Tis the Season for Giving

Since many businesses give gifts during the holiday season, we thought it would be appropriate to share the IRS rules around this practice.

A business can deduct the cost of business gifts. However, total business gifts made (directly or indirectly) during a tax year to any one individual are limited to $25 - anything above this amount is nondeductible.

$25 Limit - A gift to a business entity that is intended for the eventual personal use or benefit of an employee or owner of the entity is considered a gift to an individual (and thus nondeductible to the extent it exceeds $25).

Exceptions to Gift Treatment - A gift to a business for use in its business (e.g., a technical manual) is not considered a gift to an individual and thus is not subject to the $25 limitation. In addition, the following items are not considered gifts subject to the $25 limit:

  1. An item costing the business $4 or less on which the business name is clearly imprinted, and that is one of a number of identical such items given away.
  2. A sign, display rack, or other promotional item to be used on the recipient's business premises.
  3. An item of tangible personal property given as part of an award plan or program to an employee for length of service or safety achievement if it does not cost more than $400 (or $1,600 in the case of a qualified plan award). A qualified plan award is one based on length of service or safety achievement that is part of a nondiscriminatory written plan.

An item that could be considered either a gift or entertainment normally is considered entertainment. However, the business is allowed the option of treating some items as entertainment or gifts, whichever is more advantageous. An example is theater or sporting event tickets given to a customer who is not accompanied to the event by an employee of the gifting business.

Please contact us with any questions about this issue, and Happy Holidays!

Leaving Minnesota

No, I am not leaving Minnesota! However, I am often asked - particularly by my clients who are at or nearing retirement - what needs to be done in order to change one's residency from Minnesota to another state, most commonly Florida. As with most tax law the answer is complicated, but there are some guidelines.

  1. Change your domicile - Domicile is where your "home" is. The State of Minnesota uses 26 factors in determining where your home is. For a list of these factors, please refer to the 2015 Residency Report issued by the Minnesota Department of Revenue. A few highlights from the list:
    • Register to vote in the new state
    • If you maintain a residence in Minnesota after moving away, make sure to change the status to Non Homestead.
    • Change your driver's license to the new state.
    • If you still hunt and fish in Minnesota, be sure purchase nonresident licenses.
  2. Change your physical presence - make sure to spend less than half of the tax year in Minnesota. For rules on what constitutes a day spent in Minnesota, please refer to the aforementioned 2015 Residency Report.
  3. Maintain Records - from the 2015 Residency Report: "Any person domiciled outside Minnesota who maintains a place of abode within Minnesota and claims to be a nonresident of the state must have available for examination adequate records to substantiate that more than one-half of the tax year was spent outside Minnesota. Adequate records means any contemporaneously kept records that establish the places of physical presence of the person on particular dates. Adequate records include, but are not limited to, calendars, diaries, canceled checks, credit card receipts, and airline tickets.

If you or someone you know would like more information on this issue, please contact us.

 

Minnesota Section 529 Plan Credit and Subtraction

The Minnesota legislature has passed two tax cuts for contributions to Section 529 Plans, which has created a nice tax planning opportunity.  The first is a credit of up to $500, and the second is a subtraction of up to $3,000.  Since the credit and subtraction are available to the individual who makes the contribution, this is a tremendous opportunity for parents and grandparents to coordinate their contributions.

For example: if the grandparents plan to contribute $2,000 to their grandchild’s 529 plan for 2017, they could contribute $1,000 and receive the $500 credit, and they could give the remaining $1,000 to their children to contribute to the same 529 plan, who would then also receive the $500 credit.

Of course, the credit is subject to income limitations, but the Subtraction is not.  Please contact us if you wish to take advantage of this tax planning opportunity, and see below for some of the details of the legislation.

 

Section 529 Plan Credit

  • Minnesota residents that contribute to a Section 529 College Savings Plan may be eligible for a nonrefundable credit up to $500.

  • The Section 529 Plan Credit is available beginning tax year 2017.

  • This credit is available to Minnesota residents and part-year residents who contribute to a qualified Section 529 College Savings Plan and meet certain income guidelines.

  • The credit is a maximum of $500 or 50% of contributions made during the year.

  • This credit phases out for taxpayers with an Adjusted Gross Income over $75,000. 

 

Section 529 Plan Subtraction

  • Individuals who contribute to a Section 529 College Savings Plan may be eligible for a subtraction from income up to $1,500 ($3,000 for married couples filing joint returns).

  • The Section 529 Plan subtraction is available beginning tax year 2017.

  • If you contribute to a Section 529 Plan, you may claim this subtraction. However, if you claim the Section 529 Plan Credit, you cannot claim the subtraction.

  • Many states offer 529 College Savings Plans. Contributions to a qualifying account are eligible regardless of which state administers the plan.

  • Taxpayers filing single, head of household, or married filing separate may qualify for a subtraction up to $1,500. Married couples filing joint returns may qualify for up to $3,000.

Staff Accountant Needed

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I am looking for a permanent employee who is able to work 10 to 20 hours per week initially and eventually full time, with flexible schedule.  This position is part staff accountant (hourly wage), part administrative (hourly wage), and part business development (commission), and is open immediately.

Job Duties

  • Assemble client tax returns
  • Administer our Client Relationship Management software
  • Administer our Social Media presence
  • Perform ad hoc projects and tasks for firm Principal
  • Prepare individual and business tax returns
  • Process payroll and payroll tax returns for business clients
  • Provide bookkeeping services for business clients
  • Scan documents into our document management system

Qualifications

  • Proficient with QuickBooks
  • Proficient with Microsoft Office products Excel and Word
  • Tax preparation experience

Compensation

$15 - $20 per hour, depending on qualifications, with strong potential for future increases based on performance.

Please send your resume along with a cover letter to kcollins@collinsallen.com

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New Office!

I want to share the great news that I have signed a five year lease on a terrific new office space, and will be moving in on June 1st, 2016.  I will be on the 4th floor of the Quadrant Office Building, which is conveniently located near the intersection of Boone Avenue and Interstate 694.  The address is:

7100 Northland Circle N #403
Minneapolis, MN 55428
map

There are several things that I’m excited about with this move:

  • I will have more total space than I do now, including an office for an assistant/staff person which I plan to hire in the near future.
  • A third office in the suite will become available to me in June 2017, offering even more room to grow my staff.
  • The Quadrant Office Building is more centrally located than my current office and provides easier access, while remaining very close to the Maple Grove retail area.
  • The five year lease will provide more continuity to my practice, which I believe will be a welcome “change” for my clients, who have been extremely loyal throughout each of my moves over the past several years.

I look forward to being able to better serve my clients’ needs in several ways with what this new office will provide.

Roth IRA Conversion & Recharacterization

There are many strategies surrounding the IRA and Roth IRA, two of which are the Roth IRA Conversion and the Recharacterization of a prior Conversion. There are many articles out there describing these strategies, but the reason for this post is to make you aware of a silver lining in a down market. If you executed a Roth IRA Conversion in 2015 when the market was up, you may want to consider Recharacterizing - or undoing - the conversion and furthermore you may want to consider Reconverting in the current down market. If you did not execute a Roth IRA Conversion in 2015, you may want to consider doing so in the current down market.

There are many factors that affect the decision of whether to Convert, Recharacterize or Reconvert, and each individual situation is unique, so please contact your financial advisor as you consider these options.

Please contact us if you have any questions regarding this issue.

 

Form 1099-MISC Filing Requirements

In general, your business must furnish Form 1099-MISC to any individual that it pays $600 or more in a calendar year.  This also applies when your business pays an LLC $600 or more, unless the LLC is taxed as a C Corporation or an S Corporation.  If said LLC is taxed as a Partnership or a Sole Proprietorship, your business must furnish a Form 1099-MISC thereto for payments totaling $600 or more in a calendar year.  The safe action would be to simply furnish a Form 1099-MISC to all individuals and LLCs that your business pays $600 or more in a calendar year.

In order to properly complete Form 1099-MISC, it is recommended that you obtain a completed Form W-9 from each payee to which you will furnish a Form 1099-MISC.

Generally, you must furnish Form 1099-MISC to the recipient by February 1, 2016, and you must file the IRS copy along with Form 1096 by February 29, 2016.

Please contact me as soon as possible if you need assistance with filing these forms.

We're Growing!

Thanks to my wonderful clients my practice is growing quickly, and because of this I am in need of a staff accountant to assist me. The following is the advertisement for this position. Please pass this along to anyone you know who might be a good candidate.

Thank you!

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Small CPA firm in Maple Grove, looking for a permanent employee willing to work 10 to 20 hours per week initially and potentially full time eventually.  This position is partially administrative and partially staff accountant.  This position is open immediately.

Job Duties

  • Assemble client tax returns
  • Administer our Client Relationship Management software
  • Administer our Social Media presence
  • Perform ad hoc projects and tasks for firm Principal
  • Prepare individual and business tax returns
  • Process payroll and payroll tax returns for business clients
  • Provide bookkeeping services for business clients
  • Scan documents into our computer filing system

Qualifications

  • Proficient with QuickBooks
  • Proficient with Office products Excel and Word
  • Tax preparation experience

Compensation

$15 - $20 per hour, depending on qualifications, with strong potential for future increases based on performance.

Please send your resume along with a cover letter to kcollins@collinsallen.com

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