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Our offices will be closed on December 24, December 25, and January 1.
Friday, December 27, is the last day of our winter hours, with offices closing at noon MST.
Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Our offices will be closed on December 24, December 25, and January 1.
Friday, December 27, is the last day of our winter hours, with offices closing at noon MST.
Year-end tax planning will be just as complicated as it was last year due to the complexity of new tax regulations for businesses and individuals. This is of the essence as tax planning strategies to reduce your 2019 tax bill must be taken before year end.
Take advantage of planning strategies for individuals
Individuals often can reduce their tax bills by deferring income to the next year and accelerating deductible expenses into the current year. To defer income, for example, you might ask your employer to pay your year-end bonus in early 2020 rather than in 2019.
To accelerate deductions, consider increasing your IRA or qualified retirement plan contributions to the extent that they’ll be deductible. Such contributions also provide some planning flexibility because you can make 2019 contributions to IRAs, and certain other retirement plans, after the end of the year.
Other year-end tax planning strategies to consider include:
Offsetting capital gains. If you sold stocks or other investments at a gain this year — or plan to do so — consider offsetting those gains by selling some poorly performing investments at a loss.
Reducing capital gains is particularly important if you are subject to the net investment income tax (NIIT), which applies to taxpayers with modified adjusted gross income (MAGI) over $200,000 ($250,000 for married couples filing jointly). The NIIT is an additional 3.8% tax on the lesser of 1) your net income from capital gains, dividends, taxable interest and certain other sources, or 2) the amount by which your MAGI exceeds the threshold.
In addition to reducing your net investment income by generating capital losses, you may have opportunities to bring your MAGI below the applicable NIIT threshold by deferring income or accelerating certain deductions.
Charitable giving. If you plan to make charitable donations, consider donating highly appreciated stock or other assets rather than cash. This strategy is particularly effective if you own appreciated stock you would like to sell but you don’t have any losses to offset the gains.
Donating stock to charity allows you to dispose of the stock without triggering capital gains taxes, while still claiming a charitable deduction. Then you can take the cash you’d planned to donate and reinvest it in other securities.
Contact your trusted advisor to discuss end of year planning for you and your business.
With the holiday season right around the corner, it is a good time for business owners to focus on strategic planning for next year. Here are some ways to get started.
A good place to find inspiration for strategic objectives is your financial statements. They will tell you whether you are excelling or struggling so you may decide how strategically ambitious or cautious to be in the coming year.
Use the numbers to look at key performance indicators such as gross profit, which tells you how much money you made after your production and selling costs were paid. It’s calculated by subtracting the cost of goods sold from your total revenue. Also calculate current ratio, which is calculated by dividing current assets by current liabilities. It helps you gauge the strength of your cash flow.
A CFO or CPA-prepared budget can serve as more than just a management tool – it also can be presented to lenders and investors who want to know more about your start-up’s operations and its expected financial results. Review your findings with your CPA or a CFO consultant if you do not already have a CFO on staff.
Human resources is another critical area of strategic planning. Consider last year’s employee turnover rate. High turnover could be a sign of poor training, substandard management or low morale. Any of these problems could undercut the strategic objectives you set.
Examine sales and marketing. Did you meet your goals for new sales last year, as measured in both sales volume and number of new customers? Did you generate an adequate return on investment for your marketing dollars?
Finally, take a close look at your production and operations. Many companies track a metric called customer reject rate that measures the number of complete units rejected or returned by external customers. Sometimes a business must improve this rate before it moves forward with growth objectives. If yours is a service business, you should similarly track and assess customer satisfaction.
Set new objectives
With a review of your financials and key business areas complete, you can more reasonably set goals for next year under the banner of your strategic plan. On the financial side, for instance, your objective might be to boost gross profit from 20% to 30%. But how will you lower your costs or increase efficiency to make this goal a reality?
Or maybe you want to lower your employee turnover rate from 20% to 10%. Strategize what will you do differently from a training and management standpoint to keep your employees from jumping ship this year.
Act now
Don’t let year end creep any closer without reviewing your business’s recent performance. Then, use this data to set realistic goals for the coming year.
Contact your trusted advisor to choose the best metrics numbers and put together a solid strategic plan.
Owners of certain rental real estate interests have final guidance on what qualifies for the qualified business income (QBI) deduction.
QBI in a nutshell
QBI equals the net amount of income, gains, deductions and losses — excluding reasonable compensation, certain investment items and payments to partners for services rendered. The deduction is subject to several significant limitations; however, QBI generally allows partnerships, limited liability companies (LLCs), S corporations and sole proprietorships to deduct as much as 20% of QBI received.
Many taxpayers involved in rental real estate activities were uncertain whether they would qualify for the deduction. The final guidance leaves no doubt that individuals and entities that own rental real estate directly or through disregarded entities (entities that are not considered separate from their owners for income tax purposes, such as single-member LLCs) may be eligible.
Covered interests
The safe harbor applies to qualified “rental real estate enterprises.” For purposes of the safe harbor only, the term refers to a directly held interest in real property held to produce rents. It may consist of an interest in a single property or multiple properties.
You can treat each interest in a similar property type as a separate rental real estate enterprise or treat interests in all similar properties as a single enterprise. Properties are “similar” if they are part of the same rental real estate category (that is, residential or commercial). In other words, you can only hold commercial real estate in the same enterprise with other commercial real estate. The same applies for residential properties.
Bear in mind, if you opt to treat interests in similar properties as a single enterprise, you must continue to treat interests in all properties of that category — including newly acquired properties — as a single enterprise. If, however, you choose to treat your interests in each property as a separate enterprise, you can later decide to treat your interests in all similar commercial or all similar residential properties as a single enterprise.
Notably, the guidance provides that an interest in mixed-use property may be treated as a single rental real estate enterprise or bifurcated into separate residential and commercial interests.
Safe harbor requirements
The final guidance clarifies the requirements you must fulfill during the tax year in which you wish to claim the safe harbor. Requirements include:
Keeping separate books and records. You must maintain separate books and records reflecting income and expenses for each rental real estate enterprise. If the enterprise includes multiple properties, you can meet this requirement by keeping separate income and expense information statements for each property and consolidating them.
Performing rental services. For enterprises in existence less than four years, at least 250 hours of rental services must be performed each year. For those in existence at least four years, the safe harbor requires at least 250 hours of rental services per year in any three of the five consecutive tax years that end with the tax year of the safe harbor.
The rental services may be performed by owners or by employees, agents or contractors of the owners. Rental services include:
Financial or investment management activities, studying or reviewing financial statements or reports, improving property, and traveling to and from the property do not qualify as rental services.
Maintaining contemporaneous records. For all rental services performed, you must keep contemporaneous records that describe the service, associated hours, dates and the individuals who performed the service. If services are performed by employees or contractors, you can provide a description of them, the amount of time employees or contractors generally spent performing those services, and time, wage or payment records for the individuals.
This requirement does not apply to tax years beginning before January 1, 2020. The IRS cautions, though, that taxpayers still must establish their right to any claimed deductions in all tax years, so be prepared to document your QBI deduction.
Providing a tax return statement. You must attach a statement to your original tax return (or, for the 2018 tax year only, on an amended return) for each year you rely on the safe harbor. If you have multiple rental real estate enterprises, you can submit a single statement listing the requisite information separately for each.
Excluded real estate arrangements
The safe harbor is not available for all rental real estate arrangements. The guidance excludes:
The guidance states that taxpayers that do not qualify for the safe harbor may still be able to establish that an interest in rental real estate is a business for purposes of the deduction.
Next steps
The final safe harbor rules apply to tax years ending after December 31, 2017, and you have the option of instead relying on the earlier proposed safe harbor for the 2018 tax year. Plus, you must determine annually whether to use the safe harbor.
Contact your trusted advisor to determine whether you are eligible for this and other valuable tax breaks.
Inside Public Accounting (IPA) presented its first ranking of the nation’s TOP 300 accounting firms—the only one of its kind. Stockman Kast Ryan + Co, LLP (SKR+CO), the largest locally-owned certified public accounting firm in Southern Colorado, has been named one of seven recipients of the inaugural Excellence in Firm Culture awards.
The award is based on the results of an assessment of 2,000 staff members and recognizes firms demonstrating excellence in 12 core qualities of culture as determined by third-party culture experts, CultureIQ.
“I’m so excited about this particular recognition because culture is an expression of our collective values, daily interactions and general environment,” SKR+CO Managing Partner Trinity Bradley-Anderson stated. “The survey results conveyed the trust, respect and appreciation that we each try to demonstrate every day at Stockman Kast Ryan + Company.”
The 12 core qualities measured in the Culture Assessment: Agility; Alignment; Collaboration; Customer Centricity; Empowerment; Engagement; Growth Development; Innovation; Quality; Recognition and Rewards; Trust and Integrity, and Work-life Balance.
IPA Excellence in Firm Culture award winners achieved at least 75% of the total possible score in the combined 12 core culture qualities as well as a minimum of 75% of the total possible employee Net Promoter Score.
IPA also considered the firms’ employee Net Promoter Scores (eNPS) in determining the winners. According to CultureIQ, the eNPS captures a snapshot of employees’ willingness to be ambassadors for the company by advocating employment there.
About Stockman Kast Ryan + Company
Stockman Kast Ryan + Co, LLP (SKR+CO) is Southern Colorado’s largest certified public accounting firm providing a variety of in-depth business services. Tax services for individuals include businesses, fiduciaries and nonprofit organizations, audit and accounting services. SKR+CO also offers outsourced controller and contract CFO services as well as accounting and bookkeeping services – customized to clients’ needs, estate planning, small/emerging business advisory services, business valuations and litigation support services. SKR+CO is a member of DFK International/USA, a worldwide association of independent firms. For more information on SKR+CO visit skrco.com.
About INSIDE Public Accounting
The Platt Group, based in Indianapolis, was founded in 2006 and is a highly regarded independent publication was formerly known as Bowman’s Accounting Report. IPA publishes two award-winning publications: the IPA newsletter and the annual IPA National Benchmarking Report, along with in-depth reports focused on IT, HR and firm administration. For more information, visit www.insidepublicaccounting.com.
Bitcoin and other forms of virtual currency are gaining popularity worldwide. Yet many businesses, consumers, employees and investors are still confused about how they work and how to report transactions on their federal tax returns. The IRS recently announced that it is reaching out to taxpayers who potentially failed to report income and pay tax on virtual currency transactions or did not report them properly.
The nuts and bolts
Unlike cash or credit cards, small businesses generally don’t accept bitcoin payments for routine transactions. However, a growing number of larger retailers and online businesses now accept payments. Businesses can also pay employees or independent contractors with virtual currency. The trend is expected to continue, so more small businesses may soon get on board.
Virtual currency has an equivalent value in real currency and can be digitally traded between users. It can also be purchased and exchanged with real currencies (such as U.S. dollars). The most common ways to obtain virtual currency like bitcoin are through virtual currency ATMs or online exchanges, which typically charge nominal transaction fees.
Tax reporting
Virtual currency has triggered many tax-related questions. The IRS has issued limited guidance to address them. In 2014, the IRS established that virtual currency should be treated as property, not currency, for federal tax purposes.
As a result, businesses that accept bitcoin payments for goods and services must report gross income based on the fair market value of the virtual currency when it was received. This is measured in equivalent U.S. dollars.
From the buyer’s perspective, purchases made using bitcoin result in a taxable gain if the fair market value of the property received exceeds the buyer’s adjusted basis in the currency exchanged. Conversely, a tax loss is incurred if the fair market value of the property received is less than its adjusted tax basis.
Wages paid using virtual currency are taxable to employees and must be reported by employers on W-2 forms. They are subject to federal income tax withholding and payroll taxes, based on the fair market value of the virtual currency on the date of receipt.
Virtual currency payments made to independent contractors and other service providers are also taxable. In general, the rules for self-employment tax apply and payers must issue 1099-MISC forms.
IRS campaign
The IRS announced it is sending letters to taxpayers who potentially failed to report income and pay tax on virtual currency transactions or did nott report them properly. The letters urge taxpayers to review their tax filings and, if appropriate, amend past returns to pay back taxes, interest and penalties.
By the end of August, more than 10,000 taxpayers will receive these letters. The names of the taxpayers were obtained through compliance efforts undertaken by the IRS. The IRS Commissioner warned, “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics.”
Last year, the tax agency also began an audit initiative to address virtual currency noncompliance and has stated that it is an ongoing focus area for criminal cases.
Implications of going virtual
Contact your trusted advisor if you have questions about the tax considerations of accepting virtual currency or using it to make payments for your business. If you receive a letter from the IRS about possible noncompliance, consult with your trusted business advisor before responding.
If your small business doesn’t offer its employees a retirement plan, you may want to consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions and help attract and retain employees. For a variety of reasons, a SIMPLE IRA can be a particularly appealing option for small businesses. The deadline for setting one up for this year is October 1, 2019.
The basics
Unlike cash or credit cards, small businesses generally don’t accept bitcoin payments for routine transactions. However, a growing number of larger retailers and online businesses now accept payments. Businesses can also pay employees or independent contractors with virtual currency. The trend is expected to continue, so more small businesses may soon get on board.
As the employer, you can choose from two contribution options:
1. Make a “nonelective” contribution equal to 2% of compensation for all
eligible employees. You must make the contribution regardless of whether the
employee contributes. This applies to compensation up to the annual limit of
$275,000 for 2018 (annually adjusted for inflation).
2. Match employee contributions up to 3% of compensation. Here, you contribute
only if the employee contributes. This isn’t subject to the annual compensation
limit.
Employees are immediately 100% vested in all SIMPLE IRA contributions.
Employee contribution limits
Any employee who has compensation
of at least $5,000 in any prior two years and is reasonably expected to earn
$5,000 in the current year, can elect to have a percentage of compensation put
into a SIMPLE IRA.
SIMPLE IRAs offer greater income deferral
opportunities than ordinary IRAs, but lower limits than 401(k)s. An employee
may contribute up to $12,500 to a SIMPLE IRA in 2018. Employees age 50 or older
can also make a catch-up contribution of up to $3,000. This compares to $5,500
and $1,000, respectively, for ordinary IRAs, and to $18,500 and $6,000 for
401(k)s.
A SIMPLE IRA might be a good choice for your small business, but it isn’t the
only option. Contact your trusted advisor to learn more about a SIMPLE IRA or
to hear about other retirement plan alternatives for your business.
Contact your trusted advisor with any questions.
Look beyond day-to-day financial management.
Many business owners reach a point where managing the financial side of their enterprise becomes overwhelming. This is usually a good thing; the company has grown to a point where simple bookkeeping and basic financial reporting no longer suffice.
If your business has similarly expanded past its capacity, it may be time to add a chief financial officer (CFO) or controller – on either a full-time or part-time basis. Before taking the leap to hire, consider whether your payroll can take on this high-paying position as a full-time employee, or if hiring a part-time CFO consultant is a better fit. Read more to understand exactly what services you are paying for and what makes the most business sense for your company.
The broad role
The role of a CFO or controller is to look beyond day-to-day financial management to more holistic, big-picture planning of financial and operational goals. CFOs take a seat at the executive table and serve as a higher level of support for all matters related to the company’s finances and operations.
CFOs go far beyond merely compiling financial data. They interpret the data to determine how financial decisions will impact all areas of your business. These individuals can plan capital acquisition strategies, so your company has access to financing, as needed, to meet working capital and operating expenses.
In addition, a CFO or controller will serve as the primary liaison between your company and its bank to ensure your financial statements meet requirements should you require help negotiating any loans. Analyzing possible merger, acquisition and other expansion opportunities also falls within a CFO’s or controller’s purview.
Specific responsibilities
A CFO or controller typically has a set of core responsibilities that link to the financial oversight of your operation. This includes making sure there are adequate internal controls to help safeguard the business from internal fraud and embezzlement.
The hire also should be able to implement improved cash management practices that will boost cash flow and improve budgeting/cash forecasting. They should be able to perform ratio analysis and compare the financial performance of your business to benchmarks established by similar-size companies in the same geographic area. A controller or CFO should analyze the tax and cash flow implications of different capital acquisition strategies — for example, leasing vs. buying equipment and real estate.
Major commitment
Make no mistake, hiring a full-time CFO or controller represents a major commitment in both duration of the hiring process and dollars to your payroll. These financial executives typically command substantially high salaries and attractive benefits packages. Another option is to outsource this role to a part-time or fractional CFO consultant who provides business advisory services for a set amount of time. Starting with a part-time CFO may help you assess your current processes and internal controls, then help your company to transition to a full-time CFO position down the road.
Regardless of the route you choose, contact your trusted advisor to help you assess the financial impact of the idea.
When President Trump signed into law the Tax Cuts and Jobs Act (TCJA) in December 2017, much was made of the dramatic cut in corporate tax rates. But the TCJA also includes a generous 20% qualified business income (QBI) deduction for smaller businesses that operate as pass-through entities, with income that is “passed through” to owners and taxed as individual income.
The IRS issued proposed regulations for the qualified business income (QBI), or Section 199A, deduction in August 2018. Now, it has released final regulations and additional guidance, just in time for the first tax season in which taxpayers can claim the deduction. Among other things, the guidance provides clarity on who qualifies for the QBI deduction and how to calculate the deduction amount.
Rental real estate owners – proposed safe harbor
One of the lingering questions related to the QBI deduction was whether it was available for owners of rental real estate. The latest guidance (found in IRS Notice 2019-07) includes a proposed safe harbor that allows certain real estate enterprises to qualify as a business for purposes of the deduction. Taxpayers can rely on the safe harbor until a final rule is issued.
Generally, individuals and entities that own rental real estate directly or through disregarded entities (entities that are not considered separate from their owners for income tax purposes, such as single-member LLCs) can claim the deduction if:
The 250 hours of services may be performed by owners, employees or contractors. Time spent on maintenance, repairs, rent collection, expense payment, provision of services to tenants and rental efforts counts toward the 250 hours.
Investment-related activities, such as arranging financing, procuring property and reviewing financial statements, do not.
Be aware that rental real estate used by a taxpayer as a residence for any part of the year is not eligible for the safe harbor.
This safe harbor also is not available for property leased under a triple net lease that requires the tenant to pay all or some of the real estate taxes, maintenance and building insurance and fees, or for property used by the taxpayer as a residence for any part of the year.
Aggregation of multiple businesses
It is not unusual for small business owners to operate more than one business. The proposed regs include rules allowing an individual to aggregate multiple businesses that are owned and operated as part of a larger, integrated business for purposes of the W-2 wages and unadjusted basis immediately after acquisition (UBIA) of qualified business property (QBP) limitation, thereby maximizing the deduction. The final regs retain these rules with some modifications.
For example, the proposed rules allow a taxpayer to aggregate trades or businesses based on a 50% ownership test, which must be maintained for a majority of the taxable year. The final regulations clarify that the majority of the taxable year must include the last day of the taxable year.
The final regs also allow a “relevant pass-through entity” — such as a partnership or S corporation — to aggregate businesses it operates directly or through lower-tier pass-through entities to calculate its QBI deduction, assuming it meets the ownership test and other tests. (The proposed regs allow these entities to aggregate only at the individual-owner level.) Where aggregation is chosen, the entity and its owners must report the combined QBI, wages and UBIA of qualified property figures.
A taxpayer who doesn’t aggregate in one year can still choose to do so in a future year. Once aggregation is chosen, though, the taxpayer must continue to aggregate in future years unless there’s a significant change in circumstances.
The final regs generally don’t allow an initial aggregation of businesses to be done on an amended return, but the IRS recognizes that many taxpayers may be unaware of the aggregation rules when filing their 2018 tax returns. Therefore, it will permit taxpayers to make initial aggregations on amended returns for 2018.
UBIA in qualified property
The final regs also make some changes regarding the determination of UBIA in qualified property. The proposed regs adjust UBIA for nonrecognition transactions (where the entity doesn’t recognize a gain or loss on a contribution in exchange for an interest or share), like-kind exchanges and involuntary conversions.
Under the final regs, UBIA of qualified property generally remains unadjusted as a result of these transactions. Property contributed to a partnership or S corporation in a nonrecognition transaction usually will retain its UBIA on the date it was first placed in service by the contributing partner or shareholder. The UBIA of property received in a like-kind exchange is generally the same as the UBIA of the relinquished property. The same rule applies for property acquired as part of an involuntary conversion.
Specified Service Trade or Business (SSTB) limitations
Many of the comments the IRS received after publishing the proposed regs sought further guidance on whether specific types of businesses are SSTBs. The IRS, however, found such analysis beyond the scope of the new guidance. It pointed out that the determination of whether a particular business is an SSTB often depends on its individual facts and circumstances.
Nonetheless, the IRS did establish rules regarding certain kinds of businesses. For example, it states that veterinarians provide health services (which means that they’re subject to the SSTB limits), but real estate and insurance agents and brokers do not provide brokerage services (so they aren’t subject to the limits).
The final regs retain the proposed rule limiting the meaning of the “reputation or skill” clause, also known as the “catch-all.” The clause applies only to cases where an individual or a relevant pass-through entity is engaged in the business of receiving income from endorsements, the licensing of an individual’s likeness or features, or appearance fees.
The IRS also uses the final regs to put a lid on the so-called “crack and pack” strategy, which has been floated as a way to minimize the negative impact of the SSTB limit. The strategy would have allowed entities to split their non-SSTB components into separate entities that charged the SSTBs fees.
The proposed regs generally treat a business that provides more than 80% of its property or services to an SSTB as an SSTB if the businesses share more than 50% common ownership. The final regs eliminate the 80% rule. As a result, when a business provides property or services to an SSTB with 50% or more common ownership, the portion of that business providing property or services to the SSTB will be treated as a separate SSTB.
The final regs also remove the “incidental to an SSTB” rule. The proposed rule requires businesses with at least 50% common ownership and shared expenses with an SSTB to be considered part of the same business for purposes of the deduction if the business’s gross receipts represent 5% or less of the total combined receipts of the business and the SSTB.
Note, though, that businesses with some income that qualifies for the deduction and some that does not can still separate the different activities by keeping separate books to claim the deduction on the eligible income. For example, banking activities (taking deposits, making loans) qualify for the deduction, but wealth management and similar advisory services do not, so a financial services business could separate the bookkeeping for these functions and claim the deduction on the qualifying income.
REIT investments
The TCJA allows individuals a deduction of up to 20% of their combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income, including dividends and income earned through pass-through entities. The new guidance clarifies that shareholders of mutual funds with REIT investments can apply the deduction. The IRS is still considering whether PTP investments held via mutual funds qualify.
QBI deduction in action
The QBI deduction generally allows partnerships, limited liability companies, S corporations and sole proprietorships to deduct up to 20% of QBI received. QBI is the net amount of income, gains, deductions and losses (excluding reasonable compensation, certain investment items and payments to partners) for services rendered. The calculation is performed for each qualified business and aggregated. (If the net amount is below zero, it’s treated as a loss for the following year, reducing that year’s QBI deduction.)
If a taxpayer’s taxable income exceeds $157,500 for single filers or $315,000 for joint filers, a wage limit begins phasing in. Under the limit, the deduction can’t exceed the greater of 1) 50% of the business’s W-2 wages or 2) 25% of the W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition (UBIA) of qualified business property (QBP).
For a partnership or S corporation, each partner or shareholder is treated as having paid W-2 wages for the tax year in an amount equal to his or her allocable share of the W-2 wages paid by the entity for the tax year. The UBIA of qualified property generally is the purchase price of tangible depreciable property held at the end of the tax year.
The application of the limit is phased in for individuals with taxable income exceeding the threshold amount, over the next $100,000 of taxable income for married individuals filing jointly or the next $50,000 for single filers. The limit phases in completely when taxable income exceeds $415,000 for joint filers and $207,500 for single filers.
The amount of the deduction generally can’t exceed 20% of the taxable income less any net capital gains. So, for example, let’s say a married couple owns a business. If their QBI with no net capital gains is $400,000 and their taxable income is $300,000, the deduction is limited to 20% of $300,000, or $60,000.
The QBI deduction is further limited for SSTBs. SSTBs include, among others, businesses involving law, financial, health, brokerage and consulting services, as well as any business (other than engineering and architecture) where the principal asset is the reputation or skill of an employee or owner. The QBI deduction for SSTBs begins to phase in at $315,000 in taxable income for married taxpayers filing jointly and $157,500 for single filers, and phasing in completely at $415,000 and $207,500, respectively (the same thresholds at which the wage limit phases in).
The QBI deduction applies to taxable income and doesn’t come into play when computing adjusted gross income (AGI). It’s available to taxpayers who itemize deductions, as well as those who don’t itemize, and to those paying the alternative minimum tax.
Proceed with caution
The tax code imposes a penalty for underpayments of income tax that exceed the greater of 10% of the correct amount of tax or $5,000. But the TCJA leaves less room for error by taxpayers claiming the QBI deduction: It lowers the threshold for the underpayment penalty for such taxpayers to 5%.
Please contact your tax advisor to avoid such penalties and review your specific facts and circumstances regarding the QBI deduction.
Review our QBI Flow Chart using your facts and circumstances to answer the question, “Am I eligible for the new 20% Qualified Business Income (QBI) Deduction?”
The Colorado Department of Revenue issued the following statement regarding proposed sales tax rules to implement the U.S. Supreme Court’s South Dakota v. Wayfair decision and destination sourcing:
“As part of our rulemaking process to implement sales tax rules for in-state and out-of-state retailers, we have heard from legislators and the business community, and the Department of Revenue agrees it is important for the state to take the time to get this right.
“As such, the Department is extending the automatic reprieve for Colorado businesses and out-of-state retailers to comply with the emergency rules from the current March 31, 2019 deadline to May 31, 2019. We will evaluate the need for another extension as May 31 nears. This additional time will give the state legislature an opportunity to find innovative solutions to streamline and simplify our sales tax collection laws in accordance with the wishes of the residents of Colorado.
“This is an opportunity to simplify sales tax for all parties: for businesses that collect and remit sales tax, for customers who pay it, and for those of us in state government whose obligation it is to carry out the tax laws passed by the state legislature. No one desires a streamlined and simplified sales tax collection and compliance system more than the Department of Revenue.”
If you have questions about sales tax in Colorado or in other states, please contact your tax advisor.
Ten Warnings Signs:
If you have compliance questions on your employee benefit plan, please contact the SKR+CO audit team.