Major Lease Accounting Change

The Financial Accounting Standard Board (FASB)’s lease accounting standard change, Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), presents dramatic changes to the balance sheets of lessees.  The ASU affects all companies and other organizations that lease assets such as real property, airplanes, and manufacturing equipment.

The standard is effective for US Generally Accepted Accounting Principles (GAAP) public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For private companies (i.e., those not meeting the FASB’s definition of a public business entity), the standard is effective for fiscal years beginning after December 15, 2019 and interim periods beginning the following year. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. Early application will be permitted for all organizations.

Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP—which requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance sheet.

For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term.

The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.

The accounting by organizations that own the assets leased by the lessee—also known as lessor accounting—will remain largely unchanged from current GAAP. However, the ASU contains some targeted improvements that are intended to align, where necessary, lessor accounting with the lessee accounting model and with the updated revenue recognition guidance issued in 2014.

Please contact us if you have any questions on how these changes affect your company.

New York State Paid Family Leave

Dean Carter, Patagonia VP and Head of HR – One of the major exponents of the #LeadOnLeave movement

As of January 1, 2018, most employees who work in New York State for private employers are eligible to take Paid Family Leave.

New York’s Paid Family Leave provides job-protected, paid time off so you can:

– bond with a newly born, adopted or fostered child;

– care for a close relative with a serious health condition; or

– assist loved ones when a family member is deployed abroad on active military service.

Employees can continue health insurance while on leave and are guaranteed the same or a comparable job after the leave ends.

Businesses play an important role in implementing Paid Family Leave.

Insurance coverage for Paid Family Leave benefits generally will be added to an employer’s existing disability benefits policy. Paid Family Leave coverage is funded by employee payroll contributions.

Through Paid Family Leave, employers may increase recruitment and retention as eligible employees are guaranteed:

– paid time off for 8 weeks in 2018, increasing to 12 weeks by 2021;

– job protection upon return from Paid Family Leave; and

– continuation of health insurance while out on Paid Family Leave.

 

Employers’ Responsibilities

– Ensure your company has Paid Family Leave coverage

Most private employers with one or more employees are required to obtain Paid Family Leave insurance. Contact your broker or insurer for information about available policies as well as options for paying your premium (e.g., whether it can be paid semi-annually, annually, or annually on a retrospective basis).

This insurance is generally added to an existing disability insurance policy.

– Inform your employees about Paid Family Leave

Update appropriate written materials distributed to your employees, such as employee handbooks, to include Paid Family Leave information.

If you do not have a handbook, provide written guidance to employees concerning their Paid Family Leave benefits.

– Prepare for employee payroll contributions

Update your payroll processes to collect the employee contributions that pay for this insurance.

It is strongly recommended you notify employees before withholding any contributions.

– Inform ineligible employees about waivers

Identify employees who will not meet the time-worked requirement for and offer them the option to waive coverage.

– Post an employee notice

Your insurance carrier will provide you with a notice to employees (Form PFL-120) stating that you have Paid Family Leave insurance.

Post and maintain this notice in plain view, similar to how the signage for workers’ compensation and disability insurance is displayed.

Attached you can find additional information:

 

As originally published on: https://www.ny.gov/new-york-state-paid-family-leave/paid-family-leave-information-employees

Final Republican Tax Bill – The Details

Corporate Income Tax

  • Flat tax rate of 21% effective January 1, 2018
  • 100% deduction for qualified property through 2022, then phased down over 5 years.
  • Interest expense deduction limited to 30% of adjusted taxable income if average receipts are greater than $25 Million
  • Alternative minimum tax would be repealed
  • The two-year carryback and 20-year carryforward periods would be eliminated, allowing the NOL to be carried forward indefinitely. The NOL deduction would be limited to 80% of the taxable income.

 

Business Income tax of Sale-Proprietors, S Corporation, & Partnerships

Deduction equal to 20% of their allocable share of business income

Limitations for S-Corp equal to the lesser of:

  1. 20% of allocable share of business income, or
  2. 50% of share of the W-2 wages of the S-Corp.

Limitations for Real Estate Partnerships equal to the lesser of:

  1. 20% of net income, or
  2. 25% of W-2 wages plus 2.5% of allocable share of the unadjusted basis of the building.

 

Individual Income Tax

Tax brackets would remain at 7, but the rates would be lower for most brackets including

Rate Single Married filing jointly
10% Up to $9,525 Up to $19,050
12% $9,525–$38.7K $19,050–$77.4K
22% $38.7K–$82.5K $77.4K–$165K
24% $82.5K–$157.5K $165K–$315K
32% $157.5K–$200K $315K–$400K
35% $200K–$500K $400K–$600K
37% Over $500K Over $600K

 

Standard deduction increases to $12,000 for individuals, $18,000 for head of household and $24,000 for married couples filing jointly.

Personal exemptions will be eliminated.

State and local Tax deduction can be combined with property taxes to reach and not to exceed a total amount of $10,000.

Mortgage Interest can be deducted on the interest paid on the first $750,000 of mortgage debt for a first and second home. No home line of equity can be deducted.

Medical expenses above 7.5 percent of a taxpayer’s adjusted gross income can be deducted for 2017 and 2018; 10% thereafter.

Charitable Contributions still allowed

Other miscellaneous itemized deductions Eliminated

Student Loan Interest can continue to be deducted up to $2,500.

Alimony for divorce or separation instruments executed after December 31, 2018, will no longer be deductible by the payer, nor will it be includible in income of the payee.

Trump’s Tax Reform Plan, or not….

A few highlights of what is supposed to happen in the next month or so, and a crucial caveat: nothing is written in stone…. so, stay tuned.

In the past month, both the House Ways and Means Committee (“House”) and Senate Finance Committee (“Senate”) have proposed a tax legislative bill to revamp the current US tax code.  The House released its proposal on November 2; the proposal was passed in the House of Representatives after a vote on November 16.  The Senate released its proposal on November 10 and is scheduled to pass the bill to a full vote of the senate after returning from the Thanksgiving holiday.

We have received many requests to determine the impact of the proposed bills.  Both bills are complexed with a variety of changes for corporations, pass-through entities and individuals’ taxation.

Changes will affect deductions, repeal of the estate tax, repeal of the individual and corporate alternative minimum tax, and a shift to a territorial system for foreign-sourced income.

Below are selected highlights for both proposals related to corporate and individual income tax:

House Bill

Senate Bill

Corporate Income Tax

Flat tax rate of 20% effective
January 1, 2018.

Flat tax rate of 20% effective
January 1, 2019.

100% deduction for qualified
property placed into service for 5 years.

100% deduction for qualified
property placed into service for 5 years.

Alternative minimum tax would
be repealed.

Alternative minimum tax would
be repealed.

The two-year carryback and 20-year carryforward periods would be eliminated,
allowing the NOL to be carried forward indefinitely.    The NOL deduction
would be limited to 90% of the taxable income.

The two-year carryback and 20-year carryforward periods would be eliminated,
allowing the NOL to be carried forward indefinitely.    The NOL deduction
would be limited to 90% of the taxable income.

Individual Income Tax

Tax brackets would be
reduced from seven to four.

Tax brackets would remain at 7, but the rates would be lower for most
brackets including

Rate

Single

Married filing jointly

Rate

Single

Married filing jointly

12%

Up to $45K

Up to $90K

10%

Up to $9,525

Up to $19,050

25%

$45K–$200K

$90K–$260K

12%

$9,525–$38.7K

$19,050–$77.4K

35%

$200K–$500K

$260K–$1M

22%

$38.7K–$70K

$77.4K–$140K

39.6%

Over $500K

Over $1M

24%

$70K–$160K

$140K–$320K

 

 

 

32%

$160K–$200K

$320K–$400K

 

 

 

35%

$200K–$500K

$400K–$1M

 

 

 

38.5%

Over $500K

Over $1M

Standard deduction increases to $12,200
for individuals, $18,300 for head of household and $24,400 for married
couples filing jointly

Standard deduction increases to $12,000
for individuals, $18,000 for head of household and $24,000 for married
couples filing jointly

Personal exemptions will be eliminated.

Personal exemptions will be eliminated.

State and Local Tax deduction will
be eliminated, with the exception of property taxes that can be deducted up
to $10,000.

State and Local Tax deduction will
be eliminated completely.

Mortgage Interest can be deducted on the
interest paid on the first $500,000 of mortgage debt.

Mortgage Interest can be deducted on the
interest paid on the first $1,000,000 of mortgage debt.

Medical Expense deduction will be eliminated.

Medical expenses above 10 percent of a
taxpayer’s adjusted gross income can be deducted.

Student Loan Interest deduction will be
eliminated.

Student Loan Interest can continue to be
deducted up to $2,500.

These proposals are not final and at this time it cannot be determined when or if either proposal will be passed. As noted above, there are key differences between the two bills that need to be resolved.  The bill can only be passed into law once both the house and senate pass identical bills.

Under Banks’ Microscope: How KYC (Know Your Customer) bank compliance is going to affect you

Banks have been required to enforce their Final Customer Due Diligence Rule and will “look through” both individual and nominal legal entity account holders to clearly identify them.

Did you receive a KYC (Know your Customer) Form from your bank? Here’s what you have to know:

KYC Policies enable banks to know their clients and comply with The FinCen guidelines with respect to the U.S. Bank Secrecy Act/Anti Money Laundering (AML) regulations.

Under these regulations every financial institution has to obtain beneficial ownership and control information when an account is being opened. AML Compliance includes analyzing the account relationship, develop a customer risk profile and conduct ongoing monitoring to identify and report suspicious transactions.

If you are an individual you will be asked to submit copies of your ID or passport, form W9 or W8Ben, and documents proving your current address.

If you are a legal entity you will be asked to verify the legal status of the entity, the identity of the authorized signatories and the identity of the beneficial owner/s, and/or controllers of the account and the chain of ownership of the entity.

If you refuse or delay your answer, the Bank is entitled to refuse to open new accounts or discontinue its relationship with you.

Any questions or concerns?  Please contact us, we at GC Consultants, Inc. are here to help you and clarify all your doubts.

Tax Scams: IRS “Dirty Dozen” List for the 2016 Filing Season

WASHINGTON — Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers, headlining the annual “Dirty Dozen” list of tax scams for the 2016 filing season, the Internal Revenue Service announced today.

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Tax Scams

The IRS has seen a surge of these phone scams as scam artists threaten police arrest, deportation, license revocation and other things. The IRS reminds taxpayers to guard against all sorts of con games that arise during any filing season.

“Taxpayers across the nation face a deluge of these aggressive phone scams. Don’t be fooled by callers pretending to be from the IRS in an attempt to steal your money,” said IRS Commissioner John Koskinen. “We continue to say if you are surprised to be hearing from us, then you’re not hearing from us.”

“There are many variations. The caller may threaten you with arrest or court action to trick you into making a payment,” Koskinen added. “Some schemes may say you’re entitled to a huge refund. These all add up to trouble. Some simple tips can help protect you.”

The Dirty Dozen is compiled annually by the IRS and lists a variety of common scams taxpayers may encounter any time during the year. Many of these con games peak during filing season as people prepare their tax returns or hire someone to do so.

This January, the Treasury Inspector General for Tax Administration (TIGTA) announced they have received reports of roughly 896,000 contacts since October 2013 and have become aware of over 5,000 victims who have collectively paid over $26.5 million as a result of the scam.

“The IRS continues working to warn taxpayers about phone scams and other schemes,” Koskinen said. “We especially want to thank the law-enforcement community, tax professionals, consumer advocates, the states, other government agencies and particularly the Treasury Inspector General for Tax Administration for helping us in this battle against these persistent phone scams.”

Protect Yourself from Tax Scams:

Scammers make unsolicited calls claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls,” or via a phishing email.

Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don’t get the money.

Scammers often alter caller ID numbers to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim’s name, address and other personal information to make the call sound official.

Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam.

The IRS will never:

Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
Require you to use a specific payment method for your taxes, such as a prepaid debit card.
Ask for credit or debit card numbers over the phone.
Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

If you don’t owe taxes, or have no reason to think that you do:

Do not give out any information. Hang up immediately.
Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.

If you know you owe, or think you may owe tax:

Call the IRS at 800-829-1040. IRS workers can help you.
Stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

IRS YouTube Video:

Tax Scams – English | Spanish | ASL
Security Summit Identity Theft Tips Overview – English
Be Careful When Using Wi-Fi – English
Update Your Password Regularly – English

 

Which country has the highest tax rate?

In which countries do high earners pay the most tax? And where do average earners pay the most?

Income tax has been a political hot potato for decades.

In 1966 The Beatles released their song Taxman as a protest against the 95% “supertax” rate introduced by Harold Wilson’s Labour government, which the band had to pay. The top rate of tax in the UK is less than half that now but it’s still a source of controversy.

In France, President Francois Hollande’s election campaign promise to tax salaries above one million euros (£830,000) at 75% was – not surprisingly – met with howls of protest by the rich, who Hollande once said he “didn’t like”. His policy was struck down by the courts in 2012 who ruled it unconstitutional but he amended it so that the employer became liable to pay it.

To put this in context, the football club Paris Saint-Germain have to pay nearly 35m euros (£29m) to the government on star striker Zlatan Ibrahimovic’s net annual salary of 11m euros.

Tax rates do vary dramatically depending on which country you live in. The accountancy firm PricewaterhouseCoopers (PWC) has crunched the numbers for the G20 nations.

For each country, they calculated how much a high earner on a salary of $400,000 (£240,000) in 2013, with a mortgage of $1.2m (£750,000), would have left after all income tax rates and social security contributions.

They assume this person is married with two children, one of them aged under six.

These are their findings. In each country, the wage earner takes home the following proportion of his or her salary.

  • Italy – 50.59% (takes home $202,360 out of $400,000 salary)
  • India – 54.90%
  • United Kingdom – 57.28%
  • France – 58.10%
  • Canada – 58.13%
  • Japan – 58.68%
  • Australia – 59.30%
  • United States – 60.45% (based on New York state tax)
  • Germany – 60.61%
  • South Africa – 61.78%
  • China – 62.05%
  • Argentina – 64.02%
  • Turkey – 64.64%
  • South Korea – 65.75%
  • Indonesia – 69.78%
  • Mexico – 70.60%
  • Brazil – 73.32%
  • Russia – 87%
  • Saudi Arabia – 96.86% (so you take home $387,400 out of the $400,000 salary)

In most of these 19 rich countries (the 20th member is the EU) the take-home pay is between $230,000 – $280,000.

But one important thing to consider when comparing the top rate levels of tax is the threshold where the rate kicks in, because the differences are massive.

“In the UK, the 45% top rate of tax kicks in at an income level of around $250,000 (£151,000) compared to Italy where the top rate of 43% comes in at $125,000,” says Ben Wilkins, a tax partner at PWC.

Outside the G20, the Danish government taxes workers at 60% on all earnings over $60,000.

Most of us can only dream of earning a salary that would attract the top rate of tax, so what about ordinary earners?

It is difficult to compare tax rates. Income tax is only one tax – most of us will pay other kinds of tax, like social security, and those with children might get some tax relief.

The statisticians at the Organisation for Economic Cooperation and Development (OECD) have done some analysis of average salaries.

“At the top end of the distribution we have Belgium where single people pay 43% of earnings in income tax and social security contributions (or national insurance), followed by Germany with 39.9%,” says Maurice Nettley, head of tax statistics at the OECD. “The lowest rates are paid in Chile at 7% and Mexico at 9.5%.”

These tax rates apply to single people with no children, on an average salary for their country.

  • Belgium – 42.80%
  • Germany – 39.90%
  • Denmark – 38.90%
  • Hungary – 35%
  • Austria – 34%
  • Greece – 25.4%
  • OECD Average – 25.10%
  • UK – 24.90%
  • USA – 22.70%
  • New Zealand – 16.40%
  • Israel – 15.50%
  • Korea – 13%
  • Mexico – 9.50%
  • Chile – 7%

The following tax rates apply to married couples with two children.

  • Denmark – 34.8%
  • Austria – 31.9%
  • Belgium – 31.8%
  • Finland – 29.4%
  • Netherlands – 28.7%
  • Greece 26.7%
  • UK – 24.9%
  • Germany – 21.3%
  • OECD average – 19.6%
  • USA – 10.4%
  • Korea – 10.2%
  • Slovak Republic – 10%
  • Mexico – 9.5%
  • Chile – 7%
  • Czech Republic – 5.6%

In Germany the rate drops from 39.9% to 21.3% because of generous child tax credits. Across the OECD, tax rates drop by an average of 5.5% for married couples with children. Greece is the only country where you pay more tax if you are married with children.

Of course, the point of paying taxes is that the government is supposed to provide services for that.

“In a lot of the European countries tax rates and social security contributions are high but the provision of benefits by the state tends to be very generous compared to countries in other parts of the world,” says Nettley.

“If you fall ill or become unemployed the state will contribute and there are also generous pension arrangements.”

Source: BBC News