Click here for information about the Tax Cuts and Jobs Act – Section 199A deduction: November 2018 Client 199A Letter
To read the current Client Newsletter, please click Tax and Business Letter Summer 2019
LLG Memories – Day of Service
Each year, LLG participates in the Illinois CPA Society’s Day of Service. There are great opportunities out there to volunteer within our community, having fun while helping to enriching the lives of others. Past organizations we have been fortunate to visit include: North Lawndale College Prep, Anti-Cruelty Society, Journeys – The Path Home, Feed My Starving Children, and Watts of Love.
This year will be no different as the 2019 Day of Service has been announced for September. We are currently in the planning phase to determine who and how we can help this year. But it is always fun to stroll back down Memory Lane…
LLG Crosses Tax Season Finish Line
It was a feverishly paced March and April of 2019 racing through this year’s tax season, but the LLG staff handled whatever curves came our way to greet the checkered flag like Champs! Afterwards, it was time to celebrate and unwind. We were able to enjoy some time at K1 Racing Complex as a group for a little healthy competition and a lot of speed. Qualifying race set the tone and the Championship race brought out the winners.
First Place: Mike Rice
Second Place: Neshant Dedakia
Third Place: Aaron Zimmerman
Click here to view the Client Bulletin for February, 2019: Client Bulletin Feb 2019
THE NEW TAX REFORM LAW TAKES A BITE OUT OF MEALS, ENTERTAINMENT, AND TRANSPORTATION DEDUCTIONS
By Jay M. Rubinstein
The Tax Cuts and Jobs Act, (TCJA), although being pro-business in many respects, limits the deductibility of meals, entertainment, and transportation expenses. In the past, taxpayers could deduct 50% of expenses for business related meals and entertainment. But under the new law, many clients are asking questions regarding these new limitations. We have simplified the changes so you and your business can have a quick guide to understanding the new law and how these deductions can help you manage the cost and deductibility of these expenses.
Prior to 2018, the entertainment strategy of a business was to give the customer/prospect a good time and 50% of the cost of event tickets or other entertainment could be deducted. A charitable event cost was 100% deductible. But no longer; the TCJA has repealed the deduction for all client/prospect related entertainment or amusement activities. No more deductions for sporting events, nightclubs, or sunset boat rides.
But there is good news for deducting one aspect of customer/prospect entertainment: the reasonable cost of a business related meal is still 50% deductible. I recommend that the meal be in a food venue such as a restaurant. Meal or food expenses that are incurred at a club or event will likely be disallowed by the IRS as being an entertainment expense, which is no longer deductible, rather than a “meal” expense which is still 50% deductible.
TAKING CARE OF BUSINESS-EMPLOYEE MEALS…
Meals provided for the employer’s convenience remain 50% deductible through 2025. In 2026 they become nondeductible. This 50% deduction applies to all snacks, beverages, and other food items. Office parties when everyone is invited remains 100% deductible. It seems the cost of a party for a group of employees is also still deductible at 100%. This would be when an entire department has a party for achieving a goal for example, but the cost of a meal brought in for just managers only would be deductible at only 50% since everyone in the group was not participating. All employee meal expenses while traveling remain 50% deductible.
EMPLOYEE TRANSPORTATION PERKS…
Employee transportation benefits for parking, transit passes, and bike commuting were deductible. These expenses are no longer deductible for travel between the employee’s home and workplace, with two exceptions: transportation considered necessary for the employee’s safety and for bike commuters who can be reimbursed up to $20 per month. Note that if your business still reimburses transportation costs, employees can still exclude these benefits from income.
THE AWARD FOR THE EMPLOYEE OF THE MONTH GOES TO… Previously employee awards of up to $400 per award or $1,600 per year were fully deductible and not taxable to the employee. Under TCJA, the dollar limits remain the same and the employee does not have to declare the award, but cash, gift cards, certificates, vouchers, stocks/bonds, lodging, and coupons are not deductible by the employer. To be deductible the award must be tangible goods.
Here is a quick reference recap of the new law as it relates to meals and entertainment:
EXPENSE / DEDUCTIBLE
Entertainment expenses at an event, club, or social venue / NO
Meals with customers/prospects involving business topics at a restaurant / 50%
On premise meals, snacks, or beverages for convenience of employer / 50%
Meals for traveling employees / 50%
Company social events such as a holiday party or summer BBQ / 100%
Jay M. Rubinstein, J.D., M.B.A., is a senior tax manager at LLG with 30+ years experience in federal and state taxation. If you have any questions, please contact him at 847-205-5420 or email@example.com.
SOUTH DAKOTA V WAYFAIR INC.
A VERY IMPORTANT DECISION FOR YOUR BUSINESS AFFECTING STATE SALES TAX AND STATE INCOME TAX
On June 21, 2018 the Supreme Court rendered a decision with far reaching and substantial implications for many businesses. The purpose of this communication is to inform you of the importance of this decision and to encourage you to contact us to discuss how this decision could affect your business and operations.
In Quill Corp. v. North Dakota (“Quill”), the U.S. Supreme Court held that a state could not require a seller to collect and remit sales tax in a state unless the taxpayer had a physical presence in the state. Since that decision, businesses have generally understood that they were not required to collect and remit sales tax in another state unless they had a physical presence in the state.
In 2016, South Dakota directly challenged the Quill decision by enacting a law requiring remote sellers (sellers without a physical presence in the state) to collect and remit sales tax to the state if the seller had sales exceeding $100,000, or 200 separate sales transactions, with South Dakota customers.
On June 21, 2018 the U.S. Supreme Court overturned Quill in South Dakota v. Wayfair, Inc.(“Wayfair”), concluding that “the physical presence rule of Quill was unsound and incorrect. In doing so, the Supreme Court struck down the physical presence standard to create state sales tax nexus and instead, established economic nexus as the new standard.
The U.S. Supreme Court remanded the case to a lower court in order to determine if the South Dakota law is constitutional. In its decision, the U.S. Supreme Court cited several factors that appeared to support the constitutionality of the law.
Currently, more than 20 states have enacted similar legislation and more states are expected to follow. Under these laws, remote sellers are required to collect sales tax (or comply with use tax notification requirements) in a state if their business, measured by either sales volume and/or the number of sales transactions, exceeds certain minimum thresholds. The precise thresholds and effective dates of these laws vary from state to state. These laws are likely to face court challenges to determine if they are constitutional.
Further adding to the compliance complexity, many states have enacted and other states are likely to enact economic nexus standards for state income tax, not just sales/use tax.So physical presence is no longer the nexus standard when evaluating whether or not a business should collect and remit sales tax to a specific state, and it is important that you understand this important concept.
This represents a seismic change in nexus standards for sales, use and income tax purposes. Previously issued guidance related to state filing obligations for sales, use and income taxes may no longer be appropriate in view of the 2018 U.S. Supreme Court decision. The Wayfairdecision may require your business to register, collect and remit sales tax in additional states and file state income taxes in additional states.
We strongly encourage you to contact us to discuss your specific situation.
Click on the link below to see a chart of the key individual tax provisions of the Tax Cuts and Jobs Act of 2017, which include the item, effective date, new law and before the law change: