Virginia's Sales Tax Holiday

Below is an email from the Virginia Department of Taxation describing the upcoming Virginia sales tax holiday.

Save on qualifying items during Virginia’s 3-day sales tax holiday Aug. 7-9

Virginia shoppers get a break from local and state sales tax on qualifying back-to-school, emergency preparedness and energy efficient items during the state’s sales tax holiday, Friday, Aug. 7 through Sunday, Aug. 9, 2015.

New legislation enacted by the 2015 General Assembly combined Virginia’s three existing sales tax holidays into one, three-day holiday in August. Previously, the August sales tax holiday only applied to qualifying back-to-school items. For detailed information on the combined holiday, refer to the department's Combined Sales Tax Holiday Guidelines and Rules.

Overview of Exempt Items include:

·         Qualifying school supplies - $20 or less per item

·         Qualifying clothing and footwear - $100 or less per item  

·         Portable generators - $1,000 or less per item

·         Gas-powered chainsaws - $350 or less per item

·         Chainsaw accessories - $60 or less per item

·         Other specified hurricane and emergency preparedness items - $60 or less per item 

·         Energy Star labeled dishwashers, clothes washers, air conditioners, ceiling fans,  light bulbs, dehumidifiers, and refrigerators - $2,500 or less per item purchased for noncommercial home or personal use

·         WaterSense labeled bathroom sink faucets, faucet accessories such as aerators and shower heads, toilets, urinals, and landscape irrigation controllers - $2,500 or less per item purchased for noncommercial home or personal use

Notable additions to the list of qualifying items from previous years include certain computer supplies priced at $20 or less per item, such as computer storage media and printer paper, and all light bulbs affixed with the Energy Star label.

For additional information on the sales tax holiday, including detailed lists of qualifying items, visit the department’s Sales Tax Holiday web page.

Note that although used to be a back-to-school tax holiday qualified items now include many related to emergency preparedness and energy efficiency.

If you have questions about this or any other tax issue, please contact me at bill@hollandbrowncpa.com

Tax Implications of Bitcoins

Back on March 25 the IRS issued IR-2014-36 entitled “IRS Virtual Currency Guidance : Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply.”  
The title pretty much says it all. Virtual currency, of which Bitcoins are a well-known example, is treated like regular currency although not legal tender in the U.S.
“General tax principles that apply to property transactions apply to transactions using virtual currency.  Among other things, this means that:

• Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
• Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Normally, payers must issue Form 1099.
• The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
• A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.”

Payments described in the first two bullet items are reported at the fair market value of the virtual currency on the date of the payment. Reporting requirements mentioned in the last bullet item also use fair market value on the transaction date to determine whether the need for a report is triggered.
If you invest in a virtual currency, like Bitcoins, when you sell that investment you will have a capital gain or loss.
The full text of Notice 2014-36 is available as a PDF file here.
If you have questions about this or any other tax issue, give me a call (804-745-7157) or send me an email (bill@hollandbrowncpa.com).

Travel & Entertainment: Maximizing Tax Benefits

Tax law allows you to deduct two types of travel expenses related to your business, local and what the IRS calls "away from home."

1. First, local travel expenses. You can deduct local transportation expenses incurred for business purposes such as the cost of getting from one location to another via public transportation, rental car, or your own automobile. Meals and incidentals are not deductible as travel expenses, but you can deduct meals as an entertainment expense as long as certain conditions are met (see below).
2. Second, you can deduct away from home travel expenses-including meals and incidentals, but if your employer reimburses your travel expenses your deductions are limited.

Local Transportation Costs

The cost of local business transportation includes rail fare and bus fare, as well as costs associated with use and maintenance of an automobile used for business purposes. If your main place of business is your personal residence, then business trips from your home office and back are considered deductible transportation and not non-deductible commuting.

You generally cannot deduct lodging and meals unless you stay away from home overnight. Meals may be partially deductible as an entertainment expense.

Away From-Home Travel Expenses

You can deduct one-half of the cost of meals (50 percent) and all of the expenses of lodging incurred while traveling away from home. The IRS also allows you to deduct 100 percent of your transportation expenses--as long as business is the primary reason for your trip.

Here's a list of some deductible away-from-home travel expenses:

• Meals (limited to 50 percent) and lodging while traveling or once you get to your away-from-home business destination.
• The cost of having your clothes cleaned and pressed away from home.
• Costs for telephone, fax or modem usage.
• Costs for secretarial services away-from-home.
• The costs of transportation between job sites or to and from hotels and terminals.
• Airfare, bus fare, rail fare, and charges related to shipping baggage or taking it with you.
• The cost of bringing or sending samples or displays, and of renting sample display rooms.
• The costs of keeping and operating a car, including garaging costs.
• The cost of keeping and operating an airplane, including hangar costs.
• Transportation costs between "temporary" job sites and hotels and restaurants.
• Incidentals, including computer rentals, stenographers' fees.
• Tips related to the above.

Entertainment Expenses

There are limits and restrictions on deducting meal and entertainment expenses. Most are deductible at 50 percent, but there are a few exceptions. Meals and entertainment must be "ordinary and necessary" and not "lavish or extravagant" and directly related to or associated with your business. They must also be substantiated (see below).

Your home is considered a place conducive to business. As such, entertaining at home may be deductible providing there was business intent and business was discussed. The amount of time that business was discussed does not matter.

Reasonable costs for food and refreshments for year-end parties for employees, as well as sales seminars and presentations held at your home are 100 percent deductible.

If you rent a skybox or other private luxury box for more than one event, say for the season, at the same sports arena, you generally cannot deduct more than the price of a non-luxury box seat ticket. Count each game or other performance as one event. Deduction for those seats is then subject to the 50 percent entertainment expense limit.

If expenses for food and beverages are separately stated, you can deduct these expenses in addition to the amounts allowable for the skybox, subject to the requirements and limits that apply. The amounts separately stated for food and beverages must be reasonable.

Deductions are disallowed for depreciation and upkeep of "entertainment facilities" such as yachts, hunting lodges, fishing camps, swimming pools, and tennis courts. Costs of entertainment provided at such facilities are deductible, subject to entertainment expense limitations.

Dues paid to country clubs or to social or golf and athletic clubs however, are not deductible. Dues that you pay to professional and civic organizations are deductible as long as your membership has a business purpose. Such organizations include business leagues, trade associations, chambers of commerce, boards of trade, and real estate boards.

Tip: To avoid problems qualifying for a deduction for dues paid to professional or civic organizations, document the business reasons for the membership, the contacts you make and any income generated from the membership.

Entertainment costs, taxes, tips, cover charges, room rentals, maids and waiters are all subject to the 50 percent limit on entertainment deductions.

How Do You Prove Expenses Are Directly Related?

Expenses are directly related if you can show:

• There was more than a general expectation of gaining some business benefit other than goodwill.
• You conducted business during the entertainment.
• Active conduct of business was your main purpose.

Record-keeping and Substantiation Requirements

Tax law requires you to keep records that will prove the business purpose and amounts of your business travel, entertainment, and local transportation costs. For example, each expense for lodging away from home that is $75 or more must be supported by receipts. The receipt must show the amount, date, place, and type of the expense.

The most frequent reason that the IRS disallows travel and entertainment expenses is failure to show the place and business purpose of an item. Therefore, pay special attention to these aspects of your record-keeping.

Keeping a diary or log book--and recording your business-related activities at or close to the time the expense is incurred--is one of the best ways to document your business expenses.

If you need help documenting business travel and entertainment expenses, don't hesitate to call us. We'll help you set up a system that works for you--and satisfies IRS record-keeping requirements.

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For more useful tax information, please read our monthly newsletter.

Email: bill@hollandbrowncpa.com

Web page: http://www.hollandbrowncpa.com

"Alternative" Financial Institutions

"Alternative Financial Institution" is an unfortunate choice of terms because in some contexts it means useful organizations such as Community Development Financial Institutions.  In the context of this post, however, the term is better viewed as a synonym for vulture. In an editorial on July 17^th, the Virginian-Pilot said this:  “If predatory lenders had a trade publication – say, “Usury Today” – they’d undoubtedly rank Virginia near the top in annual roundups of the best places in the nation to do business.”

These institutions (vultures, predatory lenders, or whatever other pejorative you wish to use) include pay day lenders and short-term car title lenders both of which, in my opinion, exist to take advantage of people who are down and out. In Virginia, a car title lender is restricted, if you can call it a restriction, to charging not more than 22% per MONTH. That’s right, these people (for want of a better family rated term) can charge 22% per month.  The law, in its infinite mercy (recognize the sarcasm?), does not allow compounding so 22% per month is  264% per year. Virginia law allows that highest rate on the first $700 borrowed. Interest on the next $700 is “only” 18% per month. Above $1,400, a real bargain rate kicks in, 15% per month.  Another crumb offered by the law -- up front fees are limited actual costs of  recording a lien on the motor vehicle.

Tuesday afternoon (July 17) the Chesterfield County Planning Commission, of which I am a member, heard a staff presentation of a proposed ordinance to regulate where in the county alternative financial institutions might be located along with other restrictions.  In a private conversation with me, one attorney noted the proposal would allow these operations in only 3 locations in the county. My unspoken thought was, “that many?” I let staff, including the assistant county attorney assigned to advise the Planning Commission, know that I want an ordinance as restrictive as possible, given limits placed on the county by state law and judicial precedence.  I clearly expressed my opinion of these operations during the work session when I said, “They take people who are in a hole (and) instead of handing them a ladder, they hand them a shovel.” The Richmond Times-Dispatch has as article today reporting on this part of the Commission’s meeting.

For more information, see this earlier Pilot Online article headlined, “New data shows car title loans big business in Va.”

The above article reports that repossession rates are about 6.5% of loans made resulted in repossession of the motor vehicle (8,378 repos out of 128,500 loans). However, the article also reports 105,542 different individuals took out those 128,500 loans making the repo rate per individual borrower be over 7.9%. Repossession rates on auto loans financed by traditional means (banks, credit unions, new car dealers) don't seem to be readily available although using rough numbers and reasonable assumptions, that rate appears to be not more than the 3% to 4% range.

As always, comments are welcome. 

Edited on July 24 to provide a working link to the news article, “New data shows car title loans big business in Va.”

American Institute of Certified Public Accountants

I’m a member of the AICPA.  I get really useful, relevant materials that greatly assist my practice of public accounting. I also get cheap insurance. So despite what I say below, I don’t believe the AICPA is all bad.

The AICPA's mission is to provide members with the resources, information and leadership that enable them to provide valuable services in the highest professional manner to benefit the public, employers and clients. In fulfilling its mission, the AICPA works with state CPA organizations and gives priority to those areas where public reliance on CPA skills is most significant.”

The mission statement used to be to provide CPAs with resources, etc. but no more.  Since you do not have to be a licensed CPA to be a member of the AICPA it is not surprising that “CPAs” was changed to “members” in the first sentence . The last sentence of the current mission statement reads like an afterthought.

The “AICPA Values and Vision Statement” doesn’t mention CPAs at all. The first sentence reads, “The AICPA is the premier national professional association in the United States.” While that may be true, it used to read, “The AICPA is the premier national professional association in the United States of Certified Public Accountants.”

Over the past few years, a member of the AICPA could acquire another AICPA issued professional designation by claiming to have the required experience and paying a few hundred dollars. Part of the marketing campaign was to get in early so you wouldn’t have to take the exam which would become mandatory for the new designation in the near future. Examples include Certified Information Technology Professional (CITP) and Certified in Financial Forensics (CFF). With the newest “certification for dollars” (Chartered Global Management Accountant), people don’t even have to be AICPA members to get a few more letters to tack on behind their names.

Voting membership is now available to non-CPAs who have done everything (gotten the education, passed the exam, obtained the experience) but have never bothered to actually get licensed as CPAs.  This is purely an effort to gain members and to increase revenue for the AICPA.  It has nothing to do with serving what, so far, is still the core constituency of the AICPA, Certified Public Accountants.
I am not the only CPA member of the AICPA who believes the top management of the AICPA has forgotten its original mission, its primary reason for existing. The primary mission of the AICPA was and should be to help CPAs be better CPAs.  Another  important function was and should be to enhance and protect the CPA brand. I, for one, do not see "certification for dollars" sold by the major CPA professional organization as protecting the CPA brand or assisting CPAs in being better at what we do.

I'm not sure if I'm being cynical or just fatalistic when I ask when is the Institute going to put forth the idea of changing the organization's name to something like Global Institute of Accountants (GIA)?  Since you no longer have to be a CPA to be a voting member, or even an accountant, it appears to me to be a real possibility.

If the AICPA were really concerned about the profession of being a CPA we would be seeing more focus on business ethics, as one example, than on growing our membership by adding non-CPAs to the rolls. As another example, if the AICPA were really concerned with enhancing the CPA brand then, the first, iron clad requirement for all these new certifications would be possession of an active CPA license.  That latter used to be the case but the CGMA is the first exception.

So what do I recommend? First,  the Virginia State Board of Accountancy should revise its rules so that only AICPA members who are licensed CPAs are allowed to use the phrase “Member of the AICPA”  on their signage, business cards, advertising etc.  A similar rule should be put in place for membership in other organizations using CPA or Certified Public Accountant in their names.  Failure to prohibit such use could easily create the impression that those non-CPAs were licensed Certified Public Accountants.

Second, I suggest anyone seeking professional services use professional designations only as a first filter in making a choice of provider.  If the AICPA will give you a credential simply because you say you have the necessary training and experience, then what are some other designations worth?

As I said in the first paragraph above, the AICPA is not all bad. In fact, it is a good organization of high value to CPAs. It should be noted that most of the useful work is done by volunteers and by AICPA staff who are well below the policy making level in the organization.  I am concerned, however, that the Institute is heading down a path that will make it less useful to Certified Public Accountants.  Its injudicious approach to membership requirements and manner of granting other certifications will make it less credible as an organization to government, business and the investing public.

It's education, stupid

Will Davis said it again. "The quality of [local] schools is the deal maker or breaker on many [economic development] projects." The managers of those companies thinking about investing in Chesterfield don't just ask about the schools, they point at a specific one and say, "I want a tour. Now." Not in a couple of months after some cosmetic fix-ups.

Virginia enjoys a reputation for quality education at all levels. So does Chesterfield County. However, that reputation is on the brink of being flushed down the toilet by a state legislature with too many members who cannot, or will not, think beyond the next election.

In Chesterfield, some of the new School Board members show signs of (1) seeing the connection between quality physical plant (an important component of quality education) and economic revitalization and (2) being willing to do something about it.

The final outcome remains to be seen but those who care about good jobs, a stable economy, and a reasonably high quality of life for everyone had better also begin voicing their support for restoration of school budgets and teaching positions.

Sales Tax Collection Rules Expanding

When people realized that Amazon's new distribution centers in Chesterfield and Dinwiddie would not trigger sales tax collection by Amazon on sales to Virginia residents, the state legislature demonstrated that it is capable of reacting to new situations quickly and effectively. Legislation has been passed that will trigger collections by Amazon and other online retailers that use a controlled subsidiary to operate a distribution center in the Commonwealth.

Education

"If we don't have a trainable work force, we're not going to be successful in economic development." -- Will Davis, Director of Econcomic Development, Chesterfield County.

That begs the question, what is a trainable work force? What attributes are necessary for a person to be trainable?

Trainable (or trainability) means a person is capable or learning a particular set of skills intended to fit that person for a particular role. Examples: computer programer, nurse's aid, doctor, lawyer, automobile repairman (or woman). [Adapted from the Free Online Dictionary .]

Of the things controllable by society, the most important characteristic of a trainable work force is possession of a quality education. In my opinion, if Virginia continues to short change its public education system from Pre-K through graduate school it will soon lose its status as one of the best places to do business because it will soon fail to create a "trainable work force."

Limit the Turnout

Limit the turnout, at least, of voters who are most likely to lean Democratic.

The campaign to acheive the above goal is moving along in Virginia. See here. At the same time, the campaign of that counter-example of "fair and balanced," (cable) Fox News, to persuade us that fraudulent votes by dead people are rampant in South Carolina has been exposed as dishonest horse manure. See here.

Endorsements

Election day in Virginia is Tuesday, November 8th. The polls are open from 6:00 AM to 7:00 PM.

Here are the people I hope will win in Chesterfield.

For Board of Supervisors:

In the Dale Magisterial District, JAMES "JIM" HOLLAND. Jim is my business partner, the man who appointed me to the Planning Commission and my friend of 16 years. Four years ago his campaign slogan was "Leadership that Listens." Since that time he has lived up to the promise of that slogan. He listens, he gathers information, and then he decides based upon what is best for the citizens of the Dale District and of Chesterfield County. He is a strong supporter of education, public safety, and creating jobs. He also believes in holding people and organizations accountable for meeting their responsibilities to the chagrin of the current School Board, among others.

Unlike his opponent, Jim knows that a good system of public education is crucial to attracting employers to Chesterfield County. Jim also knows, as do we all, that bankers don't make beans and that CPAs are, deservedly, one of the most trusted professions in the United States. Bankers suffer the fate of lobbyests and politicians, 90% of the group give the other 10% a bad name.

In the Matoaca Magisterial District, MARLENE DURFEE

Marlene Durfee has been a burr under the saddle of a lot of people during the last four years and that is a good thing. Sometimes, she talks too much. But, she also believes in holding people accountable for meeting their responsibilities. She asks tough questions and keeps asking until she gets the right, accurate, complete answer. I like her style and admire her for her courage.

In the Bermuda Magisterial District, MARK FAUTZ

I don't know Fautz as well as the other two I favor for Board of Supervisors. However, his opponent, the incumbant, is just too conservative, in my opinion, even for Chesterfield County. According to one source, about 40,000,000 Americans between 18 and 40 have tattoos. To Ms. Jaeckle, those people are self-mutilators who should be separated from civilized society (or, at least, the businesses they frequent should be separated). There are over 14,000,000 college students in America. They are the sort of people Ms. Jaeckle doesn't want living in Chesterfield County. (I know I'm being generous when I presume that in her use of the phrase, "that sort," Ms. Jaeckle meant college students.)

For School Board

In the Dale Magisterial District, MICHAEL JACKSON

About a year ago I offered the suggestion that all five members of the School Board should be voted out of office. Even if I didn't hold that broad opinion I would support Michael Jackson. He understands that School Board members are accountable to the parents and voters of Chesterfield, not the paid administrators who are supposed to be answering to the School Board. Michael's background, experiences and training make him an ideal steward of Chesterfield's students and the resources intended for their education.


In the Bermuda Magisterial District, STELLA EDWARDS

Stella Edwards would bring a highly relevant set of experiences to the School Board. She has been involved in education both as a profession and as a volunteer serving, learning and problem solving for most of her adult life. Her opponent has the same good intentions and much general experience but Stella's experiences and training are specific to educating children in a public school system.

In the Matoaca Magisterial District, SHAUKAT M. SIDDIQI

The best thing I can come up with to say about incumbant Omarh Rajah is that he seems to be disliked by the other current members of the School Board. As a one term incumbant, Tom Dolan lost to Mr. Rajah four years ago.

I know from personal experience that retired college professor Dr. Shaukat Siddiqi has dealt first hand with the successes and failures produced by public education. He has been recognized for his effective contributions to both Virginia State University and Chesterfield County. He would bring a fresh, competent, effective voice to the Chesterfield School Board.

For Commissioner of the Revenue, MICHAEL J. MARCOTTE

The incumbant has spent almost $3,000,000 on two whacks at acquiring a usable computer system and failed. When budget constraints forced tough decision making, he layed off tax auditors. The Board of Supervisors recognized that lost tax revenues would be greater than the salaries saved and said so to no avail.

Marcotte recognizes the problems created and compounded by the incumbant and he has solutions ready to solve or mitigate those problems.

For the Senate of Virginia

In the 10th Senate District, DAVID BERNARD

People who pander to anti-government, anti-science extremists need to be replaced. People who care about the environment and about creating jobs across the Commonweath should be elected. Replacing John Watkins with David Bernard would accomplish both of these objectives.

In the 16th Senate District, HENRY MARSH

I saved the best for last. Henry Marsh is one of the sharpest, knowledgable people I've met. He knows the best way to get re-elected is to take care of the interests of the people who vote for him and that is exactly what he does. He is an advocate and protector of individual rights, a strong supporter of education at all levels, and a man of conviction who can be trusted to put the good of the people first.

Commonwealth Transportation Board Approves Amended Subdivision Street Acceptance Regulations

In general, the Virginia Department of Transportation maintains streets and roads in most counties including Chesterfield. However, VDOT only does so for streets and roads accepted into the state system. The new regulations specify the criteria for acceptance of subdivision streets into the Virginia system so that the state will maintain them.

The main change in the Subdivision Street Acceptance Regulations  is increased connectivity requirements for subdivisions. This is important because it will result in more connections between new and existing subdivisions. In turn, this is important because residents of existing subdivisions generally do NOT want prospective new residents to be able to drive through their streets to get to major arterials. They (the existing residents) fear an increase in traffic with an accompanying decrease in safety and general quality of life.

Another important change is a requirement for sidewalks in new subdivisions with an average lot size of 1/4 acre or less and along both sides of new streets that average over 8,000 motor vehicle trips per day. New streets that average between 2,000 and 8,000 trips per day would have to have a sidewalk on at least one side.

The new regulations go into effect on January 1, 2012. They are described here with links to both the new and current regulations.