Monday, August 1, 2016

Real Estate Matters: Know the Tax Rules

Taxes are an important part of the decision to own real estate. Here's a brief overview of tax benefits you can realize while you own real property, as well as when you sell or otherwise dispose of the property.
Current expenses. As a rental property owner, you can deduct current expenses to offset the tax you owe on the rent you receive. For instance, you can write off mortgage interest, property taxes, repairs, and expenses of maintaining your property. The cost of capital improvements is generally added to your basis, providing a benefit when you sell. Be aware that passive activity rules may limit your ability to claim current annual losses.
Depreciation. Depreciation lets you convert the purchase price of your rental property into an expense over the property's expected life. The recovery period for residential buildings is 27½ years, while commercial buildings use a 39-year period. Some qualified improvements may be expensed over a shorter time.
Capital gain. The sale of real estate is generally taxed under capital gain rules. If you sell rental property you've held for longer than one year for more than you paid for it, the gain is taxed at rates up to 15% (20% if you're in the top ordinary income tax bracket). However, you may have to recapture some of the depreciation expense you claimed over the time you owned the property. That can mean part of your gain may be subject to higher tax rates. Losses can offset capital gains from sales of other assets.
Like-kind exchange. Instead of selling your property, you might arrange a like-kind exchange under Section 1031 of the federal income tax code, where you "swap" your property for replacement property. If certain timing and other requirements are met, you can defer tax on part or all of the transaction.
Please contact us to discuss these and other tax-saving opportunities.
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What's Your Personal Net Worth?

Net worth is a familiar term, but you may not calculate or watch it in the same way you track your income. Yet net worth is a valuable measurement tool for overseeing your financial success.
In a nutshell, net worth is total assets less total liabilities, such as debts. Here's an example. Say your assets consist of your home, vehicle, a savings account, and your retirement accounts, all of which total $515,000. Your liabilities, including a mortgage, vehicle and student loans, and credit card debt, total $275,000. Your net worth is $240,000 ($515,000 - $275,000).
What does that tell you? Positive net worth can indicate you have sufficient assets to handle emergencies, though you'll need to drill down a bit more deeply to your liquid net worth to make sure you can successfully navigate unforeseen events. Liquid net worth is the amount of assets you can easily access, such as checking accounts, or quickly turn to cash, such as certificates of deposit.
While a one-time snapshot of your net worth can be useful, such as when you apply for a mortgage or other loan, consistent monitoring gives you the ability to detect trends, both the good (decreasing liabilities) and the worrisome (increasing liabilities). A continual climb upward indicates your financial plan is on track. A steadily decreasing net worth is a signal that you need to make corrections. The goal: Positive growth over time.
You'll also want to review the asset and liability pieces of your net worth separately. In general, you want your assets to steadily increase, and your debt to decrease. Opposite trending should set off warning bells.
Net worth can provide other useful measurements of your financial progress as well, such as work hours required per incremental increase in your net worth, and the time between incurring debt and paying it off.
For more tips and suggestions about calculating, analyzing, and increasing your net worth, contact us.

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New Overtime Rule May Mean More of Your Employees Qualify for Overtime Pay

A new overtime rule takes effect on December 1, 2016, and the Department of Labor estimates that over 4 million workers will become entitled to overtime in the first year of the change. If your employees are included in that number, now is the time to begin preparing. Here's what you need to know.
The background. The Fair Labor Standards Act mandates the federal minimum hourly wage and time-and-one-half pay for hours worked beyond 40 in a week. The Act exempts certain "white collar" workers and "highly compensated employees" from both the minimum hourly wage and the time-and-one-half rules. These workers are collectively classified based on duties and level of earnings. Though job titles do not determine status, typically, executive, administrative, professional, outside sales, or computer workers fit into the white collar category. Highly compensated employees are subject to a more relaxed duties test and a standard annual salary amount.
What's changing. The new rule doubles the annual salary level for the white collar exemption from $23,660 to $47,476, or $913 per week. For highly compensated employees, the total annual compensation level required to claim the exemption rises from $100,000 to $134,004. These salary levels will increase every three years, beginning on January 1, 2020.
How to prepare. Some of your employees may move from exempt to non-exempt status. The only way to be sure is to begin tracking hours and documenting job duties. Once you have determined how the new rule will affect your payroll, you'll have choices to make, including requiring authorization for any overtime, increasing salaries, hiring additional workers, re-assigning duties, and restricting after-hours work-related activities. You may need to update your payroll software as well as your employee handbook and educate your staff about the new requirements.
Contact us if you have questions. We'll be happy to work with your compliance team to assess the impact of the new overtime rule.

Call us at (219) 769-3616 with your questions, or email them to

Thursday, June 16, 2016

Personal Property Tax Notices

Now that the filing deadline for property tax returns has come and gone, the assessors are working to process the returns.  Businesses that filed an Indiana personal property tax return may receive tax notice 113/PP from their assessor.  A company that receives this notice only has forty-five days from the mailing date to respond or appeal.  Please watch for tax notices from your assessor.  If you receive a notice, please scan or fax a copy to the attention of Stephen A. Sienicki, CPA at, FAX (219)736-4876.  Given the deadline to respond, please make sure to forward the notice received as soon as possible.


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Saturday, May 14, 2016

Hiring For the Summer? Know the ACA Rules

If you're an employer, what you have to do to comply with Affordable Care Act (ACA) rules depends on the size of your workforce. When you have 50 or more full-time employees – a total that can include seasonal workers – you have to deal with additional reporting and coverage requirements known as the "employer shared responsibility" provisions. Those provisions mean you need to offer a minimum level of affordable health coverage to full-time employees and their dependents. Otherwise you may have to pay a penalty, if even one of your full-time employees receives a tax credit for buying individual coverage on the government health insurance website.

What's a full-time employee?
 A worker who averages 30 or more hours per week (or 130 hours per month) is considered full-time. But you also need to consider "full-time equivalent" employees. You can determine how many full-time equivalent employees you have by multiplying the number of part-time employees by average hours worked, and dividing the result by the hours required for full-time status. For example, 20 employees working an average of 15 hours per week are equivalent to 10 full-time employees (20 employees times 15 hours divided by 30 hours).

Seasonal employees are generally included in the computation.
 However, there is an exception you'll want to be aware of. Say your workforce exceeds 50 full-time and full-time equivalent employees for 120 days or fewer during a calendar year. If, during that period, the employees in excess of 50 were seasonal workers, you're generally not subject to the employer shared responsibility provisions. What if your workforce exceeds the limit? You may have to offer health insurance to seasonal workers who meet specific weekly work-hour requirements during a look-back "measurement period." The measurement period is a specified number of months during which you track an employee's hours.
ACA requirements apply to nearly every employer in some form, and the rules get complicated quickly.
Please contact us for details.
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Wednesday, May 11, 2016

Tax News - 2016 Changes to Note

Effective beginning with 2016 taxable years, the de minimis tangible property safe harbor has increased to $2,500 per invoice or item. The change affects regulations issued in 2013 that clarified when your business could expense tangible real and personal business property. Previously, the de minimis safe harbor let you elect to deduct individual capital expenditures of $500 or less if your business did not have an “applicable financial statement.” (In general, an applicable financial statement is a financial statement based on a certified audit by an accounting firm.)

The extender legislation passed in December made changes to ABLE accounts. ABLE accounts – named for the Achieving a Better Life Experience Act that created them – are tax-beneficial savings accounts for qualified individuals with disabilities. The extender legislation eased the requirement that you had to open the account in the beneficiary’s state of residence. Now you are free to open an ABLE account with any state program you choose.

Three Section 179 expensing deduction changes may affect your 2016 tax planning. First, the $2,000,000 phase-out limit was adjusted for inflation and is $2,010,000 for 2016. (The $500,000 deduction amount did not change.) Second, you may be able to deduct more of qualified leasehold, retail, and restaurant property in 2016.
The $250,000 cap on the amount of Section 179 you could claim for this property was eliminated. Third, air conditioning and heating units are now eligible for Section 179 expensing.

You have new options for funding your myRA this year. In the past, you could fund your account from your paycheck by completing a direct deposit authorization form and giving it to your employer. That option is still available. In addition, now you can choose to make direct deposits from a checking or savings account or from your federal income tax refund. A myRA (my Retirement Account) is a simplified Roth IRA that costs nothing to open, has no fees, and lets you start saving with any amount that fits your budget. The maximum contribution for 2016 is $5,500 ($6,500 when you're age 50 or older at the end of the year).

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IRS Warns of Impersonation Telephone Scam

The Internal Revenue Service recently highlighted an aggressive and sophisticated phone scam targeting taxpayers, including recent immigrants, that has been making the rounds throughout the country. Callers claim to be employees of the IRS, but are not. These con artists can sound  convincing when they call. They use fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling.

Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver's license. In many cases, the caller becomes hostile and insulting.

Or victims may be told they have a refund due to try to trick them into sharing private information. The latest variation being seen in the last few weeks tries to play off the current tax season. Scam artists call saying they have your tax return, and they just need to verify a few details to process your return. The scam tries to get you to give up personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards.

If the phone isn't answered, the scammers often leave an "urgent" callback request.

"These schemes continue to adapt and evolve in an attempt to catch people off guard just as they are preparing their taxreturns," said IRS Commissioner John Koskinen. "Don't be fooled. The IRS won't be calling you out of the blue asking you to verify your personal tax information or aggressively threatening you to make an immediate payment."

Note that the IRS will never:
1. Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill;
2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe;
3. Require you to use a specific payment method for your taxes, such as a prepaid debit card;
4. Ask for credit or debit card numbers over the phone; or
5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not  paying.

The IRS has information online ( that provides additional details and can help protect taxpayers from phone
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