UPDATE FROM THE ROAD: PIVOT TEAM IN PANAMA CITY

Good morning,

image2.jpg

I wanted to report in from Panama City where, as you know, along with my wife Amy and a team from Pivot, have been helping to repair some of the damage left by Hurricane Michael. Thank you for being so supportive - financially and as cheerleaders. (Here’s a photo to the right of team members before we left. We cannot get a strong enough cell signal to send photos from here).

At the recommendation of Deerpoint Lake Church, where we are getting our “direction” we first went to the home of Patti Miller, a member of the church. A tree fell on her home and she was unable to live there. We worked on clearing her driveway on Thursday. As we were wrapping up for the day, a family approached us and said there was a couple not far from us that could use some help.

We went by the next morning to meet Shawn Waters. His driveway had not even been cleared yet. We learned from Shawn that his wife had just passed away from cancer on November 7th. We were shocked. He also said that he rents the house he lives in and the landlord offered no assistance with clearing the driveway or fixing the power pole in his yard. Shawn eventually was able to get several friends over to help move the power pole himself. We worked all day on clearing his driveway, and got the majority of it cleared with the exception of some larger items that we physically couldn’t move. 

As we finished our day, we went back to the church to meet with Pastor Curtis Kent. We talked him through our experience, and he told us about their plan to help the community. He said they are trying to rent a Bobcat so they can begin to send it out when teams such Pivot’s come to help. This way they will have a way to move the bigger items that require heavy machinery.

He said that the Bobcat rental is $3,000 a month and they are currently waiting on the credit approval process before they are able to get the Bobcat. All of this was before I even told Curtis we were going to be giving them financial assistance. I then handed him the check from the money we raised, and said “Well, here is your first month’s rent.”  Everyone is so appreciative of all of the work done but I can’t even begin to explain how bad it still is over here. This is going to take years. 

Again, thank you to those who have given and thank you to those who still may.

IRS Releases 2019 Retirement Plan Contribution Limits

On November 1, the IRS announced cost of living adjustments for various retirement accounts, including IRAs and 401(k) plans. The changes are as follows:

  • For the first time since 2013, the IRA contribution limit will increase from $5,500 to $6,000 in 2019. Catch up contributions if you are age 50 or older remain unchanged at $1,000 for IRAs.

  • For 401k plans (and 403(b) plans), the retirement plan contribution amount will increase from $18,500 to $19,000. Catch up contributions for age 50 and older participants remain unchanged at $6,000.

  • The income phase-out for taxpayers making contributions to Roth IRAs will increase from $122,000 to $137,000 for singles and heads of household and for married couples filing jointly, the income phase-out is from $193,000 to $203,000.

  • The limitation on the annual benefit for defined contribution plans (i.e. 401(k) plans and profit sharing plans) will increase from $55,000 to $56,000.

  • The annual compensation limit will increase from $275,000 to $280,000. For more information, please contact your Pivot tax advisor at 904.280.2053.

Content originally posted in IRS, written by Gary A. Phillps.

Pivot celebrates being the Official CPA Firm of the Web.com Tour Championship

For the second straight year, Pivot celebrates being the Official CPA Firm of the Web.com Tour Championship. Sure, we love seeing the Pivot logo almost everywhere one looks, but truly we see this as a way to give back to the community by promoting Atlantic Beach and helping to raise funds for local charities like Wolfsons Children’s Hospital and the American Red Cross.

The Web.com Tour Championship is an important event in the men’s professional golf landscape. 25 guys from this tournament will receive they’re PGA TOUR Cards for 2019, marking their graduation and fulfilling their dreams. Each golfer is an entrepreneur, not unlike many of our clients. And like each of them, there is a team behind them that few people see – family, trainers, coaches and and even CPA firms guiding their way. For us, it’s a chance to get some fresh air and to spend some time with clients, family and each other. From our private clinic with 2013 NCAA Champion Max Homa to the Pivot Tee Party on Saturday night to the tear-filled graduation ceremony, this is a week we look forward to.

Pivot was recently honored as one of Jacksonville Business Journal’s Best Places to Work and received the St. John County Chamber Award for community involvement. The Web.com Tour Championship allows Pivot to extend both brand values through sponsorship. “Let’s face it,” said Reynolds, “CPA firms aren’t known for their creativity. We’re different: this firm really does have a unique personality. We care about our employees, their families, our clients and our community. During one big week we get to celebrate all of that. We get to spend time with each other and with our clients in a really fun environment that allows us to get away from always talking business.”

This is a great week for golf, for Atlantic Beach and for us. We’re proud to be part of it, and we are proud of the success the tournament had this year – bigger crowds, more fun and a lot of drama down the stretch.  Make sure you come out next year!

Meal & Entertainment Changes Under Tax Reform

The new tax act made changes to the deductibility of certain business meals and entertainment expenses. Under the act, entertainment expenses incurred or paid after Dec. 31, 2017 are nondeductible unless they fall under the specific exceptions in Code Section 274(e). One of those exceptions is for “expenses for recreation, social, or similar activities primarily for the benefit of the taxpayer’s employees, other than highly compensated employees” (e.g, office holiday parties are still deductible). Business meals provided for the convenience of the employer are now only 50% deductible, whereas before the act they were fully deductible. Without further action by Congress, those meals will be nondeductible after 2025.

Businesses must continue to separately account for meals and entertainment expenses by category in order to properly apply the appropriate limitation. For 2018, they should have separate accounts for meals and entertainment expenses. “Entertainment meals” also require further analysis because unless business is conducted during the meal – no deduction is allowed. The chart below contrasts the proper treatment for many types of meals and entertainment expenditures both before and after the act.

BDO Knows Salt - South Dakota v. Wayfair Unleashes The Online Sales Tax Debate

bookkeeping-615384_1920.jpg

The South Dakota v. Wayfair, Inc. case may mark a monumental development in the debate over the digital economy’s for the collection of sales tax. companies increasingly conduct business state lines, how states and the government craft tax legislation that the evolution of ‘nexus’ could have implications for e-commerce, services providers, and taxpayers alike.

The U.S. Supreme Court’s review of the nexus standards at issue in South v. Wayfair, Inc., could result in the overturning Quill Corp. v. North Dakota, which established the physical presence nexus standard that presently applies to sales tax. The current physical presence nexus standard severely limits states’ abilities to impose such a tax on an out-of-state seller. In December 2017, the U.S. Government Accountability Office estimated that state and local governments lost between $8 billion-$13 billion in revenue in 2017 because they did not have the authority to require sales tax collection from all remote sellers and because purchasers commonly fail to self-assess and remit use taxes. In addition to lost sales tax revenues, states are also losing income tax revenues because states typically impose income taxes on businesses with an in-state physical presence. 

With this case, South Dakota has asked the Court to decide whether the physical presence standard is outdated, and whether states can constitutionally require out-of-state retailers to charge and collect sales and use taxes from in-state consumers when the retailer has no physical presence within a state. To date, over a dozen states, including South Dakota, have created economic nexus legislation for out-of-state sellers, despite a lack of authorization from Congress or the High Court. Moreover, about a dozen states impose economic nexus standards for state income tax purposes.

When the case was recently argued before the Supreme Court, Justices across party lines appeared divided. Many questioned the potential impact of retroactive applications, the cost burdens for businesses should they be required to collect sales and use taxes, and whether a signal from the Court for congressional action was the better course of action.

While companies will have to wait patiently for clarity from either the Supreme Court or Congress, they should take the time now to better understand their business connections across states. After all, both retailers of tangible products and digital services providers stand to face major repercussions if the nexus standard is altered. While some large online retailers have already begun collecting sales taxes, changes to nexus standards could disrupt the balance between online retail and brick-and-mortar retail. Digital service providers would also be charged with the complex task of understanding how their various services are taxed (or not) across state lines.

W-4 changes meant to get individuals closer to their true tax liability

For more detailed information as it might pertain to your situation, please contact your Pivot tax professional.

The Internal Revenue Service (IRS) published the new 2018 W-4 form on Feb. 27, 2018. Employers use the form to withhold the correct amount of federal income tax from workers' pay.

Accurate withholding is meant to get individuals close to their true tax liability at the end of the year. However, the new tax code, passed into law in December, made significant changes to calculations for income tax liability. Employers and employees alike need to reexamine withholding needs to ensure precision.

The IRS intended that tax withholding under the new law should work with the 2017 W-4 form. This required revisions to retain components such as personal exemptions, which are no longer in the tax code. The 2018 W-4 retains the personal exemption because those still using the previous year's form need to have it.  The new W-4's instructions and calculations attempt to get individuals closer to their tax liability for 2018.

Highlights from the changes

Exemption from withholding
The IRS changed instructions for claiming exemptions from withholding. Now you must indicate that for both 2017 and current year 2018 you had or expect no tax liability.

Withholding calculator
The IRS released its withholding calculator on Wed., Feb. 28. The W-4 instructions state that if you use the withholding calculator, you don't need to complete any of the worksheets for Form W-4. This was not stated on the previous W-4. It may indicate that the withholding calculator is the most reliable method to get your withholding closest to your tax liability.

Calculating personal allowances

The 2018 W-4:

  • Removed the reference to dependents whom you can claim on your tax return.
  • Changed the calculation for the child tax credit to reflect the new amount and the significant increase in the phase-out amounts.*
  • Added the credit for non-child dependents to factor into allowances.*

*While the new calculation more accurately reflects what the taxpayer should claim to get withholding closer to tax liability at the end of the year, it still is not precise. Tax credits function differently from deductions. To retain the allowances in the withholding process for this year, the IRS has had to calculate the approximate amount of deduction necessary based on incremental tax rates of various income brackets.

Changes to Deduction, Adjustments and Additional Income Worksheet

What The IRS changed:

  • The estimate of itemized deductions to reflect the new tax law referencing the $10,000 cap on state and local taxes (including property and income taxes) and the change to medical expenses in excess of 7.5 percent.

  • The wage thresholds and amounts for the Two-Earners/Multiple Jobs Worksheet to reflect the dynamic of the new tax code on these taxpayers.

What do employers and employees need to do?

The IRS is not requiring employers to obtain new W-4s from their employees, as it revised the withholding tables to function with the old W-4 for 2018. However, businesses might want to notify their employees of this fact.

Because of the significant changes in the new tax code, employees may want to ensure that their current withholding is appropriate. Many employers may have already received inquiries, and now they can direct staff to the new 2018 W-4. Companies can refer staff to the updated withholding calculator from the IRS. Employees can use it to help ensure they do not face surprises next year when they file their income tax returns.

Employers will need to ensure they adjust withholding appropriately for employees who choose to complete a new W-4.

Still pending

  • Changes to how states interact with federal withholding and the federal W-4. Many states use the federal code as a starting point for tax liability and withholding. State regulators and legislators are debating whether they will decouple from the federal code, and if so, to what extent. Effects on the states and their employers will unfold in the months to come.

  • Further revisions to withholding rules in 2019, as the IRS might seek to shape withholding to more closely mimic the new tax code. In particular, the agency could revise the structure of withholding from deductions to tax credits, removing references to personal deductions, which are no longer a factor in the new code. To accomplish this, the IRS in 2019 may require employers to get new W-4s from their employees or some subset of their employee population.

For more detailed information as it might pertain to your situation, please contact your Pivot tax professional

PIVOT CPAs ON NEW REPORTING GUIDELINES

Summary

money-256312_1920.jpg

Private companies and not-for-profit entities can give “reasonable estimates” for corporate tax reporting, according to FASB.

The recently-enacted Tax Cuts and Jobs Act (P.L. 115-97) made widespread changes to the Internal Revenue Code, but has left some reporting entities and companies scrambling. To help clear things up, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 118, interpreting  Financial Accounting Standards Board (FASB) Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, with regards to the new legislation.

The FASB is the authority on financial accounting and reporting standards for public and private companies, as well as non-profits.

The Bottom Line

If a company doesn’t have the information needed to evaluate, compute, and prepare accounting entries to report the effect(s) of the Act by the time financial statements are required to be filed, they are permitted to report reasonable estimates for those effects in their financial statements for the reporting period in which the law was enacted.

The bulletin also details that if a company or reporting agency doesn’t have enough information to calculate a reasonable estimate, they should continue to apply Topic 740 based on the provisions of the tax laws that were in effect before the new law was enacted.

The FASB recently posted a Q&A stating the staff would not object to private companies and not-for-profit entities applying SAB 118 on the application of Topic 740 in the reporting period that includes the date on which the 2017 Tax Cuts and Jobs Act was signed into law. Historically even though the SEC staff’s views and interpretations aren’t directly applicable, private companies and not-for-profit entities have chosen to apply the guidance in the SABs.
For more information or if you have questions about this issue, please contact your Pivot CPA.

2018 Tax Bulletin

On Friday, December 22, President Trump signed sweeping tax reform (the “Act”) into law. The Act provides the most comprehensive update to the tax code since 1986, and includes a number of provisions of particular interest to partnerships and their partners. This alert addresses the following provisions:

  • Recharacterization of Certain Long-Term Capital Gains
  • Taxation of Gain on the Sale of Partnership Interest by a Foreign Person
  • Repeal of Technical Termination Rules under Section 708(b)(1)(B)
  • Modification of the Definition of Substantial Built-in Loss in the Case of a Transfer of a Partnership Interest under Section 743(d)
  • Charitable Contributions and Foreign Taxes Taken into Account in Determining Basis Limitation under Section 704(d)
  • Like-Kind Exchange Transactions under Section 1031

To download the complete bulletin please click here. To learn how it affects you, please contact your Pivot tax professional.