Hawkins Ash CPAs https://hawkinsashcpas.com Part of your business. Part of your life. Wed, 20 Mar 2019 17:29:41 +0000 en-US hourly 1 FinCEN Creates Exception to Beneficial Ownership Rule https://hawkinsashcpas.com/fincen-creates-exception-to-beneficial-ownership-rule/ Mon, 18 Mar 2019 13:41:56 +0000 https://hawkinsashcpas.com/?p=7200 As part of its efforts to combat money laundering and other fraudulent activity, the Financial Crimes Enforcement Network (FinCEN) issued its Beneficial Ownership Rule, effective for new accounts opened on or after May 11, 2018. The rule requires financial institutions , as part of their customer identification programs, to verify the identity of the beneficial […]

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As part of its efforts to combat money laundering and other fraudulent activity, the Financial Crimes Enforcement Network (FinCEN) issued its Beneficial Ownership Rule, effective for new accounts opened on or after May 11, 2018. The rule requires financial institutions , as part of their customer identification programs, to verify the identity of the beneficial owners of certain legal entities. Beneficial owners include individuals who, directly or indirectly, own 25 percent or more of an entity, as well as any individual who has “significant responsibility to control, manage or direct the legal entity.”

In a September 7, 2018, ruling, FinCEN created an exception to the beneficial ownership rule for legal entities that open new accounts on or after the effective date as a result of:

  • Rolling over a certificate of deposit
  • Renewing, modifying or extending a loan, commercial line of credit or credit card account that doesn’t require underwriting review and approval
  • Renewing a safe deposit box rental

The exception applies only to rollovers, renewals, modifications or extensions of the above product types that take place on or after May 11, 2018. It doesn’t apply to the initial opening of such accounts.

Financial Institutions Considering Use of Alternative Credit Data

Some lenders are considering the use of alternative data to expand access to credit for people with thin credit histories or negative items on their credit reports. By developing innovative techniques for analyzing a borrower’s ability to repay, lenders can expand their pools of potential borrowers beyond those identified by traditional techniques.

Alternative data refers to information that may be used to evaluate creditworthiness but is not traditionally part of a credit report. Examples include rent payments, mobile phone payments, cable TV payments and bank account information. This may also include education, occupation and even social media activities.

It may take some time before alternative data techniques catch on among community financial institutions. In 2017, the Consumer Financial Protection Bureau (CFPB) released a “Request for Information” seeking information about alternative data and the modeling techniques used to analyze them. You can find the document, which discusses the benefits and risks associated with alternative data, at https://www.consumerfinance.gov/policy-compliance/notice-opportunities-comment/archive-closed/request-information-regarding-use-alternative-data-and-modeling-techniques-credit-process.

Supervisory Guidance Isn’t the Law

In a recent joint statement, the federal financial institution agencies clarified that supervisory guidance “does not have the force and effect of law.” Among other things, the agencies intend to limit the use of numerical thresholds or other “bright lines” in describing expectations, and examiners won’t criticize financial institutions for “violations” of supervisory guidance.

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QuickBooks Update: March 15, 2019 https://hawkinsashcpas.com/quickbooks-update-march-15-2019/ Mon, 18 Mar 2019 12:49:53 +0000 https://hawkinsashcpas.com/?p=7312 Headlines in the March 15, 2019 QuickBooks Update include the following: Faster ACH Payments Coming This Year What’s the Difference Between an Invoice, Sales Order or Estimate in QuickBooks? Protect Prior Year Data – Set a Closing Date Password Updating SUTA Rates QuickBooks 2016 to be Discontinued on May 31, 2019 View and sign up […]

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Headlines in the March 15, 2019 QuickBooks Update include the following:

  • Faster ACH Payments Coming This Year
  • What’s the Difference Between an Invoice, Sales Order or Estimate in QuickBooks?
  • Protect Prior Year Data – Set a Closing Date Password
  • Updating SUTA Rates
  • QuickBooks 2016 to be Discontinued on May 31, 2019

View and sign up for the newsletter here>>>

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Podcast: Items That Can Drastically Change Your Return https://hawkinsashcpas.com/podcast-items-that-can-drastically-change-your-return/ Fri, 08 Mar 2019 20:20:01 +0000 https://hawkinsashcpas.com/?p=7271 For many people, your return looks similar this year than it did last year. But there are things that can affect your return which may have a large impact. That is what I want to talk about today. Click the orange button to play: Script: – Okay, so I know the first one is probably […]

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For many people, your return looks similar this year than it did last year. But there are things that can affect your return which may have a large impact. That is what I want to talk about today.

Click the orange button to play:

Script:

– Okay, so I know the first one is probably going to be children.

Exactly. So, did you know that once a child is born, if your income is low enough, you get a $2,000 per child tax credit? So that can definitely change the way your return works. When the child turns 17, you lose that credit. Sometimes we have that time when the child turns from 16 to 17 and the parents are used to getting a really nice refund and all of a sudden they don’t get that refund anymore because they just lost that $2,000 child tax credit.

As your income goes up and down, your earned income credit could sway drastically and really affect the refunds that you’re getting. But when you have children, you have daycare expenses. For daycare expenses, that can be a large burden on a family, but it can also be a nice tax deduction whether you run it through your company plan or take it as a credit on your tax return.

Then of course in the later stages, your child goes to college. For the first four years, you may be eligible depending on your income limit to a $2,500 credit. Once that child goes into their 5th year of college, that credit is reduced substantially because rather than getting the American Opportunity Credit, you potentially get a Lifetime Learning Credit, which is a lot less. So in those years we can notice that people’s refunds tend to fluctuate.

– Okay, so what about adults? Can adults change your return?

Oh, absolutely. One of the things that can change it a lot is the death of a spouse, divorce, even when you get married. When it comes to the death of a spouse, you’re always considered as married-filing joint until the end of the year. So this change doesn’t really take effect until the next year. But for divorce and for marriage, it’s your status as of the end of the year. So if you get divorced or married on December 30th, that’s your status for the whole year. Not just that one day.

Then there’s of course other things like loss of job and unemployment, cancellation of debt if there is a credit card or something that cancels the debt you owe to them, distributions from retirement plans, and just the Affordable Care Act and the subsidies that go with that – we’ve talked about that on prior shows and that can have a big impact.

– What about senior citizens?

Senior citizens are another one. Getting married later I life can really have an effect on your taxes. Taxable social security benefits are the ones that we see the most.

Let’s say that you have two individuals and together they don’t make a lot of income. Generally their social security benefits are not taxable. But now you combine their incomes together and their social security benefits become taxable. That can be a huge amount for some people and really affect their taxes.

Also, when you turn 70 and a half you get the required minimum distribution. Then there’s other things like gifting directly through an IRA that we’ve talked about on prior shows.

– Okay, what about things that don’t affect your taxes?

There’s a lot of things people ask us about, and they say, “Do I get a deduction for this or do I get income for this?” There’s things like burial expenses, funeral expenses, credit card fees that aren’t for your business, home repairs, life insurance premiums, and a lot of times rent payments. There’s no deduction on the federal side or a lot of times on the state side allowed
for that. Those don’t really affect your taxes.

Talk to your CPA to determine if any of the above ideas may affect you.

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Did You Repair Your Business Property or Improve It? https://hawkinsashcpas.com/did-you-repair-your-business-property-or-improve-it/ Fri, 08 Mar 2019 16:27:10 +0000 https://hawkinsashcpas.com/?p=7263 Repairs to tangible property, such as buildings, machinery, equipment or vehicles, can provide businesses a valuable current tax deduction — as long as the so-called repairs weren’t actually “improvements.” The costs of incidental repairs and maintenance can be immediately expensed and deducted on the current year’s income tax return. But costs incurred to improve tangible […]

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Repairs to tangible property, such as buildings, machinery, equipment or vehicles, can provide businesses a valuable current tax deduction — as long as the so-called repairs weren’t actually “improvements.”

The costs of incidental repairs and maintenance can be immediately expensed and deducted on the current year’s income tax return. But costs incurred to improve tangible property must be capitalized and recovered through depreciation.

Betterment, Restoration or Adaptation

Generally, a cost must be depreciated if it results in an improvement to a building structure, or any of its building systems (for example, the plumbing or electrical system), or to other tangible property. An improvement occurs if there was a betterment, restoration or adaptation of the unit of property.

Under the “betterment test,” you generally must depreciate amounts paid for work that is reasonably expected to materially increase the productivity, efficiency, strength, quality or output of a unit of property or that is a material addition to a unit of property.

Under the “restoration test,” you generally must depreciate amounts paid to replace a part (or combination of parts) that is a major component or a significant portion of the physical structure of a unit of property.

Under the “adaptation test,” you generally must depreciate amounts paid to adapt a unit of property to a new or different use — one that isn’t consistent with your ordinary use of the unit of property at the time you originally placed it in service.

Safe Harbors

A couple of IRS safe harbors can help distinguish between repairs and improvements:

1. Routine maintenance safe harbor .

Recurring activities dedicated to keeping property in efficient operating condition can be expensed. These are activities that your business reasonably expects to perform more than once during the property’s “class life,” as defined by the IRS.

Amounts incurred for activities outside the safe harbor don’t necessarily have to be depreciated, though. These amounts are subject to analysis under the general rules for improvements.

2. Small business safe harbor .

For buildings that initially cost $1 million or less, qualified small businesses may elect to deduct the lesser of $10,000 or 2% of the unadjusted basis of the property for repairs, maintenance, improvements and similar activities each year. A qualified small business is generally one with gross receipts of $10 million or less.

More to Learn

To learn more about these safe harbors and other ways to maximize your tangible property deductions, contact us.

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Tax+Business Alert: March 5, 2019 https://hawkinsashcpas.com/taxbusiness-alert-march-5-2019/ Fri, 08 Mar 2019 16:17:50 +0000 https://hawkinsashcpas.com/?p=7259 Headlines in the March 5, 2019 Tax+Business Alert Newsletter include the following Weigh the Tax Impact of Income vs. Growth When Investing Podcast: Where’s My Refund Did You Repair Your Business Property or Improve It? View and sign up for the newsletter here>>>

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Headlines in the March 5, 2019 Tax+Business Alert Newsletter include the following

  • Weigh the Tax Impact of Income vs. Growth When Investing
  • Podcast: Where’s My Refund
  • Did You Repair Your Business Property or Improve It?

View and sign up for the newsletter here>>>

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Weigh the Tax Impact of Income vs. Growth When Investing https://hawkinsashcpas.com/weigh-the-tax-impact-of-income-vs-growth-when-investing/ Fri, 08 Mar 2019 16:09:18 +0000 https://hawkinsashcpas.com/?p=7256 As the 2018 tax-filing season heats up, investors have much to consider. Whether you structured your portfolio to emphasize income over growth — or vice versa, or perhaps a balance of the two — will have a substantial impact on your tax liability. Let’s take a look at a couple of the most significant “big […]

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As the 2018 tax-filing season heats up, investors have much to consider. Whether you structured your portfolio to emphasize income over growth — or vice versa, or perhaps a balance of the two — will have a substantial impact on your tax liability. Let’s take a look at a couple of the most significant “big picture” issues that affect income vs. growth.

Differing Dividends

One benefit of dividends is that they may qualify for preferential long-term capital gains tax rates. For the 2018 tax year, the top rate is 20% for high-income taxpayers (income of $425,800 or more). For those with incomes between $38,601 and $425,800, the rate is 15%. Individuals with incomes of $38,600 and below pay 0% on long-term capital gains.

Keep in mind, however, that only “qualified dividends” are eligible for these rates. Nonqualified dividends are taxed as ordinary income at rates as high as 37% for 2018. Qualified dividends must meet two requirements. First, the dividends must be paid by a U.S. corporation or a qualified foreign corporation. Second, the stock must be held for at least 61 days during the 121-day period that starts 60 days before the ex-dividend date and ends 60 days after that date.

A qualified foreign corporation is one that’s organized in a U.S. possession or in a country that has a current tax treaty with the United States, or whose stock is readily tradable on an established U.S. market. The ex-dividend date is the cutoff date for declared dividends. Investors who purchase stock on or after that date won’t receive a dividend payment.

Timing is Everything

One disadvantage of dividend-paying stocks (or mutual funds that invest in dividend-paying stocks) is that they accelerate taxes. Regardless of how long you hold the stock, you’ll owe taxes on dividends as they’re paid, which erodes your returns over time.
When you invest in growth stocks (or mutual funds that invest in growth stocks), you generally have greater control over the timing of the tax bite. These companies tend to reinvest their profits in the companies rather than pay them out as dividends, so taxes on the appreciation in value are deferred until you sell the stock.

Keeping an Eye Out

Regardless of your investment approach, you need to understand the tax implications of various investments so you can make informed decisions. You should also keep an eye on Congress. As of this writing, further tax law reform beyond the Tax Cuts and Jobs Act of 2017 isn’t on the horizon — but it’s being discussed. Contact our firm for the latest news and to discuss your tax and investment strategies.

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Hawkins Ash CPAs Ranks among Top 25 Accounting Firms in Greater Milwaukee Area https://hawkinsashcpas.com/hawkins-ash-cpas-ranks-among-top-25-accounting-firms-in-greater-milwaukee-area/ Mon, 04 Mar 2019 20:13:52 +0000 https://hawkinsashcpas.com/?p=7241 With thorough experience providing tax, audit and accounting services to individuals and privately-held businesses, Hawkins Ash CPAs recently ranked among the largest Certified Public Accounting firms in the Milwaukee area by the Milwaukee Business Journal.   Hawkins Ash CPAs expanded services to southeastern Wisconsin in 2018 by merging with the Mequon office of Anderson Tackman […]

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With thorough experience providing tax, audit and accounting services to individuals and privately-held businesses, Hawkins Ash CPAs recently ranked among the largest Certified Public Accounting firms in the Milwaukee area by the Milwaukee Business Journal.
 
Hawkins Ash CPAs expanded services to southeastern Wisconsin in 2018 by merging with the Mequon office of Anderson Tackman & Company which has been serving Milwaukee area individuals and businesses since 1982. The Milwaukee-area office of Hawkins Ash CPAs is located at 1249 W. Liebau Rd, Mequon, WI 53092. The 10 certified public accountants and 19 total staff members in that location are supported by the firm’s other eight offices, 55 CPAs and nearly 140 total employees. 

Since 1956, Hawkins Ash CPAs has been providing expertise in audit, accounting, tax and consulting services to a wide variety of sectors, including individuals, privately held businesses, nonprofit organizations, governmental entities, credit unions and housing authorities. Hawkins Ash CPAs is now a $19.5 million firm that aims to rank in the top 200 in a field of over 44,000 accounting firms in the nation.

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Accounting for Fees Paid in a Cloud Computing Arrangement https://hawkinsashcpas.com/accounting-for-fees-paid-in-a-cloud-computing-arrangement/ Mon, 04 Mar 2019 11:43:17 +0000 https://hawkinsashcpas.com/?p=7196 In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . This ASU amends the definition of a hosting arrangement to be “an arrangement in which the customer […]

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In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . This ASU amends the definition of a hosting arrangement to be “an arrangement in which the customer of the software does not currently have possession of the software; rather, the customer accesses and uses the software on an as-needed basis.” The ASU goes on to clarify the accounting for implementation, setup, and other upfront costs (implementation costs) incurred to implement a hosting arrangement that is a service contract.

A customer in a cloud computing arrangement that is a service contract is now required to follow the internal-use software guidance in Accounting Standards Codification (ASC) 350-40 to determine which implementation costs to capitalize as assets. A customer’s accounting for the hosting component of the arrangement is not affected by the new guidance. Implementation costs will be capitalized or expensed depending on the nature of the costs and the project stage (preliminary project stage, the application development stage, or the post-implementation stage) during which they are incurred. Generally, only costs associated with the application development stage are going to be capitalized. Overhead costs cannot be capitalized.

The capitalized implementation costs will be amortized over the life of the hosting arrangement, plus any reasonably certain renewal periods on a straight-line basis, unless another methodology is justifiable.

The amendments in ASU 2018-15 are effective for annual reporting periods beginning after December 15, 2020 for all nonpublic entities. Early adoption is permitted and should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Overall, entities should review hosting arrangements that are service contracts, determine whether costs are associated with the purchase of a software or are for a service, capitalize implementation costs with the purchase of the software that are incurred during the application development stage, and amortize these costs over the life of the hosting arrangement.

If you have any questions regarding the accounting for fees paid in a cloud computing arrangement, please contact your Hawkins Ash CPAs representative.

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Podcast: Where’s My Refund https://hawkinsashcpas.com/podcast-wheres-my-refund/ Wed, 27 Feb 2019 21:43:49 +0000 https://hawkinsashcpas.com/?p=7233 Listen in about certain factors that may affect how long it will take to receive your tax refund:   Script: As we get into the middle of tax season, returns are being filed and refunds are issued. Did you know that there are factors that can affect the timing of your refund? – Such as? […]

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Listen in about certain factors that may affect how long it will take to receive your tax refund:

 

Script:

As we get into the middle of tax season, returns are being filed and refunds are issued. Did you know that there are factors that can affect the timing of your refund?

– Such as?

Well it depends on how you file your return. So, if you e-file your return and you ask for direct deposit, 90 percent of those returns should be in your bank account within 21 days. But we’re seeing many within 7 to 10 days. So that, by far, is the fastest way to file your return and I think that’s what the majority of people are using now.

But there are some people who are e-filing and then asking for a paper check. That can delay your refund. So with that, you would be looking at the tail-end of the 21 days. So rather than 7-10 days, you may be looking at 21 or maybe even a little more than 21 days.

If you’re somebody who still likes to hand-file your return and you send that in via snail mail, you’re looking at 6 to 8 weeks before you’ll get your refund.

– Are people still filing out tax returns manually?

There are some, we get clients every year where we ask for the prior year return and it’s a hand-written return.

– Wow! I thought that was the thing of the past.
So, what can delay a refund?

It doesn’t happen as much anymore with the e-filing, but paper returns especially have errors. For example, math errors, ID numbers where your social security number is mismatched, and also matching errors. The IRS is doing more matching, like taking your W-2 information and comparing it to returns that are filed. States are also matching a lot of different things.

There’s also identity theft or identity fraud. So, if that happens, the IRS will contact you, but that will of course slow your refund down, because the IRS really wants to make sure they’re giving this refund to the right person. They’ve been kind of big on that before.

If you have the earned income credit, which a lot of people do, at least for the 2017 year, those refunds weren’t even issued until the end of February. I would assume the same thing is going to happen this year is they probably won’t be issued until the end of February.

Other abnormalities, things that just don’t look right from returns that you’ve filed in the past. Maybe you have four dependents now or maybe you used to have no dependents. There’s just other things like that.

There’s the Government shutdown. There’s been talk in the past about the government shutdown and delaying refunds. I think they’ve said that the refunds would not be delayed, but there could be reasons with a paper-filed return that the refunds could be delayed because it’s slower to process through the IRS system.

The other interesting thing is States. There was a couple years ago where the state of Illinois actually did not send out refunds in a timely manner because they couldn’t afford it.

– Hey I think it’s important to note too when the IRS contacts you, they’re not going to call you – they don’t have your phone number. It’s most likely a scam if someone is saying they’re the IRS and calling you. They have very traditional ways of communicating.

That’s exactly right. So they generally do not do phone calls or email. They mostly do mail at this point. I think that may change in the future, but right now I would be highly critical if they sent it to you in anything other than mail.

– Can I check on the status of my refund?

Sure. What you can do is you can call the IRS directly. I probably wouldn’t suggest that because you’re going to be waiting on hold for a long time. Even to just get your refund status.

The other thing you can do is go right to the IRS website. They have a great tool that’s called “Where’s My Refund.” You can even google “Where’s My Refund” and “IRS” and it’ll bring you right to that site. It gets updated once a day and you can see the status of your refund about 24 hours after your return is filed electronically or 4 weeks after it’s done by paper.

How and when you file your return can really affect when your refund will be issued.

– And you can help file those tax returns?

You bet, we are always taking on new clients. E-filing is really a neat thing and you can get your returns so much faster.

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Throwing Snowballs at Your Mountain of Debt https://hawkinsashcpas.com/throwing-snowballs-at-your-mountain-of-debt/ Fri, 22 Feb 2019 17:26:12 +0000 https://hawkinsashcpas.com/?p=7223 Many people start the year intending to get out of debt, yet end the year owing just as much, if not more. One approach that might yield success is called “throwing snowballs.” Under this method, you organize your debts from the lowest balance to the highest balance and begin paying off the debt on top […]

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Many people start the year intending to get out of debt, yet end the year owing just as much, if not more. One approach that might yield success is called “throwing snowballs.”

Under this method, you organize your debts from the lowest balance to the highest balance and begin paying off the debt on top of the list. The idea is to throw as many “snowballs” as you can gather or earn at that first creditor until the debt is gone.

While you hurl these snowballs, pay the minimum amount to your other creditors. Avoid trying to send an extra $20 or so a month to each one. If you want to contribute extra money, throw it at your primary target.

Once the first debt is paid off, you should have even more money to send to the next one. Over time you can start heaving bigger and bigger snowballs at the remaining targets because, as you pay off each debt, you’ll have more money to pay toward remaining debts.

The objective is to start an avalanche of payoffs until your debts disappear. Under this method, the best predictor of success isn’t the number of dollars you pay off but rather the number of accounts that you close.

Please note: There’s some debate on the practicality of throwing snowballs. Opponents argue that you should first pay off debts with the highest interest rates. We can help you choose a debt-reduction strategy that’s right for you.

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