Calvetti Ferguson

Articles

IRS Grants Automatic Consent to Change to Cash Method of Accounting – Revenue Procedure 2018-40

On August 3, 2018, the IRS issued Revenue Procedure 2018-40, which provides the procedures by which an eligible small business can change their method of accounting to cash and obtain automatic consent. Taxpayers still need to notify the IRS by filing Form 3115 with their federal return, but they do not need to get prior approval to make the change. Any eligible small business on an accounting method other than the cash method should consider a change to the cash method.
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Practical Guidance on ASU 2017-01 and its Implications to Upstream Companies

ASU 2017-01 provides a screen to determine when a set (acquired inputs, processes, and outputs) is not considered to be a business. Paragraph 805-10-55-5A, which will be codified with the implementation of the ASU states, “if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business.” Under this basis for conclusion, the FASB clarifies assessing the risk associated with managing a group of assets and creating outputs should be an integral process in evaluating whether a group of assets should be considered to be a single group of similar units.
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Qualified Business Income Deduction: Understanding the Specified Service Trade or Business Rules

On August 8, 2018, the IRS released proposed regulations which begin to provide guidance and clarification to what is essentially a very complex calculation. Our second article in this series takes a deeper look into what constitutes a qualified trade or business for purposes of the Qualified Business Income (QBI) Deduction.
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Court of Appeals Reverses and Remands Tax Court Decision in Transfer Pricing Arena – Medtronic, Inc.

On August 16, 2018, the Court of Appeals for the Eighth Circuit reversed a Tax Court decision regarding the transfer pricing court case of Medtronic, Inc. & Consolidated Subsidiaries v. Commissioner, No. 17-1866.
The transfer pricing case analyzed the transfer pricing issue of locating operations and intangible assets in Medtronic, Inc.’s subsidiary in Puerto Rico.

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An Overview of the 20% Qualified Business Income Deduction

Under the new tax law enacted at the end of last year (Tax Reform and Jobs Act, Dec. 22, 2017), one of the provisions geared to the individual taxpayer was the ability for owners of a sole proprietorship, S-corporation, or partnership to receive a 20% deduction for qualified business income, also known as the Qualified Business Income deduction (QBI deduction). This additional deduction was geared to equalize the tax rates between individuals and corporations.
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Implementing the New Revenue Recognition Standard

In 2017 and the first quarter of 2018, most public companies began implementing the new revenue recognition standard, ASC 606 – Revenue from Contracts with Customers. Presently, there are many questions from private companies, and their stakeholders, on the implementation of ASC 606 before the effective date, January 1, 2019.
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Proposed regulations on pass-through businesses issued

The Tax Cuts and Jobs Act of 2017 contained a new provision allowing many owners of sole proprietorships, partnerships, trusts, and S-corporations to deduct 20% of their qualified business income. On Wednesday, August 8, 2018, the IRS announced they have issued the long-awaited, proposed regulations for the new deduction.
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Decisions, decisions – The impact of state tax rules on trusts and estates

Texas taxpayers dealing with trusts need to be aware of fact patterns that can sneak up and surprise them in negative ways. This word of caution applies to certain other states that, similar to Texas, are tax friendly to trusts. Such fact patterns can materialize, over time, even when thoughtful pre-planning has taken place.

Trusts can be exceptionally effective tools for managing, protecting and distributing a family’s financial legacy. The settlor/grantor (the one setting up the trust) faces many decisions. For instance, who will serve as the trustee, what distribution rules the trustee must follow, and many more. State taxation rules can further complicate those decisions in matters ranging from establishing a trust to managing its operations in the future.
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A New Precedent – Wayfair Decision

On June 21, 2018, the Supreme Court ruled that states have the authority to tax online retailers and that online shoppers may be charged sales tax by foreign (out-of-state) businesses if the state requires it. What this decision means is that a business may now collect and remit a state’s sales tax even when shipping a product to a state where it does not have an office, warehouse, employee(s), or other physical presence. Read More >

 

New Tax Law Puts Businesses on a Diet

Over the years, businesses have become accustomed to the benefits of deducting its business-related meals and entertainment expenses. However, the Tax Cuts and Jobs Act of 2017 has changed the deductibility of certain meals and entertainment expenses.
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Tax Reform: International Tax Law Changes

Great! Now, U.S. taxpayers will enjoy a lower corporate statutory rate of 21% on corporate profits or, if the U.S. business is a flow-through business, a rate of 37% (less the potential Qualified Business Deduction of 20%). We are nearly on par with many other developed countries transitioning from a worldwide taxation system to a territorial taxation system.
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Casualty Loss Safe Harbor

The year 2017 has been a headliner of a year for natural disasters. Americans have fallen victim to multiple hurricanes, floods, epic brush fires and earthquakes, all of which have caused extensive property damage. In response, the Internal Revenue Service has issued guidance on casualty losses in an effort to help victims who have suffered from these natural disasters. Safe harbor methods have been created to help individuals determine the impact of the disaster to their property and to help them recover financially.
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Tax Cuts and Jobs Act of 2017 – Individual Impact

The Tax Cuts and Jobs Act of 2017 significantly impacts all individual taxpayers generally starting in the 2018 tax year. Most of the tax reform related to individual taxpayers is temporary as many of the tax provisions sunset (i.e. expire) after the year ending December 31, 2025.
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Trends in Nexus: States Extend Their Reach for Sales & Use Tax Revenues

Over the last thirty years, technological strides have had impacts considered revolutionary on the economy and the way business is done. Consumers now have super computers in their smartphones, and can access virtually any product from anywhere in the world through the internet. Businesses can now sell products to every state without ever setting foot in them.
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Self-Employment Taxes and LLCs

Self-employment tax considerations for members of a limited liability company have come to the forefront recently due to the tax court decision in Vincent J. Castigliola, et ux., et al. v. Commissioner. This has long been a gray area as the Internal Revenue Code and the Treasury Regulations have not explicitly addressed whether members of an LLC are subject to self-employment tax on pass-through income generated by the entity.
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Houston, TX – New Tax Law Developments: Expanding the Hurricane Harvey, Irma, and Maria Relief Efforts

We hope that you, your families and your business fared well through the various storms. However, if you were not as lucky, we hope that you are aware and taking advantage of the various programs available to help you get back on your feet.
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Donations Via Crowdfunding: Don’t Forget Your Tax Advisor

When confronted with a disaster, such as we just experienced with Hurricane Harvey, the generosity of the human spirit becomes apparent as we all ask “What can I do to help?” For many of you, the answer will come in the form of setting up an online fund raising account to assist in raising money to help a family member, friend or co-worker in need.
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Financial Accounting Standards Board Issues Accounting Standard Updates on Consolidations

In recent years, the Financial Accounting Standards Board (FASB) has issued five Accounting Standard Updates (ASU’s) on consolidations that for private companies have gone, or are starting to go, into effect. 
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The Impact of the New Lease Accounting Rules on Your Organization

What does the new lease accounting rules mean to your company? The new rules will affect your organization if you lease anything from copiers to office space. The new rules provide guidelines on lease accounting that represents the most significant change to lease accounting rules since capital and operating leases were differentiated forty years ago.
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International Tax Perspectives: Corporate and Individual Tax Issues of Middle-Market Companies and Their Employees

The international expansion of business is inevitable. It used to be that this was reserved for only a small number of companies, meaning only those that could operate on an international scale such as ExxonMobil and the like. This, however, is no longer the case. More and more, middle-market companies are able to sell their products and services internationally. These middle-market firms often start selling into the various markets from their respective countries and eventually end up sending their personnel to those markets to continue to penetrate and grow the business.
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Update on the Single Sales Factor in Louisiana

Louisiana Governor John Bel Edwards signed legislation on June 28, 2016, to adopt changes to the Louisiana corporate income tax apportionment formulas for certain businesses and to provide rules for the sourcing of income relating to certain sales. These corporate income tax amendments apply to all taxable periods beginning on or after January 1, 2016. Prior rules continue to be in effect for taxable periods beginning before January 1, 2016.
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Tax Relief Granted to Flood Victims in Texas

On April 25, 2016, President Obama issued a disaster declaration for Texas. The Federal Emergency Management Agency (FEMA) announced that relief would be provided for the Texas counties of Harris, Fayette, Grimes, and Parker due to flooding occurring from April 17, 2016 to April 24, 2016.
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Increase in De Minimis Safe Harbor Limit

In late December, in response to numerous comments from tax professionals, the IRS issued Notice 2015-82 effectively increasing the de minimis safe harbor limit from $500 to $2,500 for taxpayers without an applicable financial statement. The safe harbor limit for taxpayers with an applicable financial statement remains unchanged at $5,000.
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When Does an Employee Benefit Plan Require an Audit?

The July 31st Form 5500 filing deadline for employee benefit plans will be here before you know it. To avoid late fees and penalties, it’s important for plan sponsors to understand the compliance rules that trigger the audit requirement before it’s time to file with the Internal Revenue Service (IRS).
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A New Perspective on Treating Cloud Computing Costs

Many companies in today’s high tech world use cloud based applications. The accounting professional has formulated new guidance on how to treat the cost of cloud based applications. The Financial Accounting Standards Board (FASB) recently issued Accounting Standard Update (ASU) 2015-05 to offer guidance on customer’s Cloud Computing Arrangement (CCA) fees.
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ACA New Reporting Requirements

When the Affordable Care Act was signed into law on March 23, 2010, there were numerous ramifications for individuals and businesses alike – not just in regards to healthcare and insurance, but in how businesses operate as well. New reporting requirements as a result of that legislation are in effect for 2015 and businesses need to be aware and address these new requirements now in order to ensure timely filing in 2016.
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The Need is Now

As the economy appears to be headed for a slowdown once again, businesses and individuals alike should be prepared for a range of far-reaching effects. Each will need to tighten their belts, save revenue, and cut expenses if they are to maintain profitability.
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Preparing for Liquidity Events

There is a significant amount of private equity capital waiting to be deployed into businesses. The fundamentals being sought are profitable businesses with a good model for growth. Having a market with investors seeking new ventures to deploy their capital, and competitors wishing to bypass organic growth, provides an opportunity for business owners to leverage liquidity options.
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Impairment – Delayed Reaction to Depressed Oil Prices

As everyone is painfully aware, oil prices began to fall considerably in the 3rd quarter of 2014, a trend which continued through to the end of the year. The year-end price of NYMEX light sweet crude contracts had settled in the low-to-mid $50s – a significant contrast to the low $100s they had commanded early in the year. This raises the question: where were the impairments on the year-end 2014 financial statements?
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Success-based Fees Being Allowed Administrative Relief

The IRS has recently issued relief for companies that failed to fully and completely make affirmative elections in order to deduct very large portions of success-based fees that were incurred during acquisitive transactions. There are several requirements that must be met in order to fall into the IRS issued safe harbor rules. One of the steps is ministerial in nature.
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Goodwill: The New Standard for Private Companies

Accounting for goodwill is an important part of the financial statements for any company, both public and private. Yet for private companies, the benefits were out weighed by its cost and complexity. This resulted in a general disregard of goodwill and its impairments by users of financial statements.
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Lower of Cost or Market

Lower of Cost or Market is the approach to valuing inventory. Recent events, particularly in the energy industry are causing economic uncertainty. This economic uncertainty is affecting the entire supply chain in the energy industry. Many companies are experiencing increasing pricing pressures and they are finding the recorded cost of inventory may be higher than current market prices.
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Tax Increase Prevention Act of 2014

Congress has approved the Tax Increase Prevention Act (“TIPA”) of 2014 (HR 5771), which provides a one year retroactive extension of popular incentives and credits. These “extenders” affect both businesses as well as individuals.
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Greener Fracking

The largely-untapped oil and natural gas in shale plays is an undisputable new source of reserves for the companies that explore and produce it, as well as a financial boon to the surrounding communities that benefit from the associated activities of exploring for and producing oil and natural gas.
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Foreign Bank and Financial Accounts (FBAR) Deadline

The 2014 FIFA World Cup Brazil (www.fifa.com/worldcup/) begins June 12, 2014. This will be the second time that Brazil has hosted the competition since 1950. Brazil was elected unchallenged as a host nation in 2007 after the FIFA decreed that the tournament would be staged in South America for the first time since 1978 in Argentina.

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Like-Kind Exchanges Involving Oil & Gas Real and Tangible Property

A like-kind exchange – also known as a 1031 Exchange because it is governed by Internal Revenue Code Section 1031 – is an often overlooked tax benefit that allows a taxpayer to postpone the recognition of gain on the sale of property when the proceeds from the sale are reinvested into a qualifying similar, or like-kind, property.
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