Is it February already? It sure is! (Heck, it’s almost March!) That means it’s time the monthly PayTech Newsletter. This month we have a special accounting report discussing the Impact of the Tax Cut and Jobs Act on Section 1031. Our Human Resource Update highlights docking pay for excempt employees: what’s allowed and not allowed. Also for the payroll update, we cover updated 2018 withholding tables and small business trends and projections for the rest of 2018 for the market update.
Market Update – Small Business Trends and Projections for the Rest of 2018
Another year has come to a close and businesses are preparing to enter 2018 with a bang.
What do entrepreneurs expect heading into the new year? Business News Daily reached out to find out some of the major things on their radar. Here are 20 key ideas, trends, and predictions to keep in mind in order to make the most of 2018 for both your business and your customers.
Technology and cybersecurity
A shift in IT spending: “A significant number of enterprises will begin to invest in a dedicated security operations center as part of the shift away from prevention towards detection and response … Hybrid security offerings combining on-premise and SaaS/Cloud solutions will become the dominant architecture with customers beginning to integrate these offerings starting in 2018.” – Prakash Nagpal, vice president of Infoblox.
Payroll Update – 2018 Withholding Tables Updates
The Internal Revenue Service today released Notice 1036, which updates the income-tax withholding tables for 2018 reflecting changes made by the tax reform legislation enacted last month. This is the first in a series of steps that IRS will take to help improve the accuracy of withholding following major changes made by the new tax law.
The updated withholding information, posted today on IRS.gov, shows the new rates for employers to use during 2018. Employers should begin using the 2018 withholding tables as soon as possible, but not later than Feb. 15, 2018. They should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.
HR Update – Docking Pay for Exempt Employees
Don’t feel bad if you have trouble understanding the pay-docking rules laid out by the Fair Labor Standards Act (FLSA). The regs are pretty murky.
As a general rule, FLSA doesn’t permit deductions from exempt employees. The regs state that the amount of money a salaried employee earns can’t be dependent on the number of days or hours he or she works. You also can’t deduct money based on the quantity or quality of work the employee produces.
Accounting Update – Impact of the Tax Cut and Jobs Act on Section 1031
The Tax Cut and Jobs Act was signed into law on December 22, 2017, and took effect on January 1, 2018. It is a complex modification to the Internal Revenue Code that will take some time to fully understand, especially since it became effective just nine days after signing.
The major change to Section 1031 is the complete repeal of personal property exchanges. The Code section now refers exclusively to real estate assets, and has been retitled, “Exchange of real property held for productive use or investment.”
Real estate exchanges are subject to the same rules and regulations as under previous law. The 45 day identification and 180 day exchange periods remain unchanged, as does the role of the Qualified Intermediary. All real estate in the United States, improved or unimproved, also remains like-kind to all other domestic real estate. Foreign real estate continues to be not like-kind to real estate in the U.S.
Personal property assets that can no longer be exchanged include intangibles, such as broadband spectrums, fast-food restaurant franchise licenses and patents; aircraft, vehicles, machinery and equipment, railcars, boats, livestock, artwork and collectibles. Transition rules permit a personal property exchange to be completed in 2018 if either the relinquished property was sold or the replacement property was acquired by the taxpayer during 2017. Note that there is no mention in the transition rule of acquisition by an EAT; the rule is specific to the taxpayer.
Full expensing. The full cost of tangible business use personal property assets such as heavy equipment, farm machinery, vehicles and hotel furniture can be written off in the year that they are placed in service by the taxpayer. Although tax can no longer be deferred through like-kind exchanges for these assets, the full expensing deduction can be used to offset any capital gain or depreciation recapture recognized in that same or future years. Full expensing is temporary; it will expire in 2022, and will be reduced to 80% for assets placed in service in 2023, 60% for 2024, 40% for 2025 and 20% for 2026. This deduction applies to both new and used assets acquired by the taxpayer.
Since there was a complete repeal of tax free exchanges for personal property; we highly recommend that you contact our office first before you trade in a vehicle. It is possible that the days of lowering your net income at year-end are over as the trade in could possibly result in a gain on the trade in.