See beyond the numbers

How Tax Law Changes Will Affect You and Your Construction Company This Year

With all the talk about the many tax law changes for the 2013 tax year, hopefully you have already met with your tax advisor to do some tax planning for yourself and your construction company.  While before you probably heard “accelerate income” or “defer deductions,” this tax year we are back to more traditional strategies, such as delaying income and accelerating deductions.  Hopefully you got some good advice at the end of 2012, and you were prepared for the tax increases in 2013.

Did you say tax increases? 
Terri Richards, CPA

Yes – here they are in a nutshell:

Single taxpayers with taxable income over $400,000 (married over $450,000) will see a 4.6% marginal tax increase over last year (from 35% to 39.6%).  The long-term capital gains tax rate for taxpayers with income over those thresholds jumps from 15% to 20%.  And then there’s more –  a surtax on net investment income has been added, which translates to taxpayers paying an additional 3.8% on the lesser of net investment income or modified adjusted gross income over $200,000 for individuals ($250,000 for married filers).  The combination of these last two increases results in an 8.8% tax increase on long-term capital gains. Taxpayers with earned income over the same thresholds can expect to pay an additional 0.9% Medicare tax.

So what can you do?

  • If you are a cash basis taxpayer, hopefully you paid as many bills as you could without damaging your cash flow.
  • If you are an accrual basis taxpayer, make sure you record all of your bills and accrue for any expenses related to 2013, paid in 2014.
  • If you file your taxes using the completed contract method, be mindful that jobs that are 95% complete are considered complete for tax purposes so review your contract schedules carefully to ensure proper reporting.
  • If you use the percentage of completion method, you will want to review your contract schedule to confirm your estimates and cost allocations are correct and all approved change orders are included.

Additionally, be sure to tell your tax advisor if you bought new equipment in 2013. If qualifying property placed in service does not exceed $2 million, you can fully deduct up to $500,000 of qualifying purchases.  Additionally, for qualifying purchases through December 31, 2013, the 50% bonus depreciation is available.  Each of these tax advantages are currently set to expire or be drastically reduced in 2014.

Other considerations might be making a retirement plan contribution or giving bonuses to reward employees for exceptional performance.

The most important thing you can do is meet with your tax advisor as soon as possible to discuss strategies to minimize the tax burden for yourself and your construction company.

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Terri Richards, CPA, is an entrepreneurial services manager in Kaufman Rossin’s Boca Raton, Florida, office, and a Certified QuickBooks ProAdvisor. Kaufman Rossin offers QuickBooks consulting services for a variety of industries, including construction. Terri can be reached at trichards@kaufmanrossin.com.

See beyond the numbers

How Your Tax Bill May Change in 2014

Nearly two dozen tax provisions are set to expire or change in 2014. As always, there’s chatter in Washington about re-instating or modifying some of these provisions, and the election year timing means those discussions may grow louder.  But at the moment, it’s wise to become familiar with the scheduled changes that may affect you or your business this tax season.

Here are the top five tax changes that you should be aware of:

  1. Evan Morgan, CPA, of Kaufman RossinCancellation of Debt (COD) provision for mortgage debt is expiring. In 2013, you could exclude up to $2 million ($1 million if your status is married filing singly) of COD income from qualified principal residence debt that is forgiven due to your financial condition or decline in the value of the home.  This exclusion expired at the end of 2013, with no provision for extension into 2014.
  2. Qualified Charitable Distribution exclusion is expiring.  In the 2013 tax year, taxpayers over age 70 ½ could make tax-free transfers directly from their IRAs to charities and count them toward required minimum distributions.  This exclusion expired at the end of 2013, with no provision for extension into 2014.
  3. Section 179 deductions and bonus depreciation are changing or expiring.  Using the Section 179 deduction, you can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service.   In 2013, the Section 179 deduction and qualifying property limits were $500,000 and $2,000,000; certain software qualified and so did some qualified real property.  In 2014, the deduction and qualifying property limits are decreased to $25,000 and $200,000 respectively. Software and real property no longer qualify for Section 179 expensing.  In addition, bonus depreciation for qualified property additions will now be limited to long production-period property and certain aircraft.
  4. The research credit is expiring.  The current credit for the cost of increasing research activity, IRS Sections 41(f) and (h)(1),  expired at the end of 2013, with no provision for extension into 2014.  Other tax benefits for research remain in effect.
  5. Built-in gains provisions for S-Corps changes.   C-corporations electing to be taxed as S-Corps are subject to tax at the highest corporate rate on gains that were built-in at the time of the election and recognized during the recognition period, which was five years in 2013.  For 2014 and future years, the recognition period increases to 10 years. 

If you have questions about how these tax changes could affect your tax planning for 2014, please contact me or another Kaufman Rossin tax specialist.

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Evan S. Morgan, CPA, is a tax associate principal in Kaufman Rossin’s Miami office. Kaufman Rossin is one of the top CPA firms in the U.S. Evan can be reached at emorgan@kaufmanrossin.com.


See beyond the numbers

Time’s Running Out for Individual Year-End Tax Planning!

I woke up last weekend from my turkey-induced slumber and realized that we are already in December.  Luckily, we still have some time before the end of the year to help with last-minute tax planning, but time is running out.

Here are a few suggestions for individual taxpayers:

  • Scott Berger, CPA, of Kaufman, RossinAccelerating or deferring of income: You should plan for your income taxes by looking at two consecutive years: the current tax year as well as the next. A little planning on the timing of the income can result in big savings.
  • Gains and losses: Consider selling securities with losses and offsetting your current year gains. You can fully offset your gains and you can deduct your net loss up to $3,000 per year. Any excess is carried forward indefinitely.
  • Itemized deductions: If you are close to the standard deduction amount, consider bunching itemized deductions in one year to get the most out of them and then claim the standard deduction in the other year.
  • Retirement plans: Take full advantage of available retirement plans. If you participate in your employers’ 401K plan, maximize your contribution and any employer matching.  If you don’t participate, consider the alternatives, such as an IRA, Roth IRA, SIMPLE IRA or SEP-IRA.
  • Charitable giving: Remember to keep proper documentation to support your charitable contribution. Also, consider gifting appreciated securities. You can claim the fair market value of the donation, and you do not have to pay the tax on the gain.

Lastly, review your withholding and estimated tax payments to be sure that you will not be subject to underpayment penalties. For more assistance with year-end tax planning, contact your Kaufman Rossin tax professional today.

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Scott F. BergerCPAis a tax and accounting services principal in Kaufman Rossin’s Boca Raton office. Kaufman Rossin is the fastest growing accounting firm in the U.S. Scott can be reached at sberger@kaufmanrossin.com.

See beyond the numbers

Don’t Miss These Year-End Tax Planning Opportunities for Business Owners!

As the year comes to a close and we begin to prepare for the holiday season, we must also prepare for tax season.  There are a number of opportunities for business owners to consider before the end of the year.
Scott Berger, CPA, of Kaufman, Rossin

  • Section 179 deduction: One major tax benefit that is scheduled to be drastically reduced in 2014 is the Section 179 expense deduction.  The current dollar amount on expensing new asset additions for 2013 is $500,000, and that amount is scheduled to be reduced to $25,000 in 2014. In addition, the 50% bonus depreciation on qualifying purchases is still available for 2013.  However, this is scheduled to expire in 2014.  Therefore, business owners should strongly consider accelerating purchases of qualifying equipment into 2013.
  • Retirement savings: It is not too late to create a retirement plan for 2013 and contribute. Doing so can reduce your overall taxable income.
  • Tax credits: There are a number of tax credits such as the Work Opportunity Tax Credit (WOTC) and research and development tax credit that are still available for 2013, but those windows will also expire on December 31, 2013.

Contact your Kaufman Rossin tax professional to learn how your business can take advantage of the tax opportunities that are available now.

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Scott F. Berger, CPAis a tax and accounting services principal in Kaufman Rossin’s Boca Raton office. Kaufman Rossin is the fastest growing accounting firm in the U.S. Scott can be reached at sberger@kaufmanrossin.com.

See beyond the numbers

IRS Confirms ALL Same-Sex Spouses, Even Florida Residents, Qualify for Federal Tax Benefits

Updated September 24th, 2013

Some Tax Savings are Contingent on Taking Immediate Action!Scott.Mark5

In June, in the highly-publicized case of U.S. v. Windsor, the U.S. Supreme Court held unconstitutional the Defense of Marriage Act (DOMA) provision that defined “marriage,” for purposes of all federal laws, as between one man and one woman.  The case resulted in the extension of over 1,100 federal benefits, including several tax benefits, to same-sex married couples; however, it also confirmed that the states retain jurisdiction over marriage policy.  Thus, a debate raged over whether federal benefits were available to same-sex married couples residing in “non-recognition” states, such as Florida, which prohibit same-sex marriage within their borders AND refuse to recognize same-sex marriages validly performed in other jurisdictions.

In Revenue Ruling 2013-17, the U.S. Treasury Department and IRS ended the debate by adopting a rule that recognizes every same-sex marriage validly performed in a U.S. or foreign jurisdiction, even if the spouses are domiciled in a non-recognition state.  It is now clear that, going forward, married same-sex couples residing in Florida will be treated the same as their opposite-sex counterparts for all federal tax purposes.

Note, however, that such tax treatment does not extend to unmarried individuals, whether same-sex or opposite sex, who have entered into a registered domestic partnership, civil union or other similar relationship recognized under state law.

The Revenue Ruling sets the ground rules for the filing status of same-sex spouses for their federal individual income tax returns.  Those rules vary depending on the tax year and the date by which the return is filed.  In some cases, the same-sex couple’s options are limited depending on when they file.  Therefore, same-sex spouses should consult their tax professionals IMMEDIATELY.

  • Scott Goldberger, J.D., of Kaufman, Rossin2013 and future years.  All same-sex spouses will be required to file their federal returns as either “married filing jointly” or “married filing separately.”
  • 2012 returns that are still on extension.
    • If the couple was married in 2012 and filed their 2012 return(s) BEFORE September 16, 2013, they had the option to file as unmarried, “married filing jointly” or “married filing separately.”  In some, but not all cases, filing as unmarried will result in less tax than filing as married.
    • If the couple was married in 2012 and files their 2012 return(s) ON OR AFTER September 16, 2013, they are limited to choosing between “married filing jointly” or “married filing separately.”
  • Amending prior tax returns.  For prior year returns, including 2012 returns that have already been filed, if the couple was married during the year, they MAY file an amended return to change their filing status from unmarried (as was required under DOMA) to “married filing jointly” or “married filing separately.”  However, a return may be amended only if the statute of limitations is still open.  Generally, the limitations period is 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later.  For example, for 2009 returns that were filed on October 15, 2010 (the extended due date), the deadline to file an amended return is October 15, 2013.

Thus, whether or not they have already filed their 2012 returns, same-sex spouses should consult their tax professionals right away to discuss their options, including amending returns to reap tax refunds.

The Revenue Ruling did not address the estate or gift tax consequences of the Windsor case, other than noting the proper form to be used to apply for an estate or gift tax refund.  Additional guidance from the IRS is anticipated.  In the meantime, same-sex spouses and the executors of their estates should consider filing or amending estate or gift tax returns to take advantage of the “unlimited marital deduction,” spousal “gift-splitting” or “portability” of the estate tax exemption between spouses.  These topics are beyond the scope of this article but should be carefully reviewed by same-sex couples with the help of their tax advisors.

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Mark Scott, J.D., LL.M, is an estate and trust partner with Kaufman, Rossin & Co., one of the top accounting firms in Florida.   Scott L. Goldberger, J.D., is a director of estate and trust services with the firm.