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Massachusetts Film Tax Credits<br />Irene Wachsler, CPA, MBA<br />Tobolsky & Wachsler CPAs, LLC<br />
Overview of the Mass. Film Tax Credit<br />Payroll Procedures<br />Accounting / Recordkeeping for AUP<br />Additional Requ...
25% tax credit for both above and below the line qualifying production expenses incurred in Mass.<br />Exempt from paying ...
Must spend at least $50K on production expenses within a 12-month period<br />50% of total expenses incurred must be spent...
Cost of rental equipment<br />Employer-paid expenses<br />FICA / Medicare<br />Pension<br />Federal & state unemployment<b...
Individual employee salary &gt; $1 million<br />Production expenses that do not qualify:<br />Legal and audit / AUP<br />M...
Each employee’s salary &lt; $1 million<br />Must withhold Mass. state income tax<br />If employee claims Exempt on W-4<br ...
In order to qualify for the payroll credit, the production company must withhold Mass. State Income Taxes<br />Actors – bo...
Loan out companies<br />Dept. of Revenue (DoR) mustapprove Form PWH-WW Performer Request for Waiver of Withholding prior t...
If the LLC elects to be treated as a partnership, guaranteed payments(i.e. salary) does not counttowards the film tax cred...
Must file at least ten business days before starting work on production<br />Mass. Dept of Revenue must approve the reques...
Accounting package<br />Quickbooks or PeachTree<br />Do not use Quicken – it is not meant for accounting<br />Use separate...
Keep copies of all invoices & receipts, including petty cash<br />For invoices / receipts, we recommend as a minimum:<br /...
For petty cash, we recommend worksheet:<br />Number each receipt (i.e. 1, 2, 3, 4, etc.)<br />Separate line for each recei...
Date<br />Amount<br />Invoice / receipt #<br />Vendor name<br />Description of the expense<br />Expense classification of ...
Use a payroll service provider that specializes in the Entertainment Industry<br />Enter total payroll costs into accounti...
Application must be submitted with original signature (i.e. no scanned PDF / fax)<br />All applicable fields on the applic...
List of all employees who worked in Mass.<br />All personnel – actors, crew, extras, talent, etc.<br />Dates worked in Mas...
DoR requests – all data Microsoft Excel format<br />List of all vendors – include address<br />Payroll register:<br />Gros...
Company is registered with Mass. Secretary of State<br />All owners / members have filed appropriate Mass. state tax retur...
Will check to see if each employee filed their state income taxes<br />If an employee receives a notice from DoR, don’t pa...
Obtain 90% tax rebate (cash) after the end of your tax year<br />Sell film tax certificate to a broker<br />Assess cash fl...
Receive a film tax certificate from DoR<br />Use 100% of the film tax certificate against Mass. tax liability<br />Receive...
90% rebate / sale of tax credit certificate is considered income at date of the sale<br />Pay both federal and state incom...
90% rebate / sale of tax credit certificate is considered income at date of the sale<br />If the production ties into the ...
Everyone – Schedule RFC – Refundable Film Credit Motion Picture Production Company<br />Individual – Form 1, Line 42, Refu...
Not-for-profit organizations<br />If production ties to organization’s mission:<br />Form M990-T – Line 39, Refundable Fil...
Special tiered pricing for smaller productions (under $2 million)<br />Help our clients from start to finish<br />Typicall...
Irene is a managing member of Tobolsky & Wachsler CPA’s and is responsible for the Audit Practice.  In addition to taxes, ...
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09 09 2009 Massachusetts Tax Credits Presentation

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Massachusetts Film Tax Credits Presentation

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Transcript of "09 09 2009 Massachusetts Tax Credits Presentation"

  1. 1. Massachusetts Film Tax Credits<br />Irene Wachsler, CPA, MBA<br />Tobolsky & Wachsler CPAs, LLC<br />
  2. 2. Overview of the Mass. Film Tax Credit<br />Payroll Procedures<br />Accounting / Recordkeeping for AUP<br />Additional Requested Information for Film Tax Credit Application Submission<br />Cash Flow Considerations<br />Personal / Corporate Tax Considerations<br />Mass. Dept. of Revenue (DoR) Forms to Obtain the 90% Rebate<br />Tonight’s Agenda<br />2<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />November 5, 2009<br />
  3. 3. 25% tax credit for both above and below the line qualifying production expenses incurred in Mass.<br />Exempt from paying sales & use tax on items purchased for production & crew meals<br />Submit Application for Sales Tax Exemption for Film Production Certificate to Film Credit Unit at DoR<br />Provide Form ST-12 Exempt Use Certificate to vendors<br />Overview of Mass. Film Tax Credit<br />3<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />November 5, 2009<br />
  4. 4. Must spend at least $50K on production expenses within a 12-month period<br />50% of total expenses incurred must be spent in Mass. OR 50% of total principal photography days shot in Mass.<br />Spend $250K+<br />Requires an audit / agreed-upon procedure<br />Performed by Massachusetts CPA<br />Film tax credit is transferable or receive 90% cash rebate<br />Mass. Film Tax Credit Requirements<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />4<br />November 5, 2009<br />
  5. 5. Cost of rental equipment<br />Employer-paid expenses<br />FICA / Medicare<br />Pension<br />Federal & state unemployment<br />Travel expenses<br />Must originate and conclude in Mass.<br />I.e. roundtrip airfare from Boston to Los Angeles does not qualify<br />Production Expenses<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />5<br />November 5, 2009<br />
  6. 6. Individual employee salary &gt; $1 million<br />Production expenses that do not qualify:<br />Legal and audit / AUP<br />Marketing and advertising<br />Insurance<br />Loan fees, completion bond expenses and interest expenses<br />Archival materials and stock footage<br />Production Expenses (cont.)<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />6<br />November 5, 2009<br />
  7. 7. Each employee’s salary &lt; $1 million<br />Must withhold Mass. state income tax<br />If employee claims Exempt on W-4<br />Must be a student<br />Must complete Mass. Form M-4 and check box 5D<br />Includes 1099-MISC wages (Independent Contractor)<br />Includes fringe benefits<br />Transportation<br />Box rentals<br />Qualifying Aggregate Payroll<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />7<br />November 5, 2009<br />
  8. 8. In order to qualify for the payroll credit, the production company must withhold Mass. State Income Taxes<br />Actors – both above & below the line<br />Extras<br />Crew<br />Employees<br />Independent Contractors<br />Loan out companies<br />Qualifying Aggregate Payroll<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />November 5, 2009<br />8<br />
  9. 9. Loan out companies<br />Dept. of Revenue (DoR) mustapprove Form PWH-WW Performer Request for Waiver of Withholding prior to payment of wages<br />Must submit separate PWH-WW for each production<br />Use a payroll service that specializes in working with the Entertainment Industry<br />Qualifying Aggregate Payroll<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />9<br />November 5, 2009<br />
  10. 10. If the LLC elects to be treated as a partnership, guaranteed payments(i.e. salary) does not counttowards the film tax credit<br />Consider working under a separate company – consult an attorney<br />Limited Liability Corporations (LLC)<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />November 5, 2009<br />10<br />
  11. 11. Must file at least ten business days before starting work on production<br />Mass. Dept of Revenue must approve the request for waiver<br />If approved, then production company does not have to withhold Mass. Income tax<br />Form PWH-WW Performer Request for Waiver of Withholding<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />November 5, 2009<br />11<br />
  12. 12. Accounting package<br />Quickbooks or PeachTree<br />Do not use Quicken – it is not meant for accounting<br />Use separate classes<br />Massachusetts expenses – one class<br />Non-Massachusetts expenses – separate class<br />Consider a third class for expenses that you’re not sure whether or not they qualify<br />Involve CPA / Independent Auditor in the beginning of the process<br />Accounting / Recordkeeping<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />12<br />November 5, 2009<br />
  13. 13. Keep copies of all invoices & receipts, including petty cash<br />For invoices / receipts, we recommend as a minimum:<br />Each invoice is stamped with date entered into accounting system<br />Each invoice is stamped with date paid<br />Check stub / copy of check attached to invoices paid<br />Vendor Invoices<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />13<br />November 5, 2009<br />
  14. 14. For petty cash, we recommend worksheet:<br />Number each receipt (i.e. 1, 2, 3, 4, etc.)<br />Separate line for each receipt #<br />Geographic location of where the expense was spent (i.e. Boston, Waltham, Worcester, etc.)<br />Vendor name<br />Purpose of expense<br />Petty Cash Receipts<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />14<br />November 5, 2009<br />
  15. 15. Date<br />Amount<br />Invoice / receipt #<br />Vendor name<br />Description of the expense<br />Expense classification of general ledger (GL) account<br />Not sure of GL account – put into Unclassified or Ask My Accountant<br />Data Entry in Accounting System<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />15<br />November 5, 2009<br />
  16. 16. Use a payroll service provider that specializes in the Entertainment Industry<br />Enter total payroll costs into accounting system for each state worked in:<br />Above the line (ATL) gross wages<br />Below the line (BTL) gross wages<br />Employer-paid benefits (FICA, Medicare, pension, federal & state unemployment, etc.)<br />Payroll service fees<br />Payroll<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />16<br />November 5, 2009<br />
  17. 17. Application must be submitted with original signature (i.e. no scanned PDF / fax)<br />All applicable fields on the application must be completed, including Production Information<br />Identification of the production – narrative<br />List of all sources of funds used to finance the production<br />List of all parents or affiliates<br />Budget and cost report for:<br />All expenses<br />Massachusetts expenses<br />Required Information for Film Tax Credit Application<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />17<br />November 5, 2009<br />
  18. 18. List of all employees who worked in Mass.<br />All personnel – actors, crew, extras, talent, etc.<br />Dates worked in Mass.<br />Gross salaries earned for each employee<br />Above information usually contained in Payroll Register provided by payroll service provider<br />All Mass. principle photography days<br />Dates<br />Locations<br />List of property not disposed of<br />Independent Accountant’s Report (if required)<br />Required Information for Film Tax Credit Application<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />18<br />November 5, 2009<br />
  19. 19. DoR requests – all data Microsoft Excel format<br />List of all vendors – include address<br />Payroll register:<br />Gross wages<br />Mass. state income tax withheld<br />Last 4 digits of social security number / tax ID<br />Employer-paid benefits<br />Payroll service fees<br />Journal (dump) of all Mass. general ledger transactions<br />Power of Attorney (M-2848)<br />Additional Information to Submit with Film Tax Application<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />19<br />November 5, 2009<br />
  20. 20. Company is registered with Mass. Secretary of State<br />All owners / members have filed appropriate Mass. state tax returns<br />If required, all owners / members have submitted quarterly tax estimates to DoR<br />As part of the application process:<br />DoR will check that each individual employee filed state tax returns<br />If an employee receives a notice from DoR, don’t panic<br />Employee may not be required to file Mass. tax return<br />Employee should consult with their local CPA / tax practitioner<br />Other Considerations on Film Tax Application<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />20<br />November 5, 2009<br />
  21. 21. Will check to see if each employee filed their state income taxes<br />If an employee receives a notice from DoR, don’t panic<br />The employee may not be required to file Mass. tax return<br />The employee should consult with their local CPA / tax practitioner<br />Other assumptions:<br />Mass. DoR will match each employee’s income as reported by the production companies against the income that they report on their state tax return<br />Mass. DoR will share income information with the IRS<br />Mass. Dept. of Revenue (DoR) <br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />November 5, 2009<br />21<br />
  22. 22. Obtain 90% tax rebate (cash) after the end of your tax year<br />Sell film tax certificate to a broker<br />Assess cash flow considerations<br />Submit film tax credit application after payment of production expenses<br />Current gap in financing – use potential film tax certificate as a bridge loan<br />Finance post-production / distribution costs<br />Financial analysis – cost of receiving funds now vs. waiting 1+ years<br />Consider tax implications of when funds are received<br />Consult your local CPA / financial planner<br />Do I Sell or Keep the Film Tax Certificate?<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />22<br />November 5, 2009<br />
  23. 23. Receive a film tax certificate from DoR<br />Use 100% of the film tax certificate against Mass. tax liability<br />Receive a 90% cash refund on remaining balance due to taxpayer<br />Example<br />Film tax certificate: $25,000<br />Mass. tax liability: 10,000<br />Balance credited to taxpayer: $15,000<br />90% rebate (cash) due taxpayer: $13,500<br />How Mass. Film Tax Credit Works<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />23<br />November 5, 2009<br />
  24. 24. 90% rebate / sale of tax credit certificate is considered income at date of the sale<br />Pay both federal and state income taxes<br />Each individual tax situation is different:<br />Recommend putting aside 30% to pay taxes<br />Try to match income and expenses in same tax year<br />Consult your local CPA / tax practitioner<br />Personal / For-Profit Entities Tax Considerations<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />24<br />November 5, 2009<br />
  25. 25. 90% rebate / sale of tax credit certificate is considered income at date of the sale<br />If the production ties into the organization’s mission:<br />Not taxable<br />Disclose income on Form 990 and financial statements<br />Production does not tie into mission:<br />Income is considered Unrelated Business Income Tax (UBIT)<br />File Form 990-T and M-990T<br />Not-for-Profit Organization Tax Considerations<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />25<br />November 5, 2009<br />
  26. 26. Everyone – Schedule RFC – Refundable Film Credit Motion Picture Production Company<br />Individual – Form 1, Line 42, Refundable Film Credit<br />Not-for-profit organization, Form M990-T, Line 39, Refundable Film Credit<br />Corporate – Form 355, Line 15<br />Partnership – Form 3K-1, Line 5h<br />Mass. Tax Forms for Film Tax Credit<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />26<br />November 5, 2009<br />
  27. 27. Not-for-profit organizations<br />If production ties to organization’s mission:<br />Form M990-T – Line 39, Refundable Film Credit<br />If production does not tie to organization’s mission:<br />Form M990-T – Line 30, Film Incentive Credit Certificate Number<br />Both cases above:<br />Schedule RFC – Refundable Film Credit Motion Picture Production Company<br />Mass. Tax Forms for Film Tax Credit<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />27<br />November 5, 2009<br />
  28. 28. Special tiered pricing for smaller productions (under $2 million)<br />Help our clients from start to finish<br />Typically, fixed price that encompasses all services rendered for Film Tax Credit:<br />Provide an estimate of the Film Tax Credit based on your project’s budget<br />Facilitate completion and DoR approval of the Form PWH-WW Performer Request for Waiver of Withholding prior to filming / payment of the loan out<br />Submit the Tax Exempt Certificate Form<br />Work with the payroll company to facilitate maximization of payroll tax credit<br />Work with production accounting<br />Perform the AUP (additional variable costs may apply)<br />Complete and submit the Film Tax Application on your behalf to Mass. Dept. of Revenue<br />Monitor the Film Tax Credit application process with DoR<br />About Tobolsky & Wachsler CPAsAUP for Mass. Film Tax Credits<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />28<br />November 5, 2009<br />
  29. 29. Irene is a managing member of Tobolsky & Wachsler CPA’s and is responsible for the Audit Practice.  In addition to taxes, the firm specializes in performing audit / agreed-upon procedures for the Massachusetts film tax credits and has performed a number of agreed-upon procedures for productions including motion pictures, television series, documentaries and commercials.  <br />Irene also performs audit, review, and compilation services for the not-for-profit sector.  Irene received her Masters degree in Business Administration from Babson College.  <br />Irene worked at Deloitte & Touche LLP.  She also worked in the high-tech, banking and non-profit sectors.<br />About Irene Wachsler, CPA, MBA<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />29<br />Recent AUPs:<br /><ul><li>Âs Nutayuneân
  30. 30. Girlfriends
  31. 31. John Hancock commercial
  32. 32. Last Harbor
  33. 33. Liberty Mutual commercial
  34. 34. Madso’s War
  35. 35. Time Warp, Yrs 1 & 2
  36. 36. Visa commercial
  37. 37. We Got the Beat</li></ul>November 5, 2009<br />
  38. 38. We are a full-service, family-owned (mother / daughter) CPA firm with over 25 years of experience in providing personalized services.<br />Our services include:<br />Audits, reviews, compilations and agreed-upon procedures for Film Tax Credits<br />Tax services for individuals, corporations, estates, LLCs, not-for-profit organizations, partnerships & trusts<br />Resolution of IRS, Massachusetts and other state tax notices<br />Accounting / bookkeeping services<br />Financial planning<br />Referrals are always appreciated <br />About Tobolsky & Wachsler CPAs<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />30<br />November 5, 2009<br />
  39. 39. Irene Wachsler, CPA, MBA<br />Tobolsky & Wachsler CPAs, LLC<br />irene@milliecpa.com<br />(781) 883-3174<br />To ensure compliance with the requirements imposed on us by Circular 230, we inform you that any tax advice contained in this communication (including any attachments) is not intended to and cannot be used for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.<br />Thank You!<br />31<br />Tobolsky & Wachsler CPAs, LLC ● www.milliecpa.com ● (781) 883-3174<br />November 5, 2009<br />

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