Monthly Archives: May 2016

Sustainable Tax Breaks Can Save You Green

Save on Taxes Save the Planet

earth2Many people want to do something, however small, to contribute to a healthier environment. There are many ways to do so and, for some of them, you can even save a few tax dollars for your efforts.

Indeed, with the passage of the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) late last year, a couple of specific ways to go green and claim a tax break have been made permanent or extended. Let’s take a closer look at each.

Not driving for dollars
Air pollution is a problem in many areas of the country. Among the biggest contributors are vehicle emissions. So it follows that cutting down on the number of vehicles on the road can, in turn, diminish air pollution.

To help accomplish this, many people choose to commute to work via van pools or using public transportation. And, helpfully, the PATH Act is doing its part as well. The law made permanent the requirement that limits on the amounts that can be excluded from an employee’s wages for income and payroll tax purposes be the same for both parking benefits and van pooling / mass transit benefits.

Before the PATH Act’s parity provision, the monthly limit for 2015 was only $130 for van pooling / mass transit benefits. But, because of the new law, the 2015 monthly limit for these benefits was boosted to the $250 parking benefit limit and the 2016 limit is $255.

Sprucing up the homestead
Energy consumption can also have a negative impact on the environment and use up limited natural resources. Many homeowners want to reduce their energy consumption for environmental reasons or simply to cut their utility bills.

The PATH Act lends a helping hand here, too, by extending through 2016 the credit for purchases of residential energy property. This includes items such as:

  • New high-efficiency heating and air conditioning systems,
  • Qualifying forms of insulation,
  • Energy-efficient exterior windows and doors, and
  • High-efficiency water heaters and stoves that burn biomass fuel.

The provision allows a credit of 10% of eligible costs for energy-efficient insulation, windows and doors. A credit is also available for 100% of eligible costs for energy-efficient heating and cooling equipment and water heaters, up to a lifetime limit of $500 (with no more than $200 from windows and skylights).

Doing it all
Going green and saving some green on your tax bill? Yes, you can do both. Van pooling or taking public transportation and improving your home’s energy efficiency are two prime examples. Please contact Tony Constantine, CPA, Partner, at 216.831.7171 or tconstantine@cp-advisors.com for more information about how to claim these tax breaks or identify other ways to save this year.

You may also be interested in:

Run a Business on the Side

IRS Extends ACA Reporting Deadlines

© 2016

Effective debt management for construction companies

Managing debt helps protect your construction business

TJCTimes are good in Northeast Ohio right now for construction companies and contractors.  However it wasn’t all that long ago the industry was struggling, so it’s important to know the rules to effectively manage your company’s debt and protect its future.

The rules
No one wants to think too much about debt, but knowledge is an important management tool to have.  For example, if a creditor loses hope of collecting an outstanding debt, it may cancel your debt and report the amount to the IRS using Form 1099-C.  This form helps determine:

  • Whether the debtor is personally liable for the debt,
  • whether the debt was canceled in a bankruptcy proceeding, and
  • the fair market value of any property that may be foreclosed on because of the debt cancellation.

When tax season arrives and you receive your 1099-C, you’ll need to report the canceled debt as additional taxable income.  Lenders may also issue a 1099-A, which is required if a debtor stops paying or abandons its debt.  But if the debt is canceled, the lender can include information regarding the abandonment on Form 1099-C instead of 1099-A.  The lender must send a copy of the form to the borrower by Jan. 31 of the year after the debt is canceled.

People often confuse “canceled” debt with “charged off” or “written off” debt.  A “charge-off” means the creditor has deleted your account from its active books and has likely sent the account for collection or sold the account to a debt buyer.  Keep in mind that a charge-off on your credit report doesn’t mean you don’t have to pay the debt.  Unless the debt was canceled with a 1099-C or discharged in bankruptcy, you still owe the money.

Swap debt for equity
One strategy to consider is a debt-for-equity exchange, which is when a business replaces its debt with a percentage of ownership in the business.  This solution often occurs when a company is unable to repay its creditors without going bankrupt.

Bear in mind, such a swap will likely mean a drastic restructuring of your construction business and may even result in a surrender of business leadership as creditors gain more control over operations.  The advantage, however, is the prospect of future growth:  Debt-for-equity frees up money that you would have previously spent on debt repayment.

Work with creditors
Coming to a debt agreement with creditors isn’t always a possibility.  But, if you have strong working relationships with one or more of these parties, it’s at least worth a try.  An informal debt agreement may enable you to freeze accrued interest on your debt and give you some welcome relief from the onslaught of letters, e-mails and calls from the creditor in question.
This option is also preferable because it does less damage to your construction company’s credit rating than bankruptcy would.  In addition, payments are often simpler, because, depending on the nature of the agreement, you may be able to pay a one-time sum to the creditor rather than keep up with multiple repayments.

If you plan to take this route, it’s generally best to engage an experienced debt agreement administrator to help negotiate and prepare the arrangement.

Get creative
When a contractor falls into major debt, filing for bankruptcy may seem like the easiest or only option.  Yet there may be a variety of ways to creatively restructure your financial obligations to your advantage — and we’ve mentioned only a couple of them here.

The best resource to help manage your financial health in good times and bad is a financial advisor.  Contact Tony Constantine, Ciuni & Panichi, Inc. Partner in the Construction and Real Estate Group, at 216-831-7171 or tconstantine@cp-advisors.com to learn how your company can benefit.

You may also be interested in:

Run a business on the side?  The tax implications

IRS Extends Affordable Care Act Deadlines

 

May Tax Tips

Why it’s time to start tax planning for 2016

april 15Now that the April 18 income tax filing deadline has passed, it may be tempting to set aside any thought of taxes until year end is approaching. But don’t succumb. For maximum tax savings, now is the time to start tax planning for 2016.

More opportunities
A tremendous number of variables affect your overall tax liability for the year. Starting to look at these variables early in the year can give you more opportunities to reduce your 2016 tax bill.
For example, the timing of income and deductible expenses can affect both the rate you pay and when you pay. By regularly reviewing your year-to-date income, expenses and potential tax, you may be able to time income and expenses in a way that reduces, or at least defers, your tax liability.

In other words, tax planning shouldn’t be just a year-end activity.

More certainty
In recent years, planning early has been a challenge because there were a lot of expired tax breaks where it was uncertain whether they’d be extended for the year. But the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) extended a wide variety of tax breaks through 2016, or, in some cases, later. It also made many breaks permanent.

For example, the PATH Act made permanent the deduction for state and local sales taxes in lieu of state and local income taxes and tax-free IRA distributions to charities for account holders age 70½ or older. So you don’t have to wait and see whether these breaks will be available for the year like you did in 2014 and 2015.

Getting started
To get started on your 2016 tax planning, contact Jim Komos, CPA at 216-831-7171 or jkomos@cp-advisors.com.  We can discuss what strategies you should be implementing now and throughout the year to minimize your tax liability.

You may also be interested in:

April Tax Tips

March Tax Tips
© 2016