December 29, 2020

Rehabbing a Historic Building? Historic Preservation Tax Credits Can Help

The Historic Preservation Tax Incentives Program works to revitalize communities across the country by offering a tax incentive for the rehabilitation of historic buildings. The program offers a 20% Federal tax credit to private investors who undertake substantial rehabilitation of a historic building that will be used for a business or other income-producing purpose while maintaining the historic character of the property. The 20% rehabilitation credit equals 20% of qualified expenses spent on the approved rehabilitation of a certified historic structure.

How do Historic Preservation Tax Credits work?

Only certified historic structures qualify for Historic Preservation Tax Credits. The National Park Service maintains a list of buildings that are certified as historic. The rehabilitation work must meet the Secretary of the Interior’s standards for rehabilitation, which aim to ensure the historic integrity of the building remains intact.

Taxpayers must complete a three-part application to qualify for the 20% tax credit:

  1. Part 1 presents information about the significance and appearance of the building
  2. Part 2 describes the condition of the building and planned rehabilitation work
  3. Part 3 certifies that the project meets specific standards laid out by the Secretary of the Interior

Do states offer Historic Preservation Tax Credits?

Many states also offer Historic Preservation Tax Credits. An application and approval process is required at the state level, as well. Missouri offers tax credits equal to 25% of qualified expenses of the rehabilitation to approved historic buildings. The Missouri Historic Tax Credits can be carried back 3 years or carried forward 10 years.

Find out how Anders can help with Missouri Historic Tax Credits.

Should I take advantage of Historic Preservation Tax Credits?

Yes, Historic Preservation Tax Credits are a great way for historic real estate owners to lessen their tax burden for rehabilitating or restoring their historic property. If you are considering purchasing or have already purchased a historic building for commercial use, contact an Anders advisor below to take the next steps for qualifying for these tax credits.

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December 28, 2020

New $900 Billion Pandemic Relief Package Includes Additional Stimulus Payments, PPP Loans and More

A new pandemic relief bill was recently passed by the House and Senate and signed into law by the President on December 27, 2020. The $900 billion COVID-19 relief package was part of a $2.4 trillion Consolidated Appropriations Act bill signed by President Trump.

As a follow up to the CARES Act, which was the largest federal stimulus package, the new bill will help fund several expiring CARES Act aid programs to help individuals, businesses and schools. While the bill does not allocate aid for state and local governments or provide for business liability protections, Congress expressed that this is a starting point and future bills will be introduced. Below we discuss the major provisions included in the relief package.

$600 individual stimulus payments

The criteria for the stimulus payments is similar to the first round, with full payments given to those making up to $75,000 for individuals and $150,000 for married filing jointly. Phaseouts equaling $5 for every $100 of Adjusted Gross Income (AGI) beginning at $75,000 for individuals and $150,000 for married filers. Individuals making $87,000 or more and $174,000 for those married filing jointly would not receive a payout. An additional $600 will be provided for each dependent child under the age of 17. This appears to still make college students ineligible for the stimulus payments if they are claimed as dependents.

The House has indicated they will be introducing a bill to potentially increase stimulus payments to as much as $2,000. Stay tuned on if and when the bill moves to the next level.

$284 billion for another round of PPP loans and small business funding

The package extends the Paycheck Protection Program (PPP), expanding eligibility for local newspapers, broadcasters and not-for-profit organizations. The extension allocates another $20 billion to small business grants and $15 billion to live event and cultural venues.

Highlights of the next round of PPP loans:

  • A second round of PPP loans are available for businesses that experienced 25% or more reduction of gross receipts in any 2020 calendar quarter compared to the same quarter of 2019. Companies with 300 or less employees will qualify.
  • Expanded eligible non-payroll costs to include:
    • Worker protection equipment
    • Supplier costs
    • Property damage
    • Operating expenses
  • Similar to the first round, the loan amount will equal 2.5x average monthly payroll costs, except for the restaurant and hospitality industries, which can apply for 3.5x average monthly payroll costs
  • Economic Injury Disaster Loan (EIDL) advances/grants are no longer subtracted from loan forgiveness amount and are no longer treated as taxable income
  • PPP loans up to $150,000 will be forgiven with a new one-page form including the loan amount, number of employees retained and payroll percentage.

Deductible expenses for payment of covered costs

The Act allows business owners to deduct expenses paid with forgiven PPP loan funding. This would give small business a much-needed tax break, overriding an IRS decision so businesses can claim 100% of deductions on rent, wages and more. The deduction applies to all PPP loans, regardless of if the loan has already been forgiven.

Extension of credits for paid sick leave

Families First Coronavirus Response Act (FFCRA) paid sick leave and family leave tax credits are extended through March 31.

$30 billion for vaccine distribution 

With the vaccine ready for distribution, the aid package directs $30 billion for procurement and distribution throughout the country.

$300 weekly federal unemployment assistance 

An expansion of federal unemployment assistance was included, providing an additional $300 per week for those on unemployment. This amount is down from the $600 passed by the CARES Act and would span for 11 weeks, from the end of December through mid-March. This relief is not retroactive.

Extension of rental assistance and eviction moratoriums

The bill allocates $25 billion in emergency rental assistance for those who lost their source of income due to COVID-19. It also extends the eviction protection another month to January 31.

Additional school funding

$82 billion is laid out for K-12 schools and colleges for heating and cooling system upgrades to fight against virus transmission. An additional $10 billion is allocated for childcare assistance.

These funding categories are just a few of the provisions included in the stimulus bill. There are many smaller provisions, including a new “three martini” tax deduction for business meal expenses, a U.S. Postal Service grant and more.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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December 22, 2020

Gifting Personal or Business Assets to Children Using a Family Limited Partnership

Passing along a business or wealth to the next generation is a goal of many individuals. There are several ways to transfer personal assets or business interests to your children or grandchildren. One often-overlooked strategy is utilizing a Family Limited Partnership to gift these assets. Below we dive into the basics and benefits of a Family Limited Partnership.

What is a Family Limited Partnership?

A Family Limited Partnership (FLP) is a limited partnership where a family of two or more individuals pool a portion of their personal or business assets together under one limited partnership. FLPs are recommended for individuals seeking to transfer these assets to their children or grandchildren while maintaining partial control, educating their heirs, and potentially saving on taxes in the process.

Similar to a traditional limited partnership, a family limited partnership is set up with general partner(s) and limited partner(s). In a FLP the general partner(s) is the family member(s) who hold the assets, typically the senior-generation. The remaining family members, typically the children or grandchildren, are receiving the limited partnership interest as a gift.  In some scenarios the limited partnership interest may be sold to at a discounted price rather than gifted.

What are the benefits of using a Family Limited Partnership?

Asset Control

Any individual who has worked hard building their wealth or business may be reluctant to the idea of giving up control. This is where the structure of the partnership is crucial.  The general partner(s) retain control over the managing of the assets. This allows them to educate their heirs on how the business is ran while simultaneously having the control to make the necessary decisions.  With this level of control, senior generation family member can also use the FLP to disperse assets to the limited partners utilizing the annual and lifetime gift tax exclusions. The structure also allows interest or ownership of an assets to be divided to family members without fractionalizing titles of the assets.

Tax Savings

A popular benefit of an FLP is the potential savings from estate and gift taxes. This has also put FLPs on the IRS radar for scrutiny.  Since limited partners maintain a lack of control in the FLP, a limited partner can receive a gift of interest in the FLP or buy interest in the FLP at a discount from the general partner. Any interest gifted or transferred to a limited partner can be utilized against the annual gift tax exclusion, which is currently set as $15,000 per recipient for 2020 and 2021. Once a family member has limited interest in an FLP, any earnings from the assets in the FLP are taxed at his/her income tax bracket.

Protection from Creditors

An FLP offers a great deal of safety in a situation where a creditor needs payment from a family member in the partnership. The structure of a FLP makes it to where the creditor does not have any control or access to the underlying property within the partnership. Instead, the creditor can only receive payment from the distributions of the partner who personally holds the debt.

Anders can work with you to decide if a Family Limited Partnership is best for your situation. Contact an Anders advisor today to discuss the many benefits of forming a Family Limited Partnership or learn more about Anders Family Wealth and Estate Planning services.

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December 15, 2020

5 Ways Azure Active Directory Can Integrate and Improve How Employees Work

Enabling employees to work from anywhere while keeping company data secure is a growing need for businesses. To accomplish this, Microsoft’s Azure Active Directory (Azure AD) should be a tool in your company’s IT arsenal. Azure AD is Microsoft’s next-generation, fully cloud-based identity and access management solution. It allows organizations of all sizes to manage accounts and data access. In many cases, Azure AD does not require any on-premises servers, allowing companies to actually decommission aging Domain Controllers. Imagine never buying another Domain Controller! Azure AD can do that for your company, while also helping your employees work more efficiently, effectively and securely.

How has Azure Active Directory evolved with company needs?

Twenty years ago, Microsoft released the first version of Active Directory. It was revolutionary at the time, allowing businesses to centrally secure and manage their information within their datacenters. Back then, most employees worked in the office. Smartphones would not exist for another seven years, tablets for another ten. Most of us didn’t even have high speed internet at home. Companies focused on building and securing their own datacenters, making them inaccessible outside of their own buildings. Active Directory was fantastic in 2000, before we had the expectation to have all corporate data securely accessible anywhere, from any device.

Now in 2020, the world has changed. Modern workers need data quickly. Modern customers demand security. New hires entering the workforce have never worked any other way. The incoming generation of workers are digital natives who expect the ability to be productive from anywhere. Companies are rethinking their datacenter infrastructures, wanting to become faster, less expensive, and more flexible. IT Managers want to spend less time and money on hardware, and more on delivering the outcomes their users’ demand. With all of this in mind, below we talk about five ways Azure Active Directory can help accomplish these needs and wants.

1. Seamlessly Connect to All of Your Business Applications

Azure AD Single Sign-On (SSO) provides easy access to internal and external resources for permitted users. This means that anyone in your organization can have secure access to on-premise resources and thousands of cloud SaaS applications from anywhere. SSO increases productivity by giving users access to company applications by signing in once to one convenient portal. Users use one password to get into all of their applications while being completely secure.

2. Enhance Security with Multi-Factor Authentication

Multi-Factor Authentication (MFA) significantly increases the security of logins by enforcing a two-step verification process and is a must in today’s cybersecurity climate. According to Microsoft’s Group Program Manager Alex Weinert “your account is more than 99.9% less likely to be compromised if you use MFA.” Azure AD offers a built-in, comprehensive MFA security solution with easy implementation. Combine MFA with conditional access, and you can create policies that control how, where and who can access your company’s data.

3. Protect Against Costly Data Breaches

Anders Technology specializes in implementing Azure AD policies and procedures that reduce IT security risks. With the use of risky user and sign-in reports, we can identify and stop account compromises before harmful behavior arises. Automated responses to unusual user behavior or sign-in attempts instill confidence in organizations knowing their applications and company data remain safe.  

4. Synchronize with Existing Windows Server Active Directory

If your organization already has an on-premises Windows Server Active Directory, users and groups can be synchronized to Azure AD using a tool such as Azure Active Directory Connect (AAD Connect). Implementing Azure Active Directory Connect enables users to authenticate to Windows Server Active Directory when accessing cloud and on-premises applications or resources.

Many businesses rely on existing Active Directory structures to enforce Group Policies within their network. Using Azure Active Directory in conjunction with Microsoft InTune, Group Policies can now be enforced on any of your resources, anywhere in the world. And all of this can be achieved using the same set of credentials for a single user identity!

5. Azure AD Is a Cost-Effective Solution to Windows Server Active Directory

Many startups and small businesses do not have an on-premise Windows Server Active Directory. With Azure AD, they may never need to buy one. These organizations can leverage Microsoft‘s cost effective cloud-based Azure AD services to manage their user’s identity and access to SaaS applications, all while taking advantage of all the other great features mentioned above.

How to Get Started with Azure AD

With over 28 data centers around the world and Microsoft handling the availability and services, Azure AD is accessible from wherever you are. While there are no costs for using Azure AD, several paid Azure Premium subscriptions can be added to best fit your business needs. The subscriptions provide value-added features, including:

  • Comprehensive security alerting and reporting
  • Group and user-based application access
  • Custom company branding
  • Self-service user management capabilities

Azure AD helps businesses streamline productivity by providing an easy means for managing company resources and applications, making them securely accessible to all of your users, no matter where they are or what devices they use. You wouldn’t expect your year-2000 mobile phone to work for you today. Why expect that from your access management solution?

As a Microsoft Gold Partner, Anders Technology has both the expertise and the experience to guide you to a solution that’s tailored to your company’s unique and specific needs. Contact an Anders advisor to discuss your situation.

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December 8, 2020

How Working from Home Affects State Taxes in Missouri and Illinois

With many companies having a remote workforce for most of 2020, there are a lot of questions around the state tax treatment for employees working from home. Each state handles their withholding differently, but below we discuss how Illinois, Missouri and St. Louis income tax withholding is currently treated at the state and local level.

Illinois Income Tax Treatment

In general, Illinois withholding is based on where the employee is working. Below is an outline of common questions and answers around Illinois income tax withholding, according to the Illinois Department of Revenue (DOR) Publication 130.

When are companies required to withhold Illinois income tax from an employee’s paycheck?

Employers must withhold Illinois income tax when federal income tax is withheld from compensation. Compensation is paid in Illinois when the employee’s services are “localized” in Illinois. This statement applies to all individuals except qualifying residents of Iowa, Kentucky, Michigan, and Wisconsin and military spouses.

When is compensation considered paid in Illinois?

The following are general rules for when compensation is paid in Illinois for tax reasons.

  • If all of an employee’s services are performed in Illinois, then compensation is considered paid in Illinois and subject to Illinois income tax withholding.
  • If some of the employee’s services are performed outside Illinois, but the services outside Illinois are incidental to the services performed inside Illinois, then compensation is considered paid in Illinois and subject to Illinois income tax withholding.
  • If the employee is an Illinois resident and neither of the rules above apply and no other state’s taxes are withheld, then compensation is considered paid in Illinois and is subject to Illinois income tax withholding.
  • If the employee’s compensation is not localized to any state under any of the rules above and the employee performs significant service within Illinois for more than 30 working days, and the service performed within Illinois is nonincidental to the employee’s service performed outside Illinois, then a portion of compensation is considered paid in Illinois and subject to Illinois income tax withholding. The portion of compensation subject to Illinois withholding equals the total compensation paid to the employee multiplied by a fraction equal to the number of working days the employee spent within Illinois during the year divided by the total working days of the year.

What is considered incidental?

The Illinois DOR defines “incidental” as any service which is necessary to or supportive of the primary service performed by the employee or which is temporary or transitory in nature or consists of isolated transactions. The incidental service may or may not be similar to the individual’s normal occupation as long as it is performed within the same employer-employee relationship.

An employee who normally performs all of their service in Illinois may be sent by their employer to another state to perform services which differ from their usual work, or they may be sent to do similar work. As long as the service is temporary or consists merely of isolated transactions, it will be considered to be incidental.

What is considered a working day?

The Illinois DOR defines “working days” as all days during the tax year in which the individual performs duties on behalf of his or her employer. Days in which the individual performs no duties on behalf of his or her employer, such as weekends, vacation days, sick days, and holidays, are not working days.

A working day is spent within Illinois if:

• The individual spends a greater amount of the day performing services on behalf of the employer within Illinois rather than not, without regard to time spent traveling, or

• The only service the individual performs on behalf of the employer on that day is traveling to a destination within Illinois, and the individual arrives on that day.

Example: Jane is a Missouri resident who earned $70,000 in wages from her employer for the tax year. During the year, she performed services for her employer for 40 days in Illinois out of 250 total working days for the year. Accordingly, 16% (40 working days divided by 250) of Jane’s wages, or $11,200, was paid in Illinois and is subject to Illinois income tax withholding.

When are employers not required to withhold Illinois income tax?

According to the Illinois DOR, unless you enter into a voluntary withholding income tax agreement, you are not required to withhold Illinois income tax from the following:

  • Compensation paid to residents of Iowa, Kentucky, Michigan, and Wisconsin, due to reciprocal agreements with each of these states, and certain military spouses;
  • Compensation paid to a non-resident employee who has performed less than 31 days of service in Illinois and whose compensation is not localized in Illinois
  • Compensation paid to a non-resident employee whose service is performed entirely in another state;
  • Compensation paid to an Illinois resident whose service is performed entirely in another state, and the compensation is subject to withholding in another state;
  • Other specific situations as described in Illinois Department of Revenue Publication 130

If an employee lives in another state, are employers required to withhold income tax for that state?

If your employee is “paid in Illinois” and is a resident of Iowa, Kentucky, Michigan, or Wisconsin, you may, but are not required by Illinois law, withhold income tax for the other state. If your employee is a resident of a state with whom Illinois does not have a reciprocal agreement (i.e., Missouri), you must withhold Illinois income tax on all income that is paid in Illinois. You may be required to withhold tax for another state in which the employee works or resides. Contact those states to determine if you are required to register as a withholding agent.

Missouri Income Tax Treatment

Missouri income tax treatment is a bit simpler for remote employees than Illinois. According to the Missouri Department of Revenue (DOR), any time an employee is performing services for an employer in exchange for wages in Missouri, those wages are subject to Missouri withholding. This applies to remote workers where an employee is located in Missouri. This rule also applies when the employer instructs the employee not to work but the employee is still being paid.

If you have employees performing services for wages in Missouri, those wages are subject to Missouri withholding, regardless of where you as the employer are located.

Earnings Tax Treatment in St. Louis

According to the St. Louis Collector of Revenue, employees who have been working remotely due to COVID-19 or in conjunction with the acting City of St. Louis Health Commissioner’s Order should be treated as working at their original, principal place of work for earnings tax purposes.

The acting Health Commissioner’s Order required all non-exempt City of St. Louis employers to “facilitate employees working remotely” but is completely neutral to the location of the remote work site. It does not order employees to work outside the City nor require any individual who is employed outside the City, to work remotely in their City Home.

Employers in the city of St. Louis should continue to withhold on those employees in the same manner as they did prior to the temporary relocation of their employees.

Under these circumstances, days worked out of the city due to a temporary reassignment caused by COVID-19 or the acting Health Commissioner’s Order may not be included in the Non-Residency Deduction formula on Form E-1R when claiming a refund for tax year 2020.

Due to the COVID-19 remote working environment, state and local tax withholding is complicated and changes or clarifications can be made at any time. Contact an Anders advisor below to discuss your specific tax situation.  

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December 7, 2020

Forbes Names Anders to America’s Best Tax and Accounting Firms List

For the second year in a row, Anders has been named to Forbes’ America’s Best Tax and Accounting Firms List for 2021. With firms recommended in tax and accounting, Anders is one of 172 firms in the country to be recommended for both lists. Anders is also one of only six firms in Missouri and one of three in St. Louis.

For the second year, Forbes has partnered with market research company Statista to create a list of the most recommended firms for tax and accounting services in the U.S. based on surveys of tax and accounting professionals and their clients. The firms that received the most recommendations were included on the list. The 278 firms identified include the biggest firms in the country and some of the smallest. According to Statista, they’re all tackling the complexities of the ever-changing tax laws head-on.

What should you look for in a firm? According to Forbes, a team dedicated to your industry, whether it’s cannabis or manufacturing, is a must. But make sure you also ask about what other value-added services are on offer, like a state and local tax practice, a wealth practice, or an IT advisory group.

Read the full list of Forbes’ Top Recommended Tax and Accounting Firms for 2021.

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December 1, 2020

Looking to Invest in Real Estate? Consider These 5 Strategies to Get Started

There are many reasons people get into real estate investing, including to help diversify investment portfolios, generate cash flow and hedge against inflation. Real estate investments can also create passive income and offer tax benefits, such as the ability to deduct mortgage interest, real estate taxes and depreciation. While some real estate investment strategies require hands-on management of the property, other options allow investors to own real estate without becoming a landlord. Below are five potential ways to get started investing in real estate.

1. Buy a Rental Property

One way to start investing in real estate is to buy a rental property. The investor would purchase a commercial or residential rental property and serve as the landlord. This type of investment would require more hands-on work than some other options, but it could generate rental income and tax deduction benefits. Depending on their goals, the investor can either hold their property or flip it:

  • Buy and hold real estate – The real estate could be held and rented to generate income with the intent of growing the initial investment through rental income and market appreciation. 
  • Buy and flip real estate – Investors could purchase lower-priced real estate and put in the work to repair and improve the property. Fixing up the property requires more hands-on work, but it can increase the property’s value in a relatively short time. The improved property could then be sold for a profit or held for rent.

2. Invest in a Real Estate Investment Trust (REIT)

A REIT is a company that owns, operates or finances real estate. Many REITs are publicly traded, like stocks and bonds, so they are highly liquid, pay dividends and require no hands-on management. 

3. Convert a Personal Residence to a Rental Property

An investor could convert their own home into a rental property rather than selling the home when ready to move to a new home. The rental income would help cover the mortgage on the property and allow the investor to build equity while not requiring much, if any, additional investment. As an added benefit, the investor could start taking depreciation on the rental property.   

4. Invest Through Real Estate Funds

Real estate crowdfunding platforms connect real estate developers with investors to finance real estate projects. Investing through a real estate fund requires capital from the investor to make the investment, and the investments tend to be illiquid. However, pooling funds allow investors the opportunity to purchase larger properties, like commercial properties or multi-tenant residential properties, that might be too expensive for one single investor.

5. Buy a Vacation Rental Property

An investor could purchase a vacation home or condo and rent the property when they are not using it. The investor could enjoy the benefits of owning a vacation home while receiving rental income and taking advantage of the tax deductions. Like with other rental properties, the investor would be responsible for finding renters and maintaining the property unless they use a property management company.

The real estate investment strategy an investor chooses will depend on several factors, including the investor’s financial situation, the desired level of involvement required by the investment and the time-horizon of the investment. Once an investor determines these factors, they can identify the real estate investment option that works best for them.

If you’re considering investing in real estate, the Anders Real Estate Group can help decide the best option for you. Contact an Anders advisor below to learn more.

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