Learning Center for Tax and Financial Insights

If you've been keeping up with the news, you're no doubt aware of a recent policy change that will impact the way that research and development (R&D for short) is handled when it comes to income taxes in the United States. Rather than being allowed to deduct those costs immediately, companies are now being told that they must spread those costs out over a period of five years.Unsurprisingly, those companies are none too thrilled with that change. It has the potential to hurt manufacturers in a number of different ways, all of which are worth exploring.The R&D Tax Policy Change: An OverviewIn a letter that was sent on November 4, 2022, no less than 178 CFOs - primarily those from some of the biggest names in United States manufacturing like Ford Motor Company, Lockheed Martin, Boeing, and others - outlined why they believe that these aforementioned new rules would lead to what they call a "competitive disadvantage" for American companies. This in turn would almost certainly lead to job losses, which would in turn harm their ability to innovate over the next decade.Their point of view was simple: they were asking the current Congress to switch back to a system that allowed them to immediately deduct their costs when it came to research and development as soon as the end of the year.It's important to note that in a general sense, research and development investment does not spread evenly across the economy. It tends to be heavily localized in a few key spaces, with manufacturing being chief among them. In fact, the manufacturing sector alone accounts for 58% of all research and development costs according to one recent study.To contextualize that in a different way, it means that the manufacturing sector would face a significant tax increase as per the research cited above - to the tune of $31.7 billion in 2023 alone which is directly attributed to this new approach to R&D amortization.It's equally important to note that, until January 1, 2022, businesses could deduct 100% of all expenses that were directly attributed to research and development in the same year that they were incurred. With this new law change, effective January 1, 2022, it essentially makes it not only more expensive to invest in advancements that will help innovate various sectors like manufacturing, but in the growth of these companies as well.

Your time as a business owner is valuable. Don’t waste any of it doing duplicate data entry.Accounting takes time. And the last thing you need when you’re working with your company’s finances is activity that takes unnecessary minutes. If you’ve created a record or transaction once, you don’t want to have to enter the information a second or third time.That’s why using QuickBooks Online is so far superior to manual accounting. It remembers everything, so you can use data again when you need it. But sometimes you have to give it a little guidance.That’s the case with recurring transactions. If you have forms that you create repeatedly, with very few changes (like utility bills), you can “memorize” the transactions. When the bill comes around the next month, you can modify any details necessary and dispatch it again. Here’s how it works.Three OptionsTo get started, enter a transaction that you want to save and be able to use again (with changes). Let’s say it’s an invoice that you send to a customer once a month who has a service contract for network maintenance. When you’ve completed the form, look toward the bottom of the screen and click Make recurring. The screen will now read Recurring Invoice, with new content as pictured below. You can specify transactions as recurring and add details like frequency and start/end dates.If you want to change the Template name to something that will remind you of its purpose, you can do so. In the field beneath Interval, select Daily, Weekly, Monthly, or Yearly, and then indicate what day of the month the transaction should occur. Enter a Start date and End [date] or select None if the length of service is open-ended. In example above, you would receive a reminder from QuickBooks Online three days before the invoice is scheduled to go out. The service contract has no ending date, so you’d continue to get reminders until you change the template.Next to the Template name is a field labeled Type. QuickBooks Online gives you three options for taking action on the recurring transaction. It can be:• Scheduled. This is an automated option that should be used with caution. If you select this, your transaction will go out as scheduled with no intervention from you. Only the date will change.

Article Highlights:Background Qualificationso Income Limito 4-wheel vehicleo Street Vehicleo Minimum Battery Capacityo Acquired for Original Useo Final Assemblyo MSRPo Critical Mineral and Battery ComponentsSeller Provided ReportList of Qualifying VehiclesTransfer of Credit to the DealerAlthough the credit for purchasing a new electric vehicle can still be as much as $7,500, Congress has added some new stringent qualifications as to which vehicles qualify, and for the first time Congress has limited who qualifies for the credit by barring the credit to higher income taxpayers.But first a little background. Prior to this change, a vehicle qualifying for the credit needed only to be a 4-wheel vehicle, with a minimum battery capacity of 5 kilowatt hours and a gross weight of less than 14,000 pounds. There was also a manufacturer limit of 200,000 units, after which the credit phased out over the subsequent four quarters. There were no qualification requirements for the purchaser of the vehicle.New Qualifications - Under the new law, starting in 2023 the vehicle and the buyer must meet far more stringent requirements for a taxpayer to qualify for the clean vehicle tax credit. Purchaser’s Income Limit - No credit is allowed for any tax year if the lesser of the modified adjusted gross income (MAGI) of the buyer for the:Current tax year, or The preceding tax year exceeds the threshold amount as indicated below. There is no phaseout and just one dollar over the limit means no credit will be allowed. Thus, Congress has essentially eliminated the credit for higher income taxpayers.Married Filing Joint or Surviving Spouse - $300,000Head of Household - $225,000Others - $150,000MAGI is the buyer’s adjusted gross income increased by any foreign earned income and housing exclusions and excluded income from Guam, American Samoa, the Northern Mariana Islands, and Puerto Rico. Vehicle Qualifications - To qualify, the vehicle must:Be a 4-wheel vehicle.Be a Street Vehicle that was manufactured primarily for use on public streets, roads, and highways.Have a Minimum Battery Capacity of 7 kilowatt-hours.Be acquired for Original Use by the taxpayer. Original use means that the vehicle has never been used by any taxpayer for any purpose. A vehicle is not a new clean vehicle if another person has ever purchased or leased the clean vehicle and placed it in service for any purpose. Where a vehicle is acquired for lease to another person, the lessor is the original user.Have had its Final Assembly in North America, which includes the 50 states, the District of Columbia, and Puerto Rico, Canada, and Mexico. Where the vehicle was manufactured can be determined from the 17-digit vehicle identification number (VIN). The VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA) also provides final assembly location information. The website, including instructions, can be found at VIN Decoder. The VIN is permanently attached to a vehicle in several locations, appearing on the dashboard for most passenger vehicles and on the label located on the driver’s door frame. The VIN is also located on the window sticker of new vehicles and often appears on the vehicle listing on dealers’ websites. Meet the MSRP requirement - The manufacturer's suggested retail price (MSRP) cannot exceed:o $80,000 for vans, SUVs, and pickupso $55,000 for other vehicles The MSRP will be on the vehicle information label attached to each vehicle on a dealer’s premises. The MSRP for this purpose is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees.Even when a vehicle is purchased for less than the MSRP, the credit limitation on the price of the vehicle is based on the manufacturer's suggested retail price (MSRP), not the actual price paid for the vehicle. Meet the Critical Mineral and Battery Components test – Congress, in an effort to bring the battery manufacturing for electric vehicles to the United States, included a requirement that a percentage of critical minerals needed to manufacture batteries be extracted or processed in the U.S. or a country with a free trade agreement with the U.S. or recycled in the U.S. It also requires a percentage of battery components be manufactured or assembled in North America. The initial percentage is 50% and 100% after 2028.Luckily for a buyer the dealer must provide a report that certifies the vehicle meets these requirements by specifying the amount of credit the vehicle qualifies for.

Article Highlights:Custodial ParentDependency ReleaseJoint CustodyTiebreaker RulesChild’s ExemptionHead of Household Filing StatusTuition CreditChild Care CreditChild Tax CreditEarned Income Tax CreditIf you are a divorced or separated parent, a commonly encountered but often misunderstood issue is who claims the child or children for tax purposes. This is sometimes a hotly disputed issue between parents; however, tax law includes some very specific but complicated rules about who profits from the child-related tax benefits. At issue are a number of benefits, including the children’s dependency, child tax credit, child care credit, higher-education tuition credit, earned income tax credit, and, in some cases, even filing status. This is actually one of the most complicated areas of tax law, and inexperienced tax preparers or taxpayers preparing their own returns can make serious mistakes, especially if the parents are not communicating well. If parents will cooperate with each other, they often can work out the best tax result overall, even though it may not be the best for them individually and compensate for it in other ways. Physical Custody (Custodial Parent) – If a family court awards physical custody of a child to one parent, tax law is very specific in awarding that child’s dependency to the parent with physical custody, regardless of the amount of child support provided by the other parent. However, the custodial parent may release that dependency to the non-custodial parent for tax purposes by completing the appropriate IRS form. The release can be granted on a yearly basis or for multiple years at one time. But once made, it is binding for the specified period. CAUTION – The decision to relinquish dependency should not be taken lightly, as it impacts a number of tax benefits.Joint Custody – On the other hand, if the family court awards joint physical custody, only one of the parents may claim the child as a dependent for tax purposes. If the parents cannot agree between themselves as to who will claim the child and the child is actually claimed by both, the IRS tiebreaker rules will apply. Per the tiebreaker rules, the child is treated as a dependent of the parent with whom the child resided for the greater number of nights during the tax year; or if the child resides with both parents for the same amount of time during the tax year, the parent with the higher adjusted gross income will claim the child as a dependent. Parents in the process of divorcing should be aware that for tax purposes, the IRS’s rules as to who can claim a child’s dependency takes precedence over what a divorce decree says or what a judge may have ruled. So, for example, if the family court awards full custody of a child to Parent A but says that Parent B can claim the child as a tax dependent, the IRS’s position is that the child is a tax dependent of Parent A unless Parent A releases the dependency to Parent B, as explained above. Child’s Exemption Allowance – While there is no longer (through 2025) a monetary tax deduction (also referred to as an exemption allowance) for a dependent child, it still matters who claims the child as a dependent because certain tax credits are only available to the taxpayer claiming the child as a dependent.

The Internal Revenue Service recently completed the final automatic corrections of tax year 2020 accounts for taxpayers who overpaid their taxes on unemployment compensation they received in 2020. Some 12 million refunds were issued.

The world of eCommerce is one that is constantly evolving - both in terms of public perception and concerning how the industry serves customers.In the 1990s, the very idea of buying something online (not to mention entering your credit card information into a computer) was unthinkable to a lot of people. Flash forward to today, and eCommerce sites are used all around the world every single day. During the COVID-19 pandemic, it even became the dominant way that people got essential items due to the fact that many stores in their area were closed due to lockdowns and other restrictions.Throughout it all, one of the biggest names in eCommerce has been Shopify. Originally founded in 2006 by entrepreneurs Tobias Lutke, Daniel Weinand, and Scott Lake, the Canada-based service was used by more than 1.7 million businesses in 175 million countries as of 2021. Shopify's continued success story and the way that it upended the way we think about eCommerce in the first place is an important one to observe, as are the lessons that we can learn from the story itself.Shopify: In the BeginningIn 2002, Tobias Lutke and his partner Scott Lake took it upon themselves to create a company called Snowdevil. Its mission was simple: it acted as a convenient way to sell snowboarding equipment online.However, they quickly grew frustrated with how difficult it was to get an eCommerce site off the ground. The solutions that existed at the time were time-consuming and lacked essential features, so Lutke decided to build his own platform.Though the snowboarding business wasn't successful, Lutke and Lake saw a different opportunity. They could sell the platform they had built to other businesses so that everyone could easily sell their products and services over the Internet.From the beginning, the success of what is now known as Shopify is one built on disruption. Lutke and Lake saw a gap between what the marketplace was and what people needed it to be. They designed a product that could fill that gap and were suddenly off to the races.Another key ingredient to the company's success was that they focused on delivering the features they themselves wanted when they were still working on Snowdevil. The earliest versions of Shopify were all about the essentials - customizable store templates, tracked order feeds, robust inventory management capabilities, and more. It also offered PayPal and credit card integration to help streamline the payment processing system as much as possible.