August 11, 2016 § Leave a comment
The conventions are over and now the fun begins. Not! I’m afraid we are in for a nasty three months of campaigning. Both sides have put forth their proposals for tax reform. I thought it would be interesting to see what a neutral party has to say about tax reform.
The Tax Foundation is an independent tax policy research organization that was founded in 1937. Their mission is to educate taxpayers and show how tax policy impacts taxpayers, the government, and the economy at large. The Tax Foundation’s economists have measured the economic effects of 86 changes to the Internal Revenue Code. In their opinion, here are the top ten pro-growth business and individual tax reforms (ranked in the order of their projected effect on generating economic growth):
Top Ten Pro-Growth Business Tax Reforms
- Reduce the corporate rate to 25% and allow full expensing
- Replace the corporate income tax with a 5% value added tax (VAT)
- Allow full expensing of capital investments
- Lower the top corporate rate to 15%
- Lower the top corporate rate to 20%
- Allow corporations to deduct dividends paid, thus integrating the corporate and individual tax systems
- Lower the top corporate rate to 25%
- Lower the top rate on pass-through business income to 25%
- Cut corporate rate to 28% while eliminating most tax expenditures, except cost recovery
- Eliminate estate and gift taxes
Top Ten Pro-Growth Individual Tax Reforms
- Lower marginal income tax rates across the board by 20%
- Lower marginal income tax rates across the board by 10%
- Lower the top marginal tax rate to 25%
- Lower the top marginal tax rate to 28%
- Consolidate current bracks into three: 10%, 25%, 35%
- Move to a flat rate of 20%
- Eliminate taxes on long-term capital gains and dividends
- Cut top rate to 27% while eliminating all itemized deductions, except charitable and mortgage
- Repeal the Net Investment Income Tax
- Cut all rates by 10% while eliminating all itemized deductions, except charitable and mortgage
Naturally, lawmakers will have to weigh the desired economic gains against the policy’s impact on the federal deficit, absent any cuts in the federal spending.
Not surprisingly, the “experts” don’t expect much to happen in tax legislation this election year. However, depending on the election results we may see major tax reform next year. Or, we may be in for the same old gridlock we have experienced for the last several years.
Dave Hurst, CPA
Partner – McGowen, Hurst, Clark & Smith, P.C.
July 18, 2016 § Leave a comment
If you’re like me, you are probably wondering where the summer has gone. Baseball season is over for many of our kids, we’re past the 4th of July celebrations and back-to-school preparations are in the near future. As business owners, many of us are half way through our fiscal year operations. This is good news in many cases as we can reflect on the past 6 months of operations and look forward to what’s ahead. Planning is a key to any business success, and focusing on planning all year long can provide many opportunities to review and refine your annual goals.
On the minds of most business owners is planning for taxes. Most people get a sick feeling in their stomach when the word “taxes” is even brought up, but planning can ease their pain or at least help them understand and plan for this business expense. Uncertainty has always played a role in tax planning for individuals and businesses as they look to the future. Typically, taxpayers are scrambling to see what Congress is going to do in late December that impacts them for that entire year.
On December 18, 2015, Congress passed the PATH Act, which retroactively extended many expired tax provisions back to the beginning of 2015 along with making over 20 key tax provisions permanent into the future. The history by Congress to give taxpayers 2 weeks to plan for an entire year has been difficult to put it mildly. This unexpected certainty in the tax law (although never guaranteed) is welcoming and comforting for taxpayers as they plan for 2016 and know their options.
Individual Tax Update
The PATH Act permanently extends the following for individuals:
- State and Local Sales Tax Deduction – this provision allows you to claim an itemized deduction for state and local general sales taxes, but only in place of deducting state and local income taxes as an itemized deduction. Unfortunately, for most Iowa residents, the sales tax deduction is generally smaller than the state and local income tax deduction, but always worth looking into when major purchases are done during the year.
- American Opportunity Tax Credit – making this extender permanent has been great news for all those parents with college age students. The credit allows for up to $2,500 against your federal tax liability if your AGI is below certain thresholds.
- Teachers’ Deduction – this $250 deduction has been around for some time, but now is permanently extended. New for 2016, the deduction includes professional development expenses incurred by teachers, such as courses related to the curriculum taught by the teacher. Now if we can just work on that $250 amount as I speak for most teachers out there, that expense typically doesn’t even touch the surface of expenses paid by them for their profession.
- Charitable Distributions from IRAs – individuals age 70 ½ and older can continue to take advantage of making tax-free distributions from their IRA to a qualified charity and counting it towards their RMD up to $100,000 per taxpayer each year.
Provisions that are currently set to expire at the end of 2016 include:
- Qualified Tuition Deduction
- Mortgage Debt Exclusion
- Mortgage Insurance Premium Deduction
Business Tax Update
The PATH Act permanently extends the following for businesses:
- Section 179 Deduction – One of the most significant impacts to small businesses, the permanent setting of the 179 deduction provides a major benefit to those industries that make significant equipment purchases. The law permanently sets the 179 limit at $500,000 with a $2 million purchase limit before it begins to phase-out. For real estate owners, the 179 expense for qualified real property was made permanent and the previous limit of $250,000 was removed beginning in 2016.
- R&D Tax Credit – Finally the R&D credit, which has a history of expiring and being retroactively extended is now made permanent. As an added bonus, qualified small businesses can claim the credit against AMT, and qualified startups can claim a portion of the credit against their employer FICA payroll tax liability.
- S Corp Built-In Gains Tax – Those owners of C Corporations who are looking to sell their business in the next 6-10 years may be able to take advantage of converting their C Corporation to an S Corporation and avoid the double taxation. The built-in gains tax was a deterrent to converting and used to be a 10 year recognition period. That period is now made permanent at 5 years.
- 15 Year Depreciation – Qualified leasehold improvements, restaurant property and retail improvements can continue to enjoy the reduced 15 year write-off of these costs if they qualify.
Tax Provisions that were extended for 5 years and are available through 2019:
- Bonus Depreciation – Bonus depreciation has been around for many years in various forms and applies to new (not used) qualifying assets placed in service during the year. For tax years 2016-2017, the amount is 50% of the asset cost, then reduces to 40% in 2018 and 30% in 2019. In addition beginning in 2016, an added “Bonus” to real estate, qualified improvement property is 39 year depreciable property but eligible for bonus depreciation. Qualified Improvement Property is any building improvement to an interior portion of the building that is nonresidential property if the improvement is placed in service after the date the building was first placed in service. It does not include expenses attributable to the enlargement of a building, any elevator or escalator or the internal structural framework of a building.
- Work Opportunity Tax Credit – this provision was enhanced for employers that hire certain long-term unemployed individuals. Be aware there are specific time limits on when credits can be applied for. It’s always good practice to have these procedures in place as part of your hiring process.
There were several other items that were impacted by the tax update, including energy incentives, ACA updates and more. One important item to consider as you develop your tax strategy is the impact of state income taxes. Currently, the above extenders are not adopted in Iowa for 2016. This can have a significant impact to taxpayers as they plan for the year. Iowa delayed their adoption of the 2015 IRS tax changes until late March of 2016, which did not include bonus depreciation. There is concern that Iowa will not continue to adopt these changes that the federal government has implemented, so careful consideration should be done when analyzing your options.
Taxpayers should take advantage of the current laws in place and begin implementing specific tax strategies now to maximize benefits, rather than waiting until the end of the year. Taxpayers should consider several “what if” scenarios over a number of tax years to determine any benefits that can be used based on the above items. Careful consideration to cash flow planning needs to be reviewed and incorporated in the planning process. Businesses and individuals need to plan out their tax strategy so that it is in line with their business goals. These types of decisions need to be reviewed by business owners, with their MHC&S trusted advisor, for pros and cons to determine the best approach for their company. Contact MHC&S to get started on developing and implementing your tax strategy today!
David Farnsworth, CPA
Co-Managing Partner – McGowen, Hurst, Clark & Smith, P.C.
June 13, 2016 § Leave a comment
Small business marketing is no small feat. With the digital world growing every day, marketing is becoming a confusing cluster of social media, email newsletters, websites, blogs, ads – the list goes on and on. With limited resources compared to large corporations, small businesses can have a difficult time coming up with marketing ideas and content.
The two no-brainers in the digital marketing world right now are a solid website and active social media platforms. (If you need help with either or both of these, give us a call for some references.) But a very important and often overlooked opportunity in e-marketing is business blogging, of which there are some great benefits. You might think, “I don’t have the time,” “My industry can’t sustain an interesting blog, and I don’t know what to write,” or “I don’t have the writing skills to blog.” Well, buckle up for another few minutes, because if I can write a blog, so can you!
I don’t have the time. The beauty of business blogging is that the topics are things in which you already have expertise. When you sit down to write a blog, knowledge will flow from your brain right through your fingertips onto your computer screen. In fact, maybe you sent an email about a new industry policy to your team members earlier today. With a little polishing, you have yourself some content. To save yourself even more time, engage your team members in writing blogs, and re-publish some of your most successful blogs.
My industry can’t sustain an interesting blog, and I don’t know what to write. Let’s be real; are there many industries that are so interesting that we could all read news blogs about them every day or every week? Personally, I think not. This is where some creativity comes in. That may sound daunting, but actually, it can make business blogging much easier for you. As we talked about in the former paragraph, industry blogging is a great thing; share news with your customers. However, sometimes, there is only so much news to be shared. Your readers aren’t robots, and they want to know about your company, your life and your ideas. Share your pride in your team members on the latest company-wide award; after your summer vacation, blog about the beauty of taking time to unwind from work; if a family members graduates from school, share your excitement about the future of the next working generation. The key is to make your blog relatable to your readers in some way. Sometimes, that means telling them about the newest company development; other times, it’s simply saying, “I’m a human, too, and here’s what’s on my mind.”
I don’t have the writing skills to blog. Every single person out there has the potential to be a great writer. Perhaps you aren’t right now, but practice makes perfect. You don’t have to get a perfect blog written in your very first draft. In fact, that’s nearly impossible no matter your skill level. Think about what you want your main points to be, and write an outline if necessary to create a map for yourself. Then, type out that first draft. It might be horrible, but luckily, it’s not permanent. Read through for errors and self-edit your blog. After just a few times, this will be a lot easier than you think. I would also encourage you to purchase an AP Stylebook (or something similar) as a reference for when you just aren’t sure whether to use “effect” or “affect.”
When it comes to business blogging, I want you to remember:
You are the expert. By blogging, you are positioning yourself as the expert in your field. If your competitor down the street isn’t blogging and you have the latest information, I’m choosing you and your company for my project.
Content is king. For the foreseeable future, content is what drives marketing. By blogging, you are creating original content for your company that you can share on your website and your social media outlets. And guess what? That increases your search engine optimization, meaning when people search for “[your industry] in [your region],” there you are – a glistening beacon at the top of the search results.
A strong business blogging culture doesn’t happen overnight. But without a push, it never will at all. Sit down with your team and map out ways you can post at least one blog per month, increase it to every other week, and if you can, every single week. The more, the merrier. Now get out there and take the blogging world by storm!
Marketing Assistant – McGowen, Hurst, Clark & Smith, P.C.
June 2, 2016 § Leave a comment
As the weather changes and it’s sunny and warm, I can’t help but think about vacations. Studies show that employees who use their vacation days are happier and more productive in the workplace. Whether it’s a vacation or a long weekend it’s great to get away and come back refreshed.
My family has already scheduled our big vacation for the year. Our vacation will include my parents, my sister and her boyfriend, another sister and her husband and nieces and nephews, and a grandma and aunt. Some may cringe, but we love going and spending time together and making memories. This year we are going to drive to Orlando over Christmas. YES, I said drive to Orlando, Florida. Two years ago we went on a similar vacation; my husband, I and our one-and-a-half year old flew to Florida. On our return trip we got stuck in Chicago with weather delays – or the normal Midwest snow storm. Some members of my family drove back to Iowa faster than we flew with the delays. The memories of the hours in a packed airport with a one-and-a-half year old are still fresh, and we paid money for that fun experience!
Some vacations are a lot of work, but you are making memories with your family or friends that you will never forget. In fact, you may feel like you need a vacation after the vacation. We have all been on one of those trips. Other vacations are relaxing like a beach in a tropical destination.
Have you started to schedule your vacation or time off? Is it a long weekend going to Omaha, Kansas City, or the lake? Does it include any extended family? Do you plan vacations with children and without children?
Ashley Mowery, CPA
Manager – McGowen, Hurst, Clark & Smith, P.C.
May 20, 2016 § Leave a comment
That’s the way I see it anyway. Yes, our firm does tax planning and preparation, we certainly do audits, we provide accounting services, and we offer a myriad of business consulting services to help our clients and their businesses succeed. But we do more than that; we are a good corporate citizen in our community – doing what we can to make Greater Des Moines and the state of Iowa great places to live.
One of the ways we take care of our community is by hosting an annual blood drive. This year the LifeServe Bloodmobile will be pulling into the MHC&S parking lot on May 24. We invite our employees, families, clients, neighbors, tenants, vendors, etc. to join us in donating blood. While donating blood is important during the entire year, it is always especially important during holidays like Memorial Day – with increased travel and vacations, the need for blood increases as well.
You may already know some of these facts, but it’s always good to be reminded of the importance of donating blood. (This and other important information can also be found on the LifeServe website.)
- One pint of blood can save up to three lives.
- Only 38 percent of the U.S. population is eligible to donate blood, but less than 10 percent donate annually.
- One unit of blood can be separated into several components: red blood cells, plasma, platelets.
- There is no substitute for human blood.
- The average red blood cell transfusion is 3.4 pints.
- Every three seconds someone needs blood.
- You cannot get AIDS or any other infectious disease by donating blood.
- About one in seven people entering a hospital need blood.
- Fourteen lab tests (eleven for infectious diseases) are performed on each unit of donated blood.
- People donate blood out of a sense of duty and community spirit, not to make money. They are not paid for their donation.
More than 3,000 units of blood are needed each week to maintain an adequate blood supply in our community and to meet rising transfusion demands across the country. In fact, nine out of ten people who live to age 70 will use donated blood during their lifetime. New, first time donors, as well as established donors, are needed to expand and sustain the donor base.
The entire procedure takes less than an hour, and well, frankly, could anything be more worthwhile? For more information about blood donation, please check out the LifeServe website. We invite you to mark your calendar and join us on May 24 to be a blood donor in our parking lot at 1601 West Lakes Parkway, West Des Moines.
Please click here to make your appointment online, and feel free to call our office at 515-288-3279 with questions. It will make your day!
Director of Marketing – McGowen, Hurst, Clark & Smith, P.C.
May 11, 2016 § Leave a comment
I recently came across this quote that a professor gave me in college:
People are unreasonable, illogical, and self-centered
LOVE THEM ANYWAY
If you do good, people will accuse you of
Selfish, ulterior motives,
DO GOOD ANYWAY
If you are successful,
You win false friends and true enemies,
The good you do will be forgotten tomorrow,
DO GOOD ANYWAY
Honest and frankness make you vulnerable,
BE HONEST AND FRANK ANYWAY
What you spent years building may be
People really need help
But may attack you if you help them,
HELP PEOPLE ANYWAY
Give the world the best you have
And you’ll get kicked in the teeth,
GIVE THE WORLD THE BEST YOU’VE GOT ANYWAY.
(From a sign on the wall of Shishu Bhavan, the children’s home in Calcutta)
There is a lot that is said in the quote – but I think the most important phrases are ‘LOVE THEM ANYWAY,’ ‘DO GOOD ANYWAY,’ and ‘HELP PEOPLE ANYWAY.’ I remember reading this quote in college, and not seriously thinking about how hard it might be to love people, to do good things, and to help everyone that I meet in my life with a smile on my face. As I am going into my sixth year in the career world, I realize this is a purposeful mindset that one has to choose to live by, doing “the hard thing” – even when we don’t feel like it. It requires an attitude of persistence in spite of discouragement or opposition. In the workplace, it can be especially difficult when there are work demands, and emotions can hold us back from giving the best of ourselves.
Are you doing your best to genuinely live by those phrases? It’s definitely easier said than done some days, and I admit, I fail at this at times, and it’s a work in progress. But, yes, I want to be intentional in this area, and I want people to remember me for the fact that I loved, helped, and did some measure of good in the world, not only with my family and friendships, but also in my work relationships.
In college, we had a project to write our eulogy. This was very thought-provoking (and kind of sad!), as I thought about the legacy that I want to leave behind. I encourage you to think about that with the quote above. Are you sleep-walking through life, or are you being purposeful in your actions to love, doing good anyway, and being helpful to anyone you come across, in the workplace and with everyone that you meet in life?
Sara Hugley, CPA
Senior Auditor – McGowen, Hurst, Clark & Smith, P.C.
April 20, 2016 § Leave a comment
A popular quote by Maya Angelou states, “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” I’m not sure if I totally agree with that since words and actions can be very important too but none the less, how others feel about being around us is something worth spending time exploring and improving.
Stop and reflect for a moment how you interact with others. When they’re talking, are you listening? I mean really listening? Most people are not really listening but rather thinking about their response to what the other person is saying. It is nearly impossible to be fully concentrating on what someone is saying while formulating a response at the same time. The need to be understood, heard and valued is at a person’s core, and when they are not listened to, they feel disconnected from the other person. Rather than gathering your thoughts for your response, try asking follow up questions to what the other person has just said. This is especially important if the person has just shared with you something heartfelt and full of emotion for them.
In addition to fully listening when others are talking, try not to pass judgement on what they are saying. We are all different and value different things so it’s important to allow the other person to be able to share their thoughts freely without the intimidation of feeling as though they are being judged. That doesn’t mean that you have to agree with what they are saying, but there are ways that you can disagree and still allow them to feel accepted as a person around you.
People pick up cues as to how you feel about them by your body language as well. Keeping your body language open and inviting will allow the other person to feel free to share their thoughts with you. You can check this by observing your body language when others are speaking to you. Are you smiling when appropriate, making good eye contact, keeping your arms uncrossed, and leaning toward the person speaking? When it is your turn to speak, are you using a positive tone? These are all things that make the other person feel as though you care about what they’re saying.
Observing how you respond when others are around you and speaking to you is always a good self-check tool. We may not even be fully aware of how we come across to others, which could cause us to give off airs that we don’t care about others when in fact that is not the case at all. Find a friend you trust and ask them how you come across to them and what they might suggest to improve your interaction with others. Sometimes it’s just is a matter of being aware of our shortcomings and how to practice making them better.
Emotional intelligence is the skill of perceiving, understanding, and managing emotions and feelings. It is an art that comes easily to some and takes practice for others. At a deeper level, it is the art of being able to overcome self and put others first. Most people love to share information about themselves. They know the topic well, and it’s interesting to them. Allow people to do this when they speak to you. Encourage them by asking follow up questions and by keeping the conversation on them. This produces endorphins in them that make them happy. Why wouldn’t you want people to be happy around you? A good conversation will allow both parties equal give and take where this is concerned, but if Maya Angelou’s quote is true, then it really doesn’t matter what you say next because in the long run, the person is only going to remember how you made them feel.
Director of Human Resources – McGowen, Hurst, Clark & Smith, P.C.