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.

If you are starting a business and don't have your heart set on a particular state for personal or business reasons, taxes may be a consideration.  They also can make or break a deal for some entrepreneurs.

The Small Business and Entrepreneurship Council recently unveiled its Business Tax Index, which identifies state tax systems best and least suited for small businesses. The ranking looks at 18 different tax measures and combines those into a single score for comparison. Among the taxes included are income, capital gains, property, death /inheritance, unemployment, and various consumption-based taxes, including state tax and diesel levies.

The top 15 tax-friendly states for starting a small business are as follows:  1. South Dakota, 2. Texas, 3. Nevada, 4. Wyoming, 5. Washington, 6. Florida, 7. Alaska, 8. Alabama, 9. Ohio,  10. Colorado,  11. Mississippi, 12. Michigan,  13. South Carolina,  14. Tennessee, and 15.  Missouri.

The 15 worst state tax systems are:  37. Nebraska, 38. North Carolina, 39. Illinois, 40. Oregon, 41. Rhode Island, 42. Connecticut, 43. Hawaii, 44. Vermont, 45. California, 46. Maine, 47. Iowa, 48. New York,  49. New Jersey, 50. Minnesota, and 51. District of Columbia.

Click here to view the complete Portfolio.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.

The House has approved Republican-backed legislation to provide a tax cut of up to 20% for one year to businesses with fewer than 500 employees.  While the bill is aimed at small businesses, Democratic lawmakers have complained that most of the benefits would go to much larger companies. The bill is not expected to go far in the Democratic-controlled Senated.

Under the legislation, which is known as the Small Business Tax Cut Act, businesses with fewer than 500 employees would be eligible for a 20% deduction on their domestic business activities income, restricted to half of the amount of wages paid to employees.

Democratic lawmakers are backing an alternative that extends a tax break on equipment purchases for another year, but that was defeated by a vote of 236-175. Democrats also plan to schedule a vote on a bill combining the bonus depreciation extension with a tax break for new hires in the coming weeks.

Click here to view the complete WebCPA.com article

Contact us today with your audit, accounting and tax needs at 703.218.3600 or email info@mcb-cpa.com and start building a relationship with a CPA firm who strives to earn your RESPECT and CONFIDENCE as a TRUSTED business adviser.

Congressional Democrats have introduced a bill that would provide tax relief to homeowners who were wrongfully foreclosed upon and receive money from the recent mortgage foreclosure settlement.  The bill would protect homeowners from extra tax on debt forgiveness and settlement payments received.

State attorneys general across the country successfully sued five of the major banks that were accused of using so-called "robo-signing" and other dubious methods to expedite illegal foreclosures.  The $25 billion settlement will allow hundreds of thousands of distressed homeowners to stay in their homes through enhanced loan modifications and principal reduction and provide payments to victims of unfair foreclosure practices.

However, under current law, those settlement payments would subject the homeowners who receive them to additional tax.  Homeowners receiving relief in the form of mortgage debt forgiveness and cash payments for wrongful foreclosure could be subject to federal income tax. In addition, extra taxes would be owed on payments received by servicemembers who were wrongfully foreclosed upon while deployed overseas.

The Homeowners Tax Fairness Act would protect homeowners and service members who were wrongfully foreclosed on from additional tax burdens by extending the exclusion for debt forgiveness on a primary residence throughout the terms of the settlement agreement and exclude the relief payments from income. The bill also denies the banks who wrongfully foreclosed on or overcharged mortgage interest on servicemembers the ability to deduct these payments from their federal income taxes.

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.

C-SPAN, April 7th, 8:30 to 10 am:  MCB is proud to announce that Bob Baldassari, MCB Principal and Tax Expert, has been invited as an expert guest to appear on C-SPAN's Washington Journal program offering viewers advice for preparing their federal taxes.  The show will feature two Washington tax experts who will take questions via phone calls, tweets and emails.  

One guest is Kevin McCormally from Kiplinger and the other is Matthews, Carter & Boyce's very own Tax Expert, Bob Baldassari.   The segment will air from 8:30 to 10 a.m. this coming Saturday, April 7.  The host will be Robb Harleston.  MCB will post a video link of the show on our blog next week.

MCB has over 60 years of experience serving clients as a full service accounting firm.  Contact us today with your audit, accounting and tax needs at 703.218.3600 or email info@mcb-cpa.com.

The IRS has released a set of proposed regulations expanding the list of tax return preparers who may obtain and renew a Preparer Tax Identification Number (PTIN).  The proposal provides for two additional categories: certain supervised tax return preparers and preparers who prepare tax returns and claims for refund that are not covered by a competency examination.

In the first category, any individual 18 years of age or older is eligible for a PTIN if the individual is supervised by an attorney, CPA, enrolled agent, enrolled retirement plan agent or enrolled actuary authorized to practice before the IRS. In the second category, any individual 18 years of age or older is eligible for a PTIN if he or she exclusively prepares tax returns and claims for refund that are not covered by any minimum competency test prescribed by the IRS.  To be eligible for a PTIN, the individual must certify that he or she only prepares returns and claims for refund that are not covered by a minimum competency test.  Individuals must also comply with any other eligibility requirements that the IRS may prescribe.  These requirements are set forth in IRS Notice 2011-6.

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

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.