• New Overtime Rules

    09 June 2016 / Uncategorized / Comments Off on New Overtime Rules

    DON’T PANIC – Employers Have Until December 1, 2016 to Figure This Out

    by Matthew J. Lapointe, Esq.[1]

    On May 18, 2016, the Obama administration announced the publication of the Department of Labor’s final rules updating the federal overtime regulations.  We knew these rules were coming.  In 2014, President Obama signed a Presidential Memorandum directing the DOL to update these regulations and on July 6, 2015 the DOL published a Notice of Proposed Rulemaking.  These final rules differ a bit from what the DOL proposed in 2015.  This article will bring you up to date and will suggest some strategies to comply with the new rules.

    Mandatory overtime for certain classes of employees is required by the federal Fair Labor Standards Act (the “FLSA”).  The FLSA regulations establish two categories of employees:  exempt and non-exempt.  Exempt employees are exempt from the overtime requirements; non-exempt employees must be paid overtime for hours worked in excess of forty hours in any given week.

    Many employers erroneously believe that if they pay an employee a salary, the employee is not eligible for overtime pay.  This is and always has been WRONG.  To be exempt from the overtime requirements, three tests must be met:  (1) the employee must be paid a fixed salary, (2) the amount of the salary must exceed a certain amount, and (3) the employee’s actual job duties must primarily involve executive, administrative, professional, computer, or outside sales duties.  All three tests must be met for the employee to be exempt.  Even if an employee is paid a salary that exceeds the minimum amount (tests 1 and 2), if that employee’s actual job responsibilities do not fit within one of the job duties exemptions (test 3), then that employee is entitled to overtime for hours worked over forty hours in a work week.

    The new rules have changed test 2.  The current rules set the minimum salary amount at $455 per week, or $23,660 per year.  The new rules, which go into effect December 1, 2016, raise the minimum salary to $913 per week, or $47,476 per year.

    The new rules did not change the so-called “duties tests.”  The DOL has published a number of “Fact Sheets” providing helpful information on the various duties tests.  See https://www.dol.gov/whd/overtime/fact_sheets.htm  For example, to qualify for the administrative exemption, the employee must meet a 3-part test:  (1) the employee must be compensated on a salary or fee basis at the new rate (effective 12/1/2016) of not less than $913 per week or $47,476 per year, (2) the employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operation of the employer or the employer’s customers; and (3) the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.  It is this last one that trips up a lot of employers.  DOL Fact Sheet #17C states:  “The term ‘matters of significance’ refers to the level of importance or consequence of the work performed.  An employee does not exercise discretion and independent judgment with respect to matters of significance merely because the employer will experience financial losses if the employee fails to perform the job properly.’

    We recommend that employers take another look at all employees who are currently classified as exempt and review the duties tests for each exemption. If an employee does not meet the applicable duties test, then he or she is currently misclassified and should be re-classified as non-exempt. Assuming all of the currently exempt employees meet the applicable duties tests, the next step is to determine whether any of them do not receive a salary of at least $913 per week or $47,476 per year.  Beginning as soon as possible, these employees falling under the minimum salary threshold should begin tracking their time, to determine whether or how often they exceed forty hours per week.  Once the time data has been collected, the employer will need to decide whether it makes sense to raise the salaries of certain of those employees so that they will remain exempt starting December 1, 2016 or whether such employees will be re-classified as non-exempt as of December 1, 2016.  If the employer decides to re-classify currently exempt employees as non-exempt beginning December 1, 2016, the employer needs to have a reliable method of tracking those employees’ hours to determine overtime compensation or to ensure that such employees do not work more than forty hours per week.

    These new regulations are expected to impact approximately 4 million workers.  Fortunately, there is adequate time for employers to plan for the impact of the new regulations.  Employers should discuss their options with their legal counsel.  The lawyers at Wetherington Hamilton stand ready to assist.  Please call Matt Lapointe at 813-676-9075 with any questions.

    Matthew J. Lapointe[1] Matt Lapointe is a business lawyer with Wetherington Hamilton Law Firm, P.A. in downtown Tampa.  Matt advises business owners on regulatory compliance, financing, contracts and many other areas.   For Matt’s full bio, please visit www.whhlaw.com.

  • 2013 was the year of "Let's Tax the Rich!"

    21 January 2014 / Uncategorized / Comments Off on 2013 was the year of "Let's Tax the Rich!"

    2013 Tax increases for the rich!

    There are SEVEN large tax increases for wealthy taxpayers this year that you probably haven’t heard much about.  Now that we are starting to file 2013 returns, it’s time to make you aware of these sneaky tax increases.

    1. The 39.6% bracket is back! - Beginning in tax year 2013 (generally for tax returns filed in 2014), a new tax rate of 39.6 percent has been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other marginal rates — 10, 15, 25, 28, 33 and 35 percent — remain the same as in prior years.  Thus taxpayers in the highest bracket see the top marginal tax rate rise to 39.6% in 2013 from 35% in 2012.  OUCH!

    2. The “Phase-out” of itemized deductions returns to the tax code in 2013 after a several-year absence!  It applies to individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly. An example is helpful to show how this would work. Assume that a married couple filing a joint return has an adjusted gross income of $500,000 and itemized deductions for mortgage interest, property taxes and charitable contributions of $100,000.The deduction amount disallowed under the phase-out is an amount equal to 3 percent of the excess of the taxpayer’s adjusted gross income over $300,000 for taxpayers filing a joint return, to a maximum of 80 percent of a taxpayer’s total itemized deductions.The excess amount in this example is $200,000 ($500,000 adjusted gross income minus $300,000) and 3 percent of that amount is $6,000, so the taxpayers would lose $6,000 of their $100,000 of itemized deductions.

    3. The “Phase-out” of personal exemptions returns to the tax code in 2013 after a several-year absence!  For 2013, the personal exemption amount for you, your spouse and every child you have is a deduction of $3,900, each.  Thus a family of five would get to deduct $19,500 in personal exemptions.  A NICE deduction.The deduction is a bit more complicated than the itemized deductions, but the deductions start being whittled away at the same thresholds as the itemized deductions phase-out ( Income of $250,000 or more ($300,000 for married couples filing jointly).

    4. Think Long Term Capital Gains are 15%?  Of course you do…they always have been…until NOW.Under the American Taxpayer Relief Act of 2012, the top capital gain tax rate has been permanently increased to 20% (up from 15%) for single filers with incomes above $400,000 and married couples filing jointly with incomes exceeding $450,000.

    5. Thought the marriage penalty was gone?  Think AGAIN! This is one of the sneakiest tax increases that occurred in 2013.  This is because it’s hidden away in the tax brackets, which most people are not very familiar with!What am I talking about?  Let me explain by showing you the first four tax brackets in 2013 as single versus married.

    10% Bracket – Single from $0 to $8,925.  MFJ from $0 to $17,850
    15% Bracket – Single from $8,925 to $36,250.  MFJ from $17,850 to $72,500

    See how the 10% and 15% brackets for MFJ are EXACTLY double those of Single?  So for taxpayers in the bottom two brackets, there is no marriage penalty.  However…

    25% Bracket – Single from $36,250 to $87,850.  MFJ from $72,500 to $146,400 (not $175,700)
    28% Bracket – Single from $87,850 to $183,250.  MFJ from $146,400 to $223,050 (not $366,500)

    Now, we see that MFJ brackets are NOT exactly double.  In fact, once you hit the 28% bracket, being married costs you a bundle.  How much?  Depends on how much income they each earn.  Here are two examples! Two individuals each making $87,850 would never enter the 28% bracket if they stayed single, but if they are married, they will pay an additional 3% on $29,300! Two individuals each making $183,250 would never enter the 33% bracket if they stayed single, but if they are married, they will pay an additional 5% on $143,450!

    6. Form 8906 – The new 3.8 percent surtax on investment income that applies to single filers with modified adjusted income of more than $200,000 and married couples filing jointly with more than $250,000.In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities and businesses that are passive activities to the taxpayer.  To calculate your Net Investment Income, your investment income is reduced by certain expenses properly allocable to the income.

    7. Form 8959 – The new .9 percent surtax on earned income that applies to single filers earning more than $200,000 and married couples filing jointly earning more than $250,000.An individual will owe Additional Medicare Tax on wages, Tips, compensation and self-employment income (and that of the individual’s spouse if married filing jointly) that exceed the thresholds above. Medicare wages and self-employment income are combined to determine if income exceeds the threshold. A self-employment loss is not considered for purposes of this tax.

    As you can see...2013 was the year of "Tax the Rich!"  If you have any questions, please give Widget a call and we can help you!

  • The Best Investment

    12 November 2013 / Uncategorized / Comments Off on The Best Investment

    Welcome to another edition of Tuesday Tidbits where we make tax and accounting simple. I'm your host Charles D. Shapero CPA with Widet Bookkeeping & Tax, and today we're not going to talk about tax. We going to talk a little about investment advice, I am not a financial planner but one investment I really like is Real Estate,well and I guess it is tax related, cause that's one of the reasons I like it. If you buy a portfolio of rental properties you can have people live in these properties for 30 years, pay your mortgage payment and all the expenses related to that property, and then 30 years from now, you own a house free and clear. Sounds pretty good doesn't it? Who wouldn't want somebody else to pay their mortgage for them on a house they're going to own. It gets better. During the time we rent this property we're depreciating it. Which means not only do we have our rental income but we have our expenses of our mortgage interest, our property taxes, we're also depreciating the house, so we have a situation where we have positive cash flow, in other words our bank account and wallets are getting fat. But due to depreciation, it's hitting our tax return and reducing our tax bill. What could be better? A lot of our clients here are rental real estate investors and long term holders of real estate, they do multi-family apartment buildings, residences, and it is one of the best investments you can make. This concludes today's non-tax Tuesday Tidbits, see you next Tuesday. Widget Bookkeeping & Tax Know More, Keep More.

  • Real Estate Conversions

    05 November 2013 / Video Blog / Comments Off on Real Estate Conversions

    Welcome to another edition of Tuesday Tidbits where we make tax and accounting simple. I'm your host Charles D. Shapero, CPA with Widget Bookkeeping & Tax and we're going to talk about some pro-tax payer provisions today. IRS Code Section 1031 and 1033. Both of them deal with gains in real estate. What's that you say? We haven't had gains in real estate in some time. Hopefully that's changing! What 1031 allows you to do is sell real estate whether it be land, apartment building, house or any other US real estate, and you can take the proceeds from that real estate, and directly invest them in other pieces of real estate. The thinking behind Congress, in passing this code section is, that you never got the cash from that sale, so you really shouldn't have to pay the tax on that sale at that time. All that cash got put into another real estate. So maybe you sell one strip mall and invest in a bunch of apartment buildings. That cash is tied up, you don't have the wherewithall to pay that tax. So 1031 allows you if you follow it's provisions, to not pay tax until that second piece of real estate is sold. 1033 is a very similar code section but it deals with involuntary conversions That's if you didn't sell a house but what if your house burns down, the insurance company comes in writes you a big check, you have gains! But you want to use that insurance check to bring that house back, or maybe buy another one. Therefore, the IRS Code Section says if you have a gain on that piece of property, you don't have to pay it until you sell the replacement property. With the 1031 I have 45 days from the time I sell my first property to pick out my replacement property, and then I have six months to consummate the deal. WIth 1033, obviously I didn't think about buying a replacement property, I didn't even know my first property was going to be destroyed. I have full two years to reinvest those proceeds, and not pay taxes. Both those provisions are really not tax saving provisions they are tax deferral. The IRS is eventually going to get their money, unless you pull a Houdini trick and you die before you pay taxes. If you do that you can use 1031 and 1033 to escape tax, but it's not advised. This concludes today's Tuesday Tidbit, see you next Tuesday. Widget Bookkeeping & Tax: Know More, Keep More!

  • How to survive an IRS audit

    29 October 2013 / Uncategorized / Comments Off on How to survive an IRS audit

    Welcome to a special Halloween edition of Tuesday Tidbits. We're going to talk about a very scary topic today. I'm your host Charles D. Shapero, CPA with Widget Bookkeeping & Tax, and today we're going to talk about the IRS Audit..(evil laugh) Actually IRS Audits can be very scary, but if you're prepared for them, they don't need to be. When the IRS comes in they're going to want to look at 3 main expenses: Your meals and entertainment, your auto expense and your travel and there's reasons for that. For your auto expense, they're going to want to see your mileage log, and they know that most business owners don't take the time to do their mileage log correctly. What happens, the scariest part of that is, anything you can't prove, you lose. So, they hit that area often. Meals and entertainment: under code section 274 of the Internal Revenue Code, you're suppossed to, on the business receipt write: who you had lunch with and what was the business purpose so they look at all meals and entertainment because they know that most business owners will not take the extra effort to do that documentation. When it comes to travel, how many of us have taken a business trip and tacked on a few extra personal days, and tried to deduct it? Or we travel and take a spouse along. The IRS knows we do things like that, so thats why they audit that. In order to deduct your travel, let's just say I'm going to Vegas for seminar the seminar is a 3 day seminar and I'm out in Vegas for 7 days cause I'm tacking on a few personal days, then I can deduct the three days of lodging while I'm there. I can deduct my entire airine ticket, because I had to go whether I'm going for 3 days or 7 days. But deducting just the business portion, you will withstand an audit everytime. The old saying pigs get fat and hogs get slaughtered, because people try to deduct the whole trip. Likewise, if I bring my spouse, if she is not involved in my business, I can deduct the airfare, but I can't deduct hers. The trick to make audits less scary, is to be prepared. and have your documentation in place. This concludes a very scary Tuesday Tidbits, see you next Tuesday! Widget Bookkeeping and Tax, Know More Keep More

  • How to account for losing real estate on your taxes

    22 October 2013 / Video Blog / Comments Off on How to account for losing real estate on your taxes

    Welcome to another edition of Tuesday Tidbits where we make tax and accounting simple. I'm your host Charles D. Shapero, CPA with Widget Bookkeeping & Tax and today we're going to talk about the unfortunate topic of losing real estate. We've heard it a lot, short sales, foreclosures does it have a tax impact? Well there's a lot of IRS forms that you've been seeing lately. The 1099-A, the 1099-C and how does that affect your tax return? Well the 1099-A really deals with the abandonment of a property, all it tells the IRS is that you lost a property, it doesn't really tell the IRS if the bank is going to come after you for the loan balance, or what gain or loss can be calculated on that transaction. So really with a 1099-A its what's called an open transaction, you can't really do anything with it, except know that something is on the horizon. The 1099-C however, is a totally different animal, 1099-C's as it relates to real estate means that the bank is going to forgive the loan on that piece of property. They are not going to come after you and sue you for the deficiency. That's a good thing. We don't want to repay that loan. Could it have tax impact? Yes it could, but generally it won't. Because you did pay something for that property. 1099-C's are also issue when a bank forgives a credit card loan. That is entirely taxable for the most part, unless...there is an exception one of the best tools in our arsenal to pull that income off your return is Form 982, it allows us to exclude forgiveness of debt in certain circumstances: bankruptcy, insolvency and there's a couple of other exceptions as well. So 982 can be very helpful in pulling that income off your return and lowering your tax bill. All those forms that I described can be found on our resources tab on the Widget website. This concludes todays Tuesday Tidbits, see you next Tuesday Widget Bookkeeping & Tax; Know More, Keep More.

  • Depreciation 102: Real Estate Depreciation

    16 October 2013 / Uncategorized / Comments Off on Depreciation 102: Real Estate Depreciation

    Welcome to another edition of Tuesday Tidbits where we make tax and accounting simple. I'm your host Charles D. Shapero, CPA with Widget Bookkeeping & Tax, and today we're going to talk about the depreciation of Real Estate. A lot people, a lot of our clients buy rental real estate, whether it be commercial or residential. And that's really how they're broken out. When you depreciate residential real estate, say we have an apartment building that we're renting, that buidling gets depreciated over 27 1/2 years, if you're doing commercial, like a strip mall, that is 39 year property. But that's not all, I just kinda lumped them into two baskets. When we buy a rental house, there's a couple things we're buying, we're buying the house, we're also buying land, the land that that property sits on, we're also buying some appliances in that building, and maybe some land improvements. So now I've just chopped this one asset that we said was going to be depreciated over 27 1/2 years, and I've chopped it up into several different categories The appliances, appliances when you buy them are 5 year assets. That's a lot more rapid write-off than taking 27 1/2 years. So to the extent that we have appliances we probably want to break them out. I also mentioned land. Land is not as happy as appliances because land we can't write-off at all, land does not depreciate. So let's just say we spend $200 grand on this house, maybe $20,000 of that relates to the land, which we'll never be able to write-off, until we sell the property. So no depreciation on land. I mentioned land improvements, that could be like a parking lot or a fence. Those items are written off over 15 years, so we don't have to wait 27 1/2 years, to write them off. Commercial has many of the same items, but they're basically 39 years. If you buy a big enough property, say we buy a strip mall for 1/2 a million dollars. One of the things we can do to accelerate our depreciation and speed it up, is to hire a cost segregation specialist. What that is, is he's an engineer that will go in and instead of seeing this building a 39 year asset, he'll chop it up into pieces like I did over here at the residential, he'll say oh those ceiling tiles, those are 5 year property, and this electrical runs this, that's 5 year property and this is 7 year property. So instead of calling it 39 years, we're writing different buckets of items over off shorter periods of depreciation. Which really accelerates our write-off. This concludes today's Tuesday Tidbit, see you next Tuesday. Widget Bookkeeping & Tax Know More, Keep More

  • Independent Contractor or Employee? How to tell the difference.

    08 October 2013 / Uncategorized / Comments Off on Independent Contractor or Employee? How to tell the difference.

    Welcome to another edition of Tuesday Tidbits where we make tax and accounting simple. I'm your host Charles D. Shapero CPA with Widget Bookkeeping & Tax, and today we're going to talk about a topic that affects almost every business owner. Whether your people who are working for you are independent contractors or employees. So what's the difference? What we're talking about in this issue is who's gonna pay the social security and the medicare taxes that this employee should be paying. If they're independent contractors the business owner doesn't pay them, they pay them. But if they're employees, we pay half, they pay half. So it's very economical to classify them as independent contractors because we save the tax money. What the IRS will do is they will come in and they will hit the employer for all the taxes we should have withheld from their employee paychecks, plus they'll hit us for the employer portion. So it's a really big issue. So what does it boil down to? How do we know? Are they an independent contractor or an employee. Way back a few years ago, there was a court case called Elliots, they decided on a 20 factor formula on how to classify independent contractors vs employees What the court looked at, when it looked at this court case was, okay we have certain factors that think that these people should be employees, certain factors that they should be independent contractors, which... Which is more? And that's what we kinda have to look at with everybody we hire. IRS has a form, and you can find it on the resource page of our website it's SS8, now what that form is used for is you fill out give them all the facts and the IRS can make a determination as to whether a person is an independent contractor or an employee. We don't want the IRS to make that determination, but we can use the form because it has a lot of the questions we're gonna need to ask ourselves to classify these people. The bottom line: It really comes down to control. Do we tell the person, employee or independent contractor, when to be here? How to do their jobs? Do we provide the tools necessary for them to do their job? Do they work for anybody else? These are some of the factors that you're going to be talking through when you decide to classify the people that work for you. This concludes today's Tuesday Tidbit, see you next Tuesday. Widget Bookkeeping & Tax Know More Keep More

  • Advanced Depreciation-Automobiles

    01 October 2013 / Uncategorized / Comments Off on Advanced Depreciation-Automobiles

    Welcome to another edition of Tuesday Tidbits, where we make tax and accounting simple. I'm your host Charles D. Shapero, CPA with Widget Bookkeeping & Tax, and today we're going to talk about Auto Depreciation. In a previous Tuesday Tidbits, we talked about how mileage was the best method. But we can also choose to deduct autos by deducting actual expenses, gasoline, oil, insurance and of course, the car itself. The rules that govern depreciation on vehicles are very complex. If you have a vehicle that is more than 14,000 pounds, most of us don't. There is no limit to your depreciation. We're talking a huge shipping truck ,no limit. If you have a vehicle, that's say a Mercedes, the IRS has a real problem with that, because they think that we're buying this beautiful great car a luxury car, and we're deducting it, we're writing it off. They don't like that. So what they put under code section 280F, they put what's called the luxury auto rules, and what they say is that you can depreciate your car, just like any other asset under section 167 but we're gonna put caps on it. Those caps are typically around two to five thousand dollars a year. Well, that's pretty small, if you take five years times two thousand, you can write off somewhere around ten grand for a car. What if you bought a $50,000 Mercedes? Well the IRS is going to limit you to five grand a year. But there is a loophole, I'm a CPA, what would I be without showing you the loopholes right? The loophole in cars is that you go and find a car with a gross vehicle weight of more than six thousand pounds, the gross vehicle weight on most SUV's exceeds six thousand pounds and what the IRS says is that there is no limit on those vehicles, except that you can take up to $25,000 a year. So they have this really high cap. So the game is, that if you have profit near the end of the year and you want to make some of that profit go away, you can buy an SUV that's more than six thousand pounds, at a purchase price of right around $25,000 bam, instant lowering of your tax bill. That concludes today's Tuesday Tidbits, see you next Tuesday! Widget Bookkeeping & Tax, Know More, Keep More

  • Depreciation Basics

    24 September 2013 / Uncategorized / Comments Off on Depreciation Basics

    Welcome to another edition of Tuesday Tidbits. Where we make tax and accounting simple. Today we're gonna talk about depreciation. It's governed by Internal Revenue Code section 167. And basically what depreciation is, is the IRS says you cannot write things off that have a useful life more than one year. So you buy a desk and chair to sit at when you do your work. The IRS has stated that those are seven year assets, and we need to write that purchase price off, in other words, deduct it over the next seven years. Computers, they don't last as long So computers are typically a five year life. Now that really applies to every asset you buy. So, I, as an accountant buy a stapler for $20. If I were to read that IRS rule strictly, that section 167, I'd have to write this off over it's useful life, seven years. It's $16 so that really isn't practical. So what we do in accounting is we say okay we're gonna set up a floor if we buy anything under $300 we're just gonna write it off as office supplies. If we buy something more than $300 or something like a printer or a monitor, that really is a tangible asset, we're gonna go ahead and write that off over five years. One other thing that we can do if we have a lot of income in our company, there is another code section that helps us out. It's code section 179, and what code 179 says is we know we just told you under 167 that you have to write that off over five or seven years. But under 179 you can make an election to write it off immediately. So what's the difference? Why have all the, why have two different code sections? Because if you don't make the election and you just decide to write off assets, the IRS can step in and say no we're not going to allow that deduction, you didn't make the election you lose it, you need to depreciate that over time. So it's really one of those IRS traps that everybody hates. That concludes today's Tuesday Tidbit See you next Tuesday. Widget Bookkeeping & Tax Know More, Keep More

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