I Really Mean It!! The Blog is Moving!!

Thank you for being a follower of my SenneySays Blog. We are moving the SenneySays Blog from Blogger.com to our new Pickrel, Schaeffer and Ebeling Website. I’d love for you to follow my Blog on our website at www.pselaw.com. 

You can also find it on Facebook at or even on LinkedIn. Hope you enjoy the Blog and find it valuable for your business. As always if you have any questions, feel free to email me at jsenney@pselaw.com or call 937.223.1130. Thanks again, Jeff Senney, attorney

Blog Moving to PS&E Website

Thank you for being a follower of my SenneySays Blog.  We are moving the SenneySays Blog from Blogger.com to our new Pickrel, Schaeffer and Ebeling Website.   I’d love for you to follow my Blog on our website at www.pselaw.com.  You can also find it on Facebook at or even on LinkedIn.  Hope you enjoy the Blog and find it valuable for your business.  As always if you have any questions, feel free to email me at jsenney@pselaw.com or call 937.223.1130.  Thanks again, Jeff Senney, attorney

How to Treat Start-Up Expenditures

Start-up expenditures generally must capitalized and amortized over a 15 year period.  However, for years after 2010, you may elect to expense up to $5,000 of start-up costs in the year the business begins, and then amortize the balance over 15 years.  The first year expense limitation amount is reduced to the extent total start-up expenditures exceed $50,000. 

Start-up expenditures are amounts paid or incurred in connection with investigating the creation, acquisition or establishment of an active business.  But start-up expenditures do not include any amounts that would be deductible as interest, taxes or R&D expenses.  If a business is disposed of before the end of the 15 year amortization period, any expenditures not yet deducted may be deducted to the extent the disposition results in a loss.

A corporation that makes expenditures in an unsuccessful effort to start or acquire a business may deduct such expenditures as a loss.  Non-corporate taxpayers not engaged in the business of locating or promoting new business ventures cannot deduct  the cost of unsuccessful searches or investigations (they are considered personal expenses).  However, once the non-corporate taxpayer has focused on the acquisition of a particular business, unsuccessful start-up expenditures are deductible as business losses.

You may deduct expenditures related to expansion of your existing business if you can show that the contemplated business expansion and the existing business are closely-related.  But such expansion costs must be capitalized and amortized if they provide you with long term benefits, create separate and distinct assets or relate to a change in the nature of your business operations. 

If you have any questions about whether to deduct or amortize start-up expenditures, or whether you can write-off unsuccessful start-up expenditures as losses, please give me a call or email at (937) 223-1130 or jsenney@pselaw.com.  And please send a copy of SenneySays to your to your friends.   

AND ONE MORE THING.    Tax deductions are a matter of “legislative grace.”  You are only entitled to take a tax deduction if you meet all of the requirements for such deduction as set forth in the federal tax code and regulations.   In order to qualify for tax deductions, you are generally required to adequately substantiate the amount, timing and purpose of the deduction.   In some cases you are required to go even further and maintain a contemporaneous written log to substantiate the expenses.  In other cases, you may be permitted to estimate your expenses based on the US Tax Court’s Cohan rule.   More about substantiation of tax deductions in a future blog.  If you want to talk about it now, please call or email me at  Jsenney@pselaw.com or 937-223-1130.

 Serving Dayton, Serving You

Pickrel, Schaeffer & Ebeling Co., LPA, 2700 Kettering Tower, Dayton OH 45423

www.pselaw.com

Tax, Business, ERISA, Employee Benefits, Real Estate, Construction Law, Private Placement Security Law, Employment Law, Workers Compensation, Probate, Estate Planning, Succession Planning, Bankruptcy, Creditors Rights, Immigration Law, Litigation, Arbitration, Mediation

IRS Accepts Gambling Addiction as Reasonable Cause

In a previous blog we discussed what constitutes “reasonable cause” for abatement of federal income tax penalties.  Reasonable cause can be any situation beyond the control of the taxpayer that prevents the taxpayer from filing, paying or depositing taxes.  Common examples of reasonable cause are death or serious physical or mental illness.   While there is no published case or IRS ruling on point, in a very recent case I was able to convince the IRS that gambling addiction was a reasonable cause.

 In deciding whether a particular problem or set of circumstance amounts to reasonable cause, the IRS agent reviewing the abatement request will typically want answers to the following questions: (1) Why did these problems keep you from complying with your filing, payment or deposit requirements?  (2) Do you have a history of filing, paying or depositing taxes late?  (3) How were other financial matters handled during this time you had the problem?  (4) Did the time period you had the problem correlate to the time of the tax filing deadline or tax due date?  (5) Was your problem anticipated?  How beyond control of the taxpayer was the problem?  (6) Do you have written documentation to support your claim that a problem existed   such as doctors notices or hospital bills?

There is no special form that needs to be completed to make a request for abatement.  A letter addressed to the IRS collection agent requesting abatement of penalties, which sets forth the facts and includes copies of supporting documentation should be sufficient.

In a recent case I handled involving failure to timely deposit income and payroll taxes, IRS agreed to waive all penalties (and interest assessed on the penalties) based on gambling addiction as reasonable cause for failure to timely deposit.  While there were no published cases or IRS rulings on point, I was able to cite a Mayo Clinic study that indicated gambling addiction was a medical condition caused by an imbalance in the brain chemicals serotonin, norepinephrine (adrenaline) and dopamine, and that such condition prevented the addict from coping with business and financial pressures.        

If you have any questions about reasonable cause for penalty abatement, or need any assistance with a federal or state income tax matter, please give me a call or email at (937) 223-1130 or jsenney@pselaw.com.  And please send a copy of SenneySays to your to your friends.   

AND ONE MORE THING.  Too often business owners forget to prepare and sign a buy-sell agreement.  And way to often they forget to pull it out and see what the buy-sell agreement says.   If the owners do not have a buy-sell agreement in place, the occurrence of a trigger event such death, disability, or termination of employment can lead to confusion at least, and litigation at worst.  If you have any questions or comments about buy-sell agreements or succession planning, please call or email me at ..  Jsenney@pselaw.com or 937-223-1130.

Serving Dayton, Serving You

Pickrel, Schaeffer & Ebeling Co., LPA, 2700 Kettering Tower, Dayton OH 45423

www.pselaw.com

Tax, Business, ERISA, Employee Benefits, Real Estate, Construction Law, Private Placement Security Law, Employment Law, Workers Compensation, Probate, Estate Planning, Succession Planning, Bankruptcy, Creditors Rights, Immigration Law, Litigation, Arbitration, Mediation

Ohio BWC Safety Grant Program - Sarah Carter Guest Blogger

When a business owner thinks of the Bureau of Workers’ Compensation (“BWC”), the opportunity to receive funds is probably not high on the list, if at all, but the BWC has implemented a variety of programs for employers who take steps to make their workplaces safer and healthier for employees.

The most lucrative program is the Safety Intervention Grants Program, which provides the employer with up to $40,000 towards the purchase of ergonomic, safety, and/or industrial equipment. This is a 2-to-1 matching grant, which means the employer has to contribute at least $20,000 toward the equipment in order to earn the $40,000 grant.

To be eligible for this grant you must: (a) be a state fund employer in business for at least two years; (b) maintain active coverage; (c) be current on all funds owed to the BWC; and (d) demonstrate the need for safety intervention (note due to high demand, numerous items have been identified by the BWC as no longer being eligible for grant funds, including fork lifts, boom lifts, and vehicle lifts). There are several additional requirements, including extensive documentation regarding the purchase and ongoing reporting requirements detailing the impact the equipment has had on the workforce. There are strict rules regarding the use of the funds, and any unused funds must be returned to the BWC.

If you have any questions about the Safety Grant Program, call or email Sarah Carter at (937) 223-1130 or scarter@pselaw.com. 

AND ONE MORE THING.  The BWC also offers grants under the Drug Free Safety Program (“DFSP”) and newly created Workplace Wellness Grant Program. Sarah Carter will provide more information about the DFSP program in a future Blog.  If you have any questions or comments about any tax or business matter, please call or email me or Sarah Carter at Scarter@pselaw.com or Jsenney@pselaw.com or 937-223-1130.

Serving Dayton, Serving You

Pickrel, Schaeffer & Ebeling Co., LPA, 2700 Kettering Tower, Dayton OH 45423

www.pselaw.com

Tax, Business, ERISA, Employee Benefits, Real Estate, Construction Law, Private Placement Security Law, Employment Law, Workers Compensation, Probate, Estate Planning, Succession Planning, Bankruptcy, Creditors Rights, Immigration Law, Litigation, Arbitration, Mediation

Can I Get Tax Penalties Abated?

The federal income tax code is extraordinarily complex.  It can be extremely difficult for a small business owner to comply timely with all of the rules and regulations in the best of situations.  If for any reason you fail to file, pay or deposit income or payroll tax as required, you are subject to tax, interest and penalties.  

It is unlikely the IRS will abate interest charges.  But if you meet certain requirements, it is possible to get most or all of the penalties abated.   The IRS will generally abate penalties for failure to file, pay or deposit if the failure was due to “reasonable cause.”

Reasonable cause can be any set of circumstances that prevent you from being able to file, pay or deposit taxes on time.  Some common examples that the IRS has accepted as reasonable cause for abatement of penalties are: death or serious illness of you, a family member or someone very close to you; unavoidable absence (in hospital, rehabilitation, or prison);  destruction of your office and records (fire, flood or other casualty); civil disturbances; incorrect advice from a tax professional; incorrect advice received  from the IRS; or other events beyond your control.  More about this in a future blog.

If you are being assessed tax, interest and penalties for failure to timely file, pay or deposit, you may be eligible for abatement of penalties.  Give me a call if you want to discuss reasons for penalty abatement in more detail.  Jsenney@pselaw.com or 937-223-1130.

AND ONE MORE THING.    The Minority Business Enterprise (MBE) / Encouraging Diversity, Growth & Equity (EDGE) Unit has the responsibility for implementing the State of Ohio's minority business set-aside program. This includes certifying minority businesses thereby making them eligible to participate in the state's set aside program, as well as assisting state agencies with the selection of set aside contracts, maintaining a list of certified minority business enterprises, monitoring program compliance, and conducting research & reporting.  If you want more information go to the MBE/EDGE website by clicking MBE / EDGE Certification .  Or give me a calll or email at Jsenney@pselaw.com or 937-223-1130.

PS. Got a topic you want to see discussed in SenneySays?  questions I can help with?  Any business isssue you want to Give me a call or email.  I'll send you a SenneySays headband.  Thanks for reading.

Serving Dayton, Serving You

Pickrel, Schaeffer & Ebeling Co., LPA, 2700 Kettering Tower, Dayton OH 45423

www.pselaw.com

Tax, Business, ERISA, Employee Benefits, Real Estate, Construction Law, Private Placement Security Law, Employment Law, Workers Compensation, Probate, Estate Planning, Succession Planning, Bankruptcy, Creditors Rights, Immigration Law, Litigation, Arbitration, Mediation

Stock Options - Succession Planning

Successful succession planning sometimes involves the use of stock options.  Stock options are used to give employees incentive to put render exceptional service and put forth their best effort to grow and increase the value of the corporation.  If the employee works hard and the corporation increases in value the employee’s stock increases in value. 

Stock options can also be used to create a market for the stock of the founding shareholder.  When stock options are awarded to and exercised by key employees, a market is created for eventual sale of the founding shareholder’s stock. 

Stock options can be qualified or non-qualified.  Qualified options have to granted with an option price equal to fair market value.  Non-qualified options may have an option price less than fair market value.  Qualified and non-qualified options are treated differently for federal income tax purposes.  More about taxation of stock options will be in a future blog.

Options generally are awarded for a 5 year term.  The employee can exercise the option any time during the term.  Upon exercise of the option, the employee pays the option price to the corporation.  Some corporations set a below market option price for non-qualified stock options to make it easy for employees to exercise the option.  Other corporations require employees to pay a fair market value option price so they really have “skin in the game.”  Other corporations pay a bonus to the employee at the time of option exercise so as to partially fund the employee’s payment of the option price.  The right answer here depends on the situation. 

When you issue stock options to your key employees, it is important that the award agreement contain non-competition provisions, transfer restrictions and buy/sell provisions.  If you and a key employee who exercised a stock option have a dispute in the future, you want to make sure you have a way to get the stock back when his employment e is terminated.

Will talk more about taxation of stock options in future blogs.  Please give me a call if you want to discuss any questions about qualified or non-qualified stock options.  Jsenney@pselaw.com or 937-223-1130.

AND ONE MORE THING.  The stock market seems to have turned itself around.  Now might be a good time to consider making gifts of appreciated stock or other assets to the next generation.  Many assets are still being traded or valued at relatively low prices. If these assets are expected to increase in value over time, now might be the right time to gift such assets.  You can take a business valuation discount on a transfer of closely-held stock.  Give me a call or email at Jsenney@pselaw.com or 937-223-1130 if you want to talk about gifting stock to family as part of your succession planning.  Jsenney@pselaw.com or 937-223-1130.

 Serving Dayton, Serving You

Pickrel, Schaeffer & Ebeling Co., LPA, 2700 Kettering Tower, Dayton OH 45423

www.pselaw.com

Tax, Business, ERISA, Employee Benefits, Real Estate, Construction Law, Private Placement Security Law, Employment Law, Workers Compensation, Probate, Estate Planning, Succession Planning, Bankruptcy, Creditors Rights, Immigration Law, Litigation, Arbitration, Mediation

Deferred Compensation - Code Section 409A

Successful succession planning often involves the use of deferred compensation arrangements with key employees.  Such arrangements are designed to generate employee loyalty, and keep the key employee on board after the owners have moved on. 

Deferred compensation arrangements come in many shapes and sizes.  Many deferred compensation arrangements are structured so that the amount of deferred compensation is determined by increases in the value of the company, sales volume, net profits, reduction in expenses or other measurable factors within the influence of the employee.

When setting up drafting a deferred compensation arrangement it is important to make sure the arrangement complies with Internal Revenue Code section 409A.  Code section 409A was enacted to prevent executives from controlling the timing of cash distributions under deferred compensation arrangements.  Under Code section 409A, the timing of payments under a deferred compensation arrangement must be specified in the agreement, and with limited exceptions may not be further deferred or accelerated.  Care should be taken when amending an existing deferred compensation arrangement to avoid making a change that accidentally violates Code section 409A. 

If a deferred compensation arrangement does not meet the requirements of Code section 409A, the compensation is subject to certain additional taxes, including a 20% ADDITIONAL income tax. Section 409A has no effect on FICA (Social Security and Medicare) tax.

Will talk more about deferred compensation arrangements and succession planning in future blogs.  Please give me a call if you want to discuss any questions about deferred compensation arrangements.  Jsenney@pselaw.com or 937-223-1130.

AND ONE MORE THING.  Shahrzad Allen is now working with PS&E.  Shahrzad does immigration work.  If you or one of your clients needs assistance with a VISA or other immigration matter, please give me or Shahrzad Allen a call.  Jsenney@pselaw.com or Sallen@pselaw.com or 937-223-1130.

Serving Dayton, Serving You

Pickrel, Schaeffer & Ebeling Co., LPA, 2700 Kettering Tower, Dayton OH 45423

www.pselaw.com

Tax, Business, ERISA, Employee Benefits, Real Estate, Construction Law, Private Placement Security Law, Employment Law, Workers Compensation, Probate, Estate Planning, Succession Planning, Bankruptcy, Creditors Rights, Immigration Law, Litigation, Arbitration, Mediation