What is Cost Segregation?

Cost segregation is a tax planning strategy used by real estate investors that accelerates the depreciation of certain components of their properties. This amounts to a reduction in your current tax liability, resulting in upfront cash flow.

How exactly does it work? According to the IRS, a building normally depreciates its value over 39 years (non-residential) or 27.5 years (residential).

So, let’s say you own a residential rental property. Without cost segregation, your property would be depreciated consistently (known as “straight line”) over 27.5 years.

Sure, that’s great and all, but everyone knows that most components, like carpeting, landscaping, appliances, and cabinetry, don’t last 27.5 years—particularly in rentals.

With cost segregation, you can reclassify a portion of your assets as personal property instead of real estate property in order to depreciate them on a much, much faster schedule (such as five, seven, or 15 years) for tax purposes. This lessens your tax burden, thereby leaving you with more profit. 

Your Business is Missing out on These Tax Incentives

Business Owners are rightfully frustrated with the complexity and length of the federal tax code.  It is that length and complexity that allows the largest corporations, with their army of attorney’s, to take advantage of tax incentives that others would never even know about.

Just as most doctors would not be able to perform brain surgery, most CPAs don’t have the proper expertise and experience to help their clients capture complicated tax incentives.  That’s why CPAs and Financial Advisors love working with our consultants to help their clients take advantage of the specialized tax incentives and audits that are typically only taken by the largest corporations.

Some of the specialized tax services offered by our consultants include:

Cost Segregation of Commercial Property

Engineering based cost segregation studies permit commercial real estate owners to reclassify real property for depreciation purposes and reclassify it as more rapidly depreciating personal property. This reclassification can result in a cash flow increase of 5% – 8% of the building’s cost.  “Cost Segregation Studies are a lucrative tax strategy that should be considered in almost every real estate purchase.” -US Treasury Department

Research & Development Credits or Manufacturing Incentives

Any company that designs, develops, or improves products, processes, techniques, formulas, inventions, or software may be eligible for an R&D Tax Credit. In addition to the current year, businesses may claim for the last three years where credits were not taken.  “The R&D credit is designed to spur growth through innovation by enabling taxpayers with research-related expenditures to receive a credit against their regular income tax liability”-American Institute of CPA’s (AICPA)

Hiring Tax incentives

Many employers are not aware of the many tax incentive programs available to help companies hire and keep employees, such as: The Work Opportunity Tax Credit, Hiring Incentives Restore Employment Act, and the Small Business Jobs Act.  The PATH Act of 2015 significantly expanded the platform of Hiring Incentives.  Congress and the IRS want you to take advantage of these tax incentives.

Commercial Property Tax Mitigation

Commercial property owners who haven’t appealed their property taxes this year, or ever, are likely overpaying the government by thousands or tens of thousands of dollars.  Besides the reduction of commercial property tax liability going forward, a commercial property tax audit may recapture overpayments from previous years.

Want a free consultation?  Contact Bruce Bradshaw at 414-531-4755

Understanding MACRS

Modified accelerated cost recovery system depreciation schedule can lower your tax liabilities.  This is particularly important if  you have either built new business facilities or substantially renovated within the past 20 years.  Not all accountants can do this properly as the IRS prefers an engineering report to an estimate of cost basis.

Credit card transaction costs

It is rare today for a retail business not to accept credit cards.  Accepting credit cards, however comes with associated costs.  The major credit card (CC) companies call the fees collectively “transaction costs”.  Each retailer receives a monthly statement from the CC company which itemizes the transaction costs for that period.  I’ve seen them all over the map on a month to month basis for the same retailer.  From 1.9% to 2.85%.  So that we may look for savings opportunities, it is necessary to understand the individual components of the “transaction costs”.

In the above example, assume the retailer has made a $100 sale.  His total transaction costs are 2% so he receives $98 for that sale.  The $2 in this example that is paid to the bank issuing the credit card is split according to the pie chart on the right.  Notice that the majority of the fee goes to the issuing bank (identified as the interchange fee).

Interchange is an unregulated industry.  Although designated to cover the costs of transferring money between institutions, it has become a profit center for issuing banks.  This in spite of the fact that actual interchange costs have declined due to technology advances.   Frankly, interchange tripled from 2001 to 2008 to a total of $48 billion.

The majority of retailers that I meet with look to their processor to get them lower transaction costs.  However, the processor can only influence a minor portion of the overall cost.   The real opportunity lies in the interchange.

We’ve been able to recover from 8% to 20% of the transaction costs for our clients since we addressed this market.

Here’s an example of a hotel that we were able to help.

We are not a processor, a bank, or a credit card company.  We are an independent industry watchdog that works on your behalf.  All our work is done on a contingency basis.  No savings, no cost.

If you find this information useful, please like and share with your friends.

prxglobal.net

R&D Tax Credits

The IRS has redefined the activities that qualify as research and development.  According to section 41 of the Internal Revenue Code, the list of qualifying activities has been greatly expanded.  Businesses are allowed to review their activities as far back as 2003.  If savings opportunities are found, amended returns can be filed resulting in cash back to the company.  Going forward, activities can be identified that may have an impact on current year tax liabilities.  Your CPA most likely cannot conduct the comprehensive audit to capture your greatest savings.  A specialized company focusing solely on assisting business take full advantage of current tax laws and doing so on a contingency basis will provide the most benefit.

We can help – visit our website today.

Workers compensation insurance provides savings opportunity

WorkComp Premium Recovery Group identifies and recovers workers’’ compensation premium overcharges by reviewing the past five (5) to seven (7) years of classifications, experience rating calculations and premium audit calculations.

Our experience indicates that over 70% of all companies have been or are currently overcharged for their workers’’ compensation premiums.

We review current and expired workers’’ compensation policies, locating technical mistakes and rule violations that cause overcharges. We correct the errors, producing cash refunds from past policies and/or reduce current premium costs. Our independent review often produces savings on future policies as well.

WorkComp Premium Recovery Group works solely on a contingency fee basis. No Recovery, No Fee.

WorkComp Premium Recovery Group has no connection with any insurance agency or insurance carrier. We are truly independent workers’’ compensation premium consultants. There is never a need for a company to change insurance agents or insurance companies to take advantage of our services.

Frequently Asked Questions

1. Question:  I don’’t’’ have the time for another ““project.”” How much of my time will the audit take?

Answer:  Once all the policy information on site is gathered, we will prepare the necessary letters to your agent or insurance carrier requesting copies of the missing information. If possible, we will copy all the information available in your files. The review is conducted at our office.

2.  Question:  How will my agent handle the news that his/her work will be audited?

Answer:  Most insurance agents recognize that what is good for the client is what matters. Most agents do not have the time or the resources to conduct the in depth review that they will receive from WorkComp Premium Recovery Group.

3.  Question:  Why do we need your services when my agent already does that for us?

Answer:  Workers’’ compensation is all we do. It is virtually impossible for your agent to verify all the details involved in your premium calculations. Often time’’s, insurance agents do no receive copies of your experience rating worksheets or your auditor worksheets to review their accuracy. In fact, after the audit has been completed, insurance agents send a letter to the client requesting that the client review the audit for accuracy. Without these documents, it is impossible to verify if you were charged the correct premiums.

4.  Question:  My insurance company just performed an audit. Why do I need your services?

Answer:  Insurance companies perform an annual audit to determine the actual payrolls for the past policy year. The audit, who works for the insurance company and not your company, is there to adjust your company’’s estimated payroll to the actual payroll figures. The auditor is not there to locate overcharges.