The tangible property de minimis safety harbor that was finalized and issued in 2013 provided a regulation that allows qualifying businesses to deduct purchases of tangible property immediately that were below a certain dollar amount. If you were a taxpayer that did not have an AFS (audited financial statement), that dollar amount must be under was $500.

However, in the recent years, many businesses and taxpayers have made comment that the $500 threshold was too low of a monetary number to sustainably and effectively reduce administrative burdens that come from running a small business. While the original threshold amount was helpful, it was not making a very big difference in the financial health of small businesses all across the country.

A taxpayer without an applicable financial statement (“AFS), as defined in Reg. Section 1.263(a)-1(f)(4), may elect to apply the de minimis safe harbor if, in addition to other requirements, the amount paid for the property subject to the de minimis safe harbor does not exceed $500 per invoice (or per item as substan-tiated by the invoice).

In contrast, a taxpayer with an AFS may elect to apply the de minimis safe harbor if, in addition to other requirements, the amount paid for the property does not exceed $5,000 and the taxpayer treats the amount paid as an expense on its AFS in accordance with its written accounting procedures.

A larger safe harbor limitation is reasonable for a taxpayer with an AFS because an AFS provides independent assurance that the taxpayer’s de minimis policies are consistent with the requirements of generally accepted accounting principles (“GAAP”) and do not materially distort the taxpayer’s financial statement income.

Taking these concerns into consideration, the IRS announced that they would increase the de minimis safe harbor threshold to $2500 starting with the 2016 tax year.

The increasing of the de minimis safe harbor threshold by the IRS will help many small businesses thrive financially in the upcoming years. While $2500 still may not cover a large chunk of all small business administrative burdens, this ruling that increased the threshold by five times its original amount will greatly lessen costs associated with the implementation of business for a wide percentage of taxpayers.

The post IRS De Minimis Safe Harbor appeared first on Evolve Financial Services.

A big part of understanding best tax practices is knowing how to pay them, and how to use them to your advantage. With current headlines claiming that certain tax policies like the Net Operating Loss Carryback and Carryforward Provisions are either a genius move or a cowardly loophole, the fact of the matter is that the Net Operating Loss Provision is a legal tax practice that is used by many businesses each year.

First created with the Revenue Act of 1918, the Net Operating Loss was established as a provision to allow corporations to, quite literally, carryback and carryforward any expenses that exceeded their revenue yearly when filing taxes. Established at the end of World War I with the expectation of loss in business, this provision was created to help alleviate corporations of a tax burden on funds they lost while operating.

Still in practice today, the Net Operating Loss Provision allows for companies who have lost money to offset their taxable income, which reduces the tax liability of the reporting entity. With the provision, companies have the option of carrying the amount back over the preceding two tax years and applying it against any taxable income – often resulting in an immediate tax rebate, or carrying the amount forward for the next 20 years and applying it against any future taxable income, reducing tax liability over the course of those years. However, the Net Operating Loss does expire after a 20 year time period.

The Net Operating Loss Carryback and Carryforward Provisions may be making headlines today, but they have been a major factor in tax policy for nearly a century, and will continue to be for many years to come. Tax policies and provisions are established to protect individuals and businesses within the United States, and can be a very powerful tool when utilized. While controversial, the Net Operating Loss Provision is a completely legal way for businesses to operate under the United States governing tax policy.

For more information on tax policies and provisions, visit Evolve Financial today.

The post Net Operating Loss: Carryback and Carryforward Provisions appeared first on Evolve Financial Services.

Having a foreign student work for you as a nanny can be a great experience for both the student and your family, but you may be asking yourself, how do taxes factor in with workers like this?

As long as certain requirements are met, you as the employer are not required to withhold or pay-in FICA or other federal income taxes for the student’s services. Keep in mind, the student must be a nonresidential alien, and not make above the applicable threshold during their time of employment. Students cannot work more than 10 hours per day or 45 hours per week, and must be enrolled in no less than 6 semester hours of classes at a post-secondary educational institution. As long as all requirements are met, then you as an employer do not have to pay-in or withhold income taxes for the student’s domestic style work.

However, even though you do not have to pay income taxes for this work, the student you employ is required to claim the wages he or she made, and file an income tax return. As a nonresidential alien, the student must report all au pair wages unless those wages, in addition with any other U.S. source income, does not exceed the personal exemption amount.

Hosting a foreign student can be an incredible lesson in differing cultures for both you and the au pair you employ. While you do not have to pay-in or withhold taxes for the student you host, be sure that they are made aware of their responsibilities to report their individual income. After all, there is no better lesson in a foreign culture than learning about its finances.

For more information on tax guidelines, visit Evolve Financial today.

The post IRS Tax Guidance: Foreign Student Nanny appeared first on Evolve Financial Services.

However, mistakes happen, and you may end up filing your taxes late, or maybe even not at all. While it is not by any means encouraged to put your taxes on the back burner, the IRS can be understanding of individuals who have made a one-time mistake such as this. That is why the First Time Penalty Abatement exists.

If you or any individual you know accidentally files your taxes late, or mistakenly does not file them at all, the IRS allows for the one-time abatement of any late or non-filing fee you may receive. Meaning, as long as you have filed your taxes correctly and on time for the past three years, the IRS will, just this once, let your penalty slide.

The First Time Penalty Abatement can be extremely helpful for individuals who have made a one-time mistake, and can result in quite a bit of money being saved in fees. However, it is important to note that this abatement does not keep you from incurring other consequences for not filing your taxes correctly. To avoid any other penalties or fees, speak with a trusted expert, like Evolve Financial, to make sure you are correctly filing all past mistakes, and all future claims moving forward.

The First Time Penalty Abatement can be a live-saver, but do not rely on it as an excuse to ignore your taxes. While it is a wonderful safety net that should be taken advantage of if needed, the best way to avoid any penalties from the IRS is to always file your taxes correctly, and on time.

The post First Time Penalty Abatement appeared first on Evolve Financial Services.

The Rev Proc 84-35 is an IRS Penalty Abatement that allows for the automatic penalty abatement for any organization whose partners or LLC/LLP members file their personal taxes on time (by May, or if filed for an extension, by October). Basically, if the people who make up the organization have made no mistakes in filing their own personal taxes, the organization is granted a get out of jail card when it comes to an IRS penalty.

However, there are several factors that must be met in order for an organization to be eligible for the Rev Proc 84-35 IRS Penalty Abatement:

• The partnership must be a domestic partnership
• The partnership must have 10 or fewer partners (husband and wife and their estate count as one)
• All partners must be natural persons (other than a nonresident alien) or an estate of a deceased partner
• Each partner’s share of each partnership item has to be the same as their share of every other item
• All partners need to have filed their income tax returns timely
• All the partners need to have full reported their share of the income, deductions, and credits of the partnership on their timely filed income tax returns
• As long as all of these requirements are met, and you have submitted a letter to the IRS regarding the matter that looks like this example, the abatement will be yours.

In recent years, the IRS seems to have grown tired of Rev Proc 84-35 abatement requests, and have been trying to shift the discussion of penalty abatement to “reasonable cause”. Do not let them pressure you into backing down. The Rev Proc 84-35 is available to you as long as you meet the above criteria. No matter the number of years you have claimed the abatement, it is there for you to use. If they persist with a reasonable cause argument, stick to your knowledge of Rev Proc 84-35, and stand firm until you get your abatement.

The post IRS Penalty Abatement: Rev Proc 84-35 appeared first on Evolve Financial Services.

Definition
The WOTC (Work Opportunity Tax Credit) is a tax credit available to employers who hire and retain individuals from target groups with significant barriers to employment, such as veterans. The tax credit is dependent upon number of eligible employees, hours worked, and wages paid to individuals within their first year of employment.

Benefits
The WOTC serves several different benefits to employers who take advantage of it. First, it provides a potential for a reduced tax liability, up to over $9,000 per eligible employee hired. Second, the WOTC reduces the cost of business for an employer, while requiring little paper work and helping those in need of good jobs retain employment. Lastly, the WOTC helps to stimulate and boost the U.S. Economy, which in turn helps increase small business productivity and growth.

Eligibility
To be eligible to receive the WOTC, an employer must hire and retain certain individuals that fit categories listed under the WOTC Target Groups, and those employees must work a minimum of 120 hours in their first year of employment. Some of these groups of people include; Veterans, Long-Term or Short-Term Temporary Assistance for Needy Families Recipients, Supplemental Nutritional Assistance Program Recipients, Designated Community Residents, Vocational Rehabilitation Referrals, Ex-Felons, Supplemental Security Income Recipients, and Summer Youth Employees.

Application
The process of applying for and receiving WOTC benefits is simple, as long as you have the correct paperwork from the State Workforce Agency (SWA) proving that your new hire falls under one of the WOTC Target Groups. After you have this, you will be able to complete the process by completing the IRS Form 8850 and the ETA Form 9061, and submitting those forms to your SWA. Once you have done that, you will be issued a Final Determination from the SWA about your WOTC status, and then you will be able to file for the credit with the IRS. Like with any tax information, be sure to keep thorough and detailed records for your own use and reference.

The WOTC can be a powerful tool for you and your business, so ensure that you are getting all that you can from your taxes by getting started with the process today.
For more information on the WOTC or other tax credits, contact Evolve Financial.

The post WOTC: What You Need to Know appeared first on Evolve Financial Services.

Evolve Financial Services’ mission is to help small businesses streamline and improve their processes so that they can save money and grow their business. We put our clients at the center of our business. We want to build a long-term relationship with our clients. Any accounting firm can step in when there’s a problem, but a partner will be with you every step of the way to help you look ahead for new ways to excel and proactively address potential problems before they become reality. That’s what Evolve Financial Services will do for you.

As Fred LaCerra, St. Juliana Grade School football coach and mentor, says “Never be complacent. If you’re not improving each and every day, you’re regressing – there is no being stagnant.” Many companies find themselves in a comfort zone, where they can easily maintain a status quo. They fear trying to take their business to the next level and leaving that comfort zone. Evolve Financial Services will give you the tools and data you need to have a thorough understanding of where your business currently is and have a clear vision of where it can go. With accurate, up-to-date financial information and outstanding business tools and processes, Evolve Financial Services will give you the confidence to take your business to its full potential. As hockey great and NHL Hall of Famer Wayne Gretzky said, “You miss 100% of the shots you don’t take.”

The post Let Evolve Financial Services Help Your Business Reach Its Maximum Potential appeared first on Evolve Financial Services.

The April 15th tax filing deadline is right around the corner. While time is already out to contribute to your employer-sponsored 401(k), there is still time to minimize your tax bill by contributing to other retirement accounts.

There is still time to contribute to an Individual Retirement Account (IRA) for 2013. The deadline to contribute to an IRA is April 15, 2014. The contribution limit is $5,500 for people under age 50 and $6,500 for people ages 50 and older. Your deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. Be sure to tell your plan sponsor that any contributions made before April 15 is designated for 2013. Many financial advisers recommend making IRA contributions as early in the year as possible as markets tend to start off stronger at the beginning of the year, giving you a bigger boost than if you wait until April to contribute.

If you have not established an IRA yet, you still have time for that as well. The IRA establishment deadline is also April 15. Make sure your IRA application is postmarked by midnight the day of the deadline to be valid.

Self-employed individuals have an additional opportunity to contribute to retirement savings. If some or all of your income is via self-employment, you can contribute up to 25 percent of your net earnings from self-employment, up to $51,000, to a Simplified Employee Pension (SEP) plan. You have until the due date of your tax return, including any extensions, to establish and fund your SEP for the 2013 tax year.

The post There is Still Time to Make Tax-Deductible Contributions to Your IRA appeared first on Evolve Financial Services.

Under the program, companies that meet the eligibility criteria will receive a $2,500 job tax credit for each new position they create and retain for one year. The program is capped at $50 million worth of job tax credits, which are claimed against payroll withholdings.

How do you qualify? If your organization has 50 or fewer full-time employees, including all of your organization’s locations and subsidiaries, as of July 1, 2012, you may be eligible. Your organization and the newly created position must be located in Illinois. In addition, your employee headcount must stay the same or increase to receive the tax credit. Creating one new position while eliminating others will disqualify you from receiving the credit. If your organization has more than 50 full-time employees, you can still qualify for the tax credit by hiring a 2010 “Put Illinois to Work Program” worker-trainee.

In addition to meeting the requirements for your organization, the position you create also needs to meet some specific criteria. It must be a new position, created between July 1, 2012 and June 30, 2016. The job must pay at least $10 per hour or an equivalent annual salary of at least $18,200. The position must be filled by either a salaried employee or an hourly employee working at least 35 hours per week and that person cannot have previously been employed with your organization for six months prior to the start of the program, July 1, 2012. To receive the credit, the position must be retained for one full year, but does not have to be held by the same person for the entire 12-month period.

You can receive the job tax credit for every new position you create and retain. But you have to apply for the credit, which can be done as soon as the new, full-time employee begins work. Because the program has a cap and applications are processed on a first-come, first-serve basis, we strongly encourage those organizations that qualify to complete the application as early as possible. Approximately one year after you have filed the new position, you will need to provide substantiating data that all requirements were met before the tax credit certificate will be issued to you.

As with most things tax related, determining if you meet all the criteria and qualify for the credit can be confusing. Evolve Financial Services is ready to help. We offer a free assessment to help you determine if your organization qualifies for the job tax credits. If we find that your organization qualifies, we will assist you in registering all qualifying positions for a 10 percent processing fee for each tax credit for which you qualify. If you’re one of the 95 percent of Illinois businesses with fewer than 50 employees, don’t miss out on this tax saving opportunity. Call Evolve Financial Services at 847-212-3694 or email us at info@evolvefinancialservices.com to get started.

The post Does Your Company or Not-for-Profit Organization Qualify for Illinois Small Business Job Creation Program Tax Credits? appeared first on Evolve Financial Services.

Who you invite and what transpires at the event determines how much of the expense you can deduct. Simply throwing a party to generate goodwill is not deductible and will be disallowed. The only exceptions to this is hosting a party for employees and their families, such as an annual holiday party, or hosting an event for the general public. In all other cases, the event must be directly related to the conduct of business or directly related to a substantial business discussion that takes place at some point during the event, either before, during, or after. Examples of relevant business elements include presentations, demonstrations, sales pitches, speeches, product displays, and product discussions. In addition, the environment must be conducive to conducting business. A loud environment, like a sports event, or a sales pitch that follows a party with significant consumption of alcohol may be rejected as impeding the ability to have an in-depth business discussion. IRS rules also state that the party or event cannot be lavish or extravagant. What constitutes lavish or extravagant is subjective and can be difficult to define, so keep it relatively simple to play it safe.

The guest list also determines how much of your event you can deduct. As previously mentioned, events for employees and their family members or the general public qualify for 100 percent deduction. No business discussion is required in these situations. Customers, prospective customers, and independent contractors associated with your firm qualify for the standard 50 percent entertainment deduction, but only if the event has a business purpose. Friends and family, including family members who are also employees, are not deductible.

If your event includes a mix of employees, clients, and family, it is important to keep track of the number of each so you know how to handle deductions. You will need to attribute the correct percentage of the total cost to each category and then take the appropriate deduction. For example, assume you spent $1,500 on an event for 75 people, with 25 attendees in each category. You would divide the total cost and attribute one-third, or $500, for each group of attendees. For the 25 employees, you can deduct the entire $500 that would be attributed.  For the 25 clients, you can deduct half of the amount attributed to them, or $250. For the 25 family members and friends, you cannot deduct any of the amount.

Documentation is critical in ensuring your deduction is allowed. This should include:

• A copy of the invitation, which should clearly indicate the business purpose of the event.
• A copy of the guest list, totaled by employees, customers, and friends and family. You can have attendees sign a guest book or track RSVPs.
• Keep all receipts, invoices, and cancelled checks or credit card receipts.
• Video of the relevant presentations, speeches, or business discussions or photographs of guest viewing product displays or demonstrations are a good idea to have as proof that you met the requirement of a relevant business purpose.

Make sure all of your documentation is maintained in your tax file. Ensure that your bookkeeper or tax professional is aware that the event included employees so that it is properly reported at tax time. Otherwise it may be reported under the 50 percent entertainment rule, costing you a valuable write-off.

The post If You Follow the IRS Rules, Your Business Party or Event Can Be Tax Deductible appeared first on Evolve Financial Services.