Online business is the new "Main Street" of America. According to the U.S. Chamber of Commerce, 74% of small businesses have a website online; many of these solely conduct business through their website. With an uptick of devices that increases social media presence (i.e. the smart phone, tablets, apps); businesses are able to conduct more of their daily activities online than ever before. This drive to do business or maintain a website online does not just apply to corporations, but to entrepreneurs looking to start or grow their business online.
While companies large and small are increasing their online business, larger companies have the capability to improve their defenses and resilience against cyber threats, leaving the small companies ripe for the picking for cyber criminals. Theft of digital information has become the most commonly reported fraud. Whether a business is utilizing, or thinking of utilizing cloud computing or just using email and maintaining a website, cyber-security should be part of the plan. It is a business’s responsibility for creating a culture of security that will enhance business and consumer confidence.
In order for businesses to stay a step ahead of cyber criminals these steps should be taken to increase security:
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Train your employees in security principles- establishing basic practices and policies for online use, such as creating strong passwords, appropriate internet use, and rules on how to handle and protect customer information and vital data.
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Protect computers, networks from cyber attacks- “cleaning” computers is one of the most vital things you can do to help prevent cyber attacks. For example having security software, web browser, and operating systems are the best defense against malware, viruses or other online threats.
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Provide a firewall for your computer- a firewall is a set of related programs that prevents outsiders from accessing data on private network information. This includes ensuring that if an employee is working from home that their home system has firewall protection. One of the most common mistakes is downloading firewall programs but not “enabling” them; essentially “turning them on”.
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Secure Wi-Fi networks- make sure that any Wi-Fi networks you have for your business is secure, encrypted and hidden. You can hide information by setting up your wireless access point or router so that it doesn’t broadcast a network name, and password protect access to the router.
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Limit employee access to data- do not provide any one employee to all data systems. Employees should only be given access to the specific data systems that they need to perform their jobs, and should not be able to install any software without permission.
PCI Compliance is also a big part of being secure online. PCI DSS is the Security Standards Council that was put into place to ensure that businesses storing, transmitting, and processing payment card data, are not putting their customers or their business at risk of data theft or fraud. The PCI DSS has four levels of compliance, with number one set as the highest level. The level that your business requires depends on:
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The volume of transactions you process, and
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How you process them.
Cyber-security is a team sport. Taking actions that will better protect both vital data and your business operations will have positive consequences for the security of all businesses, communities and the country. Computers and networks are interconnected through cyberspace; that means that both public and private sectors share responsibility.
Freed Maxick CPAs
Freed Maxick’s tax team and enterprise risk management team want to make sure that your online business is secure. Our firm is registered with the Payment Card Industry Security Standards Council, LLP (PCI SSC) and has Qualified Security Assessor’s certified by the Council to validate an entity’s adherence to the PCI DSS. Contact us and connect with our experts.
By: Howard Epstein, CPA, Director, International Tax
Opening a new front in the U.S. crackdown on offshore tax evasion, federal investigators have won court approval for a summons on a Caribbean bank, to turn over account data for wealthy American clients. This is just the latest of several overseas banks served with similar demands from the IRS, in an effort to identify federal tax evaders who have assets and income hidden offshore. This comes in response to the IRS leniency program (or Voluntary Disclosure Program), in which Americans can disclose previously secret foreign accounts to the IRS to avoid tax liens and pay back taxes.
The fact that the IRS is using John Doe Summons and other data mining means to flesh out non filers of FBARs provides further proof that they are steadfast in their resolve to find people committing tax fraud. The unfortunate part is that honest people that simply don't know the law are being compromised at the same time. It is important that those innocent people come forward under the current programs available before the IRS taps them on the shoulder and such relief is not available.
At Freed Maxick, we are poised to assist you in assessing your FBAR filing requirements, integrate the necessary information, and prepare your current and past due FBARs. We also have considerable experience helping taxpayers that have not been historically compliant navigate the IRS guidelines, minimizing any potential penalties through the various IRS Voluntary Disclosure Programs that are available.
For a confidential discussion of your FBAR situation, call us at 716.847.2651, or complete and submit this form for more information.
The RMA (Risk Management Association) Buffalo-Chapter Presents:
Fraud in the WorkplaceWith Guest Speakers:
Adrienne SchreierSenior Manager Freed Maxick, CPAs. P. C.
Shawn M. FrierDirector Freed Maxick, CPAs, P. C.
• How does Fraud affect you?
• Examples of Fraud
• Types of Fraud
• Common Fraud committed by employees
• Red Flag indicators for Fraud
• How to prevent fraud
Thursday May 16, 2013
8:00 a.m. Coffee/Breakfast, 8:30 a.m. Presentation
The Buffalo Club
388 Delaware Ave, Buffalo, NY
$25 for RMA members/$30 for RMA non-members/$10 Students
There will also be a Q&A period following presentation.
For questions and reservations, please contact:
Ann Berardi at: aberardi@mtb.com
Senate Approves Internet Sales Tax: Measure Headed to House
The U.S. Senate has overwhelmingly, and with strong bipartisan support, passed the Marketplace Fairness Act of 2013 (the Act) by a vote of 69-27. The bill would allow a state to require certain remote sellers to collect sales and use tax on sales made to customers in the state. States that are members of the Streamlined Sales and Use Tax Agreement (SST) would automatically be granted this authority. States that are not SST members would be required to implement simplification requirements. The bill provides an exception for businesses with annual remote sales of $1 million or less.
Highlights of the report available below include:
To check out a detailed summary on the Marketplace Fairness Act, click HERE for the full report.
When it comes to taxes, Freed Maxick CPAs is different than most accounting firms in Western New York. To us, tax time is all the time. We’re sticklers about deadlines and compliance, but our larger goal is tax management. So we keep a year-round eye on federal, state and local tax laws, including those pending. We alert you to any changes that may affect you and help you respond in a timely way.
We have the experience and resources necessary to resolve all your tax issues no matter what the complexity, including:
ASC 740
Canadian Services
Capitalization vs. Repair
Cost Segregation Services
Foreign Bank Account Report Compliance
IC-DISC
International Tax Services
New York (NY) State Excelsior Jobs Program
Personal Tax Services
Research & Development (R&D) Tax Credits
State and Local Tax Services
State Tax Analysis & Resolution
Tax Credits
Tax Planning and Consulting
Transfer Pricing Analysis – Study
Tax Planning and Consulting
We may be based in New York State, however Freed Maxick provides tax services to business all over the U.S., no matter your location: Alabama, AL; Alaska, AK; Arizona, AZ; Arkansas, AR; California, CA; Colorado, CO; Connecticut, CT; Delaware, DE; Florida, FL; Georgia, GA; Hawaii, HI; Idaho, ID; Illinois; IL; Indiana, IN; Iowa, IA; Kansas, KS; Kentucky, KY; Louisiana, LA; Maine, ME; Maryland, MD; Massachusetts, MA; Michigan, MI; Minnesota, MN; Mississippi, MS; Missouri, MO; Montana, MT; Nebraska, NE; Nevada, NV; New Hampshire, NH; New Jersey, NJ; New Mexico, NM; New York; NY, North Carolina, NC; North Dakota, ND; Ohio, OH; Oklahoma, OK; Oregon, OR; Pennsylvania, PA; Rhode Island, RI; South Carolina, SC; South Dakota, SD; Tennessee, TN; Texas, TX; Utah, UT; Vermont, VT; Virginia, VA; Washington, WA; West Virginia, WV; Wisconsin, WI; Wyoming, WY. We Serve all 50 States.
By Joe Burwick, CPA
Crowdfunding is not a new concept, as grassroots fundraising dates back to 1997. But with new platforms, like that of IndieGoGo and Kickstarter, crowdfunding has gained traction in raising revenues for donations, charities, and businesses.
What types are there?
Crowdfunding relies on the concept of asking large groups of organizations and individuals, to contribute to a project. There are three primary types of crowdfunding:
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Donation or Reward. When people give money towards a project and receive a gift or promise of one of the finished products in return.
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Debt. Receiving funding from people with the expectation they will be paid back with interest in the future.
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Equity. This involves getting a large number of people to buy into an idea in return for equity in the project or business.
Implications
Depending on the structure of the transaction (Equity, Debt, or Donation/Reward) there are differing tax implications and reporting requirements. For instance, donations/rewards where the investor receives something in return is a taxable event and must be included in gross receipts. However, if deductible business expenses exceed your crowdfunding revenue and other operating revenue, then you won’t owe income tax (but may owe franchise or minimum taxes).
Depending on how the payments are received, the crowdfunding recipient may get Form 1099-K. If payments are made by credit card or if payment in settlement of third party network transactions (i.e. PayPal) where gross payments exceed $20,000 and there are more than 200 transactions, you may receive one of these forms. The IRS will look to match (and analyze) the income on your return to Form 1099-K you receive.
Legal Implications
In response to the growing popularity of Crowdfunding, the JOBS act set the Crowdfunding exemption for equity interest offered to the public at a ceiling of $1,000,000 for the aggregate amount sold to all investors in a twelve month period. Prior to this act you had to either register with the SEC or meet another exception before offering securities to the public.
The act further limits the amount sold to any individual investor based upon their annual income or net worth as follows:
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If annual income or net worth is less than $100,000; the aggregate amount sold to such investor cannot exceed $2,000 or 5 percent of net worth / annual income.
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If annual income or net worth is greater than $100,000 the aggregate amount sold to such investor cannot exceed ten percent of the annual income or net worth of the investor (not to exceed a maximum aggregate amount of $100,000).
You should consult a tax advisor to determine if the amounts received can be excluded from income (i.e. under Internal Revenue Code Section 118 for a Corporation).
What are the Financial Reporting Requirements?
Not only are there potential tax implications to these equity investments, but you must meet various financial reporting requirements as well. Here is what you have to know to meet the financial condition requirements clause of the JOBS act:
Different offering amounts have different SEC financial reporting standards. Congress has set forth the standards as follows:
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If the target offering is $100,000 or less, the most recently completed income tax return and financial statements certified by the principal executive officer of the issuer must be provided.
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If the target offering is more than $100,000, but not more than $500,000, financial statements reviewed by a public accountant independent of the issuer must be provided.
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If the target offering is $500,000 or more, audited financial statements reviewed by a public accountant independent of the issuer must be provided.
As new provisions of the JOBS Act are rolled out, it seems to have raised more questions than answers for entrepreneurs and online start ups. While the bill was designed to help companies tap investors for the early cash they need to get established and hire workers, easing federal requirements for completing private share offerings; a young company would then be bound by SEC rules protecting the rights of their new stockholders, as well as certain state laws.
Don’t expect state security regulators to ease up anytime soon. As crowdfunding gains traction (and the dollars associated with it grow), so too will the scrutinizing of start-ups that issue shares through crowdfunding. Due to the complexities of parts of the JOBS Act and SEC rules toward crowdfunding, entrepreneurs should talk to a tax consultant; to be aware of all the state and federal regulations and the impact it may have at tax time.
Freed Maxick CPAs
Freed Maxick tax auditors will keep you up to date on the most pressing tax issues. If you would like to know how crowdfunding may affect your business at tax time Contact us and connect with our experts.
Over the past year, commercial and industrial buildings used approximately 50% of the energy in the U.S. economy. Building on the American Recovery and Reinvestment Act, operations can be made more efficient using cost effective efficiency improvements. The “Better Buildings” initiative gives commercial and industrial builds a chance to increase efficiency 20% by 2020. These changes are built into the President’s 2014 Federal budget, which includes a proposed tax change to modify and permanently extend the 179D Energy Efficient Commercial Building Deduction. There are various strategies to the initiative.
Streamlining Green Energy Incentives for Commercial Buildings
In order to encourage businesses to go green, a number of financial measures are being explored. Progress has been made by proposing updates to the rules for the 179D tax deduction. The Federal Government is looking to redesign the current deduction to be more generous which will encourage building owners and real estate investment trusts (REITs) to retrofit their properties.
The proposal would raise the current maximum deduction for energy efficient commercial building property to $3.00 per square foot. The maximum partial deduction allowed with respect to each separate building system would be increased to $1.00 per square foot. For taxpayers that simultaneously satisfy the energy savings targets for both building envelope, HVAC, and lighting systems, the proposal would increase the maximum partial deduction to $2.20 per square foot.
The proposal also provides a new deduction based on energy savings realized from retrofitting an existing building. The deduction would be capped at 50 percent of the total cost of implementing the plan. The deduction would be allowed on a sliding scale ranging from $1.00 per square foot of retrofit floor area, for energy savings of at least 20 percent, up to $4.00 per square foot of retrofit floor area, for energy savings of 50 percent or more. Sixty percent of the deduction would be available when the property is placed in service and would be based on the projected energy savings performance of the commercial building retrofit plan. The remaining 40 percent of the allowable deduction would be available at a later point and would be based on actual energy savings performance of the retrofit plan.
Do you know what deductions are available for your business?
CSP360 is one of the nation’s leading providers of cost segregation and consulting services to real estate owners. Our philosophy is to offer clients an experienced team of professionals who take a 360° view of a taxpayer’s assets. This helps our team identify credits and incentives that the taxpayer may benefit from. Contact us to learn more!
From the Thompson Reuters report," On April 10, President Obama released his Fiscal Year 2014 federal budget proposal, which included $1.8 trillion of additional deficit reduction over 10 years. It contains many of the provisions proposed in his 2013 budget, along with several new ones, such as the use of a chained consumer price index (CPI), a $3 million limit on tax-preferred retirement accounts, and an increase in the excise tax on tobacco.
Employing a “balanced approach,” the budget proposal seeks to tame the deficit while making businesses more competitive, providing middle-class tax relief, and reforming the tax Code. There are provisions that many will wholeheartedly support, and others that many will find unacceptable. Businesses will undoubtedly applaud the new stability in a permanent research credit and expensing deduction. Higher earners with incomes over $1 million will not be happy with paying at least 30% of their income in taxes under the so-called “Buffett Rule.” The elderly on a fixed budget may see the use of chained CPI as a politically safe way to cut Social Security. Some will view as overdue reforms to prevent companies from shifting profits overseas to avoid U.S. taxes and to encourage “insourcing” and job creation in
the U.S.
It is of course unlikely that many of these provisions will make their way into legislation, but some very well may. Whether regarded as a vision of the President’s agenda or a road map to coming changes, the budget proposal can’t be ignored."
To learn more and gain access to the full report, click HERE.
By: Michael Weslowski
Who qualifies and how it works
The Energy Policy Act of 2005 created a tax deduction for constructing energy efficient buildings. It is important to note that this is a tax deduction and not a tax credit. This deduction reduces the taxable income for the year while a tax credit is a dollar for dollar reduction in taxes owed. The full tax deduction is available to owners of both new and existing commercial buildings in which the installation of interior lighting system, HVAC system, and building envelope which reduce the total annual building power and energy costs by 50% or more as compared to ASHRAE 90.1-2001 minimum requirements. Benefits are available for new construction or improvements placed into service from 2006 thru 2013. Taxpayers can use IRS form 3115 to catch up on all missed 179D deductions back to 2006.
Who qualifies for this tax deduction – Taxpaying entities that has performed:
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New Construction
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Remodels, upgrades, and expansions of existing buildings
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Tenant owned leasehold improvements
The three areas that qualify are lighting, HVAC, and building envelope. The deduction ranges from $0.30 to $1.80 per square foot.
A building does not have to qualify for all three pieces to receive a deduction.
What is it worth?
As noted in the table above the ROI for this tax deduction can be substantial. If you or your clients have built a new building or made improvements to an existing building contact us. We have the knowledge and experience to guide you through this process.
CSP 360 is one of the nation's leading providers of cost segregation and consulting services to real estate owners. As part of every cost segregation study we offer the following services: State & Federal Tax Credit Review, Fixed Asset Analysis and Section 179D Analysis. CSP 360 also assists accountants and CPA firms in providing services to their qualified clients who have constructed, purchased, expanded or remodeled real estate.
Our philosophy is to offer clients an experienced team of professionals who take a 360 degree view of a taxpayer’s assets. This helps our team identify credits and incentives that the taxpayer may benefit from. To learn more about our unique approach click here.
Posted by
Joe Aquino on Tue, Apr 30, 2013 @ 08:17 AM
IRS Undermines a Family Limited Partnership
Author: Joe Aquino
Recently, the IRS celebrated another victory in its long-running campaign to challenge family limited partnerships (FLPs). In Estate of Lockett v. Commissioner, the agency attacked an FLP for being an invalid partnership under state law. Ultimately, however, it was the decedent’s estate planning that undermined the FLP, thus handing the IRS another win.
Widow takes ownership
Lois Lockett was predeceased by her husband, whose will established a trust for her benefit (Trust A). In 2000, as part of her estate planning, Lockett formed Mariposa Monarch, LLP under Arizona law. The partnership’s formal agreement, signed in 2002, named her sons Joseph and Robert as general partners. Lockett, the sons and Trust A were named as limited partners. At that point the parties hadn’t yet agreed on initial capital contributions or their percentage interests in Mariposa.
Shortly after the agreement was signed, Lockett and Trust A began funding Mariposa. Joseph and Robert never made any contributions. In 2003, Trust A was terminated, and Lockett became the owner of her limited partnership interest in the partnership. An amended agreement was executed to reflect this. The agreement continued to list the sons as Mariposa’s general partners, but an exhibit listed their mother as holding 100% of the partnership and each of the sons holding 0%.
When Lois Lockett died in 2004, Mariposa held assets worth more than $1 million. On its tax return, the estate valued Lockett’s 100% ownership interest in Mariposa at $667,000 after applying control and marketability discounts.
IRS raises state law
Initially, the IRS argued that Mariposa wasn’t a valid partnership under Arizona law. In that state, partnerships are defined as an association of two or more persons and are formed to operate a business for profit. The IRS contended that only Lockett contributed assets to Mariposa and that Mariposa wasn’t operated for profit.
Nevertheless, the court found that Mariposa was a valid partnership. Although the sons didn’t hold interests in it, Trust A contributed assets and was therefore a limited partner, satisfying the requirement of an association of two or more persons.
The court also found no requirement that an Arizona business engage in a certain level of economic activity. Moreover, it determined that Mariposa was operated to derive a profit. The partnership hired a financial advisor to manage its stock portfolio, purchased real estate that it leased and made loans requiring annual interest payments. It thus operated as a business for profit.
Trust termination found faulty
Unfortunately for the estate, the IRS had an alternative argument. Even though a valid partnership was formed, it had terminated at the time of Lockett’s death because she had acquired 100% of the interest in it. This occurred when Trust A was terminated in May 2003 (effective Dec. 31, 2002). At that point, Lockett had become the owner of Trust A’s limited partnership interest in Mariposa as well as being its sole partner.
Arizona law provides that a partnership is dissolved when a dissolution event previously agreed upon in the partnership agreement occurs. The Mariposa agreement established that the FLP would be dissolved when one partner acquired all of the other partners’ interests. So on Dec. 31, 2002, Mariposa dissolved and Lockett became the legal owner of its assets.
Many potential errors
Because the FLP had dissolved by the time of Lockett’s death, its assets were included in her gross taxable estate. If her sons had made contributions to fund their general partnership interests or she had gifted them with small interests in Mariposa, the FLP may well have withstood scrutiny and removed the assets from the estate.
Lockett’s mistakes were only a few of the many errors that can sabotage an FLP. To protect your clients from IRS attack, work with financial experts when drafting partnership agreements and making estate plans.
If you have any questions about FLPs or any other issue, give us a call at 716.847.2651, or you may contact us here.
Ever hear the saying “there’s an app for that”; well now there’s a currency for online users-Bitcoin. With no actual existence in the physical world, Bitcoin has been breaking barriers for online and consumer bartering.
How does it work?
By visiting an online exchange site, you can simply exchange traditional curriences (dollars, pounds, etc) for the virtual currency. Trading started at $7.00 in 2010, in exchange for one Bitcoin. What separates the Bitcoins from other tradable scripts (i.e. the Disney dollar), is that the coins trade on a floating exchange rather than having a fixed exchange rate set to a national currency. Prices have fluctuated wildly over the last couple of years, and with no government oversight or regulation, there is also no way to protect the online exchange. This led to a brief shutdown after Bitcoin sites were hacked. It is back in circulation, but finding places that will take the coin is difficult. There are some restaurants, book stores and online retailers that will take the coin as currency. It requires logging into your IPhone and sending the coins to the retailer you are dealing with, virtually. Once the exchange is complete, you have your merchandise. According to Bitcoin Magazine, the currency has gained over 1 million users.
It can’t be that easy?
It’s not! When Bitcoin first started trading in 2009 it sold for less than a dollar. The virtual currency started garnering more attention when, in the start of January of this year, it rose from $10.00 to roughly $260.00 by April 10th. But that bubble burst when it fell to $77.00; since then it is slowly rising again. Not only is the currency volatile, but investors have had to deal with highly unstable trading platforms- the unfortunate symptom of decentralized currency. Currently there are 11 million Bitcoins in circulation, but this new way of bartering is unpredictable. Traditional currencies are safely held in a range of investment funds and banks. While both have their security problems, only one is considered “hard currency”.
Are there tax implications?
Due to widespread curiosity and the growing interest in Bitcoins, the Treasury Department issued a series of guidelines for Bitcoin brokers. The guidelines serve more as a direction against money laundering than tax implications. The IRS hasn’t specified yet whether Bitcoins should be considered an in-kind payment, bartering system, or foreign currency payment. Trying to decipher between these distinctions is no easy task, as each has its own implications under the U.S. tax code. As the continued education is necessary, to be aware of future tax issues that may arise from internet currencies; as the IRS and government entities move toward concrete answers to questions surrounding the treatment of digital currencies.
Freed Maxick tax auditors stay current and update with currency guidelines, to help keep you aware of issues or implications that could affect your taxes. If you would like to learn more Contact us to connect with our experts.
We have also worked with hundreds of high tech companies and startups. Please call us to talk with one of our CPAs or business advisors about getting your high tech company to growth mode. Call us at 716.847.2651, or contact us here.