Unearned Income of children rates change quickly in new tax law

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The “kiddie tax” has been modified under the Tax Cuts and Jobs Act (TCJA). Under current law, a child’s net unearned income is taxed at the parents’ tax rate if that rate is higher than the child’s. The remainder of the child’s taxable income is taxed at the child’s rate. Under the TCJA, for years beginning after Dec. 31, 2017, the taxable income of a child attributable to earned income is taxed under the rates for single people, and taxable income of a child attributable to net unearned income is taxed according to the brackets applicable to trusts and estates.

Watch out for the ACA employer mandate when hiring seasonal workers

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Many employers hire seasonal workers this time of year. If your organization is one of them, you might worry about becoming subject to the Affordable Care Act’s (ACA’s) employer mandate — also known as the “play or pay” provision. To determine whether you may be at risk for triggering the mandate and, ultimately, penalties, you’ll need to count all of your employees while factoring in the special rules for seasonal workers.

Determining ALE status

Under the play-or-pay provision, an “applicable large employer” (ALE) may be subject to penalties for failure to offer adequate health coverage to enough of its full-time employees (and their dependents).

An ALE is generally an employer that employed 50 or more full-time employees (including full-time equivalents) during the previous year. Although seasonal workers must be included when determining whether your workforce exceeds this threshold, you won’t be considered an ALE if:

  • You exceeded that threshold for 120 days or fewer during a calendar year, and
  • The employees in excess of the threshold who were employed during that period were seasonal workers.

Employers are permitted to apply a reasonable, good-faith interpretation of the term “seasonal worker.” But the term generally applies to someone who performs labor and services on a seasonal basis, including workers employed exclusively during holiday seasons.

Noting the particulars

Let’s say an employer has a regular full-time workforce of approximately 40 employees and, this year, it has hired about 80 additional full-time employees in November and December for the holiday shopping season.

Under these circumstances, the employer could likely apply the seasonal worker exception because its workforce has included 50 or more full-time employees for no more than 120 days, and the number of full-time employees would be less than 50 during those months if seasonal workers were disregarded.

Note that you must determine your ALE status annually by counting the number of employees during the previous year and measuring the number of days that seasonal workers were actually employed during that preceding year. Once the previous year ends, your ALE status (or lack thereof) is fixed for the current year.

Also be aware that there’s a distinction between the terms “seasonal worker,” relevant when determining ALE status, and “seasonal employee,” relevant — for employers that are ALEs — when determining an employee’s status as a full-time employee under the look-back measurement method (one of the two permissible methods for determining full-time employee status). If you’re not an ALE for a particular year, you don’t need to identify full-time employees using the separate definition of seasonal employee.

Teetering on the edge

It’s wise to determine now what the impact of seasonal workers is on whether you’ll be subject to the play-or-pay provision in 2018. Companies that teeter on the edge of being an ALE are particularly at risk of facing ACA penalties. Please contact us for help.

What you need to know about year-end charitable giving in 2017

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Charitable giving can be a robust tax-saving strategy: Donations to qualified charities are fully deductible, and you have complete control over when and how much you give. Here are some important considerations to keep in mind this year to ensure you receive the tax benefits you desire.

Delivery date

A charitable donation must be made by Dec. 31, 2017, for inclusion on your 2017 return. According to the IRS, a contribution is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity receives the funds — or perhaps the date of the charity’s acknowledgment of your contribution?

The delivery date depends in part on what you donate and how you give it. Here are a few examples of regular donations:

Check. The date you mail it.

Credit card. The date you make the charge.

Pay-by-phone account. The date the financial institution pays the amount.

Stock certificate. The date you mail the adequately endorsed stock certificate to the charity.

Qualified charity status

To be deductible, a donation also must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions.

The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at http://apps.irs.gov/app/eos. Information about agencies qualified to accept deductible donations is updated monthly.

Potential impact of tax reform

The charitable donation deduction isn’t among the deductions eliminated or reduced under proposed tax reform. In fact, income-based limits on deductibility in a particular year might be expanded, which will benefit higher-income taxpayers who make substantial charitable gifts.

However, for many taxpayers, accelerating into this year donations that they might typically give next year may make sense for a couple of tax-reform-related reasons:

  1. If your tax rate goes down for 2018, then 2017 donations will save you more tax because deductions are more powerful when rates are higher.
  2. If the standard deduction increases significantly and many itemized deductions are eliminated or reduced, then it may not make sense for you to itemize deductions in 2018, in which case you wouldn’t directly benefit from a charitable donation deduction next year.

Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering  — or the potential impact of tax reform on your charitable giving plans.

3 good reasons to conduct background checks when hiring

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Many employers use background checks as a regular part of their hiring processes. But “many” does not mean “all.” In fact, recent research conducted by the Society for Human Resource Management indicates smaller businesses tend to skip this important hiring step. Among companies with fewer than 100 employees, fewer than half conduct criminal background checks on job candidates vs. 83% for employers with at least 2,500 employees.

If yours is a smaller organization, you may understandably feel pressured to hire good candidates quickly. After all, you don’t have the hiring resources of a larger organization and might really need the help. But, in today’s complex and often litigious working world, background checks remain highly advisable. Here are three good reasons to conduct them:

1. To protect yourself legally. Among the various legal risks you face is being accused of “negligent hiring.” This is a legal concept used in lawsuits against employers that alleges an employee’s harmful actions (such as assault of a co-worker) could have been avoided had the employer more thoroughly vetted the worker before hiring. The cost of a background check today is likely a tiny percentage of the legal costs your organization could incur if such a lawsuit were filed.

2. To safeguard your business data and customers’ personal info. Although many data breaches are perpetrated by distant outsiders breaking into proprietary systems, the threat of an inside job is very real. A dishonest job candidate may be playing a “long game” of getting hired and then gradually siphoning data (or money) from your organization. Or he or she may simply steal sensitive information as soon as possible. In either case, a background check can raise red flags that warn you of these possibilities.

3. To improve your hiring process (and background checks aren’t that expensive anymore).Sometimes the hardest part of doing anything is changing existing processes. If you’ve hired new employees the same way for ages and never had a problem, background checks may seem unnecessary. But a hiring process that involves background checks is simply better. And they’re not as expensive as they used to be. Providers now have technology that makes the process much more efficient, and they have to price their services competitively.

If your organization is inexperienced in obtaining background checks, approach the matter carefully. You’ll need to jump through some legal hoops to comply with existing laws and regulations. We can work with you and your attorney to assess what’s appropriate for your organization.