Tax

Business Expense Deductions for Meals, Entertainment

As the end of year approaches, taxpayers are reminded that business expense deduction for meals and entertainment have changed due to tax law changes in the Tax Cuts and Jobs Act (TCJA). Until proposed regulations clarifying when business meal expenses are deductible and what constitutes entertainment are in effect, taxpayers should rely on transitional guidance that was recently issued by the IRS.

Prior to 2018, a business could deduct up to 50 percent of entertainment expenses directly related to the active conduct of a trade or business or, if incurred immediately before or after a bona fide business discussion, associated with the active conduct of a trade or business. However, the 2017 TCJA eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.

Taxpayers may continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact.

Please note that food and beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event.

• By Leon Clinton
• November 19, 2019

Seasonal Workers and the Healthcare Law

Businesses often need to hire workers on a seasonal or part-time basis. For example, some businesses may need seasonal help for holidays, harvest seasons, commercial fishing, or sporting events. Whether you are getting paid or paying someone else, questions often arise over whether these seasonal workers affect employers with regard to the Affordable Care Act (ACA).

For the purposes of the Affordable Care Act the size of an employer is determined by the number of employees. As such, employer-offered benefits, opportunities, and requirements are dependent upon your organization’s size and the applicable rules. For instance, if you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, you are an ALE (Applicable Large Employer) for the current calendar year.

If you hire seasonal or holiday workers, you should know how these employees are counted under the health care law:

Seasonal worker. A seasonal worker is generally defined for this purpose as an employee who performs labor or services on a seasonal basis, generally for not more than four months (or 120 days). Retail workers employed exclusively during holiday seasons, for example, are seasonal workers.

Seasonal employee. In contrast, a seasonal employee is an employee who is hired into a position for which the customary annual employment is six months or less, where the term “customary employment” refers to an employee who typically works each calendar year in approximately the same part of the year, such as summer or winter.

The terms seasonal worker and seasonal employee are both used in the employer shared responsibility provisions but in two different contexts. Only the term seasonal worker is relevant for determining whether an employer is an applicable large employer subject to the employer shared responsibility provisions; however, there is an exception for seasonal workers:

Exception: If your workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and the employees in excess of 50 during that period were seasonal workers, your organization is not considered an ALE.

For additional information on hiring seasonal workers and how it affects the employer shared responsibility provisions please call.

• By Leon Clinton
• November 16, 2019

Tax Tips for Owners of Historic Buildings

If you own a historic building you should know about a tax credit called the rehabilitation tax credit, which offers an incentive to renovate and restore old or historic buildings.

Here are seven facts that building owners should know about this credit:

1. The credit is 20 percent of the taxpayer’s qualifying costs for rehabilitating a building.
2. The credit doesn’t apply to the money spent on buying the structure.
3. The legislation now requires that taxpayers take the 20 percent credit spread out over five years beginning in the year they placed the building into service.
4. The law eliminates the 10 percent rehabilitation credit for pre-1936 buildings.
5. A transition rule provides relief to owners of either a certified historic structure or a pre-1936 building by allowing owners to use the prior law if the project meets these conditions:
6. The taxpayer owned or leased the building on January 1, 2018, and the taxpayer continues to own or lease the building after that date.
7. The 24- or 60-month period selected by the taxpayer for the substantial rehabilitation test began June 20, 2018.
8. Taxpayers use Form 3468, Investment Credit, to claim the rehabilitation tax credit and a variety of other investment credits.

If you would like more information about the rehabilitation tax credit or any other real estate tax credits you might be eligible for, don’t hesitate to call.

• By Leon Clinton
• November 12, 2019