Monday, November 13, 2017

Cost Segregation and Depreciation Recapture





Depreciation recapture is an often misunderstood aspect of tax planning and comes into effect only during the sale of a property.  


Recapture is limited to the lesser of the gain or the depreciation taken. Meaning, first you have to sell the property and have a gain on the sale to even be concerned. 
To have a loss, one would have to sell the property for less than its net tax value. For practical purposes, the depreciation taken is the main limiting factor because the IRS calculates gain as the selling price less the net tax value (cost less depreciation taken). The recapture rules dictate how the gain is taxed, with § 1245 governing personal property and § 1250 governing real property. Section 1245 dictates that the accelerated depreciation taken on personal and real property be taxed at ordinary income tax rates. Section 1250 requires that depreciation taken on real property be taxed at a 25% capital gains rate. Any gain in excess of the total depreciation is taxed at the normal capital gains rate, but this does not wholly dictate whether recapture eliminates a need to do a cost segregation study. This is illustrated in the example below.
Assuming your client has sold or is going to sell their building, let us use the facts below to show the benefit of a cost segregation study.
• Property purchased 6/1/2005
• Cost = $5,000,000 with a breakdown of:
» 5 - year  – $1,000,000
» 15 - year – $750,000
» 39 - year – $3,250,000
• Selling price of $10,000,000
• Effective tax rate of 40% (Fed. & State)
• Interest rate of 6%
Using these assumptions, we can calculate the benefit on the sale derived from the cost segregation study taking the accelerated depreciation now vs. depreciating the building at a 39-year life. The benefit of the study is compared to the increased tax generated by the study in the table below.
Benefit of StudyExtra Tax w/StudyNet Benefit
If sold in 2008$291,439$261,636$29,803
If sold in 2009$380,711$330,265$50,446
If sold in 2010$456,023$380,984$75,039
Note: Calculations based on accumulated depreciation at date of sale, not net present value.
Keep in mind that depreciation recapture occurs only to when the sales price is allocated to a specific item in an amount sufficient to produce a gain. Therefore it is essential that the selling price allocation be as part of an appraisal. When a building is sold, for purposes of calculating the gain on the sale, the sale price should be allocated to the specific items based on their fair market value at the time of the sale. While conventional wisdom might suggest that appreciation of real estate generally occurs due to economic appreciation on land, and inflation on the cost of materials and labor, other factors such as income stream and goodwill are often taken into consideration when appraising the property. According to the IRS, the fair market value is not determined by the net tax value but by an appraisal that assigns the fair market value to the property. The IRS will respect a purchase and sale agreement (P&S) in an arm’s length transaction. If a seller allocates the selling price in a P&S to the assets class by class and this is accepted by the purchaser, it will be considered binding on both parties by the IRS – so much so that you cannot do a cost segregation study in this case.
One more point, when a C Corporation sells real property prior to the end of its full recovery period, part of the time value benefit is also lost. However, because all income is taxed at the same rate in the “C” corporation, recapture is a non-issue.
The bottom line is that recapture depreciation does not automatically negate the gain from a cost segregation study. We are not denying that a Cost Segregation Study will produce additional recapture tax, but when you compare the benefit of the accelerated depreciation from a Cost Segregation Study, it usually exceeds the increased tax. 
Get your free analysis now and remember, No Savings = No Fees.
Larry
Larry@yourwotc.com

Tuesday, November 7, 2017

THE KEY TO THE GATEKEEPER

IT’S ALL IN THE APPROACH, IF SOMEONE BELIEVES YOU ARE IMPORTANT, THEY WILL TREAT YOU DIFFERENTLY


1 – Use a calm and relaxed voice. Smile and confidently greet with energy and ease! Make sure you answer any question about the nature of your call with confidence and authority.

2 – Don’t use a script! A good gatekeeper will recognize it immediately and you will be shut down. Instead, plan your talking points but leave room for improvisation. Speak slowly and articulately. The Gatekeeper will notice if you are rushing through the call.

3 – Engage the Gatekeeper, learn their name. Write it down and use it while you speak to them. Be friendly, this will result in a positive attitude from the Gatekeeper the next time you speak.

4 – Don’t give out more information than is necessary. Remember, you are not selling to the Gatekeeper. You don’t need to go into detail with them, keep it simple! Tell them who you are calling for, do not ask if the decision maker is available.

5 – Do your research, approach with familiarity of the business and of the decision maker. Use the first name of the decision maker. Make it personal! If you don’t know who the decision maker is, ask the Gatekeeper. A simple question of, “Who is in charge of…” can hep immensely. Ask for the best time to call, a direct number to call, email address to follow up with, etc.

6 – Be POSITIVE, if you’re asked if he or she is expecting your call. Answer positively with, “Yes, I’ve sent information that we need to discuss.” You may want to give a sense of urgency by adding, “by the close of business.” to your positive response.

 For More Info:  http://bit.ly/2cv3i8O

Wednesday, October 18, 2017

Access Discount Healthcare


Access Discount Healthcare is transforming consumer health services by delivering convenient and affordable access to quality health care and well being for the populations we serve. 

ADHC's platform combines cutting-edge technology with access to highly trained healthcare professionals to connect employees with the benefits they need most.  Bringing ADHC to your Client's organization ultimately results in better health outcomes, improved productivity, lower costs, and higher morale for employees or members-which help make your Client's culture both happy and healthy. 

Program Benefits
  • Triage Nurse
  • Client satisfaction is 98% 
  • Annual client retention is 95%
  • Comprehensive bouquet of services in the industry

Minimum Requirements
We prefer (as will you) to work with larger employers (50+) but will not pass up any employer due to the fact that this is just another tool to help you build your practice and provide benefit to the businesses you want to work with. 


                            Larry@yourwotc.com


Wednesday, August 9, 2017

Are you losing these tax credits on new employees?

Did you know that most companies that are hiring go thru 10-20 applications before they hire? And many businesses don't take advantage of WOTC which provides a $2400-$9600 tax credit for each new hiree. Also, many managers that are using WOTC have to do all the work under deadlines that must be met to qualify for the tax credits. Our proprietary software does all the work swiftly and automatically.

You can test it out now at  www.yourWOTC.com and self-enroll if you wish to.

Monday, July 10, 2017

Business Tax Due Dates, plus obtainable Business Tax Credits




July 12+

Employers - Obtain $2400 - $9600 Tax Credit for each new employee hired (seasonal too)

July 17

Employers - Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in June.
Employers - Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in June.

July 31

Employers - Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2017. Deposit any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until August 10 to file the return.
Employers - Federal unemployment tax. Deposit the tax owed through June if more than $500.
Employers - If you maintain an employee benefit plan, such as a pension, profit-sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar-year 2016. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year ends.
Certain Small Employers - Deposit any undeposited tax if your tax liability is $2,500 or more for 2017 but less than $2,500 for the second quarter.

Sunday, June 25, 2017

What does it take to be successful?

There are many ideas floating around in this economy about what it takes to be successful.

Books by the 100's provide a prescription, a plan, or a word of advice. Most turn out to  be very helpful but, I have noticed there is one thing missing from all of them. It is the one thing that is a common thread of every successful business person, company, or an investor.

Yes, we have to have a good idea that solves a problem or need; yes, good people are important; and yes, tenancity and persistance are all a must. But, there is one aspect of success that is deeper--one that, if missing, will cause failure. If you talk to successful people you will feel it, but they might not even mention it as THE key. They might blame their success on a new product, or a new computer, or on a good manager. They all miss the point!

So, what is it? It is excitement, enthusiasm and it's staying motivated. Making money is a good motivator; a dream motivates some, just working toward a goal motivates others.

What motivates YOU......?

Larry
  http://bit.ly/2cv3i8O

Friday, May 19, 2017

The “Startup Act” addresses major concerns of small technology businesses and startups.

The “Startup Act” – Catching the Economic Winds

The “Startup Jobs and Innovation Act”, properly evangelized within the economic development eco-system, can be reasonably expected to create jobs by nudging innovative technologies into the promised land of commercial success.
The “Startup Act” addresses major concerns of small technology businesses and startups. The government’s focus on bolstering startups is well-directed… “To jump-start economic recovery through the formation and growth of new businesses…”, …and well-founded. Paraphrasing Congress’ findings, “From 1980 to 2005, companies under 5 years old accounted for nearly all jobs created in the United States…accounting for 3M jobs annually…”. Therefore, “To get Americans back to work, entrepreneurs must be free (incentivized) to innovate, create new companies, and hire employees.”
The employee-hiring ability of technology-based entrepreneurial ventures relies largely upon continued 1) Economic (including tax related) Incentives, and 2) Capital Investment.
Incentivizing and funding such early stage companies requires unflinching resolve given the operating losses typically experienced while a technology’s functionality and value proposition are market-tested, adjusted and re-tested until validated. Only then making the way clear to pursue economies of scale for production and marketing functions.
This resolve to support startups in many ways rests with the government which has adjusted tax code to create investor-friendly treatment to transform otherwise unacceptable risk-reward investment propositions into compelling deals.
Further, entrepreneur-friendly tax code has been created to help minimize the risk-taking inherent in the effort to bring innovation to the market and create good-paying technology-oriented jobs.
To be effective, the ‘good news’ about these entrepreneur-encouraging, investor-compelling, job-creating government-tendered incentives must find it’s way to the investors and entrepreneurs; and economic development agencies at state and local levels make the perfect evangelists.
So, let’s get to preaching the virtues of the “Startup Act” (note: “small business” and “startup” are used interchangeably):
Small Business (SB) Expensing

The small business expensing limitation was permanently restored to $500,000, thus encouraging small businesses to continue investing in economy-of-scale-producing assets that improve top line and bottom line performance. This means the SB can fully write off investment ‘costs’ as current expenses (up to $500,000) instead of fractionally allocating deductions against those costs over the course of multiple years.
The SB gets the profit-boosting effects from the employment of key assets AND the tax-reducing effects from fully deducting the cost of those assets in the current year.
The financial picture of the company is much brighter from these dual benefits and becomes a more attractive funding opportunity for investors who can justify better terms with the SB for the use of their capital.
If expensed costs can’t be applied against taxable income, then an investor may become a pass-through loss beneficiary as addressed below.
Small Business Investors

The attractiveness of certain small businesses to investors is greatly increased when 100% of an investor’s gains on such investments can be excluded from capital gains taxes.
Further, the qualifying criteria for a business to be able to offer such favorable tax treatment are less strict now. This means investors can find more of these opportunities. Likewise, more businesses can entice investors with this highly favorable capital gains tax treatment.
Investors as Beneficiaries of Startup Pass-Through Losses

Investors (in certain cases) can be the beneficiaries of losses being ‘passed through’ from the SB (where the business wouldn’t be able to apply said losses against taxable income).
Startups Benefit From “R&D” Tax Credits As Payroll Tax Offset

The PATH Act (“Protecting Americans from Tax Hikes”), related to the “Startup Act”, allows the technology-based startup, which is commonly rich in “qualifying research expenditures” and associated tax credits, but often lacking in taxable income, to now apply “R&D” tax credits against payroll taxes. Startups in this case, among other criteria, are firms with less than $5 million in annual gross receipts.
Instead of suffering the inability to take advantage of R&D tax credits due to taxable income restraints, the startup can now use these tax credits to offset their payroll taxes by as much as $250,000 per year for as long as five years.
Startup Cost Expensing Level Raised

In the same vein as SB Expensing discussed above, startups will be able to fully deduct up to $10,000 (up from $5,000). This is another $5,000 that can be written off as an expense versus depreciating fractionally over a 15-year allocation timeline.
Cash Accounting

The cash accounting method is both less complicated and less costly to maintain, while reducing regulatory risk, versus more sophisticated tax methods required in the past. More small businesses can use this favorable method; now firms with up to $10M in gross receipts, up from $5M, can opt in.
It’s not a reach to expect that a small business would save money from less complexity associated with their taxes. These savings, and the attention that would otherwise be focused on complex tax compliance matters, could be used to improve a venture’s chances for success.
Favorable winds are at the back of the entrepreneur and investor alike. But, if their respective sails aren’t set to catch those winds then the creation of good-paying jobs and the realization of market-transforming innovations will be less robust than it could be otherwise.
Those close to the entrepreneur and private investor, that is, anyone directly or indirectly tied to the economic development eco-system (you know who you are), would do well to take it upon themselves to “inform and educate” as it is safe to assume that the intended beneficiaries of this favorable legislation are focused on developing cutting edge technologies and making the next deal, and not so much on deciphering government policy.