Summer Tax Tip: ‘Tis the Season to Give!

14/07/16 3:15 pm | Comments (0) | Posted By:

According to the Network for Good, 30% of all online charitable contributions in 2015 were made during the month of December. This is not surprising as the gift-giving spirit around the holidays inspires many people to donate to causes near to their hearts at that time. Fortunately for us taxpayers, a donation to an IRS qualified charity can provide a tax deduction regardless of when it was made throughout the year. Summers, in particular, are a great time of year to think about donating. First, you can give cash without the stress of holiday spending. Second, you can donate non-cash items and declutter your home at the same time. Here are some tax tips on deducting charitable donations posted by the IRS on its website:

1. Make sure to donate a qualified charity. You cannot deduct donations to individuals or political organizations or candidates. Use the IRS Select Check tool to check the status of the charity to which you would like to give.

2. Be aware that your deduction may be limited. If you receive something in return for your donation, you can only deduct the amount in excess of the value of what you received in return. For example, if you donate $50 to a qualified charity and receive a ticket to a fundraising dinner valued at $30, you may only deduct $20. In addition to this rule, there are AGI limits on charitable donation deductions. Generally, donations may only be deducted up to 50% of AGI. See Publication 526, Charitable Contributions for more information.

3. If you donate non-cash items, there are several things to keep in mind. For donated property to be deductible, it must generally be in good condition. Also, the amount of the deduction for donated property is generally its fair market value. There are special rules for cars, boats, and other types of property. See Publication 526, Charitable Contributions, for more information on these rules. See also Publication 561, Determining the Value of Donated Property.

4. Be diligent with recordkeeping. There are very specific substantiation rules regarding charitable donations. The amount and type of your donation will determine what kind of record you must keep. In general, you must have a written record of any cash you give to claim a deduction. For donations of $250 (cash or property) or more, you must have a written statement from the charity stating the amount and/or a description of the property you gave and whether or not you received anything in return.

The IRS has a section on its website dedicated to information relating to charitable contribution deductions. More guidance can also be found in Publications 526 and 561.


Washoe County’s Proposed Sales Tax Increase

03/06/16 10:40 am | Comments (0) | Posted By:

On the ballot in November will be a tax rate adjustment that’s worth taking a look at: Sales Tax. The proposed sales tax hike would increase Washoe County sales tax from 7.725% to 8.265%, which would make Washoe County the highest tax rate in Nevada. The current high is in Clark County at 8.15%. To put this into perspective – if you bought an iPhone and it cost $400 pre-tax, the cost would go from $430.90 to $433.06 after tax under the new sales tax rate. The committee overseeing the proposal had several different options to choose from including sales tax, property tax, car registration, hotel room tax, and real-estate transfers before settling on sales tax for the final proposal.

Where would the money go?

The money received from the tax increase is to go to Washoe County schools, which currently are overcrowded and underfunded. However, the sales tax increase would be effective indefinitely. The intent is to allow the school district to use $781 million in bonds to fund school projects over the next 20 years to be used along with the $315 million in rollover bonds granted from state lawmakers stemming from the 2002 ballot election for Washoe County Schools that expired in 2012. According to the Reno Gazette Journal, the proposed fixes to the schools are: additions to Damonte Ranch High School, existing school repairs, three new middle schools, three new high schools, repurpose Hug High School, nine new elementary schools, expand Sparks High School, invest in older schools, expand nutrition services, and expand the transportation yard.

Where are Nevada schools ranked?

Currently, Nevada ranks lasts in education ranking in the nation; according to a report in the Reno Gazette Journal. Nevada also ranks 48th for school funding, only paying about $8,200 per student, when the national average is $11,700 per student.


Prepare Your Business for the New Overtime Rules

26/05/16 3:21 pm | Comments (0) | Posted By:


If you haven’t heard the buzz over the past few weeks, there has been a significant change in federal overtime rules for employees. For business owners it is important that you be aware of these changes. If you have employees you need to prepare to be in compliance and possibly fork out more cash when the law goes in to effect on December 1, 2016.

 The Facts

Under the current system, salaried employees earning in excess of $23,660 ($455/week) are excluded from time-and-a-half pay for hours worked over 40 in a week. Under the new rules the salary threshold more than doubles to $47,476 ($913/week). This rule does not apply to employees employed as bona fide executive, administrative, professional and outside sales employees.


Business owners will need to prepare themselves to face these changes as they could have significant effect on cash-flow not only in the increased wages but in administrative costs of keeping track of time.

The first step an employer should take is identifying the workers who will be affected. Employers who are not currently keeping track of exempt employees’ hours should start doing so they can predict how much overtime they will owe under the new laws. This will give baseline with which to work with in planning on whether your business can handle the increased expense.


Once you have figured out if your business will be affected and if so whether it can withstand the increase expense, you will be faced with some decisions to make. Unfortunately if your business will not be able to tolerate the expense burden you will need to make some changes and cut some costs. Looking at your financials and budgets will be a first step. Many businesses may have to cut in other areas to balance the increase in wages. Businesses who cannot find places to cut will be faced with tough decisions on changing your pay structure. Here are some steps that can be taken to lessen the burden of the new rules:

  • Bumping pay – if you have a salaried employee making slightly below the new wage limit ($47,476) and working more than 40 hours per week, you may want to bump their pay over the threshold. Part of this equation could be solved by reducing fringe benefits in exchange for higher pay.
  • Hiring part-time workers – instead of hiring one person who may work 60 hours per week, an employer could hire two part-time workers for 30 hours each.
  • Change salaried workers to hourly – although hourly workers still must be paid overtime you will have an easier time tracking and regulating employee hours.

You also may need to invest in a better time-keeping system so that should be kept in mind as well.


Remember when all is said and done, being proactive rather than reactive is going to benefit your business. Take your time to understand the rules and if they will apply to you and take the necessary steps to keep your business in the best financial shape it can be. If you have any questions about the law or need an expert to evaluate the potential financial impact give your CPA a call.



Cancellation of Debt or Capital Gain?

11/05/16 4:31 pm | Comments (0) | Posted By:

An issue that can still have tax ramifications today, years after the great recession hit Reno, is that of debt forgiveness. If you think that since you never received any cash, debt forgiveness is not taxable, think again!

Whenever there is a loan balance that gets reduced in any way, either with debt forgiveness, a foreclosure, a short sale, or a cancellation of debt, there is a taxable event. Depending on whether the debt held was recourse or nonrecourse makes a difference as to whether the forgiveness will be classified as cancellation of debt income or a capital gain.

A taxpayer wants cancellation of debt income when they are either insolvent, the home is their principal residence or they are in bankruptcy. In these situations the income is excluded from taxable income. If these situations don’t apply then the debtor wants a capital gain. In this instance the gain will be taxed at lower rates and if they have any capital losses then the gain can be reduced by these losses.

Generally, if a loan is nonrecourse and the property backing the loan is foreclosed upon to satisfy the nonrecourse debt, then the excess of the debt over the tax basis of the property is a gain. However, if the lender merely reduces the principal of the nonrecourse debt, then cancellation of debt income occurs.

The rules are different for recourse debt. If there is a foreclosure of property to satisfy recourse debt than the taxpayer recognizes cancellation of debt income by the difference between the fair market value of the debt versus the debt discharged. The difference in the fair market value versus the tax basis is then recorded as a gain or loss.

This brief summary just hits the surface of the complex rules regarding debt forgiveness. When this situation occurs, consult a Reno CPA to figure out the tax consequences.


Deploying to military combat zones: Tax regulations designed to benefit those who serve

28/04/16 9:13 am | Comments (0) | Posted By:

There are a number of beneficial tax provisions that have been implemented to help military members who have been deployed to combat zones and their families. Two substantial benefits are extensions of filing deadlines and military pay exclusions. To be able to take advantage of these special tax treatments, however, specific requirements need to be met. The following takes a brief look at some of the regulations affecting military members when serving in combat zones. More information can be found on the IRS website or in IRS Publication 3 – Armed Forces’ Tax Guide.

Which members of the military are eligible for special tax treatment?

Per IRS Publication 3, the U.S. Armed Forces comprise officers and enlisted personnel in all regular and reserve units subject to control by the Secretaries of Defense, Army, Navy, Air Force, and Coast Guard. The U.S. Merchant Marine and the American Red Cross are not included.


What qualifies as a combat zone?

Per the IRS website, combat zones are specified by executive orders from the President. They are regions (including the airspace above them) in which the U.S. Armed Forces currently are or previously were engaged in combat. At this time, there are three combat zones:

  •  Arabian Peninsula areas – These areas were established as combat zones starting January 17, 1991 and include the Persian Gulf, Red Sea, Gulf of Oman, and part of the Arabian Sea. They also include the countries of Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
  • Kosovo area – This area was designated a combat zone beginning on March 24, 1999. It comprises the Federal Republic of Yugoslavia, Albania, the Adriatic Sea and part of the Ionian Sea.
  • Afghanistan – This country was deemed a combat zone beginning on September 19, 2001.

In addition to these designated combat zones, the Department of Defense has ordered several other areas to qualify for combat zone tax benefits. These regions have played crucial roles in supporting military operations under either Operation Enduring Freedom or Operation Iraqi Freedom. A few examples are Pakistan, Tajikistan, Jordan, Yemen, and Somalia.

 How long is the filing deadline extension?

When serving in combat zones, military members and their spouses are allowed an extension to file their Forms 1040. The deadline is extended for 180 days after the service member’s last day in a combat zone. Additionally, any period of time before the regular filing deadline that the service member spent in a combat zone is added to the 180 days. For instance, if a service member deployed to a combat zone on January 15, 2016 and returned November 15, 2016, the deadline for filing his 2015 Form 1040 would be extended for 274 days (180 days plus the 94 days he was deployed prior to April 18, 2016) after he returned on November 15, 2016, making his filing deadline August 16, 2017. The IRS has listed many examples on its website and in its Publication 3 for guidance.

 What is the military pay exclusion?

Enlisted members, warrant officers, and commissioned warrant officers, who serve in combat zones during any part of a month, can exclude all of their military pay for that month from their gross income. This rule applies to commissioned officers as well, but with one limitation. The amount of the income tax exclusion is limited to the highest rate of enlisted pay, plus any hostile fire or imminent danger pay received. For 2015, the exclusion amount is $8,119.50 per month ($7,894.50 for the highest enlisted pay plus $225 for imminent danger pay).

There are many other tax regulations that affect individuals serving in the military. As mentioned, the foregoing is intended to take a glimpse at some of the tax benefits received by service members deployed to combat zones. The IRS has a section on its website dedicated to giving military members tax information and, more specifically, rules regarding combat zone service. IRS Publication 3 is also a useful resource.



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