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.
Health Savings Accounts (HSAs) are one of the best retirement and investment tools for various reasons. A HSA is a savings account set up for the sole purpose of paying the qualified medical expenses of the account’s beneficiary or the beneficiary’s dependents or spouse. The HSA can be funded with before-tax employer contributions and/or employee contributions. Employee contributions are tax deductible. The contributions may be invested and grow-tax free in the account. Qualified distributions from the HSA to pay medical expenses are not taxable income.
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.
Think about this situation. You received word that an acquaintance passed away suddenly and you were designated as the person to contact. You met the deceased a few years ago and you maintained a causal friendly relationship. After some time for grief and remembrances, you start to think about the task that awaits you. The deceased never asked you to be his/her personal representative. You ponder: What do I do now? Events like this occur every day. Sometimes the departed is a family member, business associate, friend, neighbor, or your spouse. Handling the affairs of someone who has passed away or who abruptly becomes incapacitated would be so much easier and more effective if there was a frank discussion in advance and there was a file containing the key documents, data, and the location of important items needed to conduct a smooth and orderly transition.
How do you determine if an individual who is hired to do household work is considered a household employee or an independent contractor? Per the IRS guidelines, an individual who works around your home is considered a household employee if you can control the type of work they do and how they do it. This applies to babysitters, cooks, maids, nannies, caregivers, gardeners, etc. unless the worker is customarily engaged in an independently established trade or business.
Once you’re able to identify you have a household employee, the employee will need to fill out Forms W-4 and I-9 so the correct taxes can be deducted from their paychecks. Keep in mind a household employee can elect out of having income taxes withheld from their pay. These two forms do not need to be submitted to the IRS. They are kept for the employer’s records.
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
I inherited my mother’s IRA and I’m required to begin taking required minimum distributions (RMDs) this year. Can I have the withdrawals transferred to a charity and not report them as income?
Taxpayers are allowed to donate up to $100,000 ($200,000 for a couple) of RMDs to charity in any year. These are Qualified Charitable Deductions (QCD) but certain rules do apply.
- While the amount of the QCD is not considered taxable income, the payments to charity are not deductible contributions.
- The transfer must be made directly from the IRA to the charity before the RMD deadline for the year (usually December 31).
- You must be 70 ½ or older.
- The charity must be a qualified charity. QCDs are not allowed to Donor Advised Funds, Private Foundations, split interest charitable trusts, or supporting organizations.
So, if you are 70 ½ or older and your charity qualifies, you can use your IRA RMD for a QCD!
Photo by geralt on Pixabay
You all met Maureen Wild earlier this year when she wrote about the Capaldi Reynolds & Pelosi Team’s support of the American Heart Association and her personal connection to that cause. This month she has made us aware of the Robert Wood Johnson campaign, Christmas in July, to bring toys and games to young cancer patients. CRP is on board with that effort.
Maureen has been part of our Team for 29 years. Her day job is managing our financial statement and audit quality review process, but around the holidays she finds us a worthy family to adopt and leads the effort to shop for, wrap, and deliver gifts and food for their celebration. Come February she has us sending Valentines to the troops.
Maureen has one son and two grandchildren whom she adores. She teaches Sunday school and is active in collecting clothing that will be sold to fund animal rescue and the treatment of animals in shelters. She enjoys reading, day trips, and playing chicken foot for hours. You might even find her at a yard or estate sale. She is one busy lady with a very big heart.
It is with great sadness that we advise our readers of the passing of one of the firm’s partners Therese M. Connell, CPA (Tese) at the age of sixty five, after a lengthy illness.
When we think of and remember Tese in both her personal and professional life, the words that best describe her are “role model”. Her commitment to honesty, integrity, fair dealing and client service combined with her passion for technical excellence made her not only a role model but a CPA’s CPA. Tese was recognized throughout Southern New Jersey as an expert in the fields of estate planning, estate and trust taxation, gifting, and estate administration. She routinely worked with area attorneys in the development and implementation of cutting edge estate planning and asset protection planning.
Tese was also a teacher and mentor who devoted countless hours to the education and training of the members of our firm, with her legacy being a group of professionals within our firm who are well prepared to serve our clients in her areas of specialization.
Please keep Tese and her family in your thoughts and prayers.