March 28, 2019

Tax Reform for Individuals: Changes in Deducting Gambling Losses

Professional gamblers and hobby gamblers are now on the same playing field in the eyes of the IRS. Under the Tax Cuts and Jobs Act (TCJA), changes were made to how expenses and losses are deducted against gambling winnings. Previously under the old law, allowable losses and expenses were different for professional gamblers and those who gamble as a hobby. Below we cover how they were handled under the previous law, what has changed, and how gamblers will be impacted from a tax perspective.

Previous Law

Under prior law, individuals who gambled as a hobby and not as a trade or business could deduct gambling losses only to the extent of gambling winnings. Nongambling expenses, such as travel to and from a casino, were not deductible against gambling winnings.

Individuals who gambled as a trade or business, considered professional gamblers, could also deduct gambling losses only to the extent of gambling winnings. The difference was that nongambling expenses, such as travel to and from a casino, were deductible as an ordinary business income expense, creating the potential for a loss.

New Law

The new law treats professional gamblers and hobby gamblers the same from a tax perspective. Gambling losses are still deductible only to the extent of gambling winnings, but gambling expenses, such as travel to and from a casino, are deductible only to the extent of gambling winnings for both types of gamblers.

Impact on Individuals

While the changes seem minor, they have the potential to offset a substantial amount of income for individual taxpayers. If a taxpayer still has gambling income after offsetting those winnings with gambling losses, they can continue to offset any of that income with expenses incurred in relation to those winnings. Before the TCJA, those who gamble professionally could generate a loss by including these expenses as an ordinary business expense, but now these individuals are on the same playing field as those who gamble as a hobby and are unable to generate a loss. These changes are in effect until December 31, 2025.

Contact an Anders advisor with questions on how these changes will affect you. Visit our Tax Reform Resource Center for videos, blog posts and resources on how tax reform will impact you, your family and your business.

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March 26, 2019

Fire Proof: Are You Ready to Unexpectedly Transition Your Business?

Have you ever noticed that fire trucks always back into the fire hall? Why don’t they just pull into their parking spot?

Backing in at the end of a shift saves them time when they have to get to a fire.  They back in to be ready; whether the call comes in 5 minutes or 5 days, they are prepared to leave as quickly as possible.

Like the firemen, you, as a business owner, need to be prepared when you get the call from someone who wants to buy your business.  And these days, owners are getting that call more often.

Preparing for Unsolicited Offers

Companies are becoming more acquisitive because they have access to more cash. This increase in acquisitiveness among buyers has important implications for you as a business owner. You need to have a sellable asset when opportunity strikes.

Statistically speaking, the two most common reasons you are likely to sell your business are:

  1. A health scare;
  2. An unsolicited offer to buy your business.

As unsolicited offers increase, so too does the need for you to be ready if an opportunity comes your way. The trademark of an unsolicited offer it the owner is unaware it is going to happen and are less prepared.  This puts the advantage in the hands of the buyer.  Companies that are put together with disordered bookkeeping, too much customer concentration or poor management styles will end up being passed over for turnkey operations.

This means you need to operate your business as if an offer were always around the corner.  Being prepared puts the advantage back in the hands of the seller.  The time is now for you to get your company ready to showcase when an opportunity comes knocking. Anders Business Transition Planning can work with you on a personalized transition plan based on your Value Builder assessment. Contact an Anders advisor to start the process.

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March 20, 2019

Making the Most of Your Internship

College: everyone tells you it will be the best years of your life. You’re finally studying something you’re interested in, meeting new people and creating memories. At the same time, looming over your head is a dark cloud called “the real world”. Ideally, after college you’ll find a nice job in your field of study with a decent salary, right? If that’s the goal, then it looks like you’re going to need to gain some real-world experience through an internship.

Congrats, you’ve landed your first internship!

Whether you apply for 10 opportunities before you hear back from a company, or you get a phone screen after your first application, at some point you will finally land an internship. Each company handles internships differently. In one you may be a coffee/errand runner, in another you may be dealing with clients directly. No matter where your internship falls on this broad scale, the questions of “what am I getting out of this internship?” and “how do I make the most of this experience?” always come up in the back of your mind. Below are some ways to make the most out of your internship.

Have a game plan

You should know what you want to get out of the internship before it begins. Write out goals that you want to accomplish over the course of the internship. Some examples are soft skills, such as speaking on the phone and writing business emails, and technical skills that are specific to your field or career.

Once you have your goals written out, schedule a time with your supervisor to discuss how you can work together to meet these goals during your time there. It is your job to hold yourself and your supervisor accountable for completing your goal list.

Make connections

You will want to build relationships with coworkers that are both in and outside of your department. This can be a daunting task as you are most likely one of the youngest people in the office and may feel intimidated by many of your new colleagues. The easiest step you can take towards building relationships is introducing yourself to each person in the office when you come across them. Another thing you can do is offer help to others when you find yourself without any work to do. If you’re really up for breaking out of your comfort zone, you can ask colleagues to get lunch with you, or eat lunch with different groups in the office. Your goal is to make everyone remember your name after your internship is over.

Ask questions & make suggestions

The people you will be surrounded by and receiving projects from have quite a few years of experience on you. They will forget that you may need more specific instructions on how to do something or where to find information. Don’t be afraid to ask for help. Asking an expert for help will be a lot faster than panicking and trying to figure something out on your own. Asking questions is often encouraged and shows that you want to do well and respect that person’s expertise. Sometimes you will have to venture outside of your department to ask questions and that is just another way to build connections. You also want to ask questions to learn more about the organization. See if there are strategic goals, new initiatives or upcoming events that you can be a part of. Staying involved is the best way to feel engaged in the company rather than a visitor.

Remember, you were hired for a reason. Interns are hired to learn and assist on projects and tasks. If you see something that you think could be done differently, make a suggestion. Your supervisor should value your perspective and what you have to bring to the table. You may find something that they haven’t thought of, or if they already have thought of it, you’ll learn why they don’t do it.

Own your mistakes

This is a hard one to learn. Owning up to your mistakes is a part of learning and growing in your career. You’re going to make mistakes and the worst thing you can do is try to ignore the situation. Missed a deadline? Explain what happened to your supervisor and tell them how you are going to fix this issue so you don’t miss the next deadline. Accidentally sent an email to the wrong person? Apologize and reconcile the situation. If you don’t know what to do about your mistake, ask your supervisor how you can fix it or suggest different solutions and ask which one they recommend.

Keep a copy of projects and things you learn, as long as they are not confidential

Internships are learning experiences. You will be doing things you’ve never done before and hopefully they will be helpful in the future. Keeping a copy of projects you worked on and information you learned will be helpful for your future positions. Having a portfolio of work you’ve done could help you land a new job and keeping information on things you learned will become a great guide for when you’re on your own in a new position. Make sure you aren’t taking confidential information outside of the company. If you’re not sure whether you should keep something, ask your supervisor.

Keep in touch after the internship ends

Coworkers and supervisors from your internships are now a part of your network so you’ll want to keep up with them. A former supervisor could be a great recommendation for a future position and coworkers can become your references. These people could also become future clients depending on what field you are in. Adding colleagues on LinkedIn is the perfect way to stay in touch and keep up with what they are doing in their careers. If you ever need advice or a warm introduction, you could ask former coworkers to lunch. Building and maintaining your professional network is vital to growing your career.

Remember, you are in charge of making your internship a meaningful and useful experience. Don’t let those few months go by without making a lasting impact and creating connections. Every small step is bringing you closer to “the real world”, and you want to be as prepared as possible. Check out current openings at Anders for a full list of our internships and full-time positions available.

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March 20, 2019

Anders Named a Top Midwest Firm and a Firm to Watch by Accounting Today

Anders has been named to Accounting Today’s 2019 “Beyond the Top 100: Firms to Watch” list for the seventh year in a row, and to the “Top Firms: The Midwest” list for the 14th consecutive year.

Jumping 10 spots this year, Anders ranked #7 in a total list of 46 Firms to Watch. Firm revenues totaled $36.10 million in 2018, with those on the Top 100 List starting at $41 million and upwards.

Anders also ranked #9 on the Top Midwest Firms list for the third consecutive year. This list includes 25 firms in Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. Anders is the largest single office firm on the list.

The lists appear in a special supplement to the March 2019 edition of Accounting Today.

Download the Accounting Today Top 100 Firms and Regional Leaders supplement.

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March 19, 2019

How to Protect Your Network After the Microsoft Windows 7 End of Life

Microsoft is ending extended support for many of their outdated products and services through their End of Life Program, including the Windows 7 Operating System. Starting January 14, 2020, businesses with Windows 7 machines in their network will be leaving their data at risk of cybersecurity attacks if they don’t have a plan.

What will happen to Windows 7 after it goes End of Life?

After January 14, 2020, Windows 7 will continue to work, but it will no longer receive security updates. All of the devices running on Windows 7 and the information on them are open to a cybersecurity attack, exploitation and data theft.

What are your options?

Upgrading your Windows 7 on existing hardware could be a solution if you have newer equipment. However, with the expected lifespan of a workstation being 3 to 5 years, it may be more cost efficient to replace the workstation versus upgrading your existing. Finding the cost benefit of buying new versus upgrading is something the Anders Technology Services Team can help you with.

Is Microsoft 365 right for you?

You have many different options for moving to Windows 10 and utilizing Azure and Office 365.  Since Office 2010 is going End of Life the same time as Windows 7, it may be beneficial to transition straight to the Microsoft 365 license. This license includes everything you need to protect your business while working and collaborating more efficiently with access to all of the Office 365 product lines. The Microsoft 365 license includes five fully installable versions for your PCs or laptops, Enterprise Mobility Suites, Advanced Threat Protection with an email spam filter, as well as Autopilot to manage all of your Windows 10 desktops and applications in one location. The Anders Technology Services Group can help look into options to decide the best plan for your business. Contact an Anders advisor to learn more.

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March 14, 2019

Take the Value Builder Assessment to Help Increase the Value of Your Business

How much did your home increase in value last year? Depending on where you live, it may have gone up by 5 – 10% or more. How much did your stock portfolio increase over the past year?

Now consider what portion of your wealth is tied to the stock or housing market, and compare that to the equity you have tied up in your business. If you’re like most owners, the majority of your wealth is tied up in your company. Increasing the value of your largest asset can have a much faster impact on your overall financial picture than a bump in the stock market or the value of your home.

How Anders Uses the Value Builder Assessment to Evaluate Your Business

Anders Business Transition Planning team works with a variety of businesses, from startups to multi-generational companies, on how to create, harvest and preserve wealth in the company for a successful transition when the time comes. Our team of Certified Exit Planning Advisors (CEPA) utilizes a Value Builder Assessment that helps business owners get a better idea of the value of their company before they decide to sell or entertain offers.

The Value Builder Assessment provides insight on what areas to focus on to build value in your company and receive higher offers from buyers. Companies with a Value Builder Score of 80+ out of a possible 100 typically receive offers to buy their business that are 71% higher than what the average company receives.

How long would it take your stock portfolio or home to go up by 71%? Years, maybe even decades. Your Value Builder Score helps you track your overall business value along with your performance on the eight key drivers of company value. You can quickly zero in on which of the eight drivers is dragging down your value the most and then take corrective action.

Your overall Value Builder Score is derived from your performance on the eight attributes that drive the value of your company:

  1. Financial Performance: your history of producing revenue and profit combined with the professionalism of your record keeping.
  2. Growth Potential: your likelihood to grow your business in the future and at what rate.
  3. The Switzerland Structure: how dependent your business is on any one employee, customer or supplier.
  4. The Valuation Teeter Totter: whether your business is a cash suck or a cash spigot.
  5. The Hierarchy of Recurring Revenue: the proportion and quality of automatic, annuity-based revenue you collect each month.
  6. The Monopoly Control: how well differentiated your business is from competitors in your industry.
  7. Customer Satisfaction: the likelihood that your customers will re-purchase and also refer you.
  8. Hub & Spoke: how your business would perform if you were unexpectedly unable to work for a period of three months.

To find out how you’re performing on the eight key drivers of company value and start your journey of increasing the value of your largest asset, contact an Anders advisor to get your Value Builder Score assessment.

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March 13, 2019

Spring Training 2019: New Tax Law Swings Away at Top Earning Players

MLB Spring Training is in full swing, and one of the most buzzed about topics down in Florida this year was Bryce Harper signing the biggest MLB contract in history. With a 13-year contract of $330 million, you can only imagine how taxes will come into play. While players aren’t paid for spring training beyond per diem stipends, some major tax implications are put on them during the season, especially following tax reform.

Big Changes for Income Tax Returns

Most professional athletes are W-2 employees. Under tax reform, the 2% miscellaneous itemized deduction was eliminated.  Therefore, athletes can no longer deduct employee business expenses, which for some athletes means big changes in their itemized deductions.  This change coupled with $10,000 cap on state and local income tax and real estate taxes has changed the landscape for professional athletes’ income tax returns.

For Bryce Harper, he will save tens of millions in taxes by signing with the Phillies over a California team because of Philadelphia’s low flat tax rate. Whether this was a factor in his decision or not, it will certainly help offset some of the incentives lost because of tax reform.

Paying the Price for Agent Fees

Some typical employee business expenses that are no longer deductible are agent fees, spring training or training camp lodging expenses, clubhouse dues, travel expenses and off-season training. If Bryce Harper paid Scott Boras the typical agent fee on $330 million, which would calculate out to be $9,900,000 if he pays 3%, Bryce would see a huge difference on his tax return if agent fees were still deductible. The typical agent fee is 3-5% – big numbers even on smaller contracts.

Should the MLB, or any professional sport, consider having the club pay the agent fee as part of the contract and reduce the salary to the athlete? This would be a win-win, the club would get a deduction for the payment to the agent and the salary paid to the player would be less, they end up whole and the player receives the lower salary, therefore, paying less tax. This would achieve the same, or better, results as they would have under the old tax law when they received a tax deduction for 2% miscellaneous itemized deduction for the agent fee.

Despite big changes to the tax law, there are ways for athletes to minimize their tax liability with proper planning. Contact an Anders advisor to discuss your specific tax situation, or learn more about the Anders Sports, Arts & Entertainment Group.

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March 12, 2019

Tax Reform for Individuals: Qualified Charitable Distributions

The tax benefits of donating to your favorite charity have changed under the Tax Cuts and Jobs Act (TCJA), but there are ways to offset the changes for individuals 70 ½ or older with individual retirement accounts (IRAs). With more taxpayers now utilizing the higher standard deduction, Qualified Charitable Distributions (QCDs) present a new opportunity for taxpayers to maximize the tax benefits of charitable giving.

What are the benefits of Qualified Charitable Distributions?

To retain the tax advantages of charitable giving, many taxpayers are considering making QCDs from their IRA. A QCD is:

  • An otherwise taxable distribution from an IRA
  • Owned by an individual who is age 70 ½ or over
  • Paid directly from the IRA to a qualified 501(c)(3) organization

This is a great opportunity because QCDs are not considered taxable income to the account holder and they help satisfy the annual required minimum distribution (RMD). QCDs are not deductible as itemized deductions on the taxpayer’s individual income tax return, but because they don’t increase taxable income QCDs essentially provide a tax deduction and still allow taxpayers to benefit from the new, higher standard deduction.

Who is eligible for a Qualified Charitable Distribution?

IRA owners and beneficiaries are eligible to make a QCD, so long as the distribution is made on or after the date the taxpayer reaches age 70 ½. Simply making a distribution in the year the taxpayer turns 70 ½ is not sufficient. Distributions can be made from traditional, or SEP and SIMPLE IRAs that are not ongoing. An ongoing SEP and SIMPLE IRA are ones with active employer contributions in the year in which the charitable contributions are made.

How can I make a Qualified Charitable Distribution?

To make a QCD, instruct the trustee of your IRA to make a direct contribution to an eligible 501(c)(3) organization. It is important to insist the check is made payable to the charity directly and is not first payable to the owner or beneficiary of the IRA. If the check is first made to the taxpayer and then passed onto the charity, the requirements for a QCD are not met. Ensure that adequate records of the contribution are received to support the QCD.

QCDs may exceed a taxpayer’s RMD amount, so long as they do not exceed the $100,000 annual limit for single taxpayers. If married filing jointly, spouses can also elect to make a QCD of an additional $100,000 from his/her IRA.

QCD Example

On December 7, 2018, Steve, age 72, advised the trustee of his IRA to donate his $10,000 RMD directly to a qualified 501(c)(3) organization. Because Steve was 70 ½ at the time of the distribution and he directly contributed funds from his IRA to a qualified organization, the $10,000 is a QCD and is not included in his taxable income. Steve and his spouse file a joint tax return and their 2018 itemized deductions consist of $8,000 of state tax payments, so they will not itemize their deductions in 2018.

If Steve would have withdrawn $10,000 from his IRA and written a $10,000 personal check to the same charitable organization, he would have been required to pay income tax on the IRA distribution and, because his increased charitable deductions of $18,000 would still not have exceeded the $24,000 standard deduction, he wouldn’t have received tax benefit from the contribution. By choosing to utilize the QCD rules, Steve saved tax at his marginal federal rates on the $10,000 IRA distribution, satisfied his RMD requirement and still benefitted from the increased standard deduction. For a taxpayer in the 22% federal tax bracket, this represents $2,200 of federal tax savings.

Every taxpayer’s situation is different, so please contact an Anders advisor to determine if making a QCD is the right choice for you. Learn more about charitable contribution deduction changes under tax reform, or visit our Tax Reform Resource Center for videos, blog posts and resources on how tax reform will impact you, your family and your business.

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March 7, 2019

How Much NHL Players Really Make

Professional athletes get paid very well for doing a job they love to do.  While athletes make a lot of money compared to the typical individual, athletes’ take-home pay is not nearly as high as advertised. The information we hear and see most often is that this player signed for $1 million or that player signed for $5 million. But how much of that goes into their pocket? Below we uncover common fees that impact most NHL players.

Jock and Income Taxes

As some may know, athletes have federal, state and, in some cases, city taxes withheld from their pay. Athletes are subject to what’s called “jock tax” to be paid in each state, and some cities, in which they play. Along with paying taxes wherever they play, most of these athletes will find themselves in the highest income tax brackets due to their compensation levels. Depending on a number of factors, such as state of residency and team schedules, athletes can be paying roughly 45-50% in income taxes on a rather frequent basis – and may even be north of 55% in certain situations.

Agent Fees

While not withheld from a player’s paycheck, agent fees are another somewhat significant expense for each player. Agent fees generally range anywhere from 3-5% of a player’s salary, which takes another chunk out of their take home pay.

Escrow

The four major sports leagues each have their own collective bargaining agreement (“CBA”) that governs much of the league rules and finances. The National Hockey League is one of the leagues where teams withhold a portion of player earnings in escrow to ensure a 50/50 revenue split between owners and players. The amount/percent teams withhold in escrow is determined at the beginning of each season and is adjusted after each quarter of the season, if needed.

As of the second quarter of the 2018-2019 NHL season, the escrow withholding rate is 13.5% of a player’s compensation. While escrow funds are not directly deducted from bonus payments, the escrow withholding rate is set to include all the player’s compensation – salary, signing bonuses, and estimated performance bonuses. After the end of each season and financial figures are ultimately determined to ensure the appropriate revenue split, a portion of the amounts held in escrow may be refunded to the player. In the recent past, refunds have generally been less than 4% of the amounts withheld, and are not refunded until about a year or so after that season ends.

Down to the Numbers

Using federal/state/city income taxes of 50%, escrow withholding rate of 13.5%, and agent fees of 4%, a player making $2 million in a season would see that dwindle down to $795,800 – a number that almost anyone would still be content with. A player’s NHL salary may seem high, and it is, but the take-home pay is not nearly as much as it sounds after withholdings and agent fees. We work with athletes to help them make better financial decisions during and after their careers. Learn more about the Anders Sports, Arts & Entertainment Group.

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March 7, 2019

Anders Named the Best Place to Work in Large Employer Category by the St. Louis Business Journal

Anders has been named the 2019 Best Place to Work in the Large Employer Category by the St. Louis Business Journal. This is the third consecutive year that Anders has been ranked #1 in the Large Employer Category, made up of 10 companies with 100-249 local employees.

St. Louis companies and their employees completed surveys administered by Quantum Workplace, which used its own algorithm to measure communication, management structure, benefits, teamwork and several other factors at each firm. The companies were grouped by size and ranked to determine the most employee-friendly workplaces in St. Louis.

View the full list of 2019 Best Places to Work and read the feature on Anders.

Anders Best Place to Work
Anders employees celebrating the win at the St. Louis Business Journal’s Best Place to Work Breakfast

 

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