Nonprofit organizations are subject to numerous federal and state tax filing requirements, including annual tax returns. Most nonprofit organizations are required to file an annual federal tax return (Form 990, 990-EZ, 990-PF, or 990-N); however, state filing requirements are different and vary from state to state. The State of New Jersey (NJ) requires a nonprofit organization to file an annual tax return (initial registration and renewal registration) if it has 501(c)3 tax exempt status, is domiciled in NJ, or solicits NJ residents for a charitable cause.
The 2018 Tax Cuts and Jobs Act added something new to the tax code called Opportunity Zones. An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury through their authority to the IRS. Opportunity Zones have now been designated covering parts of all 50 states, the District of Columbia and five U.S. territories.
Opportunity Zones are being used to spur economic development and job creation in distressed communities and in return they are providing tax benefits to investors. A Qualified Opportunity Fund (QOF) is formed and used for investing in eligible property that is located in a Qualified Opportunity Zone. A partnership or corporation can be used as an entity type.
Investors can defer tax on any prior gains invested in a QOF until the earlier of the date on which the investment in a QOF is sold or exchanged, or December 31, 2026. To defer/exclude prior capital gain, within 180 days you have to invest the gain amount in a QOF.
- If the QOF investment is held for longer than 5 years, 10% of the deferred gain is excluded and goes away forever.
- If the QOF investment is held for more than 7 years, the 10% becomes 15% and now that 15% deferred gain is excluded and goes away forever.
- If the QOF investment is held for 10 years, any deferred gain recognized on the sale of your interest in the QOF is excluded forever, as long as the sale takes place before the end of 2047.
A list of Opportunity zones can be found here.
If you would like to discuss this topic further, please feel free to call us.
This article was contributed by Michael J. Reynolds, CPA, CEPA
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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.
Despite approval of three cannabis bills, including adult use legalization, following a four hour hearing held before the joint session of the New Jersey Senate and Assembly Budget and Appropriation Committees on November 26, 2018, it appears unlikely that marijuana legislation will be voted upon in 2018. December 17, 2018 is the latest voting day of the legislative year and work still remains on gaining consensus on key issues in the bills including the tax rate, expungements and whether the proposed Cannabis Regulatory Commission would be a full-time commission. Work also remains in ensuring the number of votes needed for passage.
If you give someone money or property during your lifetime, you may be subject to federal gift tax. The federal gift tax exists for one reason: to prevent taxpayers from avoiding the federal estate tax by giving away their money before they die. When it comes into play, the tax is owed by the gift giver and not by the recipient. You probably have never paid it and probably will never have to.
If your business is actively invoicing and billing clients, the “Note” function in Quickbooks online may be something you want to use. This function could become a powerful selling tool for your business. You can keep notes on all client contacts and even the client’s preferences: what color he likes, his favorite products, her love of cats. The more details you have about a client, the more impressed s/he will be.
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 Jersey has just announced a tax amnesty for taxpayers with liabilities for the tax years 2008-2016. The Division of Taxation has proactively contacted some taxpayers with liabilities already assessed and/or unfiled tax returns. This amnesty does not extend to liabilities with the Department of Labor or fees imposed by any other state agency.
Almost all taxpayers qualify for relief except those under criminal investigation or with debts in appeal in bankruptcy. The amnesty applies to returns due between February 1, 2009 and September 1, 2017 or for the calendar years 2008-2016.
For more information or assistance contact us. The amnesty period runs from now until January 15, 2019.
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There are a many different benefits offered by the Social Security Administration, and knowing your options and requirements is essential. Don’t expect the Social Security Administration to know who you married, who you divorced, whether your spouse or ex-spouse died, whether or not you are caring for a young or disabled child, or if you are taking care of dependent parents. You need to equip yourself with some knowledge of the benefit provisions, ask if you don’t know, and/or find a well-informed advisor. Decisions made regarding claiming Social Security are critically important. This is the third piece of a series of articles with the objective of assisting you in making better decisions regarding claiming Social Security.
I am often asked whether it is a good idea for elderly parents to transfer their home to their children. I always ask: “Why do you want to do this?” The most common reason is to protect the house in the event one or both of the parents need nursing home care.
First, I want to emphasize that there is no easy answer to this question without knowing the full asset and income picture, as well as the health status of the parents. If I get all that information, the answer can be easy (for me!).