Commercial buildings and improvements generally are depreciated over 39 years, which essentially means you can deduct a portion of the cost every year over the depreciation period. (Land isn’t depreciable.) But special tax breaks that allow deductions to be taken more quickly are available for certain real estate investments. Some of these were enhanced by the Tax Cuts and Jobs Act (TCJA) and may provide a bigger benefit when you file your 2018 tax return. But there’s one break you might not be able to enjoy due to a drafting error in the TCJA. Section 179 expensing This allows you to deduct (rather than depreciate over a number of years) qualified improvement property — a definition expanded by the TCJA from qualified leasehold-improvement, restaurant and retail-improvement property. The TCJA also allows Sec. 179 expensing for certain depreciable tangible personal property used predominantly to furnish lodging and for the following improvements to nonresidential real property: roofs, HVAC equipment, fire protection and alarm systems, and security systems. Under the TCJA, for qualifying property placed in service in tax years starting in 2018, the expensing limit increases to $1 million (from $510,000 for 2017), subject to a phaseout if your qualified asset purchases […] Read More
Many, if not most, employers today use some form of an “at-will” employment contract when hiring. The arrangement is theoretically simple: The employer can terminate the employee at any time, for any cause — with or without notice. But is that what at-will employment really means? Not necessarily. Common exceptions For every rule, there are exceptions. Those applicable to at-will employment include: Unlawful discrimination (that is, statutory considerations established under Title VII of the Civil Rights Act of 1964, including age, race, sex or sexual orientation discrimination, as well as other applicable laws), Public policy infringements (such as retaliation for having filed a workers’ compensation claim), and Violation of implied covenants of good faith and fair dealing (such as terminating long-term employees just before they’re due to receive an anticipated financial benefit). When considering whether to terminate an employee signed to an at-will contract, it’s important to review these exceptions and other mitigating factors with your employment attorney before acting. Progressive discipline Even when an employer doesn’t view a termination as being subject to an at-will exception, that doesn’t mean the terminated employee won’t view it as discriminatory, retaliatory or otherwise unlawful and file a wrongful termination claim. So, documented […] Read More
Business owners sometimes mistakenly equate profits with cash flow. Here’s how this can lead to surprises when managing day-to-day operations — and why many profitable companies experience cash shortages. Working capital Profits are closely related to taxable income. Reported at the bottom of your company’s income statement, they’re essentially the result of revenue less the cost of goods sold and other operating expenses incurred in the accounting period. Generally Accepted Accounting Principles (GAAP) require companies to “match” costs and expenses to the period in which revenue is recognized. Under accrual-basis accounting, it doesn’t necessarily matter when you receive payments from customers or when you pay expenses. For example, inventory sitting in a warehouse or retail store can’t be deducted — even though it may have been long paid for (or financed). The expense hits your income statement only when an item is sold or used. Your inventory account contains many cash outflows that are waiting to be expensed. Other working capital accounts — such as accounts receivable, accrued expenses and trade payables — also represent a difference between the timing of cash flows. As your business grows and prepares for increasing future sales, you invest more in working capital, which […] Read More
External audits aren’t required for every business. But whether required or not, they can provide lenders and investors with assurance that your financial statements are free from material misstatement and prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). How can you help facilitate efficient, timely audit fieldwork? The keys are frequent communication and coordination between a company’s internal audit department and its external audit firm throughout the year. Here are four ways to foster this partnership. 1. Encourage frequent communication Scheduling regular meetings between members of the internal and external audit teams sets the stage for a more efficient audit process. You might discuss emerging issues, such as how the company intends to apply a new accounting standard or the status of internal control remediation efforts. In preparation for an audit, auditors can meet to compare the internal audit department’s workplan to the external auditor’s audit plan. This comparison can help minimize duplication of effort and identify areas where the teams might work together — or at least complement each other’s efforts. 2. Provide access to internal audit reports The external audit team can’t rely exclusively on the internal audit department’s reports to plan their audit. But sharing […] Read More
Now that 2019 has begun, there isn’t too much you can do to reduce your 2018 income tax liability. But it’s smart to begin preparing for filing your 2018 return. Because the Tax Cuts and Jobs Act (TCJA), which was signed into law at the end of 2017, likely will have a major impact on your 2018 taxes, it’s a good time to review the most significant provisions impacting individual taxpayers. Rates and exemptions Generally, taxpayers will be subject to lower tax rates for 2018. But a couple of rates stay the same, and changes to some of the brackets for certain types of filers (individuals and heads of households) could cause them to be subject to higher rates. Some exemptions are eliminated, while others increase. Here are some of the specific changes: Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37% Elimination of personal and dependent exemptions AMT exemption increase, to $109,400 for joint filers, $70,300 for singles and heads of households, and $54,700 for separate filers for 2018 Approximate doubling of the gift and estate tax exemption, to $11.18 million for […] Read More
Tyler, Simms & St. Sauveur, CPAs, P.C.
Phone: +1 (603) 653-0044