Volume 4 – 2016
Hochschild, Bloom & Company LLP – Announcements
Hochschild, Bloom & Company LLP has hired several new employees during 2016. We would like to introduce you to them. We know our clients will welcome them and be as impressed with them as we are.
Reece Ebert, CPA joined the Firm in October 2016 as Director of Tax. He graduated from Southern Illinois University with a Bachelor of Science degree in Accounting, and is a licensed CPA in the State of Missouri. Reece is a member of the American Institute of Certified Public Accountants and the Missouri Society of Certified Public Accountants. Prior to joining the Firm, Reece had almost thirty years’ experience in public accounting and works with a variety of clients. His specialties include tax services for individuals, small to medium business, and nonprofit organizations. Reece is extremely active in his local community and has volunteered countless hours of his own time toward a variety of causes.
Melissa Watson joined the Firm in January 2016. She graduated from Fontbonne University with a Master of Science degree in Accounting in December 2015. Prior to joining the Firm, Melissa worked for 12 years in municipal accounting for the City of Hazelwood and the City of Brentwood. She plans to sit for the CPA examination within the next year. Melissa lives with her husband, Joe, in the City of St. Louis.
Tiffany Novak joined the Firm in August 2016 as a staff accountant. She graduated with a Bachelor of Science in Accounting and is currently pursuing a Master of Science in Forensic Accounting, both from Webster University. Prior to joining the Firm, she had 10 years of industry accounting experience. She lives in Arnold, Missouri with her husband and son.
Collin Maune joined the Firm in October 2016. He started as a staff accountant. He graduated from Central Methodist University with a Bachelor of Accounting and Finance. He is currently pursuing his CPA license. Collin lives in Washington, Missouri.
The Firm is very pleased to introduce these individuals to you. They all mainly work out of the Chesterfield office but do help with work in the Washington office also.
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Success means we go to sleep at night
knowing that our talents and abilities
were used in a way that served others.
Year-End Tax Planning
With the election of Donald Trump as President of the United States, and the Republican majority in the House and Senate, it appears that income tax rates will probably be decreasing in the next year or two. With that in mind people need to be doing some year-end tax planning. The strategy of deferring income and accelerating deductions should probably be looked at a little more closely in 2016.
If you can defer an income item, such as a year-end bonus or other forms of income, taxpayers may want to look at delaying them until next year if possible. If you have a business, you need to consider purchasing addi-tional needed supplies or equipment in 2016 (if you were considering purchasing them after the first of the year). See also the article later in the newsletter concerning capital gains and losses.
Charitable contributions can help lessen your tax burden. Taxpayers may want to make additional contribution to various charities. You can also make advance payments on any charitable pledges that you previously agreed to make. Using long-term appreciated stock rather than cash to make your contributions is an excellent way to receive a deduction and not have to pay taxes on the sale of the stock. The deduction for the stock donation is equal to the fair market value of the stock.
Accelerating your fourth quarter State tax estimate might be another idea to lower your tax liability. State and local tax deductions are a little more complicated than other deductions. These deductions are a tax preference item for alternative minimum tax (AMT) purposes, which means that they are not deductible for AMT purposes. If you are an individual who is subject to the AMT tax it will not be to your advantage to pay your State tax estimate before the end of the year.
An analysis or review of your tax situation at year-end is always advisable. This analysis is also encouraged to address your overall financial status. With the estate exemption for 2016 at $5.45 million per individual or $10.9 million for married couples (the 2017 exemption is $5.49 million per person), planning to minimize estate taxes may not be necessary for many people. If you do have a potential estate problem, you need to be sure to make gifts of $14,000 per year per person.
Family Gifting Discount
For estate planning purposes many individuals make gifts of ownership interests in a closely-held family business to other family members. This allows the donors to lower their overall estate. Significant valuation discounts are commonly utilized through the use of minority and lack of marketability discounts. These discounts are often as much as 30%. Therefore, a gifted interest of 10% with a market value of $100,000 after the discounts may only be valued at approximately $70,000 for gifting purposes.
The IRS has proposed regulations barring valuation discounts for gifts within a family where the family still has control of the business after the gift. This proposed regulation would apply to closely-held operating businesses as well as family entities that hold only passive assets (e.g., real estate).
This proposed regulation change is in a 90 day public comment period through December 1, 2016. Many feel the regulations will become effective soon after the comment period. Others feel that Congress will override the IRS and continue to allow the discounts on certain types of gifts to family members. Only time will tell, but if you are considering making such a gift, you should discuss the situation with your estate attorney and CPA before the proposed regulations are finalized into law.
Hochschild, Bloom & Company LLP Gives Back
HBC recently had the opportunity to help out with a renovation project for Services by Design d/b/a Caring Solutions. Caring Solutions is a 501(c)(3) nonprofit organization with a 15-year history of designing and providing services and staff support for the unique needs of children and adults with developmental disabilities living in the greater St. Louis community. Valentine Place will be part of their Family Support program.
Our staff had a great time participating in this worthy cause and giving back to the community.
New Reporting Rules for Nonemployee Compensation
Businesses, nonprofit organizations, and governments may have paid nonemployee compensation that is required to be reported to the recipient and the IRS using Form 1099-MISC. For calendar year 2016, Forms 1099-MISC are due to the nonemployee payee and the IRS by January 31, 2017. Previously, businesses, nonprofit organizations, and governments had an extra month to send in Form 1099-MISC to the IRS. Failure to timely file Form 1099-MISC could subject you to substantial penalties from the IRS.
The following four conditions would have occurred for nonemployee compensation to be present;
- Payment was made to someone who is not an employee.
- Payment was made for services in the normal course of your business.
- Payment was made to an individual, partnership, LLC, estate, or in some cases a corporation.
- Total amount paid was at least $600 for the year.
With the new deadline for filing Form 1099-MISC, it is more important than ever to be organized and have the necessary information available by year-end. The best tool for achieving this is to require your vendors to complete an IRS Form W-9, “Request for Taxpayer Identification Number and Certification” and keep this on file. Form W-9, when completed properly, includes the vendor’s name, address, taxpayer ID number, and the federal tax classification. Sole proprietors, partnerships, or LLCs should receive a Form 1099-MISC. Corporations and LLCs that are taxed as a C or S corporation do not require a Form 1099-MISC. If you have any questions regarding when and to whom you are required to issue Form 1099-MISC, or need assistance preparing Form 1099-MISC, please feel free to contact our office.
By: Ashley Heifner
Protecting Animals. Educating Humans.
The Animal Protective Association of Missouri is a nonprofit organization dedicated to bringing people and pets together, advancing humane education, and creating programs beneficial to the human/animal bond.
Mrs. Ella Megginson gathered a group of her friends in the basement of her Webster Groves home to discuss matters of animal cruelty. From that meeting, the Animal Protective Association of Missouri (originally known as the Humane Society of Saint Louis County) was born.
With the original donation of $500 from Mrs. Harry F. Knight, the women bought the shelter’s first truck and hired a driver. The first office was located in Mrs. Megginson’s basement. The Association eventually moved out of Mrs. Megginson’s home in 1924 and had offices in numerous locations over the next 13 years. In 1937, a shelter was built at 1802 South Hanley – just across the street from the present shelter facility, which was built in 1947.
Originally formed to help prevent cruelty to working animals and stray animals in the “county,” better known now as St. Louis County, the APA now assists and advocates for companion animals in both St. Louis City, St. Louis County, and several surrounding counties.
Ashley Heifner, Staff Accountant at Hochschild, Bloom & Company LLP, is a volunteer at the APA of Missouri. Ashley adopted her lab mix, Nala, from the APA in March 2012. As a volunteer, Ashley spends a few weekend hours washing dishes, doing laundry, shredding newspaper, or helping in the puppy room.
The APA holds annual fundraising events and community outreach programs. Such events include Golf Tournaments, the Canine Carnival, Pet-A-Palooza, Pub Crawls, and Trivia Nights. Since 1983, PetReach has sent APA Adoption Center staff, volunteers, and their pets into senior care facilities, psychiatric units, convalescent centers, and children’s hospitals. PetReach was the first no-fee, pet-assisted activity program in the St. Louis area.
In addition to adoption services and fundraising events, the APA offers the Domestic Violence Pet Assistance Program. The APA Adoption Center has established St. Louis’ first pet assistance program for victims of domestic violence in 1997. Because concern for the safety of pets is often a barrier to leaving a violent home environment, the APA works with area domestic shelters and anti-violence agencies to provide temporary foster care for pets of domestic violence victims transitioning to safety. To learn more about the APA of Missouri, or to make a donation, please visit https://apamo.org/.
New Form I-9
The U.S. Citizenship and Immigration Services (USCIS) started requiring employers to use the Form I-9 to verify the identity and employment authorization of every person they hire. The form has been required to be used since November 16, 1986. A new Form I-9 was issued by the USCIS on November 14, 2016. Some of the new changes include:
- Asking for “other last names used” verses “other names used”
- The ability to enter multiple preparers and translators
- Prompts to insure information is entered correctly
- A supplemental page for the preparer/translator
- A dedicated area for including additional information
The instructions are separate from the form and include specific instructions for each line. The new form is also easier to complete online.
Employers are allowed to use the Form I-9 dated March 8, 2013 until January 22, 2017, after which the new form is required to be used. Employers must retain the form for the later of either three years after the employee was hired or one year after the employee was terminated.
Individual’s Capital Gains and Losses
Year-end is a good time to engage in planning to save taxes by carefully structuring your capital gains and losses. Suppose you lost money on stocks you sold in 2016 and have other investment assets that have appreciated in value. Before the end of 2016, you should consider the extent to which you should sell appreciated assets (if you think their value has peaked) and thereby offset gains with pre-existing losses.
Long-term capital losses offset long-term capital gains before they offset short-term capital gains. Similarly, short-term capital losses offset short-term capital gains before they offset long-term capital gains. Remember you may use up to $3,000 of total capital losses in excess of total capital gains as a deduction against ordinary income in computing your adjusted gross income. Any net losses in excess of the $3,000 must be carried over to future years.
Paper losses or gains on stocks may be worth recognizing this year in some situations. But suppose the stock shows a loss now but is also an attractive investment worth holding for the long term. There is no way to precisely preserve a stock investment position while at the same time gaining the benefit of the tax loss, because the so-called “wash sale” rule precludes recognition of a loss where substantially identical securities are bought and sold within a 61 day period (30 days before or 30 days after the date of sale). Thus, you cannot sell stock to establish a tax loss and simply buy it back the next day.
Careful handling of your capital gains and losses can save you a substantial amount of taxes.