MCB Accounting Blog

Here are seven tax-free benefits that keep cash in employees' pockets and may provide attractive deductibles for employers.

1. Frequent flyer miles.  Employees who fly on business can earn miles tax-free when they pay with a personal credit card for reimbursed corporate travel. When used as a rebate, the IRS permits employees to exclude frequent flyer benefits from taxable compensation.
2. Non-cash awards and prizes.  The IRS allows employees to exclude three types of non-cash awards from employers.  Certain employee achievement awards that are a part of a "meaningful presentation" are tax-free as long as the gift does not appear to be disguised wages. Certain prizes or awards transferred to charities are tax-exempt, as are "de minimis awards and prizes," which are not cash or cash equivalent, of nominal value and provided infrequently.
3. Cell phones. Tax-free treatment of cell phones is applicable in cases where employers provide cell phones to employees or where employers reimburse their employees for the business use of personal cell phones without burdensome recordkeeping requirements.
4. Meals and lodging on employer premises.  Meals are excludable from employee wages if they are provided on an employer's business premises and for the employer's convenience. Lodging also can be tax-free for employees if it is provided at the worksite, for the employer's convenience and is a condition of employment.
5. Commuter benefits and free parking. Employers can contribute $125 per month tax-free for public transportation, $240 per month for qualified parking or $365 per month for both public transportation and qualified parking.
6. Dependent care assistance.  Generally, an employee can exclude from gross income up to $5,000 of benefits received under a dependent care assistance program each year.  The exclusion cannot be more than the smaller of the earned income of either the employee or the employee's spouse.
7. Qualified educational assistance. Tuition or educational expenses paid by an employer for an employee under an educational assistance plan are excludable from employee wages if certain IRS requirements are met. An employee cannot receive more than $5,250 per calendar year from his or her employer.

Click here to view the complete AccountingToday.com article.

Contact an MCB Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

President Obama has signed into law the Jumpstart Our Business Startups (JOBS) Act. The Act lowers regulatory and auditing barriers for companies to seek funding and enter capital markets. Congress passed the bill in late March with strong bipartisan support despite opposition from several investor groups and accounting organizations, who warned that the bill would weaken auditing safeguards and investor protections.

The bill aims to reduce the cost of going public by giving companies a temporary reprieve from certain Securities and Exchange Commission (SEC) regulations.  It phases in the regulations over five years to allow smaller companies to go public sooner.  The bill also creates a new category of issuers called emerging growth companies, which would retain that status for five years or until they reach or exceed $1 billion in annual gross revenue or become large accelerated filers.

It also removes an SEC regulatory ban preventing small businesses from using advertisements to solicit investors and eliminates SEC restrictions on "crowdfunding" so entrepreneurs can raise equity capital from a large pool of small investors who may or may not be considered "accredited" by the SEC. Companies would be able to pool up to $1 million from investors without registering with the SEC, or up to $2 million if the company provides the SEC with audited financial statements.

Other provisions also make it easier for small businesses to go public. The bill increases the offering threshold for companies exempted from SEC registration for $5 million to $50 million and raises the shareholder registration requirement threshold from 500 to 1,000.

Click here to view the complete Accounting Today article.

Contact an MCB Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

House and Senate negotiators finalized a deal to extend the payroll tax cut, emergency unemployment benefits and the Medicare reimbursement rate for doctors.  Although a few minor details remain to be worked out, a majority of conferees have endorsed the package.  It looked possible at one point that the plan would be derailed over a provision that would have included cuts to federal pensions.  In the end, a compromise was reached that mandates that new federal employees contribute more to their pension funds than workers already on the federal payroll.

The deal extends the payroll tax cut through 2012, with its $100 billion cost added to the deficit. The agreement also reforms the unemployment insurance program, reducing the maximum number of weeks an unemployed worker could receive benefits from 99 to 73 by the end of the year.  Those benefits are to be funded by roughly $15 billion in revenue from the sale of spectrum rights.  The third part of the deal averts a 27 percent cut in the reimbursement rate for doctors under Medicare, paid for with savings from the 2010 health care overhaul, Medicaid and Medicare.

Contact an MCB Tax Adviser at 703.218.3600 and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

Eliminating capital gains taxes on investments in startups could help these companies raise up to an additional $7.5 billion over ten years, according to an analysis by the Kauffman Foundation, which specializes in entrepreneurship. This report is timely because there is legislation pending in Congress that would permanently eliminate capital gains taxes on investments in C corporations with less than $50 million in assets.

Kauffman's estimate of how much additional investment this tax break would generate is based on how much money venture capitalists, angel investors and entrepreneurs themselves currently invest in startups. In 2010, that amount was around $10 billion. Exempting these investments from the current 15 percent capital gains tax rate should lead to a 7.5 percent increase in total investments in startups.

Measures that would lead to more investment in startups should lead to the launch of more high-growth firms and boost the odds that they will reach the growth phase and create jobs. This growth is key because startups contribute the vast majority of net new jobs created in the U.S. economy.

Until 2009, taxpayers could exclude 50 percent of their gains from the sale of stock in qualified small businesses from capital gains taxes.  This amount was increased temporarily to 75 percent, then additional  legislation raised it to 100 percent for stock in qualified small businesses acquired before the end of 2011.  This small business stock must be held for five years in order to qualify for the tax break, making it hard to tell how much additional investment was generated.

President Obama has proposed additional enhancements to make these investments even more attractive: making the capital gains tax break exempt from the alternative minimum tax and giving investors six months to roll over their gains into new investments in small businesses.

Click here for the complete Portfolio.com article.

MCB has over 40 years of experience serving Private Equity and Venture Capitalists with accounting, tax, audit, due diligence and consulting services. Contact Matt Dwyer at 703.218.3600 to start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

Top Republican lawmakers have said that they expect to reach a deal with Democrats to extend the payroll tax cut before it expires at the end of February, but they offered no specifics on how they would pay for it. Republican and Democratic lawmakers have started negotiating a deal to extend unemployment benefits and a tax break for 160 million Americans beyond February.  If they fail to reach agreement, the payroll tax, which funds the Social Security retirement program, will revert to 6.2% from 4.2%, leaving workers with about $900 less in their wallets this year.

Disagreements over how to pay for the tax break hampered lawmakers' efforts to extend it until the end of this year. Democrats had proposed a surtax on millionaires. Republicans had proposed cutting salaries and benefits for federal workers as well as raising premiums on wealthier Medicare recipients.

In the end, lawmakers agreed to increase the fees the government's mortgage backers, Fannie Mae and Freddie Mac charge lenders to guarantee loans.

Click here to view the complete Fiscal Times article.

Contact an MCB Tax Adviser for your tax and accounting needs at 703.218.3600 or at info@mcb-cpa.com.

President Obama has announced that he is elevating the head of the U.S. Small Business Administration, Karen Mills, to a Cabinet-level position.  The move was greeted with applause by small-business owners present at the White House for the announcement. According to Mr. Obama, the purpose of the move was to ensure that "small-business owners have their own seat at the table."

Mills is credited  with reducing lender paperwork for SBA-backed loans, enforcing stricter oversight of government contracting and rolling out several laws that facilitated more lending to small businesses.  Other administrations have elevated people to cabinet-level status, which is mostly a symbolic way of saying they and their subject areas are considered important.

The announcement accompanied a broader proposal to combine the SBA with five other government offices to become a single, streamlined agency.  The proposal would merge the Department of Commerce's core business functions with the Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, and the Trade and Development Agency. The new agency would replace the Department of Commerce.

Under the broader plan, the SBA administration would no longer be in the Cabinet following the reorganization.

Closely held businesses are the backbone of MCB's success.   We understand the pressures you face today.  We work together with our clients as accounting, business, and tax advisers to navigate the current economic difficulties.  Contact an MCB adviser for your tax and accounting needs at info@mcb-cpa.com or 703.218.3600 to start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

A White House appointed group of business, academic and labor leaders has recommended corporate tax reforms and other measures to increase jobs and improve the economy.  The 27-member President's Council on Jobs and Competitiveness is chaired by GE chairman and CEO Jeffrey Immelt. The Jobs Council has issued 35 recommendations to foster growth, competitiveness, innovation and job creation.

In a meeting with President Obama on January 17, 2012, the Council reported that of the 35 recommendations the council has made that don't require legislative action, the White House reported that Obama has taken action on 33 and the administration has already implemented 16. Implemented recommendations include proposing new tax rules that encourage businesses to invest and create jobs in the United States instead of overseas, expediting job-creating infrastructure projects across the country, eliminating inefficient and burdensome federal regulations and streamlining government.

A new report issued in advance of the meeting details recommendations to improve long-term competitiveness by investing in the U.S. education system, building on existing strengths in manufacturing and energy and reforming the regulatory and corporate tax systems.  This year-end report, titled "Road Map to Renewal," also addresses broader factors influencing American prosperity and competiveness in a global age.

Click here to view the complete AccountingToday.com article.

Closely held businesses are the backbone of MCB's success.   We understand the pressures you face today.  We work together with our clients as accounting, business, and tax advisers to navigate the current economic difficulties.  Contact an MCB adviser for your tax and accounting needs at info@mcb-cpa.com or 703.218.3600 to start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.