Finances

Going Solar: Commercial Building Owners Could Save $1M-$7M Over the System’s Life

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If you’re like most New Jersey residential and business building owners, you’ve become accustomed to multimedia messages prodding you to switch to solar power. Maybe you haven’t acted because you think it’s too expensive. Or maybe you find the incentives confusing.

Interestingly, with some of the top incentives in the nation, New Jersey has become one of the most successful solar locations in the United States. According to SEIA, the national trade association for the US Solar Industry, New Jersey ranks seventh in the nation for cumulative solar electric capacity installed through Q3 2020.

This boom has been fueled by a federal tax credit, thriving state incentives and the decreasing cost of installing solar in comparison to the utility costs NJ building owners are used to.

This is especially true for building owners with large flat roofs and high electricity usage on site.  Aside from the obvious environmental benefits of solar power (reduced air pollution, decreased water usage, better control of climate change), these recent incentives make an investment in solar something that New Jersey building owners might want to consider.

What makes solar a good investment in New Jersey?

  • Thriving state incentive – The current program in place is the TREC (transition renewable energy certificates) program, paying $152 per MWh of solar produced for 15 years.
  • Energy savings – New Jersey has high utility rates above the national average. New Jersey has a “Net-Metering Program” where you get a full retail rate credit for the amount of electricity you send back into the grid with your solar array.
  • Federal tax credit – Currently you can get a 26% federal tax credit for the total cost of installing solar.

How much can I save?

  • Capital purchase – For commercial building owners with large flat roofs, we are seeing payback periods on a solar project between 2-4 years and can save $1,000,000-$7,000,000 over the life of the system. We have seen IRR between 10-20 percent for many of our customers.
  • Power Purchase Agreement (PPA) rate – For commercial building owners with large flat roofs, you can see PPA rates from 1-4 cents/kWh vs the 9-12 cents/kWh you are currently paying the utility. This can translate into $1,000,000-$4,000,000 in savings over the life of the system.

The size of the system, and ultimately the annual returns of a solar array, are highly dependent on how much space you have on your rooftop, parking lot and/or property, what you currently pay the utility, and how much electricity you use on an annual basis.

Right now, the returns are so lucrative,  if you need a roof replacement and/or repairs, these costs can be paid for and/or financed into the solar project.

So the time just might be right to invest in solar. It’s not as expensive as you may have thought (in fact, it’s likely to be a huge money saver). And the proper partner, such as Pfister Energy, can simplify the once-confusing incentives that make going solar an attractive alternative.

At no cost to you, Pfister Energy can help analyze your property by designing an array, analyzing your utility bill, and presenting you with a financial analysis on how much solar can save you over the next 15-25 years.

Sean Quin is Vice President, Strategy & Business Development for Pfister Energy, Inc. Founded in 2005, Pfister Energy is an industry leader in solar project development, construction and operations.  Pfister Energy has more than 225MW of solar electric power installed in the U.S.

Four Secrets of a Tax Preparer: What You Don’t Know Can Cost You

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Tax time will be here before you know it. If your return is a simple one, you may be up to preparing and filing yourself. But if your situation is somewhat complicated, seeking the help of a qualified professional may be a smart move.

When you look to hire a professional, keep in mind that training, certifications and expertise can greatly vary from one tax preparer to another. And what you don’t know about them can leave you on the hook for a hefty tax bill.

#1. Many tax preparers lack tax-specific training or expertise. Just because an employee of a large tax preparation company is allowed to complete tax returns doesn’t make them an expert. In fact, the only pre-requisite for obtaining the required preparer tax identification number (PTIN) to file taxes on your behalf is the completion of a simple form — one that takes about 15 minutes to fill out.

Before you engage any tax professional, ask questions about their specific training, qualifications and expertise. Find out how long they’ve been preparing returns, ask about audits they’ve been involved in, and share your personal tax situation. Above all, ensure that you’re confident with their ability to handle your tax return properly.

#2. They very likely won’t be preparing your return. It’s an open secret in the world of tax preparers that returns are prepared in stages. That means the owner of the firm or the most experienced professional will probably not be the one who initiates your return. Instead, a junior associate will likely enter your income information and other relevant data, identify potential deductions and tax credits and give your return a quick review. Once that’s done, a senior advisor or tax preparer verifies the return and signs off on it.

The sheer number of tax returns that experienced firms handle during a busy season makes this multi-step process necessary, but it’s important to know how things work. At Magone & Company, we’ve honed a rigorous quality assurance process to ensure your return gets the right level of attention. Read what our tax clients have to say.

#3. They may not research unusual deductions and tax breaks. Your tax preparer will typically apply the most common deductions and tax credits to your return — things like deductions for educational expenses and health care costs, as well as earned income or retirement tax credits, etc. But what they may not do is research more unusual tax credits and deductions, even if they could potentially save you money.

Keep in mind your accountant is not a mind reader. Without documentation and/or mention of situations such as property held in trust or part ownership of a business, it’s difficult to identify the best way to proceed to minimize your tax burden.

Discuss situations like these with your tax preparer. You may need to pay an extra research fee or renegotiate the cost of preparing and filing your return, but the tax savings could be well worth the extra cost.

#4. CPA doesn’t mean tax relief pro. When clients get into tax trouble or get behind on paying their tax debt, they often turn to the very same tax pro that prepared the return. Unfortunately, most CPAs and tax preparers are not skilled in tax relief.

Tax relief means they know all the available IRS programs to settle your tax debt or give you favorable payment terms that don’t drown you in penalties and interest. Even if they think they know, they may not be experienced in negotiating with the IRS on your behalf.

Get tax season off to a solid start
Tax season may look a little different this year, but you can count on the tax professionals at Magone & Company to provide you with straightforward, socially distanced tax preparation. To learn more about our virtual services, call our office at (973) 301-2300.

PPP News: Stimulus Package Approved by Congress

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On December 20, 2020, Congress agreed on a $900 billion stimulus package. The President is expected to sign this legislation into law before Christmas.

What does this mean for you?
The uncertainty has finally been resolved! Businesses that received a Paycheck Protection Program (PPP) loan and had it forgiven would now be entitled to a tax deduction for costs covered by the loan. The COVID-19 relief bill clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided” by Section 1106 of the CARES Act (which has been redesignated as Section 7A of the Small Business Act). This provision applies to loans under both the original PPP and subsequent PPP loans.

The COVID-19 relief bill creates a simplified forgiveness application process for loans of $150,000 or less.  Specifically, borrowers who received less than $150K would now be eligible to submit a simplified, one-page forgiveness application.

There will also be a new round of PPP loans available to businesses that are determined to be “eligible entities.” Businesses would need to demonstrate that the loan would be “necessary to support the on-going operations of the business.”

It appears that an “eligible entity” would be one with fewer than 300 employees that experienced at least a 25% reduction in revenue compared with the prior year or compared with the first quarter of 2020 for new businesses.

Stay tuned…

 

Paycheck Protection Program Forgiveness: Is it Taxable Even if Not Forgiven? An Analysis of Current Guidance

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The only certainty in 2020 seems to be whatever you think you know about the Paycheck Protection Program (PPP) changes like the wind.

Established by the CARES Act (signed into law in March 2020), the PPP provided loans to eligible small businesses. If the borrower used the loan proceeds to pay certain eligible expenses, an amount of the loan up to such eligible expenses would be forgiven under the law, and such forgiveness would not be treated as taxable income to the borrower.

In April 2020, the IRS issued Notice 2020-32 explaining a deduction is not allowed for expenses where proceeds are effectively tax exempt, as is the case with the loan forgiveness. This would mean the loan proceeds received by businesses will be taxable since the expenses paid with those proceeds would be disallowed in determining taxable income.

This is a consistent position of the IRS, as expenses associated with tax-exempt investment income are not deductible.

Alternatively, the other argument in Notice 2020-32 is that the expenses are not tax deductible, because prior case law and published rulings essentially deny deductions for otherwise deductible expenses for which “the taxpayer receives a reimbursement.”

A second issue relates to economic performance. Economic performance states that a taxpayer is able to deduct expenses associated with a liability such as a loan, whereby the amount of the liability is unconditionally fixed. Upon review of the PPP loan document language, one finds the note to include language such as “The Note is subject to partial or full forgiveness, the terms of which are dictated by the SBA, Interim Final Rule RIN 3245-AH34, subsequent SBA guidance, the Code of Federal Regulations, the PPP, and all related rules, laws, regulations, and guidance, as may be amended from time to time (the “Forgiveness”).”

The fact the loan is subject to partial or full forgiveness is enough to question whether or not it is unconditionally fixed. It is our belief it is not unconditionally fixed and therefore, the expenses will be disallowed based on Notice 2020-32.

Finally, there is possible reliance on the Bliss Dairy case, which for the sake of brevity draws the following conclusion, “until a taxpayer obtains forgiveness there is no tax exempt income” and IRS Notice 2020-32 does not apply until there is tax-exempt income. The problem with this court case is the American Institute of Certified Public Accountants (AICPA) made an inquiry in regard to forgiveness occurring after year-end and the impact on the expenses paid with PPP monies. According to Mr. Edward S. Karl of the AICPA, “Treasury officials generally stated that if a borrower has a reasonable expectation of loan forgiveness, the expenses can’t be deducted to the extent paid by the loan. That’s true regardless of when the loan is forgiven.”

So what’s a business to do? Here are the options:

  1. Pay the tax on the disallowed expense (not optimal).
  2. Defer the tax on the basis of the Bliss Dairy case (not certain it will withstand an audit challenge).
  3. Place your business tax return on extension and await more guidance.

Congress may act on this issue with the relief being granted retroactively, as bills have been proposed by chairs of both tax committees and have bipartisan support. If this occurs, the entire discussion above for most businesses is moot.

Given the environment in Washington, we are not hopeful there will be a bill in time for the filing of most business tax returns. If Congress does not act, many businesses may find the relief of the PPP funding will be met by the possible nightmare of having to find the funds to pay the taxes.

Need help navigating Paycheck Protection Program loan forgiveness? Call us at (973) 301-2300 or reach out — we’re here to help.

What is a Levy? IRS and Other Asset Levies Explained

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Falling behind on your debts is never a fun position to be in. It’s less fun when a levy is placed on your assets. In this article, we take a look at what an IRS levy is, why it happens, and what you can do about it.

What is an IRS levy?
Simply put, if you owe back taxes and you ignore the IRS, they can seize your property, take money from your bank accounts, or sell your assets in order to satisfy the balance due.

The IRS will give you plenty of notices via mail before they take this step. If you do not satisfy the debt or make payment arrangements by the specified date, the IRS will attempt to take the amount of the levy directly out of your bank account.

Other types of levies
Private creditors may issue a levy against your bank account with a court order. Court orders are not required for levies by government agencies. The creditor must notify you of the upcoming levy at least 21 days before removing any funds from your account. You may not withdraw money or close the account during this waiting period.

Funds earned from child support, social security, unemployment, workers’ compensation settlements and certain other types of government agency payments are exempt from levy. You must request the exemption and offer proof of the source of the funds.

Wage garnishments
Government agencies may also garnish an employee’s wages for back taxes, child support and other delinquent payments required by law.

The IRS has the authority to levy up to 85 percent of your paycheck. The levy notice will be sent to your company’s payroll or human resources department, which will then withhold the appropriate amount of money from each paycheck and send it to the IRS or state tax board. You must provide a wage garnishment release if you’re able to work out a payment arrangement.

If you are behind on your taxes, the IRS may levy most payments from federal agencies. This includes railroad retirement benefits, Medicare supplier and provider payments and federal retirement annuities, among others.

Seizing your assets
The IRS may also seize your real estate and personal property such as a car or boat. You will receive a 30-day notice indicating that seizures will follow if you do not pay your outstanding taxes or contact the IRS to make payment arrangements. This authority also extends to property and money you own that’s being held by another party, such as the cash value accrued from a life insurance policy. The government sells its seized property at auction to recover some of the funds owed by delinquent taxpayers.

What to do if you have an IRS levy
Back taxes don’t just disappear if you ignore them long enough. Putting your head in the sand will cause the problem to get worse. The IRS knows if you’ve paid or not. They might even be willing to compromise.

If you have back tax debt, we highly recommend you reach out to our firm first, particularly if you owe more than $10k in federal or state taxes and can’t pay in full. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other IRS relief programs or get your penalties reduced or removed. Reach out today for a consultation.

Charitable Donations: Recouping Tax Savings for Your Time and Services

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Donating to charities is a noble way to support causes that are close to your heart. But if your contributions begin and end with writing a check, you may be missing out on some satisfying volunteer opportunities — and a few tax deductions. IRS rules allow you a number of tax breaks for contributions other than cash that you can make to qualified organizations.

Going the extra mile…literally

Did you know that you can deduct the costs of going to and from a location where you volunteer your services? You can also deduct the costs of driving on behalf of the organization — for example, to pick up or deliver items. To compute your deduction for charitable driving, use the standard mileage rate of 14 cents per mile for 2020, per the IRS, or deduct the actual cost of your gas and oil. Either way, parking fees and tolls are also deductible.

Recouping your expenses

If you’re not reimbursed by the organization, the out-of-pocket expenses you pay in giving services may count as a charitable donation. While you can’t deduct your personal expenses, such as childcare costs accrued while volunteering, you can deduct the costs of buying and cleaning a uniform you’re required to wear while volunteering.

No time to volunteer?

Many charities accept non-cash donations. And giving investments that have increased in value can be a smart tax move. Instead of selling an investment and paying capital gains tax, donate it to a qualified organization. If you held the investment for more than one year, you can generally deduct its fair market value at the time of the donation. Remember, you’ll need a receipt from the organization to claim a tax deduction, and other records also may be required.

Contributions must be made to qualified organizations that meet IRS guidelines. Not sure? Let the NJ CPAs at Magone & Company help. Give us a call today at (973) 301-2300.