This is part five of a five-part series on indirect costs.
As we wrap up our series on indirect costs, it’s important to remember the key takeaways from parts one through four:
In addition to the above points, the following items should be considered when evaluating indirect costs:
Though considering indirect costs in your construction contracts may seem like a no-brainer, these costs can be overlooked since they may be related to all projects but not easily allocated to just one. A concerted effort should be made to accurately estimate, allocate, and track these costs on a job-by-job basis to ensure accurate financial reporting, budgeting, and to remain in compliance with GAAP and other standards (FAR, CAS, etc.) that could be applicable to your construction business.
For more information regarding indirect costs and construction contracts, please contract Chris Fischer of Aronson’s Construction Real Estate Group at 301.231.6200.
The IRS recently released the 2015 annual deduction limits for a health savings account. These limits are typically adjusted each year for inflation.
The 2015 limits are $3,350 for an individual with self-only coverage and $6,650 for an individual with family coverage. Such deductible contributions can only be made to an HSA that is maintained in conjunction with a high-deductible health plan.
A high-deductible plan is defined as
In a recent Court of Appeals case (Berkshire Bank vs. Town of Ludlow MA and IRS, 1/11/2013) the Court ruled that an LLC owned by individual behind on his taxes was that individual’s alter ego. That is, the LLC and the individual were deemed to be one and the same, resulting in the assets of the LLC being available to satisfy the IRS tax debt.
Closely held businesses are in particular in danger of being seen as the alter ego of its owners. Common elements the IRS can use to find an alter ego relationship exists include
In a newly issued Revenue Procedure 2013-13, effective for tax years starting on or after 1/1/2013, the IRS has created a safe harbor for the home office deduction calculation. The safe harbor is $5 times the home office square footage, for a maximum of $1,500. The safe harbor is in lieu of the substantiation of actual expenses otherwise required under IRC 280A.
If the safe harbor is used:
• The safe harbor is the total deduction. No depreciation or any other costs can be taken in addition to the safe harbor amount.
• The taxpayer can take 100% of the mortgage interest and property taxes as an itemized deduction on schedule A. No reduction of these expenses are required.
• Disallowed home office expenses that were carried over from prior years cannot be used in the year the safe harbor is taken. These amounts continue to be carried over and are usable in a year in which actual (substantiated) expenses are claimed.
• The taxpayer can elect safe harbor or substantiated expenses year-by-year.
In December 2011, the IRS issued temporary regulations that offer guidance on capitalizing or expensing costs incurred in the acquisition, production, or improvement of tangible property. Recently, the IRS’ Large Business and International (LB&I) Division issued a memorandum to field agents concerning their examination of whether such costs have been properly treated