New Regime for PartnershipsPosted on December 10th, 2018
Centralized Partnership Audit Regime–if it sounds like a military action, you have the right frame of mind. The new guidance has and will affect ALL partnerships, LLCs and joint ventures, even if formed fifty years ago. Indeed, partnerships may now become targets for audits. The CPAs at Baratz & Associates are ready to help our business clients understand the ramification of the changes.
The consequences of these new rules are significant and can adversely affect your partnership, LLC or joint venture should it have an audit which results in a tax liability. We encourage businesses that are taxed as partnerships to begin the analysis of their newly formulated compliance burdens with your CPA.
Under the CPAR, all partnership tax adjustments will be made at the partnership level (not at partner lever as under traditional flow-through principles). The economic burden of an IRS adjustment will be borne by partners (hence need to consider contractual indemnification):
- The CPAR is intended to raise revenue – it will increase partnership audit rates. Partnerships and LLCs are now targets for audits.
- The partnership/LLC tax calculation will be at the highest tax rate levied against the partnership.
- No more “tax matters partner” – new concept “partnership representative” (PR).
- The PR has exclusive power to deal with IRS for audit/appeals/litigation, AND it does not have to be a partner. The PR can be an advisor, so long as s/he has presence in the U.S.
Unfortunately, no grandfather provision applies. The CPAR rules apply to all existing partnerships and new partnerships formed.
This may impact how you conduct business moving forward, as there will be significant impact on partnership transactions in the form of acquisitions of partnership interests, mergers as well as due diligence, representations, and indemnification.
It is recommended to review your partnership agreement as well. It is essential to designate a partnership representative, obtain partner approval of certain decisions made by partnership representative, provide contractual notice/participation rights, and finally, indemnify current and former partners of partnership tax liability under default rule (including method of allocating liability among partners).
Is There a Way Around CPAR?
The CPAR dramatically alters the federal tax treatment of all partnerships except those with a valid election out. And this could be the best option for you or your company. This election is available only if partnership is required to furnish less than 100 K-1s or has all eligible partners. This can result in separate audits at the partner lever (same as under pre-1982 law and for “small partnerships” not subject to TEFRA rules under 1982-2017 law).
Opt-out election for partnerships taxable years beginning after 1/1/2018. If “eligible,” partnership can opt-out of the CPAR; the key is whether the partnership consists of all eligible partners.
WHO IS ELIGIBLE?
Only eligible partnerships may opt out of new partnership audit procedures. The partnership required to furnish less than 100 “statements” (i.e., Schedules K-1) or any other partnership with only eligible partners. Eligible Partners (those who can opt-out):
- C corp.
- S corp.
- Deceased partner’s estate
- Foreign entity taxed as a C-Corp
WHO IS INELIGIBLE?
The term eligible partner does not include:
- foreign entities that are otherwise ineligible;
- disregarded entities;
- nominees or others who hold an interest on behalf of another person; and
- estates that are not estates of a deceased partner
It should be understood that the legal exposure of partners has changed and there will be a need for recourse and indemnity under such changed rules on a look back basis. This is not one to be ignored. Consult with your Baratz & Associates CPA or attorney to make any necessary adjustments.
Do You Facilitate or Sell and Why You Need to Know–Sales Tax Regulations Have ChangedPosted on December 4th, 2018
A few weeks ago, things changed for buyers and sellers of goods in New Jersey. Even those without a storefront. The days of “Look Ma! No sales tax” are over. You may be familiar with the recent decision of the U.S. Supreme Court in South Dakota v. Wayfair, Inc., in which the court determined that physical presence within a state was not a prerequisite for the collection of sales tax on purchases of tangible personal property.
Most businesses were not concerned at the time. However, under the law, if a seller does not have a physical presence in the state but has revenue from sales into the state in the calendar year, or prior year, in excess of $100,000, the seller must collect taxes. For it seemed as though the revenue from such sales had to be quite large to affect any seller—like Amazon sized.
However, the same rule will apply to a seller with 200 or more separate transactions into the state in a calendar year or in the prior year. Therefore, if you sell 200 widgets at $.50 a piece, you may not be living the Jeff Bezos lifestyle, but you are bound by the same guidelines as of November 1, 2018.
Indeed, over forty states and the District of Columbia levy taxes on the sale of goods and certain services, including those sold remotely, such as over the Internet. New Jersey has now released TB-83 to help guide you in who’s who and what’s what.
The terms used can be confusing, and we want you to rely on your CPA to help you determine how your business is affected and at what point, but here is a primer on the language included…
A marketplace facilitator is required to collect Sales Tax on sales of tangible personal property, specified digital products, and services delivered into New Jersey, which are made by a marketplace seller through any physical or electronic marketplace owned, operated, or controlled by the marketplace facilitator, regardless of whether they are over or under the thresholds of $100,000 or 200 transactions.
Marketplace sellers are not required to collect and remit sales tax on a sale when a marketplace facilitator is required to collect and remit sales tax on the transaction. If a marketplace seller is registered with New Jersey for the collection and remittance of sales tax an option exists. The marketplace facilitator and marketplace seller are permitted to enter into an agreement with each other regarding the collection and remittance of sales tax.
If this sounds like a lot to account for, you are right. The State of New Jersey agrees and may allow a six-month reprieve to allow businesses to get a system in place. The Division of Taxation may temporarily suspend or delay the registration, collection, and remittance obligations of a marketplace facilitator for a period not to exceed 180 days.
If your CPA recommends this course of action, you’ll need to follow the protocol exactly. Requests for a delay must be marked “Marketplace Facilitator—Request for Delay” and include the following:
– Name and address of the taxpayer;
– The taxpayer’s New Jersey Taxpayer Identification Number (if registered with New Jersey) or Federal Employer Identification Number (FEIN) (if not registered with New Jersey);
– The date the taxpayer expects to be able to comply with the new collection and reporting requirements; and
– An explanation as to why they require additional time in order to meet the new collection and reporting requirements.
Following each retail sale made through the marketplace, the marketplace facilitator must provide the purchaser with a sales slip, invoice, receipt, or other statement of the price paid or payable. The amount of tax due must be separately stated from the sales price of the item(s) purchased. A marketplace facilitator is subject to audit with respect to all retail sales for which it is required to collect and remit sales tax.
A marketplace facilitator will be relieved of liability for the tax on a retail sale if it demonstrates that it made a reasonable effort to obtain accurate information from the marketplace seller about a retail sale, and the failure to collect and pay tax was due to incorrect information provided to the marketplace facilitator by the other party. When the marketplace facilitator is relieved from tax liability for this reason, the marketplace seller is liable for the tax.
The goal of TB-83 and other regulations like it is to put all marketplace sellers (internet or brick and mortar) on the same playing field. While this may be a lot for your local five and dime to figure out, the CPAs at Baratz & Associates will help. It’s the time of year when you need to rely on your trusted advisor, start planning for 2019 now.
401 (k) AuditsPosted on September 26th, 2018
As auditors we are occasionally surprised that some responsible employers don’t realize that with company growth and success comes new responsibilities. You may not realize that the number of participants in your 401(k) plan dictates whether you have a large or small plan.
The Department of Labor regulations require that an employee benefit plan filling as a “Large Plan” submit audited financial statements with its annual form 5500. A large plan is defined as a plan with 100 participants at the beginning of the plan year. Employees become includable as “participants” on the date which the employee becomes eligible to participate – regardless of whether they elect to participate. This is an important distinction and could potentially increase the number, bumping you into a large plan status.
Accurate census data will assist your firm in properly counting your participants, and ensure that your plan files its form 5500 under the proper category. The participant count must include (1) actively participating employees, (2) retired, deceased, or separated employees who still have assets in the plan and (3) all eligible employees who have yet to enroll or have elected not to enter the plan. When this count reaches 100, your plan is now a “Large Plan” and is subject to the audit requirements of the Department of Labor.
This is where an established relationship with a firm is crucial to planning and reporting. The more a third-party administrator knows, the better. With expertise comes creativity, and at Baratz & Associates, PA we use our expertise in auditing to help keep your costs down.
Some good news for those who are reaching the next level…There is some relief allowed by the Department of Labor in the form of the 80/120 rule. This rule allows plans with between 80 and 120 participants, as of the 1st day of the plan year, to file the Form 5500 in the same category (“large plan” or “small plan”) as indicated on the prior year Form 5500 filing. This allows a growing business whose plan was under 100 participants to continue to file as a small plan until the plan reaches 120 participants.
The table below illustrates most possibilities:
|Top of Form
# of eligible participants on 1st day of the plan year
Bottom of Form
|Financial schedule filed with prior year Form 5500||Options for current year Form 5500||Audit Required?|
|<80||Does not matter||Small Plan – Schedule I||No|
|80-99||Small Plan – Schedule I||Small Plan – Schedule I||No|
|Large Plan – Schedule H||Either – Schedule H or Schedule I||Optional|
|100-119||Small Plan – Schedule I||Either – Schedule H or Schedule I||Optional|
|Large Plan – Schedule H||Large Plan – Schedule H||Yes|
|>120||Not applicable||Large Plan – Schedule H||Yes
Bottom of Form
In addition to that, there are some options available that can assist your plan in staying under 100/120 participants. The expertise of the right auditing firm helps you plan ahead and take advantage of the rules.
- Automatic rollover of terminated employees with small accounts, typically 5,000 or less.
- Using multiple plans
This last option is more complicated, but if there is a legitimate business purpose to separate employees of a certain class–such as employees covered under collective bargaining agreement, it could be best to take advantage of this possibility. Again, full disclosure to your auditing firm like Baratz & Associates will allow us to determine how to best help you and remain in compliance with the law.
If you think you may be on the cusp of a new status, you need an expert on your side. For more information on understanding the audit requirements of 401k plans and other employee benefit plans, please consider the CPAs at Baratz & Associates, PA. We have a dedicated staff for employee benefit plan audits, with CPAs educated in single-employer 401k plans, multiemployer Taft Hartley plans, health and welfare plans, and more. We have been awarded by SJ Biz magazine for our auditing work. Contact us today to see what we can do for you.
William C. Smitheman Jr., CPA
Blending Accounting and Financial ServicesPosted on July 9th, 2018
Whether you are in the process of organizing your financial records or trying to establish a succession plan, it pays to work with professionals that can help guide you through intricate tax records and accounting processes. While the help of one firm can help ensure your long-term success and peace of mind, the additional help of an expert advisory group can further guarantee your personal success. Our team of CPAs at Baratz and Associates regularly works with CORA Capital Advisors to provide our clients the comprehensive approach they deserve.
The Value of Collaboration and Special Services
At Baratz and Associates, we pride ourselves on responsiveness and developing effective solutions for unique problems. To this end, we collaborate with CORA Capital Advisors to offer service packages which encompass diverse solutions, provided in a timely manner. With our combined expertise, we recommend innovative forms of guidance, including:
- Asset Management
- Retirement Planning
- Estate Planning
- Risk Management
- Tax Planning
- Executive Compensation
The world of accounting and finance is filled with intricate paths that can easily dissuade you from moving forward with plans. But with expert guidance, you can overcome these hurdles and develop an effective strategy that considers your past, present, and future. Whether this involves the development of a succession plan or you need help outlining a living will, our large team of advisors oversees each step and makes sure that you are aware of obscure obligations and tax laws. Those who need help with estate planning, for example, would benefit from a meeting with our team if they are concerned about the distribution of their assets.
Schedule Your Comprehensive Consultation Today!
On our own, we at Baratz and Associates can help you establish processes that organize your assets while planning for the future. But with the added assistance of CORA Capital Advisors, we are able to ensure that all of your needs and goals are accounted for. For more information on our services or to schedule a consultation, contact our Marlton firm today!
Mergers and Acquisitions – What to Look ForPosted on June 25th, 2018
Knowing what to look for when selling, buying, or merging your business is crucial for company owners. Because of the numerous factors to consider, many entrepreneurs have turned to outside CPA firms to assist them throughout the process.
A qualified accounting professional can offer you the support necessary to successfully navigate the mergers and acquisitions process. Below are some examples of what CPAs look for to ensure the most beneficial result.
Why Do I Need a CPA’s Help?
When looking to expand your business, merging and acquiring another company are ways to increase your presence and make an impact in your particular industry. However, there is a significant amount of due diligence required for all parties involved. The buyer has the great responsibility of ensuring the venture they’re interested in acquiring is worth their investment. Accounting professionals verify this by examining the business’ records and back-office practices, so they can discover any inaccuracies or risk factors that could complicate the deal.
It’s important for your CPA to take a thorough approach when examining the financial records and operating processes of the acquisition prospect. They can organize and advise improper bookkeeping, ensure tax implications are considered, and ultimately whether or not the transaction will benefit the long-term growth and profitability of your business after taking this new direction.
During the sale an effective accounting firm will also collaborate with legal professionals so the ownership change process is a smooth transition.
Providing Comprehensive Recommendations and Valuation
Business owners tend to have enough responsibility on their plate that spending the time necessary to prepare for mergers or acquisitions isn’t feasible. A CPA firm’s qualified financial and accounting professionals have the savvy to efficiently research company financials so they can recommend strategies and point out any red flags that could potentially derail the purchase.
Whether combining forces, or taking over operations, obtaining a valuation to determine the company’s worth is an important step to take. CPAs provide this estimate to clients involved in the M&A process to give them the full scope of their financial undertaking.
Schedule a Consultation in Marlton Today
At Baratz and Associates, our trusted accounting team has decades of combined experience, so we’ve seen the ways nearly every scenario has played out during mergers and acquisitions. If you are looking for a Marlton CPA firm with the expertise to navigate the M&A process successfully, call us today to set up a consultation.
The Importance of Tax Planning vs. PreparationPosted on June 6th, 2018
Having a tax plan in place, to many business owners, amounts to setting a calendar reminder on January 1st to organize the paperwork for their accountant. This is a perfectly reasonable approach if the end goal is filing returns in a timely fashion. Yet, compliance isn’t why most entrepreneurs started their company.
For these professionals, moving forward means pursuing opportunities as soon as they appear. Often, this flexibility comes from reducing how much income goes toward fulfilling yearly tax obligations. This is easier to do with a strategic tax plan in place and the guidance of supportive financial experts along the way.
Plan or Prepare — What’s the Difference?
Both tax preparation and planning are important, especially as the IRS and state tax boards dedicate more time to reviewing returns line-by-line. Avoiding compliance issues is why many business owners enlist the help of CPA firms for return preparation. Tax planning allows you to tackle issues that go beyond the past year’s earnings, not by managing the amount owed but ethically reducing it.
The strategies that make up a tax plan start well before tax season begins. After December 31st, the ways to adjust liability are few and far between. Comprehensive tax services help clients identify valuable deductions early, so no opportunity falls by the wayside. Where the scope of preparation is limited to current and past returns, the benefits of planning come from making projections for the future and anticipating concerns.
The Value of Keeping Your Tax Strategy Relevant
Without organized records, it is impossible to have an actionable tax plan. Out-of-date or, worse, altogether absent documentation would tie the hands of even the most talented accountant. Fortunately, the same professionals that help entrepreneurs plan for their obligations can also set up a system that makes viewing and interpreting financial data easy to do. Since the most beneficial tax strategies take changing economic realities into consideration, accurate year-round bookkeeping becomes all the more essential.
Prepare Your Business for the Future, Today – Contact Baratz & Associates, P.A.
At our firm, we help clients make the proactive, well-informed decisions that improve wealth and well-being. More than offering support during tax season, we work alongside business owners throughout the year. The strategic approach we take encompasses ongoing obligations and steps for gaining a stronger foothold in the marketplace.
To discover more about how Baratz & Associates, P.A. provides tax planning in Marlton and throughout the greater Evesham Township area, schedule a consultation today.
Healthcare Accounting: Top Tips for CompliancePosted on May 22nd, 2018
Operating a healthcare business requires attention to detail and a commitment to generating routine, accurate financial reports. If you operate a healthcare enterprise, you can’t afford to be lax in your accounting methods. The following tips help you understand why it’s important to maintain an organized accounting process and how can you achieve efficient reporting and data entry:
Establish a QuickBooks Accounting System
Setting up a digital bookkeeping and reporting system is crucial. With accounting software, you can easily add, track, and filter data for organizing into the necessary reports at tax time. When implementing QuickBooks for your medical practice, be sure to use the right platform – some business owners may be better off with the online version, as this allows real-time access for both the business owner and any professional accountants. It’s also advisable to reconcile accounts monthly to ensure accuracy. QuickBooks’ reporting tools help you separate data by office location or specific services rendered.
Create a Relevant Chart of Accounts
Operating a medical practice is different than managing a business in any other field; you may have to invest money in purchasing larger or more advanced equipment or in maintaining malpractice insurance. You should meticulously record your income and expenses, including leasing your office space and patient record storage and maintenance. By closely monitoring the various ways your business makes and spends money, you can fine-tune operations to improve profitability. Your chart of accounts can be created and customized in QuickBooks.
Perform Accurate Cost Reporting for Medicare
Practices that work with Medicare patients must submit separate reports for funding purposes. If you expect reimbursement by Medicare for services provided, financial statements and cost reports must demonstrate accurate and on-time data tracking with the appropriate accounting method. In many cases, this method is accrual-based accounting, which allows healthcare companies to provide transparent financial data, where expected costs are matched to profits.
Hire a Professional Accountant
Even with the right software and tools, you may still need insight from a financial professional. A CPA with experience in healthcare accounting can help you establish an accrual-based system, provide you with access to a QuickBooks online account, and troubleshoot any issues with recordkeeping. If you’re looking for assistance in operating your healthcare venture, contact Baratz & Associates’ business consultants for additional tips!
Lifelong Advantages of Personal Financial PlanningPosted on May 9th, 2018
One of the most effective ways to protect your fiscal wellness is to strategize properly. Whether you wish to retire by a certain age send your kids to college, you should consider your long-term goals and how you will set out to achieve them. At Baratz and Company, we work with CORA, a personal financial planning firm to guide our clients in their saving and wealth management choices.
We understand the true value of a clearly laid out financial plan, which is helpful in obtaining the following:
A Reliable Safety Net
From economic shifts to changes in health, we do not always know what life will throw at us. Being prepared for the unexpected is one of the best ways to take care of your needs. Retirement planning is crucial to securing a comfortable lifestyle, and can include succession strategies for your business. For younger individuals, managing finances early in their professional career positive financial habits and more freedom to adapt to life changes.
Fluctuating market trends and tax policies affect your overall income and savings. Tailoring your savings and investments to capitalize on ever-changing regulations and economic shifts can be profitable in the long run, enhancing your retirement or taking advantage of tax opportunities. If you are looking to buy a home, or support your loved one’s higher education, flexible saving strategies can make these large expenses much more manageable.
Securing a Legacy
When nearing retirement, many people consider their long-term influence of their assets or how they can benefit their heirs. Gift-giving and assigning beneficiaries is one way to see that your hard-earned profit is allocated wisely, avoiding the hefty taxes tied to estates and portfolios.
Contact Baratz and Associates for Personal Wealth Strategies!
Our firm focuses on the big-picture of your financial well-being, and offers practical guidance achieve your goals. We are passionate about our clients and treat your finances with the utmost level of care. Call us for a consultation today and we will help you plan for the future. Call our accounting firm in Marlton for professional financial planning.
Common IRS ConcernsPosted on April 26th, 2018
At Baratz & Associates, our team works with clients in the greater Evesham Township or Marlton area who need help communicating with the IRS. If you are the target of an unexpected audit or a levy, we will guide you through proper protocol to reestablish compliance and stand between you and the IRS. Baratz & Associates will also help you prevent further complications by outlining tax strategies in the future.
The following problems raise a red flag with the IRS:
Excessive Exemptions. We could all use tax deductions, but it’s important to file exemptions accurately and not, for example, wrongly claim dependents. Attempting to save money by filing too many exemptions can easily subject you to a levy, lien, or wage garnishment. Our team can ensure that you do not file extra exemptions, keeping your returns free of errors.
Early Retirement Withdrawals. If you need to withdraw funds from your 401k or IRA, you need to be aware of special fees which can be applied to this transaction. There are early withdrawal penalty fees that should be paid promptly. With a trusted team at your side, you can navigate these fees and build a wealth strategy that streamlines your current budget.
Not Paying Enough Taxes. Those who are self-employed may be unsure of what they owe, especially when estimating on a quarterly basis. In such situations, entrepreneurs should consider professional tax guidance. Even if you know what to pay, deductions and other complexities such as health insurance or federal and state costs can still compromise your compliance with the IRS.
Failure to Report Winnings. Whether you hit it big at the casino, horse track, or through the lottery, you must always report your winnings, as they are considered taxable income by the IRS. A trusted CPA can help you not only report your winnings accurately but also advise on investment strategies that allow you to make the most of these earnings.
Need help avoiding trouble with the IRS? Call Baratz & Associates today to schedule your consultation! We help clients in New Jersey retain compliance and plan for the future.
November 2017 Election–Candidate Rundown and the Tax ImplicationsPosted on October 31st, 2017
Every four years, New Jerseyans go to the polls hoping to get some tax relief…or change…or at least a different outlook for the future. No issue that touches so many people invites more political debate and misinformation. We wanted to break the issues and ramifications down for our clients so that you could consider tax planning implications along with other views before you head to the polls next month. New Jersey voters have a lot to think about this November–here is an unbiased peek at some of the tax implications ahead.