Blog

Bonus Pay Limitation

27/10/16 2:01 pm | Comments (0) | Posted By:

Modern day business is built on constant competition and an ever changing landscape, where CEO’s must take risks to survive. Risk-taking is something that happens in everyday business and those that have good results from the risks are given bonuses. What if the CEO received a bonus from good results in the current year and then 3 years down the road that risk had then flipped and the company tanks? Should the CEO be liable?

Well, according to a recent Wall Street Journal article, that very thing is being proposed on Large Firm Wall Street Bankers. The thought is that their bonuses be deferred over four years and any actions that hurt the firms or a financial statement restatement would have a “claw back” affect over a period of seven years. The CEO’s would have to pay back a portion of their bonuses. There is already a form of “claw back” that is in place, but it is less stringent and only goes back about three years. Regulators are presuming that issues arising from the CEO’s decisions usually take more than three years to show up; thus the reason why they are proposing pushing the time limit to seven years. The purpose of the proposition is to combat and prevent another recession by holding CEO’s more accountable.

The issue that has been raised is if this passes, would the CEO’s adjust their pay structure? Would they opt for more stock and salary instead of bonus structure?

 

 

A Non-Partisan Comparison of Presidential Candidate Tax Plans

29/09/16 10:56 am | Comments (0) | Posted By:

Just over a month away is the election for the 45th President of the United States. No matter which side of the aisle you find yourself on, there is no doubt that each candidate has proposed some substantial tax legislation changes. Here is a comparison of the candidates tax plans:

Hillary Clinton’s Plan:  

• “Fair Share Surcharge” – A proposed 4% increase to the top tax rate of 39.6% for individuals making over $5,000,000 per year. All other tax rates for individuals would remain constant.

• Closing loopholes – Strengthening the Buffet Rule and broadening the base of income subject to the rule, closing Bermuda reinsurance loophole and the “Romney Loophole”, and closing the “step up in basis” loophole.

• Closing the “Carried Interest” Loophole – Loophole which allows hedge fund managers to avoid ordinary income tax rates for earnings.

• Restore Estate Tax to 2009 Parameters($3,500,000 Estate exemption, 45% tax rate) with rates increasing to as much as 65% on estates over 1 billion.

• Ensure millionaires pay a minimum tax rate of 30%.

• Impose a “risk fee” on the largest financial institutions.

• Corporate tax rate will remain at 35%.

 

Donald Trump’s Plan:

• Reduce tax rates for individuals from 12% for Married Filing Jointly (MFJ) filers under $75,000, to a maximum of 33% for MFJ filers over $225,000. Single filers would be half of these numbers.

• Retain current capital gains rates(max of 20%).

• Repeal net investment income tax of 3.8%.

• Increase standard deduction to $30,000 for MFJ, and get rid of personal exemptions.

• Cap itemized deductions at $200,000.

• Repeal Estate Tax unless capital gain assets valued over $10,000,000 were held until death, disallow private established charity donations.

• Above-the-line deduction for childcare for children under 13, capped by states per child. Not available to MFJ taxpayers over $500,000.

• Spending rebates for childcare expense to certain low-income taxpayers through the Earned Income Tax Credit (EITC).

• Cut corporate tax rate from 35% to 15%, and provide 1 time repatriation of offshore funds for a 10% tax rate.

 

Each tax plan is diametrically opposed from the other, but both will change the tax planning efforts that accountants will need to have to properly advise clients in the coming years. To view the tax plans in full detail, click on each candidates name to connect to their websites.

 

 

The “Final-Offer” Arbitration Challenge

19/09/16 11:06 am | Comments (0) | Posted By:

The Harvard Business Review recently published an article outlining an interesting strategy which should make negotiations more civil, speedy and fair.

The authors have proposed an approach they call the “final-offer arbitration challenge” for reaching fair agreements efficiently.

It works like this. If the other side’s position is unreasonable, one’s initial reaction is often to be just as unreasonable, believing that the issue will be resolved somewhere in the middle, and thus be reasonable. This may ultimately be the result but often only after investing a lot of time and money to get there. It stands to reason that if the parties come to a negotiation with realistic starting positions, the negotiations that follow should be relatively civil, speedy and fair.

But how can a negotiator who wants to be fair at the outset be sure that his or her counterpart will do the same? This is where the “final-offer arbitration challenge” can help to reach fair agreements efficiently. It works like this: To encourage reasonableness, one side should make their offer demonstrably fair from the outset. Then, if the other side is unreasonable, they should be challenged to take the offers to an arbitrator who must not compromise, but must choose one or the other offer. This approach should result in offers that are more aligned from the beginning. Thus it is to everyone’s benefit if the parties come to the negotiations with reasonable offers in hand.

This is not unlike the way thoughtful parents have resolved disputes between two siblings. Have one cut the last piece of cake in half, and have the other choose first.

 

Are you selling your home? There may be an income tax impact.

31/08/16 4:53 pm | Comments (0) | Posted By:

Selling your home sale could impact your income taxes. You may or may not have to pay income taxes on the gain from the sale of your home.

The gain from the sale of your home may be excluded, either all or in part, from your income tax if you meet the eligibility test. The eligibility test consists of ownership and the use of the home rules. You must have owned and used it as your main home for at least two out of the five years before the date of the sale. Property acquired through a like-kind exchange (1031 exchange) during the 5-year period is not eligible for the exclusion.

The 24 months used as your main home can fall anywhere within the 5-year period and does not need to be consecutive 24 months. Short absences count as time lived at home. Only 12 months of residence will meet the requirement if you are physically or mentally unable to care for yourself. Time spent living in a licensed care facility also counts toward the residency requirement.

Partial exclusion is available if you moved because of work, health or an unforeseeable event. Work-related exception qualifies if your new job is at least 50 miles farther from home than your old work location. Health-related exception qualifies if you moved to obtain, provide, or facilitate diagnosis, cure, mitigation or treatment of disease, illness, or injury for yourself or a family member. Health-related exceptions also include a doctor’s recommendation of a change in residence due to health problems. Giving birth to two or more children from the same pregnancy is one of the situations qualifying as an unforeseeable related exception.

The maximum gain exclusion is $250,000 or ($500,000 if married filing jointly). The eligibility test must be met to qualify for the full or partial exclusion. Check for additional rules and any exceptions that may apply to you. One last note: You must report the sale to claim the exclusion and if you receive a form 1099-S, Proceeds from Real Estate Transactions, even if you have no gain from the sale.

 

Autumn is the time to think about taxes

25/08/16 9:34 am | Comments (0) | Posted By:

It’s hard to believe we are two-thirds of the way through 2016 already. Seems like just yesterday you were gathering all of your tax documents and filing your 2015 return (or maybe you still are if it was extended). I know for a lot of individuals and business owners taxes are the last thing on their mind right now, but if you are willing to spend a little time in September it might save you some heartburn come next tax season.

For most business owners and self-employed individuals, September 15th marks the due date for your third round of 2016 estimated tax payments. Most simply rely on the vouchers printed out with their 2015 tax return. There is nothing wrong with this, but these figures are based on your 2015 income. If you have experienced changes in 2016, whether good or bad, the amount you are planning on paying on September 15 may require some tweaking.

We are far enough in to the year to put together a good picture of where you will be at the end of the year. Doing some quick forecasting now could save you from a big cash hit on January’s estimated payment (if you tax plan at year end) or on April 15th. If you take a look at your books and notice some big changes from 2015 now is a good time to adjust your payment.

Keep in mind that as long as you make the payment amounts on your current vouchers you will have met the withholding requirements and will not be subject to estimated tax penalties, but the consequence of withholding too little or too much hits the pocketbook down the line, and we all know the lifeblood of small business is cash.

If you have any questions or would like a qualified professional to take a quick look at your numbers to make sure you aren’t going to be forking out extraordinary amounts of cash come spring, give your CPA a call. It may be well worth it.

 

Page 3 of 4012345102030...Last »