Alexander Thompson Arnold PLLC Named Top 200 Firm in Nation
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ATA Named Top 200 Firm in Nation
Author: Alexis Long
Employers generally pay federal unemployment tax (FUTA) of 6% on the first $7,000 of covered wages of each employee each year. That’s offset by the state unemployment insurance (UI) tax paid. States that can’t meet their obligations to pay UI benefits may borrow funds from the federal government. If the loans aren’t repaid, employers in the state may be subject to “credit reductions,” resulting in higher FUTA until loans are paid off. According to the U.S. Labor Dept., only the Virgin Islands is currently subject to a credit reduction, with FUTA increased by 2.4%.
The Tax Cuts and Jobs Act ushered in new rules for the “kiddie tax,” which govern the taxation of unearned income of certain young taxpayers. Under prior law, children having more than $2,100 (in 2017) of unearned income were taxed at the same rate their parents paid (unless the child’s rate was higher). On 1/1/18, the kiddie tax rules switched to applying the same tax rates used for trusts and estates. The effect of this and other changes are that a child’s tax won’t be affected by the parents’ rates and may result in higher tax. Contact us about your situation.
At this time of year, a summer vacation is on many people’s minds. If you travel for business, combining a business trip with a vacation to offset some of the cost with a tax deduction can sound appealing. But tread carefully, or you might not be eligible for the deduction you’re expecting.
General rules
Business travel expenses are potentially deductible if the travel is within the United States and the expenses are “ordinary and necessary” and directly related to the business. (Foreign travel expenses may also be deductible, but stricter rules apply than are discussed here.)
Currently, business owners and the self-employed are potentially eligible to deduct business travel expenses. Under the Tax Cuts and Jobs Act, employees can no longer deduct such expenses. The potential deductions discussed below assume that you’re a business owner or self-employed.
Business vs. pleasure
Transportation costs to and from the location of your business activity may be 100% deductible if the primary reason for the trip is business rather than pleasure. But if vacation is the primary reason for your travel, generally none of those costs are deductible.
The number of days spent on business vs. pleasure is the key factor in determining whether the primary reason for domestic travel is business:
- Your travel days count as business days, as do weekends and holidays — if they fall between days devoted to business and it would be impractical to return home.
- Standby days (days when your physical presence is required) also count as business days, even if you aren’t called upon to work those days.
- Any other day principally devoted to business activities during normal business hours also counts as a business day.
You should be able to claim business was the primary reason for a domestic trip if business days exceed personal days.
Deductible expenses
What transportation costs can you deduct? Travel to and from your departure airport, airfare, baggage fees, tips, cabs, etc. Costs for rail travel or driving your personal car are also eligible.
Once at the destination, your out-of-pocket expenses for business days are fully deductible. Examples of these expenses include lodging, meals (subject to the 50% disallowance rule), seminar and convention fees, and cab fare. Expenses for personal days aren’t deductible.
Keep in mind that only expenses for yourself are deductible. You can’t deduct expenses for family members traveling with you — unless they’re employees of your business and traveling for a bona fide business purpose.
Substantiation is critical
Be sure to accumulate proof of the business nature of your trip and keep it with your tax records. For example, if your trip is made to attend client meetings, log everything on your daily planner and copy the pages for your tax file. If you attend a convention or seminar, keep the program and take notes to show you attended the sessions. You also must properly substantiate all of the expenses you’re deducting.
Additional rules and limits apply to the travel expense deduction. Please contact us if you have questions.
© 2018
When you think about recent tax law changes and your business, you’re probably thinking about the new 20% pass-through deduction for qualified business income or the enhancements to depreciation-related breaks. Or you may be contemplating the reduction or elimination of certain business expense deductions. But there are also a couple of recent tax law changes that you need to be aware of if your business sponsors a 401(k) plan.
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Plan loan repayment extension The Tax Cuts and Jobs Act (TCJA) gives a break to 401(k) plan participants with outstanding loan balances when they leave their employers. While plan sponsors aren’t required to allow loans, many do. Before 2018, if an employee with an outstanding plan loan left the company sponsoring the plan, he or she would have to repay the loan (or contribute the outstanding balance to an IRA or his or her new employer’s plan) within 60 days to avoid having the loan balance deemed a taxable distribution (and be subject to a 10% early distribution penalty if the employee was under age 59-1/2). Under the TCJA, beginning in 2018, former employees in this situation have until their tax return filing due date — including extensions — to repay the loan (or contribute the outstanding balance to an IRA or qualified retirement plan) and avoid taxes and penalties.
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Hardship withdrawal limit increase Beginning in 2019, the Bipartisan Budget Act (BBA) eases restrictions on employee 401(k) hardship withdrawals. Most 401(k) plans permit hardship withdrawals, though plan sponsors aren’t required to allow them. Hardship withdrawals are subject to income tax and the 10% early distribution tax penalty. Currently, hardship withdrawals are limited to the funds employees contributed to the accounts. (Such withdrawals are allowed only if the employee has first taken a loan from the same account.) Under the BBA, the withdrawal limit will also include accumulated employer matching contributions plus earnings on contributions. If an employee has been participating in your 401(k) for several years, this modification could add substantially to the number of funds available for withdrawal.
Nest Egg Harm
These changes might sound beneficial to employees, but in the long run they could actually hurt those who take advantage of them. Most Americans aren’t saving enough for retirement, and taking longer to pay back a plan loan (and thus missing out on potential tax-deferred growth during that time) or taking larger hardship withdrawals can result in a smaller, perhaps much smaller, nest egg at retirement. So, consider educating your employees on the importance of letting their 401(k) accounts grow undisturbed and the potential negative tax consequences of loans and early withdrawals. Please contact us if you have questions. © 2018
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Will there be a second tax cut law?
The White House is working on a second tax bill. The Trump Administration plans to propose a second tax cut law, possibly by the end of summer, which would make permanent the tax breaks for individuals that were passed in the Tax Cuts and Jobs Act. The White House Director of Legislative Affairs has been working with House Ways and Means Committee Chairman Kevin Brady (R-TX) and the Senate Finance Committee on the proposal. If a bill materializes and gains approval in the House, it would face an uncertain future in the Senate, where it would need 60 votes to pass.
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Ready for the new lease standard?
A new accounting rule for reporting leases goes into effect in 2019 for public companies. Although private companies have been granted a one-year reprieve, no business should wait until the last minute to start the implementation process. Some recently revised guidance is intended to ease implementation. Here’s an overview of what’s changing.
Old rules, new rules
Under the existing rules, companies must record lease obligations on their balance sheets only if the arrangements are considered financing transactions. Few arrangements get recorded, because accounting rules give companies leeway to arrange the agreements in a way that they can be treated as simple rentals for financial reporting purposes. If an obligation isn’t recorded on a balance sheet, it makes a business look like it is less leveraged than it really is.
In 2016, the Financial Accounting Standards Board (FASB) issued a new standard that calls for major changes to current accounting practices for leases. In a nutshell, Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), will require companies to recognize on their balance sheets the assets and liabilities associated with rentals.
Most existing arrangements that currently are reported as leases will continue to be reported as leases under the new standard. In addition, the new definition is expected to encompass many more types of arrangements that aren’t reported as leases under current practice.
Revised guidance
Recently, the FASB revised two provisions to make the lease guidance easier to apply:
1. Modified retrospective approach. Upon adoption of the new lease accounting standard, companies may elect to present results using the current lease guidance for prior periods. This will allow management to focus on accounting for current and future transactions under the new rules — rather than looking backward at old leases.
2. Maintenance charges. On March 28, the FASB agreed to give lessors and property managers the option not to separately account for the fees for “common area maintenance” charges, such as security, elevator repairs and snow removal.
In addition, the FASB has provided a practical expedient to utilities, oil-and-gas companies and energy providers that hold rights-of-way to accommodate gas pipelines or electric wires. Under the revised guidance, companies that hold such land easements won’t have to sort through years of old contracts to determine whether they meet the definition of a lease. This practical expedient applies only to existing land easements, however.
Need help?
The lease standard is expected to add more than $1.25 trillion of operating lease obligations to public company balance sheets starting in 2018. How will it affect your business? Contact us to help answer this question and evaluate which of your contracts must be reported as lease obligations under the new rules.
© 2018
Part-time and seasonal workers are urged to check their tax withholding amount. Due to changes under the Tax Cuts and Jobs Act, the IRS is urging these employees to use its “Withholding Calculator,” rather than Form W-4 worksheets, to confirm the correct amount of withholding. The IRS notes that the worksheets can’t account for part-year employment, but its calculator can. And any changes that part-year employees make to their withholding may affect their paychecks in a larger way than would be the case for year-round employees. Go to https://bit.ly/2Gj8rjT.
Alexander Thompson Arnold PLLC (ATA) is pleased to announce its recent hire of Alexis Long, who joined the ATA team as marketing director. In this role, Long is responsible for overseeing the firm’s marketing and promotional activities, enhancing client communications and increasing market awareness in both new and existing markets.
“This is an exciting time to be a part of ATA as it continues to expand,” said Long. “I look forward to leveraging my experience and being involved with the firm for many years to come.”
Prior to joining ATA, Long was manager of member engagement for the Jackson Chamber, where she oversaw membership that consisted of 1,200 businesses and managed events. Long has a background in community development, event planning, and membership growth and retention.
“We are excited to have someone with Alexis’ credentials and expertise join our team. She brings a fresh perspective, great energy, and an excellent work ethic and will be a huge asset to ATA”, said Stephen Eldridge, a Partner in the Jackson TN office.
Long studied public relations at Middle Tennessee State University, where she earned a B.S. in mass communications. She is a Middle Tennessee native but proudly calls Jackson home with her husband Andrew and their daughter, Joanna, due in June.
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ATA has 17 office locations in Tennessee, Indiana, Kentucky and Mississippi. ATA is an IPA Top 200 regional accounting firm who 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, which allows it to utilize the resources and expertise for its clients of a top five global accounting firm.
An old business adage says, “Sales is a numbers game.” In other words, the more potential buyers you face, the better your chances of making sales. This isn’t completely true, of course; success also depends on execution. Nonetheless, when a company builds a pipeline to funnel prospects to its sales team, it will increase the opportunities for these staff members to strike and close deals. Here are some ways to undertake construction.
Do your research
First, establish a profile of the organizations that are the best candidates for your products or services. Criteria should include:
- Location
- Number of employees
- Sales volume
- Industry
- Specific needs
Next, think lead generation
The two best sources for generating leads are companywide marketing activities and individual salesperson initiatives, both of which create name recognition and educate prospects on the benefits of your products or services. Although you may find one method works better for you than the other, try not to be too dependent on either.
Three ways to reach out
Once you identify prospects, your sales team has got to reach out.
Here are three ways to consider:
- Cold calls. Every salesperson has done traditional cold calling — assembling a list of prospects that fit into your established customer profile and then calling or visiting them. Cold calling requires many attempts, and the percentage of interested parties tends to be small. Encourage your sales staff to personalize their message to each prospect so the calls don’t have a “canned” feel.
- Researched cold calling. Select a subset of the most desirable candidates from your prospect list and do deeper research into these organizations to discover some need that your product or service would satisfy. Work with your sales team to write customized letters to the appropriate decision-makers, highlighting your company’s skills in meeting their needs. If possible, quote an existing customer and quantify the benefits. The letter should come from the sales rep and state that he or she will be following up with a phone call. Often, after sending such a letter, getting in the door is a little easier.
- Referrals. Research potential referral sources just as you study up on sales prospects themselves. Your goal is to develop and maintain a referral network of satisfied customers and other professionals who interact with your prospects. When you get referrals, be sure to send thank-you notes to the sources and keep them informed of your progress.
Go with the flow
Does your business regularly find itself hitting dry spells in which sales prospects seem to evaporate into thin air? If so, it may be because you lack a solid pipeline to keep the identities of those potential buyers flowing in.