One of the latest trends in state and local corporate income tax has been the adoption of market-based sourcing for the sales of services. In 2018, new state legislation made significant changes to the New Jersey Corporation Business Tax Act, including the implementation of market-based sourcing for services beginning in 2019.
The New Jersey Corporation Business Tax Act imposes tax on domestic and foreign corporations having a taxable status in New Jersey based on the portion of net income allocable to New Jersey. In order to properly determine the net income allocable to New Jersey, corporate taxpayers doing business both within and outside New Jersey must source their revenue to the appropriate state.
Who owns that nice new car in your parking lot? Do you have an employee who seems to be living at a standard higher than his salary would permit? Hmmm, he (or she) tells you his Uncle Joe died and left him a huge inheritance, or maybe he won the lottery. You’re happy for him; such a hard worker who never takes a vacation!
This could all be as innocent as it sounds BUT it could also be a flashing warning sign of employee dishonesty.
Employee parking expenses – how much can your business deduct?
The Tax Cuts and Jobs Act (TCJA) resulted in many tax law changes. One of them was the new rule for determining the deductible portion of employee parking expenses.
Under the new Section 274(a)(4), expenses paid by employers after Dec. 31, 2017, to provide employee parking are generally no longer deductible. Also, new Section 512(a)(7), requires tax-exempt organizations to increase their unrelated business taxable income (UBTI) by the amount of employee parking expenses that are nondeductible.
Long-term, well trusted employees are an employer’s dream. In the event that an employee is dishonest, good internal controls can keep that dream from becoming a nightmare.
For medical offices, there is a significant risk that employee dishonesty will lead to the diversion of collections with a corresponding record-keeping cover up. To mitigate this risk, the person who opens the mail or collects funds should not have the ability to credit a patient’s account. Additionally deposits should be made daily and collections should be posted to patient accounts based on the date received. This allows an owner to reconcile patient funds received to deposits. Of course, an owner must regularly perform this check, and it’s never a bad idea for the employees to know that this is done.
Regular online account statement review by the owner and the owner’s monthly review of statement transactions and cancelled checks may be an especially important internal control in a small practice where there aren’t enough employees for an adequate segregation of duties. An alternative to online statement review would be for the owner to receive the unopened bank and credit card statements and review the hard copies for suspicious activity. Another effective and important control is for the owner to perform regular reviews and approval of write-offs.
If you would like assistance in establishing or reviewing the effectiveness of your internal controls, please contact us. In our next issue we will help you identify signs of potential problems resulting from employee dishonesty and suggest more ways to help you avoid them.
Article contributed by Terri Marakos, CPA
Photo by Pixabay on Pexels
Late last month, Governor Phil Murphy passed legislation calling for the gradual increase of the state’s minimum wage from $8.85 per hour as of January 1, 2019, to $15.00 per hour by January 1, 2024. The first jump in hourly minimums is set to take effect this July, when minimum wages paid by most business owners will rise to $10.00 per hour. There are a number of considerations that small business owners and employees alike must take into account with the newly-passed legislation, but we have summarized the most significant takeaways below:
Every year some of our clients go through a mad rush getting the information needed to file 1099s timely and correctly. How does one stop this madness? A Form W-9 should be obtained from the vendor BEFORE any payments are issued. W-9s can be more easily obtained while the vendor is awaiting approval, when the vendor has more incentive to cooperate than after payment has been made.
The best Christmas present for your accountant is organized records. Follow these simple steps and you’ll feel the love all the way through 2019. Use Quickbooks to help:
Generally income tax returns are constructed to report business income, and then subtract cost of sales (the cost of producing or purchasing the product being sold) and the expenses of carrying on the business (things like employee wages, rent, and office supplies). There is an overriding provision for businesses that sell cannabis, however. Even though cannabis is legal in certain states, Section 280E of the federal income tax code states that no deduction is allowed for an amount paid or incurred in carrying on a business if the business consists of trafficking in controlled substances. Since marijuana is on the list of controlled substances, no deductions can be taken for the costs of carrying on the business of marijuana sales. Because of this, income tax represents a significant cost for these businesses.
Beginning on October 29, 2018 employees in New Jersey may earn up to 40 hours of paid sick leave per year. A benefit year can be defined by the employer and cannot be changed without the approval of the Department of Labor. All New Jersey employers, except governments, are subject to this law. Employers who already have policies in place should confirm that they are in compliance with the new law.
New Tips for Employers in New Jersey
Federal Tax Credits
The Work Opportunity Tax Credit allows employers that hire members of targeted groups who face employment barriers to claim a credit against income tax for a percentage of first-year wages. In a recent News Release, the IRS reminds employers there are now ten categories of eligible workers: qualified IV-A Temporary Assistance for Needy Families recipients; unemployed veterans, including disabled veterans; ex-felons; designated community residents living in Empowerment Zones or Rural Renewal Counties; vocational rehabilitation referrals; summer youth employees living in Empowerment Zones; food stamp (SNAP) recipients; Supplemental Security Income recipients; long-term family assistance recipients; and qualified long-term unemployment recipients.