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STAFFING AGENCIES

New Tax Deduction for Owners of Qualified Businesses

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Good news for partnerships, S corporations, sole proprietorships, and estates and trusts

(pass-throughs) which can deduct  up to 20% of their Qualified Business Income (QBI) under new IRS Section 199(A).

What is Qualified Business Income? Qualified Business Income is net income that is received from a Qualified Trade or Business. Capital gains, and dividend and interest income are not considered business income. Guaranteed payments or wages paid to owners are excluded.
What is a Qualified Trade or Business? A Qualified Trade or Business is any trade or business that is not a “Specified Service Trade or Business” defined by the IRS as the following:
• businesses in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services,
• any banking, insurance, financing, leasing, investing, or similar business,
• operating a hotel, motel, restaurant, or similar business, and
• businesses involved in investing and investment management, trading, or dealing in securities

Income Limitation for Specified Service Trade or Businesses Owners of a Specified Service Trade or Business may take the QBI Deduction if their taxable income is below $157,500 for single filers ($315,000 for Married Filing Joint) to be eligible for the full deduction.

How is the QBI Deduction Calculated? The QBI Deduction usually is the smaller of 20% of the Qualified Business Income or 20% of taxable income. For example, a single self-employed lawyer has $150,000 of QBI. His taxable income is $138,000(below the income limitation). Therefore, his QBI deduction is $27,600, which is 20% of his taxable income.

Good news for staffing firms, and the real estate industry! The IRS proposed regulations clarify that the following businesses qualify for the QBI deduction with  no income limitation: staffing firms, real estate agents and the rental of tangible or intangible property to a related business. Other rental real estate properties may qualify if the activity rises to the level of a business.
Limitations for Qualified Businesses – these businesses have no income limitations but may be limited based on the business’s W-2 wages and unadjusted basis in qualified property. The amount of the tax deduction will vary depending on the specific taxpayer circumstances.
Want to maximize your deduction? Whether your business is a Qualified Business or a Specified Service Trade or Business and regardless of your income level, there are numerous tax moves one can do to maximize this new Sec 199(A) deduction- even for 2018! Please consult with us about your situation.

NJ Tax Amnesty Program -Running Now!

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The Clock is Ticking…NJ Tax Amnesty Program Runs Through Jan. 15, 2019  

Gift from State of NJ

Businesses and individuals with unpaid NJ tax liabilities may be able to get a break on penalties under the Amnesty Program  which is in effect from November 15, 2018 through  January 15, 2019.  The measure applies to all state taxes including  gross income,   corporate business tax and sales and use tax.  However, it does not apply to unemployment  type taxes administered by the Department of Labor.   

 Why should I do this now? Because under this limited-time offer the Division of Taxation will forgive all penalties, and one-half of the accrued interest due at Nov. 1, 2018. 

 Here are some of the details 

  • NJ Amnesty will provide relief for 2008 – 2016 delinquent individual or business tax return filers. 
  • Requests for amnesty must be filed electronically 
  • The Division of Taxation recently mailed a letter to all taxpayers who are known to have amnesty-eligible deficient and/or delinquent accounts 
  • If you didn’t receive a letter and you want to participate, you will need to register or self-report through the Non-Outreach Portal 
  • Federal tax liabilities are not included under the program 

 Is there a hitch? Sort of. The bad news is that if a taxpayer is eligible for amnesty and does not take advantage of it, an additional 5% penalty will be added to the already imposed penalties and interest on the original tax liability.   

To see if this program might be right for you, please contact our Tax Manager, Steven Citron.   

 

 

NJ Employers- August Deadline to Reduce Unemployment Rates

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Did you check your NJ SUI rates?

On July 28, 2018, the annual Notice of Employer Contribution Rates were mailed to all New Jersey employers.

NJ Unemployment Tax Savings

This is not a bill, but rather a summary of the way the NJ Department of Labor calculates the employer contribution rate for unemployment and disability. This form enables you to determine whether a voluntary contribution would save you money in the subsequent year.

Can I reduce the NJ SUI rate?

A voluntary contribution increases your reserve balance and may reduce your contribution rate. Each employer should calculate the amount of the voluntary contribution required to reduce the rate. The required voluntary payment should be compared to the savings realized from a lower rate.

The unemployment expense is a substantial component of your labor cost. Business owners should give it careful attention. If you wish to make a voluntary contribution to your reserve balance you only have 30 days from the notification date to do so. We recommend that you verify all the NJ DOL calculations including the amount of the employer contributions and the benefits charged to your account. Report any discrepancies to the NJ Dept. of Labor. 

Checked your TWES Account?

Good news…if you didn’t receive the Notice and have a Tax Web Enabled System (TWES) account online – you can find your contribution rates there as well. The TWES system provides a wealth of information allowing employers to review their account status, open balance, payment history, employer and worker contribution rates, credit balance and any delinquency.   You can log on to the TWES website at https://my.state.nj.us/

Remember – doing your summer homework now may save you money down the road!

If you would like assistance in determining if a voluntary contribution will save you money, please do not hesitate to contact us immediately.

 

NJ Tax Amnesty: Cool Savings Despite Sizzling Summer Heat

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 Businesses and individuals facing unpaid NJ tax liabilities may be able to get a break on penalties according to the tax amnesty measure signed into law on July 1, 2018. The amnesty period will not begin before November 1, 2018 and will end by January 15, 2019. The program will apply to state tax liabilities for tax returns due on and after February 1, 2009 and prior to September 1, 2017. The measure will apply to all state taxes including gross income, corporate business tax and sales and use tax. However, it does not apply to unemployment type taxes administered by the Department of Labor. 

Why should I do this now? Because under this limited-time offer (remember, the clock runs out by January 15, 2019) the Division of Taxation will forgive all penalties, and one-half of the accrued interest due at Nov. 1, 2018. 

Here are some more details

    • The program will also apply to amounts currently under audit or being contested with the NJ Div. of Taxation.
    • A start date for the program has not yet been announced.
    • NJ Amnesty will provide relief for 2009 – 2016 delinquent individual or business tax return filers.
    • The program also forgives all penalties and 50% of interest for delinquent sales and use tax filings for quarters ending Dec. 31, 2009 – June 30, 2017.

Is there a hitch?  Sort of. The bad news is that if a taxpayer is eligible for amnesty and does not take advantage of it, an additional 5% penalty will be added to the already imposed penalties and interest on the original tax liability.

To see if this program is right for you, please contact our Tax Manager, Steven Citron

 

 

Should I Pay My Child Wages?

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Children Running Office

Does It Make Tax Sense to Pay Jr?

Your child probably knows a lot more about technology—from designing a website to posting on social media—than you ever will. At many family businesses, Junior may already be helping with a variety of digital and other tasks.

Have you considered paying your kids for their work? Besides motivating them, putting kid(s) on the payroll is an attractive way to transfer assets to them while saving taxes. You might be able to help them fund their college costs or purchase a home while getting a tax break.

That’s because your company can take a deduction for the salary you’re paying them. The kid’s tax bracket will almost certainly be lower than yours, so the family unit saves thanks to the difference in the tax rates. It’s up to you to match their skills with your business’ needs, but we can help with some of the tax aspects.

Goodbye to Payroll Taxes

Are your children under 18? And are you a sole proprietor, a single-member LLC, or operate a partnership where the only members are you and your spouse? If so, congrats—your children won’t have to pay Social Security, Medicare taxes or NJ unemployment if they work for you. If your child’s earned income—generally salary, as compared to interest and dividends, is less than the standard deduction of $6,350 in 2017, he won’t have to file his own income tax return.

What are my Tax Savings?

Let’s assume, you pay your high school son, your computer tech, a salary of $6,300. He will pay no US or NJ income taxes on this salary. If you are in a high tax bracket, your US and NJ tax savings can be as high as $3,000!  And he will not have to file a tax return.

What If My Children Are Over 18?

Now let’s assume that your college daughter does the graphics and social media for the business. Or your child is under 18 but you own a “C” or “S” Corporation. You pay her $15,000. These wages are subject to Social Security & NJ unemployment. Her federal and N.J. income taxes plus the payroll taxes will be about $3,500. However, at your higher tax bracket, the federal and NJ income tax savings could be as high as $7,500. So the net tax savings to the family may be $4,000. Still a good deal!

The Retirement Savings Credit Saves More…

If your child over 18 who is not a full-time student contributes up to $2,000 into a Roth or traditional IRA, she will receive a Retirement Savings Credit of up to 50%. In our example, her tax burden of $3,500 will be only $2,600. And the family saves $4,900. A homerun!

The Bottom Line

Hiring your kids can be a good experience, while potentially offering some nice tax breaks. There are some twists: you must pay the salary in that tax year, and the pay must be “reasonable”. If your kid sweeps floors, forget about paying enough to cover his college costs and then trying to deduct it as salary expense. The state tax implications may differ from the federal. Before you go ahead and pay your child, it is a good idea to consult with your tax advisor. It could end up saving you money later.

Payroll Tax Savings for NJ Employers- August Deadline

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Did you check your NJ SUI rates?

Tax Savings

On July 28, 2017, the annual Notice of Employer Contribution Rates were mailed to all New Jersey employers. This is not a bill, but rather a summary of the way the NJ Department of Labor calculates your employer contribution rate for unemployment and disability. This form enables you to determine whether a voluntary contribution would save you money in the subsequent year.

Can I reduce my NJ SUI rate?
A voluntary contribution increases your reserve balance and may reduce your contribution rate. Each employer should calculate the amount of the voluntary contribution required to reduce the rate. The required voluntary payment should be compared to the savings realized from a lower rate.

The unemployment expense is a substantial component of the labor cost of staffing agencies. You should give it careful attention. If you wish to make a voluntary contribution to your reserve balance you have 30 days from the date of your notice to do so. We recommend that you verify all the NJ DOL calculations including the amount of the employer contributions and the benefits charged to your account. Report any discrepancies to the NJ Dept. of Labor.

By making a voluntary payment, employers may reduce the NJ SUI rate for the coming year. Please be aware that this payment increases your reserve balance and helps reduce the NJ SUI rate in future years as well.

Checked your TWES Account?

Good news…if you didn’t receive the Notice and have a Tax Web Enabled System (TWES) account online…you can find your contribution rates there as well. The TWES system provides a wealth of information allowing employers to review their account status, open balance, payment history, employer and worker contribution rates, credit balance and any delinquency. You can log on to the TWES website at https://my.state.nj.us/

Remember doing your summer homework now may save you money down the road! If you would like assistance in determining if a voluntary contribution will save you money, please do not hesitate to contact us immediately.