C&R’s Insights Newsletter

(c) Dick Dubroff Final Focus Photography

Cover & Rossiter Receives Coveted Marvin S. Gilman Superstars in Business Award

Cover & Rossiter is excited to announce they have been awarded The Marvin S. Gilman Superstars in Business Award presented by the Delaware State Chamber of Commerce. The award honors businesses and nonprofit organizations for their achievements and model approaches to business and management.

What’s the Best Type of Business Entity for Tax Purposes

There are several major types of business entities, including S Corporations, C Corporations, Limited Liability Companies (LLCs) and being self-employed. Each type of structure has its own advantages and disadvantages when it comes to taxes, assets and liability protection.

Generally, certain types of businesses are best for certain professions from a tax perspective; however, with the tax law changes last year it may be time to reconsider. Under the current tax law, what used to be the best business entity type for certain scenarios may no longer be the same due to the pass-through deduction and corporate tax rate changes. Let’s look at the most common business entity types and see what’s best.

Self-employed

The self-employed includes everyone who is a freelancer, independent contractor and many business owners who don’t have any partners. The nice thing about being self-employed is that it’s simple; you don’t need to set up any type of legal entity. Moreover, if you qualify for the 20 percent pass-through deduction, you’ll pay even less. Being self-employed is best for simple businesses without major assets and little potential legal liability due to the lack of protection.

The self-employed are required to pay both halves of self-employment taxes on top of their regular income (if you are an employee, you pay one half and your employer pays the other) so you’ll need to take this into account.

S Corporations

Aside from taxation, asset protection is a major consideration when selecting a corporate entity. For those who have significant assets that need protection, especially if they don’t have any partners in the business, an S Corporation may be the best bet. There are restrictions on ownership structure; for example, S Corporations are limited to 100 shareholders, so this might be a limitation for some.

As a pass-through entity, an S Corporation doesn’t pay taxes on income at the corporate level; instead, it passes through to the business owners. As a result, S Corporations can benefit from the 20 percent pass-through deduction as well, though high earners may be phased out. S Corporations are generally favored by certain professions such as doctors, dentists and certain types of consultants.

C Corporations

Unlike S Corporations, there are no restrictions on ownership for C Corporations, and they provide great asset protection. Therefore, almost all public companies and those that want to go public are C Corporations, such as start-ups.

The downside of C Corporations is that they are subject to “double taxation.” The corporation is taxed on entity level profits and then shareholders are taxed again on dividend distributions. The dividend distributions are not deductible to the entity, hence the double taxation issue.

The new tax law lowered the top corporate tax rate to 21 percent, so for high earners the double taxation issue is not as much of a consideration as it used to be. Also, Section 1202 allows shareholders of start-ups to sell their stock without any taxes on the first $10 million in gain after five years.

Limited Liability Company (LLCs)

LLCs are generally the preferred entity structure for certain professionals and landlords. LLCs have flexibility as the owners can file as a partnership, S Corporation or even sole proprietor since the LLC is really a legal and not tax designation. LLCs benefit from the 20 percent pass-through deduction if the owner elects to be taxed as a pass-through, depending on the income level and nature of the business.

Many states do charge annual fees or minimum taxes on LLCs, but it’s usually insignificant. California is one of the most onerous with an $800 minimum fee per year.

Conclusion

Tax savings are often the main motivator in selecting a corporate entity, with asset protection right behind it. The new tax law’s 20 percent pass-through deduction and corporation tax rate reductions make the choice a little tougher than in the past, but generally unless a company wants to go public most businesses will either choose an LLC or S Corporation structure. Every situation is unique, so make sure to consult a professional that can help you choose the right entity type for your situation.

Disclaimer: This article is not intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topic in this article.

5 Ways to Get a Jump on Your 2019 Taxes

Yes, tax season is officially over. And you might be kicking back and relaxing, putting off thinking about next year’s taxes as long as you can. However, smart taxpayers know that the more you plan ahead, the better chance you have of reducing the amount you pay next time around. Here are a few easy ways to get a handle on your financial future – aka your 2019 taxes.

1. Understand claiming dependents

When you know the rules, it can be a game changer. Let’s start with the basics. You can take a $4,000 exemption for each dependent. You also can claim their related expenses, such as child care, medical costs and tuition payments. However, if you share custody with someone, support an elderly parent or if a relative lives with you, things can be a bit complex. Sometimes, if you plan how much money you’re going to spend on the dependent and/or how many days the dependent lives with you, this can make a major difference in the tax benefits you reap.

2. The personal exemption is gone

The standard deduction has roughly doubled, but this doesn’t mean that people are getting double the tax break – far from it, actually. While the standard deduction has increased, the personal exemption has gone away.

In the 2017 tax year, each personal exemption was an effective $4,100 (not $4,000 as above) tax deduction and there was no limit to the number of personal exemptions that could be claimed. For example, a married couple with six dependent children could claim eight personal exemptions. This was on top of the standard deduction.

Starting in 2018, everyone gets a much higher (basically double) standard deduction, but no more personal exemptions. In prior tax years, Americans could claim one personal exemption for themselves, their spouse and one for each dependent.

Try a tax calculator

This handy tool helps you anticipate the upcoming year. You can set up a variety of What If scenarios. If you have an income that’s variable, like a seasonal business or freelancing, you might set up high-, medium- and low-income situations and see how these affect your tax bottom line.

3. Consider bunching deductibles

Paying a major expense over a long period of time has its advantages, but you might get little or no tax benefit. With bunching, you pay more of one type of deductible expense in one year. For example, your child needs braces. The rule is that you can only deduct medical expenses after they exceed 10 percent of your adjusted gross income, or AGI; 7.5 percent if you and your spouse are over 65. If you pay the braces off over a couple of years, you may never reach your AGI ceiling. However, if pay for them in one year, you are more likely to get a tax break.

4. Put money into retirement all year long

While you can wait until right before you file next April to sock your money away into your IRA, let’s be honest: do you think, right now, you’ll have it ready to go? Rather than scramble at the last minute, contribute to your IRA every month, or whenever you can all year long. The amount will have longer to compound interest, plus you’ll be ahead when it comes to your retirement.

5. Think before you sell the big stuff

Let’s say you want to sell your house, but you’ve lived in it for only 18 months. If you wait until the two-year mark, you might qualify to exclude the capital gains on the sale from your taxable income. Better still, if you meet certain exceptions, such as being transferred to another city for your job, you could avoid paying taxes on the sale of your home. The IRS allows a reduced maximum exclusion due to changes in employment, health reasons or other “unforeseen circumstances.” (https://www.irs.gov/pub/irs-pdf/p523.pdf) The same principle applies to shares of stock and other capital assets: consider keeping them longer than a year. Why? You’ll pay lower capital gains tax rates.

When you prepare all year for the April deadline, taxes can be a lot less stressful and save you money. And when you think about it, who wouldn’t want that?

Sources

https://blog.taxact.com/planning-next-years-taxes/

Disclaimer: This article intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topic in this article.

Cover & Rossiter Selected For New Diversity Internship Program

The American Institute of CPAs has announced that they have partnered with five CPA firms in the new Private Companies Practice Section (PCPS) George Willie Ethnically Diverse Student Scholarship and internship program. Cover & Rossiter is honored to be one of those five firms! Click HERE to read the entire article.

Cover & Rossiter Insights: Winter 2019 Newsletter

Click here to view the February 2019 Newsletter 

Cover & Rossiter Leaders Elected to Local Boards

Cover & Rossiter is excited to announce that Marie Holliday was recently elected to the Delaware State Chamber of Commerce’s Board of Governors and Peter Kennedy was elected to the Delaware College Scholars (DCS) board.

Mrs. Holliday is the Managing Director of the firm, a role she has held since December 2015.  Since joining the firm in 1997, Holliday’s area of expertise has been in Tax. She applies a holistic approach with her clients, focusing on the various stages of growth in one’s life or business to come up with tax planning strategies that influence long-term financial stability.

In addition to serving on the Chamber’s Board of Governors, Holliday participates in a nationwide practice management (MAP) group through the AICPA and is a member of the Estate Planning Council of Delaware, Inc. and Wilmington Tax Group. In the community, Holliday is an active member of the Newark Morning Rotary Club, is board Treasurer for New Directions Early Head Start program, and is a Founder in the Delaware Fund for Women.

Holliday said of her recent election, “We believe in the Delaware State Chamber and the support they provide to Delaware businesses. It is a great honor to be asked to be a member of their Board of Governors to help them shape the future.”

Mr. Kennedy is a Director at Cover & Rossiter and heads the Audit practice. Since joining the firm in 1999, he has developed an expertise in not-for-profit accounting, auditing and tax issues and is privileged to work with many of the region’s leading not-for-profit institutions.

“Pete’s extensive knowledge in and passion for nonprofit operations will truly be an asset to our organization,” said Dr. Tony Alleyne, Executive Director of DCS. He continued, “Ultimately, it is our scholars who will benefit from Pete’s time and commitment to the organization, and we are grateful to have him join us in preparing our next generation of future leaders for success.”

In addition to his role with Delaware College Scholars, Pete is a member of the Finance Committee of Christiana Care Health System, the Audit Committee of the Delaware Community Foundation, the Audit and Governance Committee of the Delaware State Employee Benefit Plans Management Board, and the EastSide Charter School Citizens’ Budget Oversight Committee.

“I had heard about DCS and the great work they are doing. It is truly an honor to be asked to join them. I hope to be able to contribute in a small way to their continued success.” said Mr. Kennedy.

Cover & Rossiter is one of the first and most respected full-service CPA & advisory firms in Delaware, providing tax, audit, trust, and accounting services to individuals and families, businesses, nonprofits, and captive insurance companies. The firm, currently celebrating its 80th year in business,  is a two-time winner of The Marvin S. Gilman Superstars in Business Award presented by the Delaware State Chamber of Commerce.

Cover & Rossiter Announces Promotions of Roseman and Truby

Cover & Rossiter, one of Delaware’s first and most respected CPA and advisory firms, is pleased to announce the promotions of Luci Roseman to Manager in the Tax Department and Tina Truby to Senior Staff Accountant.

Since joining the firm in 2011, Roseman has used her keen attention to detail and problem solving ability to help clients navigate the ever-changing tax laws. In addition, she has taken on a leadership role in staff training and is involved in the firm’s recruiting. Roseman is a member of the AICPA, Delaware Society of CPAs, and Wilmington Tax Group. She is also actively involved with Toastmasters International and is a member and officer of a local club, CSC Incorporators Toastmasters International, where she currently serves as Club President.

Truby joined the Tax Department at Cover & Rossiter in September 2017 after a successful career in the chemical industry in product R&D and marketing research.  She completed a Post-Baccalaureate Certificate in Accounting at Goldey Beacom College and also holds a Bachelor of Science degree in BioChemistry from the Pennsylvania State University and an MBA from Drexel University.  Truby was awarded her CPA license from the State of Delaware in November 2018. She enjoys mentoring current CPA exam candidates at the firm. In the community, Truby is treasurer of her community association and has served as a Tax-Aide Volunteer with AARP in Newark, Hockessin and Brandywine Hundred.

Cover & Rossiter is one of the first and most respected full-service CPA & advisory firms in Delaware, providing tax, audit, trust, and accounting services to individuals and families, businesses, nonprofits, and captive insurance companies. The firm, currently celebrating its 80th year in business, is a two-time winner of The Marvin S. Gilman Superstars in Business Award presented by the Delaware State Chamber of Commerce.

Myunghee Geerts Joins Cover & Rossiter

Myunghee Geerts, CPA joined Cover & Rossiter in December as a Principal in the Tax Department. She has 13 years of experience in public accounting. Prior to joining the firm, she was Senior Manager at Ernst & Young’s Quantitative Services where she specialized in advising her clients with tax planning ideas to reduce their tax liabilities and mitigate risks associated with tax returns. Myunghee also worked at KPMG and Santora Group CPA. Working with a wide variety of industries including bio science, technology, real estate, industrial tools and household hardware, and the automotive industry, she has provided numerous tax planning ideas and solutions for her clients. Marie Holliday, Managing Director, said, “We are fortunate to have Myunghee join the firm. Her broad experience as well as her passion for helping small businesses and entrepreneurs will open doors to new business opportunities for the firm.”

Myunghee has a Bachelor of Arts degree in Accounting from Michigan State University and a Masters of Business Administration degree from the University of Delaware. She is a Certified Public Accountant in Delaware and Pennsylvania and frequently speaks on tax planning and tax reform at workshops. She is a member of the Delaware Korean American Association’s Board of Directors as well as a member of the Audit Committee of Delaware Symphony Orchestra. Geerts previously served as Chair of the Delaware Society of CPAs’ Board of Directors and was instrumental in organizing the 2018 Big IDEas for Your Business Conference.

Myunghee and her husband live in Aston PA with their daughter, Leanna. They enjoy spending time at the beach. Welcome Myunghee!

Shane Bennett Joins Audit Department

Shane Bennett

Cover & Rossiter is pleased to announce the hiring of Shane Bennett as Audit Specialist in the Audit Department. Bennett joined Cover & Rossiter in late October after spending the last 10 years as the Financial Management Director for a Planning District in southwest Arkansas.  Born in Texas and raised in Arkansas, she completed both her Bachelor’s and Master’s degrees at Southern Arkansas University, as well as an Associate’s degree in Business Education.  Bennett’s first two professional positions were in Corporate Accounting for two private international companies in the diamond mining and construction industries.  She then practiced public accounting for six years before joining the nonprofit world.  For the last four years, Bennett participated in the Volunteer Income Tax Assistance (VITA) program for the IRS through CADC.  Director, Eric Williams, said, “We’re excited to have Shane join the team. She brings a wealth of experience in nonprofit and government industries that will strengthen our audit practice.” In her spare time, Bennett enjoys CrossFit, traveling and baking.

Cover & Rossiter Welcomes Recent New Hires

(L to R) Gemino, Grant, Hanak

We are pleased to welcome Rachael Hanak, Rita Grant, and Rosellen Gemino to Cover & Rossiter.

Hanak joined the tax department in July as a staff accountant. She graduated last May from Widener University with a Bachelor’s of Science in Accounting and a minor in Tax. She was an active member in the Honors Program and General Education and School of Business Administration Honors Program. Hanak interned at Cover & Rossiter in spring 2017 and at Wipfli LLP in summer 2017. When she’s not working, Hanak loves to read and travel with her family.

Grant joined the tax department in August as a staff accountant. She graduated in May with a Bachelor’s of Science in Accounting from West Chester University. Grant interned at Cover & Rossiter this past spring and, prior to that, worked as an intern in finance and accounts receivable for Wesco Aircraft. She was involved in many clubs and activities at WCU and was co-founder and president of the West Chester University Irish Dance Team. During her free time, Grant likes to teach dance classes, travel, and spend time with family and friends.

Gemino joined our administrative staff in June and is the first face you see when you walk into the firm. After leaving New York, where she was born and raised, she retired briefly while living in southern Delaware. Her past experience includes working as an office manager/bookkeeper at Profile Technologies, Inc., and working in Corporate Cash Management for Oppenheimer & Co., Inc. Gemino and her husband, Henry, are empty nesters while their daughter teaches special education in Brooklyn, New York, and their son studies medicine in Philadelphia. As members of Winterthur, they continue their interest in the arts and visit the superb house and gardens on a regular basis.

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