Tag: business owner

Food Industry Trends and More: Notes from the Summer Fancy Food Show

Posted by Maria T. Rollins on

Maria Rollins at the Summer Fancy Food ShowWhenever a local industry trade show aligns with a KRS service offering or niche I look forward to an opportunity to get out and network with its exhibitors. I also find that the breakout education sessions are extremely relevant and offer insight to the business challenges faced by industry members. Recently I had the opportunity to attend the Specialty Food Associations’ Summer Fancy Food Show in New York City.

I was drawn to this particular show because we have many clients who are in the food and beverage industry. In addition, I am a “foodie” and was enticed by the thought of spending a day in New York City networking while sampling the latest in specialty foods and beverages.

The show lasted for four days and although I only attended the last day (usually the day with the most giveaways) I was able to get a flavor for many product and business trends. Here’s just a sampling of what I learned.

Hot product trends and business challenges

In light of the shift in consumer demand from processed foods to healthier options, I wasn’t surprised to see gluten-free, vegan, raw and “sugar conscious” products as the hot items on exhibit. Many of the dessert and snack items I sampled were marketed as gluten-free and many amount were also dairy-free and vegan.

As the gluten-free trend continues, manufacturers will face challenges in production when gluten-free and gluten products are manufactured in the same facility. The gluten-free trend will also continue to boost the need for gluten-free flour substitutes such as coconut, corn and rice flours, in addition to other ingredients needed to improve texture and consistency.

Shelf-life of gluten-free products can also be a business challenge. Many exhibitors stressed the shelf-life of their products since many of the ingredients in these gluten-free alternatives result in a shorter shelf-life compared to full gluten products.

Many of the beverage samples offered by exhibitors continued the “healthier” option theme and were low sugar alternatives to traditional sodas. Flavored waters and spritzers containing organic juices, apple cider vinegar or Acai berries were positioned as healthier alternatives to sugar-laden sodas.

I also saw many dairy-free and vegan products exhibited by small businesses and start-ups. Many of the small business exhibitors I spoke with are challenged with expanding their distribution beyond their local geographical region. Attending such premier show was an important way for these companies to get their products in front of the many distributors and buyers attending.

All the small businesses and start-ups I spoke to have e-commerce sites and will ship their products to consumers. We talked about how important e-commerce is to their growth and how it requires that they invest in technology. I also listened to panelist Monica Schechter, specialty and international food category manager at Jet.com and Walmart.com, who cited technology as a catalyst to finding new products and assisting with the discovery experience through online searching and shopping.

Turning a food idea into a successful business

My favorite experience at any trade show is talking to the exhibitors and learning the story behind their product or brand. Many are family businesses or friends who came up with an idea. They are passionate about their ingredients and the quality of the product they deliver to their consumers. As an accountant working with many start-ups and “well-seasoned” businesses, I find these stories are refreshing and often heart-warming. Common for start-ups, these stories usually include a business mistake or two they encountered along the way. After all, having a great idea is only the first step. A successful food manufacturer must build their brand, secure efficient manufacturing, seek distribution channels, set pricing, manage inventory, finance the business and market their product. The most successful businesses deliver their product more efficiently than their competitors.

My advice to small businesses and start-ups is to seek out help from professionals and mentors. I recently spoke to one food manufacturer who has grown a significant business and now offers advice to those entering the market. They are willing to share their challenges and how they overcame obstacles in growing their business.

Are Club Dues a Deductible Business Expense?

Posted by Maria T. Rollins on

Are Country Club dues a tax deductible expense?With the warmer weather and longer days of summer here, many business owners turn to golf and other outdoor activities for their business networking and development activities. A question I am often asked by my clients is whether they can deduct the dues for clubs at which they entertain customers or that otherwise may be relevant to their business.

Dues may or may not be deductible; depending upon the type of club and its purpose.

A business generally can’t deduct dues paid to a club organized for business, pleasure, recreation or other social purposes. This disallowance rule would apply to country clubs, golf clubs, business luncheon clubs, athletic clubs, and even airline and hotel clubs.

What about the cost of business meals held at the club with your customers?

Just because the dues are not deductible you can still deduct 50% of the cost of otherwise allowable business entertainment at a club. For example, if you have dinner with a client at your country club after a substantial and bona fide business discussion, 50% of the cost of the dinner is deductible as a business expense.

The club-dues disallowance rule generally doesn’t affect dues paid to professional organizations including bar associations and medical associations, or civic or public-service-type organizations, such as the Lions, Kiwanis, or Rotary clubs. The dues paid to local business leagues, chambers of commerce and boards of trade also aren’t considered “nondeductible club dues.”

If the principal purpose of the club is to provide entertainment facilities to its members or to conduct entertainment activities for them, most likely no tax deduction for the dues will be allowed.

Finally, keep in mind that even if the general club-dues disallowance rule doesn’t apply, there’s no deduction for dues unless you can show that the amount you pay is an ordinary and necessary business expense.

We’ve got your back

If you have additional questions about entertainment, travel, gift or car expenses, we’re here to help. Contact me at MRollins@krscpas.com or 201.655.7411.

Resources for Growing Your NJ Food Business

Posted by Maria T. Rollins on

Resources for Growing Your NJ Food BusinessWith food trucks, farmers markets and innovative “Jersey Fresh” products popping up daily, it’s no wonder New Jersey is known as a food industry hub.

According to Choose NJ, New Jersey boasts a thriving $105 billion food industry and an agriculture sector that’s growing every day. The Garden State is home to 1,900 food manufacturing companies employing about 31,000 people at last count. There are also thousands of food distribution centers, retailers, restaurants and farms. For more on the size and importance of food manufacturing to the New Jersey economy, download the New Jersey Business and Industry Association (NJBIA) report, “Food Manufacturing in New Jersey.”

At KRS, we work with many food startups, as well as established companies in food manufacturing, wholesale and distribution, brokerage, and transportation and logistics. We know how important it is to have the resources you need to grow your business, so we’ve put together this guide to the local food industry to help you.

Innovation and technical expertise for emerging and established food companies

Rutgers Food Industry Gateway combines the resources of the Rutgers Food Innovation Center and Rutgers’ Center for Advanced Food Technology to create a business incubation and economic development accelerator for the food and agricultural sectors.

The Gateway provides business and technical expertise in addition to serving as a guide to the wealth of knowledge within the many departments and institutes of Rutgers. Chief among these are:

Financial incentives and workforce development programs

Choose: New Jersey’s mission is to encourage and nurture economic growth throughout New Jersey, with a focus on urban centers. They provide relocation and expansion services, property search/site visits, and economic development connections.

Under their Grow New Jersey Assistance Program, food companies may qualify for fully-transferable tax credits by creating as few as 25 full-time jobs (10 for new technology startups). The Advanced Manufacturing and Transportation, Logistics and Distribution Talent Networks partner with businesses to develop workforce training and connect companies with already trained employees to address their needs. Download Choose: New Jersey’s food industry brochure to learn more.

New Jersey Economic Development Association (EDA) works in partnership with Choose NJ and the New Jersey Business Action Center, along with the Office of the Secretary of the Higher Education, to collaborate under the umbrella of the New Jersey Partnership for Action (PFA). The EDA’s role in attracting and retaining businesses is to administer financial resources that help companies bridge financing gaps and encourage companies to choose New Jersey over a competing location by making a project more financially viable.

Best practices for food manufacturers and suppliers

The New Jersey Food Processors Association (NJFPA) is an organization of manufacturers and suppliers of food and agricultural products joined together to promote best practices, share information and expand the food industry of New Jersey and the surrounding region.

NJFPA provides its members with access to the networking events and the resources necessary to strengthen their companies. The NJFPA holds an Annual Conference, usually in January, which provides sessions on technical innovations, sales and marketing tips, consumer trends, distribution solutions, new product and package development, and food safety issues.

New Jersey Manufacturing Extension Program, Inc. (NJMEP) is a not-for-profit company that works with New Jersey’s small to mid-sized manufacturers to help them become more efficient, profitable and globally competitive. NJMEP’s Made in New Jersey program showcases the state’s products and the companies that are manufacturing them. A key component of this program is the online directory listing NJ’s manufacturers and the products they create. Register to be a part of Made in New Jersey.

Food conferences and trade shows

Many food conferences and trade shows occur in the New Jersey and New York area. We’ve been to these four and they are worth checking out:

FOODBIZ, presented by NJBIZ, is a day of education and networking designed to benefit New Jersey business owners and operators in the food and beverage industries. The event brings together buyers and sellers in this business-to-business environment aimed to stimulate revenue opportunities, educate and inspire.

The World of Latino Cuisine Food and Beverage Trade Show, held at the Meadowlands Expo Center, includes the participation of domestic food manufacturers, producers, and distributors. Importers from the Caribbean and many Latin American countries also participate as exhibitors. Matchmaking opportunities are offered off-site and at the event, as ninety-five percent of the largest Latino food and beverage distributors in the Northeastern United States are located within a 25 miles radius of the Meadowlands Expo Center.

The New York Produce Show and Conference is held each year at the Javits Center, NYC, and is presented by the Eastern Produce Council and Produce Business magazine. The 3-day event includes networking opportunities and a tradeshow of over 400 companies representing local retailers, wholesalers, foodservice distributors, urban farmers and unique eateries.

The Fancy Food Show, presented by the Specialty Food Association, showcases over 2,500 exhibitors with the latest in specialty food and beverages from across the U.S. and 55 countries. It is held annually at the Javits Center.

We’ve Got Your Back

Regardless of the type of food business you run, you need to have the financial, accounting and business advice that enables your company thrive in a competitive marketplace. We can help. Contact Managing Partner Maria Rollins at 201.655.7411 or mrollins@krscpas.com to set up a free initial consultation.

Is Your Accountant More than Your Trusted Advisor?

Posted by Loraine Kasprzak on

Is Your Accountant More than Your Trusted Advisor?Managing partner Maria Rollins was a guest on the Accounting Success podcast, speaking on the topic, “How Successful Accountants Serve Their Clients.” In this session excerpt, host Ian Welham and Maria discuss what it means as a CPA to be more than a trusted advisor.

IAN: It’s sometimes said that owning a business can be a lonely world and even that clients can go into their own shell or into their own world. Do you find that once you’ve got a relationship with a client that they tend to reach out to you to help them understand their business, help them avoid that feeling of loneliness…?

MARIA: Sometimes we refer to ourselves as more than just the trusted advisors. Sometimes we’re the psychologist that steps in and listens to what our clients’ issues are even if it goes beyond their business or accounting. I think it’s the fact that our clients know that we really do care about the success of their business, so we can listen to their troubles and their stresses and provide that third-party advice, that independent advice, to help them succeed.

IAN: I think that’s very important. I think you used the word “help them succeed.” Do you find that some clients aren’t actually clear about where they want to go? They got into business. They’ve grown, perhaps, over 10 or 15 years, but they don’t have an end game.

MARIA: We do talk a lot about succession planning for their business. We do talk about buy/sell agreements… We do try to sit down and understand what the goals are. We talk a lot about a three-year plan and a five-year plan so we can help them, guide them. Their business is their biggest asset most times. You want to add value within that asset.

IAN: You have clients not just from New Jersey, but across the U.S. and from around the world. They’re quite diverse in terms of size, ranging from multinational corporations to small, independent businesses. What do you actually look for in a client? What are the things that attract you to the client?

MARIA: The biggest attraction is what we can do to help that client. Where can we actually see some success with what that client needs and how we can match up our talent to get them to that next level and to help them achieve their goals. We do talk a lot about what the client needs are, our understanding of those needs, and how we can help them achieve those goals.

IAN: I think it helps, of course, whether the client’s large or small, that they welcome outside expertise and understand this value.

MARIA: There’s clients that could be a little bit larger that have very different needs. Maybe those clients are more in the need of the traditional accounting services where we’re providing audit assistance or a financial statement assistance. We’ve found very small businesses, and we don’t want to pigeonhole any business based on size, but very small businesses that are very entrepreneurial, they have a very high need and use of technology, and it’s exciting to be part of that growth.

IAN: I noted another expression on your website that caught my attention. I think it was echoed in some of your clients’ testimonials as well. The phrase is: “We’ve got your back.” Can you explain what you mean by that? How does that phrase embody how you serve your clients?

MARIA: The culture here is that we care about our clients’ businesses, sometimes even more than our clients seem to care about their businesses. That’s really where that comes from. You’re focused on your business. You’re in it day-to-day. Sometimes it’s very hard to step back and look at the big picture. We’re there. We’ve got you. We have that big picture in mind. You can count on us for that.

Listen to the entire discussion on YouTube at https://youtu.be/ox6UNUzreXk.

Trade-in or sell your vehicle?

Posted by Maria T. Rollins on

The decision to trade in or sell your vehicle is not so easy if you’ve used that vehicle for business.

Tax implications of trading or selling your vehicleSelling a vehicle outright or trading it in towards a new vehicle usually involves analyzing the economics of the transaction. However, tax factors can start to complicate things if that vehicle was used in your business.

Generally, a gain or loss on the sale of a business asset is determined by the difference between the sales price and basis (your cost for tax purposes). Basis is typically your original cost less depreciation deductions claimed for the asset over the years.

Under the tax-free swap rules, trading an old business asset for a new, like-kind asset doesn’t result in a current gain or loss. The basis in the new asset will be the remaining basis in the old asset plus any cash paid on the deal.

So if your car was used exclusively in business and depreciated down to a zero, or very low basis, trading in the car can avoid current tax. Here is an example:

Mary originally purchased her car for $35,000. The car is used exclusively for business and Mary has deducted depreciation of $33,000 over the years. Mary’s remaining basis is $2,000. Mary has an offer to sell her car for $7,000. If Mary accepts the offer she will have a taxable gain of $5,000. If, however, Mary decides to accept a trade-in of $7,000 for the car she will not recognize any gain. The basis in the new car will be Mary’s basis in the original car ($2,000) plus any cash she paid to trade-up.

Alternately, you would choose to sell the car if the depreciation was limited by annual depreciation dollar caps. In this situation, your basis in the old car may exceed its value. If you sell the car you will recognize a tax loss. If you trade the car in, you would not recognize the loss under the tax free swap rules.

What if you used the standard mileage allowance to deduct car-related expenses?

The standard mileage allowance has a built-in allowance for depreciation, which must be reflected in the basis of the car. For 2016, the deemed depreciation is 24¢ for every business mile traveled. This method may leave you with a higher basis when the car is sold. Therefore, the car should be sold rather than used as a trade-in to recognize the tax loss.

We’ve got your back

At KRS we assist our individual and business clients with all matters related to taxes. If you’re faced with trading in or selling your vehicle, and aren’t quite sure what to do, contact managing partner Maria Rollins at 201.655.7411 or mrollins@krspcpas.com.

People: The First Decision Every Growth Company Must Get Right

Posted by Maria T. Rollins on

Mike Goldman - President, Performance Breakthrough“A mediocre strategy with A-players executing with discipline will blow away your competition.” – Mike Goldman

The February KRS Insights Breakfast featured guest speaker Mike Goldman, President of Performance Breakthrough, who works with leadership teams to ensure they have the right people, strategies and execution habits for growth.

For those who missed the breakfast, we wanted to share some of Mike’s insights and best practices.

Mike started off by sharing the four decisions CEOs face to drive scale and growth: People, Execution, Strategy and Cash. Of these, decisions about people are by far the most important. Quoting Jim Collins, author of Good to Great, Mike pointed out, “First take care of the who, then the what. If you don’t have the right people, you’re going to be miserable.”

Key insight: A great strategy with the wrong people and/or undisciplined execution will fail every time. It is vitally important to put practices in place so that your company has A-players who can execute effectively.

Who is an A-player?

You may believe you have great players because you’ve worked with them for years. But you probably don’t have as many A-players as you think. For instance, your employee Joe might be a great guy who shows up for work on time, but he’s become complacent in his job and his skills outdated – not what you need in an A-player.

Ask yourself this question: Would you enthusiastically rehire everyone on your team? The answer to this question can mean huge changes within your organization.

Kip Tindell, founder and former CEO of The Container Store, believes one A-player’s productivity equals that of three average employees’ productivity.

Being an A-player, however, is not just about productivity. You must take into account your organization’s core values. “If someone on your team is highly productive, but not living the core values, they are a cancer in your organization,” said Mike. “So a salesperson who beats his or her quota every month but is abrasive to customers is hurting, not helping your organization.”

Determining your organization’s core values

Knowing your organization’s core values – what is best and most noble about your organization – will help you find, retain and leverage A-players. Mike shared three quick tests to help you decide whether something is truly a core value:

  1. Are you committed to firing someone who blatantly, and continually, violates the core value?
  2. Are you willing to take a financial hit to uphold the core value?
  3. Is the core value alive within your organization today? Can you tell recent stories describing how an individual lived the core value?

Answers to these questions can help you establish your organization’s core values. Then use core values to hire – and to fire. “Live your core values – award your team on them,” said Mike.

Finding A-players

Sourcing, recruiting and hiring A-players needs to be your organization’s most important process. Mike shared these best practices for getting started:

Create a virtual bench. Don’t wait until you have an open position to scramble to find someone to fill it. You’ll likely wind up with someone who is not an A-player, just to have a body to fill the position. Always be recruiting.

Best practice: Hold everyone on your leadership team responsible for calling ten people they know and trust to ask them, “We’re growing and always looking for A-players. Who do you know that I should talk to?” The idea is not to hire them right away; you might not need them now and they might not be looking for a job. The objective is to initiate a relationship so that when a need arises, you’ve got a virtual bench of A-players to call.

Upgrade your employee referral program. Typical employee referral programs pay a bonus to the employee who refers someone who eventually gets hired. These programs don’t work because the dollar amounts – typically between $500 and $2,500 – aren’t enough to change someone’s behavior.

“Dramatically increase the bonus amount and split it in two parts,” Mike recommended. “For example, pay a $10,000 bonus. $5,000 when the employee gets hired and another $5,000 in 12 months if both referrer and new employee are still with the company.”

Create A-player ambassadors. A-players tend to know other A-players and can be your best ambassadors, communicating what is best about working for your company.

Plan for your A-players

When you invest so much time and effort in recruiting and hiring A-players, you must have a plan for retaining them as well. Mike advised asking:

  • How can you better leverage their talents?
  • How can you give them more responsibility?
  • How can you re-recruit them to make sure they stay?

You will also need a plan for your C-players. Usually this plan consists of giving them a short period of time to make performance improvements. If they don’t make it happen, they need to go work for your competition.

We’ve got your back

At KRS CPAs our goal is to make it as easy as possible for you to get the advice and counsel needed, so you can focus on what matters most to you. The KRS Insights Breakfast Series offers timely and relevant information from experts like Mike Goldman, who can help you grow your company successfully.

Visit our Insights page to subscribe to our newsletter and you’ll be notified about upcoming breakfasts plus other KRS news, events and resources.

Mike Goldman, who is also author of the book Performance Breakthrough, offers a free online assessment for business leaders to help them determine if they are focusing on the most important issues for their business. You can also contact Mike at mgoldman@performance-breakthrough.com or 201.301.2841.

Consider Converting to an S Corporation to Avoid Taxes

Posted by Simon Filip on

Consider Converting to S Corporation to Avoid Taxes

For closely held corporations still taxed as C corporations, the opportunities to avoid future taxes should be considered.

When converting a C corporation to an S corporation there are a number of tax issues that must be addressed.

C corporation vs. S corporation tax rates

A C corporation is taxed on its taxable income at federal rates up to 35%. Distributions of qualified dividends to individual shareholders are taxed again at a federal rate as high as 23.8% (the tax rate on qualified dividends is 15% or 20%, depending on certain adjusted gross income thresholds with an additional 3.8% surtax on net investment income for taxpayers with adjusted gross income over certain thresholds).

If a business elects to be taxed as an S corporation, there is only one level of taxation, at the shareholder level.

Generally, items of income, deduction, gain or loss from a pass-through entity pass through to its owners, while the entity itself is not subject to tax. The S corporation may therefore be favorable as it avoids double taxation.

Not every C corp is eligible

Not every C corporation is eligible to elect to be taxed as an S corporation. The current S corporation eligibility requirements are as follows:

  • No more than 100 shareholders
  • Shareholders who are all individuals (there are exceptions for estates, trusts and certain tax exempt organizations)
  • No nonresident aliens as shareholders
  • Only one class of stock

Mechanics of election

The S election requires the unanimous consent of the shareholders and is effective for any year if made in the prior year or on or before the fifteenth day of the third month of the year. Some states, such as New York and New Jersey, require a separate election be filed, while some states follow the Federal tax classification.

Built-in gains

The excess of the fair market value of the assets over their adjusted basis at the time of the S election is considered “built-in gain.” If any of this built-in gain is recognized during the 5-year period beginning with the first tax year for which the corporation was an S corporation, such gains remains subject to corporate-level tax. Any appreciation of assets that occurs post-S corporation election, is subject to only one level of taxation.

Here’s an example:

XYZ, Inc., a C corporation, was converted to an S corporation on January 1, 2017. On the date of the conversion, it owned real estate with a fair market value of $3 million and an adjusted basis of $2 million. The corporation’s net unrealized built-in gain would be $1 million. If the corporation had taxable income of $1.5 million and sold the real estate asset in 2019, the corporation would be subject to the built-in gains tax of $350,000 ($1 million x 35%). However, if the built-in gain assets were sold in 2023, the built-in gains tax would be a non-issue (zero built-in gain tax), since the fifth year of the recognition period passed.

For more about real estate and C corps, see my post Do You Hold Real Estate in a C Corporation?

Excess passive investment income

If an S corporation was previously a C corporation, it may have accumulated Earnings & Profits (“E&P) from years when it was a C corporation. A potential problem for an S corporation with E&P is the passive investment income tax.

If gross passive investment income (which includes income from interest, dividends, and certain rents) exceeds 25% of gross receipts, the corporation may be subject to tax on its net passive investment income. This is fairly common when a taxpayer makes an S election for a C corporation that owns rental real estate. In a year where an S corporation has both E&P and excess passive investment income, some of the excess net passive investment income may be subject to the tax at the highest corporate income tax rate. This does not apply to a year in which there is no taxable income.

The S corporation will still have a problem if there is no taxable income and the passive investment income tax does not apply. If the S corporation has both E&P and excess passive investment income for three (3) consecutive tax years, the S corporation status is revoked on the first day of the fourth year.

Tax planning can help minimize your taxes

The double taxation of C corporation income is very tax inefficient. With proper tax planning, the owners of a C corporation can minimize their total taxes by converting the corporation to S corporation status. As always, KRS CPAs is here to help you. Contact me at sfilip@krscpas.com or 201.655.7411 for assistance with C corporations and tax planning.

Key Features of the Proposed Trump Tax Plan

Posted by Maria T. Rollins on

KEY FEATURES OF THE PROPOSED TRUMP TAX PLANPresident Trump has proposed a detailed tax plan that will revise and update both the individual and corporate tax codes.

Here are some of the key plan elements that could affect individuals and small business owners, if enacted into law.

Top tax rates decrease

Currently the 2017 top tax rate on ordinary income is 39.6%. Under the Trump Tax Plan, the top rate on ordinary income will drop to 33%. He has also proposed lower rates throughout all tax brackets.

More taxpayers will pay the 20% tax capital gains. This 20% rate will kick in for all taxpayers in the top bracket ($127,500 if single and $255,000 if married filing jointly). Currently this rate doesn’t kick in until you earn more than $425,400 if single and $487,650, if married filing jointly.

One tax rate for businesses

Trump plans a single 15% tax rate for business income, whether the business is an S-corporation, partnership or Schedule C. Because sole proprietorships qualify, we may see more wage earners become self-employed business owners.

Under the Trump plan we would also see a 100% expensing of all asset acquisitions, with no limitation.

Capped deductions

For individual taxpayers, Trump is planning an overall limit on itemized deductions of $100,000 if single, and $200,000 if married filing jointly. Currently, itemized deductions are reduced by 3% for every dollar the taxpayer’s income exceeds $250,000 if single, and $300,000 if married filing jointly.

Elimination of the estate tax

Trump has proposed eliminating the estate tax. Still up for discussion is the gift tax or whether the estate tax will be eliminated all at once or phased out over time. Also, there would be no step-up in basis. It is unclear if under Trump’s plan the heirs would take the assets at the decedent’s basis or if appreciation on the assets is taxable at death.

Other key plan features for individuals

The Trump Tax Plan also eliminates:

  • Head of household filing status for single parents
  • Net investment income tax
  • Alternative minimum tax (AMT) for individuals

The plan increases the standard deduction from $6,300 to $15,000 for singles and from $12,600 to $30,000 for married couples filing jointly. It also taxes carried interest as ordinary income.

Other changes impacting businesses

Businesses will need to pay attention to these proposed changes as well:

  • Reduction in the corporate income tax rate from 35% to 15%.
  • Elimination of the corporate AMT.
  • Elimination of the domestic production activities deduction (Section 199) and all other business credits, except for the research and development credit.
  • Implementation of a deemed repatriation of currently deferred foreign profits, at a tax rate of 10%.

We’ve got your back

Of course, these were campaign proposals and we don’t know if they will become law. KRS CPAs will keep you updated on important revisions to the tax code via email radar and blog posts. If you aren’t already registered for our email radars and newsletter, sign up here.

 

2017 NJ Tax Changes Business Owners Need to Know

Posted by Maria T. Rollins on

NJ Taxes

In my last post I reported on key federal tax changes that small business owners need to know about. This post covers three significant tax changes in New Jersey.

NJ sales tax rates reduced

The New Jersey Sales and Use Tax will be reduced in two phases between 2017 and 2018. The rate decreased from 7% to 6.875% on and after January 1, 2017. The tax rate will decrease to 6.625% on and after January 1, 2018.

Transition rules do apply:

  • For items sold before 1/1/2017 but delivered after 1/1/2017, use the 6.875% rate
  • Leases in excess of 6 months entered into before 1/1/2017, use 7%.
  • Lease extensions or renewals after 1/1/2017, use 6.875%.
  • If an agreement is less than 6 months – use 6.875% for all periods that begin after 1/1/2017.
  • Construction materials delivered after 1/1/2017, use 6.875%.
  • If the construction materials are for use in unalterable building contracts entered into before 1/1/2017, the seller must collect 7%.
  • Service or maintenance agreements entered into before 12/31/2016, seller must charge 7%. This is regardless of whether or not the agreement covers periods after 1/1/2017, unless the bill for such services was issued after 1/1/2017.

KRS Tip: Check all your vendor invoices to ensure you’re being charged the correct amount, before you pay the invoice. If it is the incorrect amount, have the vendor revise the invoice. If you go ahead and pay the incorrect amount, it is your responsibility to go back to the state – not the vendor – to get a refund.

Urban Enterprise Zone designation expires for 5 NJ cities

Under the UEZ designation, businesses in certain economically distressed areas are eligible for incentives, including tax free purchases on capital investments, tax credits to hire local workers and the ability to charge just half the statewide 7% sales tax.

The UEZ designations for Bridgeton, Camden, Newark, Plainfield and Trenton were permitted to expire. These zones can no longer collect sales taxes at reduced rates.

Changes to New Jersey estate tax

A NJ resident who dies and has assets worth more than $675,000 has had his or her estate subject to NJ estate tax. That may sound like a lot of money, but if you own even a modest home in the northern part of the state, you’ll probably hit the $675,000 threshold.

As part of the bill that raised the gas tax in the state, the exemption will increase from $675,000 to $2 million for estates of residents dying on or after 1/1/2017 and before 1/1/2018.

We expect that the increased exemption will change if there is a democratic governor elected this year.

We’ve got your back

New Jersey tax regs grow increasingly complex and it can be hard for business owners to know how to save taxes. At KRS we assist our clients in minimizing tax liabilities by providing them with comprehensive tax planning, preparation and compliance services.

Contact partner Maria Rollins at 201.655.7411 or mrollins@krscpas.com if your company needs expert advice and assistance with its 2016 taxes.

 

Moving Up from the Food Truck? Here Are Some Tax Topics to Consider

Posted by Simon Filip on

Useful Tax Tips for Expanding Your Fledgling Food Business

Tax considerations for food businessesCongratulations! You started a food service business in a food truck or completed a proof of concept on wheels or in temporary space. Now you have made a business decision to expand and operate a brick-and-mortar location.

Here are some tax considerations you should consider as you move forward with your business venture:

Choice of Business Entity

If you are creating a new legal entity for the brick-and-mortar location or never formally created one for the prior business, it is essential to consider a legal form that protects you from personal liability, such as a limited liability company (LLC) or corporation.

Unlike other industries, most successful restaurants have a substantial amount of daily foot traffic along with employees engaged in physical activities. These activities increase the likelihood a person could be injured on the premises. For instances where there are potential claims, an owner would want the business, not him personally to be responsible for any liability.

Along with the limited liability aspect of entity choice are income tax considerations. Every entity is different and you should meet with your tax professional to discuss the entity choice. Discuss the advantages and disadvantage of Corporations, S Corporations and Limited Liability Companies all of which provide legal liability protection, but have differing tax consequences. Tax issues that should be considered include:

  • Sale of the business
  • Use of losses
  • State tax issues
  • Compensation package
  • Complexity of organization structure

Tax Credits for Restaurants

There are several tax credits available to small business employers including restaurants, which may qualify for one or more of the following tax credits:

Cost Segregation Studies for Accelerated Depreciation Recovery

A cost segregation study is an in-depth analysis of fixed asset expenditures that identifies proper cost recovery periods for tax deprecation purposes.

Typically, restaurant building components are classified with longer depreciation recovery periods of 15 to 39 years. Utilizing a cost segregation study, certain items may be identified as having shorter recovery periods of 5 or 7 years. A shorter recovery period would accelerate depreciation expense and result in reduced current income tax liabilities.

Income from Gift Cards

The purchase and use of gift cards has significantly increased in popularity, as a result the IRS has focused more on compliance.

Amounts received for the sale of gift cards generally are included in income in the year of receipt, which may not be the same year the gift card is redeemed. However, taxpayers have the ability to elect a one-year income deferral method. Under this method, revenue from unredeemed gift cards can be deferred to the first taxable year following the year of receipt. As a restaurant owner, be sure to pay special attention to the tax treatment of gift cards to ensure compliance, and take advantage of income tax deferral opportunities.

Have you recently opened or are you in the process of establishing your new food service business? If you’d like to speak to us about tax considerations please contact me at sfilip@krscpas.com or 201.655.7411.