cpa, business advisors, portland, oregon

States Sue U.S. to Void $10,000 Cap on State and Local Tax Deduction

Four states – New York, Connecticut, Maryland and New Jersey – have sued the federal government to void the tax-reform cap on the federal itemized deduction for state and local taxes, contending that limiting the deduction is unconstitutional. The taxes at issue include state and local income taxes, real property (real estate) taxes and personal property taxes.

These states – all Democratic (blue states), with some of the highest state and local tax rates in the nation – saw this deduction limitation as political retribution from the Republican-controlled Congress and have passed state legislation attempting to circumvent the tax reform provision limiting the federal itemized deduction for state and local taxes (SALT) to $10,000.

Both NY and NJ have created charitable funds that their state constituents can contribute to and allows them to receive a credit against their state and local taxes. NY’s legislation allows 85% of the amount contributed to the fund as a credit against taxes, while NJ allows 90%. The Connecticut law allows municipalities to create charitable organizations that taxpayers can contribute to in support of town services, from which they then receive a corresponding credit on their local property taxes. Each of these measures essentially circumvents the $10,000 limitation on SALT deductions.

However, two big questions are whether a donation for which a donor receives personal benefit is really a deductible charitable contribution and whether the state legislatures really thought this through. These work-arounds overlook one of the long-standing definitions of a deductible charitable contribution: the donor cannot receive any personal benefit from the donation.

Recently, the IRS waded into the issue with Notice 2018-54 and an accompanying news release, informing taxpayers that it intends to propose regulations addressing the federal income tax treatment of certain payments made by taxpayers to state-established “charitable funds,” for which the contributors receive a credit against their state and local taxes – essentially, the work-arounds adopted or proposed by the states noted above and others. In general, the IRS indicated that the characterization of these payments would be determined under the Code, informed by substance-over-form principles and not the label assigned by the state.

The proposed regulations will:

  1. “Make clear” that the requirements of the Code, informed by substance-over-form principles (see below), govern the federal income tax treatment of such transfers; and
  2. Assist taxpayers in “understanding the relationship between the federal charitable contribution deduction and the new statutory limitation” on the SALT deduction.

Substance over form is a judicial doctrine in which a court looks to the objective economic realities of a transaction, rather than to the particular form the parties employed. In essence, the formalisms of a transaction are disregarded, and the substance is examined to determine its true nature.

The implication of the IRS’s reference to the substance-over-form doctrine is likely that the formal mechanisms for implementing the state work-arounds – e.g., charitable contributions to “charitable gifts trust funds” – will not dictate their tax treatment. That is to say, the IRS will not recognize a charitable contribution deduction that is a disguised SALT deduction.

While the notice only mentions work-arounds involving transfers to state-controlled funds, another type of work-around has been enacted, and others have been proposed. In addition to the “charitable gifts trust funds” described above, New York also created a new “employer compensation expense tax” that essentially converts employee income taxes into employer payroll taxes. The IRS stated in Information Release 2018-122 that it is “continuing to monitor other legislative proposals” to “ensure that federal law controls the characterization of deductions for federal income tax filings.”

Allowing these work-arounds to stand would open Pandora’s Box to other schemes to circumvent the charitable contribution rules. For example, a church could take donations and then give the parishioner credit for the parishioner’s children’s tuition at the church’s school – something that is not currently allowed.

Have these states set their citizens up for IRS troubles if they utilize these work-arounds? Are these states now concerned that their work-arounds might not pass muster and will be ruled invalid after several years in the courts, so they are now pre-emptively suing the federal government?

Taxpayers in states with work-arounds should carefully consider all potential ramifications when deciding whether to get involved with something that could drag through the courts for years, with potential interest and penalties on taxes owed if (more likely, when) the IRS prevails.


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler Northwest is to earn our clients trust as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201

isler cpa, portland, oregon

Good and Bad News About The Home Office Tax Deduction

Article Highlights:  

  • Home Office
  • Qualifications
  • Actual-Expense Method
  • Simplified Method
  • Income Limitation
  • Employee Deduction

“Home office” is a type of tax deduction that applies to the business use of a home; the space itself may not actually be an office. This category also includes using part of a home for storing inventory (e.g., for a wholesale or retail business for which the home is the only fixed location); as a day care center; as a physical meeting place for interacting with customers, patients, or clients; or the principal place of business for any trade or business.

Generally, except when used to store inventory, an office area must be used on a regular and continuing basis and exclusively restricted to the trade or business (i.e., no personal use). Two methods can be used to determine a home-office deduction: the actual-expense method and the simplified method.

Actual-Expense Method – The actual-expense method prorates home expenses based on the portion of the home that qualifies as a home office; this is generally based on square footage. These prorated expenses include mortgage interest, real property taxes, insurance, heating, electricity, maintenance, and depreciation. In the case of a rented home, rent replaces the interest, tax, and depreciation expenses. Aside from prorated expenses, 100% of directly related costs, such as painting and repair expenses specific to the office, can be deducted.

Simplified Method – The simplified method allows for a deduction equal to $5 per square footage of the home that is used for business, up to a maximum of 300 square feet, resulting in a maximum simplified deduction of $1,500.

Even if you qualify for a home-office deduction, your deduction is limited to the business activity’s gross income—not, as many people mistakenly believe, its net income. The gross-income limitation is equal to the gross sales minus the cost of goods sold. This amount is deducted on a self-employed individual’s business schedule.

The good news is that, under the tax reform, the home-office deduction is still allowed for self-employed taxpayers. The bad news is that this deduction is no longer available for employees, at least for 2018 through 2025. The reason for this change is that, for an employee, a home office is considered an employee business expense (a type of itemized deduction); Congress suspended this deduction as part of the tax reform.

If you have concerns or questions about how the home-office deduction applies to your specific circumstances, please give this office a call.


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler NW is to earn our clients’ trust as their primary business and financial advisors.

Isler Northwest

(503) 224-5321

1300 SW 5th Avenue
Suite 2900
Portland, Oregon 97201

portland, accountants, business advisors, isler

You May Not Get a Tax Refund Next Year

Article Highlights: 

  • Payroll Withholding
  • W-4
  • 2018 Tax Projection
  • Adjusting Withholding

With all of the tax reform changes and the corresponding reductions in most taxpayers’ income tax withholding, there are serious concerns that the reduction in withholding, although providing more take-home pay now, could end up resulting in unexpected taxes due at tax time next year. For that reason, taxpayers should be overly cautious about their payroll withholding for 2018. One need only look at the W-4 instructions to realize that an individual without any substantial tax training can quickly become lost when filling out the worksheets. It is not business as usual. Read more

accounting firm, pdx, isler

There’s a Real Difference Between a Personal and Business Credit Card

Article by Jared Hecht | Found on Entrepreneur

If you’re a business owner, there are dozens of reasons to have a credit card. For one thing, they are a great way to keep track of all your business expenses in one place. They also offer opportunities to earn points or rewards on purchases you would make anyway. Not to mention, they can be an excellent option for financing your business, especially if you are in the startup phase and can’t yet qualify for a small business loan. Read more

Hyderabad Man caught hold for helping his friend to rape his wife!

Hyderabad rape case: Yet, another rape case in brought ahead in front of you. But, this time it’s not Delhi, but it’s Hyderabad- the pearl city. The incident took place in the city where 30 years old coward was arrested for helping his friend to rape his wife. Mohammed Saleemuddin, 30 years old was married and living in Hyderabad. His close friend Chand Pasha, who was badly addicted to pornography, has raped his wife with the help of Mohammed. My review here on a complaint was then filled against the culprits by the victim with an allegation that she was raped and his husband has helped the rapist. Not only this, she also made the complaint saying that he was a drug habitant and use to consume pills and behave erratically. There was also hard pressure to get involved having sex with other men says the victim.

After giving such complaint, the police team has held the husband but the rapist friend is still absconding.  The Wife, who was the victim gave a statement saying, “He (husband) told me that a woman maintains multiple sexual parts was common in the West. He once urged me to have sex with a friend while he was present in the same room.”  As per the sources, the husband got addicted to taking drugs in Australia where he got addicted and continued with the same after coming back.

He used to take hard drugs -says the victim!

The victim wife was bearing lot of harassment from her husband and one fine day unable to bear the harassment has complained Seleemuddin’s mother about the same. His mother on the other side has dismissed her concerns. The victim was also asked to obey what her husband says as this would help them get the financial benefits says the victim. On the entire matter, the South Zone police are investigating the matter and say that the harassment started right before the marriage. The victim’s complaint has been logged and strict action will be imposed against the culprits says the south Zone police team.

How Millennials Are Making Work From Home Work

Article By Sarah Landrum | Found on Forbes

Millennials. They grow up so fast. America’s “Generation Y” is now moving into management roles in the workplace. They’re also starting families. And all this “grown-up stuff” inevitably means one thing for them — Goodbye, work-life balance.

The generation who works harder for less money than Boomers now needs to juggle the responsibilities of gainful employment as well as leading their households. One ever-more-popular solution for reclaiming a few hours throughout the week is working from home. And millennials are making it work for them in a big way.

Right now, about a third of working millennials say achieving and maintaining this balance feels out of reach, which is probably why, as of 2015, the average worker in the U.S. telecommutes to work two days out of each month and why WFH has risen in popularity by 80% in just a little over 10 years. Read more

8 Things Keeping You From Early Retirement

Article by Maya Kachroo-Levine | Found on Forbes

Early retirement is a goal most people talk themselves out of before ever starting. It involves making lifestyle changes in order to accommodate hard-to-reach savings goals, and often going to extreme lengths to pay off debt quickly. The upside, of course, is shaving 10-30 years off your workload. I’ve interviewed people who are just starting to plan for an early retirement, and others who have already successfully retired before 30. From them, I’ve gleaned some of the dos and don’ts of retiring early. If you want to pursue early retirement, here are eight things that may be holding you back.
Read more

New Tax Rules for 2017

By Robert Trinz | Article Featured on AccountingToday

The new year promises to be an challenging one for tax practitioners, as President-elect Trump and Congressional Republicans have promised to enact a significant tax reform package in 2017. However, even if there is no new law, practitioners still will have to cope with a number of tax changes that go into effect for the first time this year or apply for the first time for tax returns filed this year.

This article is a roundup of these tax changes, other than indexing changes and changes created by Congress’s failure (as of now), to enact an extenders package to revive tax provisions that expired at the end of 2016. (You can see an abridged list of the new items here.) Read more

Happy Holidays 2016

How to fix Faulty hard drives using Check Disk Utility in Windows 10

Your PC’s hard circle holds all your essential information, and any harm to it can put your information in danger also. Shockingly, a hard plate has a constrained life expectancy, and sometime it will get ruined/harmed. So relying upon it for all your valuable information isn’t generally a decent alternative.

You have to ensure all your vital information is went down before anything happens to your hard plate. Faulty Hard Drives chkdsk on Windows 10 For this reason, you have to keep a tab on your hard circle well being, so you can move down every one of your information on the off chance that you presume a broken hard plate. In this post we will demonstrate you distinctive strategies to check hard plate well being and get the required data.

1. Windows CHKDSK Tool

Windows CHKDSK Tool is a worked in Windows apparatus that will check your plate to discover framework mistakes and awful segments and show if there are any issues with your hard circle. It will both sweep and fix issues it can settle and will fill you in as to whether there is a more concerning issue that it can’t settle. You can utilize this device to both check hard plate wellbeing and fix terrible segments and mistakes if conceivable.

To utilize CHKDSK, right-tap on the drive which you might want to check for mistakes, and select “Properties.” Now tap on the “Apparatuses” tab, and after that tap on the “Check now” catch.

A discourse will open up with two choices to settle blunders and output for terrible segments. You can choose these choices in the event that you need to settle mistakes and terrible divisions, else you can simply tap on “Begin” to get a fundamental report of hard plate issues (if there are any).

This instrument is exceptionally essential and concentrates on discovering framework blunders and terrible divisions. It will simply fill you in as to whether there are any huge issues and nothing more. So just utilize it as an essential hard circle checking and settling apparatus.

2. Utilize WMIC

WMIC is a charge line interface that gives you a chance to perform numerous managerial undertakings, including checking hard plate wellbeing. It utilizes the S.M.A.R.T (Self-Monitoring, Analysis and Reporting Technology) highlight of hard plates to see status and give a basic conclusion, similar to “alright” or “Pred Fail,” and so forth. It is as yet an exceptionally essential summon that offers almost no data, however it is snappy and a worked in highlight of Windows.

To check a hard plate with WMIC, press the “Windows + R” catch to open the Run exchange. Presently, type cmd and tap on “alright” to open the Windows Command Prompt.

Here, type wmic

also, hit Enter. At the point when the WMI interface is prepared, type

diskdrive get status

also, press Enter once more. You will see the status of your hard circle after a short deferral.

3. Utilize a Third-Party Hard Disk Health Checking Tool

You can likewise utilize an outsider hard plate wellbeing checking device that will offer substantially more data than simply great or terrible status. These instruments utilize the same “S.M.A.R.T” highlight of hard circles to get information, much the same as WMIC. Notwithstanding, they give every one of the points of interest to you, rather than simply demonstrating great or terrible status.

CrystalDiskInfo

For this reason, CrystalDiskInfo is an extremely straightforward, yet effective, instrument. It is an allowed to-utilize instrument that is to a great degree light and offers all the required data, for example, temperature, wellbeing status, hard circle compose and includes, and different qualities like read/compose mistake rate and turn up time, and so forth.

The standard apparatus comes as a 4 MB .exe document, and its installer contains promotions, so ensure you utilize the “Custom Installer” alternative and uncheck the side instrument (advertisement). Once introduced, you should simply dispatch the program, and you will see all the data about your hard disk(s) in the principle interface. The apparatus will likewise check the hard plate wellbeing after each 10 min (as a matter of course) and caution you if there is anything incorrectly.

There are additionally other outsider hard circle wellbeing checking instruments, as Hard Disk Sentinel again HDDScan. Windowsbeast.com These are significantly more progressed with heaps of additional highlights, however for a normal client CrystalDiskInfo should work consummately.

Conclusion

You can utilize the previously mentioned apparatuses to check hard plate wellbeing in your Windows PC. In the event that you needn’t bother with additional points of interest, at that point the Windows worked in apparatuses should work extraordinary. Else, it is prescribed to download an outsider hard circle wellbeing checking instrument.