Hoffman & Associates Expands

Overtime Law Update

IAN M. FISHERIn  June, we warned business clients that new regulations governing overtime laws would take effect on December 1, 2016. However, a number of states sued the Department of Labor and on November 23, the United States District Court for the Eastern District of Texas issued an injunction blocking the implementation from taking effect.

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Changes in Overtime Pay Regulations

IAN M. FISHERSmall business owners may be in for a shock later this year when new Department of Labor Regulations governing overtime go into effect. On December 1, 2016, a Final Rule by the Wage and Hour Division will go into effect, causing approximately 4.2 million currently exempt workers to have a right to time and a half pay from their employers.

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Tax Extender Deal Signed

IAN M. FISHERChristmas came a week early for many taxpayers in 2015.

On Friday, December 18, President Barack Obama signed into law a tax and spending package containing numerous tax breaks for individuals and businesses.

Of particular interest to many Hoffman & Associates clients may be the Conservation Easement Enhanced Incentive. In 2014, there was a provision in Sec. 170 of the Internal Revenue Code that allowed the value of qualified conservation contributions to be deducted up to 50 percent of a taxpayer’s contribution base (similar to AGI) and carried over to 15 succeeding tax years. For qualified farmers or ranchers, the deduction limit was 100 percent of the contribution base.

However, that enhanced incentive ended at the end of 2014 without Congress’s action and the easement limit reverted to 30 percent of a taxpayer’s contribution base and 5 years of carryover. As part of the now signed tax extender deal, the enhanced incentive is now permanent. The bill completely deletes the language in the code section that makes the enhanced incentive expire, so taxpayers now have peace of mind when considering conservation easements going forward.

Some other tax breaks included in the package include the following:

  • IRA charitable rollover, which means once a taxpayer reaches age 70 1/2, he or she can make direct gifts from his or her IRA to charities of up to $100,000 per year. This would be more beneficial than taking withdrawals and then gifting to charity.
  • Research and Development Credit, which incentivizes small businesses and startups to invest in research and development by allowing them the use of this credit against alternative minimum tax or even payroll taxes in some limited instances.
  • Reduced S Corporation Built-In Gains recognition period, which is important for C corporation owners who are interested in converting to S Corporations. Under previous law, the corporation had to hold appreciated assets for 10 years or it would be taxed on their gains. Now, that holding period has been reduced to 5 years.
  • Itemized deduction for state and local sales tax in lieu of income taxes. This could be beneficial if a taxpayer made a large purchase during the year that is greater than his or her state income tax obligation. This is particularly useful for taxpayers who live in states without a State income tax, such as Florida.
  • Enhanced Sec. 179 Deductions, which allow businesses to deduct full purchase price of qualifying equipment and/or software purchased during the tax year. Businesses may deduct up to $500,000 of qualifying expenses on up to $2,000,000 of equipment. These were set to drop to $25,000 and $200,000 had this not been included in the tax extender bill.
  • Once the Sec. 179 cap is reached, bonus depreciation was also made permanent in this tax deal. What that means is a taxpayer can deduct 50% of the depreciation in the first year instead of the normal 20%.

 To illustrate this in conjunction with the enhanced Sec. 179 deductions, let’s say a company bought $750,000 worth of new equipment. They would be able to deduct the following:

  • $500,000 – Sec. 179 deduction ($250,000 remaining after Sec. 179 deduction)
  • $125,000 50% Bonus first year depreciation (of the remaining $250,000)
  • $25,000 normal 20% depreciation (20% of the $250,000-$125,000)

 

  • $650,000 Total First Year Deduction ($500,000+$125,000+25,000)
  • $227,500 Cash Savings, assuming 35% tax rate

The tax extender bill contained numerous other provisions benefitting both individual taxpayers and businesses. If you have any questions about them, please feel free to contact Hoffman & Associates.

Planning for Farming and Agriculture

Farming & Agriculture

 

 

 

WealthCounsel Quarterly Q2 2015_ Planning for Farming and Agriculture

Why YOU should have a BDIT

Ian 1As a business owner, does anything sound better than having your business protected from creditors and having it grow completely outside of your estate while still having full control over it? The Beneficiary Defective Inheritor’s Trust (the “BDIT”) technique allows all of that. Essentially, a trust beneficiary, the business owner, YOU, can grow your business in a trust established for you by someone else.

The biggest advantage of this strategy is that the BDIT will be for the benefit of the business owner and will be completely discretionary, so there will be no problem getting money out of the company if needed. Some other benefits of this trust are that the beneficiary/business owner has significant control over the trust property and it is a grantor trust with respect to the beneficiary, so that will further remove assets from the beneficiary’s estate while the assets grow tax free. One other advantage is that a BDIT is more flexible than a defective grantor trust as far as changing beneficiaries of the trust, so it might be a good option if a parent is not sure if their child can handle a business or a similar situation.

The mechanics of the BDIT are as follows:

  1. A Parent (or other third party, hereinafter the “Parent”) forms the trust (in a favorable jurisdiction for asset protection) for the benefit of the business owner;
  2.  The Parent contributes $5,000 cash to the trust and allocates $5,000 of GST exemption to it;
  3.  The Parent grants the beneficiary a Crummey power of withdrawal over the $5,000 for 30 days and it lapses;
  4.  The Parent retains no powers that could trigger the grantor trust rules for the Parent;
  5.  The Parent grants full discretion over distributions of income and principal to a third-party trustee;
  6.  The child is granted the power to remove and replace the independent trustee with another independent trustee;
  7.  The Parent grants a broad special power of appointment to the child, exercisable during life or at death;
  8.  The beneficiary will be the Investment Trustee and control all managerial decisions; and
  9.  A formula clause will be used to shift any unintended gifted assets to a non-GST tax exempt BDIT.

However, because the BDIT is a very complex strategy, it must be documented, implemented, and administered very carefully.  If all the proper procedures are followed, this transaction is legitimate despite the IRS not liking it.  Anyone with a growing business should look into a BDIT

For more information regarding this or any other estate planning concern, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

Georgia Education Expense Tax Credit

Mary 1 APPLY NOW FOR 2015 PRE-REGISTRATION

This tax credit is for contributions made to Georgia Student Scholarship Organizations.  These organizations provide scholarships for students to attend primary and secondary private schools.  The contribution is deductible on your individual federal income tax return as a charitable contribution, and a dollar for dollar tax credit is allowed to offset your Georgia income tax.

 MAXIMUM TAX CREDIT ALLOWED

Individual Taxpayer – Single:  $1,000
Individual Taxpayer – Married filing joint:  $2,500
S corporation shareholders, LLC members and partners in partnerships: $10,000, limited to 6% of pass through taxable income
 

APPROVAL PROCESS

Taxpayers must apply for pre-approval in order to participate in this program.  Once the annual credit cap is met, no additional applications are approved.

The annual cap for the 2014 credits was reached on January 22, 2014.  It is expected that the demand for 2015 credits will even be greater.  Therefore, it is important to apply early in order to take advantage of this program.  Many of the Student Scholarship Organizations are currently accepting “pre-registration” for the 2015 credits.

For more information regarding this or any other tax planning concern, please visit the Hoffman & Associates website atwww.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.

Obamacare Implementation Update

Ian 1For many small business owners, dozens of questions have loomed about the implementation of the Affordable Care Act (the “ACA”).  Good news for them: the Obama administration has extended ACA transition deadlines to give small business owners a longer time to become compliant with ACA regulations.

When the ACA was first passed, all employers with 50 or more full-time employees would have had to have offered health insurance coverage to their employees by January 1, 2014.  However, the effective date for this requirement has been pushed back to January 1, 2015.  Additionally, 2015 will be considered a transition year, in which full compliance is not mandatory for employers with up to 100 full-time employees.

Since 2015 is considered a transition year, these mid-size employers (between 50 and 100 full-time employees) will not have to provide health insurance coverage until January 1, 2016 if the following two conditions are met:

  • From February 9, 2014 through December 31, 2014, the company’s number of employees and overall hours worked by employees were not reduced except for bona fide business purposes; and
  • From February 9, 2014 through December 31, 2015, health coverage for employees was not eliminated or materially reduced.

Many Hoffman & Associates clients can potentially benefit from this transition period. For employers with 100 or more full-time employees, the new regulations allow for coverage of 70% of employees in 2015 instead of 95%, which was the previous 2015 requirement.  All other provisions of the Affordable Care Act will be effective.

 

For more information regarding this or any other business planning concern, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.

Can You Afford To Ignore Your Business Exit?

Mike HoffmanHere’s another excellent article written by Denis M. Brown from Pace Capital Resources, LLC.  It is from The Exit Planning Review newsletter, issue 282, dated June 8, 2014.  Can You Afford To Ignore Your Business Exit?

Sincerely,

Mike

 

For more information regarding this or any other business planning concern, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.

No Regrets for These Former Owners

Mike1We bring you another excellent article written by Denis M. Brown from Pace Capital Resources, LLC.  It is from The Exit Planning Review newsletter, issue 281, dated May 20, 2014.  No Regrets for These Former Owners

Sincerely,

Mike

 

For more information regarding this or any other business planning concern, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.