Author: Alexis Long

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General

Potential Benefits of Section 1202 Continue to Grow

Section 1202 of the Internal Revenue Code is growing in popularity among investors and may become even more valuable in 2022.

Section 1202 allows founders and investors of corporations to exclude up to 100% of their capital gains derived from the sale of qualified small business stock (QSBS) held for more than five years (subject to limitations). Because the gain exclusion percentage for a shareholder depends on the QSBS issuance date, as time goes on more investors are becoming eligible for the full, 100% exclusion—and thus its rise in popularity.

Further, the 2021 Green Book proposes far-reaching changes to the taxation of long-term capital gains, which are taxed at graduated rates under the individual income tax. Today, the highest rate is generally 20% (23.8% including the net investment income tax, if applicable, based on the taxpayer’s modified adjusted gross income (AGI)).

Under the Green Book proposal, long-term capital gains of taxpayers with AGI of more than $1 million would be taxed at ordinary income tax rates to the extent that the taxpayer’s income exceeds $1 million ($500,000 for married filing separately), indexed for inflation after 2022. Currently, the highest rate for individuals is 37% (40.8% including the net investment income tax), though the Green Book also includes a proposal to raise the individual rate to up to 39.6% (43.4% including the net investment income tax).

While reinvestments into Qualified Opportunity Zones, like-kind exchanges for real property (possibly limited going forward), and reinvestment of proceeds into qualified replacement property from sales of corporate stock to an Employee Stock Ownership Plan of 30% or more of the corporation’s outstanding stock provide some deferral opportunities, Section 1202 is the only provision that provides an exclusion opportunity for QSBS. The higher that the capital gains tax rate goes up, the greater the potential tax benefit of utilizing an available Section 1202 exclusion.

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News Press Releases

ALEXANDER THOMPSON ARNOLD RISES ON THE IPA TOP 200 FIRM LIST

Alexander Thompson Arnold PLLC
227 Oil Well Rd.
Jackson, TN 38305

FOR IMMEDIATE RELEASE

For more information contact:

Alexis Long, Marketing Director
731.427.8571
along@atacpa.net

ALEXANDER THOMPSON ARNOLD RISES ON THE IPA TOP 200 FIRM LIST

Jackson, Tenn.– For the seventh consecutive year, Alexander Thompson Arnold PLLC (ATA) has been deemed a top 200 accounting firm in the United States by INSIDE Public Accounting (IPA), an award-winning newsletter for the public accounting profession. ATA increased its standing on the list to 134, two places higher than last year’s ranking of 136.

IPA utilizes net revenues of participating firms as well as the annual IPA Survey and Analysis of Firms to determine the lists of the 100, 200, 300 and 400 U.S.-based firms.

“ATA is regularly working to improve our firm and our reputation in the public accounting world,” said Managing Partner John Whybrew. “This recognition from IPA proves that we are making progress toward the goals we have set for the firm and serve as motivation to keep moving forward.”

IPA, founded in 1987, is published by The Platt Group. The Platt Group publishes both the award-winning INSIDE Public Accounting newsletter and the award-winning National Benchmarking Report, along with other key reports on the profession. The Platt Group assists firms to become more successful through a variety of services.

View the full IPA Top 400 rankings here.

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About Alexander Thompson Arnold PLLC (ATA)

ATA is a long-term business advisor to its clients and provides other services that are not traditionally associated with accounting. For example, Revolution Partners, ATA’s wealth management entity provides financial planning expertise; ATA Technologies provides trustworthy IT solutions; Sodium Halogen focuses on growth through the design and development of marketing and digital products; Adelsberger Marketing offers video, social media, and digital content for small businesses; and newly added ATAES is a comprehensive human resource management agency. 

ATA has 13 office locations in Tennessee, Kentucky and Mississippi. Recognized as an IPA Top 200 regional accounting firm, it provides a wide array of accounting, auditing, tax and consulting services for clients ranging from small family-owned businesses to publicly traded companies and international corporations. ATA is also an alliance member of BDO USA LLP, a top five global accounting firm, which provides additional resources and expertise for clients.

Categories
Tax

Getting a new business off the ground: How start-up expenses are handled on your tax return

Despite the COVID-19 pandemic, government officials are seeing a large increase in the number of new businesses being launched. From June 2020 through June 2021, the U.S. Census Bureau reports that business applications are up 18.6%. The Bureau measures this by the number of businesses applying for an Employer Identification Number. Entrepreneurs often don’t know that many of the expenses incurred by start-ups can’t be currently deducted. You should be aware that the way you handle some of your initial expenses can make a large difference in your federal tax bill.

How to treat expenses for tax purposes
If you’re starting or planning to launch a new business, keep these rules in mind:

Start-up costs include those incurred or paid while creating an active trade or business — or investigating the creation or acquisition of one. Under the tax code, taxpayers can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs in the year the business begins. As you know, $5,000 doesn’t go very far these days! And the $5,000 deduction is reduced dollar-for-dollar by the amount by which your total start-up or organizational costs exceed $50,000.

Any remaining costs must be amortized over 180 months on a straight-line basis. No deductions or amortization deductions are allowed until the year when “active conduct” of your new business begins. Generally, that means the year when the business has all the pieces in place to start earning revenue. To determine if a taxpayer meets this test, the IRS and courts generally ask questions such as: Did the taxpayer undertake the activity intending to earn a profit? Was the taxpayer regularly and actively involved? Did the activity actually begin?

Eligible expenses
In general, start-up expenses are those you make to: investigate the creation or acquisition of a business, create a business, or engage in a for-profit activity in anticipation of that activity becoming an active business. To qualify for the election, an expense also must be one that would be deductible if it were incurred after a business began. One example is money you spend analyzing potential markets for a new product or service. To be eligible as an “organization expense,” an expense must be related to establishing a corporation or partnership. Some examples of organization expenses are legal and accounting fees for services related to organizing a new business and filing fees paid to the state of incorporation.

If you have start-up expenses that you’d like to deduct this year, you need to decide whether to take the election described above. Record-keeping is critical.

To see how ATA can help grow your emerging business, visit our website. © 2021

Categories
Murray, KY News Press Releases

Alexander Thompson Arnold PLLC Announces Leah Bona is Newest Partner

Alexander Thompson Arnold PLLC
112 Robertson Road North
Murray, KY 42071

FOR IMMEDIATE RELEASE

For more information contact:

Alexis Long, Marketing Director
731-427-8571
along@atacpa.net

ALEXANDER THOMPSON ARNOLD PLLC ANNOUNCES NEW PARTNER

Murray, Ky. — Alexander Thompson Arnold PLLC (ATA) is excited to announce Leah Bona, CPA has been admitted as the newest partner at ATA. Bona is being promoted to partner from her position as senior tax manager at the Murray, Ky. office. Bona joined ATA two and a half years ago after a stint in private accounting.

“Leah has proven her leadership skills in her role at the Murray office,” said John Whybrew, managing partner of ATA. “Her wealth of experience in the accounting industry makes her invaluable to our team. We are excited to see Leah’s career, as well as our firm, further develop through this promotion.”

Bona has over 15 years of experience in public accounting as well as over 10 years of experience in private accounting as a controller and CFO. Her responsibilities at ATA include tax and financial planning, preparation of corporate, business and individual tax returns, governmental and nonprofit auditing and an extensive range of accounting services.

“At ATA, we offer an excellent and diverse range of client services, and I believe there is an incredible future ahead for our firm,” said Bona. “I feel very fortunate to be honored with this exciting career advancement and am very thankful for the support and guidance I have received from the ATA partners and staff throughout my career.”

Bona graduated from Murray State University with a Bachelor of Science in Accounting. She received her Master of Business Administration with an accounting emphasis from Murray State University in 1996.

Bona serves her community on the finance committee at North Fork Baptist Church. She is a member of the Murray-Calloway County Chamber of Commerce and the Murray State Alumni Association. Bona is a member of the American Institute of Certified Public Accountants (AICPA) and the Kentucky Society of CPAs.

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About Alexander Thompson Arnold PLLC (ATA)

ATA is a long-term business advisor to its clients and provides other services that are not traditionally associated with accounting. For example, Revolution Partners, ATA’s wealth management entity provides financial planning expertise; ATA Technologies provides trustworthy IT solutions; Sodium Halogen focuses on growth through the design and development of marketing and digital products; Adelsberger Marketing offers video, social media, and digital content for small businesses; and ATA Employment Solutions is a comprehensive human resource management agency. 

ATA has 13 office locations in Tennessee, Kentucky and Mississippi. Recognized as an IPA Top 200 regional accounting firm, it provides a wide array of accounting, auditing, tax and consulting services for clients ranging from small family-owned businesses to publicly traded companies and international corporations. ATA is also an alliance member of BDO USA LLP, a top five global accounting firm, which provides additional resources and expertise for clients.

Categories
Helpful Articles

How Non-Working Spouses Can Contribute to an IRA

Married couples may not be able to save as much as they need for retirement when one spouse doesn’t work outside the home — perhaps so that spouse can take care of children or elderly parents.

In general, an IRA contribution is allowed only if a taxpayer earns compensation. However, there’s an exception involving a “spousal” IRA. It allows contributions to be made for nonworking spouses. For 2021, the amount that an eligible married couple can contribute to an IRA for a nonworking spouse is $6,000, which is the same limit that applies for the working spouse.

IRA advantages

As you may know, IRAs offer two types of advantages for taxpayers who make contributions to them. Contributions of up to $6,000 a year to an IRA may be tax deductible. The earnings on funds within the IRA are not taxed until withdrawn. (Alternatively, you may make contributions to a Roth IRA. There’s no deduction for Roth IRA contributions, but, if certain requirements are met, distributions are tax-free.) As long as the couple together has at least $12,000 of earned income, $6,000 can be contributed to an IRA for each, for a total of $12,000. (The contributions for both spouses can be made to either a regular IRA or a Roth IRA, or split between them, as long as the combined contributions don’t exceed the $12,000 limit.)

Boost contributions if 50 or older

In addition, individuals who are age 50 or older can make “catch-up” contributions to an IRA or Roth IRA in the amount of $1,000. Therefore, for 2021, for a taxpayer and his or her spouse, both of whom will have reached age 50 by the end of the year, the combined limit of the deductible contributions to an IRA for each spouse is $7,000, for a combined deductible limit of $14,000. There’s one catch, however. If, in 2021, the working spouse is an active participant in either of several types of retirement plans, a deductible contribution of up to $6,000 (or $7,000 for a spouse who will be 50 by the end of the year) can be made to the IRA of the nonparticipant spouse only if the couple’s AGI doesn’t exceed $125,000. This limit is phased out for AGI between $198,000 and $208,000.

Contact us if you’d like further information about IRAs or you’d like to discuss retirement planning. © 2021

Categories
Helpful Articles Tax

Child Tax Credit Update

Recently, there were changes made to the child tax credit that will benefit many taxpayers. As part of the American Rescue Plan Act that was enacted in March 2021, the child tax credit:

  • Amount has increased for certain taxpayers
  • Is fully refundable (meaning you can receive it even if you don’t owe the IRS)
  • May be partially received in monthly payments

The new law also raised the age of qualifying children to 17 from 16, meaning some families will be able to take advantage of the credit longer.

The IRS will pay half the credit in the form of advance monthly payments beginning July 15. Taxpayers will then claim the other half when they file their 2021 income tax return.

Though these tax changes are temporary and only apply to the 2021 tax year, they may present important cashflow and financial planning opportunities today. It is also important to note that the monthly advance of the child tax credit is a significant change. The credit is normally part of your income tax return and would reduce your tax liability. The choice to have the child tax credit advanced will affect your refund or amount due when you file your return. To avoid any surprises, please contact ATA.

Qualifications and how much to expect

The child tax credit and advance payments are based on several factors, including the age of your children and your income.

  • The credit for children ages five and younger is up to $3,600 –– with up to $300 received in monthly payments.
  • The credit for children ages six to 17 is up to $3,000 –– with up to $250 received in monthly payments.

To qualify for the child tax credit monthly payments, you (and your spouse if you file a joint tax return) must have:

  • Filed a 2019 or 2020 tax return and claimed the child tax credit or given the IRS your information using the non-filer tool
  • A main home in the U.S. for more than half the year or file a joint return with a spouse who has a main home in the U.S. for more than half the year
  • A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number
  • Income less than certain limits

You can take full advantage of the credit if your income (specifically, your modified adjusted gross income) is less than $75,000 for single filers, $150,000 for married filing jointly filers and $112,500 for head of household filers. The credit begins to phase out above those thresholds.

Higher-income families (e.g., married filing jointly couples with $400,000 or less in income or other filers with $200,000 or less in income) will generally get the same credit as prior law (generally $2,000 per qualifying child) but may also choose to receive monthly payments.

Taxpayers generally won’t need to do anything to receive any advance payments as the IRS will use the information it has on file to start issuing the payments.

IRS’s child tax credit update portal

Using the IRS’s child tax credit and update portal, taxpayers can update their information to reflect any new information that might impact their child tax credit amount, such as filing status or number of children. Parents may also use the online portal to elect out of the advance payments or check on the status of payments.

The IRS also has a non-filer portal to use for certain situations.

Let us help you.

With any tax law change, it’s important to revisit your full financial roadmap. We can help you determine how much credit you may be entitled to and whether advance payments are appropriate. How you choose to receive the credit (partially advanced via monthly payments or solely on your next year’s return) could have many impacts to your financial plans.

Please contact one of our offices today to discuss your specific situation. As always, planning ahead can help you maximize your family’s financial situation and position you for greater success.

*Article from AICPA

Categories
Construction General Helpful Articles Jackson, TN Memphis, TN

Protect Your Construction Company from the Effects of High Supply Prices

Building supply manufacturers are doing their best to catch up with the high demand for their materials. Material prices overall are continuing to climb, making it difficult for contractors of all types and sizes to provide their services in the same manner they did before the pandemic as well as grow their businesses.

What can contractors do?

Communication is key for contractors and business owners right now. It is important for clients to know developments in supply chains and pricing. Much of the information that should be communicated can be included in contracts. Even though they cannot impact the supply chain and prices of materials, contractors can protect themselves from losing money and work through several means.

  • Expiration Dates

With prices and supply availability changing every day, contractors cannot guarantee a price for long. Since there is a chance that original quotes can change at a moment’s notice, contractors can explain that their quote is only viable until a certain date. 

  • Delay Clauses

Since there are typically damages contractors must claim when a job is not completed by the projected date, it is important for contractors to include delay clauses in their contracts. With the pandemic and the unknowns of the building materials supply chains, contractors cannot be held accountable for the delay in construction due to lack of materials.

Need more insight?

Our experts are consistently keeping tabs on industry changes. Contact one of our representatives today for consulting that will keep your business running smoothly and productively in the midst of unknowns.

Categories
Financial Institutions and Banking

ALTA Best Practices Certification Services

Banks and mortgage lenders are under increased pressure by regulators to protect their customers’ non-public personal information (NPI)—especially within the context of their relationships with third-party vendors, including title  companies  and  attorneys.  This  pressure  has  resulted  in  lenders conducting due diligence on title companies and attorneys. The means of approaching due diligence has been inconsistent within the industry, with some  lenders  asking  vendors  to  complete  questionnaires,  others  asking vendors to submit their policies and procedures and still others conducting interviews  and  on-site  visits.  Lenders  have  struggled  to  find  the  “right” solution to conduct this due diligence.

The American  Land  Title Association  (ALTA)  responded  to  this  industry concern by developing a Best Practices Framework (ALTA Best Practices or the Best Practices). By choosing to pursue ALTA Best Practices, a title company or attorney can demonstrate to its mortgage lenders, underwriters and customers that it is following the industry’s established practices. This demonstration extends  beyond just  the protection of NPI.  As lenders have learned about the Best Practices, this guidance has quickly become their preferred method of conducting CFPB due diligence.

The Best Practices include seven areas of guidance known as pillars:

  • Licensing
  • Escrow Accounting Procedures
  • Privacy & Information Security
  • Settlement Procedures
  • Title Policy Production & Delivery
  • Professional Liability Insurance Coverage
  • Consumer Complaints

When  a  company  elects  to  pursue  Best  Practices,  it  must  first  develop policies and procedures to address each of the seven pillars. Once an organization has fully implemented its ALTA-compliant policies and procedures, it can then elect to work toward becoming certified. The certification must be performed  by  a  qualified,  independent  third  party  that  evaluates  the  title company’s compliance with its Best Practices policies and procedures.

ATA assists clients with:

  • The development of policies and procedures consistent with ALTA Best Practices.
  • Evaluation of previously prepared policies and procedures for compliance with the seven pillars of the Best Practices Framework.
  • Certification by providing an independent assessment of your organization’s operational processes, written policies, & procedures.

 

Contact partner and financial institutions expert Jack Matthis, CPA, CBA today at jmatthis@atacpa.net or by calling (731) 686-8371.

Categories
News Tax

2021 Q3 Tax Calendar: Key Deadlines for Businesses and Other Employers

Listed below are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2021. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. 

Monday, August 2

  • Employers report income tax withholding and FICA taxes for second quarter 2021 (Form 941) and pay any tax due. 
  • Employers file a 2020 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension. 

Tuesday, August 10 

  • Employers report income tax withholding and FICA taxes for second quarter 2021 (Form 941), if you deposited all associated taxes that were due in full and on time. 

Wednesday, September 15

  • Individuals pay the third installment of 2021 estimated taxes, if not paying income tax through withholding (Form 1040-ES).
  •  If a calendar-year corporation, pay the third installment of 2021 estimated income taxes.
  • If a calendar-year S corporation or partnership that filed an automatic extension: File a 2020 income tax return (Form 1120S, Form 1065 or Form 1065-B) and pay any tax, interest and penalties due. 
  • Make contributions for 2020 to certain employer-sponsored retirement plans.

Contact your ATA representative to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. © 2021

Categories
Helpful Articles News

Early Priority for the Biden Administration: Improving Infrastructure

The Biden administration has officially been in office for 100 days.

In what is typically a period characterized by a flurry of executive orders that establish early policy priorities, President Joe Biden has understandably focused much of his energy on one of the most pressing challenges the United States has faced in generations: bringing an effective end to the COVID-19 crisis.

During the first three months in office, the Administration has been able to accelerate vaccination distribution after a record-speed vaccine development process, offering hope of a world less impacted by the spread of the pandemic.

However, with 100 days now in the rearview mirror, the Biden administration is setting its sights on the future—one in which the United States still faces both short- and long-term challenges that would be daunting for any administration. From continuing to chip away at a COVID-heightened unemployment rate to addressing domestic and social unrest to thinking through a climate change strategy, the Administration has its hands full over the next few years. With a challenging midterm election on the horizon, the motivation to advance its agenda quickly and decisively is top of mind.

For business leaders, the intersection between politics, economy, consumer behavior, public health, social issues and environmental issues has never been so large—or important. Businesses will continue to be tested in ways that they could not have imagined just a few years ago. Those that can navigate these challenges well will come out ahead.

While there are dozens of policies that will unfold over the next four years, there are several key areas for leaders to watch in the short term and consider for future opportunities and challenges that arise. One of these key areas is outlined below.

Priority: Building Back Better

On the campaign trail, then-candidate Biden outlined his vision of an infrastructure plan dubbed the “Build Back Better” plan.

The new bill, announced in full in late March as the American Jobs Plan, includes several proposed investments in both traditional and modern infrastructure systems.

  • Roads & bridges
  • Public Transport
  • Ports
  • Airports
  • Nationwide electric vehicle charging grid
  • Water Systems
  • Electric Grid Upgrades
  • Increased Broadband Access

In addition, President Biden is pushing for investment in care for elderly and disabled Americans, new affordable housing and schools, and funding for manufacturing, R&D and job training.

The Biden administration has argued that decades of a lack of investment has left the United States lagging behind others when it comes to competitiveness on the global stage. In particular, the Administration sees this as an opportunity to level the playing field, financing more projects in rural and disadvantaged communities, with a focus on sustainability and “clean infrastructure” investments.

Infrastructure is often seen as a “both-sides-of-the-aisle” issue, yet an agreement has recently been hard to come by. Whether President Biden and his team—particularly Vice President Kamala Harris and Transportation Secretary Pete Buttigieg—will be able to galvanize both sides of the aisle to come together on this shared goal of fixing the widely acknowledged problem of the United States’ aging infrastructure remains to be seen.

Interested to see what else the Biden administration is prioritizing? Read this article from BDO.