Tax Regulations

Starting with 2023, there is a new deduction available for energy efficient commercial buildings. You may qualify for the Energy Efficient Commercial Buildings Deduction if you own a building and install energy-efficient property. Higher deductions could be available if your installations save more energy or meet certain standards. As a result, making your building more energy-efficient could help you save money on taxes.

This deduction is available for new buildings that produce energy efficiency of at least 25% or for improvements made to an existing building that improve the efficiency of it by at least 25%. For example, improvements to an office building that increase its efficiency.

Normally, the cost of a commercial building or the cost of a building improvement can not be claimed as an expense when actually made. Instead, when the building or the improvement is placed in service the cost has to be taken as an expense over 39 years starting with the year when the building/improvement is placed in service.

This new rule available starting with 2023, section 179D, allows to take a lot bigger expense in the first year when the building/improvement is placed in service, if the requirements of the deduction are met.

Are You Eligible?

Starting from January 1, 2023, the tax deduction is available to the following groups:

• owners of qualified commercial buildings,
• designers of energy-efficient commercial building property or energy-efficient building retrofit property that are installed in buildings owned by certain tax-exempt entities.

Previously, this deduction was only available to owners of qualified commercial buildings and designers of energy efficient commercial building property installed in buildings owned by certain government entities. So, this is a new expansion of the taxpayers that can claim the deduction.

Requirements

To summarize the requirements:

1. The energy efficiency improvement has to be at least 25%
2. The building has to meet the 90.1 ASHRAE Standard  (this is something to talk to with the engineer or architect)
3. The building has to be built with “qualified property”: qualified property includes depreciable property installed as part of interior lighting systems, heating, cooling, ventilation and hot water systems or the building envelope
4. Also, you must obtain a certification from an engineer or contractor licensed in your state that will have to use the computer modeling required by the government to issue the certification

Amount of the Deduction

For properties in service starting with 2023, the tax deduction for energy-efficient property is based on the lesser of two amounts:

• the cost of the installed property,
• the savings per square foot, which is calculated as follows:
  • $0.50 per square foot for a building with 25% energy savings,
  • an additional $0.02 per square foot for each percentage point of energy savings above 25%,
  • the maximum amount is $1.00 per square foot for a building with 50% energy savings.

Also a bigger amount of the deduction (5 times more) is available if the contractors/laborers are paid according to the Secretary of Labor guidance for the respective geographical area (the exacts rules can be found in this notice). This is not a requirement, is just that if you meet this criteria you get a much bigger deduction.

The amount of the deduction ranges from $0.50 times the square footage of the building, if the 25% efficiency is met, up to a maximum of $1.00 times square footage for a building with 50% energy savings. And if laborers are paid local prevailing wages and apprenticeship requirements are met, then the deduction is 5 times more.

Energy Efficient Commercial Building Property

• Energy Efficient Commercial Building Property:
  • this must be installed in a building located in the U.S. and should be within the scope of a specified Reference Standard 90.1 of the:
    • American Society of Heating, Refrigerating, and Air Conditioning Engineers, and
    • Illuminating Engineering Society of North America,
  • the property should be installed as part of the:
    • interior lighting systems,
    • heating,
    • cooling,
    • ventilation, and
    • hot water systems, or
    • the building envelope.
  • it should be eligible for depreciation or amortization,
  • the installation should be part of a plan to reduce annual energy and power costs by 25% or more compared to a reference building meeting the minimum requirements of Reference Standard 90.1.

Energy Efficient Building Retrofit Property

• Energy Efficient Building Retrofit Property:
  • the property should be installed as part of the:
    • interior lighting systems,
    • heating,
    • cooling,
    • ventilation, and
    • hot water systems, or
    • the building envelope.
  • a qualified building is one located in the U.S. and has been in service for at least 5 years before a retrofit plan is established,
  • in addition, the property should be eligible for depreciation or amortization and must meet certain energy-saving requirements.

In conclusion, if you meet some energy efficiency requirements you might qualify for the Energy Efficient Commercial Buildings Deduction. If you were to qualify for this deduction, it would mean that you can reduce your taxable income in the year you place the building in service by a lot more than with the regular depreciation over 39 years. This is something to keep in mind and maybe consult with your architect or engineer and your CPA.

In the meantime, if you encounter any issues or have any questions, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

What Is Beneficial Ownership Reporting And Why Is it Important?

Beneficial ownership refers to individuals that directly or indirectly own or control a legal entity, such as a company, a trust, or a foundation. Beneficial owners are not necessarily the same as the legal owners, who are the registered shareholders or directors of the entity. For example, a legal owner may act as a nominee or a proxy for the real owner, or the entity may be owned by another entity that is itself owned by another entity, and so on.

Starting with January 1, 2024, many U.S. companies will need to submit a Beneficial Owner Report. They will share details about their beneficial owners – the people who really own or control them. This information has to be reported to the Financial Crimes Enforcement Network (FinCEN), which is part of the U.S. Department of the Treasury.

The information about beneficial ownership includes identification details of individuals who have direct or indirect control over a company. This requirement is part of the U.S. government’s initiative to prevent illicit activities by making it more difficult for individuals to hide behind shell companies or similar structures.

Federal, state, local, and tribal government officials, as well as certain foreign officials who request access through a U.S. federal agency, can see the beneficial ownership information for authorized activities related to national security, intelligence, and law enforcement. Financial institutions can also access this information under certain conditions, with the consent of the reporting company.

What FinCEN Is Planning?

The Financial Crimes Enforcement Network (FinCEN) plans to extend the deadline for certain companies to submit their initial beneficial ownership information (BOI) reports. The proposal changes the final BOI Reporting Rule, allowing companies established or registered in 2024 an additional 60 days, totaling 90 days, to file their initial reports. However, this proposed rule doesn’t affect other parts of the final BOI Reporting Rule. So, companies created or registered before January 1, 2024, still have until January 1, 2025, to file their initial BOI reports. And those created or registered on or after January 1, 2024, will have 90 days to file their initial reports.

Check the status of this proposal on FinCEN website.

You should be aware that FinCEN will not accept reports before January 1, 2024. For more information on this topic, you can refer to the Beneficial Ownership Information Reporting Rule on FinCEN’s website.

In the meantime, if you encounter any issues or have any questions, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

If you are a recipient of Social Security or Supplemental Security Income (SSI), this article might interest you. The Social Security Administration has recently announced a 3.2% increase in benefits for 2024.

In this blog post, we will try to explain what this increase means for you.

2024 Cost-of-Living Adjustment

Starting from January 2024, people who receive Social Security benefits will get a 3.2% increase in their payments. This is known as a cost-of-living adjustment (COLA). A COLA is a periodic increase in benefits that is designed to help beneficiaries keep up with the changes in the cost of living.

How Much Will Your Benefits Increase?

The amount of your benefit increase will depend on your current benefit amount and the type of benefit you receive:

• the maximum income that can be taxed for Social Security will rise to $168,600,
• if you’re younger than the full retirement age, you can earn up to $22,320 without it affecting your benefits; if you earn more than this, your benefits will be reduced by $1 for every $2 you earn above this limit,
• if you reach your full retirement age in 2024, you can earn up to $59,520 without it affecting your benefits; if you earn more than this, your benefits will be reduced by $1 for every $3 you earn above this limit, until the month you reach full retirement age,
• once you’re at full retirement age for the whole year, there’s no limit on how much you can earn.

For example, if you are a retired worker who receives an average monthly benefit of $1,548 in 2023, you will see an increase of $50 per month in 2024.

When Will You Receive Your Increased Benefits?

You will receive your increased benefits starting with your January 2024 payment.

How Will This Affect Your Taxes?

The increase in your benefits may affect your taxes if your total income exceeds certain thresholds. This is because you have to pay taxes of 50% or even up to 85% (for higher income) of your Social Security benefits if your combined income, calculated per the Social Security Taxable Benefits Worksheet exceeds $25,000 if you file as an individual or $32,000 if you file a joint return.

We hope this blog post has been helpful and informative for you.

In the meantime, if you encounter any issues or have any questions, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

If you are using QuickBooks Desktop to manage your accounting, you may need to import your accountant’s changes from a file your accountant sent you. However, sometimes you may encounter errors when importing the file, such as “This file was not created with QuickBooks Accountant Edition” or “The file you specified cannot be opened”. In this blog post, we will show you possible solutions on how to fix some errors and successfully import your accountant’s changes.

What You Need to Do If You Can’t Import Your Changes?

First, make sure you have the latest version of QuickBooks Desktop installed on your computer. You can check for updates by going to Help > Update QuickBooks Desktop. If there are any updates available, download and install them.

Next, make sure the file you received from your accountant is a valid Accountant’s Changes file. The file should have a “. QBY” extension. If it is on a USB flash or server drive, copy the Accountant’s Changes file to your local drive.

You will also need to make sure that you open the right company file. This means that if you have multiple companies you need to chose the right company. In addition, if you have other back-up files or QuickBooks file saved in the same location on your computer, you want to chose the file you just received from your accountant.

Another issue that you might encounter is related to the QuickBooks version. Make sure your accountant processed the accountant’s changes using a QuickBooks version that is compatible with your QuickBooks version. If your accountant has the 2023 version of QuickBooks, your QuickBooks version preferably should not be older than 2022. If you have an older version, you might need to upgrade to a new one.

Problems might also occur if you remove the restrictions before your accountant finishes his or her work. Restrictions are removed by going to: File -> Send Company File -> Accountant’s Copy -> Client Activities -> Remove Restrictions. If your restrictions are still in place you should see “Accountant’s Changes Pending” at the top of the opened QuickBooks file. You should always check with your accountant before removing the restrictions or the dividing date. To avoid issues when importing the Accountant’s Changes file, you should not upgrade a company file with pending Accountant’s Changes.

Other situations we have seen in our practice are related to the way the accountant’s changes file is sent between the accountant and the client. We had situations when we used the QuickBooks File Transfer service, but the client was not able to download the file. This could possibly be related to a poor internet connection, especially when the QuickBooks file is a large file. In this case you can ask your accountant to send you the changes on a CD, USB flash drive, or a secure portal.

If you still can’t import the changes, do some basic data damage troubleshooting on your QuickBooks company file or contact QuickBooks support.

Last Resort Solution

If nothing works for you, as a last resort solution, you can have your accountant import the changes for you. To do this, follow the steps below:

• send your accountant a back-up copy of your current QuickBooks file
  • the back-up copy should have the extension “.QBB”
  • make sure that you are not removing the accountant’s restrictions/dividing date
• next, your accountant will need to incorporate the changes for you; while you wait for your accountant to incorporate the changes, do not work on your QuickBooks
• as a last step, when you receive the back-up copy from your accountant with the changes incorporated, you should download the file and then do the following:
  1. In QuickBooks, go to the File menu and select Open or Restore Company
  2. Select Restore a backup copy and then Next
  3. Select Local Backup and then Next
  4. Browse your computer for your backup company file
  5. Select a folder to decide where to save your restored company file, then select Open

Make sure from now on to use this new restored QuickBooks file.

We hope this blog post helped you fix the errors when importing your accountant’s changes in QuickBooks Desktop.

In the meantime, if you need tax and accounting services, we are here to help. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

ERC Suspended

The IRS has recently announced that it will temporarily suspend the processing of new applications for the Employee Retention Credit through at least the end of the year. The reason the IRS provided for this decision was the increase in fraudulent claims for the ERC. Another reason stated for this decision was scam protection for the business owners.

Fraudulent Claims

In their announcement the IRS said that currently they are processing previously filed ERC claims that were received before their moratorium. Unfortunately, due to their increased concerns about fraud, the IRS warns that the processing times will be longer. IRS processing goal for the ERC claims will go from 90 days to 180 days. On July 26, the IRS announced that it was shifting its focus to review these claims for compliance issues. This includes intensifying audit work and criminal investigations on promoters and businesses that have filed dubious claims. The IRS may also seek additional documentation from the taxpayer to ensure it is a legitimate claim.

Moreover, the IRS is in the process of finalizing details for a special withdrawal option. The option will be available soon for those who have filed an ERC claim but have not yet had their claim processed. This option can be utilized by taxpayers whose claims have not yet been paid. As a result, it will allow businesses to avoid potential repayment issues and the need to pay contingency fees to promoters. This option will be available to the filers of more than 600,000 claims that are currently awaiting processing. However, the IRS warns that those who have knowingly filed fraudulent claims or conspired to do so will not be exempt from potential criminal investigation.

If You Did Not File A Claim Yet

If you did not file a claim yet, we advise you to consult with a CPA, instead of hiring a tax promoter or marketing firm looking to profit from generating applications that charge contingency fees. You can see some of the warning flags regarding these aggressive promoters by clicking here. A CPA or an enrolled IRS agent should not charge you a fee based on the amount of the refund. The IRS also has a helpful guide with questions and answers regarding ERC, that you can see by clicking here.

If You Currently Have A Pending Application

In the case you currently have a pending application with the IRS, but the IRS did not process or pay the claim, the IRS recommends that you carefully review the program guidelines with a trusted tax professional, like a CPA and check the new question and answer guide. If you believe you submitted the claim improperly, even if your case is already under audit or awaiting audit, the IRS will allow you to withdraw your claim.

If You Received The ERC

In the case that you have already received an ERC that you now believe you claimed in error, the IRS intends to provide a settlement program that will allow you to repay the ERC claim. Per the IRS this settlement program will enable businesses to avoid penalties and future compliance action.

If you need help with your business tax and accounting, we are here to help. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

Properly Claim an Art Deduction

If you are an art lover and you are interested in donating art to charity, you can claim a tax deduction for your donation. For tax purposes, you will need to keep track of the following details:

• the name and address of the charity that received the artwork,
• when (date) and where (location) you made the donation,
• a detailed description of the artwork you donated.

There are different requirements for substantiation depending on the value of the art donated. If your donation is worth:

• $250 or more, you need a written acknowledgement from the charity,
• more than $500 but not over $5,000, you also need to complete a Form 8283, Section A, and attach it to your tax return,
• more than $5,000, you need to complete Form 8283, Section B; this form requires signatures from a qualified appraiser and the charity; you also need to get a written appraisal of the donated art,
• 20,000 or more, you need to do all of the above and attach a copy of the appraisal to your return; you should also have a high-resolution photo or digital image of the art and be ready to provide it to the IRS, if asked.

You can legitimately claim art donations, but you should be aware of some dishonest promoters. They encourage people, especially high-income taxpayers, to buy pieces of art, donate it later, and then falsely deduct an inflated donation amount. The IRS is actively investigating such promoters and it is auditing taxpayers to prevent these kinds of art donation scams.

How These Scams Work?

Promoters encourage art loving people to buy different kinds of art, often at a lower price. This cost might also cover extra services from the promoter, like storing, shipping, and managing the art’s appraisal and donation. The promoters assure that the art’s actual value is a lot higher than what they’re selling it for.

These scams encourage buyers to donate artwork after owning it for at least a year and to claim a tax deduction based on a higher market value than what they originally paid for the art. The scammers may advise you to donate art every year and they may suggest you to buy a certain quantity of art in order to have a guaranteed tax deduction of a specific amount. They might even coordinate with certain charities to accept these art donations.

Red Flags

You should be careful when buying many pieces of art from the same artist, especially if these artworks don’t have much value outside of what the seller is advertising.

Also, be cautious if the sellers recommend specific appraisers for you to use. Appraisers supporting this art donation scheme often don’t provide enough details about the artwork. They might not consider important factors like rarity, age, quality, condition, the artist’s reputation, the price paid, and the number of artworks bought.

Conclusions

If you are approached by one of these scams promoters, you can report the scam on Form 14242, Report Suspected Abusive Tax Promotions or Preparers.

The IRS has a group of experts in Art Appraisal Services who can help you obtain a proper valuation of your donated art, if your item has a value of $50,000 or more. You will be charged a user fee for each request. You can find more information about how to make this request by clicking here.

In the meantime, if you encounter any issues or have any questions, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.