Archives for April 2015

Requirements of S Corporations

Many business owners prefer forming an S corporation over C corporations because they hold greater advantages to C corporations. One advantage of S corporations are they are only subjected to a single level of tax at the shareholder level. S corporations also pay less in employment taxes on their income, in some cases, then limited liability companies (LLCs) making them the formation of choice for many business owners.

There are specific requirements that may make it harder to comply with then the other business options available. If business owners violate any of the requirements they are inadvertently terminated from S corporation status. This may sound bad, but for many business owners it usually is corrected by following the proper procedures. [Read more…]

Share

15 Ways to Spend a Tax Refund

With Tax Season over, people are receiving refunds. According to the IRS, the average refund is about $2,893. This is slightly ahead of last year’s $2800 average refund. Even though a refund is nothing more than giving the government an interest free loan, when you get one back it does offer a few opportunities to make smart moves with the money. [Read more…]

Share

New Tangible Property Regulations

For nearly a decade, IRS has been working on finalizing tangible property regulations. These regulation affect every taxpayer that uses tangible property in its business. They are, as most tax rules go, all-encompassing and complex. They take careful consideration of facts and circumstances for each taxpayer. New collection procedures may need to be devised to capture the necessary data required for these regulations.

The first thing the IRS had to do was determine a few distinctions:

  • Should expenditures on tangible property be deductible or must be capitalized and recovered over time?
  • A distinction between deductible repairs and capital improvements.

The IRS made these decisions based on generally acceptable practices. The rules are:

  • Deductible repairs and maintenance expenses are: Incurred for the purpose of maintaining property in ordinary efficient operating condition over the probable useful life for the uses for which the property was acquired.
  • Capital Expenditures: These expenditures consist of things bought for replacement, alterations, improvements, or additions that appreciably prolong the life of the property, materially increase its value, or make it adaptable to a different use.

There are always a few exception to these regulations. Items qualify for materials and supplies are exceptions one such exception. Materials and supplies are defined as anything that costs $200 or less or has an economic usefulness of 12 months or less. These costs qualify for a deduction instead of having to be capitalized. The de minimis regulations allow taxpayer’s to substitute capitalization thresholds in certain circumstances for the $200 limit. The de minimis elections are made annually and the maximum amount depends on whether the taxpayer has a capitalization policy in place at the beginning of the year and has an applicable financial statement. The maximum threshold is $5,000; but if they don’t the threshold cannot exceed $500.

Other Regulations include:

  • Capitalizing amounts paid to acquire or produce tangible property.
  • Each unit of property must be defined as a single asset for capitalization purposes. Additional rules regarding smaller components of the unit that may have different depreciation lives.
  • An expenditure must be capitalized if the results are a betterment or the unit of property, adapts the property, or restores property.
  • Taxpayers must recognize a gain or loss when assets are permanently withdrawn from either the business or production.

I summary of the information can be found at http://www.aicpa.org/InterestAreas/Tax/Resources/Compliance/DownloadableDocuments/Quick%20Summary%20Chart%20of%20Final%20Tangible%20Property%20Regulations.pdf.

Share

FAS 116Changes for Nonprofit Accounting

The Financial Accounting Standards Board is close to unveiling a set of proposals that could have a major effect on the way nonprofit organizations present their financial statements. The new proposal updates the accounting standards that include improvements on current net assets classification scheme and the required information about an organizations liquidity, financial performance, and cash flow. [Read more…]

Share