Business Owners: Don’t Fall for the ERC Scam

by

Your business has likely been the recipient of many robocalls telling you that you’re missing out on the Employee Retention Credit (ERC). Callers promise eligibility and a fast, easy application process. Don’t fall for it, says the IRS.

The ERC (also known as the ERTC) is a tax credit that was introduced during COVID to make it easier for struggling employers to keep employees on the payroll. It was available to eligible employers for qualified wages paid from March 12, 2020 – October 1, 2021 (recovery start-up businesses qualified through December 31, 2021).

Like many pieces of pandemic-era legislation, ERC parameters changed several times, which makes claiming the credit not as straightforward as these cold callers make it out to be.

Third parties typically charge significant upfront fees, without bothering to explain that your business may not be eligible after all. If that’s the case,  your business will not only need to return the refund. You’ll also incur costs to amend your employment tax returns, and may even be subject to penalties and interest.

Don’t fall victim to this or any other scam. If you need to confirm eligibility for this or any other possible tax credits, please get in touch.

Looking for legit tax-saving opportunities? Check out our Small Business Guide to Mid-year Tax Planning.

New Guidance on Beneficial Ownership Interest Reporting

by

Anti-money laundering laws and new reporting requirements are on the horizon for many businesses, thanks to the Corporate Transparency Act.

Starting in 2024, many small businesses will be required to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN) in an effort to build a national database for national security and law enforcement agencies to aid in the prevention of using of shell companies for criminal activity.

Will your company be affected? Maybe

Both domestic and foreign reporting companies are required to file reports. A company is considered a reporting company if a document was filed with the secretary of state or similar office to create or register the entity. Corporations (including S corporations), LLCs and other entities formed through the SOS are subject to the reporting requirements.

But because sole proprietorships, trusts and general partnerships do not require the filing of a formal document, they generally are not considered a reporting company and will not have a filing requirement. Foreign companies are required to file reports if they are registered under state law.

Some companies, like large operating companies, are exempt from reporting ownership information to a governmental authority. This entity is defined as having:

  • More than 20 full-time U.S. employees
  • An operating presence at a physical office within the U.S.
  • More than $5,000,000 of U.S.-sourced gross receipts reported on its prior year federal income tax return.

If your company meets these qualifications, you are not subject to the new reporting requirements.

Terms you need to know

Beneficial owners. Beneficial ownership information (BOI) must be reported for the reporting company’s beneficial owners and (for entities formed or registered after 2023) company applicants.

Beneficial owners of a reporting company include:

  1. Any individual who exercises substantial control over the reporting company
  2. Any individual who directly or indirectly owns or controls at least 25% of the ownership interests of the reporting company.

Individuals with substantial control are those with substantial influence over important decisions made by the reporting company. Senior officers (president, CFO, general counsel, CEO, COO and any other officer who performs a similar function) are automatically deemed to have substantial control, as are individuals with the authority to appoint or remove senior officers and board members.

BOI includes an individual’s full legal name, date of birth, street address and a unique ID number. The unique ID number can be from a nonexpired U.S. passport, state driver’s license, or other government-issued ID card. If the individual does not have any of those documents, then a nonexpired foreign passport can be used. An image of the document showing the unique ID number must also be included with the report.

Company applicants. The company applicant is the person who actually files the document that creates or registers the reporting company (e.g., an attorney). Company applicants must provide the same information that is required of beneficial owners, but only if the reporting company is formed or registered after 2023.

Because of the difficulty in tracking down information about company applicants for reporting companies that have been in existence for a number of years, reporting companies formed or registered before 2024 do not have to supply BOI for their company applicants.

Mark your calendar to get ahead of reporting requirements

For existing reporting companies created or registered before 2024, your initial report is due by January 1, 2025. For those created or registered after 2023, the initial report is due 30 days after the entity’s creation or registration.

If there is a change to previously reported information about the reporting company or its beneficial owners, an updated report must be filed within 30 days of the change. The penalties for willfully failing to file both initial and updated reports are steep — $500 per day that the report is late, up to $10,000, and imprisonment for up to two years.

If you have any questions about these new reporting rules and how they impact your business, count on Magone & Company as a knowledgeable resource. Reach out today at (973) 301-2300.

NJ CPA Firm Magone & Company Partners with Alliott Global Alliance to Extend Domestic & International Capabilities

by

Roseland NJ, July 27, 2023 — Magone & Company’s Managing Partner Nick Magone lends a global view to every client engagement. So joining forces with Alliott Global Alliance (AGA) was a natural fit for the growing NJ-based CPA firm that bears his name.

An international alliance of independent professional firms, AGA is a kinship of business leaders from around the world, giving them a platform to connect, support and learn from each other. Through the collective partnership, Magone & Company can share its expertise and gain opportunities to broaden the services the firm offers its business and individual clients.

Alliott Global Alliance was established in 1979 and currently includes 219 member organizations across six continents.

Says Magone, “By partnering with AGA, we’re gaining a team of like-minded professionals worldwide with diverse areas of tax, accounting and financial expertise. Our team is looking forward to lending our skills to our fellow members, and likewise gaining trusted resources to assist our clients both domestically and abroad.”

Headquartered in Roseland, NJ, Magone & Company has provided clients with advisory expertise and personalized service since 1992. The firm takes a collaborative approach in working with businesses, individuals and families to boost financial knowledge, help build wealth and reduce risk.  As the accounting industry evolves at a rapid pace — from tax laws to technology — Magone & Company continues to build lasting, collaborative client relationships.

To learn how our affiliation with AGA may benefit you or your organization, contact us or call (973) 301-2300.

Small Business Guide to Mid-year Tax Planning

by

Want to lower your next income tax bill? Here are some mid-year tax planning strategies for small businesses:

Establish a retirement plan for employees
If your business doesn’t already offer a retirement plan, now’s the time as current rules allow for significant deductible contributions. If you’re self-employed and set up a SEP plan for yourself, you can contribute up to 20% of your net self-employment income with a maximum contribution of $66,000 for 2023. If you’re employed by your own corporation, you may contribute up to 25% of your salary with a maximum contribution of $66,000 for 2023.

Leverage depreciation tax breaks
Current federal income tax rules allow first-year depreciation write-offs for eligible assets placed in service during your business’s current tax year:

  • Depreciation deductions for passenger cars, as well as heavy or light SUVs, pickups and vans used over 50% for business
  • Section 179 deductions for qualifying personal property used for business
  • First-year bonus depreciation for qualified new and used property

Time your business income and deductions for maximum savings
Deferring income into next year while accelerating deductible expenditures into this year makes sense if you expect to be in the same or a lower tax bracket next year, because it effectively postpones part of your tax bill from 2023 until 2024. And after the inflation adjustments to 2024 rate bracket thresholds, the deferred income might be taxed at a lower rate. On the other hand, if you expect to be in a higher tax bracket in 2024, take the opposite approach.

Maximize the qualified business income (QBI) deduction
The deduction based on QBI from pass-through entities was a key element of 2017 tax reform. For tax years through 2025, the deduction can be up to 20% of a pass-through entity owner’s QBI, subject to restrictions that may apply at higher income levels. For QBI deduction purposes, pass-through entities are defined as sole proprietorships, single-member LLCs that are treated as sole proprietorships for tax purposes, partnerships, LLCs that are treated as partnerships for tax purposes and S corporations.

Claim the gain exclusion for qualified small business stock
Don’t overlook the 100% federal income tax gain exclusion privilege for eligible sales of Qualified Small Business Corporation (QSBC) stock that was acquired after September 27, 2010. QSBC shares must be held for more than five years to be eligible for the gain exclusion break.

Employ family members
Hiring family members can be a useful strategy to reduce overall tax liability. If the family member is a bona fide employee, the taxpayer can deduct the wages and benefits, including medical benefits, paid to the employee on Schedule C or F as a business expense, thus reducing the proprietor’s self-employment tax liability. In addition, wages paid to your child under the age of 18 are not subject to federal employment taxes, will be deductible at your marginal tax rate, are taxable at the child’s marginal tax rate, and can be offset by up to $13,850 (your child’s maximum standard deduction for 2023).

Questions? Reach out to Magone & Company
Our goal is to get you thinking about potential moves that can minimize your small business’s tax liability before the end of the year. If you have questions or would like our expertise in evaluating your business’s best tax planning options, give us a call at (973) 301-2300.

This document is for informational purposes only and should not be considered financial advice. Be sure to consult with a knowledgeable tax adviser regarding your taxes.

Proactive Mid-year Tax Planning Opportunities for Individuals

by

Income tax may not be on your mind right now, but we’re always thinking about ways to help you save. Here are some mid-year strategies that may help lower your individual income tax bill for 2023:

Review your tax withholding or estimated payments
Nobody wants the surprise of a larger tax bill — or a smaller refund than you anticipated. This generally occurs when you don’t adjust withholding or estimated payments to account for income changes. Fortunately, there’s still time to ensure the right amount of federal income tax is being withheld from your paycheck for 2023.

Max out generous standard deduction allowances
Consider making additional expenditures for itemized deductions before the year’s end to exceed your standard deduction. For example, making your January 2024 mortgage payment in December 2023 will give you 13 months’ worth of interest in 2023. In addition, prepaying your state and local income and property taxes can decrease your 2023 federal income tax bill because your total itemized deductions will be that much higher.

Review investment gains and losses in your taxable accounts
Have investments in taxable brokerage firm accounts? Consider selling appreciated securities you’ve held for over 12 months. The federal income tax rate on long-term capital gains recognized in 2023 is only 15% for most individuals, but can reach 20% rate at higher income levels (the 3.8% Net Investment Income Tax (NIIT) also can apply here). Biting the bullet on loser stocks and taking the resulting capital losses this year would shelter capital gains, including high-taxed short-term gains, from other sales this year.

Leverage the 0% tax rate on investment income
The current federal income tax rate on long-term capital gains and qualified dividends from securities held in taxable brokerage firm accounts is still 0% when the gains and dividends fall within the 0% bracket. For 2023, you may qualify if your taxable income is $44,625 or less for single filers, $89,250 or less for married couples filing jointly or $59,750 or less for heads of household. What if your income is too high to benefit from the 0% rate? Children, grandchildren or other loved ones may fall into the 0% bracket, so consider giving them some appreciated shares they can then sell and pay 0% tax on the resulting long-term gains. Note that if you give securities to someone under 24, the Kiddie Tax rules may apply.

Consider gifting strategies
When gifting stocks to relatives and other loved ones, don’t give away  shares that are currently worth less than what you paid for them. Instead, sell them and take the resulting tax-saving capital loss, then give the cash sales proceeds to your loved one.

Defer income into next year
Because the thresholds for next year’s federal income tax brackets will almost certainly be significantly higher thanks to inflation, deferred income might be taxed at a lower rate.

Don’t overlook estate planning
The unified federal estate and gift tax exemption for 2023 is a historically huge $12.92 million, or effectively $25.84 million for married couples. Your estate plan may need updating to reflect the current tax regime or various life changes. Be aware that in 2026, the unified federal estate and gift tax exemption is scheduled to fall back to what it was before 2017 tax reform with a cumulative inflation adjustment for 2018–2025. That might put it in the $7 million to $8 million range, depending on what inflation turns out to be through 2025.

We hope you found some useful ideas and strategies in this post. Our goal is to get you thinking about tax planning ideas and potential moves we can make to minimize your taxes before the end of the year. Don’t have a trusted advisor on your side? Give us a call at (973) 301-2300 to learn more about our tax planning services.

This document is for informational purposes only and should not be considered financial advice. Be sure to consult with a knowledgeable tax adviser regarding your taxes.

What Today’s CFOs Can Learn from Marketers

by

Chief Financial Officers (CFOs) and Chief Marketing Officers (CMOs) are generally seated on opposite sides of the boardroom — one focused on the business’s finances, the other overseeing its marketing initiatives.

But have you ever stopped to consider how thinking like a marketer can help CFOs make the most of their role and enhance the company’s bottom line?

By taking a page out of a marketer’s handbook, CFOs can improve client relationships and even outpace their competitors. Here’s how:

Leverage technology. Marketers have been quick to embrace new technologies — from AI to automation to data analytics. By leveraging technology, marketers can more accurately target their audience and measure the effectiveness of their campaigns.

CFOs, on the other hand, can embrace technology to streamline processes and improve financial outcomes. Technology can help track operational costs in real-time, revealing how to best allocate resources, optimize budgets and eliminate areas that are a drain on resources.

Make data-driven decisions. Marketers have always been focused on data-driven decision-making, using metrics and analytics to measure the effectiveness of their campaigns. CFOs can learn from this and leverage data to predict trends and identify areas of opportunity more accurately.

Focus on ROI. Marketers measure the return on investment (ROI) of all of their campaigns. By tracking expenses and measuring the ROI of organizational initiatives, CFOs can ensure they’re getting the most out of their budgets and identify areas of unnecessary spend.

Master the art of storytelling. Storytelling is a vital part of marketing as it helps establish a deeper connection between an audience and a brand. “Stories” generally focus on the challenges that a brand solves for its customers.

These storytelling skills are increasingly important for CFOs to adopt, especially when it comes to communicating facts, figures and data — to clients, to stakeholders, or to lenders when your organization is looking to grow and needs funding.

The bottom line

The modern CFO’s skillset is expanding all the time. And there’s a lot they can learn from marketers — and vice versa. Imagine the possibilities when these forces combine to drive business success in the years to come.