The Journal Spring 2017

The Journal Spring 2017

American Health Care Act Pulled from the Floor

[author-style]By Tony Panico, CPA, Partner[/author-style]

The Committee on Rules, more commonly known as the Rules Committee, is a committee of the United States House of Representatives. The Rules Committee is in charge of determining under what rule other bills will come to the floor for consideration. The Rules Committee met the morning of Friday, March 24, 2017, regarding floor consideration of the bill attached to the American Health Care Act. The Rules Committee finished its meeting a little after 10 a.m. and the mandatory four-hour debate began approximately one hour later.

Prior to this meeting, Republicans, assuming they would get no Democratic support, could only have afforded to lose 21 Republican votes and still have the bill pass. As it stood on that Friday morning, 24 Republicans stated that they would vote against the bill with an additional four indicating that they would “likely” vote against it. As time progressed during the debate, additional Republicans announced that they would be voting “no” regarding passage of the bill; and, at approximately 3:30 p.m., President Trump requested Speaker Paul Ryan pull the bill from the floor. The bill was pulled despite efforts to incentivize Republican members to change their vote on the bill such as extending the additional 0.9 percent Medicare tax another six years.

As a result, there will be no change in the current provisions under the Affordable Care Act for the time being. Various taxes such as the 3.8 percent net investment income tax and the additional 0.9 percent Medicare tax are here to stay at least until: (1) a new replacement health care bill is developed or (2) they are repealed as part of tax reform. In addition, individuals and organizations should continue compliance with other Affordable Care Act provisions such as the individual and employer shared responsibilities.

Checkout the Trumponomics Think Tank section of https://www.withum.com/ for future updates on the ACA, tax policy and other economic and business developments.

Anthony Panico, CPA, MS, Partner T (973) 898 9494 [email protected] View Experience

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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals.

Estate Planning Is a Lifetime Process, Not After-Tax Distribution

[author-style]By Hal Terr, CPA, PFS, CFP®, AEP®, Partner [/author-style]

Following is a checklist of some life-changing events or activities that could affect your estate planning needs:

While only impacting half of one percent of the U.S. population, President Trump and the Republican Congress propose the repeal of “death tax.” However, each proposal is different where President Trump proposes the elimination of step-up in basis for estates exceeding $5 million, $10 million for married spouses, and provides an exemption for family farms and businesses; the Republican Congress is silent in its proposal if step-up in basis or carryover basis would apply at an individual’s passing. In addition, there is uncertainty if a capital gains tax would apply at an individual’s passing or when the beneficiary ultimately sells the inherited property. While both proposals have the elimination of the estate and generation skipping tax, neither President Trump nor the Republican Congress proposes the elimination of the federal gift tax.

Along with the changes in federal estate tax, many states have enacted legislation that has changed the state’s respective estate tax. Recently, New Jersey increased its estate exemption to $2 million with a proposed repeal in 2018. New York had previously passed legislation to increase the state estate exemption to equal the federal estate exemption by 2019. Connecticut’s estate tax exemption is $2 million and is one of the few states that still has a gift tax. With the change of the state estate taxes paid from a credit on the federal estate tax return to a deduction on the federal estate tax return in the 2001 tax law, Florida no longer has a state estate tax.

Legislative action on the estate tax in 2017 seems likely in view of President Trump and the Republican Congress proposals. However, given the current economic environment and the need for the Federal Government to raise revenue, complete and permanent repeal of the estate tax is unlikely. If any of the life changing events listed above applies to your individual situation and the changes in federal and state estate tax law, it might be time for you to review your estate planning documents to ensure these documents still meet your estate planning goals and objectives.

Hal R. Terr, CPA, PFS, CFP®, AEP®, Partner T (609) 520 1188 [email protected] View Experience

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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals.

Regulation and Tax Implications of Crowdfunding

[author-style]By Jim Bourke, CPA, CITP, CFF, CGMA [/author-style]

Three Distinct Types of Crowdfunding

• Reward-based crowdfunding.
• Donation-based crowdfunding.
• Equity-based crowdfunding, also known as regulation crowdfunding.

In regards to equity-based crowdfunding, the SEC adopted rules in October 2015 to permit companies to offer and sell their securities through crowdfunding. These rules went into effect in May 2016. Anyone can invest; however there are limits to how much someone, together with their spouse, can invest.

Limitations for Any 12-Month Period

• If either annual income or net worth is less than $100,000 a year, the maximum someone can invest is the greater of $2,000 or 5 percent of the lesser of annual income or net worth.
• If both annual income and net worth are $100,000 or more, then the maximum someone can invest is 10% of the lesser of annual income or net worth.
• The maximum one person can invest in a 12-month period is $100,000.
• The securities cannot be resold for 12-months except to an accredited investor.

If companies want to crowdfund their securities, they can do so on portals (online platforms), which must include educational information and communication channels. Through the portal, the issuer makes required disclosures available to the public for a minimum of 21 days before any security may be sold in the offering. The maximum amount to be raised in a 12-month period cannot exceed $1 million.

Information issuer Must Inform Possible Investors

• General company information.
  Names of directors, officers and 20 percent owners, if applicable.
  Intended use of proceeds and issue price, and method for determining the price.
  Target offering amount and deadline.
  Certain related-party transactions.
  Financial condition of the issuer.

Requirements from the Issuer Depending on How Much Money Is Planned on Being Raised

• $100,000 or less – tax return and financials certified by an executive officer of the company.
• $100,001 to $500,000 or more than $500,000, but first time issuer – financial statements reviewed by a CPA.
• More than $500,000, non-first time issuer – audited financial statements by a CPA.

If there are any material changes during the offering period, the issuer must get investor recommitment within five days of filing an amendment. Certain types of entities are not eligible for regulation crowdfunding exemption, which includes non-U.S. companies, investment companies and companies without specific business plans.

Tax Implications

While the IRS and Congress have not addressed the tax implications of crowdfunding income specifically, applying common tax principles and common sense will get the taxpayer to a well-reasoned and substantiated position. While donation and equity-based crowdfunding do not have tax implications for the issuer, reward-based crowdfunding does. Amounts received through reward-based crowdfunding are usually taxable. Assuming that the crowdfunding activity is a trade or business and not a hobby, any expenses are deductible against income raised. However, if the expenses are categorized as start-up costs, the taxpayer must capitalize these costs unless an election is made to expense a portion of the costs.

Taxpayers who are thinking of starting a reward-based crowdfunding campaign should take note of the timing of the campaign. If income is taxable in one year but the related expenses, which usually occur after a crowdfunding campaign has been completed, occur in another year, there is a timing issue. Creators should plan to end their campaigns early in one year so they have time to incur expenses that would offset their income for the campaign.

To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

By Jim Bourke, CPA, CITP, CFF, CGMA, Partner T (732) 842 3113 [email protected] View Experience

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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals.

Five Ways to Be Cyber Secure

[author-style]By Anurag Sharma, CISA, CISSP, CRISC, MBA, Principal[/author-style]

#1 Avoid Using Checks For Making Payments

Your personal checks contain sensitive information like your name, bank account number, routing number and in some cases even your address. Armed with your checking account number and bank routing number, criminals can create blank checks using an online checkbook retailer and can start writing checks from your checking account. So, this new year, stop using checks to make payments. If you plan to continue to use checks, set an auto alert on your checking account to notify you of all check payments. This way you can catch a check fraud early and take it up with your bank. Using electronic payment mechanisms and, whenever possible, using a credit card for payment will give you more time to flag fraudulent transactions and reduce your risk of losing money.

#2 Don’t Provide Your SSN Just Because It Was Asked For!

When filling out forms at the local hospital or when seeing a physician, you jot down your name, address and insurance information. Then you come to a space for your Social Security number (SSN). Should you fill in your SSN? If it’s your doctor or hospital asking, the answer is – No! Doctors, hospitals and other healthcare providers may want your SSN to help with debt collection in the case of a problem with your insurance company or unpaid copay, but you are under no obligation to hand over that information. Just leave the area of the form blank and the provider will likely not ask or notice. If they do, let them know that your insurance ID should suffice and that you prefer not to reveal your SSN unless mandated by law. This can reduce your risk of identity theft by reducing the number of places where you leave your SSN behind.

#3 Security Questions… Thou Shall Not Answer Them Correctly

Many websites and applications now rely on security questions to determine your identity if you forget your password or as an additional authentication layer. While it is human nature to answer these questions correctly during set up, it is not the most secure behavior. There are a lot of people who may know your mother’s maiden name; so why not create a new one and use that as an answer? Now it is not just an answer to a security question but another password that no one else knows and cannot guess. The wackier the answer, the better. And, it’s never too late to update your answers if you, like so many of us, answered them correctly in the first place.

#4 It Is Never Too Late to Reset, Until It Is

With so many hacks and data breaches in 2016, including the one billion passwords lost by Yahoo, if you have not done so recently, consider reseting all your passwords. Stop and think! Which other websites are using your same old Yahoo password or LinkedIn, Adobe, Dropbox, Tumblr, BitTorrent, Evernote? Yes, they all suffered a breach in the last two to three years. When you do reset your password, make sure that you come up with an easy-to-remember, complex password.

Looking for a secure way to store all your passwords? Password safe is a great tool – https://pwsafe.org/. It’s a local secure store and easily meets general password needs. There are many other options which may provide portability and integrate with different browsers. If you use Excel or Word documents or Post-it® notes, then switching to a secure password vault utility should definitely be on your New Year’s resolution list.

#5 Don’t Get Phished

Don’t fall for a “phishing attack.” Never click a link or open an attachment that you did not expect to receive. Scams today look very convincing, coming in the form of voicemails, eFaxes, invoices, social media, ADP/payroll themes or the IRS. If you’re not expecting something or have to think twice about the contents, don’t open it. If you do, you’re opening hackers to the contents of your computer in multiple ways.

Remember, your CEO will usually not ask you to wire money via email nor will your CFO request you to run a W-2 report of all employees and email it. If they do, pick up the phone or walk to their office and confirm their requests. Finally, organizations should test their “human firewall” by engaging an external firm to provide “phishing” as a service and identify employees who fall for such attacks and need security training.

Need More Information?

If you have any questions about this update or would like to further discuss your cybersecurity plan, please contact a member of Withum’s Cyber Secure Services Group or email our experts Joe Riccie, Partner, [email protected], Anurag Sharma, Principal, [email protected], or Sumit Pal, Principal, [email protected].

Anurag Sharma, CISA, CISSP, CRISC, MBA, Principal T (609) 945 7985 [email protected] View Experience

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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals.

Withum Launches “Trumponomics Think Tank”

Different Thinking for Different Times

Withum’s highly credentialed Think Tank team will provide expert commentary and projections regarding the latest developments in these and other related areas of specialization throughout the Trump presidency.

If you are not receiving this valuable information already, please email [email protected] to join our distribution list.

Withum Firm News

Best 50 Women in Business

For 11 years in a row, Withum is a proud sponsor of the NJBIZ “Best 50 Women in Business” awards program. Please join us in a hearty congratulations to Carleen Gaskin, CPA, CFF, Partner, who was selected as one of this year’s honorees.

Top Accounting Firm Lists

Accounting Today recently released its 2017 Top 100 Firms report, in which Withum appears as: the #1 Pacesetter in Growth, demonstrating the largest percentage of revenue growth of the Top 100 firms in the country; the #26 ranked largest firm in the U.S.; and #6 largest firm in the MidAtlantic region. Withum also appears in the Top Accounting Firms lists of both the Boston Business Journal and Philadelphia Business Journal for the first time in the Firm’s history.
“Everyone at Withum is thrilled to be a part of this exciting growth,” says Bill Hagaman, Withum’s Managing Partner and CEO. “We are equally as pleased that throughout the Firm’s 43 years of history, we have enjoyed consistent year-over-year growth through our long-term growth vision of strategic acquisitions, supplementing our robust organic growth. We credit our success to our dedicated staff and valued, loyal clients.”

Innovation Strength Story Winner

We are pleased to announce the first winner of our Firm’s inaugural social media based- #StrengthStory campaign. Congratulations to Jason DaSilva, founder of AXS Labs and the developer of AXS Maps – winner of the Innovative Strength category. Learn more about his story and how to nominate others for the next category of Administrative Strength by visiting www.withum.com/strengthstory.