Tax-services | RKL LLP
Posted on: March 20th, 2018

Will You Be Able to Deduct Mortgage & Home Equity Loan Interest in 2018?

Almost 33 million Americans claimed home loan-related deductions in 2016, but fewer homeowners may be able to reap such benefits in 2018 due to tax reform changes.

The final version of the Tax Cuts and Jobs Act reduced the cap on acquisition indebtedness for the mortgage interest deduction and potentially eliminated the home equity loan interest deduction. Homeowners currently filing their 2017 tax returns may still claim these deductions at the previous levels.

Due to the high volume of feedback received from taxpayers and the real estate and financial services industries, the IRS recently issued a bulletin to clarify that the home equity loan interest deduction may still be an option and reiterate the new levels of mortgage interest deductibility.

Mortgage interest deduction capped

Tax reform reduced the dollar limit on mortgages qualifying for the home mortgage interest deduction. Beginning in 2018, taxpayers may only deduct mortgage interest on $750,000 of qualified residence loans. The limit is $375,000 for married filing separately taxpayers. The previous cap of $1 million remains for older debt for married filing joint taxpayers and $500,000 for married filing separately taxpayers. The mortgage interest deduction applies to both primary and vacation homes.

These new thresholds are effective for mortgage debt incurred after December 15, 2017.

Home equity loan interest may still be deductible

The initial takeaway from the Tax Cuts and Jobs Act was that the deduction for home equity loan interest was fully suspended starting in 2018. The IRS stated on February 21, 2018, that this was not a complete removal of the deduction. Instead, taxpayers may continue to deduct interest on their home equity loan, home equity line of credit (HELOC) and lines of credit provided the loan meets certain usage criteria.

Interest on home equity loans with borrowings no more than $100,000 may be deductible as long as the loan proceeds are used to “buy, build or substantially improve” the home that secures the loan. Any other use is not permitted for the deduction.

For example, interest on a home equity loan is deductible if the loan’s purpose is to build an addition on the taxpayer’s primary or secondary residence, but it is not deductible if used to pay down credit card debt. Additionally, if a homeowner takes out a home equity loan on a primary residence to purchase a vacation home, this interest will not be deductible. In this case, the homeowner would need to take out a second mortgage to purchase the vacation home.

As federal regulators interpret the statutory tax reform language into practice, more guidance and clarification will follow. RKL is monitoring these developments and will continue to provide updates as needed.

In the meantime, taxpayers with questions about their eligibility for certain itemized deductions should contact their RKL advisor.

Be sure to visit our Tax Reform Resource Center for more insights and information.

Contributed by Ruthann J. Woll, CPA, Principal in RKL’s Tax Services Group and member of the firm’s Not-for-Profit Industry Group. Ruthann oversees the firm’s individual and non-profit tax planning and compliance, and has significant experience delivering tax services to organizations, institutions and individual clients.




RKL blog disclaimer


Posted on: March 15th, 2018

IRS Guidance Clarifies Tax Reform’s New Repatriation Requirement

IRS Guidance Clarifies Tax Reform's New Repatriation RequirementTrillions of dollars’ worth of company earnings held offshore will soon be repatriated for U.S. taxation, under the new Section 965 transition tax contained in the Tax Cuts and Jobs Act. Since tax reform was enacted, the U.S. Treasury and the IRS have been largely silent on the issue of Section 965, leaving individuals and companies with ownership stakes in foreign corporations wondering how to report eligible earnings.

On March 13, the IRS issued frequently asked questions to clarify some of the bigger concerns surrounding the Section 965 reporting. Read on for a breakdown of eligibility requirements, timing and next steps related to payment of these new repatriation obligations.

Which offshore earnings must be repatriated and reported under Section 965?

  • Both taxpayers and pass-through entities (such as S-corporations and partnerships) will need to report the amount of net earnings held offshore, as well as the calculated deductions that reduce the tax rate on the repatriated earnings.
  • Taxpayers (such as individuals and corporations) must also report the amount of the transition tax liability (including amounts elected to be deferred or paid in installments), “foreign cash position,” as well as any foreign tax credit allowed. A statement signed under penalty of perjury including these items and others is also required.
  • Taxpayers with ownership in foreign corporations for which a Form 5471 has not been filed in the past should consult with their tax advisor to determine it will apply for the 2017 tax year.
  • The IRS requests that taxpayers with a reporting requirement wait to electronically file a return until at least April 2, 2018.
  • Any returns that have been submitted without this information should be amended to satisfy the reporting requirements.

Who must pay the transition tax on repatriated offshore earnings?

  • The taxpayer with direct or indirect ownership in a specified foreign corporation, including shareholders in S-Corporations and partners in partnerships with ownership in at least one foreign corporation.
  • Only taxpayers with ownership in foreign corporations that have accumulated earnings held abroad will be subject to the tax.

When is payment of the Section 965 transition tax due?

  • Payment of the tax is due at the original tax return due date of the taxpayer (generally April 15).
  • Taxpayers may make an election to pay the tax in installments over eight years. This election is due by the due date of the taxpayer’s return, including extensions, but the first installment payment is due by the original tax return due date.
  • S-corporation shareholders are allowed a special election to defer the payment of tax until certain triggering events occur, such as the closing of the business, sale of stock, termination of the corporation’s S-status, among others. However, the above reporting requirements still apply.
  • Payment for the transition tax must be made separately from regular tax payments. Taxpayers otherwise required to make payments via EFTPS must make the Section 965 tax payment via wire transfer.

I believe the transition tax will apply to me or my company. What should I do next?

  • Contact your tax advisor: Calculation of the amounts of income, deduction, foreign cash position and tax will require careful analysis and could likely involve additional communication with the foreign corporation.
  • Extend relevant filings: Given the complex nature of the provisions and coupled with the IRS request to delay filing until at least April 2, it would be prudent to extend all returns with a reporting requirement, including pass-through returns and their shareholders/partners. The IRS has also promised additional guidance on the transition tax that may impact the calculation or reporting.

Contact your RKL advisor for more information or assistance regarding Section 965 fillings. Stay tuned to our dedicated Resource Center for ongoing updates, insights and information related to tax reform as federal agencies continue to interpret, apply and advise on its various provisions.

David W. Achey, CPA, MST, Manager in RKL’s Tax Services GroupContributed by David W. Achey, CPA, MST, Manager in RKL’s Tax Services Group. Dave specializes in business tax services including combined reporting, multistate and international issues, as well as accounting for income taxes. He has extensive experience working with small and medium-sized businesses as well as multinational companies, serving clients in industries ranging from industrial manufacturing and transportation to consumer electronics and pharmaceuticals.



RKL blog disclaimer

Posted on: March 2nd, 2018

Now Available: IRS Tools to Assess and Manage Post-Tax Reform Withholding

Now Available: IRS Tools to Assess and Manage Post-Tax Reform Withholding The IRS recently released a new Form W-4 and an updated withholding calculator for 2018 personal income tax withholding. This much-anticipated information from the IRS is the final component of withholding guidance released in January. Now employers and employees have the full suite of tools at their disposal to review and update withholding as needed post-tax reform. The IRS does not require all employees to complete a new Form W-4 for 2018; however, it may be advisable for some individuals based on their personal tax situation.

Calculate Tax Reform Impact on Withholding

The Tax Cuts and Jobs Act contained a number of changes to individual taxation, including a reduction in tax rates and brackets, the elimination of personal exemptions and an increase or adjustment to certain deductions and credits. In light of this shifting tax landscape, an individual’s tax return for 2018 may look very different from 2017.

The IRS offers a withholding calculator on its website to help taxpayers review their paychecks and ensure the necessary amount is being withheld in the context of their personal circumstances. It is not necessary to have completed your 2017 return to use the calculator, though it can be a handy guide when using the tool.

Updated W-4 and Employer’s Supplemental Guide Now Available

If employees need to adjust withholding to accommodate tax reform changes or events in their personal life, the calculator provides information that can then be used to complete a new W-4 for submission to their employer.

The IRS also provided additional guidance for employers through 2018 Publication 15-A, which supplements the 2018 Employer’s Tax Guide issued in January and covers essential topics for employers like worker status, third-party sick-pay reporting and alternate withholding calculation methods.

RKL’s small business advisors stand ready to help employers adapt to the new withholding landscape – contact us with questions on this or any other aspect of tax reform impact. To view RKL’s full suite of tax reform insights and information, visit our dedicated resource center.


Tina Dodson, CPP, EA, of RKL’s Small Business Services Group.Contributed by Tina Dodson, CPP, EA, in RKL’s Small Business Services Group. Tina has two decades of experience helping small business owners and their management teams meet their financial reporting and individual and corporate tax return preparation needs.





RKL blog disclaimer

Posted on: February 27th, 2018

Ask These Questions to Maximize New Pass-Through Deduction

Ask These Questions to Maximize New Pass-Through DeductionThe Tax Cuts and Jobs Act (TCJA) created a new section of the tax code, Section 199A, which allows certain business owners to avoid tax on 20 percent of their business profits. There’s a lot of information to unpack around the new Section 199A deduction, including a number of eligibility criteria, so here are some fundamental considerations for business owners hoping to maximize this new tax reform benefit.

Is my business caught in the specified service provider definition?

Language in Section 199A explicitly prohibits service professionals from taking the 20 percent qualified business income deduction. This includes professionals in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.

Pass-through business owners should closely review the NAICS codes on their 2017 tax returns to make sure they are not misrepresenting the services provided.

There is still hope for professionals within these excluded fields. Section 199A makes an exception to the specified service trade or business based on taxable income. If a taxpayer’s taxable income from all sources (not adjusted gross income) for a given year is less than the below threshold amounts, plus $50,000 for single filers and $100,000 for joint returns, the taxpayer is eligible to take the Section 199A deduction.

  • Taxable Income Threshold: $157,000 for individuals, $315,000 for married filing jointly
  • Phase-Out Limit: $207,500 for individuals, $415,000 for married filing jointly

Your RKL advisor can help assess the impact of these thresholds and phase-outs on your personal financial circumstances.

Are wages from a business I own set at the optimal level?

In addition to the category of trade or business, another factor determining eligibility for the Section 199A deduction is wages. In the most basic terms, a business owner’s deduction under Section 199A is limited to the greater of 50 percent of W-2 wages or 25 percent of W-2 wages plus 2.5 percent of the unadjusted basis of all qualified property used or held by the business.

In order to fully avail themselves of this deduction opportunity, business owners should make sure their wages are set at an appropriate level. The tax code defines W-2 wages as the sum of wages subject to withholding, elective deferrals and deferred compensation paid by the partnership, S corporation or sole proprietorship during a given tax year. Keep in mind this does not include independent contractor or management fees.

The same taxable income threshold and phase-outs applied to specified services also apply here, so companies with taxable income under the amounts below may ignore the limitations on W-2 wages.

  • Taxable Income Threshold: $157,000 for individuals, $315,000 for married filing jointly
  • Phase-Out Limit: $207,500 for individuals, $415,000 for married taxpayers

Consult your RKL advisor for assistance at setting compensation and wages at the optimal levels to maximize your eligibility for the Section 199A deduction.

How can I reduce my taxable income to qualify for Section 199A?

Here are a few things business owners could consider to satisfy the taxable income and wage optimization requirements of Section 199A:

  • Hire independent contractors as employees.
  • Make self-employed retirement plan contributions.
  • Consider bunching itemized deductions.

Your RKL tax advisor can evaluate these and other methods to maximize Section 199A eligibility within the context of your unique circumstances.

Beyond the items mentioned above, there are a number of other uncertainties and ambiguous aspects of Section 199A that will be addressed in regulatory guidance from the U.S. Treasury. RKL will continue to monitor developments around this new deduction and continue to highlight ways pass-through business owners can mitigate disqualifying factors and maximize the benefit of this new deduction. Contact your RKL advisor or one of our local offices with any questions about this new tax code section.

Visit RKL’s Tax Reform Resource Center for more information and insights.

Wendy L. Lance, CPA, MST, RKL Tax Services Group PartnerContributed by Wendy L. Lance, CPA, MST, Partner in RKL’s Tax Services Group. Wendy delivers strategic tax planning and compliance services to corporations, partnerships, individuals and closely held businesses and their owners.




RKL blog disclaimer

Posted on: February 22nd, 2018

Tax Reform’s Impact on Your Company’s 2017 Year End Reporting

Tax Reform's Impact on Your Company's 2017 Year End Reporting The Tax Cuts and Jobs Act (TCJA) was enacted into law on December 22, 2017, and took effect on January 1, 2018. Yet companies will still feel tax reform’s impact on their December 31, 2017 financial statements, particularly with regard to accounting for and reporting of income taxes, thanks to the Financial Accounting Standards Board (FASB) requirement that companies recognize changes in the period of enactment.

The reduction of the corporate tax rate to 21 percent and a new provision for 100 percent deduction of dividends received may affect valuation allowances and analysis. These are just some of the many factors at play as businesses seek to manage deferred taxes and accounting for income tax in the wake of tax reform. Below, we round up other key tax reform considerations for financial statements and disclosures.

What does the corporate tax rate reduction mean for deferred tax balances at December 2017 year end?

Companies must remeasure their deferred tax assets and liabilities for the new rate effective January 1, 2018. The effect of the remeasurement is reflected entirely in the interim period that includes the enactment date and allocated directly to income tax expenses (benefit) from continuing operations. The effect on prior year income taxes payable (receivable), if any, is also recognized as of the December 22, 2017 TCJA enactment date.

When should a fiscal year end company adjust its estimated annual effective income tax rate?

Companies will adjust the rate based on the rate in place at the beginning of their fiscal year. For fiscal periods which cross the enactment date, a blended rate will be used. For instance, a September 30, 2018 year end would use a blended rate calculated with nine months at the new 21 percent rate and three months at the previous applicable rate.

How should my company account for and recognize significant residual tax effects in other comprehensive income?

Recognizing the full effect of the change in tax law in income tax expense (benefit) from continuing operations will result in residual tax effects for a company that recognized deferred tax balances through other comprehensive income.

Residual tax effects are released when the item giving rise to the tax effect is disposed, liquidated or terminated or when the entire portfolio of similar items (i.e. liquidation of defined benefit pension plan, available for sale securities liquidation) is liquidated. A company should apply its existing accounting policy for releasing residual tax effects.

On February 14, 2018, FASB unveiled a new requirement for companies to reclassify the residual tax effects arising from the change in the corporate tax rate from accumulated other comprehensive income to retained earnings. This requirement is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption allowed.

There is a specific formula for this reclassification that your RKL advisor can explain in greater detail, but generally speaking, the new approach requirement eliminates the stranded tax effects associated with the corporate tax rate reduction and improves the usefulness of financial statement information.

How will this affect my earnings from foreign subsidiaries?

Earnings that were formerly excluded from repatriation will no longer be indefinitely deferred. This “transition tax” may be paid over eight years, with no interest charged, and will be due over a graded scale for those eight years.

RKL’s Audit Services Group is filled with accounting professionals that can help your company assess the impact of tax reform on financial reporting and ensure financial statements are calculated and compiled accurately. Contact your RKL advisor or one of our local offices today to get started.

Visit RKL’s Tax Reform Resource Center for more information and insights.

Travis A. Bieber, CPA, Manager in RKL's Audit Services GroupContributed by Travis A. Bieber, CPA, Manager in RKL’s Audit Services Group. Travis serves clients in a wide variety of industries, including manufacturing, distribution and food processing, and works with privately held, family owned and private equity backed companies.




RKL blog disclaimer

Posted on: February 20th, 2018

Act Now to Lock in Cost Segregation Benefits for 2017 Tax Year

Act Now to Lock in Cost Segregation Benefits for 2017 Tax YearBusiness owners will reap many benefits from tax reform over the coming years, thanks to rate changes and new deductions. In the short term, however, there are several tax-minimizing strategies owners can act on now to increase the savings on their 2017 tax returns – one of which is conducting a cost segregation study.

What is a cost segregation study?

Business owners may have significant unrealized tax savings in their property and facilities. The standard tax depreciation life for a commercial building is 39 years and 27½ years for a residential building. A cost segregation study identifies, segregates and reclassifies the building-related cost into “personal property” or “land improvements,” which have shorter depreciable lives and accelerated depreciation methods for tax purposes.

Cost segregation applies to acquired or newly constructed properties, including renovations, expansions and tenant improvements, and can be performed on current year or prior year properties.

Additionally, bonus depreciation is applicable to the personal property and land improvements identified under cost segregation, which makes this strategy even more important and beneficial to taxpayers.

How does tax reform impact cost segregation studies?

The Tax Cuts and Jobs Act (TCJA):

  • Decreased overall individual tax rates to 10, 12, 22, 24, 32, 35 and 37 percent and cut the corporate tax rate from 35 to 21 percent; and
  • Increased the bonus depreciation rate from 50 percent to 100 percent for assets acquired and placed into service after September 27, 2017 and before January 1, 2023.

By utilizing cost segregation now for the 2017 tax filing season, taxpayers can:

  • Accelerate depreciation deductions in tax years with a higher tax rate than the future tax rates under TCJA; and
  • Determine the applicable bonus depreciation rate for the 2017 tax year based on the requirements and timing under the acquisition and in-service date rules.

Short window for greater tax savings

Business owners who acquired, constructed or renovated a building in 2017 or in a prior year without taking advantage of accelerated depreciation methods should consider cost segregation, but it’s important to act now. The lower tax rates effective January 1, 2018 mean business owners have a short window of opportunity to reap the benefits of cost segregation at the higher tax rates from 2017.

RKL offers cost segregation services

Ready to apply this powerful tax savings strategy and potentially increase cash flow for your business? RKL’s team can provide an analysis of the potential tax benefit and cost before engaging in a formal cost segregation study. Contact your RKL tax advisor or one of our local offices to find out whether your company can take advantage of this window of opportunity provided by tax reform.

Don’t miss RKL’s full suite of insights and information in our Tax Reform Resource Center.


Deb Rock, CPAContributed by Deborah S. Rock, CPA, consultant in RKL’s  Tax Services Group. With over two decades of public and private accounting experience, Deb is an expert in the area of cost segregation, depreciation, fixed assets and the tangible asset regulations.




RKL blog disclaimer


Posted on: February 15th, 2018

What Does Tax Reform Have to Do with My Nonprofit?

What Does Tax Reform Have to Do with My Nonprofit?Most of the headlines about tax reform focus on the individual and for-profit business provisions. Nonprofit leaders may wonder how the Tax Cuts and Jobs Act (TCJA) will affect their finances and operations. Let’s examine two key ways tax reform directly impacts tax-exempt organizations.

Direct nonprofit tax reform impact: Unrelated business income

Tax reform changes how unrelated business income (UBI) is calculated and taxed.

Starting in 2018, nonprofits must calculate UBI on each trade or business individually, rather than the previous aggregated method. The definitions for trade or business in the TCJA are currently unclear – for example, do investments in multiple real estate partnerships count as one trade or business or must each partnership be counted separately? This is just one of the many areas of tax reform that will require additional clarification as regulations are drafted by the IRS.

Under tax reform, UBI will now be taxed at the new corporate rate of 21 percent, instead of the previous multi-level rate schedule. The financial impact of this rate change depends on the size of the nonprofit. Smaller organizations with less than $90,000 of taxable income will now pay more due to the switch, while larger organizations will see a smaller tax burden.

Net operating losses (NOLs) from prior years may still be used to offset all UBI tax. Tax reform sets new rules for NOL carryforwards at 80 percent of taxable income. Keep in mind, all new NOLs must be calculated by trade or business and can no longer “cross pollinate.”

Tax reform also expands the definition of UBI to include certain fringe benefits offered to employees, like transportation, parking or on premise athletic facilities.

How nonprofits can prepare for UBI change

Under the new UBI tax calculation and rate, nonprofit leaders must ensure they are allocating the appropriate general or shared expenses to each trade or business to maximize benefit. Other options, such as moving multiple taxable trade or business activities into a wholly owned corporation to offset profitable activities with loss activities, should be considered with the consultation of a tax advisor.

With regard to certain fringe benefits now considered as UBI, nonprofits should consider increasing wages and eliminating qualifying benefits from pay plans to avoid an additional tax burden. Your tax advisor can demonstrate the pros and cons of such a decision.

Direct nonprofit tax reform impact: Excise taxes

To bring nonprofit pay in line with public company compensation rules, the TJCA created a new 21 percent excise tax on annual compensation of $1 million or higher to an organization’s top five highest compensated employees. This new excise tax also applies to certain “golden parachute” separation pay packages. Medical services provided by doctors, nurses and veterinarians are excluded from this new tax, which is the obligation of the nonprofit, not the employee.

There are a lot of details to unpack around this new excise tax, related to issues like separation pay calculation and renumeration, so make sure to discuss your nonprofit’s unique situation with your tax advisor.

Additionally, the net investment income of some private colleges and universities are subject to a new 1.4 percent excise tax. Institutions with at least 500 students (over half of which are based in the U.S.) and prior year assets of at least $500,000 per full-time student will be hit with this new tax. This asset threshold calculation does not include assets used to carry out a school’s educational purpose, but it does include assets and net investment income of all organizations related to the private university.

How nonprofits can prepare for excise taxes

To continually assess the annual impact of the compensation excise tax, nonprofit leaders should keep close track of “covered employees” and “remuneration” from related entities to determine liability. One tactic worth discussing with your tax advisor is whether or not certain individuals above this pay threshold can be paid partly or in full by an affiliate not deemed a related party.

RKL to monitor implementation

As mentioned earlier, many of the ambiguous or unclear areas of tax reform will be fleshed out during the rule-writing process. RKL’s team of professionals dedicated to serving the not-for-profit industry are monitoring this process with an eye to nonprofit impact and will provide additional updates and clarifications as more information becomes available.

In the meantime, contact Douglas L. Berman, CPA, RKL’s Not-for-Profit Industry Group leader, with any questions regarding tax reform’s impact on nonprofits or for assistance preparing for the new tax landscape for organizations. Visit RKL’s Tax Reform Resource Center for more information and insights.


Stephanie E. Kane, CPAContributed by Stephanie E. Kane, CPA, Manager in RKL’s Tax Services Group. Her client responsibilities include serving clients in a wide variety of industries with a focus on not-for-profit entities.






RKL blog disclaimer

Posted on: February 13th, 2018

New PA Rules for Non-resident 1099-MISC Withholding

New PA Rules for Non-resident 1099-MISC WithholdingPennsylvania’s tax code underwent several changes in November 2017, when Governor Tom Wolf signed Act 43 into law. One of the most significant results of that legislation was the creation of a new withholding obligation for Pennsylvania companies that pay non-resident vendors or subcontractors.

Since issuing a bulletin on this topic last month, the PA Department of Revenue (DOR) received many questions regarding the timing and implementation for this 1099-MISC withholding requirement for tax year 2018. On February 5, 2018, the DOR announced that companies that fail to withhold this tax before July 1 will not be subject to fines and penalties. Any company that does withhold tax on 1099-MISC non-resident income, however, must file and remit it according to Act 43.

To assist clients with compliance, RKL’s State and Local Tax team assembled a quick primer on these new regulations.

Withhold PA Income Tax from Non-Resident Compensation or Business Income

PA-based companies that pay non-employee compensation or business income of $5,000 or above to a non-PA resident or disregarded entity with nonresident members (such as a limited liability company treated as a disregarded entity for federal purposes) must now file a 1099-MISC with DOR and withhold PA income tax (3.07%) from such payments. For amounts under $5,000, this withholding and filing is optional but recommended.

DOR defines non-employee compensation as any payment made to someone who is not an employee and payments made for services in the course of trade or business.

Withhold PA Income Tax from Certain Lease Payments

Individuals who make lease payments of $5,000 or more on Pennsylvania real estate in the course of trade or business to non-resident lessors must now withhold Pennsylvania income tax (3.07%) from the payment amount. For amounts under $5,000, this withholding and filing is optional but recommended.

For the purposes of Act 43, DOR defines lessor only as individuals, estates and trusts, and characterizes lease payments as rents, royalties, bonus payments, damage rents and other payments made pursuant to a lease.

Lessees must provide both DOR and the non-resident lessor with a copy of Form 1099-MISC demonstrating both the amount of lease payments and the amount withheld from them. Lessors must then also file a copy of any Forms 1099-MISC with their Pennsylvania tax returns.

1099-MISC PA Filing Requirements and Schedules

The DOR stated in its February 5 announcement that it expects payors and lessors to file the related 1099-MISC forms, with boxes 16 and 17 completed, timely in January 2019. DOR recommends that 1099-MISC withholding returns and monies be remitted and filed electronically via the e-TIDES system.

It also requires that payors and lessees adhere to the following schedules according to total withholding amount.

  • Quarterly schedule: If total withholding is under $300 per quarter, the taxes are due the last day of April, July, October and January.
  • Monthly schedule: If total withholding is $300 to $999 per quarter, the taxes are due the 15th day of the following month.
  • Semi-monthly schedule: If total withholding is $1,000 to $4,999.99 per quarter, the taxes are due within three banking days of the close of the semi-monthly period.
  • Semi-weekly schedule: If total withholding is $5,000 or greater per quarter ($20,000 per year), taxes are due on a semi-weekly basis. For employers with payrolls falling on Wednesday, Thursday or Friday, the remittance is due the following Wednesday after that payday. For employers with payroll on a Saturday, Sunday, Monday or Tuesday, the remittance is due the following Friday after that payday.

In addition to the above thresholds and schedules, DOR also requires payors to file quarterly reconciliation returns and an annual withholding reconciliation statement (REV-1667 R) with the 1099-MISC statements for each payee.

Clients with questions about this new requirement may contact their RKL advisor or reach out to me directly at or 717.525.7447.

Jason C. Skrinak, CPAContributed by Jason C. Skrinak, CPA, State and Local Taxes (SALT) Practice Leader for RKL’s Tax Services Group. Highly regarded throughout the region for his deep knowledge and expertise in SALT consulting, Jason has significant experience representing taxpayers before Pennsylvania’s Board of Appeals and Board of Finance and Revenue.



RKL blog disclaimer


Posted on: February 12th, 2018

5 Things You Need to Know About International Tax Reform

5 Things You Need to Know About International Tax ReformWhile tax rate cuts and changes to deductions for individuals and businesses have been a focus of tax reform coverage, a significant shift is underway in the U.S. tax treatment of companies doing business overseas. Here’s a quick roundup of some of the central changes to international tax law that will have a profound impact on businesses with cross-border transactions.

Mandatory Repatriation

The most immediate impact of international tax reform will be a “transition tax” on the mandatory repatriation of accumulated earnings held offshore. This one-time tax is applicable to shareholders who own 10%, directly or indirectly, of a specified foreign corporation (SFC). The base for the tax is deferred income, or the accumulated foreign earnings of the SFC since 1986 that have not previously been taxed in the U.S. Shareholders subject to the tax should work quickly to quantify the earnings and profits (E&P) or deficit in E&P for each relevant foreign corporation.

Two preferential tax rates will be applied to a U.S. shareholder’s allocable share of post-1986 deferred foreign income. A 15.5% rate will be applied to the portion of earnings representing liquid assets such as cash, accounts receivable, certificates of deposit, government securities, etc. An 8% tax rate will be applied to the remainder of the allocated amount.

Since the transition tax will be a substantial sum for many taxpayers, an election is available to pay the tax on an installment basis over eight years or until a triggering event occurs (sale, liquidation, or cessation of the business, failure to pay an installment). The first installment of transition tax is due by the original due date of the shareholder’s return for the last tax year beginning before January 1, 2018. S Corporations are allowed a special election to defer the tax completely until a triggering event occurs or the entity ceases to be an S Corporation. The IRS has not yet specified the method to make these elections.

Territorial Tax System

One of the major talking points surrounding tax reform was a move from the U.S. system of worldwide taxation, whereby all income of U.S. citizens and residents is taxed in the U.S. regardless of the location it was earned, to a territorial system common among our trading partners. A purely territorial system would tax only income sourced to a particular jurisdiction.

To move the U.S. closer to this model, the new tax law uses a “participation exemption” in the form of a 100% dividends received deduction (100% DRD). This deduction is allowed against the foreign-source portion of distributions from specified 10% foreign corporations (those owned at least 10% by a domestic corporation). This DRD is only available to U.S. companies structured as C Corporations, so it will be worthwhile to analyze the entity types in a U.S. group that has ownership in at least one specified 10% foreign corporation.

Expansion of Anti-Deferral Provisions

While the participation exemption effectively excludes foreign-source income from U.S. taxation, provisions of existing law meant to prevent certain types of earnings from being held offshore long-term have been retained under the law and expanded to encompass new categories of income. Specifically, a new category labeled “Global Intangible Low-Taxed Income,” (GILTI) will be taxed currently. GILTI includes not only intangible income, but all income earned by a controlled foreign corporation (CFC) above a 10% return on its depreciable tangible property used to generate the income.

Reduced Tax Rate on High-Margin Exports, Intangibles and Services

Consistent with the goal of bringing profits home to the U.S., the legislation provides for an export incentive in the form of a deduction for foreign-derived intangible income (FDII). Similar to the determination of GILTI income inclusion, income eligible for the FDII deduction is not intangible income in the traditional sense, but income above a 10% return on its depreciable tangible property used to generate the income.

Income eligible for the deduction includes both the sale, lease, license and other disposition of property by a domestic corporation to a foreign person for foreign use and services provided by a domestic corporation to a person outside of the U.S. Through 2025, FDII is 37.5% deductible, with the intention to reduce the effective tax rate on such income to 13.125%. As with the 100% dividends received deduction, the deduction for FDII is only available to C Corporations.

Base Erosion and Anti-Abuse Tax

The base erosion and anti-abuse tax (BEAT) is a new alternative tax computation. A 10% tax rate applies to the modified taxable income of C Corporations, determined by adding back “base-eroding” deductions for payments made to foreign affiliates. BEAT only applies to corporations with a three-year average of at least $500 million in gross receipts and a “base-erosion percentage” of 3% or higher.

Tax reform replaces the previous deferral of items of foreign-source income with a system in which foreign-source income will either be taxed currently or not taxed at all. There are a number of incentives in the new law meant to encourage domestic business activity, but many of the new deductions are only allowed to be used by C Corporations.

Contact your RKL advisor for assistance with determining whether these taxes and incentives apply and to map out actions required for elections, planning or restructuring opportunities. Visit RKL’s Tax Reform Resource Center for more information and insights.


David W. Achey, CPA, MST, Manager in RKL’s Tax Services GroupContributed by David W. Achey, CPA, MST, Manager in RKL’s Tax Services Group. Dave specializes in business tax services including combined reporting, multistate and international issues, as well as accounting for income taxes. He has extensive experience working with small and medium-sized businesses as well as multinational companies, serving clients in industries ranging from industrial manufacturing and transportation to consumer electronics and pharmaceuticals.




RKL blog disclaimer

Posted on: February 7th, 2018

The Good, the Bad and the Unknown of Gov. Wolf’s 2018-19 Budget Proposal

The Good, the Bad and the Unknown of Gov. Wolf's 2018-19 Budget ProposalThe 2018-19 Fiscal Year budget address delivered by Pennsylvania Governor Tom Wolf yesterday was short and sweet. While recognition of the Philadelphia Eagles’ recent Super Bowl victory opened the proceedings with a unified and celebratory tone, it was not long until partisan differences emerged in this first stage of the annual state budget process. Despite his brevity, Governor Wolf did announce some ideas and proposals that would directly impact Pennsylvania taxpayers in a variety of ways.

The Good: No broad-based tax increases

Pennsylvania residents should be glad to hear that the Governor did not propose any broad-based tax increases. The 2018-19 budget address does not contain the broad-based tax proposals included in recent budget years, such as increases in the personal income tax, sales and use tax rates and possible sales and use tax base expansion on various services. Given how many state officials are up for re-election this year, it is not surprising that tax increases on residents were taken off the table.

In addition to personal taxes remaining at current levels, the proposed budget should also please the education sector with its call for $225 million in additional spending on early childhood, special education, basic education and career/technical training.

The Bad: Proposed natural gas severance tax

Although residents of Pennsylvania avoided possible tax increases, the oil and gas industry was not so lucky. Governor Wolf spent a significant amount of his proposed budget address calling for a severance tax in Pennsylvania. In the post-address commentary, however, it became clear that the Republican leadership will not be lending their support for this proposed tax.

The main concern regarding the severance tax is that increased taxes on the oil and gas industry could lead directly to lesser investment into the Commonwealth and a possible reduction of Pennsylvania jobs. It should also be noted that the industry is contributing to Pennsylvania’s revenues through current impact fees, corporate net income tax, sales and use tax and personal income taxes. Just because Pennsylvania is the only state without a “severance tax” does not mean one should be enacted; in fact, several analysts noted after the address that the absence of such a tax could be a differentiator in attracting more investment and keeping jobs in Pennsylvania.

The Unknown: Conformity with Federal Tax Reform

Governor Wolf’s mention of the possible location of Amazon’s second headquarters in Philadelphia or Pittsburgh was another headline of the address, since attracting an employer the size of Amazon would be a win for the Commonwealth.

Decisions by large companies such as Amazon to relocate and/or expand their footprint within the Commonwealth may be directly related to how Pennsylvania applies and treats the recent federal tax reforms. Pennsylvania already has an uphill battle in attracting corporations into the state based upon its 9.99% corporate tax rate, but this rate coupled with how Pennsylvania reacts to federal tax reforms could turn the uphill battle into a nearly impossible feat.

Due to the healthy amounts of repatriated cash businesses will experience thanks to federal tax reform, states are going to be incredibly competitive in attracting additional expenditures within their borders. A prime example of this competition is how states will treat 100% bonus depreciation. A recent position implemented by the state Department of Revenue (DOR) places Pennsylvania significantly behind most other states. Not only will the DOR not allow 100% bonus depreciation, the department will not provide for any depreciation for Pennsylvania corporate net income tax purposes until the year of disposition. As feedback to this DOR policy flows in from the business community and the General Assembly considers legislation to address this and other federal tax conformity issues, it is clear that short-term decisions may have long-term effects on the entrepreneurial landscape in Pennsylvania for years to come.

RKL’s State and Local Tax team closely tracks state budget negotiations, along with all proposed legislative efforts, for taxpayer impact. Readers with questions about the Governor’s latest proposal or Pennsylvania tax matters should contact me at

Jason C. Skrinak, CPAContributed by Jason C. Skrinak, CPA, State and Local Taxes (SALT) Practice Leader for RKL’s Tax Services Group. Highly regarded throughout the region for his deep knowledge and expertise in SALT consulting, Jason has significant experience representing taxpayers before Pennsylvania’s Board of Appeals and Board of Finance and Revenue.



Don’t miss the latest RKL business analysis and insights. Sign up for our e-newsletter. 

Working Capital blog disclaimer