 1031 exchanges are limited to real estate transactions only. Better upgrade your private jets in 2017.
  • Carried interests are considered short-term until held for 3 or more years.

My advise for business owners? Take the rest of the year off and buy yourself a new truck…over 6,000 pounds of course.

Don’t miss New Tax Law. What’s Hot. What’s Not.

Qualifications, rules and limits apply.

As with all deductions, consult your CPA to determine the qualifications, rules and limits that apply.

See also: New Tax Law. What’s Hot. What’s Not.

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.

New Tax Law. What’s Hot. What’s Not.

What you need to know about the new tax law.

Hold on for the ride, folks. It’s getting interesting. The most significant tax reform in more than 30 years is likely to be signed into law within the next couple of weeks. So before you cozy up to the fire to enjoy your holiday, here are a few things to consider:

For 2017:

  1. Prepay your 2018 property taxes, buy your vehicles, boats, etc. by December 31, 2017. The bill caps the SALT deduction at $10,000. Gasp! This won’t help much if you are an AMT victim, but if not, enjoy!
  2. Give your 2018 charitable contributions by December 31, 2017. A significant majority of filers will not itemize in 2018, since the standard deduction is doubled.

For 2018:

Get your adult kids off the dole. The new bill eliminates the personal exemption ($4,050 per dependent) but almost doubles the standard deduction. Non-child dependents will only get you a $500 temporary credit on your return. If they file on their own, they get a $12,000 standard deduction and a 10% tax bracket up to $9,525. And you get a cleaner house.

The good:

Thisishuge

  • The corporate tax rate plummets, yes plummets, to 21%!  What?  It can’t be…but it is. Wait. There’s more.
  • Pass-through owners get a 20% income deduction. This. Makes. Me. Cry. Where have you been all my life? Tragically, phase-outs and caps kick in at $157,000 for individuals and $315,000 for married couples. #productivitypenalty #thereisahackforthat #passiveownershipisattractive
  • The bill doubles the amount of money exempt from estate tax to $10.98M for individuals and $21.96M for married couples. Sweet!
  • It allows a $500 credit for non-child dependents, including elderly parents. Yes, please!
  • It doubles the child tax credit to $2,000 for children under 17 and raises the income threshold to $200,000 for individuals and $400,000 for married couples. “This is huge!”, as President Trump would say. #nowthatmykidsaregrown
  • The health insurance mandate is repealed.

The bad:

  • The bill eliminates the itemized deduction for the interest on home equity loans and caps the amount of acquisition mortgage debt at $750,000 (or $375,000 for MFS).
  • Deductions for moving expenses and most miscellaneous itemized expenses are eliminated.
  • Starting in 2019, you will no longer be able to deduct alimony payments if they are required by a divorce agreement entered into after 12/31/18. Recipients of nondeductible payments won’t have to include them in taxable income. Bad news for the payor, a sweet ride for the payee.

The ugly:

  • Without a PAYGO waiver, the bill will trigger a significant cut to Medicare.
  • The Act leaves intact the 3.8% net investment income tax and the 0.9% additional Medicare tax. Seriously?
    both enacted by Obamacare.
  • Chained CPI will be used to measure inflation. Eeek! Here today, gone tomorrow. Oh well. At least we have today. Carpe diem!

Qualifications, rules and limits apply.

As with all deductions, consult your CPA to determine the qualifications, rules and limits that apply.

See also:

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.

2nd Quarter ES Payments Due Today

Self-employed peeps, don’t forget to make your 2nd Quarter ES payment today. You can file electronically with a credit card by enrolling in the Electronic Federal Tax Payment System (EFTPS), or by using the IRS’ Direct Pay option.

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.

Businesses and Nonprofits Have Six Months to Extend Overtime Pay

The DOL estimates that the new rule will extend the right to overtime pay to an estimated 4.2 million workers.~Mitzi E. Sullivan, CPA

Working

The final rule on overtime pay protection was signed by president Obama and published on May 18, 2016.  The rule takes effect December 1, 2016.  The DOL estimates that the new rule will extend the right to overtime pay to an estimated 4.2 million workers.

Which businesses are affected?

Generally, businesses and nonprofit organizations with gross annual sales of $500,000 or more must extend overtime pay to qualified employees.  For nonprofits, only UBIT sales are considered toward the $500,000.

In addition, all hospitals, businesses providing medical or nursing care for residents, schools (whether operated for profit or not for profit) and public agencies must comply with the new rule.

Businesses must also extend protection to employees whose work regularly involves them in commerce between States (“interstate commerce”), even if the business is not covered on an enterprise-wide basis.

Which employees are affected?

Generally, overtime pay protection is extended to full-time salaried workers with earnings up to $47,476 annually or $913 per week.  Bona fide executive, administrative, and professional (“EAP”) employees are exempt.  In addition, the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test is increased to $134,004.  Nondiscretionary bonuses and incentive payments (including commissions) may be used to satisfy up to 10 percent of the new standard salary level.

Future automatic updates to salary thresholds will occur every three years, beginning on January 1, 2020.

What is overtime pay?

Employees covered by the Fair Labor Standards Act must receive pay for hours worked in excess of 40 in a workweek at a rate not less than one and one-half their regular rates of pay.

Check the DOL’s FAQs for more information.

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.

Does Your Business Provide Workers’ Compensation Insurance?

“If your Texas business does not provide workers’ compensation insurance, remember to file your DWC Form-005 by April 30th to avoid penalties.”~Mitzi E. Sullivan, CPA

Workers' Compensation Insurance JPEGIf your Texas business does not provide workers’ compensation insurance, remember to file your DWC Form-005 by April 30th to avoid penalties.   The Division of Workers’ Compensation has stepped up enforcement actions this year and failure to file may result in penalties.

The online site is down today, but you can download the pdf here and send it by fax.

DWC Form 005

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.

Commonly Overlooked Deductions for Charitable Contributions

“Deducting charitable contributions may help you lower your tax bill, especially if you are actively involved in ministry.”~Mitzi E. Sullivan, CPA

20160404-Joplin 2013-2

For taxpayers who itemize, deducting charitable contributions may help you lower your tax bill, especially if you are actively involved in ministry.  Don’t limit your deductions to cash contributions.  Keep a record of charitable miles and non-cash contributions made throughout the year.  You may be surprised at how much you can save in taxes.

In General

Deductions for charitable contributions must be:

  1. contributed to a qualified organization or an agent acting on behalf of a qualified organization.
  2. unreimbursed,
  3. directly connected with the services you give,
  4. incurred only because of the services you give,
  5. not personal, living or family expenses, and
  6. not given to a specific individual.

You can verify whether a charity qualifies at CharityCheck101.org.  Churches and governmental units (such as public schools and universities) automatically qualify and will not be listed in the database.

Note that expenses must be incurred for services you give.  This does not include expenses incurred for services that your child gives.

Charitable mileage deduction

You can deduct 14 cents per mile, or actual incremental costs, for miles driven for qualified charitable purposes, plus tolls and parking.

Examples may include:

  • round trip mileage to volunteer at a charitable event, gala, fundraiser, etc.
  • round trip mileage to volunteer for disaster relief
  • round trip mileage incurred on a mission trip
  • round trip mileage to volunteer at a federal park
  • round trip mileage to choir practice
  • round trip mileage as a volunteer chaperon
  • round trip mileage to donate clothing and household items

You have the option to deduct actual incremental out-of-pocket costs (such as gas and oil) in lieu of the 14 cents per mile.  When gas costs are high, or you are driving a large vehicle, this method will give you a better deduction.

Travel and lodging deduction

You may be able to deduct travel and lodging costs, including meals, directly connected, and incurred only because of, the service you provided to a qualified charitable organization that required you to be away from home overnight.  The IRS specifies that there should be “no significant element of personal pleasure, recreation, or vacation in the travel” and makes important distinctions based on the level of involvement.  It’s okay to enjoy the work, just make sure you are working.  And make sure you meet all of the requirements in the “In General” section above.

Unreimbursed out-of-pocket expenses

As long as expenses meet the criteria listed in the “In General” section above, you may be able to deduct expenses that you paid on behalf of a qualified charity.

Examples may include:

  • Food and paper goods purchased to provide meals at a qualified charitable activity (youth group, support raiser for a missions agency, etc.)
  • small tools and equipment (contributed to the organization, or with no residual value)
  • printing supplies
  • postage

Gently used clothing and household items

Remember to get a receipt for your donated items and note on the receipt the fair market value of donated items.

Documentation Requirements

According to the IRS, “Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.

To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.

Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.”

Check with your CPA

The expenses discussed in this article are examples of expenses that may be deductible, depending on your unique circumstances.  Discuss them with your CPA to help you decide whether or not to claim a deduction.  The information contained in this article is for discussion purposes only and is not to be considered tax advice.

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.

The Best Age to Start Receiving Your Social Security Retirement Benefit?

“Careful planning may help you avoid the “tax torpedo” that bombards many retirees. In the current system, with the right investments, it is absolutely possible to live a comfortable lifestyle tax free in your retirement years.”~Mitzi E. Sullivan, CPA

SunsetWhen can I start receiving my benefit?

Age 62 – You can start receiving your benefit at age 62, but you’ll only receive 75% of your full social security retirement benefit, and the reduction is permanent. In addition, if you continue to work or have other provisional income, your benefit may be reduced even more and a portion may be subject to income tax.

Ages 63 to 65 – The longer you wait, the larger monthly benefit you will receive. At age 65 (for those born before 1960) for example, you’ll receive 93.3% of your full benefit permanently.

Age 66 – Age 66 (for those born before 1960) is considered full retirement age. If you wait until age 66, you’ll get 100% of your full benefit.

Ages 67 to 70 – After age 66, for every year you wait to start receiving your benefit, your benefit will increase by 8%. The 8% per year increase continues until age 70. There is no advantage to delaying past the age of 70.

Up to 85% may be subject to federal income tax.

If your provisional income exceeds $25,000 (single) or $32,000 (married filing joint), a portion of your social security retirement benefits may be taxed.

Careful planning may help you avoid the “tax torpedo” that bombards many retirees. In the current system, with the right investments, it is absolutely possible to live a comfortable lifestyle tax free in your retirement years.

Be careful with earnings if you start receiving your benefit before age 66.

From age 62 up to age 66, if you continue to work and earn more than the limit ($15,720 in 2016), your monthly benefit will be reduced. The limit is increased in the year you turn 66 (increased to $41,880 in 2016).

The benefit reduction is only temporary and may be made up with an increased benefit at full retirement age.

On a positive note…

Under the current system, your social security retirement benefit is inflation adjusted. In theory, that means that your monthly benefit will provide the same standard of living 20 years from now as it does today. Your other sources of retirement income may provide an opposite return, declining in inflation-adjusted value each year. So the longer you delay your social security retirement benefit, the better your inflation adjustment will be.

What to do? What to do?

Before I offer some general guidelines, I’ll make this disclaimer: social security retirement benefits are not guaranteed by the U.S. government. So if you are worried about the solvency of the system or future reforms, such as “means” testing, the guidelines don’t apply. Take your money and run.

If you are willing to gamble on the system, consider these general guidelines:

  1. If you have health problems and believe that your life expectancy is below average (about 77-78 years), you may want to consider receiving your benefit at age 62.
  2. If you believe that your life expectancy is more than 82 years, you may want to consider delaying your benefit until age 70.
  3. If you continue to work and earn more than the limit ($15,720 in 2016), you may want to consider delaying your benefit until your income decreases.
  4. If you are a lower-earning spouse and your higher-earning spouse will wait to begin receiving benefits at age 70, you may want to consider receiving benefits at age 62.
  5. If your provisional income is less than $25,000 (single) or $32,000 (married filing joint), you may want to consider receiving your benefit at age 62.
  6. If you have other sources of retirement income that can be utilized tax free, you may want to consider delaying your benefit up to age 70.

So what is the best age at which to start receiving your benefit?

As always, consult your CPA. Time spent planning could save you a significant amount of money. There are too many factors to consider to make a decision without an in-depth personal analysis.

~Mitzi E. Sullivan, CPA

M.E. Sullivan is a cloud based professional services provider specializing in cloud accounting.