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The Edge

The Edge newsletter is comprised of important and informative articles related to businesses, entrepreneurs and individuals. Each newsletter is sent by email monthly.

The Edge eNewsletter

The Edge eNewsletter offers information ranging from tax laws and incentives to how you can more effectively run your business.
 
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5, 4, 3, 2… and they’re off—but have you prepared?

August arrived and you thought “wow that was fast, time to start thinking about back to school plans”. While toting your barrel to the curb for garbage clean up last week your neighbor mentioned “we should get together this weekend and discuss car pool schedules” and you thought “oh my gosh, it’s August 16th, time to get moving on the back to school plans.”

As a matter of fact, school begins for most New Hampshire children over the course of the next 2 weeks. While most of us are seasoned professionals when it comes to the “back to school process”, undoubtedly, there is plenty of room for improvement, amateur, professional or otherwise.

Our staff has shared a number of helpful tips this month, some time-honored, some new, that have made the process easier, smoother, or in some cases, improved the safety of our children’s commute and/or re-acclimation process.

 
 
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5, 4, 3, 2… and they’re off—but have you prepared?

August arrived and you thought “wow that was fast, time to start thinking about back to school plans”. While toting your barrel to the curb for garbage clean up last week your neighbor mentioned “we should get together this weekend and discuss car pool schedules” and you thought “oh my gosh, it’s August 16th, time to get moving on the back to school plans.”

As a matter of fact, school begins for most New Hampshire children over the course of the next 2 weeks. While most of us are seasoned professionals when it comes to the “back to school process”, undoubtedly, there is plenty of room for improvement, amateur, professional or otherwise.

Our staff has shared a number of helpful tips this month, some time-honored, some new, that have made the process easier, smoother, or in some cases, improved the safety of our children’s commute and/or re-acclimation process.

 

Carpooling Checklist: For a Safe Trip to-and-Fro

Does your neighborhood, or close group of friends, take advantage of carpooling during the school year? Not only can it free-up time in your busy schedule, but it is also good for the environment. We’ve included some important safety tips below that are often overlooked during the hustle and bustle of back to school season.

  1. Check lights and wipers for visibility. With shorter days and inclement weather ahead, make sure lights and wipers function properly so that you can see and be seen. Check the exterior and interior lights and replace any that are dimming, rapidly blinking or not functioning. Check wiper blades for signs of wear and replace if necessary.
  2. Get an annual brake inspection. The braking system is your car’s most important safety feature. Before carpool season gets in full swing, make sure that your brakes are functioning properly. Schedule a brake inspection and look for warning signs that your vehicle may need brake services, such as an illuminated brake light or screeching, grinding or clicking noises when applying the brakes.
  3. Check tires for under inflation or excessive wear. Check tire pressure and refill underinflated tires, including the spare, and look for uneven wear and check tread depth. An easy way to do the latter is by placing a penny head-down in the tread groove. If the tread does not cover Lincoln’s head, it’s time to replace your tires.
  4. Make sure everyone is buckled up. The National Highway Traffic Safety Administration (NHTSA) website has important tips on seat belt fit and position. For the younger ones riding along, the site has information about how to install car seats as well as guidelines on selecting a car seat or booster based on your child’s age and size.
  5. Consider a back-up detection device. Consider having a back-up detection device installed that provides rearview video or warning sounds when moving in reverse. While drivers should not rely solely on these devices, they can help to reduce the risk of backover incidents along with following other prevention tips from NHTSA.
 

Tips & Tricks From the LMR Staff

General Tips and useful info for setting expectations, implementing schedules (at home) and providing all of the tools your child may need to begin the school year on the right foot.

  • Normalize the fact that many children feel anxious and even a little down about the start of school.
  • Make the transition to a school sleep schedule that allows for sufficient sleep (optimally, 11 to 13 hours for elementary school children and 8½ to 9¼ hours for middle and high school tweens and teens). Move bedtime earlier by 10 to 15 minutes each night until you arrive at the time that allows for enough sleep prior to the school wake-up time.
  • Schedule quiet digital-free time 45 minutes before bed to encourage a child to relax in order to facilitate better sleep.
  • Consider visiting the school, playground and teachers prior to the start of school.
  • Review the new school schedule.
  • Organize play dates with school friends.
  • Take care of all school-related errands (clothes shopping, school supplies) as soon as possible to alleviate last-minute rushing around that could increase anxiety.
  • Try a trial run the day before school starts where the family wakes up and gets ready according to the school start time and then engages in some fun activity.
  • Organize the backpack, school outfit and select a breakfast option the afternoon before the first day of school.
  • Consider gradually phasing in after-school activities when school starts to allow your child to make the transition to school prior to adding on the additional activities.
  • Model calmness and a positive view of new experiences. Try not to show any anxiety you may feel.
  • Validate your child’s anxiety as a normal part of entering a new experience and remind her of how they overcome anxiety before.
  • If your child is having significant difficulty sleeping due to anxiety about school, or appears to be persistently worried or depressed about school in a way that affects his or her happiness, consider seeking professional help.
 
 
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Congress takes up tax bills before breaking for extended recess

The Democratic and Republican nominating conventions triggered an early recess for Congress. Lawmakers left Capitol Hill in mid-July and are not scheduled to return until September. Before recessing, the House voted to undo part of the Affordable Care Act (ACA) and approved a reduced budget for the IRS. Leading tax writers in the Senate addressed tax-related identity theft and home buying incentives.

READ THE FULL ARTICLE — CLICK HERE

The Democratic and Republican nominating conventions triggered an early recess for Congress. Lawmakers left Capitol Hill in mid-July and are not scheduled to return until September. Before recessing, the House voted to undo part of the Affordable Care Act (ACA) and approved a reduced budget for the IRS. Leading tax writers in the Senate addressed tax-related identity theft and home buying incentives.

ACA

Before passage of the ACA, taxpayers could use health flexible spending arrangement (health FSA) dollars to pay for over-the-counter medications. The ACA abolished this treatment, leaving health FSA funds for the purchase prescribed medications with some exceptions. Regularly, bills have been introduced in Congress to go back to the pre-ACA rules for health FSAs but the bills have failed to pass.

This year was different. The House approved in July the Restoring Access to Medication and Improving Health Savings Bill of 2016 (HR 1270). The bill would repeal the prohibition on using health FSA dollars to pay for over-the-counter medication. Repeal would apply to qualified expenditures incurred after December 31, 2016. The Senate did not take up the bill before recessing.

Tax-related identity theft

Tax-related identity theft continues to plague the IRS. The agency has spent significant sums on identifying false returns before fraudulent refunds are paid. In July, Sen. Orrin Hatch, R-Utah, chair of the Senate Finance Committee (SFC), introduced the Stolen Identity Refund Fraud Prevention Bill (Sen 3157). The bill would provide guidelines for the IRS in handling stolen identity refund fraud cases and would increase the criminal penalty for tax-related identity theft. “Protecting taxpayers from bad actors looking to use their identities for fraudulent purposes and enhancing overall taxpayer protections is a priority of the committee,” Hatch said.

Homebuyers

Hatch’s colleague on the SFC, Sen. Ron Wyden, D-Oregon, has introduced a bill to create a first-time homebuyer tax credit bill. Several years ago, Congress passed a similar bill to encourage home sales. Wyden’s bill would reward qualified first-time homebuyers with a refundable credit. “The credit would equal 2.5 percent of the home purchase with the maximum credit reached at homes selling for $400,000, Wyden said. The credit would phase-out for higher income taxpayers.

IRS budget

The IRS’s operating budget continues to be a source of friction in Congress. President Obama and Congressional Democrats have called for increased funding for the agency for FY 2017. Congressional Republicans have proposed budget cuts, to bring about, they argue, greater efficiency at the agency. The House approved in July a $10.9 billion IRS budget for FY 2017, more than $1 billion below President Obama’s proposal. The Senate, however, did not take up the IRS’s budget before recessing, although members of the Senate Appropriations Committee proposed keeping the agency’s FY 2017 budget at current levels. In recent years, lawmakers have waited till year-end to approve a budget for the IRS and they may do the same this year, possibly in a year-end tax bill.

Olympic winners

America’s Olympic and Paralympic winners may benefit from a special tax break, if enacted into law. Before recessing, the Senate approved the Olympians and Paralympians Bill (Sen 2650). The bill provides that the value of any medals awarded in, or any prize money received from, competition in the Olympic or Paralympic Games would be exempt from income tax, beginning with the 2016 games. Similar legislation (the Tax Exemption for American Medalists (TEAM) Bill (HR 2628)) has been introduced in the House but no vote has been scheduled.

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Employers, payroll providers prepare for accelerated filing deadlines

The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) accelerated the due date for filing Form W-2, Wage and Tax Statement and Form W-3, Transmittal of Wage and Tax Statements, and any returns or statements required by the IRS to report nonemployee compensation to January 31. The change is scheduled to take effect for returns and statements required to be filed in 2017. At this time, many employers and payroll providers are reprogramming their systems for the accelerated due date.

READ THE FULL ARTICLE — CLICK HERE

The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) accelerated the due date for filing Form W-2, Wage and Tax Statement and Form W-3, Transmittal of Wage and Tax Statements, and any returns or statements required by the IRS to report nonemployee compensation to January 31. The change is scheduled to take effect for returns and statements required to be filed in 2017. At this time, many employers and payroll providers are reprogramming their systems for the accelerated due date.

Filing requirements

Every employer engaged in a trade or business who pays remuneration, including noncash payments of $600 or more for the year for services performed by an employee must file a Form W-2 for each employee from whom income, social security, or Medicare tax was withheld or income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, Employee’s Withholding Allowance Certificate.

Prior to the PATH Act, the deadline for filing Copy A of Form W-2 with the Social Security Administration (SSA) was the last day of February following the calendar year for which the filing is made. The filing deadline was extended to the last day of March for employers that file electronically.

Comment. Under the combined annual wage reporting (CAWR) system, the IRS and the Social Security Administration (SSA) agree to share wage data. Employers submit Form W-2, (listing Social Security wages earned by individual employees), and Form W-3, (providing an aggregate summary of wages paid and taxes withheld) directly to the SSA. After the SSA records the wage information from Forms W-2 and W-3 in its individual Social Security wage account records, SSA forwards the information to the IRS

Revised deadline

Under the PATH Act, the due date has been accelerated to January 31, effective for Forms W-2, W-3 and information returns relating to calendar years beginning after December 18, 2015. The accelerated filing date of January 31 for Forms W-2 and W-3 matches the due date for providing wage statements to employees and written statements to payees receiving nonemployee compensation. One consequence of the PATH Act is that these returns no longer qualify for the extended due date of March 31 for filing electronically.

Penalties

Employers that fail to file a correct Form W-2 by the due date may be subject to a penalty under Code Sec. 6721. Higher penalties apply to returns required to be filed after December 31, 2016 and are indexed for inflation. Forms W-2 with incorrect dollar amounts may be eligible for a new safe harbor for certain minor errors.

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Crowdfunding: a new resource with developing tax rules

IRS Chief Counsel recently examined the tax treatment of crowdfunding activities in a new information letter (Information Letter 2016-36). Crowdfunding is a relatively recent phenomenon, used by an individual or entity to raise funds through small individual contributions from a large number of people. The guidance notes that the income tax consequences to a taxpayer of a crowdfunding effort depend on all the facts and circumstances surrounding that effort.

READ THE FULL ARTICLE — CLICK HERE

IRS Chief Counsel recently examined the tax treatment of crowdfunding activities in a new information letter (Information Letter 2016-36). Crowdfunding is a relatively recent phenomenon, used by an individual or entity to raise funds through small individual contributions from a large number of people. The guidance notes that the income tax consequences to a taxpayer of a crowdfunding effort depend on all the facts and circumstances surrounding that effort.

In general, Chief Counsel determined, crowdfunding revenues are included in the recipient’s gross income. Code Sec. 61(a) generally provides that gross income includes all income from whatever source derived. However, there are some benefits that a taxpayer receives that are excluded from income because they do not meet the definition of gross income or because a specific exclusion exists.

Chief Counsel observed that money received without an offsetting liability, such as a repayment obligation, that is neither a capital contribution to an entity in exchange for a capital interest in the entity, nor a gift, is included in income. The facts and circumstance surrounding the receipt of crowdfunding revenue must be considered to determine it is income.

Chief Counsel concluded that crowdfunding revenues generally are included in income if they are not (1) loans that must be repaid; (2) capital contributed to an entity in exchange for an equity interest in the entity; or (3) gifts made out of detached generosity and without any “quid pro quo.” Crowdfunding revenues also must generally be included in income to the extent they are received for services rendered or are gains from the sale of property.

Chief Counsel also examined constructive receipt rules in relation to crowdfunding. Income, although not actually reduced to a taxpayer’s possession, is constructively received in the tax year during which it is credited to the taxpayer’s account, set apart for the taxpayer, or otherwise made available. Further, although income is not constructively received if the taxpayer’s control of the income is subject to substantial limitations or restrictions, a self-imposed restriction on the availability of income does not legally defer recognition of that income, Chief Counsel noted.

These are only the specific issues that Chief Counsel addressed in Information Letter 2016-36. As the crowdfunding space develops, more guidance is likely to follow.

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How do I: Get an extension of time to change a method of accounting?

Individual taxpayers may claim a nonrefundable personal tax credit for qualified residential alternative energy expenditures. The residential alternative energy credit generally is equal to 30 percent of the cost of eligible solar water heaters, solar electricity equipment, fuel cell plants, small wind energy property, and geothermal heat pump property. After 2016, the credit is available only for qualified solar electric property and qualified solar water heating property placed in service before 2022.

READ THE FULL ARTICLE — CLICK HERE

A taxpayer changing its method of accounting must either request advance IRS consent or apply for automatic IRS consent on Form 3115, Application for Change in Accounting Method, to make the change. Automatic consent is more favorable because the taxpayer can request the change on its return filed after the year it makes the change. A taxpayer requesting automatic consent must submit Form 3115 by the due date of the return for the year of the change. Recent IRS actions indicate that a taxpayer who fails to make a timely request for a change of accounting method may qualify for an extension of time to request the change.

In 2013, the IRS issued “repair regs” that determine whether a taxpayer must capitalize or can deduct its costs related to the use of tangible property. To take advantage of the treatment provided in the regs, taxpayers often had to change their accounting methods. The IRS provided automatic consent for taxpayers to change their methods of accounting to comply with the repair regs.

Regulatory Elections

If a taxpayer fails to make a “regulatory” election on time, the IRS has discretion to grant an extension of time for making the election. A regulatory election is whose deadline is established by the IRS in regulations or other guidance, in contrast to an election whose deadline is set by statute. A taxpayer must submit a private letter request asking for an IRS ruling that grants relief. The IRS will grant relief only if it is satisfied that the taxpayer acted reasonably and in good faith when it failed to make a timely election, and that granting an extension will not prejudice the government.

Extensions Granted

The IRS has granted extensions of time to several taxpayers who missed the deadline for requesting automatic IRS consent to change a method of accounting under the repair regs. The IRS gave the taxpayer an additional 60 days (after the IRS issued the favorable letter ruling) to make the election.

In one sample ruling request, the taxpayer (a corporation) was required to submit the original of Form 3115 with its timely income tax return filed for the year of change, and to provide a copy of the Form 3115 to the IRS in Ogden, Utah. The taxpayer’s return preparer timely e-filed the taxpayer’s Form 1120, prepared Form 3115, and submitted a copy of the form to Ogden. However, the preparer inadvertently failed to scan the Form 3115 and include it with the taxpayer’s return. The preparer discovered the omission and the taxpayer applied for an extension. The IRS granted the taxpayer an additional 60 days to elect the change of accounting method permitted under the repair regs.

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FAQ: How does the suspension of the ACA medical device excise tax impact compliance?

The Affordable Care Act (ACA) imposed an excise tax on the sale of certain medical devices by the manufacturer or importer of the device. The tax is 2.3 percent. Under the ACA, the excise tax was effective for the sale of medical devices after December 31, 2012. The tax is now under a two year moratorium.

READ THE FULL ARTICLE — CLICK HERE

The Affordable Care Act (ACA) imposed an excise tax on the sale of certain medical devices by the manufacturer or importer of the device. The tax is 2.3 percent. Under the ACA, the excise tax was effective for the sale of medical devices after December 31, 2012. The tax is now under a two year moratorium.

Medical devices

The IRS has issued rules and regulations that describe what constitutes a taxable medical device. The references are geared to language in the federal Food and Drug Act. For individuals, it is important to remember that many consumer medical devices are excluded from the tax. Expressly excluded under the ACA are eyeglasses, contact lenses and hearing aids. IRS rules and regulations also create a “retail exemption” for medical devices that are commonly purchased by consumers. These include items such as crutches, bandages, wheelchairs, and portable oxygen machines.

The manufacturer or importer is responsible for reporting and paying the tax. The IRS generally treats the manufacturer as the business that produces the medical device. An importer is the business that brings a medical device into the U.S.

Moratorium

In December 2015, Congress voted to temporarily suspend the excise tax. The Consolidated Appropriations Act of 2016 imposes a two year moratorium on the excise tax. As a result, the excise tax will not apply to the sale of a medical device during the period beginning on January 1, 2016, and ending on December 31, 2017.

Filing

Manufacturers and importers use Form 720 to report sales of taxable medical devices. The IRS has explained that during the moratorium, manufacturers and importers are not required to file Form 720 to report sales of taxable medical devices for quarters during 2016 and 2017. Manufacturers and importers may make adjustments to previously-reported medical device excise tax liability and/or file claims for credit or refund during the moratorium. Additionally, a manufacturer or importer may file Form 720X to claim a refund of the amount of medical device excise tax remitted to the IRS for sales of taxable medical devices during the moratorium.

Further, the IRS has explained that the moratorium has no effect on medical device excise tax liability incurred before the moratorium. Therefore audits related to such liability will continue during the moratorium.

Resumption

The medical device excise tax will apply to sales of taxable medical devices made after December 31, 2017. Taxpayers will be required to report sales of taxable medical devices made during the first quarter of 2018 on Form 720 by April 30, 2018.

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The Annual Dover Mini Maker Faire

What: Dover’s Annual Mini Maker Faire
When: Saturday, August 27th, 2016
Where: Children’s Museum of New Hampshire
Awesomeness Score: 10 (out of 10)

Maker Faire is the Greatest Show (and Tell) on Earth—a family-friendly showcase of invention, creativity and resourcefulness, and a celebration of the Maker Movement. It’s a place where people show what they are making, and share what they are learning.

Makers range from tech enthusiasts to crafters to homesteaders to scientists to garage tinkerers. They are of all ages and backgrounds. The aim of Maker Faire is to entertain, inform, connect and grow this community.

The Children’s Museum of New Hampshire hosted the state’s first-ever Maker Faire Dover, NH in 2013. Working with community members and local organizations, the steering committee created a full day celebration of invention and creativity! Now the group is gearing up for the fourth annual Dover Mini Maker Faire on Saturday, August 27, 2016.

For more information, to purchase tickets or even volunteer for this event, click here