Lee B

Copied from the website of the Maryland Society of CPA s: Posted By: Bill Sheridan on January 22, 2015 in Taxation That didn’t take long. Tax season has only just begun, and the MACPA’s federal tax listserv is already lighting up with questions from tax pros. The issue at hand involves the IRS’s tangible property regulations. The final disposition rules for tangible property were issued in August and largely adopted the proposed regulations that were issued in 2013. The IRS also recently issued procedural guidance, but if the listserv is any indication, a ton of questions still remain. The MACPA is working on digging up some answers, possibly in the form of CPE programs and other guidance to address the issue. Stay tuned. In the mean time, here are a few resources that might provide some answers. AICPA resources: Tax treatment of expenditures related to tangible property resources FAQ: Forms 3115 and the new tangible property regulations IRS updates accounting method change procedures IRS Rev. Proc. 2015-13 IRS Rev. Proc. 2015-14 AICPA: Repair regulations’ de minimis safe harbor is set too low Regulations govern dispositions of depreciable property The five actions for IRS tangible property ‘repair’ regulations It’s not too late to save tax via IRS tangible property regs Post By:

You have two choices: 1. Use the import/export function to move the client files from the old computer to the new computer. This is what I have always used and it works pretty smoothly, never had any issues, but it does not transfer each clients efile info. 2. Use the backup/restore function to move the client files from the old computer to the new computer. Have never done it this way other users say it works fine and it brings over more client info. Either way, it doesn't bring over everything ie payer files, several days ago, ATX helped a user bring over all of the other misc files per a post on the ATX Board

Excerpted from a long post on the ATX Board: "Upgraded Server cannot run ATX 2013" . . . . . ...................................................... " The final explanation given by tech support is that the 2013 program was not really developed for a network and just will not run properly on Windows Server 2012r2" I really feel for this longtime user of ATX because he did everything right.

Remember the receivables have been distributed to the former members, the bank account would not remain open. Each member would collect his own receivables.

I believe that a new EIN is needed. The LLC is terminated and the assets and liabilities would be distributed to the members including the receivables according to their membership interest percentages. Depending how the LLC was started and what the members contributed to the LLC the termination could be fairly straightforward or somewhat convoluted.

Once upon a time, employees of the government were very very busy promulgating endless rules and regulations to instruct the citizens how to follow that wondrous creation known as The ACA. One day after the moon and the sun had circled the planet many many times,spokespersons came forth and said, "Lo and behold citizens, if you have been a member of an HRA, the rules are all different and to show that we are most thoughtful the rules go back to the beginning of this year. The citizens and their advisors were most confused crying, "This makes no sense, what will we do?" The advisors went to the country's revenue agency, "This makes no sense, what will we do?" The employees at the revenue agency said, "We don't know, the left hand knows not what the right hand is doing." The employees at the agency promulgating the new rules and regulations said, "We don't know, the left hand knows not what the right hand is doing." Moral of the story: If the left hand doesn't know what the right hand is doing you may be in big trouble. Footnote: It is said that this is what actually happened. The employees of the DOL and HHS did not know that rules and regulations they were writing would be in conflict with the rules already in place at the IRS. The employees at the IRS had no idea that the employees at the DOL and HHS were going to publish these rules when they did and were extremely surprised. After all no proposed rules or regs were ever published nor were any hearing ever held.

I am going to deduct the greater than 2 % shareholder's premiums as Self Employed Health Insurance on page 1 Form 1040. After all that is what the current unchanged IRS guidance says you can do. The strategy that I relayed in my previous post is an end run around the ACA Market Reforms. Is the strategy totally risk free, No it isn't. CliftonLarsonAllen believes that the penalty although it would be unlikely, would be limited to 10 % of the Health Insurance Premiums reported in Box 1, 3 , 5. The value of a $15,000 Health Insurance Deduction on page 1 of Form 1040 is definitely greater than a 10 % penalty as long as the taxpayer is in the 25 % bracket or higher.

After attending a class on Monday presented by the Oregon Society of CPA s, that covered this in depth, I have modified my position as follows: 1. The Regs issued November 6th change HRA s which affects the Self Employed Health Insurance Deduction for S Corp shareholders. 2. The ACA Marketplace Reform Regs are in direct conflict with IRS guidance for S Corp shareholders and partners ( See Pub 535, IRS Notice 2008-1, Rev Rule 91-26, and Ann 92-16 all of these remain unchanged.) 3. Until this conflict is resolved, we need substantial authority to rely on prior IRS guidance. 4. By subjecting the reimbursed premiums to Social Security and Medicare and including the reimbursed premiums in Box 3 and Box 5 wages, the assertion that there is a Group Plan which is subject to ACA Market Reform Penalties is significantly reduced. 5. The argument in favor of this position is the reasonable cause exception under Sec 4980D©(1) based on our reliance on Pub 535, IRS Notice 20089-1, Rev Rule 91-26 and Ann 92-16 all of which still exist unchanged. I take no credit for this strategy. The strategy originated with the National Tax Partners of CliftonLarsonAllen, the 10th largest CPA Firm in country with more than 1,000 CPA s employed who prepared over 100,000 tax returns last year. This strategy is the official position of CliftonLarsonAllen according to the course presenter and coauthor Andrew R Biebl CPA, one of the National Tax Partners for the firm.

The key is what constitutes "minimum essential coverage" for a month. Example: Jill has coverage from Jan 1st thru May 1st and she is without health insurance thru August 30th a total of 121 days until she reacquires coverage on August 31st. By definition since Jill had coverage for 1 day of both May and August those months are not included in the coverage gap and her official coverage gap is two months. No penalty.

Remember late last year, when the administration backed down and approved a number of policies as being ACA compliant only because the policyholders had been promised that they could keep any policy that they already had. I have have several clients that still have one of those policies.

I am still busy doing Payroll Reports, W 2 s and 1099 s, so I haven't downloaded the 2014 ATX Tax Program yet. My question is, "Does the 2014 version of ATX still have "Server Retry" issues and does the 2014 program have a 2014 Admin Console ? Every time I use my 2013 program, I have to go thru the Admin Console to get the server process started.

Here is a plain english article that I copied from the website of CliftonLarsonAllen which will give you an overview of what you're dealing with: Contractors may have an opportunity to save on construction and building costs based on the IRS’s recent overhaul of the regulations that govern the handling of expenditures to produce, acquire, or improve tangible property. But first you have to clarify whether your expenditure is considered a repair or improvement, among other considerations. Also, on August 14, the IRS released final regulations on the disposition of tangible depreciable property. So if repairs or improvements were properly capitalized in prior years, a partial disposition loss for the old components might be claimed with an accounting method change to write-off what was previously capitalized. Improvements or repairs Improvements are attributed to one of three areas: betterments, adaptations, or restorations (often called the “BAR” test). Betterments are a material addition to a unit of property (UOP) or a material increase in capacity to correct a material condition or defect that exists prior to acquisition or during production. Adaptations are putting a UOP to a new or different use that is not consistent with the ordinary use of the property at the time it was first placed in service. Restorations include returning a UOP to its ordinary operating condition after it deteriorated to a state of disrepair, or rebuilding a UOP to like-new condition after the end of its IRS defined class life. Replacing a part that comprises a major component or substantial structural part of a UOP also constitutes a restoration. When applying the BAR test to a building, the regulations separate the building into the building structure (roof, walls, windows, floors, and ceilings) and eight defined building systems (HVAC, plumbing, electrical, escalators, elevators, fire-protection and alarm, security, and gas distribution). Activities that are not considered an improvement can often be deducted as a repair and maintenance expense. For instance, building refresh costs (e.g., cosmetic changes such as power washing walls and repainting, cleaning or resealing wood floors), most likely should be deductible. However, if remodeling involves replacing large parts of the exterior walls or upgrading the electrical system, these costs most likely should be capitalized. BAR test example A contractor uses equipment for highway and road construction operations. Each independently operable piece of equipment is a UOP with a class life of six years. The contractor does scheduled maintenance every so often such as cleaning the engine, oiling specific parts, inspecting parts for defects, and replacing items such as springs, bearings and seals. The BAR test determines that these costs are deductible repairs and maintenance expenses, since they do not materially increase capacity, adapt the equipment to a new use, or rebuild to like-new condition. However, if the equipment was reconfigured with additional components that enhance its capacity, then it may be considered betterment and those costs would need to be capitalized as improvement. De minimis safe harbor rule If a company has an applicable financial statement (AFS) and a written book capitalization policy in place at the beginning of the tax year, then it can deduct items below this threshold but not in excess of $5,000 per invoice or per item. An AFS is defined as a financial statement filed with the Securities Exchange Commission (SEC), a certified audited financial statement by an independent CPA, or a financial statement required to be provided to a federal or state government or agency. If you don't have an AFS, you may still be able to deduct up to $500 per invoice or per item if the other requirements are met. This is an annual election made on a timely filed original tax return. Routine maintenance safe harbor rule Recurring costs to keep property in ordinary operating condition can also be deducted, when the costs are reasonably expected to occur more than once within the class life of the property. Safe harbor rule example Machinery and equipment used in road construction may need to be serviced more than once during its class life (six years), which may require disassembly, cleaning, inspection, repairs, replacement, reassembly, and testing of its component parts. (Buildings use a 10-year period class life.) So if you own a building and service the HVAC units every four years — especially if within the maintenance interval recommended by the manufacturer — these costs should be deductible. Finally, costs with longer intervals might still be deductible on a facts and circumstances basis, but would fall outside of the safe harbor rule. Disposition rules applicable to 2013 and 2014 tax returns Disposing of an entire unit of property requires the recognition of gain or loss. Partial dispositions (i.e., a disposition of less than an entire UOP) were generally not allowed in the past, but the new regulations allow for this if an election is made in the year of the disposition. You can still make this election on 2013 and 2014 tax returns for dispositions that occurred in previous tax years. It would be beneficial to make this election where repairs to a roof were capitalized in prior years (regardless of the refund statute being closed for the year), so the net tax value of the old roof at the beginning of the 2013 or 2014 tax year can be written-off. In addition, the costs of removing an asset should follow the initial treatment of the asset. So if the old asset is treated as disposed, then removal costs are part of the disposition (i.e., increase the loss or reduce the recognized gain). If the old asset is not treated as disposed, removal costs are deducted or capitalized based on whether they directly benefit a capitalized improvement. How you can benefit from the new rules If repairs or improvements have been performed on tangible property in prior years, there may be an opportunity for claiming additional deductions. Items that were capitalized in prior years due to a conservative approach and/or just following GAAP treatment might be claimed with an accounting method change to write-off what was previously capitalized as deductible repairs. Also, if improvements were properly capitalized in prior years, there may be a chance to claim a partial disposition loss for the old components that were removed. On the flip side, you can get audit protection if you have been under-capitalizing repair expenditures and then finance the resulting taxes over a four-year period with no interest or penalties

This is a very dense area with a lot of meaty issues to consider. My class spent over an hour on this subject with 25 pages of material. I encourage you to find an online webinar or a self study course. Even if I downloaded all 25 pages, it would be heavy slogging.

Went to a tax seminar on Monday that went over this in depth. First how much is the unadjusted basis of the building ? Because under the Building Safe Harbor, expenditures cannot exceed the lesser of 2 % of unadjusted basis or $10,000 If you don't want to use the safe harbor then it gets more complicated: 1. What percentage of the building's electrical wiring will be replaced will be a key decision point? 2. How long has the taxpayer owned building and did the condition exist without the taxpayer's knowledge before the taxpayer purchased the building , another key point ? 3. Will the new wiring be an improvement or is it just returning the electrical system to it's previous functionality? At this point I will stop because covering all the variables would a really long post.

Here is the response from ATX Customer Care: Re: Payers backups?? Got a lot of them. BobbyTBD, Here is an excerpt from the ATX 2014 Help Files that explains why you are seeing those Payer backups: Automatic Backup The Automatic Backup feature is enabled by default when you install ATX, so you don’t have to worry about turning it on. This preference is found on the Backup and Files tab of the Preferences dialog box. We strongly recommend that you allow the program to back up automatically so you can be assured your files are backed up regularly. With the Automatic Backup enabled, all your returns are automatically backed up whenever they are closed. With each return, ATX also backs up e-files, bank product information, Fixed Asset (FAM) data, and any PDF attachments. In addition, ATX backs up data in the Company Manager, Payer Manager, Preparer/ERO Manager, and Billing Manager two minutes after the last change is made or when the manager is closed. Brett Product Support Representative CCH Small Firm Service If it's part of the normal backup process, I wonder how much hard disk will be needed by the end of tax season ?

Copied from the ATX Board: Payers backups?? Got a lot of them. So I just went to check my backup folder. Everything looks great, then I noticed 577 different backups called Payers(XXX).atxbackup And since I have A LOT of payers each of those files is 9.5 MB. Any idea why this is happening That's over 5 Gigabytes. They're multiplying like Rabbits.

Plus if you put it on a 1099 the IRS will definitely assume that it's self employment income and make you prove that it isn't. The only other alternative would be to create a non compete agreement going forward but that door is closed for 2014. I definitely agree that treating it as a sale of of goodwill or a client list is by far the best approach.

One additional issue: Almost all states have an "Unclaimed Funds Law", which says a matter of law that funds in a checking represented by uncashed checks do not belong to the accountholder. After a period of time, usually 3 years, the state requires you to fill out forms and forward the funds to a state agency, where it's usually held for 7 years awaiting claimants. Back in the 90's my state of Oregon used to send out letters, forms and instructions to every business to remind everybody about their obligations with respect to the "Unclaimed Funds Law.". This is additional support for recording the expenses and issuing the 1099 s.

In my experience most checks are considered to be legal tender for up to 1 year. Checks that I have seen that are negotiable for less than 1 year always have that limitation printed on the front of the check. However, some banks have a policy of not accepting checks that old, but that's a bank policy, not a legality.

Over the years I have seen a least a dozen instances where the check was deposited by the payee and the check was never charged to the account the check was drawn on. About 5 years ago this happened the monthly payroll check for the owner of my largest client. After I reconciled their monthly payroll checking account, I went back to the owner and told her that her paycheck hadn't cleared. She went back and checked her bank account and her paycheck had been deposited and credited to her personal account. To this day her paycheck is still outstanding.

There is another post on the ATX Board with a similar problem, but no resolution Sounds like you are going to have to get support involved.

The IRS doesn't have any real direct power over fraudulent preparers. If you read any of the news articles, all of the enforcement happens by the U S Attorney taking the preparers to Federal Court.

For improvement purposes the new Regs identify the following separate units of property for buildings: 1. Building Structure ( Exterior Walls, Roof, Windows, Doors etc) 2. HVAC 3. Plumbing 4. Electrical 5. Escalators 6. Elevators 7. Fire Protection & Alarm Systems 8. Security Systems 9. Gas Distribution Systems 10. Other Systems Risk: Taxpayer may have expensed in past years as repairs expenditures to any of these identified systems which under the new Regs would require capitalization. In which case it may be necessary to execute a Change in Accounting Method with a positive 481 (a) adjustment spread over 4 years Reward: Conversely Taxpayer may have capitalized in past years expenditures to any of these systems which under the new Regs would require expensing in which it may be necessary to execute a Change in Accounting Method with a negative 481 (a) deductible in the current year. Opportunity: The ability to make a partial disposition election and recognize a loss on for example: the disposition of an elevator which was replaced. Went to a class on Monday which covered this in depth. Posting here helps me remember what I learned. Lee Barckert

On Monday, I attended a seminar that covered this in depth. The course and the presenter had a different take on this issue. I don't have time to post everything until the end of this week.

Small Business Healthcare Relief Act of 2014 Introduced Could Change HRAs for Small Group Employers The Small Business Healthcare Relief Act of 2014 was recently introduced to a congressional committee by Reps. Charles W. Boustany, Jr. (R-LA) and Mike Thompson (D-CA) on December 11, 2014. If the new bill were to pass, small employers would no longer have to worry about violating the health reform law by offering a stand-alone Health Reimbursement Arrangement (HRA) any longer. Under the new bill, small employers (49 or fewer employees) could: Use pre-tax dollars to give workers a defined contribution Allow employees to use those pre-tax funds in an HRA to purchase healthcare coverage on the individual market and for qualified out-of-pocket medical expenses Avoid financial penalties for providing these types of funds to employees The legislation has been referred to the House Committee on Ways and Means, so only time will tell what Congress might have in store for Health Reimbursement Arrangements. In the meantime, contact your Representative about supporting H.R.5860 — Small Business Healthcare Relief Act of 2014 in support of permitting small businesses to use pre-tax dollars for assistance to employees purchasing policies in the individual market What are the chances this will pass in the next month or two ?