Documenting Improvements to Real Property – Don’t get Screwed!

We often work with Companies constructing improvements to Real Property, including Commercial and Residential Real Estate that they own or lease. As we know,  these additions to the real property are essential in determining your investment in, or basis, in the property.  Down the road, when the Company taxpayer goes to sell the property, maintaining accurate records makes the difference between an optimal capital gain or loss calculation, and a less than optimal. We all know about the difference between these two.

Our clients rely on us to document to the California Board of Equalization (BOE), in order to establish the personal income tax adjusted basis of real property sold by them, based on information provided by the taxpayers’ external accountants, who tracked all costs and expenses of construction on the property and maintained bank and other financial records, receipts, and information.

When our clients rely on us to maintain the construction accoutning, the BOE always finds that the information compiled and provided by us, our client’s Accountants, was the most reliable.  The BOE notes that the evidence submitted by the Accountants  reflected amounts for capitalized construction loan interest and capitalized mortgage interest included in the adjusted basis reported by the taxpayers. Those amounts were tracked meticulously on a detailed schedule that reflected the exact amounts of interest that were paid and whether the taxpayers had claimed those mortgage interest payments as current year deductions or had capitalized those amounts. So, we do go the extra mile. We do provide exactly what is needed to support and defend our Client’s interests. So, contact us for your Real Estate Project. We’re Real Estate Experts, and we know exactly what the BOE, the IRS and the FTB is requiring. You’ll be so thankful, and so will we.

For our Business Clients – let’s keep an open eye on these new Regulations

Now that the October  tax deadlines have come and gone, here are some of the biggest changes to keep an eye on as we all wrap up the 2016 year, and head into 2017:

FIRST: The Annual Form 1099 just got more difficult.  Some of the biggest tax changes small-business owners will need to pay attention to is in health care coverage. For starters, businesses that are subject to the health care mandate expands in 2016. Now, not only must companies with 100 or more full-time employees provide coverage, but smaller businesses that employ 50-99 workers must do so as well.

SECOND: While small businesses may have come into contact with this requirement in early 2016, the rule’s relative newness bears a reminder: All employees will need to fill out Form 1095-B, Health Coverage, and employers will need to send these forms to the IRS. These are by no means the only changes to how employers report and provide coverage, nor are they likely to be the last as lawmakers continue to refine and tweak Obamacare.

THIRD: On January 1, 2016, a new rule was proposed by the Department of Labor that would raise the salary threshold for overtime to $50,440. That means employees that make at least this amount annually are exempt for overtime regulations. As such, employers do not have to pay them for that extra time. However, following the rule’s announcement, criticism has flooded in from employers and lawmakers, with many voicing concern that $50,440 was too big an increase from the previous threshold of $23,660. Since then, a revised number—$47,000—has been proposed as the new threshold. Once the final rule is published, employers will have 60 days before it becomes law.

Working closely with your accountant or bookkeeper will help companies best prepare and integrate the change into their workplaces. We are here to assist you implement these new rules. Just give us a call.

How do we convert all of the newly available insight into better decisions ?

I have been saying for awhile now that technology frees finance & accounting departments of the time-consuming manual responsibilities of the past. As a result, today’s accounting and business finance professionals are expected to take advantage of these efficiencies – to show results and plan strategically. To accomplish this, Accountants must incorporate analytics into their daily work, in order to develop expertise at using the results of the analytics. What are these results of improved analytics? ….. better data, more aligned with Customer requirements, and agile enough to bend with changing times.

Cloud Accounting technology gives us the ability to store and organize large sets of data over time so that results can be analyzed effectively, KPIs can be benchmarked against companies in a specific peer group and resources can be allocated appropriately. These unconventional activities provide an opportunity for us to elevate the value of our businesses’ accounting function by demonstrating our ability to turn data into knowledge and ultimately provide client companies with a competitive market advantage.

ANALYTICS AND BENCHMARKING

Analytical tools are designed to help you gather insight from your data and develop a business wealth creation strategy for your company. With access to benchmarking results, you can quickly compare your company results to those within your peer group—a game-changing advantage.

The key point here is that analysis and insight not only gives you an opportunity to plan strategically, but it can also provide your company with a tangible competitive edge. Now that you know how cloud accounting technologies enable you to glean business insight from your data, learn more about how Core Performance delivers better results for its clients, stay tuned to this blog.

Tax Responsibilities with the ACA & Resolving Information Form 1095 Conflicts

Important Introductory Note: There are no special or specific due diligence requirements related to Affordable Care Act issues or specifically to Form 1095 information returns.

Our Planning document represents best practices for Tax Preparers and their Clients to gather necessary information to prepare 2015 tax returns, including information that may be helpful to demonstrate compliance with the ACA health coverage provision. General requirements on filing a complete and accurate tax return continue to apply. Tax Preparers are expected to resolve conflicting or contradictory statements from their clients during the return preparation process, as they do today.

Extensions: Due to the extensions for furnishing health care information forms (Notice 2016-04), some individual taxpayers may not receive a Form 1095-B, Health Coverage, or Form 1095-C, Employer Provided Health Insurance Offer and Coverage, by the time they are ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required. Like last year, taxpayers can prepare and file their returns using other information about their health coverage. Individuals do not have to wait for their Form 1095-B or 1095-C in order to file.

Resolving conflicting information between Form 1095-A and Form 1095-B: In certain circumstances, some of which we have listed below, a client’s Form 1095-B may contain information that appears contradictory to their Form 1095-A, Health Insurance Marketplace Statement. In those situations, the preparer will need to ask clients about their specific circumstances to determine whether a client is eligible for the premium tax credit. Examples:

1. Reporting errors: If the issuer has reported information incorrectly on Form 1095-A or 1095-B, the client should contact the issuer of the form and ask for a correction. Because the issuer               also reports this information to the IRS, discrepancies should be resolved at the earliest opportunity.

2. Same month changes in coverage: If a client has coverage for at least one day during a month with one provider and switches coverage to another provider that takes effect later in the                     same month, both providers will report coverage provided during that month. This situation does not affect the client’s potential eligibility for the premium tax credit.

3. Retroactive eligibility determinations: A client may be retroactively determined to be eligible for government-sponsored insurance (Medicaid, for example). The client may receive both a               Form 1095-A and a Form 1095-B for an overlapping period. Although this may appear to be contradictory information, the client’s eligibility for the premium tax credit does not change                     until the first day of the first calendar month beginning after the date of the approval.

4. Eligibility for Medicaid or Medicare while enrolled in Marketplace coverage: In general, a client is not eligible for the premium tax credit for months in which the client is eligible for                         government-sponsored health coverage. Individuals are granted a short period of time to apply for and transition to government-sponsored coverage. However, any individual who fails by                 the last day of the third full calendar month following when he or she meets the criteria to enroll in the government-sponsored insurance, becomes ineligible for the premium tax credit as of             the first day of the fourth calendar month.

5. Supplemental private insurance coverage: The health care law does not prohibit individuals who have enrolled in Marketplace coverage from obtaining supplemental insurance from a                   private insurance provider. Therefore, dual coverage in this situation as reflected by a Form 1095-A and a Form 1095-B does not affect the client’s eligibility for the premium tax credit.

6. Dual enrollment:

Q. My client enrolled in a qualified health plan with Affordable Premium Tax Credit (APTC) based on a Marketplace determination or assessment that the client was ineligible for Medicaid or            CHIP  coverage. Subsequently, the client was determined eligible for Medicaid and was enrolled for several months while still enrolled in the qualified health plan. Should I treat my client as            eligible  for Medicaid and therefore ineligible for the premium tax credit for these months?

A. Generally, no. If a Marketplace makes a determination or assessment that an individual is ineligible for Medicaid or CHIP and eligible for APTC when the individual enrolls in a qualified               health plan, the individual is treated as not eligible for Medicaid or CHIP for purposes of the premium tax credit for the duration of the period of coverage under the qualified health plan                  (generally, the rest of the plan year). Accordingly, if your client was enrolled in both Medicaid coverage and in a qualified health plan for which advance credit payments were made for one or           more months of the year following a Marketplace determination or assessment that your client was ineligible for Medicaid, your client can claim the premium tax credit for these months, if               the client is otherwise eligible. The Marketplace may periodically check state Medicaid data to identify consumers who may be dual-enrolled, and direct them to return to the Marketplace to             discontinue their APTC. If you believe that your client may currently be enrolled in both Medicaid and a qualified health plan with advance credit payments, you should advise your client to             contact the Marketplace immediately.

Resolving reporting conflicts between Form 1095-A and Form 1095-C:

If a client receives a Form 1095-C that is marked in Box 14 with a code 1A, affordable offer of self-only minimum essential coverage, the client generally would not be eligible for the premium tax credit. However, the return preparer will need to ask clients about their specific circumstances to determine whether a client might still be eligible for the premium tax credit.

1. Reporting errors: If information is reported incorrectly on a Form 1095-A or Form 1095-C, the client should contact the issuer of the form and ask for a correction. Because the issuer also reports this information to the IRS, discrepancies should be resolved at the earliest opportunity.

2. Offers of affordable employer-sponsored insurance and Marketplace enrollment: Generally, individuals who are offered affordable self-only employer-sponsored coverage (in 2015, coverage that costs 9.56% or less of household income) are not eligible for the premium tax credit. There are some exceptions:

a. Employee safe harbor: In good faith, a client may provide accurate information to the Marketplace about the cost of employer sponsored insurance and the Marketplace may determine                  that the individual is eligible for advance payments of the premium tax credit. Under these circumstances, the client would still be eligible for the premium tax credit if he or she meets the                  other eligibility criteria even though the employer sponsored coverage would have been affordable based on the taxpayer’s actual household income. Note: If the client changed employers                 during the year and the new employer offered the client affordable coverage in subsequent months, the client must contact the Marketplace again to redetermine his or her eligibility for the               premium tax credit.

b. Employer-sponsored insurance offerings after Marketplace enrollment: If an employer extends an offer of affordable insurance during the year after the client had already enrolled in                     Marketplace coverage, the client generally is eligible for the premium tax credit until the first day of the first full month the employer coverage could have been effective.

 

Many of our clients are pleasantly surprised at how easy their life becomes after they take the first step toward visionary accounting with Core Performance Consulting.

We encourage you to call us at (949) 502-4680 or email us at peterc@coreperformance.net to set up your no-cost, no-obligation consultation.

What story does your Company’s financial statement tell ?

Narrative and Numbers:  Story Telling using Visionary Accounting tools, as well as solid number crunching

Are your financial statements in a strong position to tell an accurate reading of your Company, it’s past, present, and future?

Because we perform real-time business accounting using mature cloud accounting and reporting solutions, we are able to effectively leverage our traditional analytical and number crunching skills to paint an accurate picture of your Company. Given the current competitive landscape, more than ever, our clients are looking to their accounting adviser for guidance on how to grow their business and drive profitability.

With cloud accounting, time that was once spent keying in data can now be spent critically reviewing and analysing the information to draw out useful insights. This means the small business receives not only complete and accurate data, but also real insights on performance, facilitating more strategic and effective decision-making.  The benefits of the cloud are no secret. It enables our firm, and yours, to boost productivity with access to needed information from anywhere, at any time and on any device. Most importantly, it means you have access to a full picture of your business’ finances in real time so the advice we provide is based on accurate data.

We do not believe that the only things that matter are the numbers and that imagination/creativity are dangerous distractions. Both are critical to tell the story – – problem is, most Accountants and Bookkeepers are so buried in the details of the Accounts and the data entry process, that they’re not available to do the analysis, interpretation, and address the big picture.

We also do not believe that the full story is found just by story tellers, who build on the stories that can be told about companies and how these stories will bring untold wealth. In our view, you need both sides persisting to lead the storyline; and being used to cross-check and audit the other side of the story. Stories matter, but only if they are connected with numbers, and numbers are empty, unless they are connected with narratives. In our firm, we have designed accounting practices and procedures by which we help you build your Company’s narrative, we check them against reality and transition them into passionate business stories that capture the imagination.

We’re Experts at Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”)

CoreGroupWe know all the Details of the Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”)

Congressional leaders unveiled a massive comprehensive package last week, which will not only keep the government funded through September 2016, but also addresses the extension of many valuable tax provisions. Some of the most relevant provisions of the new legislation are summarized below. As always, consult your Marcum Tax professional to discuss how these provisions can benefit you and your business for 2015 and future years.

PROVISIONS 

CHANGES

KEY INDIVIDUAL TAX PROVISIONS
Tax-free IRA contributions to charity after age 70 1/2 Made permanent
State and local sales taxes itemized deduction Made permanent
American Opportunity Tax Credit (College Costs) Made permanent with new restrictions to claim credit
Enhanced Child Tax Credit Made permanent with new restrictions to claim credit
Basis adjustment to stock of S corporations making charitable contributions of appreciated property Made permanent
Income exclusion for discharged mortgage debt Extended for two years (2015 through 2016)
Deduction of mortgage insurance premiums Extended for two years (2015 through 2016)
Deduction of qualified tuition & fees “above-the-line” Extended for two years (2015 through 2016)
KEY BUSINESS TAX PROVISIONS
Research Tax Credit   •   Made permanent
•   The credit is refundable up to $250,000 against employer payroll taxes for any business under five years of age and with less than $5 million in annual gross receipts
•     Private companies with less than $50 million in gross receipts can use the credit against Alternative Minimum Tax
Five-year holding period for S Corporation built-in gains for dispositions Made permanent
Subpart F exception for active financing income Made permanent
Qualified small business stock gain exclusion Made permanent
Work Opportunity Tax Credit   •   Extended through 2019
•   Increases the credit to 40% of first $6,000 of wages for individuals who have been unemployed for 27 weeks or more and have received unemployment compensation
CFC-related payment look-through rule Extended through 2019
Energy Efficient Commercial Building Deduction Extended for two years (2015 through 2016)
New Markets Tax Credit Extended through 2019 with an annual allocation of $3.5 billion and extends the carryover period to 2024
Production Tax Credit for Renewables Extended for five years (2015 through 2019)
Affordable Care Act “Cadillac Tax” Postponed the starting date from 2018 to 2020
Affordable Care Act Medical Device Tax Two year moratorium
KEY DEPRECIATION PROVISIONS
Bonus depreciation   •   Extended for property placed in service through 2019 (2020 for certain long-lived and transportation property)
•   50% rate for 2015-2017, 40% rate for 2018, and 30% rate for 2019
Section 179 depreciation (first year expensing)   •   Made permanent
•   $500,000 expensing allowance and $2 million phase-out threshold which will be indexed for inflation for years after December 31, 2015
•   Computer software and HVAC units made eligible
•   Elimination of the Section 179 expensing cap for qualified real property beginning in 2016
15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements Made permanent

Humanity as a Competitive Advantage !

Do you have a great relationship with your Accountant?

Yes you expect an Accountant to be very technical, and demonstrate expertise about taxes, accounting and the law. Yes? ….But how about the way they treat you ? meaning their human skills.

We are open and direct Accountants and Advisers, and yet we are genuinely interested in helping you overcome and succeed in your business. We will live inside your business alongside you. That is how we are wired. It’s always been that way.  We ask intelligent questions, we want to know how you want to work, and we intend to be flexible in our style working with you. We follow up regularly, we answer all of your questions, and we do not bill you for the time we spend. In fact, our fees will be based on an understanding that we reach at the beginning of the engagement, and will be derived from the value you and we muutally agree upon. How does that sound? very good I expect.

1. What’s the best way to contact you and how often should we be in touch?

This might seem obvious, but clear, effective and frequent communication is the key to a healthy, beneficial relationship with your accountant. Establish early on how often you’ll connect, either in person, on the phone or online, via text, email, Skype or Google Hangouts. Decide together if you’ll meet weekly, monthly or bimonthly.

2. How can you help me get the best tax result?

Untangling the time sink of preparing filings for the tax authorities, including VAT / Sales tax, payroll taxes and year end company taxes, is often the number-one reason small businesses hire an accountant in the first place.

At the same time, ask them if there are any new tax laws you should take advantage of to maximize write-offs.

Tax opportunities, such as the R&D credits, accelerated depreciation, payroll tax rebates, are something they should be very aware of.

Does your accountant have a pre year-end tax planning meeting with you? It’s too late once the deadline’s passed (at least for the current year) to take advantage of any extra deductions or allowances.

3. What areas, other than tax, can they help you with?

A skilled accountant should get to know you and your business well enough to regularly keep you aware of an array of factors that could effect your bottom line, for better or for worse.

Your accountant should be well-versed in several disciplines, including corporate and individual tax, retirement planning and financial planning.

They should also be able to help you weigh the financial ramifications of certain decisions, such as hiring an independent contractor vs full-time employee, buy or rent an office space, or rent or lease a company car. Your accountant should also work collaboratively with you in a way that makes it easy for you to consider and understand which actions you need to take now and in the future. We develop full year tax plans, a year ahead, at a time.

4. How can you help me manage my cash flow?

Cashflow is the lifeblood of every business. Detailed cashflow forecasts are time consuming however this is definitely something your accountant should be able to do for you.

Your accountant should be able to help you develop an organised cash flow model that allows you to adjust your operations in ways that help you survive shortfalls, as well as improve receivables and manage payables. We do.

5. What is my break-even point?

Again, this may sound obvious however it’s one of the most important numbers for any business. If you’re below breakeven, eventually you will run out of money. If you’re above breakeven, then it’s the timing issues (such as payables and receivables) which will make or break your cashflow. This is a critical area of the planning and ongoing monitoring that we develop for all of our clients.

6. Can you assess the overall value of my business?

Is the accountant heavily involved in your industry sector, and is thus across what business’s are selling for right now, and also how this moves? Good insight into this is invaluable, especially if you want to sell or raise capital.

A good understanding of the valuation drivers in your industry will mean you can focus on those metrics to improve the value you eventually get. This needs to be done over an extended period of time so is something your accountant should be on top of.

7. Can you help me review and negotiate business contracts before I sign them?

This is a common question for accountants, and they definitely should be able to help you with the commercial terms. This doesn’t negate the need for good legal advise – often your accountant and legal counsel will work hand in hand.  We will assist you in these areas.

8. What are the trends in my particular industry and how aware is the accountant of those trends?

Businesses in different industries come with their own unique accounting issues. Your accountant should be knowledgeable about the various ones that specifically apply to yours.

9. What are some common mistakes that I should avoid when working with you?

Failing to follow the advice of your accountant is a common mistake. The whole point of hiring an accountant is for their expert advice. If you’re not following it because you have concerns about the quality of that advice, that may be a good indicator it’s time to look at a new accountant.

 

Peter P. Cullen   Partner, Core Performance
photo Phone: 949 381-5629
Mobile: 949 246-0502
Email: visionaccounting@gmail.com
Website: www.coreperformance.net
Address: 5151 California Ave. | Suite100 | Irvine, CA 92617

  

Are you forming a Non-Profit organization?

January 10, 2014 · Posted in Accounting, Cloud Accounting, Cost-Saving Tips · Comment 

CorePerf-5449We can help you – as well, the IRS now has an online form to guide you through the initial steps of completing the Form 1023, Application for Recognition of Exemption Under 501(c)(3), and its associated schedules.

Take a look at http://www.stayexempt.irs.gov/StartingOut/InteractiveForm1023Application.aspx

A Match Made in Heaven

July 4, 2013 · Posted in Accounting, Cloud Accounting, Xero · Comment 

Traditional accounting systems have you enter your data in a ledger format where there is a debit and a credit.  Accountants have done this for hundreds of years; the first evidence of a double-entry bookkeeping system dates to the year 1300 (Source: Wikipedia).

What’s different in Xero is that one side of the debit/credit entry is already handled for you when it comes to banking and credit card transactions.  You have three choices for each transaction:

  • Match
  • Create
  • Transfer

Match

In Xero, you use matching when the transaction has already been entered in Xero, such as an invoice that is awaiting payment or a check you are waiting to clear the bank.  When the transaction comes in via the bank feed, all you have to do is accept the match that Xero presents to you automatically.

The beauty of matching is it’s at least twice as fast as most other accounting systems.  Your bookkeeper will save considerable time.

Create

If there is no matching transaction in Xero, you can choose Create, which will record the new transaction.  In this case, you’ll need to enter the customer or vendor name plus the account that you want the other side of the bank transaction coded to.

For example, if a transaction comes through that is a bank charge or bank draft that is not previously recorded, then you can use create to enter it. In the case of the bank charge, you’ll enter the account Bank Fees and the bank name.

Transfer

The third choice is a transfer.  This is when money is moved from one bank account to another.  All you’ll need to do to record the transaction is to select the bank account.

Look Ma, No Data Entry

These three coding options are at the heart of how Xero saves business owners and bookkeepers so much time.  Since the bank feed side of the transaction is taken care of, all you have to do is code the transaction.

If you keep your books via the accrual basis where you enter your invoices and bills ahead of when they are received or paid, then you will use matching most often.  If you wait for the transaction to hit the bank, which is similar to cash basis bookkeeping, then you will be using the “create” function most often.

Game. Set. Match.

If you haven’t seen this part of Xero, you’re in for a treat.  Give us a call, and we’ll set up your free demo today.

 

Mobile Marvel

May 23, 2013 · Posted in Accounting, Business Tips, Cloud Accounting, Xero · Comment 

It’s common now to get alerts from your bank on your smartphone.  It’s even fairly easy to find a good app where you can take credit card payments from your cell.  But how about the rest of your mobile accounting needs?  Finally, the whole enchilada is here with Xero Touch for the Android, iPhone, and iPad.

Once you have your Xero accounting system in place, you can perform most of the major daily accounting functions from your smartphone.  Xero Touch allows you to enter a four-digit pin so that the login process is easier.  From there you can do the following:

At-a-Glance Balance Summary

You can check your real bank account, PayPal, and credit card balances.  While banks allow you to see your bank balance, this balance does not take into consideration uncleared checks, so the balance can be misleading.  Balances in Xero should be more accurate as long as you are caught up with your accounting.

Invoice Functions

You can create, approve, and send invoices.  One way this feature can be utilized is to have your bookkeeper enter the invoices as drafts in Xero.  Once they are entered, you can review and approve them via your smartphone.  You can also email them directly from your smart phone.

Expense Features

Let’s say that you just used your credit card to make a purchase.  You can take a picture of the receipt and enter it right in Xero Touch so you’ll be up-to-date and paperless.

Reconciling Transactions

What Xero calls reconciling is quite different than what you might be used to.  Much of Xero’s functionality is based around bringing banking data into the system and then either matching it with bills and invoices already entered or coding it to the proper income statement account.  The smartphone app allows you to do matching, coding (which they call creating), transferring between accounts, or adding comments.   These are the same four functions you have available online, and we’ll go into these in more detail in next month’s article.

Contacts

Are you visiting a client and need to make a note?  You can do so right on your cell phone in Xero Touch.

Jazzed About Mobile Accounting?

We know, it might be a bit of a stretch to have the words “jazzed” and “accounting” in the same sentence, but we’re jazzed about Xero Touch and the future of mobile accounting.

It will only get better from here, so be the first to join us for the ride.  Give us a call so we can see if Xero is right for your business.

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