A project management team working

8 Steps to Effective Project Management

Whether you’re trying to launch a fresh product or break ground on new construction, making progress requires concentrated effort. Project management is the process of harnessing and organizing that effort to turn a concept into reality.

The project management process can involve many different phases depending on the complexity of the goal, including planning, organizing, scheduling, and executing the work involved. With a thorough project management plan, a daunting task becomes a series of simple, actionable steps that allow you to meet deadlines, stay on budget and achieve incredible things.

In today’s world of complex, multiphase tasks that encompass a large scope, good project management is essential. However, even smaller project goals can see substantial benefits from developing a plan for their achievement. If you’re interested in harnessing the power of planning to benefit your company, here are some essential project management tips for creating action plans that work for you. 

Project Management Steps for Success

Depending on the scope of the work, some of these steps may be combined or even expanded into sub-steps to accommodate your specific needs for project success. Nevertheless, approaching any goal with this process in mind will give you a strong foundation from which to determine your ideal phases of project management.

1. Define the Project

Every accomplishment begins with a concept. The first step in making it a reality is refining it so you have a clear objective. Think about your short- and long-term goals and how this project may impact other aspects of your business. When you know what you want to do or build, you can begin planning how you’re going to make it happen.

2. Determine Who Needs to Be Involved

Identifying the relevant stakeholders is one of the most critical phases of project management. This group will obviously include parties like business owners, sponsors, and shareholders, but it is also important to remember that everyone touched by the project has a stake in it, including consumers.

With all key parties identified, ensure their needs are met and secure the necessary approvals before moving forward.

3. Define the Steps Needed and Determine Who Will Work on Each

When evaluating the parties involved in the project management process, be sure to account for all the work that will be necessary to bring your plan to fruition. Will you be able to complete the project in-house? Will you need to hire contractors or buy new tools? These considerations have a significant impact on your budget and timeline, so they should always take place early in the planning process.

4. Set Goals and Determine What Qualifies as a Successful Outcome

Once you have a clear vision and you know what your stakeholders expect, the project management process becomes more concrete. Write out your project objectives and how you expect it to benefit everyone involved.

5. Identify a Timeline and Create a Schedule

An essential aspect of developing a functional timeline is accounting for how the steps of your project might overlap. Are any of your processes prerequisites for others? You’ll want to ensure your schedule is arranged to accommodate any interconnecting project demands.

In addition to creating a final deadline for the project, be sure to include realistic, achievable milestones that will occur along the way. These may include progress markers and deadlines for individual components. Keeping your project management steps manageable and actionable will keep the project moving and ensure the continued motivation of your team.

6. Assess Risks and Resources Needed

Every project involves some risk. When you take the time to consider what might go wrong in the course of execution, you can design contingency plans to keep the project on track. Similarly, you’ll want to be sure you have everything you need on hand to complete the project before it begins, preferably with a little extra to spare in case of unexpected issues.

7. Perform the Tasks

With your plan in place, your team ready, and your resources secure, it’s time to break ground. In this phase, your job as a project manager is to keep everything moving, ensuring open communication and proactively addressing issues so the project can continue to advance toward the finish line.

8. Test the Outcome and Determine Success 

The final step of the project management process is perhaps the most rewarding. Review the work that was accomplished and evaluate its success in light of the original goal and any circumstances that emerged during completion.

Very few projects are ever finished precisely as expected, but by following these project management tips, you can design a detailed and agile plan that keeps work moving and brings your vision to life in the end.

Sharpen Your Focus With Financial Management From Marshall Jones

When you are running a company or startup in Atlanta, your focus should be on the project at hand. Let Marshall Jones handle the accounting side of your business. Contact one of our Certified Public Accountants and Advisors today!

Here is what you need to know to prepare for an audit in Atlanta

Preparing for an Audit? Here’s What You Need to Know

The idea of an audit can intimidate many business owners. However, there are several different types of audits, and many are designed to improve your business so you can operate more efficiently in the future. Read on to learn more about what each classification of audit is, as well as tips for how to prepare for an audit.

The Different Types of Government Audits

The first step when preparing for a company audit is to identify and understand which type of audit you are dealing with. There are 14 main types of audits, each one serving a unique purpose. Once you do this, you can then take the necessary steps to prepare for the audit and incorporate the results into your daily operations.

1. External Audit

External audits are performed by external auditors who have no stake in your company. They are ideal for businesses of any size that want to get a clear look at their company and its processes without bias. An external, expert opinion is often one of the best resources for difficult issues your company may struggle with, like finance or tax compliance. Additionally, external audits lend your business more credibility with financial stakeholders.

As you prepare for an external audit, take the time to designate someone to be the liaison between your company and the external auditor. A single point of contact will help both you and the auditor stay organized. This person will be responsible for compiling reports and communicating with the auditor about questions, findings and more. 

2. Internal Audit

An internal audit is an audit your company handles itself, checking that each branch of the company is following the proper procedures and internal policies. The goal of an internal audit is to strengthen the organization and identify areas for improvement. To prepare for an internal audit, sit down with all areas of management, and compile a thorough list of the areas you want your internal audit to focus on.

3. Forensic Audit

A forensic audit is usually required at the request of the court, and its findings are used during legal proceedings to investigate fraud or misappropriation. To stay on top of a forensic audit, make sure your company keeps detailed records of all financial transactions, including dated receipts. Having a clear picture of your financial transactions will help you avoid surprises during a forensic audit.

4. Statutory Audit

Statutory audits are a legally required review of a company’s finances and financial procedures. A statutory audit can occur on a federal, state or local level. Because there are differences between local standards and national standards, do not use the results of a statutory audit as your primary source of information about your company’s standings. As you prepare for a statutory audit, make sure you submit all required documentation requested by the initiator on time to avoid delay.

5. Financial Audit

A financial audit is conducted by external auditors and carefully analyzes your company’s financial statements, processes and position. Because financial audits are typically an annual audit, make sure you close out your company’s fiscal year before proceeding. This way, you get an accurate report of your company’s data.

6. Tax Audit

Tax audits are conducted by the IRS and are one of the most recognized types of government audits. Your company could experience a tax audit for several reasons, including non-compliance, or it could just be a scheduled event by the IRS. To adequately prepare for a tax audit, make sure you know the scope and purpose of the audit. If you know why your company is being audited, you can prepare your answers and have the appropriate financial information ready before the proceedings begin.

7. Information System Audit 

An Information System audit is also known as an IT audit. It is an audit of your company’s IT infrastructure, operations and related policies. For a productive audit experience, create a list of all controls and safeguards currently in place. List the applications, services, software and programs your company uses, as well as information needed to access them. You should also take the time to compile a list of all known IT gaps, so your IT auditor has a place to start and focus their efforts. 

8. Compliance Audit

A compliance audit ensures your business is compliant with a given set of standards or regulations. Compliance audits are essential, as they keep your company running smoothly and according to all laws. To avoid surprises, conduct your own internal compliance audit before the real thing so you can identify and address weak spots ahead of time. At the very least, you can learn something new to help your business run better. 

9. Value for Money Audit

A Value for Money audit is typically used by non-profit organizations when a traditional for-profit analysis of an organization’s finances cannot be made. The purpose of this classification of audit is to analyze your organizations’ financial effectiveness and determine whether your designated funds are correctly utilized. Before a Value for Money audit, make sure you have a clear understanding of your organization’s money in and money out, as well as the value of all goods and services purchased.

10. Review Financial Statements

A review of financial statements is less expensive than a full audit and smaller in scope.  A review of financial statements is useful for analyzing financial information and checking for accountability, accuracy and legality. Many organizations and businesses use a review of financial statements when they do not have financial experts on staff as a way to stay on top of their financial proceedings.

Because a financial review is smaller in scope than a full audit, it does offer less assurance. For this reason, make sure you check with all lenders or financial investors with a stake in your organization before electing to have a review of financial statements, as some may require full audits instead.

11. Agreed Upon Procedures (AUP)

An Agreed Upon Procedure (AUP) is when a company hires an external auditor to audit a specific part of their business. Companies may initiate AUPs if a part of their organizational structure is not performing up to standards or as a way to identify where they should allocate time or funds. Once you receive the results of an AUP, it is up to you to make sense of the findings and apply them to your practice. To do so, you may need to consult an outside expert. Keep this potential cost in mind as you plan and budget your AUP. 

12. Integrated Audit

An integrated audit combines an external financial audit with an internal audit of your company’s operations. It is a way to identify discrepancies before between financial reporting and financial statements. Integrated audits take a closer look at how each branch of your company interplays with one another. To prepare for an integrated audit, make sure each department of your company’s management is aware of the audit, so they can help implement internal changes, and provide the external auditor with all necessary information.

13. Special Audit

A special audit looks at one specific area of a company’s operation. It may be initiated by an outside agency, like the government, or from inside the company. To get the most out of a special audit, make sure all management has a clear understanding of the purpose and goal of a special audit. This will help your staff feel at ease and will give everyone a clear direction once the results of the special audit are returned to you. 

14. Operational Audit

Companies initiate operational audits to get a fresh perspective on their company’s processes and structure. Operational audits are excellent for identifying weaknesses and strengths, as well as introducing new ideas to help your company thrive. Before conducting an operational audit, determine the scope of the review and create a list of goals. For the most productive audit experience, work with your auditor to identify the areas of concern you want the audit to focus on.

Let Marshall Jones help your company prepare for an audit

Let Marshall Jones Help Your Company Prepare for an Audit

At Marshall Jones, our certified public accountants and advisors perform audits according to auditing standards generally accepted in the U.S. and standards that apply to financial audits in government auditing standards. We use a risk-based audit approach to comply with all standards and objectives. Contact us today for your audit needs.

Tax Tips For 2019 Year-End Tax Planning in Georgia

To ensure that you don’t have any surprises when filing your taxes it is important to meet with your Atlanta CPA when tax planning for your 2019 taxes. One of the most important reasons is to gain a better understanding of the new tax law.

Tax Tip #1: Ensure You are Continually Recalculating your Estimated Payments Throughout the Year

The tax brackets and laws around AMT have changed. It is important to make annualized calculations throughout the year to determine your quarterly payments. The last payment is due on January 15, 2020 and it is a very important deadline to avoid any underpayment penalties. If your 2018 adjusted gross income exceeded $150,000 ($75,000 for married filing separately), your 2019 estimated tax payments or withholding must equal at least 110% of your prior year tax liability, instead of the 100% required for other taxpayers. 

Fringe benefits are also table such as imputed income from group term life insurance or the use of your employer’s automobile for personal purposes. This could be additional compensation on your total tax liability and is your responsibility, not your employers.

Plan these appropriately as an overpayment is an interest-free loan to the government and while you will get the money back, the interim time could be used to make the money work for you. 

Tax Tip #2: Consider The Implications and Strategies for Your Passive Income

The laws around net investment income tax (NIIT) have also changed. Net investment tax includes interest, dividends, annuities, royalties, rent, and income from a trade or business that is considered passive activities. This is important to discuss with your CPA during your 2019 year-end tax planning as this additional tax could have an effect on your estimated payments. 

You may also want to consider grouping your trade or businesses if you own a business through an S-corporation or partnership. If you are thinking about selling your passive assets be sure to discuss the use of certain suspended losses which can reduce other income or gain under the general income rule.

Tax Tip #3: When Tax Planning for Individuals, Take Advantage of State Tax Credits

The 2017 tax law imposed a $10,000 limit on the deductibility of state and local income taxes. Many states created tax credit programs to provide you with federal charitable contribution deductions while simultaneously providing a tax credit against state income taxes. In June 2019, the IRS released Notice 2019-12 which provides a safe harbor to individuals who itemize deductions to treat, in certain circumstances, payments that are or will be disallowed as charitable contribution deductions under the final regulations laws state or local taxes for federal income tax purposes. It’s important to keep records to provide the amount of the contributions you make during the year. 

Tax Tip #4: Family Matters in Year-End Tax Planning

Taking advantage of the “kiddie tax” was always a very popular tax planning strategy. However, these rules changed beginning in 2018. Kiddie tax was widely used to transfer property to dependents in order to have the income taxes at a much lower rate. As of 2018, the law subjects the child to be taxed at the trust income rates (which are very similar to the individual tax rates). There are still positives to taking advantage of this, including defer income or possibly to have the child file their own return. It may also be feasible to transfer income-producing property to your children when they are no longer subject to kiddie tax rules since they will still likely have a lower tax rate.

Alimony rules have also hanged. If you are paying alimony, carefully review your situation with your CPA to ensure that you achieve the most desirable tax consequences. It may make sense to modify the agreements to recharacterize payments. Payment of alimony will be more expensive because payments will be made from after-tax rather than pre-tax dollars.

2020 Tax Planning? Marshall Jones’ Certified Public Accountants and Advisors can Help

Overall, having a trusted relationship with your tax advisor will help you to deal with these situations ahead of time. There are a variety of strategies that can be personally tailored to your situation. The Certified Public Accountants and Advisors at Marshall Jones are dedicated Tax professionals and can help you understand and plan for financial success in 2020. Contact Marshall Jones today using our online form or call us at (404) 321-2001.

Are you prepared financially for retirement?

Recent surveys suggest that about 44 percent of American workers who are saving in a workplace retirement plan feel confident they will retire comfortably. However, generation by generation, the numbers show that many individuals are way behind when it comes to reaching their savings goals.

A new survey from Natixis Investment Managers finds that 44 percent of American workers who participate in a 401(k) or other workplace retirement plan feel secure about their retirement, as long as they watch their spending .Another survey which found that more than half of adults are either somewhat more confident (30 percent) or much more confident (27 percent) about their ability to save for retirement than they were three years ago. 75% of Americans are rejecting financial help and that can spell disaster

Baby boomers

The oldest baby boomers are in their early 70s and possibly well into retirement by now. The youngest boomers are around age 55 with only a few years left to save. However, for most boomers, their savings aren’t ready for retirement; the median account balance for baby boomers is just $152,000.

That may sound like a lot of money, but the average person age 65 and up spends around $46,000 per year, according to the Bureau of Labor Statistics. At that rate, that $152,000 would barely last three years.

According to the Transamerica survey, most boomers realize their current savings won’t cut it – nearly 70% say they expect to work past age 65 or possibly not retire at all. However, only a quarter of them said they had a backup plan in case they were forced to retire earlier than they had anticipated.

How much should the average baby boomer have saved, then? It depends on how much you expect to spend each year, but you can estimate your retirement number by using the rule of 25. It’s based on the 4% rule, which states that you can withdraw 4% of your savings the first year of retirement, then adjust that number each subsequent year to account for inflation. The rule of 25 essentially allows you to work backward to figure out your total savings based on how much you expect to spend in the first year of retirement.

For example, say you expect to spend $46,000 in your first year of retirement. Multiply that by 25, and you get $1.15 million. (You can check your work by taking 4% of $1.15 million, which comes out to $46,000). Keep in mind that Social Security benefits will play a part here, too. If you expect to receive, say, $15,000 per year in benefits, that’s only $31,000 you’ll need to save on your own. Multiply that by 25, and your adjusted retirement number is $775,000

Gen Xers

Generation X-ers still have a few years left before retirement – but it’s approaching quickly. Individuals in this generation only have around an estimated median of $66,000 saved for retirement. With the youngest Gen X-ers in their early 40s, that’s a concerning number.

People this age also seem to be aware that they’re struggling. Only 14% say they’re “very confident” they’ll be able to retire comfortably, and nearly a third have taken a loan or withdrawal from their retirement account.

So how much work would it take for the average Generation X-er to get back on track? If you’re on the older side of the spectrum (about 54) with only $66,000 saved, you’ll need to dramatically take your savings to the next level. Even if you save $2,000 per month earning a 7% annual return, you’d only have around $500,000 saved by age 65. For those who are around age 40 with $66,000 saved, stashing away $800 per month will get you to savings of about $1 million by age 65.


The median estimated amount in millennials’ retirement accounts is $23,000, which isn’t surprising considering they have a lot of time left to save for retirement. However, given their young age, millennials are very much engaged in the topic of retirement. More than half (53%) say they expect their primary source of income in retirement to be their personal savings (as opposed to a pension or Social Security benefits), and 72% say they’re interested in learning more about how to achieve their retirement goals.

Whether that $23,000 now will amount to enough savings in the future, though, largely depends on how much you’re saving and how long you have until retirement.

Millennials are classified as those born between 1979 and 2000, which is a huge range. If you’re a 40-year-old millennial with only $23,000 saved, you may need to supercharge your savings earlier rather than later. For example, if you want, say, $800,000 saved by age 65, you’d need to save roughly $900 per month for the next 25 years to reach that goal, assuming you’re earning a 7% annual rate of return on your investments.

What’s holding workers back ?

Ideally, each generation should be much farther toward their retirement savings goals — particularly because they have access to retirement plans provided by their employers.

But other financial concerns get in the way. The biggest one: daily living expenses, which was cited by 65 percent of respondents. Then there’s generational debt, with 43 percent; housing costs, 43 percent; and health-care costs, 32 percent. Surveys show that 22 percent of workers admitted to taking a lump sum distribution from their retirement funds without moving the money to another plan. It’s not all bleak when it comes to retirement. There will be other sources of income, such as Social Security or the proceeds you may see if you decide to sell your home. Workers would be wise to understand the benefits that contributing to a workplace plan can bring. That includes the potential savings from lowering your taxable income, the extra money you may receive from employer matches, and the potential to save more once you’re 50 and older through catch-up contributions.

What to do if you’re off track?

Even if your numbers align with the median amount people in your generation have saved, that doesn’t necessarily mean you’re saving enough. If you’re falling short, the best thing you can do is set a goal for yourself and make some lifestyle changes so you can save more.

First, figure out your retirement number so you have something to shoot for. Play around with a retirement calculator to see how much you should have saved by retirement and how much you’ll need to save each month to get there.

Once you have a monthly savings goal, take a good look at your budget to see where you can make cuts. These cuts don’t have to be drastic – saving a couple of hundred dollars by cooking at home more often or riding your bike to work rather than driving to save on gas can make a big difference. If you’re seriously behind, though, you may need to make some dramatic changes, possibly by downsizing your home or moving to a less expensive neighborhood.

Regardless of how you choose to save money, the best thing you can do if you’re behind on your saving is to realize you need to make a change and then create an action plan. By making an effort to get back on track, you’re already well on your way to achieving your retirement goal.

Tax Scams Continue!

During this period when annual income tax returns are being prepared, there are a number of cons and scams that everyone should be aware of.

Taxpayers, businesses and tax pros need to be alert for a continuing “tricky and clever” surge of fake emails, text messages, websites and social media attempts to steal personal information. Watch out for emails and other scams posing as the IRS, promising a big refund or personally threatening people. Don’t open attachments or click on links in emails

Senior citizens lose an estimated $2.9 billion annually from financial exploitation. Impersonating the IRS was the No. 1 scam targeting seniors in 2018.

Phone scams are another popular scam. Generally this involves aggressive criminals posing as IRS agents to steal money or personal information via phone scams or “vishing” (voice phishing). Beginning early in the filing season, the IRS generally sees an upswing in scam phone calls (often robo-calls) threatening arrest, deportation or license revocation if the victim doesn’t pay a bogus tax bill. These con artists may have some of the taxpayer’s information, including their address, the last four digits of their Social Security number or other details.

Despite what the IRS terms “a steep drop in tax-related identity theft in recent years,” they continue to caution that scams remains serious. Tax-related ID theft occurs when someone uses a stolen Social Security number or ITIN to file a fraudulent return claiming a refund – and thieves constantly strive to find a scheme that works. Once their ruse begins to fail as taxpayers become aware of their ploys, they change tactics. Business filers should be aware that cybercriminals also file fraudulent 1120S using stolen business identities.

Another common thing scam artists use are flyers, advertisements, phony storefronts or word-of-mouth to attract victims promising overly large refunds – using such tools as fictitious rebates, benefits or tax credits – and they frequently prey on older Americans and low-income taxpayers and those who don’t have a filing requirement.

The best advice we can give is, “tax filer beware”. If it seems to good to be true, it probably is. The IRS will not make any phone calls or email you in order to collect money. Contact a tax professional before proceeding with anything related to income taxes that is out of the ordinary.

Why did I get audited by the IRS?

How does Amazon get away without paying taxes?

Amazon is a company with more than $232 billion in revenue and led by the world’s richest man Jeff Bezos and the company does not pay any tax taxes.

That annoyance boiled over in New York earlier in February when Amazon, which had been offered as much as $3 billion in tax incentives to build a second headquarters in Queens, dropped the plan amid fierce opposition from local politicians and community activists.

Despite having hundreds of billions in revenue, the company only booked about $11.2 billion in profit in 2018, creating a significantly smaller base on which taxes and offsetting credits and deductions are applied. The company says it pays all required federal, state and international taxes.

Corporate tax is based on profits, not revenues, and our profits remain modest, given retail is a highly competitive, low-margin business,” Amazon said in a statement, adding that it’s continuing to invest in its operations.

Amazon gets both the benefits mostly used by technology companies — deductions for paying employees in stock — as well as the write-offs for companies that rely heavily on building physical infrastructure.

The research and development credit — designed to encourage innovation in the U.S. — also amounts to up to a $419 million tax break for Amazon. Add in hundreds of millions of losses the company still has on its books held over from years before it turned a profit, and its U.S. corporate tax liability can be whittled down to zero.

One of the biggest factors changing Amazon’s financial filings isn’t a substantive change at all. A deduction for stock-based compensation, totaling nearly $1.1 billion in 2018, is now more prominently displayed in regulatory filings thanks to an accounting rule change.

So, for those who complain about Amazon not paying any taxes, in summary:

  • Their profits are not high enough yet to offset the billions of losses incurred as a startup which are carried forward.
  • Amazon invested heavily in research and development which receives a tax break but also has great impacts on innovation in the U. S.
  • They paid their employees $1.1 billion in stock-based compensation. This has had the effect of more taxes being paid since the income to the employees was taxed at higher rates than the maximum 21% corporate tax.

In summary, Amazon has been able to eliminate any taxes due to utilizing previous losses, investing heavily in innovation, and paying huge amounts of compensation to employees. The tax laws that were affected were designed to encourage exactly this kind of behavior.

Positive income tax news for owners of Real Estate

Recently announced by IRS

The new tax law now being dealt with in preparation of 2018 tax returns, had several items that needed clarification by the IRS. On January 19, 2019 the final regulations were released.

Among a host of other clarifications and interpretations, the regulations gave a much-welcomed surprise to the owners of rental real estate.

Pass through entities, which are generally LLC’s and S Corporations, that hold rental real estate, are deemed to be a “trade or business” thus qualifying for the 20% deduction of Qualified Business Income (QBI). The QBI deduction was put into law to try to establish some parity with the new 21% tax rate for C Corporations.

Here are some of the (unfortunately complicated) considerations in order to qualify:

• Interest in real property must be held for the production of rents

• Can consist of multiple properties

 • Individual or Relevant Pass-through Entities (RPE) must hold the interest directly or through a disregarded entity

 • Taxpayers must treat each property as a separate enterprise or treat all similar properties as a separate enterprise

• Commercial and residential property can’t be part of the same enterprise

• Cannot change treatment from year-to-year unless there is a significant change in circumstances 

• Real estate used as a residence by the taxpayer does not qualify

• Real estate rented or leased under a triple net lease does not qualify

• Separate books and records must be maintained to reflect income and expenses for each rental real estate enterprise

• Taxable years beginning before 2023 – 250 or more hours of rental services are performed with respect to the rental enterprise. This test can be met if a taxpayer has multiple entities and spends at least 250 or more hours on the total group, but logs must be maintained for proof!

• Taxable years beginning after 2022 – 250 or more hours of rental services in any three of the five consecutive taxable years that end with the taxable year -OR- 250 or more hours in each year for an enterprise held for less than five years

• The taxpayer maintains contemporaneous records, time reports, logs, or similar documents, regarding the following: – Hours of all services performed – A description of all services performed –

• Rental services included (for purposes of applying the 250- hour requirement): –

  • Advertising to rent or lease the real estate
  • Negotiating and executing leases
  • Verifying information contained in prospective tenant applications
  • Collection of rent –
  • Daily operation, maintenance and repair of property
  • Negotiating and executing leases
  • Verifying information contained in prospective tenant applications
  • Collection of rent –
  • Daily operation, maintenance and repair of property
  • Purchase of materials
  • Supervision of employees and independent contractors –
  • Rental services can be performed by employees, agents, and/or independent contractors of the owners

Rental services do not include:

  • Financial or investment management activities
  • Procuring property
  • Studying or reviewing financial statements or reports on operations
  • Managing or constructing long-term capital improvements
  • Time spent traveling to and from the real estate

The QBI 20% deduction is an extremely complicated provision of the new tax law, but can result in some considerable tax savings for those who qualify. Note that any qualifying trade or business qualifies. This blog just deals with the clarification that rental real estate is in fact a trade or business under this new law.

The 1040 Gets A New Look

The Internal Revenue Service has released the redesigned Form 1040, along with six related tax schedules, for next tax season after changes under the Tax Cuts and Jobs Act promised to simplify the tax preparation process.

The Republicans promised a postcard size form and the form, although bigger than a postcard, is shorter, but very deceiving. The prior form 1040, used through 2017, had 79 lines on the front and back, pages 1 and 2. What the new form has done is to push 56 of those lines onto 6 separate schedules to the form 1040.

So, for instance, Schedule 1, Additional Income and Adjustments to Income, is for taxpayers who have to report additional income, such as capital gains, unemployment compensation, prize or award money, or gambling winnings, or who have any deductions to claim, such as student loan interest deduction, educator expenses or self-employment taxes.

Schedule 2, Tax, is for those who are subject to the alternative minimum tax or need to make an excess advance premium tax credit repayment.

Schedule 3, Nonrefundable Credits, is for taxpayers who can claim a nonrefundable credit besides the child tax credit or the credit for other dependents, such as the foreign tax credit, education credits or the general business credit.

Schedule 4, Other Taxes, is for taxpayers who owe other taxes, such as self-employment tax, household employment taxes, additional tax on individual retirement accounts or other qualified retirement plans and tax-favored accounts.

Schedule 5, Other Payments and Refundable Credits, is for taxpayers who can claim a refundable credit aside from the Earned Income Tax Credit, the American Opportunity Tax Credit or the Additional Child Tax Credit. They may also have other payments, such as an amount paid with a request for an extension to file, or they want to report excess social security tax withheld.

Schedule 6, Foreign Address and Third Party Designee, is for taxpayers who have a foreign address or a third-party designee other than their paid tax preparer.

The most incredible aspect of this new approach to the complex requirements of form 1040, is the new IRS Section 199A which deals with the possible 20% deduction for “Qualified Business Income” (QBI) for taxpayers who are sole proprietors, or have ownerships in “pass-through” entities such as LLCs, and S Corporations. This extremely complex new deduction is listed on line 9 of the new 1040, and in parentheses is “see instructions”. However, as of January the IRS has not produced the instructions for  QBI or any other schedules or forms of form 1040.

See our blog posting on QBI. Since the regulations regarding this very complex code section have just been released, we will be posting blogs frequently on the most important aspects of this new tax provision.

Please call us if we can be of assistance in explaining and aspects of the new form 1040 and/or the new tax law and how it affects you. Since the IRS has not issued the final forms or instructions, we will have to wait until they do before any tax returns can be filed.

Clarification of deductibility of food and beverage expenses under the new tax law

The IRS on Wednesday issued guidance clarifying that taxpayers may generally continue to deduct 50% of the food and beverage expenses associated with operating their trade or business, despite changes to the meal and entertainment expense deduction under Sec. 274 made by the tax law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97 (Notice 2018-76). According to the IRS, the amendments specifically deny deductions for expenses for entertainment, amusement, or recreation, but do not address the deductibility of expenses for business meals. This omission has created a lot of confusion in the business community, which the IRS is addressing in this interim guidance. Taxpayers can rely on the guidance in the notice until the IRS issues proposed regulations.

Sec. 274(k), which was not amended by the TCJA, does not allow a deduction for the expense of any food or beverages unless (1) the expense is not lavish or extravagant under the circumstances, and (2) the taxpayer (or an employee of the taxpayer) is present when the food or beverages are furnished. Sec. 274(n)(1), which was amended by the TCJA, generally provides that the amount allowable as a deduction for any expense for food or beverages cannot exceed 50% of the amount of the expense that otherwise would be allowable.

Under the interim guidance, taxpayers may deduct 50% of an otherwise allowable business meal expense if:

  1. The expense is an ordinary and necessary business expense under Sec. 162(a) paid or incurred during the tax year when carrying on any trade or business;
  2. The expense is not lavish or extravagant under the circumstances;
  3. The taxpayer, or an employee of the taxpayer, is present when the food or beverages are furnished;
  4. The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  5. For food and beverages provided during or at an entertainment activity, they are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.

The IRS will not allow the entertainment disallowance rule to be circumvented through inflating the amount charged for food and beverages.

The notice contains three examples illustrating how the IRS intends to interpret these rules. All three examples involve attending a sporting event with a business client and having food and drink while attending the game. The examples follow the AICPA’s recommendation that meal expenses be deductible when their costs are separately stated from the cost of the entertainment.

The IRS plans to issue proposed regulations and is requesting comments by Dec. 2 on the notice. It is also asking for comments on:

  • Whether further guidance is needed to clarify the interaction of Sec. 274(a)(1)(A) entertainment expenses and business meal expenses.
  • Whether the definition of entertainment in Regs. Sec. 1.274-2(b)(1)(i) should be retained and, if so, whether it should be revised.
  • Whether the objective test in Regs. Sec. 1.274-2(b)(1)(ii) should be retained and, if so, whether it should be revised.
  • Whether the IRS should provide more examples in the regulations.