HVUT Form 2290 Filing Deadline August 31

Only days left before any company or owner-operator with commercial motor vehicles will be penalized if their 2012-13 Heavy Vehicle Use Tax Form 2290 return is not filed with the Internal Revenue Service.

August 31 is the last day the HVUT Form 2290 can be filed without incurring late fees. This annual tax return applies to carriers and owner-operators operating one or more CMVs weighing over 55,000 pounds.

HVUT Form 2290 Filing Information
Companies with 25 or more trucks must file the Form 2290 electronically online through an IRS authorized e-file provider. Organizations that have less than 25 trucks can still file using a paper return, but they must download it from the IRS Web site. Paper returns are no longer being mailed by the IRS.

All HVUT Form 2290 returns must be filed by the end of August to avoid late fees. New vehicles obtained during the tax period need to be filed no later than the last day of month following when it was first used. 

The 2012-13 filing period spans July 1, 2012, through June 30, 2013.

If you have any questions, please contact Bergan Paulsen.

Related Article:  Electronic Filing of Form 2290: What You Need to Know
Related Article:  Frequently Asked Questions about E-Filing Your Form 2290

Guidance on new $2,500 FSA Limit

The IRS released guidance in Notice 2012-40 on implementation by employers of the $2,500 annual limit on employee salary reduction contributions to health flexible spending arrangements (FSAs).  The $2,500 limit is effective for plan years beginning after December 31, 2012, and is indexed for inflation in subsequent years.  Specifically, the guidance provides that:

• The limit is per employee.  If a husband and wife both work for the same employer, each may make contributions of $2,500 per year.
• The limit applies to all employers that are treated as a single employer under IRS Code Sec. 414 as a controlled group or affiliated service group.
• In the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.
• If, by a reasonable mistake, an employer or agent allows an employee to elect a salary reduction exceeding the maximum, and the excess is paid to the employee and reported as wages on Form W-2, the cafeteria plan will not cease to be a valid plan for that plan year
• The $2,500 limit does not apply for plan years that begin before 2013.
• The term “taxable year” refers to the plan year of the cafeteria plan as this is the period for which salary-reduction elections are made.
• Plans may adopt the required amendments to reflect the $2,500 limit at any time through the end of calendar year 2014.

If you have any further questions, please contact Bergan Paulsen.

Near Record Drought: What’s Next for Iowa’s Farmers?

With the near record drought facing the United States during this summer of 2012, there will be large payouts of crop insurance proceeds.  With this, we know that it’s important to be aware of a special tax election and additional strategies related to any crop insurance proceeds that you may collect for your 2012 crop.

Normally, crop insurance proceeds are taxable in the year of receipt.  However, if a farmer meets certain requirements, an election is available to defer the proceeds for one year. The three major requirements are:

• The crop insurance proceeds relate to a damage or destruction caused by drought, flood or other major weather disaster.  This means that insurance proceeds not directly related to a weather disaster, such as insurance providing revenue guarantees or price protection, cannot be deferred.  If a claim includes both types of proceeds, an allocation between claims is required.
  
  AND
  
• The normal business practice of the farmer is that more than 50% of the crop proceeds are received in the year after harvest.  This determination is based upon the past history of deferring over half of the crop sales for the crop activity that collected the insurance.
  
  AND
  
• The crop insurance proceeds were collected in the year of damage.  If the damage occurred in 2012 but the proceeds are collected in 2013, deferral has occurred and no further election is permitted.

If you expect to have a major crop insurance claim for the 2012 crop year, it is extremely important to review this situation with your tax advisor.  Normally, a farmer would defer the insurance proceeds to 2013.  However, with the potential for increased tax rates in 2013, the expiration of bonus depreciation and the implementation of new taxes under the Affordable Care Act, this may be the year to pay income taxes at lower rates rather than defer income.

If you do not meet the requirements to defer crop insurance proceeds, other strategies are available to effectively defer the income for one year.  Only by making a detailed income tax projection for 2012 and 2013 can the appropriate strategy be determined. 

Frequently Asked Questions Regarding Crop Insurance

What should an insured farmer do once they realize they have a crop loss?

• Notify your agent within 72 hours of discovery of the damage.  This notice can be made by phone, in writing or in person.  Although damage from a drought does not occur immediately, it’s important to contact your agent as soon as you feel a loss may be present.
• Continue to care for the crop using “good farming practices:” and protect it from further damage, if possible.
• Get permission from the crop insurance company before destroying or putting any of the crop to an alternative use.

Who will appraise the crops and assess loss?

• The crop insurance company will assign an adjuster to appraise the crop and assess the loss.  The insured farmer must maintain the crop until the appraisal is complete.  If the company cannot make an accurate appraisal, or the farmer disagrees with the appraisal, the company can have the farmer leave representative sample areas.
  
  These representative sample areas of the crop are to be maintained – including normal spraying if economically justified – until the company conducts a final inspection.  If the representative sample is not maintained properly, the loss may not be covered.
  
  Once appraised, the crop can be released by the company to be:
  1)    Destroyed – through tillage, shredding or chemical means; or
  2)    Used as silage or feed.

When will farmers be receiving indemnity payments for their crop insurance losses?

• More than likely, it will be late fall or winter before most claims can be processed.  As adjustors work through claims, they will be paid as they are processed.  Once a payment is made, a 1099 will be provided to the insured for the year the payment is made.

Will there be enough money to pay all the drought claims?

• The payouts for this year’s crop insurance may be the largest in history.  However, the USDA’s Federal Crop Insurance Corporation (FCIC) evaluates the financial stability of the insurance companies every year to ensure they have adequate funds to meet their obligations.  In addition, the government will act as a reinsurer to guarantee that all claims are paid in a timely fashion.

If you have any questions regarding either the rules on deferring crop insurance proceeds or related tax strategies for 2012, please contact us. 

Inc. Magazine Names Bergan Paulsen to Its Annual Inc.500|5000 List

We are excited to announce that Inc. magazine today ranked Bergan Paulsen number 4097 and our affiliate organization, Networking Solutions, number 2670 on its sixth annual Inc. 500|5000, an exclusive ranking of the nation's fastest-growing private companies.

The list represents the most comprehensive look at the most important segment of the economy—America’s independent entrepreneurs.  Unified Payments tops this year’s list. Bergan Paulsen and Networking Solutions join Yelp, yogurt maker Chobani, Giftcards.com, KIND and famed hatmaker Tilly’s, among other prominent brands featured on this year’s list.


Thank you for helping us continue to grow!

The Importance of Written Acknowledgements to Nonprofit Organizations

Thanks to a federal income tax deduction that encourages donors to provide generous financial support, both a donor and the organization supported by the donation benefit from such contributions.  However, a recent Tax Court opinion, Durden v. Commissioner, illustrates the importance of proper substantiation of charitable contributions. 

Section 170 of the Tax Code generally allows for charitable contributions, but any contribution of $250 or more must be documented by a contemporaneous written acknowledgement (CWA) from the charitable donee.  The contents of a CWA must include [IRC Sec. 170(f)(8)(B)]:

• The amount of cash and a description (but not value) of any property other than cash contributed;
• Whether the donee organization provided any goods or services in consideration, in whole or in part, for any property contributed; and
• A description and good faith estimate of the value of any goods or services provided by the donee to the donor or, if such goods or services consist solely of intangible religious benefits, a statement to that effect.

The recent emphasis falls on the CWA meeting all of the requirements and being contemporaneous.  In Durden v. Commissioner, the donors obtained two acknowledgements:  one acknowledgement was contemporaneous, but did not contain the required information, and the other acknowledgement contained the required information, but was not contemporaneous.  And, the court eventually ruled with the IRS in refusing to accept either acknowledgement.

While we understand that it is generally up to the donor to ensure they receive proper substantiation, we advise nonprofit organizations to understand the requirements.  We believe the knowledge will help to preserve donors’ charitable contribution deductions.  Please contact our nonprofit team with any questions.

Related Article: Tax Tip: 9 Things the IRS Wants Taxpayers to Know About Charitable Giving
Related Article: Claiming Charitable Donation Deductions – What Donors and Charities Need to Know.

Embracing Change

Tom Kunz, Tax Partner

I’m in the thirty-fifth year of my career at Bergan Paulsen.  Some people who are well into their careers consider change a necessary evil.  I disagree.  To me, change is a welcome thing and a catalyst for improvement.

When I attended college, personal computers were practically the stuff of science fiction.  Today, my smart phone has more computing power than the room-sized computer systems that once represented bleeding edge technology.  I was no big fan of technology in my college days but today it’s hard to imagine going about my business without it.

Change is the enemy of monotony.  It can be exhilarating if you let it.  Embracing change and coping with the temporary discomfort it brings is the best way to grow professionally and personally.  Without continual growth and improvement, we become less than our best.  In a worst case, we become obsolete.

I encourage my clients to embrace change.  As businesses grow, their needs evolve.  I often discuss the idea of “what’s next?” with my clients so they can prepare their businesses for the future.  An integral part of this preparation is the creation of a comprehensive succession plan.  Sure, it can be intimidating to think of a time when your business is owned and operated by someone else.  But to maximize the value of your business and help assure its long-term vitality, a succession plan is a must.

Benjamin Franklin was quoted as saying:  “When you’re finished changing, you’re finished.”  Successful professionals and businesses embrace change and continually look for better ways of doing things.  

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Tom Kunz, Tax Partner   |   tkunz@berganpaulsen.com   |   LinkedIn
As a veteran tax partner, Tom serves as an advocate for his clients by helping them plan and execute tax-efficient business transactions.  With extensive experience in the construction and real estate industries, he brings a high-energy yet down-to-earth approach to every job.  He has built strong specialties in the areas of business succession planning, estate planning, business valuation and litigation support. Read more about Tom.

What You Need to Know About Doing Business across State Lines

What constitutes “doing business” across state lines?
If your business has operations in more than one state, you may be subject to income tax, employment tax and/or sales and use tax regulations in those states.  This is known as Nexus which can be created if your business has a physical presence, economic presence or factor presence in another state.  Each state has different filing requirements which can vary greatly.  To determine if your business has nexus in another state, you can begin by asking yourself some of the following questions:

• Do I have employees or agents with a physical presence in another state?  This could be due to their state of residence or their sales/service territory. 
• Do I have clients or customers outside of my state that I provide products or services to?
• Does my business have an out-of-state location?  Does my business own or rent land/property in another state?
• Does my business hold or store inventory in another state?

What do I need to do if I have nexus in another state?
More often than not, the answer is not resolved by performing just one simple task.  After you have determined you do in fact have nexus in another state, you can begin by registering your business with the various required state offices.  In addition to basic registration, you may also need to file and pay income taxes, collect and remit sales/use taxes, file and pay employment taxes, and in some states even more.  

What are the repercussions of not filing all the correct documentation?
If you fail to meet a state filing requirement, the states can assess you with back taxes, penalties and interest for the time you were required to file in that state.  However, these filing oversights can many times be discovered during your tax preparation or review.  Your CPA may notice that you have been doing business outside of your state, for example, by viewing a W-2 with another state address.  At this point, we can discuss the company’s status and you can begin to file all of the necessary paperwork.  Additionally, depending on how your business is structured, multistate taxation issues could affect all owners of the organization leading them to be liable for additional state filings on their individual tax return.

What resources are available to answer my questions? 
As stated above, each state has different laws and regulations. Most states have websites and information online, or you can also call the respective state’s department of revenue to ask questions.  However, it may be a time – and headache – saver to contact your accounting firm.  At Bergan Paulsen, we’ll be able to research and provide you with the answers specific to your situation.  We’ll also go a step further and assist you in filing all the necessary paperwork.  Please contact us with any questions.