Be Aware of the Tax Consequences Before Selling Your Home

In many parts of the country, summer is peak season for selling a home. If you’re planning to put your home on the market soon, you’re probably thinking about things like how quickly it will sell and how much you’ll get for it. But don’t neglect to consider the tax consequences.

Home sale gain exclusion

The U.S. House of Representatives’ original version of the Tax Cuts and Jobs Act included a provision tightening the rules for the home sale gain exclusion. Fortunately, that provision didn’t make it into the final version that was signed into law.

As a result, if you’re selling your principal residence, there’s still a good chance you’ll be able to exclude up to $250,000 ($500,000 for joint filers) of gain. Gain that qualifies for exclusion also is excluded from the 3.8% net investment income tax.

To qualify for the exclusion, you must meet certain tests. For example, you generally must own and use the home as your principal residence for at least two years during the five-year period preceding the sale. (Gain allocable to a period of “nonqualified” use generally isn’t excludable.) In addition, you can’t use the exclusion more than once every two years.

More tax considerations

Any gain that doesn’t qualify for the exclusion generally will be taxed at your long-term capital gains rate, as long as you owned the home for at least a year. If you didn’t, the gain will be considered short-term and subject to your ordinary-income rate, which could be more than double your long-term rate.

Here are some additional tax considerations when selling a home:

Tax basis. To support an accurate tax basis, be sure to maintain thorough records, including information on your original cost and subsequent improvements, reduced by any casualty losses and depreciation claimed based on business use.

Losses. A loss on the sale of your principal residence generally isn’t deductible. But if part of your home is rented out or used exclusively for your business, the loss attributable to that portion may be deductible.

Second homes. If you’re selling a second home, be aware that it won’t be eligible for the gain exclusion. But if it qualifies as a rental property, it can be considered a business asset, and you may be able to defer tax on any gains through an installment sale or a Section 1031 exchange. Or you may be able to deduct a loss.

A big investment

Your home is likely one of your biggest investments, so it’s important to consider the tax consequences before selling it. If you’re planning to put your home on the market, we can help you assess the potential tax impact. Contact us to learn more.

© 2018

When it comes to financial statements, you can engage your CPA to perform varying levels of service, from a compilation, to a review, to an audit. Learn the situations when each may be appropriate for your nonprofit.

To first understand what level of service is most appropriate for your situation, you need to understand the differences among the three.

A compilation is the most basic of the three levels of financial statement services your CPA can perform. In a compilation, your CPA is required to read the financial statements and consider whether those financial statements are free of obvious material misstatements based on the reporting framework presented (for example, generally accepted accounting principles, U.S. GAAP). The CPA, however, is not required to provide any assurance on the financial statements and therefore does not verify the accuracy or completeness of the information or obtain any evidence supporting the financial statement line items.

A review, on the other hand, is a level of service where the CPA provides a limited assurance on the accuracy of the financial statements. In a review, the CPA obtains an understanding of an organization’s operations and accounting practices and principally relies on applying analytical procedures and inquiries of management to determine if any material modifications should be made to the financial statements. This ensures that the financial statements are presented in accordance with the reporting framework presented (for example, U.S. GAAP).

An audit is the highest level of independent assurance that can be obtained on an organization’s financial statements. During an audit, your CPA obtains an understanding of internal controls, assesses fraud risks and corroborates amounts and disclosures included in your financial statements. The intent is to issue an opinion to provide reasonable (but not absolute) assurance on the accuracy of the financial statements in accordance with the reporting framework presented. Additionally, as part of the audit, your CPA will communicate any deficiencies identified in internal controls.

Although an audit is the most comprehensive level of service and the highest level of independent assurance you can obtain on your financial statements, it does not mean it is always the best option for an organization. In some cases, especially for smaller organizations, an audit will likely be cost prohibitive and result in more service than what an organization needs.

In Michigan, to comply with the state’s solicitation requirements, nonprofits are required to undergo an annual audit when they receive more than $525,000 in contributions (excluding any government grants). They are required to have a review performed when contributions (excluding any government grants) are between $275,000 and $525,000. Beyond these requirements, certain grantors or donors may impose audit or review requirements as a condition of receiving their funding. This is frequently the case for organizations that receive federal grants over particular dollar thresholds.

Outside of these circumstances, there is not a one-size-fits-all answer to determine the level of assurance needed on an organization’s financial statements. Each organization’s situation, including number of funding sources, complexity of operations, level of monitoring, and accounting practices, should be taken into account when determining the level of service to have performed on the financial statements. Lastly, just because you have one level of service performed one year does not mean you can’t have a different level of service in another. It is a common practice in the association industry (where there are frequently no outside requirements to undergo an audit) to have an audit performed every three years, with a review performed in the off years.

For a more in-depth information about financial statement services, refer to Yeo & Yeo’s Guide to Financial Statement Services: Compilation, Review and Audit.

If you have questions about what level of service is right for your organization, your Yeo & Yeo advisor would be pleased to help guide you and your nonprofit board through the decision-making process.

Many of the manufacturers we speak with express their concern about finding younger talent – or sometimes just available talent – in the manufacturing workforce. Since the recession a few years back, most manufacturing plants have been running leaner, and the manufacturing job force has not been appealing for the younger generation. Also, our culture promotes the mindset that the only way to be successful in a career is to attend college and earn a degree rather than learn a skilled trade. These circumstances have left a huge void in the manufacturing workforce, especially in the need for younger talent. Most manufacturers are concerned that when their machinists retire, they won’t have replacements in place who are educated enough to perform the same tasks.

Delta College and Mid Michigan Community College have addressed this problem head-on by creating an accelerated CNC program to train and prepare applicants with the proper knowledge and skills to excel in this field. The program addresses the two major problems in regards to this topic by attracting the younger generations and offering a viable solution to those who do not want to obtain the traditional college degree.

One great thing about this program is that it is local. Most of the graduates are local residents who plan to find a job locally. The colleges are an excellent resource to find trained talent who want to enter the manufacturing workforce. The students will already have the training and expertise to start working immediately, with a background that could propel them into more advanced machining.

If you are experiencing similar issues with finding younger, trained talent, look no further than our back yard!

A conflict of interest policy is essential to have in place for both governance (board of directors) and management to mitigate personal interests from competing with those of the nonprofit. Such a policy is so significant that it is one of only a handful of policies the IRS requires organizations to report on their Form 990, whether or not the policy has been adopted.

A conflict of interest policy should be written and should identify the organization’s process to identify conflicts of interest, as well as the process to oversee any conflicts of interest. A typical component of a conflict of interest policy is the annual completion of a conflict of interest disclosure form, and review of the forms at a board meeting.

Now is as good a time as any to ensure your nonprofit has adopted and is staying up to date with its conflict of interest policy.

Yeo & Yeo CPAs & Business Consultants is pleased to announce that Brian Dixon, CPA, has achieved the Advanced Single Audit Certification from the American Institute of CPAs (AICPA).

The certification is reserved for auditors with a minimum of seven years of experience planning, performing, reviewing, and reporting single audits in accordance with the latest Uniform Guidance requirements. The Advanced Single Audit exam covers topics such as internal controls over compliance, compliance testing, and audit sampling, among others.

Dixon is a Principal and leads the firm’s Audit Services Group. He has over 20 years of accounting and audit experience with specialization in the nonprofit and healthcare sectors, and proven expertise in single audits of federal awards.

Yeo & Yeo is an industry leader serving Governments, Nonprofit and Education entities throughout Michigan.

Read more information about the Advance Single Audit Certification here.

By now, most taxpayers are aware of the sweeping changes made with the Tax Cuts and Jobs Act (TCJA) late last year. Within the law were some drastic changes in the way that the income of farmers – especially those who are members of cooperatives – are taxed. When the law first took effect, there appeared to be an unintentional “grain glitch” that gave cooperatives a competitive advantage over corporate-owned businesses.

Initially, farmers were to be granted a 20 percent deduction on gross sales with a cooperative, while the deduction for doing business with a corporate-owned company was calculated on 20 percent of net income. To simplify, assume a farmer sold $1,000,000 of grain to an elevator, and had $800,000 of expenses, resulting in $200,000 of net income.

• The deduction for selling that grain to a cooperative would result in a deduction of $200,000 (20% x $1,000,000), resulting in zero taxable income.

• The deduction for selling that grain to a corporate company would result in a deduction of $40,000 (20% x $200,000), resulting in a profit of $160,000 that would be taxed.

It is easy to see why it became such a priority to level the field so that there was not such a large variance in the tax effect of doing business with either type of entity. In late March, Congress passed an amendment to agricultural cooperative taxation, with the changes retroactive to January 1, 2018.

These changes have resulted in a more level playing field. Under the new law, cooperatives can pass deductions through to the farmers (much like in the past, when cooperatives would pass Domestic Production Activities Deduction [DPAD] amounts via 1099-PATR to their patrons). This pass-through deduction, coupled with other changes stemming from the TCJA, can result in a powerful planning mechanism for taxpayers. In addition to the possible 20 percent business income deduction for pass-through entities enacted by the passing of the TCJA, certain taxpayers can receive an additional 9 percent deduction via the cooperative.

The calculations for determining the total deduction can be very complex, so it is vital to align yourself with an accounting firm that can help you properly calculate the tax affects. It is especially important to do tax planning before year-end to reduce costly equipment purchases or other inputs that may be avoidable.

Historically, if an individual paid alimony or separate maintenance to their former spouse, they could deduct on their federal individual income tax return an amount equal to the alimony or separate maintenance payments paid during the year as an “above-the-line” deduction. This kind of deduction allows a taxpayer to directly reduce his or her adjusted gross income instead of claiming the amount as an itemized deduction. On the flip side, alimony and separate maintenance payments are taxable income to the recipient spouse.

However, new rules are coming. Under the 2017 Tax Cuts and Jobs Act (the Act), there will be no deduction for alimony or separate maintenance for the payer, and the payments will not be taxable income to the recipient. Unlike most provisions of the Act, changes to alimony and separate maintenance do not take effect until 2019.

For divorces and legal separations that are executed, i.e., that come into legal existence due to a court order, after December 31, 2018, the alimony-paying spouse won’t be able to deduct the payments, and the alimony-receiving spouse won’t include them in income or pay federal income tax on them.

In addition, these new rules will not apply to existing divorces and separations. The current rules continue to apply to already-existing divorces and separations, as well as to divorces and separations that are executed before January 1, 2019.

Also, many state and local tax jurisdictions have adopted federal rules when determining their taxable income, so this new treatment may also impact state and local tax calculations.

On a tax planning note, there may be situations where applying these new rules voluntarily would be beneficial for the two taxpayers, for example when there is a change in the income levels of the alimony payer or the alimony recipient. In that case, some taxpayers may want the Tax Cuts and Jobs Act rules to apply to their existing divorce or separation. Under a special provision in the law, if taxpayers have an existing (pre-2019) divorce or separation decree, and they have that agreement legally modified after December 31, 2018, the new rules apply to that modified decree if the modification expressly so provides.

If you wish to discuss the impact of these rules on your particular situation, please contact Yeo & Yeo.

Nonprofit board members in attendance at Yeo & Yeo’s nonprofit board training inquired about the requirements for filing a license to solicit in other states when using Facebook as well as how to handle donations that are given in foreign currencies. Continue reading to learn the answers to these questions and more.

1. When should Licenses to Solicit be filed in other states?

The AICPA provides guidance in its Compliance Brief, “Compliance with Charitable Solicitation Laws.” It addresses when an organization must register to solicit. Unfortunately, each state is different, so you have to look up the state in question (the state government’s website) to see what is required.

A question was also asked about Facebook solicitations and out-of-state United Way donations and their impact on registering in other states. In regards to Facebook, if the solicitations are general requests out to the public, the nonprofit should probably be registered in Michigan. If the nonprofit starts routinely receiving donations from other states, then it may want to consider registration in those states. However, Facebook solicitations do not generate the need for registration in every state.

There isn’t a clear-cut answer in regards to out-of-state United Way donations. If the donation comes through an out-of-state United Way, the nonprofit might be able to argue that the corporate office of the donation origination is in Michigan, if this is the case. Depending on what the nonprofit is doing to try to solicit those donations, they may be able to argue that they are not requesting the money and therefore registration isn’t needed. Again, it also comes back to the different requirements in each state.

2. How should a nonprofit value a contribution or pledge receivable that is given in a foreign currency?

On the date the contribution receivable is recorded, it must be converted from the foreign currency to U.S. dollars using the exchange rate. At each balance sheet date, the nonprofit must take the remaining balance in the foreign currency and convert it to U.S. dollars. The gain or loss is considered “foreign currency transaction gains and losses” on the statement of activities (income statement). When the cash is ultimately received, the difference between the balance sheet amount and the U.S. dollar amount received is also recorded as “foreign currency transaction gains and losses.”

If it is a long-term contribution receivable, then you will also have to factor in the discount rate. We suggest keeping the amortization schedule in the foreign currency to ensure the right amounts are classified between the “discount” and “foreign currency transaction gains and losses” on the books when the conversion is done for the balance sheet.

 

Yeo & Yeo CPAs & Business Consultants is pleased to announce that Bradley DeVries , CPA, has achieved the Certified Association Executive (CAE) credential, awarded by the American Society of Association Executives (ASAE).

“We are very excited for Brad and congratulate him on all his efforts to earn such a prestigious certification,” says David Youngstrom, Principal and Assurance Service Line Leader. “I know Brad is very eager to take what he has learned and provide a greater depth of service to his clients in the association industry.”

The CAE is the highest professional credential in the association industry. To be designated as a CAE, DeVries was required to have a minimum of five years’ experience providing services within the association community, complete a minimum of 100 hours of specialized professional development, pass a stringent examination in association management, and pledge to uphold a code of ethics. The certification demonstrates his dedication to professional development in nonprofit management and enhanced value when consulting with clients in the association profession.

DeVries is a senior manager in Yeo & Yeo’s Lansing office. He is a member of the firm’s Nonprofit, Audit and Real Estate Services Groups. He is also a member of the Michigan Society of Association Executives (MSAE) and Michigan Nonprofit Association (MNA).

 

If you received a large refund after filing your 2017 income tax return, you’re probably enjoying the influx of cash. But a large refund isn’t all positive. It also means you were essentially giving the government an interest-free loan.

That’s why a large refund for the previous tax year would usually indicate that you should consider reducing the amounts you’re having withheld (and/or what estimated tax payments you’re making) for the current year. But 2018 is a little different.

The TCJA and withholding

To reflect changes under the Tax Cuts and Jobs Act (TCJA) — such as the increase in the standard deduction, suspension of personal exemptions and changes in tax rates and brackets — the IRS updated the withholding tables that indicate how much employers should hold back from their employees’ paychecks, generally reducing the amount withheld.

The new tables may provide the correct amount of tax withholding for individuals with simple tax situations, but they might cause other taxpayers to not have enough withheld to pay their ultimate tax liabilities under the TCJA. So even if you received a large refund this year, you could end up owing a significant amount of tax when you file your 2018 return next year.

Perils of the new tables

The IRS itself cautions that people with more complex tax situations face the possibility of having their income taxes underwithheld. If, for example, you itemize deductions, have dependents age 17 or older, are in a two-income household or have more than one job, you should review your tax situation and adjust your withholding if appropriate.

The IRS has updated its withholding calculator (available at irs.gov) to assist taxpayers in reviewing their situations. The calculator reflects changes in available itemized deductions, the increased child tax credit, the new dependent credit and repeal of dependent exemptions.

Learn more about the IRS resources in our article, IRS Encourages ‘Paycheck Checkup’ for Taxpayers to Check Their Withholding.

More considerations

Tax law changes aren’t the only reason to check your withholding. Additional reviews during the year are a good idea if:

• You get married or divorced,
• You add or lose a dependent,
• You purchase a home,
• You start or lose a job, or
• Your investment income changes significantly.

You can modify your withholding at any time during the year, or even multiple times within a year. To do so, you simply submit a new Form W-4 to your employer. Changes typically will go into effect several weeks after the new Form W-4 is submitted. (For estimated tax payments, you can make adjustments each time quarterly payments are due.)

The TCJA and your tax situation

If you rely solely on the new withholding tables, you could run the risk of significantly underwithholding your federal income taxes. As a result, you might face an unexpectedly high tax bill when you file your 2018 tax return next year. Contact us for help determining whether you should adjust your withholding. We can also answer any questions you have about how the TCJA may affect your particular situation.

© 2018

Our comprehensive 22-page Form 990 eBook includes:

• Overview of Form 990
• Understanding Schedules A-R
• Reporting Unrelated Business Income on Form 990-T
• Benefits Form 990 Offers an Organization.

2018 Essential Services Assessment (ESA) statements have been generated and are now available to all taxpayers whose Combined Document (Form 5278) information was forwarded to the Department by the local assessor. ESA statements may be accessed via Michigan Treasury Online (MTO) at https://mto.treasury.michigan.gov.

For instructions on accessing and navigating MTO and submitting electronic ESA payments, please visit the ESA website at www.michigan.gov/esa. If, after reviewing the information available, taxpayers or assessors have questions regarding EMPP or ESA, please feel free to contact the ESA unit at ESAQuestions@michigan.gov or 517-241-0310.

 

With the April 17 individual income tax filing deadline behind you (or with your 2017 tax return on the back burner if you filed for an extension), you may be hoping to not think about taxes for the next several months. But for maximum tax savings, now is the time to start tax planning for 2018. It’s especially critical to get an early start this year because the Tax Cuts and Jobs Act (TCJA) has substantially changed the tax environment.

Many variables

A tremendous number of variables affect your overall tax liability for the year. Looking at these variables early in the year can give you more opportunities to reduce your 2018 tax bill.

For example, the timing of income and deductible expenses can affect both the rate you pay and when you pay. By regularly reviewing your year-to-date income, expenses and potential tax, you may be able to time income and expenses in a way that reduces, or at least defers, your tax liability.

In other words, tax planning shouldn’t be just a year-end activity.

Certainty vs. uncertainty

Last year, planning early was a challenge because it was uncertain whether tax reform legislation would be signed into law, when it would go into effect and what it would include. This year, the TCJA tax reform legislation is in place, with most of the provisions affecting individuals in effect for 2018–2025. And additional major tax law changes aren’t expected in 2018. So there’s no need to hold off on tax planning.

But while there’s more certainty about the tax law that will be in effect this year and next, there’s still much uncertainty on exactly what the impact of the TCJA changes will be on each taxpayer. The new law generally reduces individual tax rates, and it expands some tax breaks. However, it reduces or eliminates many other breaks.

The total impact of these changes is what will ultimately determine which tax strategies will make sense for you this year, such as the best way to time income and expenses. You may need to deviate from strategies that worked for you in previous years and implement some new strategies.

Getting started sooner will help ensure you don’t take actions that you think will save taxes but that actually will be costly under the new tax regime. It will also allow you to take full advantage of new tax-saving opportunities.

Now and throughout the year

To get started on your 2018 tax planning, contact us. We can help you determine how the TCJA affects you and what strategies you should implement now and throughout the year to minimize your tax liability.

© 2018

Now that small businesses and their owners have filed their 2017 income tax returns (or filed for an extension), it’s a good time to review some of the provisions of the Tax Cuts and Jobs Act (TCJA) that may significantly impact their taxes for 2018 and beyond. Generally, the changes apply to tax years beginning after December 31, 2017, and are permanent, unless otherwise noted.

Corporate taxation

• Replacement of graduated corporate rates ranging from 15% to 35% with a flat corporate rate of 21%
• Replacement of the flat personal service corporation (PSC) rate of 35% with a flat rate of 21%
• Repeal of the 20% corporate alternative minimum tax (AMT)

Pass-through taxation

• Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37% — through 2025
• New 20% qualified business income deduction for owners — through 2025
• Changes to many other tax breaks for individuals — generally through 2025

New or expanded tax breaks

• Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after September 27, 2017, and before January 1, 2023
• Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phaseout threshold to $2.5 million (these amounts will be indexed for inflation after 2018)
• New tax credit for employer-paid family and medical leave — through 2019

Reduced or eliminated tax breaks

• New disallowance of deductions for net interest expense in excess of 30% of the business’s adjusted taxable income (exceptions apply)
• New limits on net operating loss (NOL) deductions
• Elimination of the Section 199 deduction, also commonly referred to as the domestic production activities deduction or manufacturers’ deduction — effective for tax years beginning after December 31, 2017, for noncorporate taxpayers and for tax years beginning after December 31, 2018, for C corporation taxpayers
• New rule limiting like-kind exchanges to real property that is not held primarily for sale (generally no more like-kind exchanges for personal property)
• New limitations on excessive employee compensation
• New limitations on deductions for certain employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation

Don’t wait to start 2018 tax planning

This is only a sampling of some of the most significant TCJA changes that will affect small businesses and their owners beginning this year, and additional rules and limits apply. The combined impact of these changes should inform which tax strategies you and your business implement in 2018, such as how to time income and expenses to your tax advantage. The sooner you begin the tax planning process, the more tax-saving opportunities will be open to you. So don’t wait to start; contact us today.

© 2018

You may have breathed a sigh of relief after filing your 2017 income tax return (or requesting an extension). But if your office is strewn with reams of paper consisting of years’ worth of tax returns, receipts, canceled checks and other financial records (or your computer desktop is filled with a multitude of digital tax-related files), you probably want to get rid of what you can. Follow these retention guidelines as you clean up.

General rules

Retain records that support items shown on your tax return at least until the statute of limitations runs out — generally three years from the due date of the return or the date you filed, whichever is later. That means you can now potentially throw out records for the 2014 tax year if you filed the return for that year by the regular filing deadline. But some records should be kept longer.

For example, there’s no statute of limitations if you fail to file a tax return or file a fraudulent one. So you’ll generally want to keep copies of your returns themselves permanently, so you can show that you did file a legitimate return.

Also bear in mind that, if you understate your adjusted gross income by more than 25%, the statute of limitations period is six years.

Some specifics for businesses

Records substantiating costs and deductions associated with business property are necessary to determine the basis and any gain or loss when the property is sold. According to IRS guidelines, you should keep these for as long as you own the property, plus seven years.

The IRS recommends keeping employee records for three years after an employee has been terminated. In addition, you should maintain records that support employee earnings for at least four years. (This timeframe generally will cover varying state and federal requirements.) Also keep employment tax records for four years from the date the tax was due or the date it was paid, whichever is longer.

For travel and transportation expenses supported by mileage logs and other receipts, keep supporting documents for the three-year statute of limitations period.

Regulations for sales tax returns vary by state. Check the rules for the states where you file sales tax returns. Retention periods typically range from three to six years.

When in doubt, don’t throw it out

It’s easy to accumulate a mountain of paperwork (physical or digital) from years of filing tax returns. If you’re unsure whether you should retain a document, a good rule of thumb is to hold on to it for at least six years or, for property-related records, at least seven years after you dispose of the property. But, again, you should keep tax returns themselves permanently, and other rules or guidelines might apply in certain situations. Please contact us with any questions.

© 2018

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.

© 2018

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.

© 2018

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.