Category Archives: News / Updates

Year-End Tax Planning Ideas

Year-End Tax Planning Ideas

The year end is approaching us fast and it’s time to consider some of the year-end tax planning ideas.  Here are some of the year-end tax saving moves to consider:

  • Even if your business uses an accrual basis method to account for taxable income, expenditures to related-parties are generally deductible in the year of payment rather than when they are occurred. Therefore, we recommend settling the liabilities before the year end to take the related deduction in 2016.
  • C-corporations should consider paying out reasonable amount of bonus to employee-shareholders to avoid double taxation. Note that compensation to employee-shareholders must be reasonable in amount and nature to avoid potential challenges from the taxing authorities.  Best practice is to adopt a written bonus plans that meets the industry practice and expectation.
  • If your business needs to make capital expenditure, why not putting it in service now and enjoy the 50% bonus depreciation and section 179 deduction now rather than next year?
  • Many business owners will be hosting Christmas parties. Learn how to structure the event to deduct 100% of event related expenses including meals.
  • Minimize capital gains tax by timing the gain or loss realization. Capital losses are generally deductible to the extent of capital gains.  So if you are looking at big gains for the year, maybe it’s time to trigger losses on built-in loss capital assets you may have been holding on to.  Or if you have excess capital losses, consider selling some built-in gain capital assets.  Timing is everything when it comes to managing capital gains tax.
  • Year-end is a perfect time to review employee benefits and compensation. Some of the qualified plans will provide opportunity to defer taxes until retirement for employees and owners.  They are SEP, SIMPlE, 401(k), profit-sharing, and pension plans.  Additionally, the business deduction is readily available for funds contributed to the these plans.
  • Review opportunity for various federal and state tax credits, including research and development, small business health care credit, work-opportunity tax credits, etc.
  • Individuals should consider prepaying property taxes and making charitable contributions of non-cash goods and/or cash. Also, perform a year-end tax projection and prepay state income taxes, if you are not subject to AMT tax.
  • Cash basis taxpayers may be able to defer income recognizing by delaying billing and collection until next year.
  • Inventory is generally valued at lower of cost or market value. The end of the year inventory should be reviewed to detect obsolete or damaged items and written down to their probable selling price (net of selling expenses).  Tax deduction for write off is available as long as the items are offered for sale within 30 days after the inventory date.
  • Perform a year-end tax projection to submit required estimated tax payment timely to avoid any penalties and interest.
  • Individuals should consider maximizing contribution to qualified retirement funds including 401(k) and traditional IRAs to defer income taxes.

Tax Accounting for Stock Compensation

Tax Accounting for Stock Compensation

FASB issued ASU 2016-09 simplifying accounting for stock based compensation under ASC 718. The amendments are effective for annual periods beginning after December 15, 2016 for public entities and after December 15, 2017 for all other entities. Early adoption is permitted. Our discussion will be focused on tax accounting aspect as summarized below:

Previously, reporting entities were subject to complex rules in accounting for the differences in tax deductions resulting from the exercise of stock compensations and how they were accounted for in the income statement. The rules under ASC 718 required reporting entities to track APIC pool, determining excess benefit and short-falls, and were required to consider recognition threshold for excess benefits (causing significant difference in book and tax attributes in certain situations). However, the amendments significantly simplify the accounting for share based compensation.

Under the amendments, reporting entities treat the tax effects of exercised or vested award as discrete items in the reporting period in which they occur, and recognize excess tax benefits and short-falls through income statement without regard to the APIC pool and regardless of whether the benefit reduces taxes payable. Accordingly, reporting entities are no longer required to maintain APIC pool.

Reporting entities shall apply the amendments on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period, and disclose the nature of and reason for the change in accounting principle and the cumulative effect of the change on retained earnings or other components of financial statements. Under the modified retrospective transition method, reporting entities will apply the overall amendments on a prospective basis and recognize previously unrecognized excess tax benefits as cumulative adjustment to retained earnings.

Please refer to the ASU 2016-09 for further detail.

http://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176168028584&acceptedDisclaimer=true

트럼프의 세금 정책

트럼프의 세금 정책

미국 제 45대 대통령 선거가 공화당 후보 도날드 트럼프의 당선으로 끝났다. 트럼프는 “Make America Great Again”이라는 그의 선거 공약과 함께, 오는 2017년 1월 20일부터 미국 제 45대 대통령으로 취임하게 된다.

공화당이 상원의원과 하원의원 또한 독점하게 되면서, 트럼프의 대통령 취임후 그가 내세운 세금 정책이 우리의 삶에 큰 영향을 미칠 것으로 예상된다. 트럼프가 대통령 공약으로 내세운 세금 정책은 아래와 같다.

I. 법인세 세율 15%로 인하 – 미국은 현재, 세계에서 39.1%로 세번째 높은 법인세 세율을 가지고 있다 (연방정부 세율 35%와 주정부 세율). 트럼프는 모든 사업체에 15%의 단일 연방 세율을 적용하여 사업체의 자금력을 높이고 일자리를 창출을 도모한다는 공약을 내세웠었다. 이 공약이 실현된다면, 국제 시장에서의 미국 사업체들의 경쟁력은 더 높아질 것으로 예상된다.

II. 해외 미국 회사들의 수익을 미국으로 반환 - 현 미국 세법상, 미국 회사의 해외 자회사의 해외 유보이익에  부과되는 미국 세금은 관련 이익이 미국 주주들에게 배당 될때까지 연기되는 것이 일반적이다.  미 정부는 2015년, 약 $ 2.6 trillion 상당의 해외 자회사의 해외 유보이익이 미국 주주들에게 배당 되지않아, 법인세가 부가되지 않았다고 발표하였다. 이에, 트럼프는 해외 자회사의 배당되지 않은 유보이익에 단 10% 정도의 세금만 부과 함으로써 해외 자회사의 자금을 미국으로 귀환시키는 방안을 소개하였다. 이를 통해,  미국의 일자리 창출과 사업체들의 번창에 큰 기여를 할 수있을 것으로 보인다.

III. 미국 제조업 회사에 주어지는 세금 혜택 - 트럼프는 미국 제조업 회사의 자산 (기계,장치,차량 등.) 투자를 전액 비용처리 할 수 있는 방안을 공약으로 내세웠다. 덧붙여, 트럼프는  미국 현지 육아 관련 세금 공제 한도를 올리고, 회사가 피고용인들에게 보조하는 육아 관련 지출을 과세 소득에서 제외 시킬 수 있도록 하겠다고 하였다.

IV. 개인 세율에 관한 혜택 – 현재, 미국은 개인에게 39.6 %의 최대 한계 세율과 3.8%의 순수 투자 이익에 관한 세금을 부과하고 있다. 트럼프는 현재의 7개의  세율 계층을 3개로 줄이고 ( 12%, 25%, 33%), 순수 투자 이익 관련 세금 (3.8%) 을 폐지하겠다고 하였다. 또한, 그는 AMT 세금 제도도 없애겠다고 공약하였다.

V. 유산세 폐지 – 현 미국 세법은 $ 5.45 million 을 초과하는 유산에 한하여 40%의 유산세를 부과하고 있다. 트럼프는 세금 개혁을 통해, 이와 같은 유산세를 폐지하고, 수혜자들은 추가적인 세금없이 유산을 상속받을 수 있게 하겠다고 하였다.

VI. 오바마 케어 폐지 – 트럼프는 오바마 케어라고도 불리우는 “Affordable Care Act” 에 관해 부정적인 의견을 가지고 있다. 그는 오바마 케어를 폐지하고, “절대적으로 적은 비용”이 요구되는 건강보험제도로 이를 대체하는 방안을 추천한다. 선거 유세 동안, 그는 오바마 케어에 대한 대안으로, 비용부담이 훨씬 적은 건강 보험 제도를 설립하기 위한 정책을 몇 가지 소개해 왔었다. 이러한 정책은 비과세 건강 보험 계좌 설립, 높은 공제 금액을 적용할 수있는 건강 보험, 그리고 건강 보험 회사들에게 각 주별 차이를 두지 않고, 보험 상품을 팔게함으로써 건강 보험 회사들간의 경쟁을 높이는 방법 등이 있다.

트럼프가 위와 같은 세금 정책들을 공약으로 낸 것은 사실이나, 아직 이 정책들이 확정된 것은 아니다. 그러나 차후 그가 대통령으로 취임했을 때, 위와 같은 세금 정책이 실현 될 가능성이 농후해보이며 이에따라서 우리는 그가 공약한 세금 정책들에 대한 알맞은 정보를 바탕으로 계획을 준비 할 필요가 있다.

Trump’s Tax Policy

Trump’s Tax Policy

The 58th U.S. presidential election of 2016 is over. The Republican Party nominee, Donald Trump, defeated the Democratic Party nominee, Hillary Clinton. Trump is expected to take office as the 45th President on January 20, 2017 and he promises to ‘Make America Great Again!’

With Republicans’ domination over the House and Senate, we can expect many of Trump’s tax policy will have big impact to our lives shortly after his administration takes off. Here are some major tax reform Trump promised during his presidential campaign:

Corporate Tax Rate Reduction to 15% - the United States has the third highest general top marginal corporate income tax rate in the world at 39.1 percent (consisting of the 35% federal rate and a combined state rate). Trump vowed to introduced a single corporate federal tax rate of 15% to all businesses in an effort to put more money into the hands of businesses to create more jobs and investments in the U.S., which would allow U.S. businesses to be more competitive in international market.

Repatriation Holiday - under present law, the U.S. tax on foreign earnings of foreign corporate subsidiaries is deferred until it is distributed back to the U.S. shareholders, generally. The government estimates as of 2015, approximately $2.6 trillion of earnings of foreign corporate subsidiaries has not been taxed and is undistributed. Trump plans to introduce a special corporate tax repatriation holiday rate whereby corporations with money stashed overseas would be able to pay a tax rate of 10% on that income in order to bring the money back into the U.S. The repatriated cash would then be reinvested in the U.S. creating jobs and expansion of U.S. businesses.

Pro-U.S. manufacturing – Trump plans to allow firms engaged in manufacturing in U.S. to elect to expense capital investment in lieu of taking deduction for interest expense. Additionally, Trump promised to increase cap on business tax credit for on-site childcare and allow businesses that pay a portion of employee childcare expenses to exclude those contributions from income.

Individual Tax Rate – currently, individuals are subject to top marginal tax rate of 39.6% plus 3.8% of net investment income tax. Trump plans cutting the current seven brackets down to three: with 12%,25%, and 33% rates, and would repeal the net investment income tax. Additionally, he plans to eliminate AMT tax regime.

Elimination of Estate Tax – currently, the U.S. government charges death tax or estate tax of 40% on estate with value in excess of $5.45 million. Trump’s tax reform would eliminate death tax. Rather, the beneficiaries of an estate take the assets with a tax-free, with no “stepped-up” basis. For rich, best time to die is during Trump’s presidency for estate tax planning purposes.

Obamacare – Trump believes the Affordable Care Act, also known as “Obamacare,” is a total “disaster” and has failed on cost and quality of health care. He proposed to repeal and replace Obamacare with “something absolutely much less expensive.” During his campaign, Trump proposed a series of measures that would allow people to buy affordable health insurance policies outside of the Obamacare exchanges. These measures include promoting tax-free health savings accounts, high-deductible health plans and health savings accounts, and boost competition in health insurance market by allowing insurers to sell policies across state lines.