Getting wise to the rise of “smart” buildings

Nowadays, data drives everything — including the very buildings in which companies operate. If your business is considering upgrading its current facility, or moving to or constructing a new one, it’s important to be aware of “smart” buildings.

A smart building is one equipped with a variety of sensors that gather and track information about the structure’s energy usage and performance. With this data, the owners can better regulate the building’s energy consumption and, ultimately, save money.

Has this been the case in real life? The results of a 2018 Forbes Insights/Intel survey seem to indicate so. Of the 211 business leaders from around the world who responded, 66% answered affirmatively when asked whether smart building management technologies have produced a return on investment.

What’s out there

The name of the game with smart buildings is integration. Traditional building management and control systems don’t easily converge with today’s technology-driven and Internet-connected infrastructure. (This infrastructure is often referred to as “the Internet of Things.”) Sensor-collected data, however, flows directly to the management and control system of a building to automate everything from HVAC to lighting to security features.

Smart technology isn’t limited to new construction. When real estate developers renovate commercial space, it’s increasingly retrofitted with smart technology. By the same token, many large companies have renovated their own buildings to install data-gathering sensors. Doing so is an expensive undertaking but may be worthwhile if your business owns facilities in a prime location and doesn’t want to move.

At the same time, don’t assume every building will be completely automated. In the health care sector, for example, some facilities are finding that manual control of lighting and ventilation systems remains more effective because high traffic volume hampers computerized efforts to regulate energy usage.

Criteria to consider

The primary advantage of smart technology is simple. Over time, you should save money on energy costs by more accurately tracking and regulating usage — dollars that you can redirect toward more profitable activities. Any property you buy, however, must still fit a sensible budget and fulfill other functional criteria, such as being “right-sized” to your on-site workforce and perhaps coming with tax incentives.

When leasing, you’ll need to get specifics from the owner regarding the smart building in question. Was it built new with sensors or retrofitted? Are the sensors and data-processing equipment themselves up to date? You’ll also need to research local energy costs to ensure that the property owner is passing along the savings to you under a reasonable lease agreement.

Here to stay

Just as auto manufacturers no longer make cars without built-in computers, developers and contractors generally aren’t constructing buildings without smart technology. Bear this in mind as you shop for space. Whether you’re looking to lease, buy or build, we can help you weigh the pertinent factors and make the right decision.

© 2019

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Following the ABCs of customer assessment

When a business is launched, its owners typically welcome every customer through the door with a sigh of relief. But after the company has established itself, those same owners might start looking at their buying constituency a little more critically.

If your business has reached this point, regularly assessing your customer base is indeed an important strategic planning activity. One way to approach it is to simply follow the ABCs.

Assign profitability levels

First, pick a time period — perhaps one, three or five years — and calculate the profitability level of each customer or group of customers based on sales numbers and both direct and indirect costs. (We can help you choose the ideal calculations and run the numbers.)

Once you’ve determined the profitability of each customer or group of customers, divide them into three groups:

1. The A group consists of highly profitable customers whose business you’d like to expand.2. The B group comprises customers who aren’t extremely profitable, but still positively contribute to your bottom line.3. The C group includes those customers who are dragging down your profitability. These are the customers you can’t afford to keep.
Act accordingly

With the A customers, your objective should be to grow your business relationship with them. Identify what motivates them to buy, so you can continue to meet their needs. Is it something specific about your products or services? Is it your customer service? Developing a good understanding of this group will help you not only build your relationship with these critical customers, but also target marketing efforts to attract other, similar ones.

Category B customers have value but, just by virtue of sitting in the middle, they can slide either way. There’s a good chance that, with the right mix of product and marketing resources, some of them can be turned into A customers. Determine which ones have the most in common with your best customers; then focus your marketing efforts on them and track the results.

When it comes to the C group, spend a nominal amount of time to see whether any of them might move up the ladder. It’s likely, though, that most of your C customers simply aren’t a good fit for your company. Fortunately, firing your least desirable customers won’t require much effort. Simply curtail your marketing and sales efforts, or stop them entirely, and most will wander off on their own.

Cut costs, bring in more

The thought of purposefully losing customers may seem like a sure recipe for disaster. But doing so can help you cut fruitless costs and bring in more revenue from engaged buyers. Our firm can help you review the pertinent financial data and develop a customer strategy that builds your bottom line.

© 2018

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A refresher on major tax law changes for small-business owners

The dawning of 2019 means the 2018 income tax filing season will soon be upon us. After year end, it’s generally too late to take action to reduce 2018 taxes. Business owners may, therefore, want to shift their focus to assessing whether they’ll likely owe taxes or get a refund when they file their returns this spring, so they can plan accordingly.

With the biggest tax law changes in decades — under the Tax Cuts and Jobs Act (TCJA) — generally going into effect beginning in 2018, most businesses and their owners will be significantly impacted. So, refreshing yourself on the major changes is a good idea.

Taxation of pass-through entities

These changes generally affect owners of S corporations, partnerships and limited liability companies (LLCs) treated as partnerships, as well as sole proprietors:

  • Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37%
  • A new 20% qualified business income deduction for eligible owners (the Section 199A deduction)
  • Changes to many other tax breaks for individuals that will impact owners’ overall tax liability

Taxation of corporations

These changes generally affect C corporations, personal service corporations (PSCs) and LLCs treated as C corporations:

  • Replacement of graduated corporate rates ranging from 15% to 35% with a flat corporate rate of 21%
  • Replacement of the flat PSC rate of 35% with a flat rate of 21%
  • Repeal of the 20% corporate alternative minimum tax (AMT)

Tax break positives

These changes generally apply to both pass-through entities and corporations:

  • Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets
  • Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phaseout threshold to $2.5 million
  • A new tax credit for employer-paid family and medical leave

Tax break negatives

These changes generally also apply to both pass-through entities and corporations:

  • A new disallowance of deductions for net interest expense in excess of 30% of the business’s adjusted taxable income (exceptions apply)
  • New limits on net operating loss (NOL) deductions
  • Elimination of the Section 199 deduction (not to be confused with the new Sec.199A deduction), which was for qualified domestic production activities and commonly referred to as the “manufacturers’ deduction”
  • A new rule limiting like-kind exchanges to real property that is not held primarily for sale (generally no more like-kind exchanges for personal property)
  • New limitations on deductions for certain employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation

Preparing for 2018 filing

Keep in mind that additional rules and limits apply to the rates and breaks covered here. Also, these are only some of the most significant and widely applicable TCJA changes; you and your business could be affected by other changes as well. Contact us to learn precisely how you might be affected and for help preparing for your 2018 tax return filing — and beginning to plan for 2019, too.

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A review of significant TCJA provisions impacting individual taxpayers

Now that 2019 has begun, there isn’t too much you can do to reduce your 2018 income tax liability. But it’s smart to begin preparing for filing your 2018 return. Because the Tax Cuts and Jobs Act (TCJA), which was signed into law at the end of 2017, likely will have a major impact on your 2018 taxes, it’s a good time to review the most significant provisions impacting individual taxpayers.

Rates and exemptions

Generally, taxpayers will be subject to lower tax rates for 2018. But a couple of rates stay the same, and changes to some of the brackets for certain types of filers (individuals and heads of households) could cause them to be subject to higher rates. Some exemptions are eliminated, while others increase. Here are some of the specific changes:

  • Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37%
  • Elimination of personal and dependent exemptions
  • AMT exemption increase, to $109,400 for joint filers, $70,300 for singles and heads of households, and $54,700 for separate filers for 2018
  • Approximate doubling of the gift and estate tax exemption, to $11.18 million for 2018

Credits and deductions

Generally, tax breaks are reduced for 2018. However, a few are enhanced. Here’s a closer look:

  • Doubling of the child tax credit to $2,000 and other modifications intended to help more taxpayers benefit from the credit
  • Near doubling of the standard deduction, to $24,000 (married couples filing jointly), $18,000 (heads of households) and $12,000 (singles and married couples filing separately) for 2018
  • Reduction of the adjusted gross income (AGI) threshold for the medical expense deduction to 7.5% for regular and AMT purposes
  • New $10,000 limit on the deduction for state and local taxes (on a combined basis for property and income or sales taxes; $5,000 for separate filers)
  • Reduction of the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers), with certain exceptions
  • Elimination of the deduction for interest on home equity debt
  • Elimination of the personal casualty and theft loss deduction (with an exception for federally declared disasters)
  • Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees and unreimbursed employee business expenses)
  • Elimination of the AGI-based reduction of certain itemized deductions
  • Elimination of the moving expense deduction (with an exception for members of the military in certain circumstances)
  • Expansion of tax-free Section 529 plan distributions to include those used to pay qualifying elementary and secondary school expenses, up to $10,000 per student per tax year

How are you affected?

As you can see, the TCJA changes for individuals are dramatic. Many rules and limits apply, so contact us to find out exactly how you’re affected. We can also tell you if any other provisions affect you, and help you begin preparing for your 2018 tax return filing and 2019 tax planning.

© 2019

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There has been a lot written since the Tax Cuts and Jobs Act a.k.a. “Tax Reform” was signed into law on December 22, 2017. As a proverbial  tax geek, I have seen and heard a lot of information that just doesn’t fit into my view of what was passed into law and the impact that it has on taxpayers. It is clear to me that with the passage of this bill there are clear winners and losers, so I thought it would be beneficial to outline our view of the impact of this major tax package.

As with all tax legislation, there is some level of demographic profiling that gets embedded into the law to insure that certain groups of people pay more or less in taxes depending on which party is in power, such as the “wealthy” or the “middle class”. I’ll try to outline the impact in plain language at a very high level without getting into deep technical discussions (which is hard for the proverbial tax geek). Please remember that tax law as a whole is extremely complicated and your specific situation determines the tax impact, so get educated on the topic as it relates to your situation and consult with your tax CPA.

Winner – The Middle Class

There has been a lot of political rhetoric that tax reform will not help the middle class. I guess it depends on your definition, but based on the hundreds of projections we have done to determine the impact across a wide range of taxpayers, I just don’t see where this doesn’t reduce the overall tax burden of the middle class. First, the tax rates across the board have been reduced by 2%-4%. This will result in less tax on our income. Second, there is a higher standard deduction which will reduce the amount of income subject to tax for taxpayers who cannot generally itemize.  For married taxpayers, this is $24,000 which is a big number for middle class families. Itemized deductions are generally made up of state and local taxes not to exceed $10,000 which we’ll talk about later, home mortgage interest and charitable contributions. For most families the $24,000 standard deduction will well exceed their itemized deductions. In fact, all projections indicate that around 90% of all taxpayers will not itemize under these new rules. There is also a new enhanced credit for your dependents that will further reduce the tax liability for the middle class.

Loser – Unmarried People

Apparently the new law does not really favor unmarried taxpayers, particularly those who earn over $157,500 in taxable income. The rates get higher for these individuals much quicker. Also the standard deduction is much lower and the elimination of the personal exemption will not help this group. In our projections, we generally see a 2%-4% increase in overall tax for this group. I guess that’s much cheaper than a spouse but it is the price you will pay for being an unmarried, high income earner.

Winner – Simplification

For taxpayers with only W-2 income, maybe a house and some kids (this is by far the largest group of taxpayers), the filing requirements are extremely simply. You don’t need a tax preparer and should be able to handle the filings yourself in a few minutes. The new law also eliminated some pretty high abuse areas such as deductibility for unreimbursed employee expenses and miscellaneous itemized deductions. There are a lot of unethical tax preparers that “sell refunds” through making up deductions or creating invalid trade or businesses to shift income or create losses. The new law puts an end to this abuse. The IRS has started targeting these prepares and their clients to eliminate the abuse (see the IRS 2018 dirty dozen list of tax scams to avoid at

Loser – Taxpayers in High Tax States

As has been highly publicized, starting in 2018 you can no longer deduct state and local tax over $10,000. For states that have high property taxes and state income taxes this will reduce the amount of deductions they receive. Some states have passed laws to try to circumvent this law by allowing taxpayers to pay these taxes through charitable donations. The IRS recently published proposed regulations on this topic which will not make this a viable strategy. Additionally, as part of the new law, you are limited to deducting mortgage interest on new mortgages over $750,000. In states that have high property values, usually the same ones with high real estate taxes, this will further reduce the amount of allowable deductions.

Winner – Small Business

There are a lot of benefits in the new law for business as a whole. The new law allows a trade or business to only pay tax on 80% of their business income if it is a flow through business (sole proprietor, partnership, S Corporation) or a significantly lower tax rate (21%) for traditional C Corporations. In typical Congressional style, the 20% deduction is complicated and the specific type of company, income and wages paid play into your ability to get the tax benefit. In this area, you need to engage a qualified tax CPA to help you plan and report the impacts of this new law. Additionally, the new law allows businesses to significantly accelerate the depreciation of newly acquired assets while easing some of the complicated rules for businesses under $25 million of average gross revenue.

Loser – Charities

Unfortunately, an unintended loser to tax reform is charities. First, the increase in the standard deduction will have less taxpayers itemizing which will eliminate the tax incentive for these small donations. Most studies estimate that there will be around a 10% reduction in donations attributable to this change in law. Additionally, the new law increased the estate exemption amount to around $11.2 million per person ($22.4 for married couples). This means that only a person with over this amount would be subject to estate taxes. The lower limit provided opportunities to create tax strategies for large donors to reduce their exposure to estate taxes. This increased limit will significantly reduce the tax incentive for a significant amount of donors. Charities will have to change their marketing strategies for how they attract these donors, but the impact is projected to reduce the amount of total contributions further.

Winner – Big Business and Corporations

Businesses as a whole are clearly the big winner in tax reform. There are a wide variety of incentives and benefits to this group throughout the new law. Changes to depreciation allow all businesses to significantly accelerate the benefits they receive when buying business assets. Additionally, the corporate tax rate was reduced to a flat 21%, down from 35%. In an effort to incentivize multi-national companies to keep their profits in the US, the new law eased the requirements (albeit extremely complicated) to allow companies to bring their foreign profits back to the US with little or no tax. The new law also allows these companies to pay tax on their prior untaxed profits at a historically low rate and spread the payments over 8 years.

The current tax environment clearly creates a great divide between different types of taxpayers. It is imperative to understand your tax situation and develop strategies to help you minimize your tax liability. 

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Potential Refund for Taxpayers with 2016 Hurricane Losses!

We have been hard at work since the passage of the Tax Cuts and Jobs Act on December 22, 2017. Since we are a boutique CPA firm focused on understanding the intricacies of the ever changing tax environment, we have spent considerable time understanding the new law and its impact on our clients.

Embedded in this Bill was a new provision that changed the rules related to casualty losses from federally declared disaster areas, this includes the areas affected by the named hurricanes in 2016 & 2017. The new law allows losses over $500, even if you did not itemize your deductions, for tax years 2016 & 2017. The old law limited the loss to only amounts over 10% of your adjusted gross. Since most taxpayers filed their 2016 tax return before the passage of this retroactive provision, you can amend your 2016 tax return to reflect these losses and the claim a refund.

The passage of this major tax bill emphasizes the criticality of using highly skilled, credentialed tax CPAs to help navigate this new law and its impact on your specific situation. If we can assist you with your tax situation or gaining a better understanding of the new law, please do not hesitate to contact us.

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4 business functions you could outsource right now

One thing in plentiful supply in today’s business world is help. Orbiting every industry are providers, consultancies and independent contractors offering a wide array of support services. Simply put, it’s never been easier to outsource certain business functions so you can better focus on fulfilling your company’s mission and growing its bottom line. Here are four such functions to consider:

1. Information technology. This is the most obvious and time-tested choice. Bringing in an outside firm or consultant to handle your IT systems can provide the benefits we’ve mentioned — particularly in the sense of enabling you to stay on task and not get diverted by technology’s constant changes. A competent provider will stay on top of the latest, optimal hardware and software for your business, as well as help you better access, store and protect your data.

2. Payroll and other HR functions. These areas are subject to many complex regulations and laws that change frequently — as does the software needed to track and respond to the revisions. A worthy vendor will be able to not only adjust to these changes, but also give you and your staff online access to payroll and HR data that allows employees to get immediate answers to their questions.

3. Customer service. This may seem an unlikely candidate because you might believe that, for someone to represent your company, he or she must work for it. But this isn’t necessarily so — internal customer service departments often have a high turnover rate, which drives up the costs of maintaining them and drives down customer satisfaction. Outsourcing to a provider with a more stable, loyal staff can make everyone happier.

4. Accounting. You could bring in an outside expert to handle your accounting and financial reporting. A reputable provider can manage your books, collect payments, pay invoices and keep your accounting technology up to date. The right provider can also help generate financial statements that will meet the desired standards of management, investors and lenders.

Naturally, there are potential downsides to outsourcing these or other functions. You’ll incur a substantial and regular cost in engaging a provider. It will be critical to get an acceptable return on that investment. You’ll also have to place considerable trust in any vendor — there’s always a chance that trust could be misplaced. Last, even a good outsourcing arrangement will entail some time and energy on your part to maintain the relationship.

Is this the year your business dips its toe in the vast waters of outsourced services? Maybe. Our firm can help you answer this question, choose the right function to outsource (if the answer is yes) and identify a provider likely to offer the best value.

© 2019

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Taking the hybrid approach to cloud computing

For several years now, cloud computing has been touted as the perfect way for companies large and small to meet their software and data storage needs. But, when it comes to choosing and deploying a solution, one size doesn’t fit all.

Many businesses have found it difficult to fully commit to the cloud for a variety of reasons — including complexity of choices and security concerns. If your company has struggled to make a decision in this area, a hybrid cloud might provide the answer.

Public vs. private

The “cloud” in cloud computing is generally categorized as public or private. A public cloud — such as Amazon Web Services, Google Cloud or Microsoft Azure — is shared by many users. Private clouds, meanwhile, are created for and restricted to one business or individual.

Not surprisingly, public clouds generally are considered less secure than private ones. Public clouds also require Internet access to use whatever is stored on them. A private cloud may be accessible via a company’s local network.

Potential advantages

Hybrid computing, as the name suggests, combines public and private clouds. The clouds remain separate and distinct, but data and applications can be shared between them. This approach offers several potential advantages, including:

Scalability. For less sensitive data, public clouds give businesses access to enormous storage capabilities. As your needs expand or shrink — whether temporarily or for the long term — you can easily adjust the size of a public cloud without incurring significant costs for additional on-site or remote private servers.

Security. When it comes to more sensitive data, you can use a private cloud to avoid the vulnerabilities associated with publicly available options. For even greater security, procure multiple private clouds — this way, if one is breached, your company won’t lose access or suffer damage to all of its data.

Accessibility. Public clouds generally are easier for remote workers to access than private clouds. So, your business could use these for productivity-related apps while confidential data is stored on a private cloud.

Risks and costs

Using a blended computer infrastructure like this isn’t without risks and costs. For example, it requires more sophisticated technological expertise to manage and support compared to a straight public cloud approach. You’ll likely have to invest more dollars in procuring multiple public and private cloud solutions, as well as in the IT talent to maintain and support the infrastructure.

Overall, though, many businesses that have been reluctant to solely rely on either a public or private cloud may find that hybrid cloud computing brings the best of both worlds. Our firm can help you assess the financial considerations involved.

© 2018

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Georgia Collection Actions

In Georgia, if a person doesn’t pay state taxes, collection actions are taken. But they may not be taken by the state. Debts are referred to private collection agencies when collection by the GA Dept. of Revenue isn’t cost effective. Debts aren’t referred to a collection agency if a taxpayer has an active bankruptcy case, the statute of limitations to enforce the collection of the debt has expired, or the taxpayer is deceased. For more details: 

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Higher mileage rate may mean larger tax deductions for business miles in 2019

This year, the optional standard mileage rate used to calculate the deductible costs of operating an automobile for business increased by 3.5 cents, to the highest level since 2008. As a result, you might be able to claim a larger deduction for vehicle-related expense for 2019 than you can for 2018.

Actual costs vs. mileage rate

Businesses can generally deduct the actual expenses attributable to business use of vehicles. This includes gas, oil, tires, insurance, repairs, licenses and vehicle registration fees. In addition, you can claim a depreciation allowance for the vehicle. However, in many cases depreciation write-offs on vehicles are subject to certain limits that don’t apply to other types of business assets.

The mileage rate comes into play when taxpayers don’t want to keep track of actual vehicle-related expenses. With this approach, you don’t have to account for all your actual expenses, although you still must record certain information, such as the mileage for each business trip, the date and the destination.

The mileage rate approach also is popular with businesses that reimburse employees for business use of their personal automobiles. Such reimbursements can help attract and retain employees who’re expected to drive their personal vehicle extensively for business purposes. Why? Under the Tax Cuts and Jobs Act, employees can no longer deduct unreimbursed employee business expenses, such as business mileage, on their individual income tax returns.

But be aware that you must comply with various rules. If you don’t, you risk having the reimbursements considered taxable wages to the employees.

The 2019 rate

Beginning on January 1, 2019, the standard mileage rate for the business use of a car (van, pickup or panel truck) is 58 cents per mile. For 2018, the rate was 54.5 cents per mile.

The business cents-per-mile rate is adjusted annually. It is based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, such as gas, maintenance, repair and depreciation. Occasionally, if there is a substantial change in average gas prices, the IRS will change the mileage rate midyear.

More considerations

There are certain situations where you can’t use the cents-per-mile rate. It depends in part on how you’ve claimed deductions for the same vehicle in the past or, if the vehicle is new to your business this year, whether you want to take advantage of certain first-year depreciation breaks on it.

As you can see, there are many variables to consider in determining whether to use the mileage rate to deduct vehicle expenses. Contact us if you have questions about tracking and claiming such expenses in 2019 — or claiming them on your 2018 income tax return.

© 2019

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