CPA Blog

Saving tax on restricted stock awards with the Sec. 83(b) election

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Published: Monday, 18 June 2018 08:09

Written by Phillip Strickler, CPA.CITP

Today many employees receive stock-based compensation from their employer as part of their compensation and benefits package. The tax consequences of such compensation can be complex — subject to ordinary-income, capital gains, employment and other taxes. But if you receive restricted stock awards, you might have a tax-saving opportunity in the form of the Section 83(b) election.

Convert ordinary income to long-term capital gains

Restricted stock is stock your employer grants you subject to a substantial risk of forfeiture. Income recognition is normally deferred until the stock is no longer subject to that risk (that is, it’s vested) or you sell it.

At that time, you pay taxes on the stock’s fair market value (FMV) at your ordinary-income rate. The FMV will be considered FICA income, so it also could trigger or increase your exposure to the additional 0.9% Medicare tax.

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Ask the right questions about your IT strategy

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Published: Monday, 18 June 2018 08:05

Written by Phillip Strickler, CPA.CITP

Most businesses approach technology as an evolving challenge. You don’t want to overspend on bells and whistles you’ll never fully use, but you also don’t want to get left behind as competitors use the latest tech tools to operate more nimbly.

To refine your IT strategy over time, you’ve got to regularly reassess your operations and ask the right questions. Here are a few to consider:

Are we bogged down by outdated tech? More advanced analytical software can eliminate many time-consuming, repeatable tasks. Systems based on paper files and handwritten notes are obviously ripe for an upgrade, but even traditional digital spreadsheets aren’t as powerful as they used to be.

Do we have information silos? Most companies today use multiple applications. But if these solutions can’t “talk” to each other, you may suffer from information silos. This is when different people and teams keep important data to themselves, slowing communication. Determine whether this is occurring and, if so, how to integrate your key systems.

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The TCJA changes some rules for deducting pass-through business losses

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Published: Tuesday, 29 May 2018 08:31

Written by Phillip Strickler, CPA.CITP

It’s not uncommon for businesses to sometimes generate tax losses. But the losses that can be deducted are limited by tax law in some situations. The Tax Cuts and Jobs Act (TCJA) further restricts the amount of losses that sole proprietors, partners, S corporation shareholders and, typically, limited liability company (LLC) members can currently deduct — beginning in 2018. This could negatively impact owners of start-ups and businesses facing adverse conditions.

Before the TCJA

Under pre-TCJA law, an individual taxpayer’s business losses could usually be fully deducted in the tax year when they arose unless:

• The passive activity loss (PAL) rules or some other provision of tax law limited that favorable outcome, or
• The business loss was so large that it exceeded taxable income from other sources, creating a net operating loss (NOL).

After the TCJA

The TCJA temporarily changes the rules for deducting an individual taxpayer’s business losses. If your pass-through business generates a tax loss for a tax year beginning in 2018 through 2025, you can’t deduct an “excess business loss” in the current year. An excess business loss is the excess of your aggregate business deductions for the tax year over the sum of:

• Your aggregate business income and gains for the tax year, and
• $250,000 ($500,000 if you’re a married taxpayer filing jointly).

The excess business loss is carried over to the following tax year and can be deducted under the rules for NOLs.

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4 ways to encourage innovation in customer service

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Published: Tuesday, 29 May 2018 08:27

Written by Phillip Strickler, CPA.CITP

When business people speak of innovation, the focus is usually on a pioneering product or state-of-the-art service that will “revolutionize the industry.” But innovation can apply to any aspect of your company — including customer service.

Many business owners perceive customer service as a fairly cut-and-dried affair. Customers call, you answer their questions or solve their problems — and life goes on. Yet there are ways to transform this function and, when companies do, word gets around. People want to do business with organizations that are easy to interact with.

Here are four ways to encourage innovation in your customer service department:

1. Welcome failure. Providing world-class customer service involves risk, and inevitably you’ll sometimes fail. For example, many businesses have jumped at the chance to use “big data” to develop automated systems to direct customers to answers and solutions. But the impersonality of these systems can frustrate the buying public until you establish the right balance of machine and human interaction. Remember, every failure opens the door to better strategies for serving your customers.

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