Hello Rich,
Happy New Year! Tax season is upon us — okay, ME. Here are some brief suggestions, reminders and cautions. My aspiration for 2020 — not to give up, on my community, country, planet. Best wishes — Rich

Not Every Meal Is Deductible!

Not every meal or beverage you take in during business hours is deductible. If you are not traveling, then every meal must have a business purpose AND shared — with a client, prospect, colleague (or your CPA!). When I see a $5.00 charge for Starbucks every day, I see red flags marching toward my client. (If you are traveling for business overnight you may dine alone and still deduct the meals.)

Not All Donations Must Be In Cash

Your donations of goods — to Goodwill, the landing dock at Savers (beneficiary is Big Brothers/Big Sisters) are deductible, as long as you are able to itemize (see last issue.) This is tricky — you get a slip that gives you a one line summary of what you gave — but what of the value for tax purposes?
Check out this handy guide from the Salvation Army. Of course it cannot be specific to your situation but try to stay reasonable. If Rich deducts $2,500 for a new bedroom set every year or $500 annually for his snazzy art ties it may not pass the smell test. The value is what it would sell for at a thrift store, Charlotte — not what you bought it for! Lots of us shop these places so we already have a sense.

What I Never Hear On Campaign Trails

My quadrennial kvetch. College is exorbitant, whether paid through student loans or from savings. usually a combination. And we are told a college education is the best pathway to earning a decent living. Right?
So look at the meager tax incentives available for higher ed. If you are a single parent with student loans and make over $85,000??, no credit for you. If you are married and together earn over $160,000 — and working overtime to put James and Miranda through university — well, bye bye to any (often minimal), help through the ‘tuition and fees” deduction.

A Tale Of Two Sisters

SUN-SET!

Thinking about going solar? The current, lucrative 30% Federal tax credit will decrease to 26% in 2020 and then to 22% for units “put into service” during 2021. Then ZERO for residential units, and a reduced rate for commercial properties for a couple of years. Even with the credit, it can be an expensive — and time consuming — undertaking. Don’t let this chance “flame out.”

Don’t My Contributions Count Anymore?

Complicated and important question. The federal income tax changes that took effect in 2018 raised the “standard deduction” significantly AND limited the amount of taxes that could be deducted to $10,000. As a result, the vast preponderance of taxpayers now take the standard deduction, ( a fixed amount, based on your filing status) as it is usually more beneficial than the itemized deductions– which include separately stated items like mortgage interest, taxes and contributions. I have noticed the change especially with married homeowners with modest contributions — their donations do not affect their taxes as they used to. Of course, they still “count” for the nonprofit recipients.

Rich CPA Speaks: LLC or S-CORP?

Detail –

IRS Notice 2018-99 provides guidance for determining the nondeductible amount of parking expense, if your organization is a for-profit company, as well as the amount that would increase Unrelated Business Taxable Income (UBTI), if your organization if a non-profit. The appropriate method depends on whether the organization pays a third party for employee parking or if the organization owns or leases a parking facility where its employees park. If an organization pays a third party for employee parking in the third party’s parking lot or garage, the Section 274(a)(4) disallowance (foregone tax deduction for a for-profit company or amount required to be
added to Form 990T as UBTI for a non-profit) generally is calculated as the organization’s total annual cost of the employee parking paid to the third party up to $265 ($260 for 2018) per month per employee. If parking expenses amount to more than $265 per month per employee ($260 for 2018), the excess needs to be included in the employees’ income and would deductible as wages if a for-profit organization. If an organization is a nonprofit organization, then excess would be added to employees’ wages but would not be added to Form 990-T as UBTI. If an organization owns or leases all or a portion of a parking facility for its employees, IRS Notice 2018- 99 proposes a four-step method to determine the amount of UBTI. This may be used as a safe harbor until final guidance is issued.

There have been so far unsuccessful efforts to repeal this. We are following the IRS updates very closely and will keep you posted with more information as it becomes available. Please reach out to us with any questions you may have.