The CPA Desk

A Thought Leader Production by PKFTexas

Save Tax with Deductions and Exclusions Related to Homeownership

Currently, home ownership comes with many tax-saving opportunities. Consider both deductions and exclusions when you’re filing your 2016 return and tax planning for 2017:

  • Property tax deduction. Property tax is generally fully deductible — unless you’re subject to the alternative minimum tax (AMT).
  • Mortgage interest deduction. You generally can deduct interest on up to a combined total of $1 million of mortgage debt incurred to purchase, build or improve your principal residence and a second residence. Points paid related to your principal residence may also be deductible.
  • Home equity debt interest deduction. Interest on home equity debt used for any purpose (debt limit of $100,000) may be deductible. But keep in mind that, if home equity debt isn’t used for home improvements, the interest isn’t deductible for AMT purposes.
  • Mortgage insurance premium deduction. This break expired December 31, 2016, but Congress might extend it.
  • Home office deduction. If your home office use meets certain tests, you generally can deduct a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, and the depreciation allocable to the space. Or you may be able to use a simplified method for claiming the deduction.
  • Rental income exclusion. If you rent out all or a portion of your principal residence or second home for less than 15 days, you don’t have to report the income. But expenses directly associated with the rental, such as advertising and cleaning, won’t be deductible.
  • Home sale gain exclusion. When you sell your principal residence, you can exclude up to $250,000 ($500,000 for married couples filing jointly) of gain if you meet certain tests. Be aware that gain allocable to a period of “nonqualified” use generally isn’t excludable.
  • Debt forgiveness exclusion. This break for homeowners who received debt forgiveness in a foreclosure, short sale or mortgage workout for a principal residence expired December 31, 2016. Although Congress may extend it.

The debt forgiveness exclusion and mortgage insurance premium deduction are not the only home-related breaks that might not be available in the future. There have been proposals to eliminate other breaks, such as the property tax deduction, as part of tax reform.

Whether such changes will be signed into law and, if so when they’d go into effect is uncertain. Also, keep in mind that additional rules and limits apply to these breaks. So contact us for information on the latest tax reform developments or which home-related breaks you’re eligible to claim.

David Friedman Discusses Using Data to Target the Ultra-Affluent

Russ:  This is PKF Texas Entrepreneur’s Playbook.  I’m Russ Capper, this week’s guest host, coming to you from the Gulf Coast Regional Family Forum and my guest is David Friedman who’s known as the Founder of Wealth-X but we’re going to get in deeper with him now; David, welcome to the Playbook.

David:  Russ thanks for having me in Houston.

Russ:  You bet.  So I say Founder of Wealth-X but as I understand it now you’ve gone way beyond that, share with us what you’re doing these days.

David:  That’s right.  So Wealth-X was kind of a first chapter and was focused on data on the ultra-affluent.  My Co-founder and I probably 6 years ago we started the company.  He was at Forbes which is where he originally came from and the notion was there really was no database of the ultra-affluent – people whose net worth are 30 million and up – primarily because their wealth is privately held; so it’s hard to find them, hard to value that.  So we did that; we built that manually, grew it up over the last 6 years.

And fortunately he and I sold a majority stake of that to a private equity fund in New York and then he and I both actually left in September.  So if you say the first chapter was kind of around the data, the next chapter for me is a portfolio of things looking at how that data and new data in wealth is going to disrupt across multiple industries.  So one of them, a Co-founder of LifeChain – LifeChain is looking at building a blockchain enabled platform around data for family offices and analyzing it, understanding it, presenting it in a new way; redefining really how families relate to capital.

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Tips for Solving Cash Flow Problems Within Your Not-for-Profit

Declining donations, dues, grants or sponsorship funds may lead to not-for-profit budget deficits. But you can reduce the risk of cash flow crunches by making relatively minor changes to your cash management practices.

Expedite receipts

The sooner your organization accumulates cash, the better your cash flow. For example, consider moving your fundraising calendar ahead. By sending an appeal in July rather than November, your nonprofit may receive significant cash in late summer. Then mail reminders in November to those who haven’t yet given, and ask summer givers to make a year-end gift, too. By doing this, you’re more likely to see contributions in December as well.

Try to collect installment donations earlier, too. Instead of waiting for each payment of a four-quarter gift, contact those donors who are clearly predisposed to giving. Asking for the remaining donation in advance may speed up the process.

Get billing right

Billing errors, whether in the amounts invoiced or the recipient’s mailing address, can delay payments and hamper cash flow. Take steps to get the details right on every invoice. Request updated address or credit card information in every encounter with a payer and review reports of declined credit cards so that recurring payments can be made without delay.

Also make your invoices clear, clean and easy to understand. Use text descriptions rather than internal billing codes. The recipient should have no questions about what the charges are for or how they’re computed. Confused payers may just set their bills aside.

And consider issuing bills earlier. If a charge is incurred at the beginning of the month, but you wait until the end of the month to bill — and then allow a 30-day grace period for payment — you’re likely waiting at least two months to collect.

Manage disbursements

Managing cash outflow goes hand in hand with accelerating cash inflow. If you’re facing severe deficits, you may need to decelerate your bill payment or negotiate extended payment plans with vendors.

When your nonprofit is in a pinch, you must prioritize disbursements. But be careful: Although employee compensation can account for as much as 70% of some nonprofits’ budgets, such disbursements generally can’t be delayed.

Taking charge

Even in relatively flush economic times, nonprofits need to take a proactive approach to managing cash flow. Contact our Not-for-Profit team for more cash management tips.

Key 2nd Quarter Tax Dates Affecting Businesses

Here are some of the key tax-related deadlines affecting businesses and other employers during the second quarter of 2017. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

April 18

  • If a calendar year C corporation, file a 2016 income tax return (Form 1120) or file for an automatic six-month extension (Form 7004), and pay any tax due. If the return isn’t extended, this is also the last day to make 2016 contributions to pension and profit-sharing plans.
  • If a calendar year C corporation, pay the first installment of 2017 estimated income taxes.

May 1

  • Report income tax withholding and FICA taxes for first quarter 2017 (Form 941), and pay any tax due. (See exception below.)

May 10

  • Report income tax withholding and FICA taxes for first quarter 2017 (Form 941), if you deposited on time and in full all of the associated taxes due.

June 15

  • If a calendar year C corporation, pay the second installment of 2017 estimated income taxes.

Brian Baumler Talks Joint Ventures and JVSA

Russ:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Russ Capper, this week’s guest host, and I’m here with Brian Baumler, a Senior Vice President with Joint Ventures Strategic Advisors and an Audit Director with PKF Texas.  Brian welcome to the Playbook.

Brian:  Thank you very much Russ, really appreciate it.

Russ:  You bet.  So our topic today is Joint Ventures.  PKF has been in that business for quite some time, right?

Brian:  Absolutely.  Being here in Houston, Texas a lot of joint venture activities take place in energy so being in the energy capital of the world you’ve got to have the Joint Ventures Strategic Advisor Services.

Russ:  Okay, and that Joint Venture Strategic Advisor Services is kind of an upgraded version of what you guys have been doing historically, right?

Brian:  You could say that.  We started getting more heavily involved in it just a few years ago and we now have a group of over 30 people that are assisting us with those types of services right now in Houston.

Russ:  So I’m real curious, I see and know, maybe have been in a joint venture or two myself over time, but when you’re coming in as an advisor do you show up and you’re automatically working for both sides?

Brian:  Well that’s an interesting question.  The reality is we’re engaged by one party but we can represent both sides of the joint venture.  If it just so happens that the way we execute upon what we’re doing we’re actually representing both sides because the benefits of whatever comes out of those joint ventures does that in both parts.

Russ:  Real interesting.  So strategic advisors on joint ventures, you’re coming in there and they’re not really merged, they’re just sort of partnering on an initiative.

Brian:  That’s exactly correct; they’re mutually executing under arrangement to pursue an investment interest jointly and hopefully have a good result.

Russ:  Okay, but it seems to me that has more of a chance of going off the track than a real merger; is that right?

Brian:  Well the reality is you want to make sure that whoever the operator is is the partner who’s really responsible for executing under all the activities that they mutually agreed to in the beginning, and at the end of the day you’re just trying to make sure everybody stays honest.

Russ:  Okay, well I want to have you back and talk about this a little more, is that okay with you?

Brian:  Absolutely.

Russ:  All right.  For more about joint ventures services visit  This has been another Thought Leader Production brought to you by PKF Texas Entrepreneur’s Playbook.

Not-for-Profits: You Can Save Tax with an Accountable Plan

Your not-for-profit can’t generally reimburse employees for business expenses tax-free just because staffers submit expense records. However, you can if you have a properly executed accountable plan. Under such a plan, reimbursement payments will be free from federal income and employment taxes for recipient employees and not subject to withholding from their paychecks. Additionally, your organization benefits because the reimbursements aren’t subject to the employer’s portion of federal employment taxes.

Follow the rules

Of course, rules and conditions apply. The IRS stipulates that all expenses covered in an accountable plan have a business connection and be “reasonable.” Additionally, an employer can’t reimburse an employee more than what he or she paid for any business expense. And the employee must account to you for his or her expenses and, if an expense allowance was provided, return any excess allowance within a reasonable time period.

An expense generally can qualify as a tax-free reimbursement if it could otherwise qualify as a business deduction for the employee. For meals and entertainment, the plan may reimburse expenses at 100% that would be deductible by the employee at only 50%.

It’s your organization’s responsibility to identify the reimbursement or expense payment and keep these amounts separate from other amounts, such as wages. The accountable plan must reimburse expenses in addition to an employee’s regular compensation. No matter how informal your nonprofit, you can’t substitute tax-free reimbursements for compensation employees otherwise would have received.

Keep good records

The IRS requires employers with accountable plans to keep good records for expenses that are reimbursed. This includes documentation of the:

  • Amount of the expense and the date,
  • Place of the travel, meal or transportation,
  • Business purpose of the expense, and
  • The business relationship of the people entertained or fed.

You also should require employees to submit receipts for any expenses of $75 or more and for all lodging, unless your nonprofit uses a per diem plan.

Put it in writing

While an accountable plan isn’t required to be in writing, formally establishing one makes it easier for your nonprofit to prove its validity to the IRS if ever challenged. Contact us for more information and help setting up an accountable plan.

David Robinson and Daniel Bassichis of Admiral Capital Group

Russ Capper interviews David Robinson, former player for the San Antonio Spurs and co-founder, Admiral Capital Group; and Dan Bassichis, co-founder, Admiral Capital Group. They discuss Admiral Capital Group’s core strengths, and how they use the company’s philanthropic footprint to do good in the community.

How to Create a Continuity Plan That Works for Your Not-for-Profit

Most not-for-profits are intensely focused on present needs — not the possibility that disaster will strike sometime in the distant future. Yet it’s critical that all organizations have a formal continuity plan to guide them should a natural or manmade disaster disrupt operations.

Formal plan

You likely already have many of the necessary processes in place — such as safely evacuating your office or backing up data. A continuity plan can help you organize and document existing processes and address any other issues you might have overlooked.

If your nonprofit provides basic human services (such as medical care and food) or disaster-related services, you generally need a more detailed and extensive plan so that you’ll be able to serve constituents — even without a full staff and other resources.

Assess risks

No organization can anticipate or eliminate all possible risks, but you can limit the damage of potential risks specific to your nonprofit. These vary by organization type, location, and technology. So, the first step in creating a continuity plan is to identify the threats you face when it comes to your people, processes, and technology.

Also, assess what the damages would be if your operations were interrupted. For example, if you had an office fire, what are the possible outcomes regarding personal injury, property damage, and financial losses?

Designate a lead person to oversee the creation and implementation of your continuity plan. Then assemble teams to handle different duties, such as a communications team responsible for contacting and updating staff, volunteers and other stakeholders. Other teams might focus on IT issues, decide how to preserve and retrieve critical inventory or devise evacuation procedures.

It only takes one

Keep in mind that the disaster doesn’t have to be a cataclysmic event such as a major fire or hurricane. Something as seemingly mundane as an extended power outage or virulent flu season could prevent your organization from carrying out its mission. Contact us for help assessing and addressing threats to your nonprofit’s operations.

Contribute to Your IRA for 2016 Until April 18

Yes, there’s still time to make 2016 contributions to your IRA. The deadline for such contributions is April 18, 2017. If the contribution is deductible, it will lower your 2016 tax bill. But even if it isn’t, making a 2016 contribution is likely a good idea.

Benefits beyond a deduction

Tax-advantaged retirement plans like IRAs allow your money to grow tax-deferred — or, in the case of Roth accounts, tax-free. But annual contributions are limited by tax law, and any unused limit can’t be carried forward to make larger contributions in future years.

This means that, once the contribution deadline has passed, the tax-advantaged savings opportunity is lost forever. So it’s a good idea to use up as much of your annual limit as possible.

Contribution options

The 2016 limit for total contributions to all IRAs generally is $5,500 ($6,500 if you were age 50 or older on December 31, 2016). If you haven’t already maxed out your 2016 limit, consider making one of these types of contributions by April 18:

1. Deductible traditional. If you and your spouse don’t participate in an employer-sponsored plan such as a 401(k) — or you do but your income doesn’t exceed certain limits — the contribution is fully deductible on your 2016 tax return. Account growth is tax-deferred; distributions are subject to income tax.

2. Roth. The contribution isn’t deductible, but qualified distributions — including growth — are tax-free. Income-based limits, however, may reduce or eliminate your ability to contribute.

3. Nondeductible traditional. If your income is too high for you to fully benefit from a deductible traditional or a Roth contribution, you may benefit from a nondeductible contribution to a traditional IRA. The account can still grow tax-deferred, and when you take qualified distributions you’ll be taxed only on the growth. Alternatively, shortly after contributing, you may be able to convert the account to a Roth IRA with minimal tax liability.

Want to know which option best fits your situation? Contact us.

An Overview of the 2017 Gulf Coast Regional Family Forum

Russ:  This is PKF Texas Entrepreneur’s Playbook.  I’m Russ Capper, this week’s guest host, and I’m coming to you from the Gulf Coast Regional Family Forum and I’m with Del Walker, Tax Practice Leader at PKF Texas and Founding organizer of the forum.  Welcome to the Playbook Del.

Del:  Welcome Russ, thank you for having us.

Russ:  You bet.  So this is my third Family Practice Forum with you guys and it is impressive but share what it’s all about with our audience.

Del:  From our standpoint what we’re trying to do is really help families provide – I told a little story this morning involving my mother.  She asked what is this about, what are you trying to do.  And I replied back to her the goal is we really want to help people be successful in achieving their family goals, we want to help people be successful as they pursue their vision.  We want to promote commerce, we want to enable people to learn from one another, kind of create a community and we want to have a little bit of fun from that standpoint.

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