With no year-end tax package, businesses face unfavorable changes

Businesses must contend with several unfavorable tax changes after no significant business tax provisions appeared in a year-end omnibus package.

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With no year-end tax package, businesses face unfavorable changes

TAX ALERT | December 22, 2022 | Authored by RSM US LLP

Executive summary: Year-end tax package fails to materialize

Year-end legislation will not contain changes to the following business tax provisions:

  1. Research and development (R&D) expensing under section 174 – Capitalization remains rather than immediate expensing 
  2. Section 163(j) business interest expenses – The more restrictive EBIT calculation remains rather than the more favorable EBITDA calculation
  3. Bonus depreciation – The phasedown to 80% begins in 2023 

We will have to wait to learn if any retroactive changes take place in 2023; however, with a divided government set for 2023, it does not look promising. Taxpayers should consider how these tax law changes affect their financial statements and cash flow.

The exclusion of business tax provisions will require businesses to respond quickly

No significant business tax provisions were included in a 4,100-page, year-end omnibus package that the Senate Appropriations Committee published on Dec. 19, confirming that businesses will have to contend with several unfavorable tax changes they hoped Congress would address.

Most notably, those waiting to see if the required capitalization and amortization of research costs (section 174), which became effective in 2022, would be deferred or repealed, now must account for a host of considerations. At a minimum, U.S. Securities and Exchange Commission (SEC) filers and C corporations will now have to present R&D as a capitalized item in their year-end income tax provisions (SEC filers should have been taking this in account in quarterly filings, but the hope of a reversal appears gone).

More broadly, companies will need to assess their overall R&D posture, including undertaking necessary documentation and estimation efforts while also planning for the cash flow impact. In addition, businesses that now have taxable income due to the capitalization of these costs may need to consider whether prior loss carryforwards are available or might be subject to equity change limitations under section 382.

Also not included in the omnibus is a reset to the EBITDA calculation of section 163(j)’s business interest expense limitations, which beginning in 2022 requires a more restrictive EBIT computation for purposes of the calculation. With borrowing costs increasing as the Federal Reserve tries to tame inflation, the loss of the depreciation and amortization addback will be costly to many businesses, especially those in capital-intensive sectors such as manufacturing. Impacted companies are looking at strategies to minimize the amount of capitalized interest and we will continue our discussions with Congress on the importance of immediate expensing of R&D and the harmful effects of the changes in the calculation of section 163(j)

Lastly, business taxpayers will need to factor into their 2023 tax planning the reversal of the phasedown of bonus depreciation, which also failed to make the cut. Starting with assets placed in service as of Jan. 1, 2023, the bonus depreciation amount phases down to 80%.

Tax components in omnibus legislation

The omnibus package is not completely void of tax changes. It includes, for example, the SECURE 2.0 Act of 2022, as well as limitations on the deduction amount of a conservation easement for pass-through entities.

SECURE 2.0 Act 

The SECURE 2.0 Act of 2022 is the most comprehensive retirement security legislation in decades. Its voluminous provisions significantly change the rules on qualified retirement plans and individual retirement accounts (IRAs) over the next several years. 

A few of the act’s headline provisions include:  

  • Requirement of mandatory automatic enrollment provisions in new 401(k) and 403(b) plans, with some exceptions
  • Creation of new “pension-linked” emergency savings accounts allowed in individual account plans up to $2,500; and new emergency withdrawal provision of up to $1,000
  • Permissible 401(k) match for participants making student loan payments
  • Elimination of age-50 catch-up contributions on pre-tax deferrals for those with wages over $145,000 (as indexed), but catch-ups on Roth deferrals still permitted
  • Increased catch-up contributions permitted at ages 60, 61 and 62
  • Expansion of small employer retirement plans, including SIMPLE 401(k)s and SIMPLE IRAs and tax credits for plan start-up costs
  • Phased-in increase of the required minimum distribution age to age 75
  • Increased mandatory cash-out limit from $5,000 to $7,000
  • Creation of a missing participant database
  • Expansion of the IRS Employee Plans Compliance Resolution System
  • Required 401(k) plan participation for employees working part-time for two consecutive years
  • Expansion of the 403(b) plan rules, including investments
  • Eventual elimination of the Saver’s Credit in favor of a federal matching contribution

SECURE 2.0 will likely cause many employers to establish new plans and/or to re-evaluate their current retirement plan designs.

Charitable conservation easements 

Included in the omnibus package is a provision that limits the deduction for qualified conservation contributions made by certain pass-through entities. Under the provision, a contribution made by a partnership (whether directly or as a distributive share of a contribution of another partnership) is automatically disallowed if the amount of such contribution exceeds 2.5 times the sum of each partner’s relevant basis in the partnership. Except as may otherwise be provided by the Treasury Secretary, the limitation rules apply to S corporations and other pass-through entities in the same manner as they apply to partnerships. 

There is an exception for contributions made outside of a three-year holding period (as determined under the new provision). In addition, the limitation does not apply with respect to any contribution made by any partnership if substantially all of the partnership interests in the partnership are held (directly or indirectly) by an individual and members of the individual’s family. Lastly, the limitation does not apply to contributions made to preserve certified historic structures. 

The provision amends the tax code’s accuracy-related penalty provisions so as to include any disallowance by virtue of this new provision. Further, deductions that are disallowed under the provision will be treated as a listed transaction, and new reporting requirements are added. Lastly, donors are given the opportunity to correct certain deed errors within a limited period of time.

The effective date of the provision is for contributions made after the date of enactment of the omnibus bill. Any taxpayers that may be impacted should contact a member of our tax team.

Looking ahead

In the end, while many lawmakers had expressed support and cautious optimism for inclusion of business tax provisions in the year-end omnibus, negotiating challenges among the parties as to key priorities ultimately proved too much to overcome. 

As we head into a new Congress and divided government, the fate of these provisions is uncertain. Section 174 remains a priority among many in Congress, and it may have just enough bipartisan support to be included in legislation during the 118th Congress. However, many of the challenges around this and other proposed tax provisions will carry over to the new Congress. On the other hand, it may be that no significant tax legislation is enacted until 2025 when some of the TCJA provisions approach their sunsets at the end of that year.

For more insights on what businesses should do now that Congress has not addressed these key business tax provisions, watch our tax policy team’s latest episode of Tax Policy Now.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 373-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Matt Talcoff, Ryan Corcoran, Fred Gordon, Joni Andrioff and originally appeared on 2022-12-22.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2022/With-no-year-end-tax-package-businesses-face-unfavorable-changes.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

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FOMC preview: Policy rate to increase by 50 basis points

Such an increase would follow a series of 75 basis-point increases and would lift the Fed’s policy rate to a range between 4.25% and 4.5%.

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FOMC preview: Policy rate to increase by 50 basis points

REAL ECONOMY BLOG | December 12, 2022 | Authored by RSM US LLP

Two weeks after Federal Reserve Chairman Jerome Powell pointed to slower interest rate increases, the central bank is poised to do just that when the Federal Open Market Committee meets this week and raises its policy rate by 50 basis points.

Such an increase would follow a series of 75 basis-point increases and lift the Fed’s policy rate to a range between 4.25% and 4.5%.

When considered along with the summary of economic projections and Powell’s news conference on Wednesday, the smaller rate hike will be part of what we expect to be a lift-and-hold policy framework over the next year.

An interesting aspect of the FOMC meeting will be found inside its summary of economic projections and dot-plot forecast of interest rates. There is the possibility that the central bank will set the median dot-plot forecast to 5.125% for next year, in contrast with the consensus forecast of 4.875%.

While we are holding to our forecast of a peak between 5% and 5.25%, it would not be any surprise if the major takeaway following the release of November inflation data on Tuesday and the Fed forecast on Wednesday is a risk of a peak above 5.5% despite the softer economic outlook.

In addition, we expect the median forecast of growth for next year to sink below 1%, which would imply risks around a recession and be in line with our core view of a 65% probability of a recession.

Moreover, we expect the median forecast of the unemployment rate to move closer to 4.5%, up from the current 3.7%, and inflation projections to remain like those published in September, mostly because of the weaker growth outlook.

We expect little to no change in the Fed’s policy statement from November. But it seems that the FOMC will need to address the phrase “ongoing increases” as the Fed slows the pace of its hikes.

One would think that the committee would want to balance that view with somewhat hawkish language around price stability to temper market expectations of policy easing next year.

And these market expectations will almost certainly be one of the primary topics at Powell’s news conference on Wednesday. While we do not think that Powell will stray too far from his recent speech on the labor market and inflation, the questions and answers that follow the likely downgrade of the forecast and risk of a higher rate peak will demand careful explanation.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 373-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Joseph Brusuelas and originally appeared on 2022-12-12.
2022 RSM US LLP. All rights reserved.
https://realeconomy.rsmus.com/fomc-preview-policy-rate-to-increase-by-50-basis-points/

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

Schedules K-2 and K-3 draft instructions for tax year 2022

Pass-through entities and partners alike should understand the compliance changes associated with the IRS’s recent release of updated draft Schedules K-2 and K-3.

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Schedules K-2 and K-3 draft instructions for tax year 2022

TAX ALERT | December 12, 2022 | Authored by RSM US LLP

This alert has been updated to reflect updated Schedule K-2 and K-3 draft instructions published by the Internal Revenue Service (IRS) in early December 2022. Among other items, the updated draft instructions include adjustments of the requirements to meet the domestic exception from filing Schedules K-2 and K-3 with the IRS. The requirement that all direct partners or shareholders are certain types of domestic entities and/or persons has been expanded to include direct partners or shareholders that are S-corporations with a sole shareholder and certain single-member LLCs.  Additionally, the required timing of partner or shareholder notification that a domestic partnership or S-corporation will utilize the domestic exception, and thus not provide Schedule K-3 information, was updated to align with Schedule K-1 issuance. The earlier version of the Schedule K-2 and K-3 draft instructions required this partner or shareholder notification to occur no later than 2 months prior to the partnership’s or S-corporation’s US income tax return due date, not including extensions (January 15 for calendar year partnerships or S-corporations).

For additional learning about the K-2 and K-3 filings, the following webcast is available.

Executive summary: Draft instructions for Schedules K-2 and K-3 released 

The IRS in the fall of 2022 released updated draft Schedules K-2 and K-3 and instructions for Forms 1065, 1120-S and 8865. Once finalized, these instructions are intended to be applicable for a partnership’s 2022 tax year. The draft instructions include various updates, including a significant change to the domestic exception that was available in tax year 2021.

Prior rules for U.S. international tax reporting by pass-through entities

The IRS in 2021 released new Schedules K-2 (Partners’ Distributive Share Items – International; Shareholders’ Pro Rata Share Items – International) and K-3 (Partner’s Share of Income, Deductions, Credits, etc. – International; Shareholder’s Share of Income, Deductions, Credits, etc. – International) that included a dramatic expansion in the amount and level of detail of U.S. international tax information. 

Schedules K-2 and K-3, including any required attachments, are required for partnership (domestic or foreign) and S corporation taxpayers (those taxpayers required to file Form 1065 (U.S. Return of Partnership Income), Form 1120-S (U.S. Income Tax Return for an S Corporation) and taxpayers required to file Form 8865 (Return of U.S. Persons With Respect to Certain Foreign Partnerships) as part of their U.S. tax return) who have any item(s) of international tax relevance, including but not limited to: direct or indirect foreign partner(s) or shareholder(s), foreign source income (FSI), foreign income taxes paid or accrued, and ownership in a foreign entity or foreign branch. 

Prior to the release of Schedules K-2 and K-3, U.S. international tax information would be included as footnotes to the Schedule K-1 (Partner’s Share of Income, Deductions and Credits, etc.; Shareholder’s Share of Income, Deductions and Credits, etc.). The format and level of detail provided in these footnotes would vary greatly between industries, taxpayers and tax preparers. 

Schedules K-2 and K-3 standardize the format for reporting U.S. international tax information to the partners and shareholders of pass-through entities and provide more clarity for partners and shareholders on how to calculate their U.S. income tax liability with respect to international items. Items addressed on the Schedule K-2 and K-3 include items to determine FSI, which affects a taxpayer’s ability to utilize foreign tax credits (FTCs), details of foreign income taxes paid or accrued, amounts related to section 250 foreign-derived intangible income (FDII), items relevant to foreign partners, controlled foreign corporation (CFC) inclusion items (e.g., subpart F, global intangible low-taxed income (GILTI), investments in U.S. property) and other items.

Given the newness of Schedules K-2 and K-3 during the 2021 tax year and the comments provided to the IRS regarding the additional compliance burden imposed on the applicable taxpayers, the IRS for the 2021 tax year provided a broad exception from filing Schedules K-2 and K-3 with the IRS when:

  • no direct partners or shareholders were foreign persons or entities
  • the partnership or S corporation had no foreign activity for the 2021 tax year
  • the partnership or S corporation did not report foreign activity on the 2020 tax year Schedule K or K-1 
  • the partnership had no knowledge that partners were requesting this information

This exception explicitly noted it was only available for the 2021 tax year returns.

Rules applicable to the 2022 tax year

The IRS in the fall of 2022 released updated draft Schedules K-2 and K-3 and instructions for the Forms 1065, 1120-S and 8865 versions of these schedules. Once finalized, these instructions are intended to be applicable for the 2022 tax year and onward (if no future updates are made). In addition to other updates, the draft instructions include a domestic exception applicable for the 2022 tax year, however this exception is much more limited than the 2021 version. 

While the 2021 exception notes that no direct partners or shareholders may be foreign persons or entities, the 2022 exception provides that in addition to the limited or no foreign activity requirement, all partners or shareholders must be either:

  • U.S. citizens;
  • U.S. resident aliens;
  • Domestic descendant’s estates in which all beneficiaries are U.S. citizens or U.S. resident aliens;
  • Domestic grantor trusts in which all grantors and beneficiaries are U.S. citizens or U.S. resident aliens;
  • Domestic non-grantor trusts in which all beneficiaries are U.S. citizens or U.S. resident aliens;
  • S corporations with a sole shareholder; or
  • Single-member LLCs, where the LLC’s sole member is one of the persons listed in (i) through (vi) above, and the LLC is disregarded as an entity separate from its owner

Most notably, based on the draft instructions the domestic exception is not available for taxpayers with owners that are S-corporations with multiple shareholders, domestic partnerships or domestic corporations.  As a result, this may pose a considerable compliance burden on tiered partnership structures.

Additionally, the 2022 exception includes a requirement that, should the 2022 exception be met, the partnership or S corporation must notify its partners or shareholders that no Schedule K-3 information will be provided (unless requested) no later than when the partnership or S-corporation furnishes the Schedule K-1 to the partner or shareholder. The notification may be included as an attachment to the Schedule K-1. 

Partners and shareholders have until one month prior to the return due date, not including extensions (Feb. 15 for calendar year entities) to timely request Schedule K-3 information. If a timely request is made, Schedules K-2 and K-3 must be completed and filed with the IRS in relation to the requesting partners or shareholders (and provided to the requesting partner or shareholder). If a partner or shareholder requests Schedule K-3 information outside of this timeframe, Schedule K-3 information must still be provided to the partner or shareholder, but this information is not required to be provided to the IRS.

For more information, please consult with your tax advisor.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 373-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Ayana Martinez, Kristina Dressel, Michael Mazzarella, Victoria Rincon and originally appeared on Dec 12, 2022.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2022/Schedules-K-2-and-K-3-draft-instructions-for-tax-year-2022.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

When will inflation slow? Pay attention to housing

A correction in the housing market as mortgage rates reach 20-year highs is underway.

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When will inflation slow? Pay attention to housing

PERSPECTIVE | December 08, 2022 | Authored by RSM US LLP

A correction in the housing market as mortgage rates reach 20-year highs is underway. While overall price growth has cooled, though, the housing components of the two inflation reports—the consumer price index and the personal consumption expenditures price index—have shown no signs of peaking.

We estimate an approximately 18-month lag between changes in housing prices and in the housing components of inflation. That means we do not expect housing inflation to peak until the third quarter of next year or to fall to the pre-pandemic level until late 2024.

The Federal Reserve will almost certainly need to lift its policy rate above 5% and be prepared to hold it there, because inflation driven by housing tends to be persistent.

Housing inflation: Long and variable lags

We used more than 20 years of historical data to estimate the correlation between current housing inflation and past housing price growth.

The results show that housing inflation in the consumer price index can be best predicted using data on housing price growth from 17 months prior, and in the personal consumption expenditures index from 19 months prior. There is roughly an 18-month to two-year lag before policymakers can assess the impact of changing housing prices and inflation.

The correlations are also strong between housing prices and the housing components of inflation reports, suggesting that housing price growth can be a reliable predictor for housing inflation despite the different methods used to calculate the two series.

First, we track the correlation between the two:

Correlation between housing prices and housing component of inflation reports

Correlation between housing prices and housing components of inflation reports

Then, we can forecast the housing inflation components for both the CPI and PCE reports:

CPI shelter component and housing prices*

CPI shelter component and housing prices*

PCE housing component and housing prices*

PCE housing component and housing prices*

At their peaks in the third quarter next year, the year-over-year housing component growth rates would be 7.49% for CPI and 7.4% for PCE.

Those would translate to 2.4 and 1.3 percentage-point contributions to overall CPI and PCE inflation, respectively.

By the first quarter of 2024, housing inflation from both reports would be 4.62% and 4.57% for CPI and PCE, respectively, remaining substantially elevated above pre-pandemic levels.

Policy implications: Lift and hold

With housing accounting for the largest portion of total consumer spending in both inflation reports—more than 32% in CPI and 17% in PCE—we expect inflation to stay sticky throughout next year, especially core inflation, which strips out the more volatile food and energy prices and affects the central bank’s policy path.

The Fed has signaled it will consider the lagging impact of monetary policy, particularly regarding the housing market, to determine the pace of its rate increases.
While we acknowledge that anecdotal evidence now shows rents possibly peaking, our interpretation of the data suggests that to pause or pivot on rate hikes would most likely result in a series of stops, starts and reversals in the policy path.

In the end, that approach would prove unproductive and put the anchoring of medium- to long-term inflation expectations at risk.

Long and variable lags associated with housing inflation should concern the Fed in two ways:

  • Transparency: The lags add to the risk of higher and more entrenched inflation expectations that would prove difficult and costly to roll back. Given that the economy would have experienced high inflation for more than two years by the time the housing components peak later next year, such a sustained period of high inflation further erodes the already strained credibility of the central bank. We think the Fed will have to be more transparent about its policies should inflation remain elevated—which seems likely, based on our research.
  • Reaching the target: As housing price growth remains above the pre-pandemic level, returning to the Fed’s target of 2% inflation would require more work from the central bank. That means more rate hikes to come—or, as Chairman Jerome Powell said Nov. 2, “Some ways to go.” And with inflation most likely remaining elevated for longer, the probability of a lift-and-hold monetary policy over the next 12 months, perhaps well above our current range of 5% to 5.2%, looks a lot higher.

The takeaway

Housing’s lagging reaction to rate increases will make the Fed’s job more complicated for months to come, even as housing inflation eases as anticipated.

While there are signs of inflation slowing, it will most likely not go back to the target rate anytime soon, which supports our forecast of a 3% core inflation rate by the end of next year as the economy continues to transition to a higher-priced environment. 

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 373-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Joe Brusuelas, Tuan Nguyen and originally appeared on 2022-12-08.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/industries/real-estate/when-will-inflation-slow-pay-attention-to-housing.html

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

Uncertainty, policy choices and the prospects for middle market investment

Stubbornly high inflation and rising interest rates are fostering uncertainty among business owners and investors, leaving policymakers with few good options.

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Uncertainty, policy choices and the prospects for middle market investment

PERSPECTIVE | December 08, 2022 | Authored by RSM US LLP

Stubbornly high inflation and rising interest rates are fostering uncertainty among business owners and investors, leaving policymakers with few good options.

But with the right targeted measures that encourage businesses to make productivity-enhancing investments, policymakers can help businesses position themselves for long-term success.

Today, firms are reporting lower earnings and revenues, which is leading them to dial back their fixed investments and potentially miss out on productivity gains in the future.

For the broader economy, it is all happening at an inopportune time. As confidence among businesses declines, the risk of a more severe downturn rises.

Policymakers, then, face a quandary: How can they confront declining output when the traditional methods of fiscal and monetary stimulus are not an option?

There are alternatives. One is to invest in infrastructure that boosts productivity and capacity. These investments are not inflationary, and position businesses for long-run success, especially in an economy with a chronic shortage of workers.

The second option is for policymakers to embrace the full deductibility of new business investment as well as increased support for research and development.

Both measures would boost productivity and reduce costs over the medium to long term without spurring inflation.

And the middle market is ready to make such investments.

Over the past eight quarters, our RSM US Middle Market Business Index, a survey of the nation’s leading middle market executives, showed that a majority of survey participants intended to boost investments to enhance productivity.

This view is notable because it comes from a cohort of the American economy that traditionally is slower to make these investments.

Any policies that dampen the risk appetite among medium-sized businesses would represent a significant setback for an important sector of the economy.

Encouraging these investments offers a number of benefits. First, it represents a middle ground that allows for higher interest rates to battle inflation and avoids fiscal and monetary stimulus that would otherwise fuel rising prices, all while still encouraging investment.

Second, our approach would avoid imposing undue hardship on the general public through higher-than-necessary rates of unemployment.

Real economy investment

A 1980 National Bureau of Economic Research paper by Ben Bernanke, who would later become Federal Reserve chairman, suggested investors will postpone a project if they think they need additional information regarding its profitability.

That information may suggest abandonment of the project, or that further delay might negatively affect profitability.

Bernanke found that because uncertainty increases the value of waiting for new information, it can impede investment.

As the U.S. economy approaches the end of the business cycle, rising uncertainty among businesses over inflation, growth and policy represents a danger to fixed business investment, productivity and, ultimately, the ability of the Fed to restore price stability.

Measuring risk

How can we measure the uncertainty factored into the decision of whether to invest? We rely on two surveys of business intentions, as well as a measure of risk priced into financial securities and a measure of policy uncertainty.

First, the RSM US Middle Market Business Index shows that after an extended period of solid revenue and profits, sentiment among executives has become aligned with the overall pessimism linked to inflation and the economy.

Even so, in the fourth-quarter MMBI survey, 38% of respondents reported increased productivity-enhancing capital expenditures during the third quarter, and 50% indicated they expected to increase those expenditures over the next six months.

Five of the regional Federal Reserve banks conduct similar surveys of manufacturing establishments regarding current activity and expectations for the next six months. While manufacturing activity has been slowing since Russia’s invasion of Ukraine, firms continue to expect continued investment in productivity-enhancing equipment.

Investment normally entails financing of debt, with uncertainty regarding the state of the economy and the ability of borrowers to service that debt factored into the cost.

After an extended period of low risk brought about by monetary policy accommodation and extremely low interest rates, the RSM US Financial Conditions Index has now fallen to two standard deviations below normal.

RSM US Financial Conditions Index

RSM US Financial Conditions Index

This decline indicates a significant degree of excess risk being priced into securities and a reduced propensity to borrow or to lend.

Because investment is required for economic growth, financial conditions dropping to such a low level are associated with recessionary periods.

Next, we see investor reaction to events and a building sense of the inevitability of an eventual economic slowdown as an explanation for the instability of investment over the business cycle.

Because monetary, fiscal and national security policies are determinants of economic activity, we can use the economic policy uncertainty indices devised by the economics professors Scott Ross Baker, Nick Bloom and Steven J. Davis to measure uncertainty surrounding public policy.

We show the index in two of its forms—the composite economic policy uncertainty index and the more volatile news-based index—both of which are normalized around a value of 100.

Two of the dramatic examples of U.S. policy uncertainty occurred in the past four years: the U.S.-China trade war and the pandemic. Those shocks are subsiding, but uncertainty is building once again.

This time, we attribute the increase to the oil and inflation shocks, the geopolitical risk introduced by Russia, and the prospect of a recession.

U.S. Economic Uncertainty Index*

U.S. Economic Policy Uncertainty Index*

Using the uncertainty index as our benchmark, we show an imperfect but consistent relationship between uncertainty and nonresidential investment: As uncertainty increases, business investment decreases.

The imperfection is somewhat due to short-term fluctuations in perceptions of uncertainty, but more from the exaggerated quarter-to-quarter changes in investment that occur within a business cycle.

And as we’ve seen by the response of the financial markets to the now-abandoned U.K. budget proposals by the Truss government—an effective veto by the bond market—those policy actions can have a lasting impact on investment, growth and employment.

Increased uncertainty corresponds to decreased investment

Increased uncertainty corresponds to decreased investment

Current state of play

In terms of increased investment in equipment and intellectual property, we can attribute the willingness to invest in those areas to the need to remain competitive.

And because a business cycle is rarely a straight line from recession to recovery, we can offer some generalized remarks.

First, investment tends to increase along with growth as lagging information about the recovery becomes evident. Second, as the business cycle matures and growth decelerates, there will be disinclination to invest as confidence declines.

We can see the impact of the loss of confidence in the 2020-22 business cycle, with investment first increasing in response to the release of pent-up demand after the pandemic.

This was followed by the deceleration of overall growth and investment as the depth of the inflation and energy shocks became apparent.

Still, there are other factors to consider. For instance, we expect residential and commercial real estate prices and investment to decrease as interest rates rise. But despite a clear correction in the housing market in many areas, there still is a housing shortage, which will tend to keep residential investment, and prices, higher.

Second, risks around rolling over lower-cost debt that is coming due and the continuing interest in working from home are two major factors in declining investment in commercial real estate.

In the business sector, the increased cost of capital and the likelihood of an economic slowdown or outright recession next year suggest postponement or abandonment of investments.

Business investment in equipment and intellectual property and teh 2022 devline in residetntial investment*

Business investment in equipment and intellectual property and the 2022 decline in residential investment*

The takeaway

As workers continue to be in short supply, businesses will need to continue investing in labor-enhancing equipment, intellectual property and software to meet demand.

Whatever policy prescriptions are put forward during the early phase of a recession, productivity should remain a top consideration.

Policymakers will have to tread carefully as they combat increasing uncertainty while simultaneously bolstering the economy without causing further inflation. But, as we have proposed here, there are solutions.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 373-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Joe Brusuelas and originally appeared on 2022-12-08.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/economics/policy-choices-and-prospects-for-middle-market-investment.html

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

How to Take Advantage of the SALT Deduction Workaround

There is a new tax deduction available S-corporations and Partnerships to deduct for pass-through entity (PTE) withholding for its owners starting in 2022!

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How to Take Advantage of the SALT Deduction Workaround

DECEMBER 7, 2021 | Authored by katie laws, cpa

There is a new tax deduction available S-corporations and Partnerships to deduct for pass-through entity (PTE) withholding for its owners starting in 2022! 

At KDP, we are focused on the legislative changes that affect your bottom line and committed to ensuring you are sustaining and improving your tax efficiency. In 2017, the Tax Cuts and Jobs Act of 2017 introduced a $10,000 limit on the amount of state and local taxes (SALT) an individual taxpayer can deduct for federal income tax purposes. This limitation undercut the consolation deduction at the federal income tax level which higher income taxpayers utilized to soften tax burden of income being double taxed by state governments—or triple taxed by local governments in some cases.  Considering this negative impact, the IRS issued a notice on 11/10/2020 allowing a SALT deduction for PTE withholding payments made by S corporations and partnerships in calculation of taxable income. 

In response to the allowance of the SALT deduction at the entity level, most states including Idaho, Oregon, and California passed legislation to allow elective PTE tax. Previously, PTE payments were only allowed for certain owners, which disqualified resident individual owners from making a payment.  This created an enormous opportunity for everyday business owners to maximize their SALT deduction.  

How to take advantage of the new legislation:

For Idaho: 

  • Engage KDP to assist you in preparing and sending an estimated PTE payment for your S corporation or partnership prior to 12/31/2021.   Note, to take a deduction for your 2021 taxes, you must make the payment prior to year-end. 
  • Example, Jane and John are 50/50 partners in their profitable, 100% Idaho business.  Their share of business income is $200,000, in which the partnership makes PTE payments of $13,000 for each partner.  The partnership gets a deduction of $26,000 which exceeds the previous $10,000 SALT limitation imposed at the individual 1040 return level.   Jane and John claim the PTE payment on their individual returns similar to withholding, with any excess payment resulting in a refund.
  • We will primarily utilize the 2020 S corporation or partnership income information to calculate an estimated PTE payment for each shareholder or partner. 
  • Note, the payments must be made at the partnership or S corporation level, and made to the corresponding state taxing agency.  Individual estimated payments made throughout the year cannot be reclassified. 

For Oregon:

  • Engage KDP to assist you in preparing and sending an estimated PTE payment for your S corporation or partnership in 2022. 
  • We will primarily utilize the 2021 S corporation or partnership income information to calculate an estimated PTE payment for each shareholder or partner, or utilize your actual book income.
  • Note, the payments must be made at the partnership or S corporation level, and made to the corresponding state taxing agency.  Individual estimated payments made throughout the year cannot be reclassified. 

For California:

  • Make an election on a timely filed 2021 tax return. Please schedule a call with us to ensure we can timely file the return and plan to submit the initial payment by June 15.
  • Note, the payments must be made at the partnership or S corporation level, and made to the corresponding state taxing agency.  Individual estimated payments made throughout the year cannot be reclassified. 

We are poised to help you get the most out of this deduction.  Please contact us to begin the process.   

We value your trust and confidence in us and sincerely appreciate you!   

Your Team at KDP 

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 373-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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Katie Laws, CPA, has 11 years of tax experience with areas of expertise including GL accounting, STAT accounting, GAAP investment accounting, CGAAP, and advanced spreadsheet analysis. She has led General Ledger management and calculation troubleshooting for accounting directors ($500 million – $150 billion AUM). She also served the Idaho State Tax Commission for 6 years as a Tax Auditor 3.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

Cybersecurity considerations and trends for boards and audit committees

Boards of directors can strengthen cybersecurity at their organizations by understanding trends and taking action accordingly.

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Cybersecurity considerations and trends for boards and audit committees

ARTICLE | December 07, 2022 | Authored by RSM US LLP

Cybersecurity has been a consistent concern for businesses and boards of directors, although the specific threats are constantly in flux. Organizations encounter a roller coaster of risks, from lingering threats related to the COVID-19 pandemic to geopolitical conflicts and economic uncertainty underscored by the war in Ukraine. As is often the case, bad actors in cyberspace could come from a variety of angles on any given day.

Breaches at large entities have grabbed many of the headlines over the past year. Those incidents continue to prove that no organization is immune to a breach, even larger enterprises that inherently have more resources to implement advanced controls and are generally now doing a better job in fortifying their environments.

How are cybersecurity measures evolving along with threats? What steps can boards of directors take to protect their organization?

RSM examines those questions and more with this collection of insights.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 373-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by RSM US LLP and originally appeared on Dec 07, 2022.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/services/audit/cybersecurity-considerations-trends-for-boards-audit-commmittees.html

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

Tax withholding for equity compensation

Employment and income tax withholding rules for equity compensation

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Tax withholding for equity compensation

ARTICLE | December 02, 2022 | Authored by RSM US LLP

Equity compensation comes in many forms and the federal income tax and payroll withholding rules vary widely depending on the type of equity compensation involved. Equity compensation generally refers to any non-cash incentive pay that represents ownership in the employer entity that is paid to employees or service providers. Equity compensation may be in the form of actual company shares or phantom units; stock appreciation rights; restricted stock; restricted stock units or performance share units (RSUs or PSUs); stock options; or partnership capital or profits interests. For a more in-depth analysis of the forms of equity compensation, read Understanding equity compensation devices.

As a starting point to determine the tax withholding on equity compensation, you must understand the type and amount of equity compensation involved and when the taxable event occurs. This table provides a high-level overview of the general guidelines on taxable events and the timing of federal income tax withholding. There are some exceptions and nuanced tax treatments that are beyond the scope of this article and have not been included.

Equity compensation

Taxable event

Timing of income tax withholding

Company stock

Ordinary income at transfer

Transfer

Phantom stock

Ordinary income at payment

Payment

Stock appreciation rights

Ordinary income at payment

Payment

Restricted stock

Ordinary income at vesting (at grant if 83(b) election made)

Vesting (or grant if 83(b) election made)

Restricted stock unit / performance share units

Ordinary income at payment

Payment

Incentive stock options

If ISO requirements met, no income at grant or exercise (AMT adjustment at exercise) Capital gain or ordinary income at disposition based on holding period

None

Nonqualified stock options

Ordinary income at exercise

Exercise

Partnership profits interest

If safe harbor met, no income at grant or vesting (capital gain at disposition)

If no safe harbor, ordinary income at later of transfer or vesting (at grant if 83(b) election made)

None

Transfer/vesting if partner is employee before grant

Partnership capital interest

Ordinary income at vesting (at grant if 83(b) election made)

Vesting (or grant if 83(b) election made) if partner is employee before grant

The next consideration is determining the amount of equity compensation that is to be recognized at the taxable event. Section 83 addresses the tax treatment of property transferred in connection with the performance of services. Section 83(a) provides that the excess of the fair market value of the property over the amount paid, if any, for the property is included in the gross income of the person who performed the services. The amount of income or compensation will depend on the type of equity compensation arrangement. For a more in-depth discussion on valuation of equity compensation in private companies, read General equity compensation valuation rules for private companies.

General rule for tax withholding and timely deposits

As a general rule, when an employee earns wages both the employer and employee are liable for the mandatory employment taxes imposed by the Federal Insurance Contribution Act (“FICA”), which fund Social Security and Medicare, and the employer must submit federal income tax withholding on the compensation. Reg. sec. 31.3121(a)-2(a) provides that wages are generally subject to FICA tax when actually or constructively received. Similarly, Reg. sec. 31.3402(a)-1(b) provides that the employer is required to deduct and withhold income tax from the employee’s wages when paid, either actually or constructively. Thus, both employment and income taxes must generally be withheld when wages are actually or constructively received. Equity compensation is supplemental wages for income tax withholding purposes so employers may choose to use flat rates for federal income tax (if the equity compensation is separately identifiable from regular wages that have tax withholding) or the aggregate method of withholding (refer to reg. sec. 31.3402(g)-1. IRS publication 15 is a good resource for additional information on supplemental wage withholding).

Reg. sec. 31.6302-1 provides the deposit rules for FICA taxes and federal income tax withholding. In general, reg. sec. 31.6302-1(a) provides that an employer is either a monthly depositor or a semi-weekly depositor, based on an annual determination. Reg. sec. 31.6302-1(c)(1)-(2) requires deposits by the 15th of the following month (monthly depositor), or the following Wednesday or Friday (for semi-weekly depositor, depending on the payment date). Notwithstanding these general deposit deadlines, reg. sec. 31.6302-1(c)(3) provides that an employer is required to deposit employment taxes on the next banking day after $100,000 or more of employment taxes have been accumulated during the deposit period. This is known as the next-day deposit rule and may often apply to equity compensation awards. Employers are often unaware of the next-day deposit rule and its application to equity compensation until it is too late. The penalty for not making timely deposits ranges from 2% to 15% of the underpayment depending on the number of calendar days a deposit is late (refer to section 6656).

In 2020, the IRS released Generic Legal Advice Memorandum (GLAM) 2020-004 regarding the timing of income inclusion for three specific types of stock-settled equity compensation: nonqualified stock options (NSOs), stock-settled stock appreciation rights (SARs), and stock-settled RSUs. That the GLAM clarifies the taxable event for stock-based equity awards is the exercise date, which means that a recipient may have income before receiving the stock. Under section 83, the fair market value of stock-settled equity compensation award is includible in gross income when the stock is considered transferred, which is the earlier of when the employee exercises the stock award (NSOs or stock-settled SARs), or when the employer initiates payment under the stock award (stock-settled RSUs).

Special timing rule for FICA purposes

There is a special timing rule that applies to FICA for certain deferred compensation arrangements. Under the special timing rule, FICA is withheld when the substantial risk of forfeiture lapses (generally at vesting), rather than at the time of payment (refer to reg. 31.3121(v)(2)-1(a)(2)(ii)). The special timing rule has limited impact on most types of equity compensation, but it may apply to phantom stock or RSUs and PSUs. When the transfer (or payment) of cash or stock is deferred beyond the calendar year in which the substantial risk of forfeiture lapses, then FICA is generally withheld at the vesting date, and income taxes are withheld when the amounts are actually paid to the employee. Other exceptions may apply, such as for short-term deferrals, so it is important for employers to understand whether this special timing rule might apply to certain equity-based payments.

Another timing rule that applies to certain deferred compensation arrangements is the rule of administrative convenience. This rule allows the employer to elect to withhold FICA as late as Dec. 31 of the calendar year in which the substantial risk of forfeiture lapses (reference reg. sec. 31.3121(v)(2)-1(e)(5)). This may result in no Social Security tax withholding on the deferred compensation if the employee already met the required withholding on the Social Security wage base during the calendar year. Medicare tax withholding will still apply as there is no applicable limit. As with the special timing rule, this rule applies only to deferred compensation, though, so employers must carefully understand their equity compensation plans to know whether this rule can apply to the particular payments being made. It would generally not apply to stock options or restricted stock, for example.

Consequences of late withholdings or deposits

Deposits of tax withholdings are due by the close of the next business day for employers with at least $100,000 of employment taxes accumulated to be deposited (one-day rule), or under the general deposit rules for lesser amounts depending on whether the employer is a monthly or semi-weekly depositor (refer to reg. sec. 31.6302-1(c)31.6302-1(c)(3)).? Equity compensation payments will often trigger this next-day requirement so it is important to plan ahead. The IRS may waive penalties in certain instances for taxes withheld from NSOs, SARs, and RSUs that are deposited within two days of exercise or payment initiation, but it may still be difficult to comply in that timeframe without advance planning.

The breadth of penalties for failure to make proper withholdings and deposits depends on when it is discovered—whether it is before or after the tax year has closed will be determinative. Penalties and interest could apply to both under-reporting income and under-withholding taxes so reach out to your advisor for assistance.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 373-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Anne Bushman, Peter Berard, Catherine Davis and originally appeared on 2022-12-02.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/services/business-tax/tax-withholding-for-equity-compensation.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

What do the latest job numbers say about the health care sector?

According to the latest nonfarm payroll report by the Bureau of Labor Statistics, health care added 44,700 jobs, exceeding our earlier estimate of 40,000.

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What do the latest job numbers say about the health care sector?

REAL ECONOMY BLOG | December 02, 2022 | Authored by RSM US LLP

According to the latest nonfarm payroll jobs report published by the Bureau of Labor Statistics, health care added 44,700 jobs, which exceeded our estimate of 40,000. The overall economy added 263,000 jobs last month, a slight increase over October’s 261,000. These results also exceeded the consensus estimate of 200,000 new jobs for November.

Health care accounted for only 17.0% of new jobs, which is down from October’s 20.2% and the trailing three-month average of 19.5%. Strong services and government job hiring accounted for much of the overall November gains.

The much-watched senior care sector added 10,400 jobs compared to our estimate of 8,000. However, despite this news the sector will remain below pre-pandemic employment for some time. Even if the sector added 10,000 new jobs per month, it’s likely conditions would not return to pre-pandemic employment until the third quarter of 2025.

senior care employment

The takeaway

While other health care sectors’ employment is back to pre-pandemic levels, demand for services continues to outpace supply of necessary labor across all health care services. While senior care operators are in a generally tighter spot, most health care organizations are facing suboptimal employment levels relative to demand. Innovation and technology could bridge what has become a systemic labor shortage.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 373-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Matt Wolf and originally appeared on 2022-12-02.
2022 RSM US LLP. All rights reserved.
https://realeconomy.rsmus.com/what-do-the-latest-job-numbers-say-about-the-health-care-sector/

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890