MA Informed

Informed Moving to Moss Adams Insights

MA Team — Wed, 01 Jan 2014 21:37:50 +0000

The Moss Adams Informed blog will be closing at the end of March. You’ll be able to find all the same great content on the Moss Adams website, under the Insights tab. Click here to check it out.

R&D Tax Credits in Silicon Valley – Interview with Moss Adams’ Carolyn Driscoll

MA Team — Mon, 21 Oct 2013 16:39:50 +0000

The Moss Adams Informed team recently sat down with Carolyn Driscoll, Senior Tax Manager at Moss Adams.

Carolyn, what areas do you specialize in?
I specialize in federal and state research tax credits. These are lucrative benefits for companies who are engaged in developing new and/or improved products and/or processes. I work with a wide range of companies in many different industries including software, high- tech, life science, telecommunication and other companies that design and develop new or improved products.

In your work with technology companies, are you seeing any trends with R&D tax credits?
Yes. The taxing authorities, particularly California, have increased the scrutiny that they apply to technology companies and are requiring increased levels of documentation to substantiate credits claimed.

With lots of start-ups in the Silicon Valley, do they face a different set of issues compared to larger companies when it comes to R&D tax credits?
Absolutely! The federal and state R&D tax credits can only be used to offset taxable income from that trade or business. Many technology companies are in an investment mode and have not yet become taxable. Though they may not be able to currently utilize the benefit of the credit, the California credit never expires and the federal credit carries forward for 20 years, so these credits can be used at a later date. To identify and preserve their credit, companies do need to make an investment in properly documenting projects and activities to illustrate how they meet the tax definition of R&D – the four-part test.

What is the four-part test?
The credit is an activity-based credit. The activities that qualify for the R&D credit are defined in the ’four-part test’ which must be met for the activity to qualify as R&D. All four of the prongs must be met to constitute qualified activity. The four-part test provides:

Permitted Purpose
The activity must be intended to be useful in the development of a new or improved business component of the taxpayer (new or improved product, process, formula, technique, invention or software component).
Technical in Nature
The research conducted must rely on the principles of hard science including engineering, physical or biological science, or computer science.
Technical Uncertainty
The activity must be intended to eliminate technical uncertainty about the development or improvement of the product or process. The uncertainty can relate to the capability of the product, the method used to produce it, or the appropriate design of the product.
Process of Experimentation
A process of experimentation designed to evaluate one or more alternatives to achieve a result where the capability, the method of achieving, or the appropriate design of a result is uncertain, must be undertaken.

What are some common R&D tax credits that clients are surprised by?
Businesses in many different industries routinely perform qualifying work as they attempt to create products that are lighter, faster, or less expensive. It applies not only to product development but also to the activities and operations supporting manufacturing processes, environmental improvements, software development, and quality enhancements. Expenses that qualify include W-2 taxable wages of not only those who perform the credit qualifying work, but also for those who perform a supporting role. Many are also surprised that the credit can be claimed for all open tax years and, depending on when you filed your return, we can go back three prior tax years or four years for California and many other states. Certain companies that were not taxable in prior years may be able to go back even further. There are some elections that must be made on a timely-filed return, so evaluating and qualifying a company’s credit on a current year basis can provide more credit options.

What can companies do to maximize R&D tax credits?
Companies should utilize the systems that they already have in place to help track time and create nexus between employees and qualified projects. Companies should also ensure that they are retaining all relevant documents, including time-keeping records, contractor invoices, contracts, Form W-2, box wages for employees and any project –specific documentation highlighting aspects of the development process. Be sure to keep track of items including contractor fees, direct support costs, and the activities of executive or high-level personnel who participate in research efforts.

What does it mean to “properly document” the credit? Is this up for interpretation?
Claiming the R&D credit requires understanding of the IRS and FTB documentation requirements. What the taxing authorities focus on as well as the legislation surrounding the credit is constantly changing. The documentation requirements can be quite nebulous and will vary by company depending on the types of documents kept in the ordinary course of business.

Are there R&D issues that affect executives?
Yes. High-wage executives and employees with executive job titles tend to be highly contested. It is critical to retain documentation that demonstrates how they are involved in performing or directly supervising activities which meet the tax definition of R&D.

When looking for a firm to help them take full advantage of R&D tax credits, what should companies look out for?
Look out for companies that estimate your credit benefit without digging into your company and your tax situation. Make sure that your service provider has a good understanding of what taxing authorities are looking for as well as a good record of supporting studies. Additionally, a firm should work closely with the R&D professionals at your company without disrupting the normal course of business. Look for a firm that will help create processes and procedures to better capture and document R&D activities and documentation going forward.

Thank you, Carolyn, for spending time with us today. How should someone contact you to learn more about your services?
People can call me at 949-623-4164 or reach me by email. I’m also on LinkedIn.

If you have any questions, please contact the team at Moss Adams, or your accounting professional.

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2013 Year-End Tax Planning Guide
Passing the Torch: Keys to Establishing an Effective Succession Plan for Your Business

2013 Year-End Tax Planning Guide

MA Team — Thu, 17 Oct 2013 22:47:15 +0000

Will your tax rates increase this year? Or stay the same? Either way, there are still plenty of planning opportunities to consider through the end of 2013 to help you manage your taxes and pay what you owe—no more and no less.

Our 2013 Year-End Tax Planning Guide provides you with a thorough checklist for yourself, your family, and your business, with a particular focus on what’s new this year, including:

Net investment income tax and additional Medicare tax for individuals
Health insurance provisions for individuals and businesses
Tangible property regulations for businesses

Are you doing everything you can to keep more of what you’ve earned?

If you have any questions, please contact the team at Moss Adams, or your accounting professional.

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Passing the Torch: Keys to Establishing an Effective Succession Plan for Your Business
Eye on Money: How to Save for Retirement

Eye on Money: How to Save for Retirement

MA Team — Wed, 16 Oct 2013 20:10:48 +0000

In this edition of Moss Adams Wealth Advisors’ Eye on Money, articles include:

Estate Planning Reminders
Leaving a Job? What to Do with Your 401(k)
Important Dates for College-Bound Seniors
How to Avoid Fraud
How to Save for Retirement without a 401(k)
What on Earth Are Marginal and Effective Tax Rates?
Create a Stream of Income with an Immediate Annuity

If you have any questions, please contact the team at Moss Adams, or your accounting professional.

You may also be interested in:
Passing the Torch: Keys to Establishing an Effective Succession Plan for Your Business
Eye on Money: How to Minimize Taxes on Your Investment Income

Why Performance-Based Compensation Is on the Rise

MA Team — Mon, 14 Oct 2013 20:31:13 +0000

Employee compensation is typically the single largest operational expense for organizations big and small, yet businesses, not-for-profits, and governmental entities all tend to struggle to use compensation strategically. After all, people are your most important asset. Do you have the right compensation structure in place to attract, incentivize, and retain them?

There are a number of industry dynamics converging to make compensation a critical success factor for organizations in all industries. These include an expected increase in ownership transition and management succession, a shortage of qualified workers, and lack of preparedness.

If you have any questions, please contact the team at Moss Adams, or your accounting professional.

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When Should Companies Start Preparing for New Revenue Recognition Rules?
Treasury Management: An Often Overlooked Tool for Competitive Advantage

Passing the Torch: Keys to Establishing an Effective Succession Plan for Your Business

MA Team — Wed, 09 Oct 2013 21:11:54 +0000

Jay Silverstein, principal in the Moss Adams Wealth Services Group, was interviewed in Smart Business on creating a succession plan for your business.

Owners of family or middle-market businesses invest a tremendous amount of time and energy — sometimes their entire adult lives — building a successful business. Yet they often spend little time working on their succession plan.

“The business world is littered with second and third generations that don’t succeed in continuing the business,” says Jay Silverstein, principal in the Wealth Services Group at Moss Adams LLP. “One of the big reasons is that there wasn’t a well thought-out succession plan.”

If you have any questions, please contact the team at Moss Adams, or your accounting professional.

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Eye on Money: How to Minimize Taxes on Your Investment Income
Do Bonds Still Belong in Your Portfolio?

A Look at the IRS’s Final Tangible Property Regulations

MA Team — Fri, 27 Sep 2013 16:19:28 +0000

As we reported earlier this month, the IRS has issued final regulations affecting tangible real and personal property—the culmination of a nearly 10-year project that will have a broad-reaching impact on almost all taxpayers. The final regulations, along with certain rules the IRS is reproposing, generally simplify and clarify the temporary regulations issued in late 2011. The rules should be welcome news for taxpayers who were concerned about the administrative challenges imposed by the 2011 temporary regulations. The final and reproposed regulations are generally effective for tax years beginning on or after January 1, 2014 (or for amounts paid or incurred in tax years beginning on or after January 1, 2014).

If you have any questions, please contact the team at Moss Adams, or your accounting professional.

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Cultivating the Deal: An M&A Guide for Private Middle-Market Companies

MA Team — Tue, 17 Sep 2013 18:44:40 +0000

What must companies consider and execute prior to and during a business acquisition? Whether you’re on the buy or sell side of a transaction, it’s critical to conduct thorough due diligence, engage in strategic planning surrounding integration, and pay close attention to the many detailed components related to structuring the actual transaction. In this three-part series, we examine all three areas to help you make smarter, more informed decisions when your next M&A opportunity arises.

Part 1: Increasing the Price of Your Business
Part 2: Facilitating the Transaction Process
Part 3: Completing the Transaction

If you have any questions, please contact the team at Moss Adams, or your accounting professional.

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Raising Capital? Know All Your Options
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Offering Loans from Your Retirement Plan? Know Your Fiduciary Responsibilities

MA Team — Thu, 12 Sep 2013 08:04:27 +0000

Many defined contribution plans offer loans to participants. Such loans are a great convenience to employees who need access to their funds immediately, but there are potential pitfalls for employers. What are they, and how can you avoid them?

In general, plan sponsors should periodically verify that the terms of new loans issued conform to the plan’s policy, loan payments are being collected and remitted to the plan in a timely manner, and interest rates charged are appropriate and reasonable. The loans, which are considered investments of the plan, must also be available to all participants on a reasonably equivalent basis and be adequately secured.

Many third-party administrators handle the loan application process and work with the custodian to issue the check to the participant. What part should the plan sponsor play in monitoring participant loans?

If you have any questions, please contact the team at Moss Adams, or your accounting professional.

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Easing the Impact of the Net Investment Income Tax for Shareholders of Foreign Entities

MA Team — Mon, 09 Sep 2013 09:40:04 +0000

The new net investment income tax, enacted under the Affordable Care Act, subjects higher-income taxpayers to a 3.8 percent surtax on certain types of passive income. The surtax is in effect for 2013. However, the reporting requirements are pending and—as they currently stand—would impose a significant burden on individuals with direct or indirect interests in any kind of foreign corporation.

In response, Christine Ballard, an international tax partner at Moss Adams and chair of the International Tax Technical Resource Panel for the American Institute of Certified Public Accountants, has helped the AICPA draft a comment letter to the IRS, urging it to reconsider its proposed approach. With the surtax in effect for the coming tax year, the urgency for the IRS to revise and finalize its proposed rules is clear.

Read more about key developments, their potential impact, and next steps in Christine’s candid interview with Bloomberg BNA:

If you have any questions, please contact the team at Moss Adams, or your accounting professional.

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