Tag Archives: cpa maumee

Volunteer Expenses — Are They Deductible?

volunteerDonating money isn’t the only way to help out an organization whose cause is important to you. Volunteering your time and expertise can be valuable to the charity and rewarding for you. And, as a bonus, you may be able to deduct some of your out-of-pocket expenses on your income tax return.

What’s Deductible

If you use your car while performing services for the charity, you can deduct gas, oil, and other unreimbursed auto expenses or take the standard charitable mileage deduction (14 cents per mile). If you travel out of town on the charity’s behalf, your travel, lodging, and meal costs may be deductible. The cost of uniforms worn while volunteering is also deductible as long as the uniforms aren’t suitable for everyday use.

What’s Not

You can’t deduct your time or the value of any services you perform. And it goes without saying that you can’t deduct expenses that have been reimbursed by the organization.

You must itemize your deductions to claim a deduction for charitable contributions.

 

5 Strategies for Reducing/Eliminating Your Estate Tax

As many of you know the estate tax exemptions and rates have been all over the board in recent years. For many Americans, this isn’t an issue. However, when you begin amassing a large enough estate this becomes a huge concern. Historically, passing away with a large enough estate has imposed upwards of 55% tax. For 2014, this rate is at 40% with a $5,340,000 personal lifetime exclusion. Below are 5 strategies you can use now to help mitigate any future tax burden you should incur.

EstateTax1. Start gifting smaller amounts
There is an annual gift exclusion of up to $14,000 per person per year. Meaning a married couple could collectively gift 28,000 per year per person without eating into any of their lifetime estate tax exclusion.

2. Gift highly appreciable assets now
Gifts of over $14,000 will still need to be reported on the federal Form 709 (and will consequently count against your lifetime limit) but gifting these assets now, instead of waiting, allows the appreciation to build with the recipient instead of counting against your lifetime limit later on.

3. Buy life insurance
Life insurance proceeds are not includible in your taxable estate and are, therefore, a good way of sheltering your net worth. Doing this essentially transforms taxable assets into non-taxable income once a death occurs (assuming the estate is not the beneficiary of the policy and the decedent is not the owner).

4. Use both exemptions
Currently, the tax code allows for the husband and wife to each claim a $5.34 million estate/gift exemption. If elected timely, any unused portion of a spouse’s estate can be transferred to the surviving spouse (called portability).

5. Take advantage of unlimited exemptions
When in doubt, be charitable! The IRS allows you to contribute an unlimited amount to the qualified charities of your choice. So if you are considering donating a portion of your estate and are over the exemption limitation this would be a terrific way of sheltering those dollars from taxation.

Courtney Elgin, CPA

Deducting Charitable Donations: What You Need to Know

The end of the year will be here before we know it and if you are like most taxpayers, you will be scrambling for some last minute tax deductions. A taxpayer can itemize and deduct such items as medical expenses, state & local taxes, real estate taxes, mortgage interest and charitable contributions. While some of those items are added back if you are subject to alternative minimum tax (AMT) or as in the case of medical expenses, they are only deductible if they exceed 10% of income (7.5% for ages 65 and older); charitable contributions are not affected by these restrictions.

Nonprofit_Donation2Come year-end, some taxpayers frantically search for additional deductions. However, charitable organizations can use these donations all year around. So I’m sure the question you’re asking is, “do all donations qualify?” Here are a few general rules that you need to follow if you want your donation to qualify on your Schedule A of your Form 1040.

Cash Donations:
• Donations must be made to a qualified organization. Click here to check to see if your organization qualifies.
• Most donations are deductible up to 50% of adjusted gross income (in some cases 20% and 30% ceilings).
• For all cash donations over $250, the taxpayer needs to keep a record of a receipt or cancelled check with the donation amount, date and qualified organization.

Non-Cash Donations:
• As with cash donations, non-cash donations also need a written acknowledgement of the donation for all donations over $250. If the donation is between $500 and $5,000, additional records for cost basis, acquisition date, and fair market value will be needed. Donations over $5,000, along with the information mentioned above, may need an appraisal.
• Non-cash donations over $500 need to be reported on the Form 8283
• You can donate used clothing and household items, but they have to be in good condition or better. Those items count as a donation up to the current fair market value and not the cost of the item

Nondeductible Donations:
• Donations made to an individual are never deductible
• Donations to foreign charitable organizations are not considered to be a qualified organization
• Any donations made to a political campaign are not considered to be a deductible charitable contribution
• Any donations where you are provided benefit over your donation, is not deductible
• If you donate more than the value of the benefit, you can deduct the difference as a charitable contribution.

There are more specific rules based on different types of charitable contributions, so be sure to consult your tax advisor with any detailed questions you may have regarding your donation.

By: Jill Blakeman, CPA

Don’t Miss Out on Ohio’s Workforce Training Voucher Program

ohio_workforce

The Ohio Workforce Training Voucher Program is now in its third year. This employer-driven program is targeted to provide direct financial assistance to train workers and improve the economic competitiveness of Ohio’s employers. The program is designed to offset a portion of the employer’s costs to upgrade the skills of its incumbent workforce and will provide reimbursement to eligible employers for specific training costs accrued during training.

This time around businesses will have a chance to claim a piece of $29.4 million. That’s the good news. The bad news however, is that you have to be quick if your business has a desire to claim any portion of these funds. Similar to round two of the program, a pre-application process is available. The period to complete this process began Sept. 15, and will continue until the application officially goes live on Sept. 30.

According to the state, the funds are to be made available on a first-come, first-served basis. Employers can apply for a credit that will reimburse them up to 50% of eligible training costs – which could mean the business could be reimbursed up to $4,000 per employee.

In order to qualify, training must have been performed between Aug. 1, 2014, and Dec. 31, 2015. Employers have the option to apply for vouchers for training that has already occurred.

Pre-application allows employers to enter as much information and specific details as possible. When the application goes live, all you need to do is log on to your account and submit it. We expect all funds to be accounted for within the first few hours of the application going live. We urge businesses to take time to complete the pre-application process as soon as possible.

What Is Considered Eligible Training?
• Classes at an accredited education institution
• Training that leads to an industry-recognized certificate
• Training provided in conjunction with the purchase of a new piece of equipment
• Upgrading computer skills (e.g. Excel, Access)
• Training for the ICD-10-CM/PCS diagnostics classification system
• Training from national, regional or state trade associations that offers certified training
• Training for improved process efficiency (e.g. ISO-9000, Six Sigma, or Lean Manufacturing)
• HR Certification – limited to HR staff only

What Companies Can Apply?
For-profit entities located in Ohio and that operate in one of the following industries are eligible to apply for the Incumbent Workforce Training Voucher Program:

• Advanced Manufacturing
• Aerospace and Aviation
• Automotive
• Bio Health
• Energy
• Financial Services
• Food Processing
• Information Technology and Services
• Polymers and Chemical
• Research and Development
• Companies with a Corporate Headquarters in Ohio (with limited availability of funds)

Creating a Winning Succession Plan

Few business owners plan their exits from their businesses with as much care as they planned their entries. Just as every owner starting out needs a business plan, every owner looking to retire needs a succession plan to help transfer ownership and to achieve his or her retirement goals.

The Four Goals of a Succession Plan

While situations vary from business to business, most well-thought-out plans are designed with some or all of these objectives in mind:

  • Protecting the company’s value and ability to compete
  • Minimizing conflicts among family members
  • Reducing gift and estate taxes
  • Achieving the owner’s retirement goals.

Start Early

succession-planningStarting work early on a succession plan may help ensure a smooth change of ownership. An early start helps those family members who are active in the business to grow into their new roles and responsibilities over time. Moreover, starting early provides the opportunity to make changes to the plan, if necessary, before the actual transfer of control.

As a business owner, you should be careful not to attach provisions to the transfer of ownership that could limit the ability of the business to grow and compete in the future. Some business owners have included provisions in their wills or in the company bylaws that, for example, limit the level of debt the business can carry or restrict the types of opportunities the company can pursue.

A succession plan is also an effective tool for minimizing your estate taxes. You can capitalize on the $14,000 federal gift-tax annual exclusion by giving your children company stock over time. However, it’s important that you determine the fair market value of the shares you transfer so that you don’t run afoul of the IRS.

Letting go of the business you have spent a lifetime building is a huge decision. That’s all the more reason why you should take the time to do it correctly. We can help you put together an effective and workable succession plan. Please give us a call.

Deducting Business Website Costs

Businesses often set up websites to sell their products and attract new customers. The proper method for deducting website development costs depends on several factors, including how the website was created and whether the website was part of the company’s “start-up” costs.

 Software costs. Website designs produced with sophisticated programming languages generally can qualify as software. The IRS has safe harbor rules for deducting software costs. These rules distinguish between software produced by independent contractors and software produced by in-house employees.

Url addressGenerally, if the design was “purchased” from an outside contractor who remains at economic risk for performance of the software, the deduction for the design costs must be spread over a three-year period. However, if the website design is “developed” in-house — or by an independent contractor who does not remain at risk for performance — the company has more flexibility. One option available in this situation is to deduct the costs in the year they are either paid or accrued (depending on the company’s accounting method).

Other costs. Website design costs that don’t qualify as software are deducted over their expected useful life. The costs of producing website content that is “advertising” are generally deductible in the year paid or accrued.

Start-up costs. Website costs incurred before a business begins may be considered start-up costs. A business may elect to deduct up to $5,000 of start-up costs in the year the business begins operations and deduct the remaining costs ratably over 180 months. (The $5,000 deduction is reduced where total start-up expenses exceed $50,000.) Alternatively, a business may capitalize its start-up costs.

IRS Scams & Phishing

What to do if you get a call or email from someone claiming to be the IRS?

The IRS has seen a recent increase in local phone scams and phishing across the country. (Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate to lure in potential victims and prompt them to provide valuable personal and financial information).

These scams include many variations including callers saying that their victims owe money or are entitled to a huge refund.

Characteristics of these scams can include:

  • Scammers use fake names and IRS badge numbers. Generally common names and surnames are used to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security Number.
  • Scammers “spoof” or imitate the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.

irs_scamsIf you get a phone call from someone claiming to be from the IRS, here’s what you should do: If you know you owe taxes or you think you might owe taxes, call the IRS at 800-829-1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.

If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above) then call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.

If you’ve been targeted by these scams, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant”  on their website. Please add “IRS Telephone Scam” to the comments of your complaint.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.

By: Jenny Furey, CPA