TCJA Changes to Employee Benefits Tax Breaks: 4 Negatives and a Positive

The Tax Cuts and Jobs Act (TCJA) includes many changes that affect tax breaks for employee benefits. Among the changes are four negatives and one positive that will impact not only employees but also the businesses providing the benefits.

4 breaks curtailed

Beginning with the 2018 tax year, the TCJA reduces or eliminates tax breaks in the following areas:

1. Transportation benefits. The TCJA eliminates business deductions for the cost of providing qualified employee transportation fringe benefits, such as parking allowances, mass transit passes and van pooling. (These benefits are still tax-free to recipient employees.) It also disallows business deductions for the cost of providing commuting transportation to an employee (such as hiring a car service), unless the transportation is necessary for the employee’s safety. And it suspends through 2025 the tax-free benefit of up to $20 a month for bicycle commuting.

2. On-premises meals. The TCJA reduces to 50% a business’s deduction for providing certain meals to employees on the business premises, such as when employees work late or if served in a company cafeteria. (The deduction is scheduled for elimination in 2025.) For employees, the value of these benefits continues to be tax-free.

3. Moving expense reimbursements. The TCJA suspends through 2025 the exclusion from employees’ taxable income of a business’s reimbursements of employees’ qualified moving expenses. However, businesses generally will still be able to deduct such reimbursements.

4. Achievement awards. The TCJA eliminates the business tax deduction and corresponding employee tax exclusion for employee achievement awards that are provided in the form of cash, gift coupons or certificates, vacations, meals, lodging, tickets to sporting or theater events, securities and “other similar items.” However, the tax breaks are still available for gift certificates that allow the recipient to select tangible property from a limited range of items preselected by the employer. The deduction/exclusion limits remain at up to $400 of the value of achievement awards for length of service or safety and $1,600 for awards under a written nondiscriminatory achievement plan.

1 new break

For 2018 and 2019, the TCJA creates a tax credit for wages paid to qualifying employees on family and medical leave. To qualify, a business must offer at least two weeks of annual paid family and medical leave, as described by the Family and Medical Leave Act (FMLA), to qualified employees. The paid leave must provide at least 50% of the employee’s wages. Leave required by state or local law or that was already part of the business’s employee benefits program generally doesn’t qualify.

The credit equals a minimum of 12.5% of the amount of wages paid during a leave period. The credit is increased gradually for payments above 50% of wages paid and tops out at 25%. No double-dipping: Employers can’t also deduct wages claimed for the credit.

More rules, limits and changes

Keep in mind that additional rules and limits apply to these breaks, and that the TCJA makes additional changes affecting employee benefits. Contact us for more details.

While April 15 (April 17 this year) is the main tax deadline on most individual taxpayers’ minds, there are others through the rest of the year that you also need to be aware of. To help you make sure you don’t miss any important 2018 deadlines, here’s a look at when some key tax-related forms, payments and other actions are due. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you.

Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them.

June 15

File a 2017 individual income tax return (Form 1040) or file for a four-month extension (Form 4868), and pay any tax and interest due, if you live outside the United States.
Pay the second installment of 2018 estimated taxes, if not paying income tax through withholding (Form 1040-ES).

September 17

Pay the third installment of 2018 estimated taxes, if not paying income tax through withholding (Form 1040-ES).

October 1

If you’re the trustee of a trust or the executor of an estate, file an income tax return for the 2017 calendar year (Form 1041) and pay any tax, interest and penalties due, if an automatic five-and-a-half month extension was filed.

October 15

File a 2017 income tax return (Form 1040, Form 1040A or Form 1040EZ) and pay any tax, interest and penalties due, if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States).
Make contributions for 2017 to certain retirement plans or establish a SEP for 2017, if an automatic six-month extension was filed.
File a 2017 gift tax return (Form 709) and pay any tax, interest and penalties due, if an automatic six-month extension was filed.

December 31

Make 2018 contributions to certain employer-sponsored retirement plans.
Make 2018 annual exclusion gifts (up to $15,000 per recipient).
Incur various expenses that potentially can be claimed as itemized deductions on your 2018 tax return. Examples include charitable donations, medical expenses and property tax payments.

But remember that some types of expenses that were deductible on 2017 returns won’t be deductible on 2018 returns under the Tax Cuts and Jobs Act, such as unreimbursed work-related expenses, certain professional fees, and investment expenses. In addition, some deductions will be subject to new limits. Finally, with the nearly doubled standard deduction, you may no longer benefit from itemizing deductions.

Let’s face it: At some point, we all feel overwhelmed at work. Emails flood our inbox, our calendars run rampant with meetings, crucial deadlines that we’ve known about for months are suddenly imminent, and we’re left feeling stressed with no hope of catching up. If your heart rate just increased simply by thinking about being overwhelmed, take a deep breath, and keep reading.

Prioritize

When the work load becomes unsurmountable, it is challenging even to decide where to begin. Starting each day with clear direction will help you feel more in control of your situation. Before you leave work for the day, take five minutes to create a list of tasks to focus on the following day. Some people use apps to accomplish this, others use the task feature of their email software, and I use old-fashioned pen and paper. With all the tech gadgets available, there is still nothing better to me than physically crossing a task off of my to-do list!

Prioritize the list, listing the most important tasks at the top and the least important tasks at the bottom. Carve out the time of day you perform optimally and focus on your most challenging tasks during that period. Save the more mindless, quick tasks for after lunch or when you have only a few minutes between meetings. Everything that needs to be accomplished should not be urgent. If you find that urgency has taken over your life, try reading 7 Habits of Highly Effective People by Stephen Covey.

Delegate

To the extent possible, delegate tasks to others. Larger projects can be broken into smaller tasks that are easier to delegate. While doing this, kick perfection to the curb. A coworker may not complete a task exactly the way you would have, but if they can accomplish the underlying requirements, then delegate the task to them. Consider this: If a task normally takes you an hour to complete, but could be performed by another individual and then reviewed by you in 15 minutes, you could gain 45 minutes with one item. When delegating, remember to provide adequate instructions and lay out your expectations.

Take a Technology Break

The screen you use to absorb as much social media as you possibly can will not miss you staring at it; life will go on. Put down your phone, close out websites unrelated to work, and get your life back. Have you ever added how many minutes per day you spend on social media? Studies have found that the average person spends nearly two hours a day on social media. Imagine what you could do with two extra hours!

The constant barrage of emails pinging in can also serve as a constant distraction. Consider turning off your new email notification or even closing out of your email program for part of the day to increase your ability to stay focused.

Minimize the Chitchat

Sharing a joke, personal story, or commiserating about last night’s big game helps us feel connected to our coworkers. However, excessive amounts of chitchat decrease productivity. Be cognizant of the time you spend casually talking with coworkers to ensure you’re not wasting your time or theirs. While it’s acceptable and often encouraged to make a personal connection with coworkers, consider whether your discussions include unnecessary gossip. Gossip creates a negative culture where people feel alienated, trust is more challenging to gain, and conflicts arise more easily.

Conclusion

Being in control of your work life is achievable if you commit to making changes. The practices presented above are not difficult to implement, but they have the potential to make a significant impact on accomplishing your duties. Prioritize the day, effectively delegate, take a technology break, minimize the chitchat, and kick that overwhelmed feeling to the curb!

Intuit is encouraging users to move from QuickBooks Desktop to QuickBooks Online (QBO). If you previously used QuickBooks for Mac, the next time you upgrade, QBO will be your only option. The user interface for QBO is quite a bit different from QuickBooks desktop, but it has several nice features.

1.Use it in Chrome

By far the best browser to use for QBO is Chrome. Microsoft’s new “Internet Edge” browser or Mac’s Safari browser work okay, but Chrome works better. You can download Chrome for either Windows or Mac.

2.Duplicate Tab& Bookmarks Bar

If you’re using QBO in Chrome, there are two great features:

Duplicate Tab: If you right-click on the tab and select “Duplicate,” it will open another tab with the same information you currently have open. If, for example, you wanted to view the Profit & Loss statement and Balance Sheet in two different tabs, you could go to the Reports area, duplicate the tab, and then open each report in one of the two tabs you now have open.

This feature also allows you to move the tabs to different screens so you can work on multiple areas of the QBO file concurrently.

Bookmarks Bar: If you turn on the bookmarks bar and bookmark an area of QBO, that bookmark will always take you to that area, even if you open a different QBO file. If you have two companies, this can be a great way to quickly move around QBO no matter which company you have open.

3.Use Keyboard Shortcuts

If you’re anything like me, you love keyboard shortcuts. You can find a list of the QBO specific shortcuts by typing Ctrl+Alt+/.

Use these date shortcuts when typing a date:

w = first day of the week

k = last day of the week

m = first day of the month

h = last day of the month

y = first day of the year

r = last day of the year

Additionally, the Escape key will cancel any transaction.

4.Download the Desktop App

The QBO Desktop App allows you to use QBO without opening a browser window. This makes the user experience much more similar to that of QuickBooks Desktop. The QBO app has drop-down menus to access various screens and reports, much like QuickBooks Desktop. It also allows multiple screens open at the same time in the same monitor, and will enable you to have several screens open across multiple monitors, which you can’t do in QuickBooks Desktop.

To download the app, go to quickbooks.intuit.com/apps.

5.Add an Accountant User

One of the great things about QBO is the ability to add an accountant user. This gives your accountant the ability to access your company’s QBO file without you having to make a backup or send an accountant’s copy. The accountant user can log in from anywhere, just like you can. This means they can quickly run reports, make adjusting journal entries, and gather the information they need to prepare and file your tax return with minimal effort from you.

For more information about how to make the most of QBO, reach out to one of our Certified QuickBooks Consultants.

School districts are as vulnerable to fraud as organizations in the private sector. The types of fraud most often perpetrated in the education industry include procurement schemes, corruption (conflicts of interest, bribery, illegal gratuities and economic extortion) and skimming. The Association of Certified Fraud Examiners’ most recent report on occupational fraud and abuse proves that the education industry is far from exempt from fraud concerns.

The study also states that across all industries, the most prominent organizational weakness that contributed to the fraud in their study was a lack of internal controls, which was cited in 29.3 percent of cases. The next most prominent weakness was an override of existing internal controls, which contributed to just over 20 percent of cases.

Over the past few months, I have been asked to present at multiple conferences regarding fraud prevention within school districts. This topic is at the forefront of many conversations between business offices, auditors, and governmental regulators. With limited resources, school districts feel the impact of even immaterial fraud losses much more heavily than larger corporations do. In addition to the monetary losses, districts face the subsequent media storm of bad publicity.

Unfortunately, even with this knowledge, many districts take a reactive approach to unethical behavior. Instead of waiting for something bad to happen and responding reactively, consider the following five tips to prevent fraud, and encourage your district to adopt a more proactive approach.

1. Establish strong internal controls. The Association of Certified Fraud Examiners (ACFE) fraud study reported that 94.5 percent of perpetrators took some efforts to conceal the fraud. This means that in all but about 5 percent of fraud cases, if the opportunity for a fraudster to commit fraud had been removed, the crime would not have occurred. The best way to remove the opportunity for concealment is to implement and enforce a strong internal control structure. An ideal structure would include the following imperative controls:

segregation of duties
consistent examination of supporting documentation
timely reconciliation of bank statements
safeguarding assets

2. Implement hotlines. The ACFE fraud study reported that 39.1 percent of fraud cases were detected through tips. Also, organizations with hotlines were nearly twice as likely to receive tips as those without hotlines. A confidential service for reporting fraud through email, telephone, or a website will allow both internal and external sources to be pursued immediately. A hotline provides employees the peace of mind that they can report suspicious activity without pressure or threat.

3. Perform surprise audits. There are many ways to wear an auditor’s hat for a day; here are a few that have yielded results at school districts:

Observe cash collections at a sporting event or lunch service
Perform an unplanned audit of technology inventory or petty cash
Review cleared checks online for a break in sequences
Verify new vendor names with a legitimate website, or their addresses to a Google Maps search

4. Utilize data analysis. This is a fancy way of saying, review accounting information for trends that make sense. If a district’s football team had a winning season, but ticket sales revenue did not increase, this may be a reason to dig deeper. If there was a decrease in student meals sold, but food costs have increased, there may be a need to gather more supporting data.

5. Train employees. Ensure that employees understand where to seek advice when they are faced with uncertain ethical situations. Instruct employees on how they can recognize red flags or early warning signs. Communicate the impact that fraud or abuse can have on the district, whether it’s negative publicity, job loss, or lower morale. Enforce a zero-tolerance policy through words and actions.

The ACFE fraud study also reported that there are typically no distinguishing factors of the “average” fraud perpetrator. Unfortunately, fraudsters look like honest people and are often first-time offenders. However, some of the behavioral red flags to be aware of include an employee living beyond his or her means, financial difficulties, unusually close association with a vendor/customer, wheeler-dealer attitude, control issues and an unwillingness to share duties, divorce/family problems, and irritability, suspiciousness or defensiveness.

By establishing a strong internal control system, providing employees with training and a confidential reporting outlet, performing surprise audits, and analyzing financial trends at your district, the likelihood that your district will be a victim of fraud will decrease substantially.

For more information about protecting your school district’s assets through effective internal controls, contact Yeo & Yeo’s Education Services Group.

Throughout the next 12 months, Medicare will remove social security numbers from Medicare cards and mail new cards to consumers. This change will help the Centers for Medicare & Medicaid Services (CMS) prevent fraud and identity theft, and protect financial information. Medicare Beneficiary Identifier numbers will replace the Health Insurance Claim Number on the new cards. Several resources are available from the CMS to help providers prepare for a smooth transition.

Check Out Our eBook on Creating Policies for Your Nonprofit

Download eBook

Taxpayers who have questions about the Tax Cuts and Jobs Act have several resources that will help answer questions. The legislation, passed in December 2017, changes many areas of the tax law. Here are some of the resources on IRS.gov that will help individual taxpayers and businesses.

New Tax Reform Web Page. The IRS created the Tax Reform page to highlight what taxpayers need to know about the tax law changes and their affect. This page also links taxpayers to news releases, publications, notices, and legal guidance related to the legislation.

Updated Withholding Calculator. The IRS updated the Withholding Calculator to reflect the changes in the withholding tables. The IRS encourages everyone to use the Withholding Calculator to perform a quick “paycheck checkup,” which is even more important this year because of the tax law changes. The calculator helps taxpayers determine if they’re having the right amount of tax withheld from their paychecks. This is especially important for specific groups of taxpayers including people in households with two or more jobs, who have children or dependents, who itemize their taxes, or who have high incomes or complex tax situations.

Updated Form W-4, Employee’s Withholding Allowance Certificate. Taxpayers who determine that they need to make changes to their withholding can refer to the new Form W-4, which reflects the tax law changes. Employees will submit the completed Form W-4 to their employers.

Frequently Asked Questions. The IRS posted new FAQs to help people understand how to use the Withholding Calculator and the changes to the Withholding Tables.

More information about the tax law changes will be coming throughout the year. Please contact your Yeo & Yeo tax professional with questions or concerns.

When a company’s deductible expenses exceed its income, generally a net operating loss (NOL) occurs. If when filing your 2017 income tax return you found that your business had an NOL, there is an upside: tax benefits. But beware — the Tax Cuts and Jobs Act (TCJA) makes some significant changes to the tax treatment of NOLs.

Pre-TCJA law

Under pre-TCJA law, when a business incurs an NOL, the loss can be carried back up to two years, and then any remaining amount can be carried forward up to 20 years. The carryback can generate an immediate tax refund, boosting cash flow.

The business can, however, elect instead to carry the entire loss forward. If cash flow is strong, this may be more beneficial, such as if the business’s income increases substantially, pushing it into a higher tax bracket — or if tax rates increase. In both scenarios, the carryforward can save more taxes than the carryback because deductions are more powerful when higher tax rates apply.

But the TCJA has established a flat 21% tax rate for C corporation taxpayers beginning with the 2018 tax year, and the rate has no expiration date. So C corporations don’t have to worry about being pushed into a higher tax bracket unless Congress changes the corporate rates again.

Also keep in mind that the rules are more complex for pass-through entities, such as partnerships, S corporations and limited liability companies (if they elected partnership tax treatment). Each owner’s allocable share of the entity’s loss is passed through to the owners and reported on their personal returns. The tax benefit depends on each owner’s particular tax situation.

The TCJA changes

The changes the TCJA made to the tax treatment of NOLs generally aren’t favorable to taxpayers:

For NOLs arising in tax years ending after December 31, 2017, a qualifying NOL can’t be carried back at all. This may be especially detrimental to start-up businesses, which tend to generate NOLs in their early years and can greatly benefit from the cash-flow boost of a carried-back NOL. (On the plus side, the TCJA allows NOLs to be carried forward indefinitely, as opposed to the previous 20-year limit.)
For NOLs arising in tax years beginning after December 31, 2017, an NOL carryforward generally can’t be used to shelter more than 80% of taxable income in the carryforward year. (Under prior law, generally up to 100% could be sheltered.)

The differences between the effective dates for these changes may have been a mistake, and a technical correction might be made by Congress. Also be aware that, in the case of pass-through entities, owners’ tax benefits from the entity’s net loss might be further limited under the TCJA’s new “excess business loss” rules.

Complicated rules get more complicated

NOLs can provide valuable tax benefits. The rules, however, have always been complicated, and the TCJA has complicated them further. Please contact us if you’d like more information on the NOL rules and how you can maximize the tax benefit of an NOL.

Technology trends change in the blink of an eye. To stay competitive, manufacturers need to know what will move their business forward, what processes have become obsolete and what innovations are on the horizon. The 2018 MFG Forum will guide industry leaders through these emerging issues and provide resources to maintain Michigan’s manufacturing advantage.

Did you know…

A $450 billion market disruption is on the horizon for manufacturers.
The FBI reports that more than $400 billion in intellectual property is lost in the U.S. every year from cyber attacks.
According to the U.S. Department of Homeland Security, one-third of all infrastructure cyber attacks occurred in manufacturing.

About the MFG Forum

Yeo & Yeo invites you to attend the Michigan Manufacturers Association’s (MMA) MFG Forum on Wednesday, May 9, at the Suburban Collection Showplace in Novi.

The MMA will continue its partnership with the National Center for Manufacturing Science to deliver an exceptional learning experience.
Manufacturers will discover critical resources on emerging issues from national professionals and learn about real-world best practices that their industry peers are utilizing.
The MFG Forum is a learning experience which goes beyond just the day of the event. All attendees will receive key takeaways including an event program filled with presentations, expert interviews and resources a manufacturing leader can implement right away.
Networking (before, during and after the event) plus interactive activities will allow attendees to take conversations to a deeper level, gain insightful information and develop new partnerships.

Cybersecurity case studies by Yeo & Yeo Technology

The manufacturing industry is among the top targets for ransomware and malware. What can manufacturers do to protect their organizations? Gus Hendrickson, IT Consultant of Yeo & Yeo Technology, will explain how to shield your manufacturing company against cybercrime, and I will present with him. We will present three case studies from MMA members and the results of their phish-prone tests, along with cybersecurity benchmarking data for Michigan manufacturers. In partnership with the MMA, Yeo & Yeo Technology will offer its members in attendance a phish-prone assessment.

Yeo & Yeo CPAs is proud to be a sponsor of the MFG Forum. Check out the 2017 Forum highlight video and go to mimfg.org for this year’s line-up of expert-led sessions. Not only does this event feature a packed agenda of manufacturing leaders, but attendees will receive a ton of additional information to help you achieve success in Industry. 4.0

Register online at mimfg.org or contact our events coordinator, Sarah Martin, at 517-487-8521 or martin@mimfg.org to register today.

Classifying workers as independent contractors — rather than employees — can save businesses money and provide other benefits. But the IRS is on the lookout for businesses that do this improperly to avoid taxes and employee benefit obligations.

To find out how the IRS will classify a particular worker, businesses can file optional IRS Form SS-8, “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.” However, the IRS has a history of reflexively classifying workers as employees, and filing this form may alert the IRS that your business has classification issues — and even inadvertently trigger an employment tax audit.

Contractor vs. employee status

A business enjoys several advantages when it classifies a worker as an independent contractor rather than as an employee. For example, it isn’t required to pay payroll taxes, withhold taxes, pay benefits or comply with most wage and hour laws.

On the downside, if the IRS determines that you’ve improperly classified employees as independent contractors, you can be subject to significant back taxes, interest and penalties. That’s why filing IRS Form SS-8 for an up-front determination may sound appealing.

But because of the risks involved, instead of filing the form, it can be better to simply properly treat independent contractors so they meet the tax code rules. Among other things, this generally includes not controlling how the worker performs his or her duties, ensuring you’re not the worker’s only client, providing Form 1099 and, overall, not treating the worker like an employee.

Be prepared for workers filing the form

Workers seeking determination of their status can also file Form SS-8. Disgruntled independent contractors may do so because they feel entitled to health, retirement and other employee benefits and want to eliminate self-employment tax liabilities.

After a worker files Form SS-8, the IRS sends a letter to the business. It identifies the worker and includes a blank Form SS-8. The business is asked to complete and return it to the IRS, which will render a classification decision. But the Form SS-8 determination process doesn’t constitute an official IRS audit.

Passing IRS muster

If your business properly classifies workers as independent contractors, don’t panic if a worker files a Form SS-8. Contact us before replying to the IRS. With a proper response, you may be able to continue to classify the worker as a contractor. We also can assist you in setting up independent contractor relationships that can pass muster with the IRS.

Tax-advantaged retirement plans like IRAs allow your money to grow tax-deferred — or, in the case of Roth accounts, tax-free. The deadline for 2017 contributions is April 17, 2018. Deductible contributions will lower your 2017 tax bill, but even nondeductible contributions can be beneficial.

Don’t lose the opportunity

The 2017 limit for total contributions to all IRAs generally is $5,500 ($6,500 if you were age 50 or older on December 31, 2017). But any unused limit can’t be carried forward to make larger contributions in future years.

This means that, once the contribution deadline has passed, the tax-advantaged savings opportunity is lost forever. So to maximize your potential for tax-deferred or tax-free savings, it’s a good idea to use up as much of your annual limit as possible.

3 types of contributions

If you haven’t already maxed out your 2017 IRA contribution limit, consider making one of these types of contributions by April 17:

1. Deductible traditional. With traditional IRAs, account growth is tax-deferred and distributions are subject to income tax. If you and your spouse don’t participate in an employer-sponsored plan such as a 401(k), the contribution is fully deductible on your 2017 tax return. If you or your spouse does participate in an employer-sponsored plan, your deduction is subject to a modified adjusted gross income (MAGI) phaseout:

For married taxpayers filing jointly, the phaseout range is specific to each spouse based on whether he or she is a participant in an employer-sponsored plan:

For a spouse who participates: $99,000–$119,000.
For a spouse who doesn’t participate: $186,000–$196,000.

For single and head-of-household taxpayers participating in an employer-sponsored plan: $62,000–$72,000.

Taxpayers with MAGIs within the applicable range can deduct a partial contribution; those with MAGIs exceeding the applicable range can’t deduct any IRA contribution.

2. Roth. With Roth IRAs, contributions aren’t deductible, but qualified distributions — including growth — are tax-free. Your ability to contribute, however, is subject to a MAGI-based phaseout:

For married taxpayers filing jointly: $186,000–$196,000.
For single and head-of-household taxpayers: $118,000–$133,000.

You can make a partial contribution if your MAGI falls within the applicable range, but no contribution if it exceeds the top of the range.

3. Nondeductible traditional. If your income is too high for you to fully benefit from a deductible traditional or a Roth contribution, you may benefit from a nondeductible contribution to a traditional IRA. The account can still grow tax-deferred, and when you take qualified distributions you’ll be taxed only on the growth.

Alternatively, shortly after contributing, you may be able to convert the account to a Roth IRA with minimal tax liability.

Maximize your tax-advantaged savings

Traditional and Roth IRAs provide a powerful way to save for retirement on a tax-advantaged basis. Contact us to learn more about making 2017 contributions and making the most of IRAs in 2018 and beyond.

Here are some of the key tax-related deadlines affecting businesses and other employers during the second quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

April 2

Electronically file 2017 Form 1096, Form 1098, Form 1099 (except if an earlier deadline applies) and Form W-2G.

April 17

If a calendar-year C corporation, file a 2017 income tax return (Form 1120) or file for an automatic six-month extension (Form 7004), and pay any tax due. If the return isn’t extended, this is also the last day to make 2017 contributions to pension and profit-sharing plans.
If a calendar-year C corporation, pay the first installment of 2018 estimated income taxes.

April 30

Report income tax withholding and FICA taxes for first quarter 2018 (Form 941), and pay any tax due. (See exception below under “May 10.”)

May 10

Report income tax withholding and FICA taxes for first quarter 2018 (Form 941), if you deposited on time and in full all of the associated taxes due.

June 15

If a calendar-year C corporation, pay the second installment of 2018 estimated income taxes.

Yeo & Yeo CPAs & Business Consultants, has been named one of West Michigan’s Best and Brightest Companies to Work For by the Michigan Business & Professional Association for the fourteenth consecutive year.

The annual competition is a program of the Michigan Business & Professional Association (MBPA) and identifies organizations that display a commitment to exceptional human resources practices and employee enrichment. An independent research firm evaluates organizations on a list of key metrics. Winning companies will be honored at MBPA’s annual Workforce Symposium & Awards Luncheon on May 3 in Grand Rapids.

“Being recognized as one of the Best and Brightest Companies to Work For is an honor for us. We are very proud to be listed among prominent companies in the greater Kalamazoo area, but also those in many other large Michigan cities such as Lansing, Grand Rapids and Mt. Pleasant,” says Carol Patridge, CPA, managing principal of Yeo & Yeo’s Kalamazoo office.

Mark Perry, CPA, managing principal of Yeo & Yeo’s Lansing office says, “This recognition is a testament to our dedicated employees and the culture we have built. I’m happy to see employees reporting that they are engaged and enriched through their work.”

Yeo & Yeo takes pride in offering more than 200 employees rewarding careers in the accounting industry. Yeo & Yeo develops future leaders through its award-winning CPA certification bonus program, in-house training department, professional development training and formal mentoring while sustaining work-life balance.

Normally when appreciated business assets such as real estate are sold, tax is owed on the appreciation. But there’s a way to defer this tax: a Section 1031 “like kind” exchange. However, the Tax Cuts and Jobs Act (TCJA) reduces the types of property eligible for this favorable tax treatment.

What is a like-kind exchange?

Section 1031 of the Internal Revenue Code allows you to defer gains on real or personal property used in a business or held for investment if, instead of selling it, you exchange it solely for property of a “like kind.” Thus, the tax benefit of an exchange is that you defer tax and, thereby, have use of the tax savings until you sell the replacement property.

This technique is especially flexible for real estate, because virtually any type of real estate will be considered to be of a like kind, as long as it’s business or investment property. For example, you can exchange a warehouse for an office building, or an apartment complex for a strip mall.

Deferred and reverse exchanges

Although a like-kind exchange may sound quick and easy, it’s relatively rare for two owners to simply swap properties. You’ll likely have to execute a “deferred” exchange, in which you engage a qualified intermediary (QI) for assistance.

When you sell your property (the relinquished property), the net proceeds go directly to the QI, who then uses them to buy replacement property. To qualify for tax-deferred exchange treatment, you generally must identify replacement property within 45 days after you transfer the relinquished property and complete the purchase within 180 days after the initial transfer.

An alternate approach is a “reverse” exchange. Here, an exchange accommodation titleholder (EAT) acquires title to the replacement property before you sell the relinquished property. You can defer capital gains by identifying one or more properties to exchange within 45 days after the EAT receives the replacement property and, typically, completing the transaction within 180 days.

Changes under the TCJA

There had been some concern that tax reform would include the elimination of like-kind exchanges. The good news is that the TCJA still generally allows tax-deferred like-kind exchanges of business and investment real estate.

But there’s also some bad news: For 2018 and beyond, the TCJA eliminates tax-deferred like-kind exchange treatment for exchanges of personal property. However, prior-law rules that allow like-kind exchanges of personal property still apply if one leg of an exchange was completed by December 31, 2017, but one leg remained open on that date. Keep in mind that exchanged personal property must be of the same asset or product class.

Complex rules

The rules for like-kind exchanges are complex, so these arrangements present some risks. If, say, you exchange the wrong kind of property or acquire cash or other non-like-kind property in a deal, you may still end up incurring a sizable tax hit. If you’re exploring a like-kind exchange, contact us. We can help you ensure you’re in compliance with the rules.

Home ownership is a key element of the American dream for many, and the U.S. tax code includes many tax breaks that help support this dream. If you own a home, you may be eligible for several valuable breaks when you file your 2017 return. But under the Tax Cuts and Jobs Act, your home-related breaks may not be as valuable when you file your 2018 return next year.

2017 vs. 2018

Here’s a look at various home-related tax breaks for 2017 vs. 2018:

Property tax deduction. For 2017, property tax is generally fully deductible — unless you’re subject to the alternative minimum tax (AMT). For 2018, your total deduction for all state and local taxes, including both property taxes and either income taxes or sales taxes, is capped at $10,000.

Mortgage interest deduction. For 2017, you generally can deduct interest on up to a combined total of $1 million of mortgage debt incurred to purchase, build or improve your principal residence and a second residence. However, for 2018, if the mortgage debt was incurred on or after December 15, 2017, the debt limit generally is $750,000.

Home equity debt interest deduction. For 2017, interest on home equity debt used for any purpose (debt limit of $100,000) may be deductible. (If home equity debt isn’t used for home improvements, the interest isn’t deductible for AMT purposes). For 2018, the TCJA suspends the home equity interest deduction. But the IRS has clarified that such interest generally still will be deductible if used for home improvements.

Mortgage insurance premium deduction. This break expired December 31, 2017, but Congress might extend it.

Home office deduction. For 2017, if your home office use meets certain tests, you may be able to deduct associated expenses or use a simplified method for claiming the deduction. Employees claim this as a miscellaneous itemized deduction, which means there will be tax savings only to the extent that the home office deduction plus other miscellaneous itemized deductions exceeds 2% of adjusted gross income. The self-employed can deduct home office expenses from self-employment income. For 2018, miscellaneous itemized deductions subject to the 2% floor are suspended, so only the self-employed can deduct home office expenses.

Home sale gain exclusion. When you sell your principal residence, you can exclude up to $250,000 ($500,000 for married couples filing jointly) of gain if you meet certain tests. Changes to this break had been proposed, but they weren’t included in the final TCJA that was signed into law.

Debt forgiveness exclusion. This break for homeowners who received debt forgiveness in a foreclosure, short sale or mortgage workout for a principal residence expired December 31, 2017, but Congress might extend it.

Additional rules and limits apply to these breaks. To learn more, contact us. We can help you determine which home-related breaks you’re eligible to claim on your 2017 return and how your 2018 tax situation may be affected by the TCJA.

Yeo & Yeo CPAs & Business Consultants is pleased to announce that Jamie L. Rivette , CPA, has achieved the Certified Government Financial Manager (CGFM) credential, awarded by the Association of Government Accountants (AGA).

“This recognition reinforces Jamie’s leadership in our government niche as she continues to be a driving force in the firm and for her clients,” says David Youngstrom, Principal and Assurance Service Line Leader.“Jamie continues to provide personal service and strong technical advice. She is an exceptional leader and we are proud of all she has accomplished.”

The CGFM credential demonstrates competency in governmental accounting, auditing, financial reporting, internal controls and budgeting at the federal, state and local levels. It recognizes the specialized knowledge and experience required to be an effective government financial manager.

Rivette is a Principal in the Saginaw office audit department. She leads the firm’s Government Services Group. She is a member of the Government Finance Officers Association, Michigan Government Finance Officers Association board and its and Standards Committee and Michigan Local Government Management Association.

In the community, Rivette is treasurer of the Hemlock School Board of Education and Hemlock/Ling Elementary PTO and a member of the Junior League Community Advisory Board.

If you suffered damage to your home or personal property last year, you may be able to deduct these “casualty” losses on your 2017 federal income tax return. For 2018 through 2025, however, the Tax Cuts and Jobs Act suspends this deduction except for losses due to an event officially declared a disaster by the President.

What is a casualty? It’s a sudden, unexpected or unusual event, such as a natural disaster (hurricane, tornado, flood, earthquake, etc.), fire, accident, theft or vandalism. A casualty loss doesn’t include losses from normal wear and tear or progressive deterioration from age or termite damage.

Here are some things you should know about deducting casualty losses on your 2017 return:

When to deduct. Generally, you must deduct a casualty loss on your return for the year it occurred. However, if you have a loss from a federally declared disaster area, you may have the option to deduct the loss on an amended return for the immediately preceding tax year.

Amount of loss. Your loss is generally the lesser of 1) your adjusted basis in the property before the casualty (typically, the amount you paid for it), or 2) the decrease in fair market value of the property as a result of the casualty. This amount must be reduced by any insurance or other reimbursement you received or expect to receive. (If the property was insured, you must have filed a timely claim for reimbursement of your loss.)

$100 rule. After you’ve figured your casualty loss on personal-use property, you must reduce that loss by $100. This reduction applies to each casualty loss event during the year. It doesn’t matter how many pieces of property are involved in an event.

10% rule. You must reduce the total of all your casualty losses on personal-use property for the year by 10% of your adjusted gross income (AGI). In other words, you can deduct these losses only to the extent they exceed 10% of your AGI.

Note that special relief has been provided to certain victims of Hurricanes Harvey, Irma and Maria and California wildfires that affects some of these rules. For details on this relief or other questions about casualty losses, please contact us.

Repairs to tangible property, such as buildings, machinery, equipment or vehicles, can provide businesses a valuable current tax deduction — as long as the so-called repairs weren’t actually “improvements.” The costs of incidental repairs and maintenance can be immediately expensed and deducted on the current year’s income tax return. But costs incurred to improve tangible property must be depreciated over a period of years.

So the size of your 2017 deduction depends on whether the expense was a repair or an improvement.

Betterment, restoration or adaptation

In general, a cost that results in an improvement to a building structure or any of its building systems (for example, the plumbing or electrical system) or to other tangible property must be depreciated. An improvement occurs if there was a betterment, restoration or adaptation of the unit of property.

Under the “betterment test,” you generally must depreciate amounts paid for work that is reasonably expected to materially increase the productivity, efficiency, strength, quality or output of a unit of property or that is a material addition to a unit of property.

Under the “restoration test,” you generally must depreciate amounts paid to replace a part (or combination of parts) that is a major component or a significant portion of the physical structure of a unit of property.

Under the “adaptation test,” you generally must depreciate amounts paid to adapt a unit of property to a new or different use — one that isn’t consistent with your ordinary use of the unit of property at the time you originally placed it in service.

Seeking safety

Distinguishing between repairs and improvements can be difficult, but a couple of IRS safe harbors can help:

1. Routine maintenance safe harbor. Recurring activities dedicated to keeping property in efficient operating condition can be expensed. These are activities that your business reasonably expects to perform more than once during the property’s “class life,” as defined by the IRS.

Amounts incurred for activities outside the safe harbor don’t necessarily have to be depreciated, though. These amounts are subject to analysis under the general rules for improvements.

2. Small business safe harbor. For buildings that initially cost $1 million or less, qualified small businesses may elect to deduct the lesser of $10,000 or 2% of the unadjusted basis of the property for repairs, maintenance, improvements and similar activities each year. A qualified small business is generally one with gross receipts of $10 million or less.

There is also a de minimis safe harbor as well as an exemption for materials and supplies up to a certain threshold. To learn more about these safe harbors and exemptions and other ways to maximize your tangible property deductions, contact us.

TCJA Changes to Employee Benefits Tax Breaks: 4 Negatives and a Positive

Read more at yeoandyeomedicalbilling.com

Check Out Our eBook on Creating Policies for Your Nonprofit