Sales Tax on Rental Properties

Florida is known for white sandy beaches, warm sunny weather and..… no income taxes for individuals.  However, many individuals have discovered there is a “sales” tax on renting their Florida beach condos.  The state of Florida  is using information from the federal income tax return to locate individuals that own rental properties in Florida.  The state will mail an assessment notice based on the address and activity on the Federal tax schedule E.

Keep this in mind for individuals that report Florida rental activity on their individual income tax returns.  The tax only applies in specific circumstances and the KatzAbosch SALT Group can help evaluate any potential tax obligations.

 Please contact the KatzAbosch SALT Group if you want to reduce potential audit assessments.

The SALT Shaker is prepared by Andy Bareham, Chair of the KatzAbosch SALT Group

Sales/Use Tax on CPA Firm Services

Currently in Maryland 12 specific services are subject to sales/use tax.  A bill has been proposed that would greatly expand the number of services subject to tax.  Two of these new services – cited below – will directly impact our practice:

11-101(m)

 (19) A tax preparation service

 (30) A management, a management consulting, a public relations, or ANY other business consulting service

 Almost every year this type of legislation is presented and thus far has been defeated.  The difference this year is that the legislation is sponsored by the powerful Chair of the House Ways and Means committee. I am concerned this bill will not “die in committee” as it has done in past years.

Additionally, the Governor’s Budget contains a new sales/use tax on “digital downloads.” There is a clause in this bill which could extend this new tax to e-filing of tax returns and CPE webcasts.

The state is looking for new revenue sources and they believe one of them could be the service economy. I try to not get worried about proposed legislation because the political world is too unpredictable but this may be the year some of these things become law.  Stay tuned.

The SALT Shaker is prepared by Andy Bareham, Chair of the KatzAbosch SALT Group

submitted by: Anita M. Sheckells, CPA, CCIFP

Members of the Board of Directors contribute to the Museum’s mission by providing cultural and educational experiences through dynamic exhibits and programs. Members strive to increase community outreach while preserving and commemorating local and regional sports teams as well as individuals.

Mattingly says he is thrilled and honored to serve on the Board and to be able to contribute to the museum. He looks forward to continuing to build and enhance the Museum as the premier destination for sports enthusiasts for many years to come.

Chief Operating Officers nominated for this award had to demonstrate the following:

• leadership by creating and communicating the strategy and mission of the company to all staff members
• implementation of coaching and recognition programs to align the staff with the company’s goals
• effective management of staff levels, expectations and knowledge
• prioritization of customer, employee and company requirements
• efficient oversight of an organization’s performance.

This is a huge honor for Arlene and our firm.

Being promoted to Principal is a huge honor within the firm. The role of a Principal is a high-level technical position that includes managing several ongoing jobs while communicating with shareholders, as well as managers and supervisors. It is their responsibility to monitor budgets, oversee the job process, and complete final reviews.

This promotion rewards managers who go above and beyond standard expectations. It is another example of KatzAbosch’s commitment to its staff by encouraging upward movement within the firm. KatzAbosch has been recognized as a “Best Accounting Firm to Work For” by Accounting Today magazine for the past 3 years in a row, as well as having earned several regional “best employer” awards, including “Healthiest Employer” by the Baltimore Business Journal, and “Baltimore’s Top Workplaces” by the Baltimore Sun.

During 2011, a growing number of businesses were subjected to state tax audits. The state governments are starved for revenue and they realize the business community is a fertile source for unreported tax revenue, particularly sales/use tax.  Our experience representing clients in audits has shown that many businesses have misconceptions regarding the sales tax.  Consider the following questions with regard to your business:

• Does your business have a Maryland sales/use tax account? (If not, you are more likely to be audited by the state)
• Have you paid sales/use tax on all of your purchases of tangible property?
• Do you buy property over the Internet from out-of-state vendors?
• Do you either charge sales tax on all of your customer sales or collect an exemption certificate?
• Is your business ready for a Maryland sales tax audit?

The answers to these questions are crucial when the state of Maryland selects your business for audit.  The SALT Group at KatzAbosch is experienced at helping businesses ensure their readiness for state auditors.  We can review your records looking for compliance with state regulations and search for potential refund opportunities. Based on our recommendations, businesses are able to significantly reduce their exposure to audit assessments.

Please contact the KatzAbosch SALT Group if you want to reduce potential audit assessments.

The SALT Shaker is prepared by Andy Bareham, Chair of the KatzAbosch SALT Group

Andrew Jones

KatzAbosch, one of the Mid-Atlantic Region’s leading certified public accounting and consulting firms, has expanded its services to the Federal Government and Government Contractors by launching a new wholly-owned subsidiary, KatzAbosch Consulting LLC.  This new vertical is led by Andrew Jones and operated by KatzAbosch, P.A..

KatzAbosch Consulting LLC will continue to provide the same high quality of service expected by its clients with a broadened focus on Financial, IT and Workforce consulting as well as FAR & CAS compliance.

Andrew Jones has over twenty years experience in financial and business consulting. He is a Chartered Accountant (ACA), Certified Information Systems Auditor (CISA) and a Certified Government Financial Manager (CGFM).  Previous to joining KatzAbosch Consulting LLC, Jones started Manpower Public Sector Incorporated, where he was Vice President and Managing Partner. Prior to his employment with Manpower, Jones led the Public Sector practice for Unisys in the United Kingdom and was an equity partner at Arthur Andersen, LLP. In this capacity, Jones led the e-business and Customer Relationship Management (CRM) practice for the Government Vertical and was also the North American head of the Government Industry Program.  Jones has worked with many governments globally on privatization, including but not limited to the United Kingdom, United States of America, Saudi Arabia, Kuwait, Russia, Thailand, Egypt, Lithuania and Jordan. Jones has testified as an expert in front of congress on two occasions related to privatization and outsourcing. Prior to joining corporate finance, Jones was an audit manager in the financial markets group in London and Chicago with a focus on the banking sector.

When asked why he wanted to join KatzAbosch Consulting LLC, Jones replied, “It was always a goal to return to a professional accounting firm with a strong culture and leadership and to have the opportunity to drive a new segment in providing professional services to the federal government.”

DC tax law changes for 2011 and 2012

Businesses:

• Mandatory unitary combined reporting effective for tax years beginning on or after December 31, 2010.
• For tax year 2011 business franchise taxes apportionment is changed to property, payroll and double weighted sales, previously the law provided for equal weighted 3-factor formula.
• Minimum tax increased to $250 for corporations with gross receipts under $1 million, increased to $1000 if gross receipts greater than $1 million.

Individuals:

• An additional tax bracket of 8.95% for taxpayers with DC taxable income over $350,000 has been added, applies to estates and trusts also.
• New limitations apply to itemized deductions for DC taxable income of $200,000; deductions are to be reduced by 5% of the amount over $200,000. This doesn’t include medical, investment interest or casualty losses.
• Effective 01/01/12 employers are to remove standard deduction from withholding calculation.
• DC has repealed its exemption for the interest on out of state tax exempt bonds, effective for bonds acquired after 12/31/11. Except for bonds issued by the District of Columbia or the Metropolitan Washington Regional Airport Authority, income from state or municipal bonds acquired on or after 1/1/12 is taxable for DC income tax purposes. State or municipal bond income is not taxable in DC if: They were acquired before 01/01/12 and exempt by federal law.
• Effective 01/01/12 withholding of DC income taxes at the highest marginal rate from distributions from retirement accounts to DC residents if there is an IRS withholding requirement.
• For both individuals and franchise taxes the safe harbor requirement has been increased to 110% for 2012.

Other:

• Sales tax rate increase on parking from 12% to 18% and packaged good liquor from 9% to 10%.
• Addition  of security services to the sales tax base.
• The sales tax rate decrease scheduled for 10/01/12 has been cancelled.

Remember the DC individual income tax only applies to residents, non-resident individuals are not subject to the individual income tax.

Please contact Amanda Pippin if you have any question regarding DC tax law.

The SALT Shaker is prepared by Amanda Pippin

Accounting firms from across the country entered the two-part survey process to determine the Best Accounting Firms to Work For. The first part consisted of evaluating each nominated firm’s workplace policies, practices, philosophy, systems and demographics. The second part consisted of an employee survey to measure the employee experience. The combined scores determined the top firms and the final ranking. Best Companies Group managed the overall registration, survey and analysis process and determined the final rankings.

This survey and award program was designed to identify, recognize and honor the best places of employment in the accounting industry, benefiting the nation’s economy, its workforce and businesses. The Best Accounting Firms to Work For list is made up of a total of 100 companies, split into three groups: 50 small-sized companies (15-49 employees), 45 medium-sized companies (50-249 employees) and 5 large-sized companies (more than 250 employees). KatzAbosch has been named one of the Best Accounting Firms to Work For in the medium category.

KatzAbosch is extremely honored to have received this distinction for a third consecutive year. It is incredibly rewarding to know that our personnel spoke so highly of the firm in the voting process. This is truly a testament to our enduring commitment policy to provide the necessary support, resources and guidance that our staff needs to excel and succeed.

The ranking of the 4^th annual Best Accounting Firms to Work For was unveiled at an awards ceremony sponsored by ADP during Accounting Today’s 2^nd Annual Growth & Profitability Summit on October 25^th – October 27^th at the Bellagio Hotel & Casino in Las Vegas. The list-making firms will also be published in the December issue of Accounting Today.