Cost Segregation Studies

If you own developed real estate, you may want to take advantage of this opportunity for substantial tax savings.

Cost segregation studies identify shorter-life assets within real estate such as certain electrical and mechanical systems, decorative features, specialty fixtures, equipment and land improvements. Using cost segregation, these types of assets, typically depreciated over 39 years, are segregated and reclassified to qualify for 5-, 7- or 15-year depreciable lives. Maximizing available depreciation deductions reduces current taxes and accelerates cash flow.

The accelerated depreciation can be applied now, going forward and going back all the way through 1987. The IRS allows owners of real estate to claim depreciation deductions that were unclaimed on prior tax returns. Assets can be reclassified without amending tax returns.

Just about every taxpayer who owns developed real estate can benefit from cost segregation.

• Do you own depreciable real property acquired in 1987 or later?
• Are you constructing or purchasing real property?
• Are you expanding your existing facility?
• Do you have extensive leasehold improvements?
• Do you have acquisitions or investments in real estate properties?

If you answered yes to any of these questions, contact us for a free initial consultation to unlock your property’s tax savings opportunities. We partner with several qualified providers for cost segregation studies, which have helped our clients save taxes and added thousands to their bottom lines.

Welcome! 

We have kept many items in the same place to keep navigation familiar to our visitors, but have implemented new features to enhance your experience. Some of those features include:

• • Mobile-friendly design that will adapt to the device and screen you are viewing it on.
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We recommend to bookmark our website as we will continuously be adding information to keep our clients and friends well-informed of the latest changes in tax and audit, and more insightful articles to help you run a successful business.

We hope you enjoy exploring our newly designed website!

 

 

Yeo & Yeo CPAs & Business Consultants has been named one of Metropolitan Detroit’s 101 Best and Brightest Companies to Work For by the Michigan Business & Professional Association for the fourth consecutive year.

“It is an honor to be recognized as one of the 101 Best and Brightest Companies to Work For,” said Thomas O’Sullivan, managing principal of the Ann Arbor office. “We credit the excellent work environment we’ve created to our dedicated employees. They are engaged in the work they do for our clients and committed to teamwork. They are an essential piece of our success and I am very proud of them,” says O’Sullivan.

Yeo & Yeo offers rewarding careers for individuals who have the desire and drive to grow as leaders in the accounting profession. More than 200 employees in offices throughout Michigan, including locations in Ann Arbor, Auburn Hills and Southgate, take pride in the firm’s reputation for personal service, commitment to clients and community support. Yeo & Yeo has a culture of developing future leaders through its in-house training department, professional development training and formal mentoring, while sustaining a family friendly work environment. The firm also offers an award-winning CPA certification bonus program. Yeo & Yeo is a strengths-based organization where employees benefit from collaboration across offices and teams, and have access to advisors and resources that help them succeed.

The annual competition is a program of the Michigan Business & Professional Association (MBPA) and recognizes organizations that display a commitment to excellence in their human resource practices and employee enrichment. An independent research firm scored each company’s entry based on key measures in categories such as work-life balance, compensation, employee education and development, recognition and retention, and community initiatives.

This year the geographic area included in the Metropolitan Detroit competition was expanded considerably to include 21 counties. Companies in counties as far north as Midland, Bay and Saginaw, as far west as Clinton, Ingham and Jackson, and those in the entire Thumb and Metropolitan Detroit regions were eligible to participate. A total of 500 companies fully completed the program this year compared to 400 companies last year.

Winning companies will be honored at MBPA’s annual awards program and human resources symposium on September 17 at the Detroit Marriott at the Renaissance Center.

Yeo & Yeo CPAs & Business Consultants was proud to join with the Young Professionals group of the Leading Edge Alliance (LEA YPs) for its fifth annual Global Volunteer Week. LEA member firms worldwide were encouraged to donate to or volunteer for a local charity.

Bradley Booms, member of the LEA YP SIG Steering Committee and senior accountant at Yeo & Yeo said, “This is an excellent opportunity for Yeo & Yeo’s Young Professionals to work together and volunteer for causes they are passionate about with an end result of making a positive impact in the communities that we work in.”

During mid-June and early July, Yeo & Yeo employees volunteered at several different Non-Profit organizations across Michigan. Yeo & Yeo’s Young Professional’s focus this year was to work together to assist a variety of Non-Profits in their efforts to provide food, shelter and safety to families in need by:

• Volunteering at Food Gatherers, a nonprofit food bank committed to alleviating hunger in the Ann Arbor community
• Planting and weeding an urban garden in downtown Detroit that provides sustainable, locally grown vegetables to 1,400 families, communities and schools across Detroit
• Inspecting and sorting 13,183 pounds of donated food items for the Food Bank of Eastern Michigan
• Golfing to raise donations for charities in Kalamazoo
• Working in the community gardens of Lansing for the Greater Lansing Food Bank
• Painting and doing yard work at Shelter House of Midland, an organization committed to provide safety, advocacy and counseling for survivors of domestic violence and sexual assault
• Landscaping at the Underground Railroad of Saginaw. The work included cleaning, digging out shrubs, mulching and planting

This is the fifth consecutive year that Yeo & Yeo employees have participated in the annual LEA YP Global Volunteer Week. The firm is proud of its employees’ outreach and pleased to participate in these efforts to support communities both locally and globally.

 

The Michigan Unemployment Agency has announced a reduction in the taxable wage base beginning with the third quarter of 2015.The taxable wage base on which businesses (that are not delinquent) pay unemployment tax has been reduced from $9,500 to $9,000.

This reduction is a result of legislation enacted to properly fund the Unemployment Trust Fund during the recession. In 2011, amendments to the Michigan Employment Security Act included a wage base increase from $9,000 to $9,500. This legislation also included a condition that if the Trust Fund balance maintained a $2.5 billion balance for two consecutive quarters, the wage base would be reduced back to $9,000. That condition has been met.

The taxable wage base reduction is effective with the third quarter tax filings and will save unemployment tax dollars for employers across Michigan that are not delinquent. While this third quarter reduction does not change the tax obligation for the first and second quarters, it will result in less tax paid by Michigan employers in the upcoming quarters.

For more information, please contact one of the professionals at Yeo & Yeo.

With nonqualified stock options (NQSOs), if the stock appreciates beyond your exercise price, you can buy shares at a price below what they’re trading for. This is the same as for the perhaps better-known incentive stock options (ISOs).

The tax treatment of NQSOs, however, differs from that of ISOs: NQSOs create compensation income — taxed at ordinary-income rates — on the “bargain element” (the difference between the stock’s fair market value and the exercise price) when exercised. This is regardless of whether the stock is held or sold immediately. Also, NQSO exercises don’t create an alternative minimum tax (AMT) preference item that can trigger AMT liability.

When you exercise NQSOs, you may need to make estimated tax payments or increase withholding to fully cover the tax. Keep in mind that an exercise could trigger or increase exposure to top tax rates, the additional 0.9% Medicare tax and the 3.8% net investment income tax.

Have tax questions about NQSOs or other stock-based compensation? Let us know — we’d be happy to answer them.

© 2015

If you usually receive a large federal income tax refund, you’re essentially making an interest-free loan to the IRS. Rather than wait until you file your 2015 tax return in 2016, why not begin enjoying your “refund” now by reducing your withholdings or estimated tax payments for the remainder of 2015?

It’s particularly important to review your withholdings, and adjust them if necessary, when you experience a major life event, such as marriage, divorce, birth or adoption of a child, or a layoff suffered by you or your spouse.

If you’d like help determining what your withholding or estimated tax payments should be for the second half of the year, please contact us.

With the U.S. Supreme Court’s June 25 decision to uphold the Affordable Care Act (ACA) yet again, employers subject to the act’s information reporting provision can no longer afford to put off planning in the hope that the requirements might go away.

Beginning in 2016, “large” employers as defined by the act (generally employers with 50 or more full-time employees or the equivalent) must file Forms 1094 and 1095 to provide information to the IRS and plan participants about health coverage provided in the previous year (2015).

Fortunately, recent IRS guidance helps clarify the reporting requirements. Furthermore, a new IRS Q&A document addresses more specific issues that may arise while completing the forms.

Keep in mind that, while some “midsize” employers (generally employers with 50-99 full-time employees or the equivalent) can qualify for an exemption from the play-or-pay provision in 2015 if they meet certain requirements, these employers still will be subject to the information reporting requirements.

If your organization is among those that are required to file Forms 1094 and 1095, and you need assistance in complying with the requirements, please reach out to us.

The Michigan Association of Certified Public Accountants (MICPA) named Suzanne R. Lozano, CPA, CVA, of the Saginaw office, a recipient of its 2015 Women to Watch – Established Leader Award. The MICPA’s Women’s Initiatives Task Force chose three recipients from nominees across Michigan for the Experienced Leader award, and one recipient for the Emerging Leader award.

“This award recognizes Suzanne’s contributions to the CPA profession, her leadership and her commitment to the community. She is disciplined, dedicated, respected by her staff and highly valued by her clients. She is a valued mentor, a positive role model for both men and women in the Saginaw office, and a dynamic ambassador for Yeo & Yeo in the community,” says David W. Schaeffer, managing principal of the Saginaw office.

Lozano started with Yeo & Yeo in 1999 and now serves as principal in charge of the Saginaw office’s Management Advisory Services Group. She is a member of the firm’s healthcare Services team, healthcare Reform team, and Business Valuation and Litigation Support Support team. She also serves on the firm’s Career Advocacy Team. Lozano holds accreditation as a Certified Valuation Analyst (CVA) with the National Association of Certified Valuation Analysts, specializing in business valuation and Litigation Support support.

Lozano is a member of National Association of Certified Valuators and Analysts, the MICPA Construction Task Force, Inforum – Great Lakes Bay Region, and the Leadership Saginaw Alumni Association. She is vice chair of the Mid-Michigan Children’s Museum, and treasurer of the Peace Lutheran Church and School Foundation..

The MICPA announced the winners on June 16 at the Women’s Leadership Breakfast in Plymouth, Mich., and the awards will be presented at the 2015 MICPA Awards Dinner on September 30 in West Bloomfield, Mich.

On June 26, the U.S. Supreme Court ruled that same-sex couples have a constitutional right to marry, making same-sex marriage legal in all 50 states. For federal tax purposes, same-sex married couples were already considered married, under the Court’s 2013 decision in United States v. Windsor and subsequent IRS guidance — even if their state of residence didn’t recognize their marriage.

From a tax planning perspective, the latest ruling means that, in states where same-sex marriage hadn’t been recognized, same-sex married couples no longer will need to deal with the complications of being treated as married for federal tax purposes but not married for state tax purposes. So their tax and estate planning will be simplified and they can take advantage of state-level tax benefits for married couples. But in some cases, these couples will also be subject to some tax burdens, such as the “marriage penalty.”

Same-sex married couples should review their tax planning strategies and estate plans to determine what new opportunities may be available to them and whether there are any new burdens they should plan for. Employers will need to keep a close eye on how these developments will affect their tax obligations in relation to employees who have same-sex spouses. Please contact us if you have questions.

© 2015

Women are gaining traction at public accounting firms

Yeo & Yeo CPAs & Business Consultants was named to the Accounting MOVE Project Best Public Accounting Firms for Women list, which recognizes firms by their women’s initiatives, female leadership, and driving results.

“Since 1987 when we elected our first female partner, we have recognized the importance of promoting women to leadership roles and it has only continued to grow,” said Thomas Hollerback, CEO. “Today, women comprise 71% of our senior manager group – the future leaders of our firm.”

In its sixth year, the 2015 Accounting MOVE Project reports a significant boost in the proportion of women partners and principals at the 47 CPA firms participating in the project—an average of 22%, up from 17% five years ago. The Best Public Accounting Firms for Women list was released by the Accounting & Financial Women’s Alliance (AFWA) and American Women’s Society of CPAs (AWSCPA).

Career paths are not do-it-yourself at Yeo & Yeo, thanks to maps and structures that show employees multiple proven routes to success. With the high proportion of women on partner-track in the firm, Yeo & Yeo is restructuring its mentor program to include more peer mentoring led by women principals. The firm is also amplifying its business development program to provide more mid-level training to best equip the firm’s emerging leaders.

“We are headed in the right direction, but we need to continue to create awareness, advocate and advance women in the accounting field,” said Carol Patridge, managing principal and member of Yeo & Yeo’s board of directors. “The firm’s Career Advocacy Team works to provide equal access to career development and advocacy experiences, assists women in advancing to leadership positions and promotes the successful integration of personal and professional lives.”

The 10 firms named to the Best CPA Firms for Women list demonstrate three characteristics:

• Consistent, measurable progress in advancing women.
• Proven and continually evolving programs that retain and advance women.
• Evidence that the firm’s advancement of women is intrinsic to its growth and succession goals.

The AFWA and the MOVE Project are dedicated to efforts that empower women in the industry and assist in advancing women to senior roles with equal pay. Top trends from the 2015 Accounting MOVE Project include:

• Pay equity is the topic that won’t go away. Celebrities and politicians are advocating for pay equity transparency and accountability. Firms have a chance to make pay equity a point of strength and trust.
• CPA firms are inviting millennials to join senior staff in networking and business development training, in turn making those processes more democratic.
• Firms that have gained momentum in their advancement of women use their women’s initiatives as strategic growth drivers.

“Women are a differentiating factor for firms competing intensely for new clients,” said Joanne Cleaver, president of Wilson-Taylor Associates, Inc., the content and communications firm that manages the Accounting MOVE Project. “Most employers are concerned with advancing women, and they want to do business with CPA firms that share those values.”

Our women leaders share their story

Women leaders of Yeo & Yeo will share their stories on how they balance the challenges of work-life flexibility via the firm’s website and social sites.  Visit our webpage, Our women leaders share their story to read their stories.

Follow Yeo & Yeo’s LinkedIn and Facebook pages for their advice to emerging women leaders in the accounting profession. 

Affiliated Medical Billing, an affiliate of Yeo & Yeo CPAs & Business Consultants, will host ICD-10-CM training sessions at locations throughout Michigan beginning in July 2015.

The impact of moving to the ICD-10 code set is substantial. Not only does the new code set include five times as many codes as the ICD-9 code set, but the different arrangement of codes will require more documentation, revised forms, retraining of physicians and staff, and changes to software and other information technology.

“The success or failure of ICD-10 implementation will depend on the staff’s ability to meet the transitional challenges. The more knowledgeable they are, the better the results. The practice’s revenue will depend on whether claims are processed as clean claims or denied for inappropriate diagnostic coding,” states Julia M. Lowe, Certified Professional Coder and President of Affiliated Medical Billing.

The ICD-10-CM training sessions have been designed to meet the needs of physicians, medical coders, billers and ancillary staff. Attendees can expect to learn about the background of ICD-10-CM and what is expected to happen when the change takes place in October 2015. Information will be shared regarding the new documentation requirements and guidelines, as well as seventh-digit extensions, placeholders and other pertinent information one must know in order to transition to ICD-10-CM.

Julia Lowe, CPC, President and Traci Cook, CPC will present the sessions. Lowe has over 40 years of experience in the healthcare environment. Her focus is on physician coding, billing and practice management. She frequently serves as a consultant to medical practices in regards to accounts receivable controls, billing and coding audits, fee structuring and CPT, ICD-10-CM and HCPCS training. She is available to lecture at private medical practices, colleges, hospitals and residency programs. For large groups, she is able to modify the ICD-10-CM training to meet the needs of the practice.

For additional information, visit ICD-10 CM Training or contact Kati Krueger, Marketing Manager, at 866-493-9830 .

Even though portability now allows married couples to use both spouses’ estate tax exemptions without having to make lifetime asset transfers or set up trusts, this “easier” path isn’t necessarily the better path. For couples with large estates, making lifetime asset transfers and setting up trusts can provide benefits that exemption portability doesn’t offer.

With portability, if one spouse dies and part (or all) of his or her estate tax exemption is unused at death, the estate can elect to permit the surviving spouse to use the deceased spouse’s remaining estate tax exemption. But making the portability election doesn’t protect future growth on assets from estate tax like applying the exemption to a credit shelter trust does. Also, the portability provision doesn’t apply to the GST tax exemption, and some states don’t recognize exemption portability.

Fortunately, recent IRS guidance helps clarify the reporting requirements. Furthermore, a new IRS Q&A document addresses more specific issues that may arise while completing the forms.

Keep in mind that, while some “midsize” employers (generally employers with 50-99 full-time employees or the equivalent) can qualify for an exemption from the play-or-pay provision in 2015 if they meet certain requirements, these employers still will be subject to the information reporting requirements.

Credit shelter trusts offer GST and state estate tax planning opportunities, as well as creditor and remarriage protection. If you would like to learn more about credit shelter trusts or other estate planning strategies for your unique situation, let us know.

If you don’t pay attention to the details, the tax consequences of a sale may be different from what you expect. For example, if you bought the same security at different times and prices and want to sell high-tax-basis shares to reduce gain or increase a loss to offset other gains, be sure to specifically identify which block of shares is being sold.

And when it gets close to year end, keep in mind that the trade date, not the settlement date, of publicly traded securities determines the year in which you recognize the gain or loss.

Finally, consider the transaction costs, such as broker fees. While of course such costs aren’t taxes, like taxes they can have a significant impact on your net returns, especially over time, because they also reduce the amount of money you have available to invest.

If you have questions about the potential tax impact of an investment sale you’re considering — or all of the details you should keep in mind to minimize it — please contact us.

Hiring someone in another state, for example, might create sufficient nexus to expose your company to that state’s income, sales and use, franchise, withholding, or unemployment taxes.

And the employee might be subject to double taxation if both states attempt to tax his or her income. The recent Supreme Court ruling in Comptroller of the State of Maryland v. Wynne addressed a similar issue, although in that case the taxpayers weren’t telecommuters but owners of an S corporation that earned income in other states.

The rules vary by state and also by type of tax — and become even more complicated for international telecommuters. So it’s a good idea to review the rules before you approve a cross-border telecommuting arrangement. If you’re considering hiring employees to telecommute from outside your state, we can help you assess the potential tax impact.

If you donate your vehicle, the value of your deduction can vary greatly depending on what the charity does with it. You can deduct the vehicle’s fair market value (FMV) if the charity:

• Uses the vehicle for a significant charitable purpose (such as delivering meals-on-wheels to the elderly)
• Sells the vehicle for substantially less than FMV in furtherance of a charitable purpose (such as a sale to a low-income person needing transportation)
• Makes “material improvements” to the vehicle.

But in most other circumstances, if the charity sells the vehicle, your deduction is limited to the amount of the sales proceeds.

You also must obtain proper substantiation from the charity, including a written acknowledgment that:

• Certifies whether the charity sold the vehicle or retained it for use for a charitable purpose
• Includes your name and tax identification number and the vehicle identification number
• Reports, if applicable, details concerning the sale of the vehicle within 30 days of the sale.

For more information on these and other rules that apply to vehicle donation deductions, please contact us.

One unique aspect of owning your business is the ability to hire your children. Whether doing so makes sense is more than a business decision. The answer depends a great deal on your intentions for passing the business to future generations, the child’s interest and aptitude, and feelings about how much a parent should “help” a child and how much they should “make it on their own.” However, some real benefits are available when you employ your children.

Usually, children (especially minors) are subject to lower tax rates than their parents. In this case, shifting taxable income away from the parents and to their children is an effective way to save on payroll taxes.

A practical example

Imagine that Mr. Smith, a sole proprietor, owns a construction business called Smith Builders. As a sole proprietor, all of the net income from the business is reported on his personal return and is subject to self-employment tax. At the end of the year, Smith Builders reports a profit of $80,000, which will result in a tax of $31,304 which is calculated as follows:

 

However, Mr. Smith has chosen to employ his 16-year-old son for the summer. His son earns $5,000 over the course of the summer and this is his only income. Mr. Smith’s son would not have a tax liability on the $5,000 he earned because it is less than the 2015 standard deduction of $6,300. By paying his son $5,000, Mr. Smith reduces his business’s net income from $80,000 to $75,000 and, as a result, his personal tax liability by $1,957 as calculated below.

 

As a sole proprietor, Mr. Smith is also entitled to additional savings due to not having to pay Social Security, Medicare, or FUTA taxes on the wages paid to his son. Social Security and Medicare taxes are not imposed on earnings paid for services performed by a child under the age of 18, and FUTA taxes are not imposed on earnings paid to a child under the age of 21.

Note: The payroll tax exemption only applies to unincorporated businesses and partnerships whose members consist solely of the child’s parents. The self-employment tax savings would also only apply to unincorporated businesses and partnerships. However, the income tax savings would apply to any business structure.

Consider retirement savings too

In the above example, the wages earned by the child were below the 2015 standard deduction. However, the wages paid to the child do not have to be below the standard deduction to derive tax savings. Let’s use the same facts as the above example, but with a few changes.

Mr. Smith would like to see his son begin an IRA. To help his son do this, Mr. Smith decides to keep his child as a part-time employee after the summer ends. As of December 31, Mr. Smith’s son has earned $10,000 (the amount necessary to contribute the maximum amount to an IRA). Mr. Smith will reduce his personal tax liability by $4,200 (25 percent of $10,000 plus self-employment tax savings of $1,700) and Mr. Smith’s son will not incur a tax liability as detailed below:

 

What is the Kiddie Tax?

Kiddie Tax is a tax that is applied to a child’s unearned income (investment income) in excess of $3,100. Kiddie Tax is applied to a child in the following situations:

1. The child is under the age of 18 at the end of the year or
2. The child is over the age of 18 (or a full-time student age 19-23) and his or her earned income does not exceed one-half of the child’s support.

 

Wages are earned income, so they are not subject to the Kiddie Tax.

Take advantage of the tax benefits

Many potential tax benefits are available by employing a child in the family business. First, the business owner may shift income from the parent’s higher tax rate to the child’s lower tax rate. Second, FICA and FUTA tax savings may be realized for both the child and the parent. Finally, the business owner may begin the child’s retirement savings process and save on taxes now.

Tax law is complex. Call on Yeo & Yeo to identify individualized strategies that will minimize tax liability now and in the future. Tax planning is vital for your family … and your family business.

Live technical support and add-on business services such as payroll, credit card processing and online banking will be discontinued for QuickBooks 2012 products and Point of Sale 10.0 as of May 31, 2015.

After this date, payroll tax calculations will be incorrect, you will be unable to send payroll for processing including direct deposits, and payroll subscriptions will be deactivated. Annual Support Plans will work until your current subscription runs out. (View Intuit’s Discontinuation FAQs and all the products and services affected by the service discontinuation.)

To purchase a new version of QuickBooks and avoid interruption to your service, call your Yeo & Yeo professional or a member of Yeo & Yeo’s Client Accounting Software Solutions team. The team is comprised of CPAs, Certified QuickBooks ProAdvisors and software programmers who can help with a seamless upgrade and provide additional support services to include:   

• Accounting software research, procurement and implementation
• Training and ongoing support
• Third-party integrated add-on applications
• Custom programming and reports

For assistance contact one of Yeo & Yeo’s QuickBooks professionals. We are happy to help.

As the school year draws to a close, it’s a good time to think about Coverdell Education Savings Accounts (ESAs) — especially if you have young children.

One major advantage of ESAs over another popular education saving tool, the Section 529 plan, is that tax-free ESA distributions aren’t limited to college expenses; they also can fund elementary and secondary school costs. That means you can use ESA funds to pay for such qualified expenses as tutoring and private school tuition.

Here are some other key ESA benefits:

• Although contributions aren’t deductible, plan assets can grow tax-deferred.
• You remain in control of the account — even after the child is of legal age.
• You can make rollovers to another qualifying family member.

The annual contribution limit is $2,000 per beneficiary. However, the ability to contribute is phased out based on income.

Would you like more information about ESAs or other tax-advantaged ways to fund your child’s — or grandchild’s — education expenses? Contact us!

Generally, businesses are limited to deducting 50% of allowable meal and entertainment (M&E) expenses. But certain expenses are 100% deductible, including expenses:

• For food and beverages furnished at the workplace primarily for employees,
• Treated as employee compensation,
• That are excludable from employees’ income as de minimis fringe benefits,
• For recreational or social activities for employees, such as holiday parties, or
• Paid or incurred under a reimbursement or similar arrangement in connection with the performance of services.

If your company has substantial M&E expenses, you can reduce your tax bill by separately accounting for and documenting expenses that are 100% deductible. If doing so would create an administrative burden, you may be able to use statistical sampling methods to estimate the portion of M&E expenses that are fully deductible. For more information on how to take advantage of the 100% deduction, please contact us.