Patrick Mutchler

Joe Boomgaard and John Wiegand, in a recent article published in MiBiz, discuss the growing craft beer industry and its demand for material handling products. While the craft beer industry has reached almost 20 billion, the number of manufactures that cater to the industry remains small. Reasoning for this is the learning curve for the equipment and the long outstanding relationships that brewers have already established with their out-of-state suppliers. Many brewers, however, aim to use local suppliers whenever possible.

The article goes on to state the challenges for manufacturers in catering to the brewery market, such as order volume, quality perception, and strict standards of equipment.

The February issue of the Journal of Accountancy discusses the new standard issued by the Financial Accounting Standards Board (FASB) that is intended to improve how deferred taxes are classified on organizations’ balance sheets. The goal in the new standard is to make financial reporting less complicated while still providing the necessary information.

Currently, an entity must separate deferred tax liabilities and assets into current and noncurrent amounts in a classified statement. The new standard simplifies this process and requires deferred tax liabilities and assets to be classified as noncurrent in a classified statement.

The amendment takes effect for financial periods beginning after Dec. 15, 2016 for public companies and beginning after December 15, 2017 for private companies, not-for-profits, and employee benefit plans.

To read the full referenced article, click here. For more information on financial reporting and the new standard issued by the FASB, please contact Patrick Mutchler, (231) 726-5870 or pmutchler@brickleydelong.com.

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Simon Bowers, in a recent article published in The Guardian, discusses a report from the Organization for Economic Co-operation and Development (OECD) which states that foreign individuals are increasingly being faced with the burden of international taxes. This is because governments have been forced to be less dependent on taxing corporate profits.   These tax hikes are coming in the form of higher social security contributions, value added taxes, and income taxes.

For example, the OECD reports that the average corporation tax receipts were 2.8% of the GDP compared to 2007 when the percentage was 3.6%. Given the same time frame, social security contributions went up from 8.5% to 9.2%, value added taxes went up from 6.5% to 6.8%, and income taxes went up from 8.8% to 8.9% of the GDP.

To read the full referenced article click here. For more information on this topic, please contact Patrick Mutchler at (616) 608-8540 or pmutchler@brickleydelong.com.

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In early 2015, the Internal Revenue Service issued Rev. Proc. 2015-20, which allowed small businesses to adopt the final tangible property regulations using simplified procedures. In a recent article published in The Tax Advisor, authors David L. Strong, Jane Rohrs, and Susan Grais discuss the options that small businesses have in relation to the tangible property regulations.

What defines a small business?

A taxpayer qualifies for the small business exception if it has one or more separate and distinct trades or businesses that have:

1. Assets totaling less than 10 million on the first day of the 2014 tax year, or
2. Average gross receipts of 10 million or less for the prior three tax years.

The Small Business Exception of Rev. Proc. 2015-20

The small business exception of Rev. Proc. 2015-20 allows small businesses to adopt the final tangible property regulation using simplified procedures without filing Form 3115 Application for Change in Accounting Method. Small businesses that adopt this exception:

1. Do not need to compute Sec. 481(a) adjustment, but
2. Do not receive audit protection for years prior to 2014.

It important for small businesses to understand the advantages and disadvantages of adopting the small business exception. To read the full referenced article click here. For assistance in how this Revenue Procedure affects your business, please contact Patrick Mutchler at (616) 608-8540 or pmutchler@brickleydelong.com.

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In a recent Accounting Today article, Scott Robins, Emily Horvat, and David Magarian provide guidance on international tax risks for small businesses, S corporations, and partnerships, including matters related to:

1. The creation of Permanent Establishment aboard such as:

• Filing annual foreign income tax returns
• Paying foreign income taxes
• Being subject to so subpoena powers of foreign tax authorities

2. Choice of Entity as a branch, partnership, or corporation
3. Foreign earnings subject to tax
4. Transfer pricing
5. Other considerations such as withholding taxes, thin capitalization, value-added taxes, and state income taxes

Peter Klein, in a recent article in the Financial Advisor discusses how business owners face distinctive challenges in relation to operating their business and personal expenses.

Seven challenges he addresses are:

• Business owners underestimate their personal exposure to business risk. The risks of business ownership are ever-changing. Owners need to make it a priority to protect their personal assets, especially when dealing with bank loans.
• Business owners double down on market risk.
  Business owners tend to reinvest their money in what they know, rather than countercyclical assets.
• Business owners loot their retirement funds to save their businesses.
  Owners tend to be too hopeful about an economic turnaround. And, if their business is failing, using a retirement fund to save the business makes little to no sense, especially when the fund has special protection.
• Business owners focus on control.
  The tendency to not want to turn business control over to an expert happens many times with business owners. However, turning over control allows for an experienced professional to help overcome barriers the business is facing.
• Business owners often fail to consult with financial professionals to gain a broader perspective.
  Owners may not be aware of market and economy changes like a financial professional.
• Business owners often do not regard taxes, succession and estate planning, which are especially important issues to Baby Boomers.
  Generational transfers are on the rise, and it is important for owners to be aware of tax, succession, and estate planning challenges.
• Business owners often lack awareness about special benefits.
  Business owners and self-employed individuals have tax-deferred savings opportunities that they may be unaware of.

For more information on these challenges, please read the full article. For assistance in overcoming some of these challenges, please contact Patrick Mutchler at (231) 726-5870 or pmutchler@brickleydelong.com.

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President Obama recently signed a budget deal that eliminated the “file-and-suspend” strategy used by many married couples.

What is the file and suspend strategy?

This strategy is when a spouse applies for Social Security retirement benefits and then suspends payment in order to trigger spousal benefits. While spousal benefits are being collected, the spouse that applied and suspended Social Security will have their own retirement benefits continue to grow by 8% a year until he or she reaches age 70.

This strategy can lead to a significant increase in Social Security retirement income for couples. There was no warning to the end of this; rather, the Social Security rule changes were slipped into a backroom budget compromise.

What are the effects?

Those who are already 66, or will turn 66 in the next six months, are still able to suspend-and-file under the old rules.

Those who turn 66 after May 1, 2016, will still be able to file-and-suspend, but their spouses and dependent children will not be able to collect benefits unless the primary beneficiary is also collecting benefits.

For more information or assistance on this new law, please visit this article or contact Patrick Mutchler at (616) 608-8540 or pmutchler@brickleydelong.com.

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On November 24, The Internal Revenue Service announced an increase in the de minmis safe harbor limit from $500 to $2500.

What is the de minimis safe harbor?

The de minimis safe harbor rule allows taxpayers to deduct eligible expenditures in the year they were paid or incurred as supplies or repairs, which would otherwise have to be capitalized.

Impact of these changes

This increased threshold will simplify the paperwork and recordkeeping requirements for many small businesses. According to the IRS, they received over 150 requests from businesses and their representatives requesting an increase in the threshold because the $500 limit was too low and provided no relief to the administrative burden of managing capital assets.

This change affects businesses that do not maintain an applicable financial statement (AFS). For businesses with an AFS, the threshold remains at $5000.

The new $2500 threshold will be effective January 1, 2016, although there may be opportunities to apply it sooner.

For more information on this threshold increase, please read the full IRS announcement, or contact Patrick Mutchler at pmutchler@brickleydelong.com or (616) 608-8540.

Read more about our business and individual taxation services here.

Eileen Reichenberg Sherr, in an article in the Journal of Accountancy, discussed how this past summer, Congress and President Obama signed legislation that modified the due dates for several tax returns.

The AICPA has been encouraging these changes since 2006, mainly due to flowthrough entities’ Schedules K-1, Partner’s [or shareholder’s] Share of Income, Deductions, Credits, etc. containing tax return information provided by partnerships and S corporations arriving late. Late K-1s make it difficult to file an accurate return on time, and many practitioners are forced to use estimates to file extended returns timely.

This will create a more logical flow for tax preparers and clients and ease the stress of those waiting for their K-1s to arrive.

To view a chart of the new due dates, click here.

For more information on the new due dates, please read the full referenced article or contact Patrick Mutchler at (231) 726-5870 or pmutchler@brickleydelong.com.

Learn about our business taxation services here.

Michael Cohn, in a recent article published in Accounting Today, states that the IRS has made progress on implementing the Foreign Account Tax Compliance Act (FATCA).

The FATCA was enacted in 2010, and states that, beginning with tax year 2011, individual taxpayers with foreign assets that meet a certain dollar amount must report the information to the IRS. This information must be attached on Form 8938, Statement of Specified Foreign Financial Assets, to the taxpayer’s annual individual 1040 tax return, or 1040 Non-resident tax return.

In a report from the Treasury Inspector General for Tax Administration (TIGTA), they found three noted limitations with the FATCA:

1. Transcribed data are not validated to ensure accuracy.
2. Data on Form 8938 continuation statements are not transcribed.
3. Losses reported by taxpayers cannot be input as negative amounts.

The TIGTA then offered three recommendations to the IRS:

1. Update the compliance activities in the FATCA Compliance Roadmap for identifying noncompliance by foreign financial institutions.
2. Initiate a periodic quality review process for the processing of paper Forms 8938 to ensure the accuracy of the data being transcribed.
3. Ensure that the transcription issues identified in this report are addressed.

For more information on the FATCA and its implementation, please read the referenced articles or contact Patrick Mutchler at (231) 726-5870 or pmutchler@brickleydelong.com.