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2018 Year End Planning

Posted by Admin Posted on Nov 09 2018

After passing a major tax legislation in December 2017, IRS has continued to release guidance pertaining to the provisions of the new tax law. On top of traditional tax planning, there are new opportunities and strategies presented by the provisions of the Tax Cuts and Jobs Act (TCJA).  We welcome you to read the latest publication addressing 2018 year end planning (click below).  

2018 Year End Planning

As always, we are here to help you with any of your planning needs, or answer your questions. 

Recent tax developments

Posted by Admin Posted on Oct 16 2018

The following is a summary of important tax developments that have occurred in July, August, and September that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.

IRS shoots down states' SALT limitation workaround. For 2018 through 2025, the Tax Cuts and Jobs Act (TCJA) limits an individual taxpayer's annual SALT (state and local tax) deductions to a maximum of $10,000, with no carryover for taxes paid in excess of that amount. (The SALT deduction limit doesn't apply to property taxes paid by a trade or business or in connection with the production of income.) As a result of this change, many taxpayers will not get a full federal income tax deduction for their payments of state and local taxes. Following the TCJA's passage, some high-tax states implemented workarounds to mitigate the effect of the SALT deduction limit for their residents. One method used was the establishment of charitable funds to which taxpayers can contribute and receive a tax credit in exchange. The IRS has issued proposed regulations, which would apply to contributions after Aug. 27, 2018, that effectively kill this workaround. The regulations would provide that a taxpayer who makes payments to or transfers property to an entity eligible to receive tax deductible contributions must reduce his or her charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive.

IRS also clarified that the proposed regulation crackdown on the SALT limitation workaround doesn't apply to businesses. In other words, a business generally can deduct a payment to a charitable or governmental entity if the payment is made with a business purpose.

 

IRS clarifies who is a qualifying relative for family credit purposes. Under the TCJA, effective for tax years beginning after Dec. 31, 2017 and before Jan. 1, 2026, you can't claim a dependency exemption for dependents, including qualifying relatives, but you may be eligible for a $2,000 credit for each qualifying child and a $500 credit (called the "family credit") for each qualifying non-child dependent, including qualifying relatives. One of the conditions for being a qualifying relative is that the person's gross income for the year can't be more than the exemption amount. That condition remains the same in the Tax Code, but the exemption amount has been reduced to zero because the dependency exemption has has been eliminated. The IRS has clarified that the gross income limit for a qualifying relative for tax credit purposes (as well as for other purposes, such as head-of-household status), is determined by reference to what the exemption amount would have been if it hadn't been reduced to zero by the TCJA. Thus, after 2017 and before 2026, the gross income limit is $4,150, adjusted for inflation after 2018.

 

IRS explains 20% deduction for qualified business income. The IRS has issued regulations on the new 20% deduction for qualified business income (QBI) created by the TCJA, also known as the pass-through deduction. Here's a summary of the basic rules:

For tax years beginning after Dec. 31, 2017, taxpayers other than corporations may be entitled to a deduction of up to 20% of their qualified business income (QBI) from a domestic business operated as a sole proprietorship, or through a partnership, S corporation, trust or estate. This deduction can be taken in addition to the standard or itemized deductions.

In general, the deduction is equal to the lesser of:

  1. 20% of QBI plus 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income, or
  2. 20% of taxable income minus net capital gains.

QBI generally is the net amount of qualified items of income, gain, deduction, and loss, from any qualified trade or business. But QBI doesn't include capital gains and losses, certain dividends and interest income, reasonable compensation paid to the taxpayer by any qualified trade or business for services rendered for that trade or business, and any guaranteed payment to a partner for services to the business.

Generally, the deduction for QBI can't be more than the greater of:

  1. 50% of the W-2 wages from the qualified trade or business; or
  2. 25% of the W-2 wages from the qualified trade or business plus 2.5% of the unadjusted basis of certain tangible, depreciable property held and used by the business during the year for production of QBI.

But this limit on the deduction for QBI doesn't apply to taxpayers with taxable income below a threshold amount ($315,000 for married individuals filing jointly, $157,500 for other individuals, indexed for inflation after 2018), with a phase-in for taxable income over this amount.

A qualified trade or business doesn't include performing services as an employee. Additionally, a qualified trade or business doesn't include a trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets or any trade or business where the principal asset is the reputation or skill of one or more of its employees. This exception only applies if a taxpayer's taxable income exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers; the benefit of the deduction is phased out for taxable income over this amount.

The IRS's new regulations explaining the 20% deduction for QBI are highly detailed and complex. A sampling of the important guidance contained in the guidance follows:

  • Partnership guaranteed payments are not considered attributable to a trade or business and thus do not constitute QBI.
  • To the extent that any previously disallowed losses or deductions are allowed in the tax year, they are treated as items attributable to the trade or business for that tax year. But this rule doesn't apply for losses or deductions that were disallowed for tax years beginning before Jan. 1, 2018; they are not taken into account for purposes of computing QBI in a later tax year.
  • Generally, a deduction for a net operating loss (NOL) is not considered attributable to a trade or business and therefore,is not taken into account in computing QBI. However, to the extent the NOL is comprised of amounts attributable to a trade or business that were disallowed under a specialized excess business loss limitation for noncorporate taxpayers, the NOL is considered attributable to that trade or business.
  • Interest income received on working capital, reserves, and similar accounts is not properly allocable to a trade or business. In contrast, interest income received on accounts or notes receivable for services or goods provided by the trade or business is not income from assets held for investment, but income received on assets acquired in the ordinary course of trade or business.
  • The 20% deduction for QBI does not reduce net earnings from self-employment or net investment income under the rules for the 3.8% surtax on net investment income.
  • Where a business (or a major portion of it, or a separate unit of it) is bought or sold during the year, the W-2 wages of the individual or entity for the calendar year of the acquisition or disposition are allocated between each individual or entity based on the period during which the employees of the acquired or disposed-of trade or business were employed by the individual or entity.
  • The rule generally barring a health services business from being a qualified trade or business doesn't include the provision of services not directly related to a medical field, even though the services may purportedly relate to the health of the service recipient. For example, the performance of services in the field of health does not include the operation of health clubs or health spas that provide physical exercise or conditioning to their customers, payment processing, or research, testing, and manufacture and/or sales of pharmaceuticals or medical devices.
  • The rule generally barring the performance of services in the field of actuarial science from being a qualified trade or business does not include the provision of services by analysts, economists, mathematicians, and statisticians not engaged in analyzing or assessing the financial costs of risk or uncertainty of events.
  • The rule barring consulting from being a qualified trade or business doesn't apply to consulting that is embedded in, or ancillary to, the sale of goods if there is no separate payment for the consulting services. For example, a company that sells computers may provide customers with consulting services relating to the setup, operation, and repair of the computers, or a contractor who remodels homes may provide consulting prior to remodeling a kitchen.

 

Bonus depreciation may be claimed for used property. The TCJA boosted the first-year bonus depreciation allowance from 50% to 100% for qualified property acquired and placed in service after Sept. 27, 2017 and before Jan. 1, 2023. That means a business can write off the cost of most machinery and equipment in the year it's placed in service. And, for the first time ever, for property acquired and placed in service after Sept. 27, 2017, bonus depreciation may be claimed for used as well as new equipment. The IRS has explained that used equipment and machinery qualifies for the 100% bonus first-year depreciation allowance if: the taxpayer (or a predecessor) didn't use the property at any time before the acquisition; the property wasn't acquired from a related party or from a component member of a controlled corporate group; and the taxpayer's basis in the used property isn't figured by reference to the basis of the property in the hands of the seller or transferor.

 

Form W-4 for 2019 will be similar to 2018 version. The IRS has announced that the 2019 version of the Form W-4 (Employee's Withholding Allowance Certificate) will be similar to the current 2018 version. IRS had earlier issued a draft W-4 for 2019 that was longer than the 2018 version and more complex due to changes made by the TCJA. Bowing to complaints that the proposed changes to the form were too confusing and too complicated, the IRS relented and announced that the Form W-4 for 2019 will be similar to the current 2018 version.

 

Simplified per-diem increase for post-Sept. 30, 2018 travel. An employer may pay a per-diem amount to an employee on business-travel status instead of reimbursing actual substantiated expenses for away-from-home lodging, meal and incidental expenses (M&E). If the rate paid doesn't exceed the IRS-approved maximums, and the employee provides simplified substantiation, the reimbursement isn't subject to income- or payroll-tax withholding and isn't reported on the employee's Form W-2. Instead of using actual per-diems, employers may use a simplified "high-low" per-diem, under which there is one uniform per-diem rate for all "high-cost" areas within the continental U.S. (CONUS), and another per-diem rate for all other areas within CONUS. The IRS released the "high-low" simplified per-diem rates for post-Sept. 30, 2018, travel. Under the optional high-low method for post-Sept. 30, 2018 travel, the high-cost-area per diem is $287 (up from $284), consisting of $216 for lodging and $71 for M&IE. The per-diem for all other localities is $195 (up from $191), consisting of $135 for lodging and $60 for M&IE.

 

Business expense deduction for meals and entertainment

Posted by Admin Posted on Oct 04 2018

With the passage of the Tax Cuts and Jobs Act, known as TCJA, you may have heard about some changes to the deductability of some business expenses such as meals and entertainment. 

In general, the new law has eliminated the deduction for entertainment, while leaving the deduction for the business meals.  In the latest news release, the IRS has provided taxpayers with additional guidance on the law changes. 

Click here to read more about the changes to the business expense deductions for meals and entertainment 

Reminder about tax scams and phishing

Posted by Admin Posted on Sept 20 2018

In wake of Hurricane Florence, the Internal Revenue Service is reminding everyone that criminals are once again trying to take advantage of those trying to help out people in need. Please read the following news release to avoid various scams and schemes:

IRS news release on Natural Disasters scams

We also would like to take this time to remind you that tax scammers are continuing making phone calls and sending emails impersonating IRS and at times tax practitioners.  Per IRS:

Telltale signs of a scam

The IRS (and its authorized private collection agencies) will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments. Generally, the IRS will first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

If you receive an email that seems strange, please call our office to verify its validity.  We are always here to answer your questions. 

2018 tax planning for businesses

Posted by Admin Posted on July 26 2018

The recently enacted Tax Cuts and Jobs Act (TCJA) has altered the tax landscape for a lot of businesses. The changes are extensive, and this letter provides a high-level overview of some of the highlights to keep you informed. Due to the sweeping nature of the changes and the need for continued guidance, we’d like the opportunity to have a personalized conversation with you now to discuss planning opportunities for your specific situation. Additional conversations and tax projections are likely necessary to ensure we maximize your tax benefits. Please call our office at your earliest convenience to schedule a meeting. 

New corporate tax rate

The prior-law graduated corporate tax rates have been consolidated into one 21% flat rate. The separate rate for personal service corporations of 35% has been repealed. These changes are effective for tax years beginning after Dec. 31, 2017. For fiscal-year corporations, the calculation of tax will be determined using a blended rate based on the number of months at the old versus the new rate structure.

Alternative minimum tax (AMT) repeal

The corporate AMT has been repealed by the TCJA. 

Bonus depreciation and Sec. 179 expensing of fixed assets

Bonus depreciation and Sec.179 expensing of property have been available in varying amounts for quite a while. The new tax law has increased the bonus depreciation percentage to 100% until 2023, where it will decrease by 20% until it reaches zero. Bonus depreciation now applies to both new and used qualified property. The Sec.179 expense limit is now $1 million of allowable expensing with a total purchase threshold of $2.5 million. If you purchase more than $2.5 million in eligible fixed assets during the taxable year, the expense limit allowed will be reduced.

The higher limits and expansion in the definition of property that qualifies for these deductions allows for tax planning opportunities. As part of your planning, we’d like to understand your asset purchasing behavior and plans for the future so we can maximize these deductions for you.

Net operating losses (NOLs)

Under the prior tax law, NOLs could be carried back two years or carried forward for 20 years. Unfortunately, the TCJA repealed the ability to carry back a NOL and claim a refund for already-paid taxes, effective for tax years starting after Dec. 31, 2017. If you have a tax situation that resulted in a NOL, we can advise you of the best options.

Interest expense deductibility

The TCJA introduced a limit in the deductibility of business interest to 30% of taxable income. However, this limitation does not apply to most taxpayers with gross receipts of $25 million or less. If your gross revenues exceed $25 million, we recommend having a discussion with us about the impact on your business. Regardless, with careful planning, we can help you maximize your deduction. 

Entertainment expenses

The TCJA repealed the deduction for business entertainment. This includes expenditures such as taking clients to sporting events and shows and paying for season tickets for various entertainment events. Since these items are no longer deductible, it is very important to have your company’s internal accounting set up appropriately. We can help you identify these expenses and treat them correctly on your tax return. And, we are happy to discuss how to account for these internally to streamline your tax compliance reporting.

Like-kind exchange restrictions

The new tax law restricts a like-kind exchange to real property (e.g., buildings and land). Under the prior law, you could utilize a like-kind exchange for tangible personal property and intangible property used in a business or held for investment. Be aware of this change and contact us so we can help you plan accordingly.  

Credit for paid family and medical leave

A new credit was created under the TCJA for employers who provide eligible employees paid family and medical leave. You may be providing paid leave for employees already, so please engage with us to determine if your employee benefit qualifies for the new credit. There may be minor adjustments necessary to make your leave policy compliant with the new credit, which we can help you with.

Please call our office to schedule a planning meeting.

While the TCJA is effective now, there are still many uncertainties. Additional technical guidance and regulations are necessary to provide more clarity on some of the changes. The Internal Revenue Service is working to provide that guidance, which we expect later this year.

We are at your disposal to identify opportunities within the new law that apply to you and help steer you away from new pitfalls and challenges.  Please call our office today at 941-366-3600 to set up a tax planning meeting. As always, planning ahead can help you minimize your tax bill and position you for greater success.

 

Sincerely,

 

Suplee, Shea, Cramer & Rocklein, PA

2018 tax planning for individuals

Posted by Admin Posted on July 26 2018

The recently enacted Tax Cuts and Jobs Act (TCJA) has altered the tax landscape for a lot of individuals and businesses. The changes are extensive and this letter provides a high-level overview of some of the highlights to keep you informed. Due to the sweeping nature of the changes and the need for continued guidance, we’d like the opportunity to have a personalized conversation with you now to discuss planning opportunities for your specific situation. Additional conversations and tax projections are likely necessary to ensure we maximize your tax benefits. Please call our office at your earliest convenience to schedule a meeting.  

Changes in tax rates

You may have heard in the news that the goal of tax reform was to reduce the number of tax rates from the existing seven rates to three. While that was discussed, the bill that was signed into law still has seven rates, but they are now generally lower with the highest rate being reduced from 39.6% to 37%. The tax rates applicable to net capital gains and qualified dividends did not change.

Increased standard deduction

The new standard deductions are:

  • Heads of household:   $18,000

  • Married filing jointly:    $24,000

  • All other taxpayers:     $12,000

Although you may have historically had itemized deductions exceeding these amounts, other changes to itemized deductions may affect whether you are above the standard deduction in a given year. The increased standard deduction is effective through Dec. 31, 2025.

Elimination of personal and dependent exemptions

In the past, taxpayers received an exemption for themselves, their spouse and each of the eligible dependents that they claimed on their tax return. The TCJA eliminated these exemptions through Dec. 31, 2025.

Child and family tax credit

The TCJA increased the child credit for children under age 17 to $2,000 and also introduced a new $500 credit for a taxpayer’s dependents who are not their qualifying children. In addition, the phase-out limits for these credits have increased to $400,000 for joint filers ($200,000 for others), so that more individuals will be able to take advantage of this credit.

Changes to itemized deductions

  • The overall phase out of itemized deductions has been repealed.

  • The itemized deduction for state and local taxes is limited to a total of $10,000 ($5,000 for those using the filing status of married filing separately). For example, if you paid $15,000 in state income taxes and $6,000 in real estate taxes on your home ($21,000 in total), you would not be able to deduct the $11,000 that exceeds the deduction threshold. 

  • Mortgage interest on loans used to acquire a principal residence and a second home is only deductible on debt up to $750,000 (down from $1 million). Loans in existence on December 15, 2017 are grandfathered (balance up to $1 million still allowed).

  • Interest on home equity indebtedness (such as a home equity line of credit) is no longer deductible unless the debt is really acquisition indebtedness (used for home improvement). Consider whether the indebtedness was used for business or investment purposes to determine if an interest deduction may be available in a different category. 

  • Cash donations to public charities are now deductible up to 60% of adjusted gross income.

  • Donations to colleges and universities for ticket or seat rights at sporting events are no longer deductible.

  • Miscellaneous itemized deductions, such as investment management fees, tax preparation fees, unreimbursed employee business expenses and safe deposit box rental fees are no longer deductible.

  • Medical expenses are deductible by the amount the expenses exceed 7.5% of adjusted gross income for 2018 (limit changes to 10% starting in 2019).

These changes (except as noted) to itemized deductions are in effect from Jan. 1, 2018 through Dec. 31, 2025.

New deduction for qualified business income

A new deduction, effective for tax years 2018 through 2025, was introduced in the TCJA that allows individuals a deduction of 20% of qualified business income from a partnership, S corporation or sole proprietorship, as well as 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership income.

This deduction will reduce taxable income, but not adjusted gross income, and is available regardless of whether you itemize your deductions. There are many limitations and restrictions to this provision, so we advise that you schedule a personal consultation with us to fully understand the impact on your situation.

Sec. 529 plans

Sec. 529 plans have been a widely used tool to help taxpayers save money for college, presuming they distribute that money for qualified higher-education costs. Depending on your Sec. 529 plan, you may be eligible for a state tax deduction for contributions to the plan. The TCJA expanded the opportunities available for education tax planning by permitting $10,000 per year to be distributed from Sec. 529 plans to pay for private elementary and secondary tuition. Contact us to learn how these new rules may help you pay for private school tuition for your family.  

Alimony

Under the prior law, individuals who paid alimony to an ex-spouse received a deduction for the alimony paid, while the individuals receiving the alimony treated those payments as income. Tax reform has eliminated the deduction for alimony paid and the recognition of income for alimony received effective for divorce decrees executed after Dec. 31, 2018. We highly recommend that if you are in the midst of divorce proceedings, please have a conversation with us and your divorce attorney to fully understand the financial impacts that this could have.

Estate and gift tax exemptions

Estate and gift tax laws have undergone a number of changes over the past decade. Under the TCJA, the estate and gift tax exemption has doubled to $11.2 million per person effective as of Jan. 1, 2018. There is still guidance necessary to reconcile gifts made and estates that occurred prior to the increased exemption and the impact on portability. We would be pleased to work collaboratively with your estate planning attorney to make sure your estate plan is appropriate with this change.

Individual shared responsibility payment

The TCJA repealed the individual shared responsibility payment for failure to have minimal essential healthcare coverage. However, this repeal does not take effect until Jan. 1, 2019.  This means that if you did not have minimal essential healthcare coverage in the 2018 calendar year, you will still be subject to the penalty if you do not meet one of the exceptions from coverage. 

Please call our office to schedule a planning meeting.

While the TCJA is effective now, there are still many uncertainties. Additional technical guidance and regulations are necessary to provide more clarity on some of the changes. The Internal Revenue Service is working to provide that guidance, which we expect later this year.

We are at your disposal to identify opportunities within the new law that apply to you and help steer you away from new pitfalls and challenges.  Please call our office today at 941-366-3600 to set up a tax planning meeting. As always, planning ahead can help you minimize your tax bill and position you for greater success.

 

Sincerely,

 

Suplee, Shea, Cramer & Rocklein, PA

Scam Alert

Posted by Admin Posted on Feb 13 2018

Please read this important Scam Alert from the IRS pertaining to erroneous tax refunds: 

IRS Scam Alert

As always, when in doubt, call our office with any questions. Do not send money to anyone without speaking to us. IRS does not demand money over the phone and always sends you a correspondence.

2017 Year-End Tax Planning for Individuals

Posted by Admin Posted on Nov 15 2017

 

Year-end 2017 is shaping up as an important deadline to have tax strategies in place to take advantage of certain opportunities before they sunset along with the close of the tax year on December 31, 2017. A major challenge this year, of course, involves the uncertainty that will remain, likely into late November/early December, over pending tax reform legislation. This includes uncertainty regarding rate cuts, certain deductions, and much more. Effective strategies in response to any of these “tax reform” priorities involve close monitoring of any proposed tax bill as it moves through negotiations within the various Congressional tax committees and Trump administration officials, with year-end action steps ready to go based upon alternative legislative outcomes.

 

Although year-end 2017 may be unique because of possible tax reform, planning during the final weeks and months of this year involves much more –both in terms of traditional year-end strategies and strategies developed in response to developments that have taken place since last year. Here are some points to consider:

 

Data gathering. Year-end planning should start with data collection and a review of prior year returns. This includes information on losses or other carryovers, estimated tax installments, and items that were unusual. Conversations regarding next year should include discussions of any plans for significant purchases or dispositions, as well as any possible life cycle events.

 

Income tax rates. One of the most significant factors in tax planning for individuals is their tax bracket. The most direct control taxpayers have over their tax bracket rests in their ability to control the timing of income and deductible expenses. For example, taxpayers who expect to be in a lower tax bracket in 2018 should consider deferring income to 2018 and accelerating deductions into 2017. Also relevant are “tax reform” proposals that may compress tax brackets and lower tax rates. These changes could present year-end tax planning opportunities for taxpayers depending on when any proposed rate changes go into effect.

 

Investments. Taxpayers holding investments, whether in the form of securities, real estate, collectibles, or other assets, often have an opportunity to reduce their overall tax bill by some strategic buying and selling toward the end of the year, as well as, exchanging appreciated assets for like-kind property in order to defer gains. Balancing tax considerations with other factors is part of the challenge in dealing with investments, including: the ordinary income tax rates, the net investment income tax rate, the capital gain rates, and the alternative minimum tax (AMT).

 

Income caps on benefits. Monitoring adjusted gross income (AGI) at year-end can also pay dividends in qualifying for a number of tax benefits. Often tax savings can be realized by lowering income in one year at the expense of realizing a bit more in another year.

 

Life events. The biggest variables for many taxpayers impacting their year-end tax planning surrounds life events such as marriage, divorce, birth or adoption of a child, a new job or the loss of a job, and retirement. These life events may, for instance, result in a change in filing status that will affect tax liability. The possibility of significant changes and/or significant or unusual items of income or loss should also be part of a year-end tax strategy. Additionally, taxpayers need to take a look into the future and predict, if possible, any events that could trigger significant income, losses, or deductions.

 

2017 tax law changes. In addition to possible changes for the 2018 tax year, and more remotely for 2017, that may be part of recent “tax reform” efforts, other tax law changes by the IRS and the courts that have taken place during 2017 are worth a look in mapping out year-end strategies.

  • Charitable contribution substantiation. In response to concerns from some in Congress and the nonprofit community, the IRS withdrew proposed regulations that would have required more stringent reporting procedure for charitable contributions of $250 or more. In general, however, courts have offered various opinions during 2017 on how strictly taxpayers must meet the substantiation requirements for claiming various charitable contributions depending on the type of donation.
  • Relief for late rollovers. The IRS unveiled a new self-certification procedure for taxpayers who inadvertently miss the 60-day time limit for certain retirement plan distribution rollovers.
  • Per taxpayer mortgage deduction. The IRS announced that it would not contest a Ninth Circuit Court of Appeals defeat that found that multiple unmarried taxpayers co-owning a qualifying residence can double the normal $1.1 million mortgage debt limit for interest deduction purposes.
  • Hurricane disaster relief. For victims of Hurricanes Harvey, Irma and Maria in 2017, a variety of tax relief measures are now available, through a special Disaster Relief Act of 2017 and numerous IRS measures to extend compliance deadlines and other requirements.
  • Offers in compromise. The IRS has updated its policy covering offer in compromise (OIC) applications received on or after March 27, 2017.
  • Interest rates. Interest rates have slowly been rising throughout 2017 and are expected to continue to rise into 2018, which points to various tax planning opportunities or the closing of certain tax advantages.

 

Timing rules. Timing, and the skilled use of timing rules to accelerate and defer certain income or deductions, is the linchpin of year-end tax planning. For example, timing year-end bonuses or year-end tax payments, or timing sales of investment properties to maximize capital gains benefits should be considered. So, too, sometimes fairly sophisticated “like-kind exchange,” “installment sale” or “placed in service” rules for business or investment properties come into play. In other situations, however, implementation of more basic concepts are just as useful. For example, taxpayers can write a check or can charge an item by credit card and treat these actions as payments. It often does not matter for tax purposes when the recipient receives a check mailed by the payor, when a bank honors the check, or when the taxpayer pays the credit card bill, as long as done or delivered “in due course."  

 

Please feel free to call our offices if you have any questions about how year-end tax planning might help you save taxes. Our tax laws operate largely within the confines of “the tax year.” Once 2017 is over, tax savings that are specific to this year may be gone forever.

 

 

Sincerely,

 

Suplee, Shea, Cramer & Rocklein, PA

2017 Year-Tax Planning for Businesses

Posted by Admin Posted on Nov 15 2017

 

As year-end approaches, each business should consider the many opportunities that might be lost if year-end tax planning is not explored. A business may want to consider several general strategies, such as use of traditional timing techniques for delaying income recognition and accelerating deductions. A business should also consider customized strategies tailored to its particular situations.

 

For the 2017 tax year, taxpayers have relative clarity with respect to available credits and deductions. With the exception of a handful of industry specific tax credits and deductions that expired at the end of 2016, most temporary credits and deductions were permanently extended by the Protecting Americans from Tax Hikes  Act of 2015 (PATH Act). A few others were extended for 5-years through 2019. Far less clear, however, is the possibility of the enactment of tax reform legislation by year’s end. The final scope of such legislation, if enacted, remains unknown. At a minimum, tax reform legislation is expected to result in a reduction of corporate and individual tax rates. However, whether such reductions would apply to 2017, as well as to 2018, will remain uncertain, likely until late November or early December. Nevertheless, much of the preparation for these contingencies should begin now.

 

The last few months of the year provide an important “last chance” to change the final course of your businesses tax year before it closes for good. Among the reasons why year-end tax planning toward the end of 2017 may be particularly fruitful are the following:

 

Business credits and deductions. Many business-related tax credits and deductions that were scheduled to expire after 2015, were permanently extended by the PATH Act. Others were only extended one year and are not available for the 2017 filing season unless extender legislation is enacted. A few were extended for a five-year period. Taking inventory of what deductions and credits your business has been using and whether they remain available or will be removed in the near future can significantly impact your bottom line. For example, one major tax deduction for many businesses is bonus depreciation. Property placed in service in 2017 is eligible for bonus depreciation at a 50% rate. The rate is reduced to 40% in 2018 and 30% in 2019. Bonus depreciation expires after 2019. Talk of “full expensing” under tax reform also belongs in this mix.

 

Repair regulations. In 2013, the IRS issued final tangible property regulations (a.k.a., the “repair regs”) on accounting for costs to acquire, repair and improve tangible property. The repair regs impact virtually all businesses by providing the rules for distinguishing between capital expenditures and deductible repairs or other types of deductible expenses. While taxpayers were expected to file change in accounting methods using the automatic consent procedure to retroactively comply with the repair regs for their first tax year beginning in 2014, taxpayers that are not yet subject to a capitalization audit may continue to file these accounting method changes using certain automatic consent procedures.

 

Business use of vehicles. Several year-end strategies involving both business expense deductions for vehicles and the fringe-benefit use of vehicles by employees require an awareness of certain rates and dollar caps that change annually. Changes affecting 2017 include a drop in the standard business mileage allowance rate to 53.5 cents-per-mile, down from 54 cents-per-mile for 2016. The maximum depreciation limits for passenger automobiles first placed in service during the 2017 calendar year remain the same as 2016.

 

“Gig” economy. Approximately 2.5 million taxpayers are now earning income each month in the “gig” economy, also commonly referred to as the “sharing” or “on-demand” economy. Participation continues to swell and is expected to double by 2020. In recognition of the increasing importance of the gig economy, the IRS opened a “Sharing Economy Tax Center” this year on its website. It also is reportedly stepping up its audit coverage of taxpayers working in the “gig” economy.

 

Affordable Care Act. Despite Congressional attempts to repeal the Affordable Care Act (ACA), the basic structure of the ACA for businesses, both large and small, generally remains intact. If an employer is an applicable large employer (ALE) based on the previous year’s employee head-count, employer shared responsibility provisions and employer information reporting provisions are triggered. Small businesses, however, are not unaffected by the ACA and should take the ACA into account in year-end planning. Some incentives in the ACA could help maximize tax savings for small businesses. Planning now, both to qualify for 2017 incentives and to meet 2018 compliance requirements, is advisable.

 

Tax reform on the horizon. President Trump ran on a platform of consolidating and reducing individual tax rates. The Trump/GOP “framework for tax reform,” released in late September, would reduce the maximum corporate rate to 20 percent, eliminate the federal estate tax and the alternative minimum tax (AMT), as well as limit the maximum tax rate applied to the business income of small and family-owned businesses conducted as sole proprietorships, partnerships and S corporations to 25 percent.  It will likely remain unclear until late November or early December whether tax reform will happen before the end of 2017, and if so, whether the law changes will be temporary or permanent and whether they will be prospective or retroactive.  

 

These are just some of the considerations that can yield tax savings for your business as year-end 2017 approaches. Please feel free to contact our offices so we can discuss specific 2017 year-end strategies that might be particularly worthwhile for your business.

 

 

Sincerely,

 

Suplee, Shea, Cramer & Rocklein, PA


 

                                                                           

Protecting Yourself Against Tax-Related Identity Theft

Posted by Admin Posted on Nov 01 2017

Tax-related identity theft continues to be an ever-growing national crisis.

The Government Accountability Office (GAO) estimated that in tax year 2013, fraudulent tax refunds misdirected to identity thieves was about $5.8 billion and impacted over 2.4 million U.S. taxpayers.  Unfortunately, this fraudulent activity has continued to rapidly expand since 2013.  All taxpayers must be diligent in further protecting themselves from becoming identity theft victims.   

As a valued client, we want to share with you some proactive steps and resources to help in your defense of tax-related identity theft. However, should you become aware that you are a victim of identity theft or that your private financial information has been compromised, please contact us immediately for additional information and assistance.

Suggestions to Protect You and Your Family from Identity Theft

Secure private personal information. Safeguard family names and birthdates, account numbers, passwords, and Social Security numbers. Carefully consider all requests to provide your Social Security number before giving it out and don’t hesitate to ask why your private information is being requested. Secure your Social Security card in a safe or safety deposit box and never in your purse or wallet. Proactively shred all documents that contain personal data before disposing of them, even solicitations and “junk” mail that may unknowingly contain account numbers and personal information.

Monitor personal information shared on social media. Cybercriminals methodically gather data from online sources, including commonly used identifiers such as birthdate, maiden name, pet name, hometown, significant other, and/or children’s information. Be cautious who you communicate with online and be selective before accepting electronic invitations from people you do not know or recognize. Separate what you post publicly from what you post with your personal contacts. Do not post personal and family data.  

Secure your computer. Use current versions of antivirus, malware protection, and firewalls and update these programs frequently. Consider having this software updated automatically, as well as using different computers for business and finances than you do for social media and personal matters. Use strong passwords, change them frequently, and do not share them with others. Review IRS Publication 4524, Security Awareness for Taxpayers, for additional tips.

Beware of impersonators. Criminals utilize sophisticated computer technology, such as dialers and automated questions, to contact thousands of targets daily. Do not provide personal information to callers you do not know. If any caller requests that you verify personal information, be extremely cautious and ask for further confirmation of their identity, such as their telephone number, website, email address, supervisor’s name, and mailing address. The IRS never initiates contact by telephone.

Beware of unsolicited emails and current phishing scams. Don’t open attachments or electronic links unless you know the sender. Internet sites should have a lock symbol to show the site is encrypted. Always beware of entering sensitive data. Forward emails received from IRS impersonators to phishing@irs.gov. The IRS never initiates contact by email, text message, or social media channels. For more guidance on phishing scams, go to irs.gov/uac/report-phishing.

Monitor your personal information. Review your bank and credit card statements often.

Consider electronic transmission of financial information. No sensitive tax or personal information should be sent via unsecured email, even information being transmitted to CPAs, bankers, and/or financial advisors. A secure portal, encrypted email, or physical mailing of sensitive information is necessary.

Order your free annual credit report. Call 1-877-322-8228 or go to www.annualcreditreport.com to request your report and/or search for creditors you do not know. Choose to use only the last four digits of your Social Security number on your report. Consider placing a credit card freeze on your account so only creditors you approve are allowed to access your file.

What to Do if You Become a Victim of Tax-Related Identity Theft

You may learn that your identity has been compromised by receiving a letter in the mail from the IRS. Alternatively, your CPA may contact you when your personal income tax return is electronically filed and subsequently rejected. If you receive a notice indicating identity theft, please contact us immediately to schedule a meeting to receive assistance in taking the appropriate steps with the IRS to resolve the matter.

Other ways you may discover your identity has been stolen include:

  • Finding purchases on your credit card that you did not make
  • Discovering withdrawals from an account that you did not make
  • Seeing that your address has been changed for certain accounts, or no longer receiving your regular bills. (Cyber criminals may change your address when filing a return.)

The unfortunate reality is that personal data is already at risk everywhere, but we will work with you to reduce the likelihood of you being victimized by cyber criminals. As your CPA and trusted advisor, we understand the need to protect your privacy and take data protection very seriously. Our security and data integrity meets the highest industry standards established by the IRS and Federal Trade Commission. We have also established protocols to guard access to client files.

Please don’t hesitate to contact us at [phone/email] with questions or concerns or if you would like to meet with us to discuss this issue or any financial or tax needs.

Disaster Relief and Airport and Airway Extension Act of 2017 - Individual Relief

Posted by Admin Posted on Oct 11 2017

To speed recovery to the devastated areas of Hurricanes Harvey, Irma and Maria, President Trump signed the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (Disaster Relief and FAA Act of 2017) on September 29, 2017. This letter highlights the tax relief included in the Disaster Relief and FAA Act of 2017 available to individuals impacted by the hurricanes. These provisions include adjustments to limitations and reductions on the personal casualty loss deduction, flexibility for the use of retirement funds, suspension of limitations on charitable contributions, and special rules for determining earned income for purposes of the child tax credit and the earned income credit.

 

Personal casualty losses. In general, casualty losses are taken as an itemized deduction subject to a $100 reduction per loss occurrence. The total annual deduction for all personal casualty and theft losses is further limited to that amount which exceeds 10 percent of the taxpayer's adjusted gross income. However, the Disaster Relief and FAA Act of 2017 modifies the reduction to $500 per occurrence but eliminates the need to exceed 10 percent of adjusted gross income. In addition, for taxpayers who do not itemize, the standard deduction is increased by the amount of the disaster loss.

 

Special rules for the use of retirement funds. Many victims of the hurricanes may be able to access retirement funds without triggering the standard early withdrawal penalties.

 

  • Tax favored withdrawals. An exception to the 10-percent early withdrawal penalty applies to qualified distributions from a qualified retirement or annuity plan, or an IRA. The qualified distribution may be included in income ratably over three years, or may be recontributed to an eligible retirement plan within three years. Qualified distributions include distributions made on or after the disaster date, and before January 1, 2019, to an individual whose principal residence is in the disaster area and who has sustained an economic loss by reason of the relevant hurricane. Such distributions are limited to $100,000.
  • Recontributions of withdrawals for home purchases. Individuals who received certain distributions from qualified plans after February 28, 2017, and before September 21, 2017, which was intended to be used to purchase or construct a principal residence in the Hurricane Harvey, Irma or Maria disaster areas but could not do so because of the hurricane may recontribute the amount to the retirement plan. The recontribution of the distribution may be made without tax or penalty if it is recontributed between August 23, 2017 and February 28, 2018.
  • Loans from qualified plans to individuals sustaining an economic loss. The Disaster Relief and FAA Act of 2017 provides an exception to the income inclusion rule for loans from a qualified employer plan if the loan is to an individual whose principal residence on the disaster date, is located in the disaster area and who has sustained an economic loss by reason of the hurricanes. The exception only applies to the extent that the loan (when added to the outstanding balance of all other loans to the participant from all plans maintained by the employer) does not exceed $100,000.

 

Special rule for determining earned income. Individuals whose principal residence was in a hurricane disaster area and who is displaced as a result may elect to calculate their refundable child tax credit and earned income credit for 2017 by using their earned income from the preceding tax year.

 

Charitable contributions. Individuals are allowed to elect to temporarily suspend for all "qualified contributions" the 50-percent contribution base limitation, and the limitation on overall itemized deductions. Qualified contributions means

 

  • Any cash contribution made beginning on August 23, 2017, and ending on December 31, 2017;
  • for relief effort in the Hurricanes Harvey, Irma, and Maria disaster areas; and
  • for which the taxpayer has obtained contemporaneous written acknowledgement.

 

Recovering from a disaster of this magnitude takes time and there are many decisions to be made. We are here to help you.  Please call our office to discuss how this tax relief may benefit you.

Disaster Relief and Airport and Airway Extension Act of 2017 - Business Relief

Posted by Admin Posted on Oct 11 2017

To speed recovery to the devastated areas of Hurricanes Harvey, Irma and Maria, President Trump signed the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (Disaster Relief and FAA Act of 2017) on September 29, 2017. The tax relief in the Disaster Relief and FAA Act of 2017 includes an employee retention credit for eligible employers.  

 

The employee retention credit allows eligible employers in the hurricane disaster areas a 40-percent credit for qualified wages paid to eligible employees. The amount of qualified wages which may be considered for any one eligible employee is limited to $6,000. The credit is part of the current year business credit and therefore is subject to tax liability limitations. This credit does not apply to wages paid to employee-owners who own more than fifty percent of the business. For purposes of this credit:

 

  • An eligible employer is any employer that conducted an active trade or business in a hurricane disaster area which, as a result of damage sustained by reason of the hurricanes, became inoperable on any day from the applicable disaster date, and before January 1, 2018. For Hurricane Harvey, the disaster date is August 23, 2017; for Hurricane Irma, the date is September 4, 2017; and for Hurricane Maria the date is September 16, 2017.
  • Eligible employees are employees whose principal place of employment on the applicable disaster date was with the eligible employer in a hurricane disaster area.
  • Qualified wages are wages paid or incurred by an eligible employer with respect to an eligible employee on any day after the applicable disaster date, and before January 1, 2018, during the period:

 

  1. beginning on the date on which the trade or business first became inoperable at the principal place of employment of the employee immediately before the hurricane and

 

  1. ending on the date on which such trade or business has resumed significant operations at such principal place of employment.

 

Qualified wages include wages paid without regard to whether the employee performs no services, performs services at a different place of employment other than the principal place of employment, or performs services at the principal place of employment before significant operations have resumed.

 

Employers cannot claim a retention credit and a Work Opportunity Credit for the same employee.

 

The employee retention credit is intended to encourage the economic recovery of the hurricane affected areas. If you have any questions related to this credit, please call our office. We are here to help.

IRS letters and notices

Posted by Admin Posted on July 10 2017

Receiving an envelope from an IRS may seem daunting, however you must always take that first step and make sure to open the envelope to look at its contents.  If you have received an IRS notice, timely response is always important, and we can always help you with that process. Please read below these helpful tips on how to handle an IRS notice or a letter.  Remember to always contact us for assistance and sucessful resolution.

IRS Summertime Tax Tip - IRS Notice or Letter

IRS cautions taxpayers about an increase in tax scams

Posted by Admin Posted on June 26 2017

Next time your phone rings, and you see an unfamiliar number, pause before answering your phone, especially if the number on your display is not a local number. Tax scam is on the rise, and in the latest IRS bulletin, you will find a listing of the latest scams going around. Read below for more, and if you ever get contacted by the IRS, please make sure to let us know.

IRS Bulletin

Reduction in Commercial Leases in Florida in 2018

Posted by Admin Posted on May 31 2017

On May 25, 2017 Governor Rick Scott signed House Bill 7109, which is supposed to reduce the state sales tax rate on commercial leases from 6% to 5.8% starting 1/1/18. This rate decrease will be applicable to new leases. In addition, there is no change to the local surtax, which for Sarasota county is currently 1%. As a result, effective rate in Sarasota County for leases starting on or after January 1, 2018, would be 6.8%. 

Be extremely cautious of the new W-2 Phishing scam

Posted by Admin Posted on Feb 07 2017

IRS has issued a very urgent alert to employers about a W-2 phishing scam that is being distributed via email.  Everyone should be on alert and question any request that comes in for a W-2 information from a superior.  Please read this alert below and feel free to contact our office with any questions.

Dangerous W-2 Phishing Scam

What to do before the year is over

Posted by Admin Posted on Dec 14 2016

The end of the year is upon us, but you can still do a few things before the year is over.  Here are a few tips from the IRS:

- Deductible donations can be charged to a credit card now and paid in 2017, as well as checks can be mailed before the end of the year in order for them to be counted as 2016 donations.

- Retired taxpayers who reach the age of 70 1/2 during 2016 can wait to take their first RMD from their IRA or workplace retirement until April 1, 2017. In turn, individuals have until April 18, 2017 to contribute to an IRA account and receive a deduction for their contribution (check with us to make sure you qualify).

- Notify the IRS, employers and the postal service of any changes in your address.

- If your name changes, you must notify the Social Security Administration in order for them to match your name with the IRS records. 

- Taxpayers who file returns using ITINs may be subject to having to renew their numbers. If you did not use your ITIN at least once in the last three years, it will not be valid. Also, ITINs with middle digits 78 or 79 are also subject to expiration. Call our office if you are not sure about your ITIN number, or you received a notice of expiration.

- Always keep copies of your tax returns. 

Please call our office with any questions or if you require any year-end planning. 

Click here to read full text

Announcement of 2017 standard mileage rates

Posted by Admin Posted on Dec 14 2016

In a recently announced Notice 2016-79 the IRS has issued 2017 standard mileage rates  to compute deductions for costs to operate vehicles for business, medical, moving and charitable purposes during 2017 tax year.  The 2017 tax rates are as follows:

- 53.5 cents per mile for business purpose

- 17 cents per mile for medical and moving purpose

- 14 cents per mile for charitable purpose

The full text of the IRS notice is available in the link above. Should you have any questions regarding this announcement, please call our office.

 

Tax Scam warnings from the IRS

Posted by Admin Posted on Dec 08 2016

Should you ever receive an email, a phone call or a pop-up online informing you that you owe money to the IRS, this is a sign of a scam.  The IRS never calls you or emails you or reaches you online, and the IRS never demands that you make any payments over the phone.  If you ever receive any communication from the IRS, please contact our office.

Please click here to read a very important IRS Newswire   

Overtime rules - current development

Posted by Admin Posted on Dec 07 2016

As you may have heard, there was a change in the overtime regulations of the Fair Labor Standards Act, and effective December 1, 2016, there should have been an increase in salary threshold for eligible workers (from $455/week to $913/week), in addition to a few other changes. Due to a litigation in the U.S. District Court of Eastern District of Texas, there is a hold in implementing of these new regulations, and the Department of Labor has filed a note to appeal the preliminary injunction to the US Circuit Court of Appeals.  We will continue watching this issue, and we will update you as more information becomes available. For more detail, please click below to go to the Department of Labor website. 

Click here to go to the Department of Labor website

Tax records - how long should you keep them?

Posted by Admin Posted on Dec 07 2016

New tax season is almost upon us, but what do we do with our prior documents and tax returns? According to the IRS, you should keep copies of your tax returns and supporting documentation for at least three years.  Certain documents should be kept for 7 years should you need to amend your return.  Documents pertaining to the sale of real estate should also be kept for 7 years. For more information, and full text of this informative IRS Newswire, please see the link below.  As always, feel free to call our office with any questions. 

Click here to see full text of the IRS Newswire

Post election recap

Posted by Admin Posted on Nov 23 2016

Any change in Presidential Administration brings the possibility, indeed the likelihood, of tax law changes and the election of Donald Trump as the 45th President of the United States is no exception. During the campaign, President-elect Trump outlined a number of tax proposals for individuals and businesses. This letter highlights some of the President-elect’s tax proposals. Keep in mind that a candidate’s proposals can, and often do, change over the course of a campaign and also after taking office. This letter is based on general tax proposals made by the President-elect during the campaign and is intended to give a broad-brush snapshot of those proposals.  
 
At the same time, the end of the year may bring some tax law changes before President Obama leaves office. This letter also highlights some of those possible changes with an eye on how late tax legislation could impact your year-end tax planning.
 
Campaign proposals
During the campaign, President-elect Trump called for reducing the number of individual income tax rates, lowering the individual income tax rates for most taxpayers, lowering the corporate tax rate, creating new tax incentives, and repealing the Affordable Care Act (ACA) (including presumably the ACA’s tax-related provisions). The President-elect, in his campaign materials, highlighted several goals of tax reform:
·    Tax relief for middle class Americans
·    Simplify the Tax Code
·    Grow the American economy 
·    Do not add to the debt or deficit
 
President-elect Trump also identified during the campaign a number of tax-related proposals that he intends to pursue during his first 100 days in office:
·    The Middle Class Tax Relief and Simplification Act: According to Trump, the legislation would provide middle class families with two children a 35 percent tax cut and lower the “business tax rate” from 35 percent to 15 percent. 
·    Affordable Childcare and Eldercare Act:  A proposal described by Trump during the campaign that would allow individuals to deduct childcare and elder care from their taxes, incentivize employers to provide on-site childcare and create tax-free savings accounts for children and elderly dependents. 
·    Repeal and Replace Obamacare Act: A proposal made by Trump during the campaign to fully repeal the ACA.
·    American Energy & Infrastructure Act: A proposal described by Trump during the campaign that “leverages public-private partnerships, and private investments through tax incentives, to spur $1 trillion in infrastructure investment over 10 years.” 
 
Individual income taxes
The last change to the individual income tax rates was in the American Taxpayer Relief Act of 2012 (ATRA), which raised the top individual income tax rate. Under ATRA, the current individual income tax rates are 10, 15, 25, 28, 33, 35, and 39.6 percent. During the campaign, President-elect Trump proposed a new rate structure of 12, 25 and 33 percent:

·    Current rates of 10% and 15% = 12% under new rate structure.
·    Current rates of 25% and 28% = 25% under new rate structure.
·    Current rates of 33%, 35% and 39.6% = 33% under new rate structure.
 
This rate structure mirrors one proposed by House Republicans earlier this year. During the campaign, President-elect Trump did not detail the precise income levels within which each bracket percentage would fall, instead generally estimating for joint returns a 12% rate on income up to $75,000; a 25% rate for income between $75,000 and $225,000; and 33% on income more than $225,000 (brackets for single filers will be half those dollar amounts) and “low-income Americans” would have a 0% rate. As further details emerge, our office will keep you posted.
 
Closely-related to the individual income tax rates are the capital gains and dividend tax rates. The current capital gains rate structure, imposed based upon income tax brackets, would presumably be re-aligned to fit within President-elect Trump’s proposed percent income tax bracket levels. 
 
AMT and more
President-elect Trump proposed during the campaign to repeal the alternative minimum tax (AMT). The last time that Congress visited the AMT lawmakers voted to retain the tax but to provide for inflation-adjusted exemption amounts
 
During the campaign, Trump proposed to repeal the federal estate and gift tax. The unified federal estate and gift tax currently starts for estates valued at $5.49 million for 2017 (essentially double at $10.98 million for married individuals), Trump, however, also proposed a “carryover basis” rule for inherited stock and other assets from estates of more than $10 million. This additional proposal has already been criticized by some Republican members of Congress, while some Democrats have raised repeal of the federal estate tax as a non-starter.  
 
Other proposals made by President-elect Trump during the campaign would limit itemized deductions, eliminate the head-of-household filing status and eliminate all personal exemptions. President-elect Trump also has called for increasing the standard deduction. Under Trump's plan, the standard deduction would increase to $15,000 for single individuals and to $30,000 for married couples filing jointly. In contrast, the 2017 standard deduction amounts under current law are $6,350 and $12,700, respectively, as adjusted for inflation
 
Possible new family-oriented tax breaks were discussed by President-elect Trump during the campaign. These include the creation of dependent care savings accounts, changes to earned income tax credit and enhanced deductions for child care and eldercare. 
 
Health care
The Affordable care Act (ACA) created a number of new taxes that impact individuals and businesses. These taxes range from an excise tax on medical devices to taxes on high-dollar health insurance plans. The ACA also created the net investment income (NII) tax and the Additional Medicare Tax, both of which generally impact higher income taxpayers. The ACA also made significant changes to the medical expense deduction and other rules that affect individuals. For individuals and employers, the ACA created new mandates to carry or offer insurance, or otherwise pay a penalty. 
 
President-elect Trump made repeal of the ACA one of the centerpieces of his campaign. During the campaign, the President-elect said he would call a special session of Congress to repeal the ACA. At this time, how repeal may move through Congress remains to be seen. Lawmakers could vote to repeal the entire ACA or just parts. Our office will keep you posted of developments as they unfold.
 
Business tax proposals
On the business front, President-elect Trump highlighted small businesses, the corporate tax rate, and some international proposals during his campaign. Along with simplification, and the reduction, of taxes for small business.
 
Particularly for small businesses, Trump has proposed a doubling of the Code Sec. 179 small business expensing election to $1 million.  Trump has also proposed the immediate deduction of all new investments in a business, which has also been endorsed by Congressional tax reform/simplification advocates. 
 
The current corporate tax rate is 35 percent. President-elect Trump called during the campaign for a reduction in the corporate tax rate to 15 percent. He also proposed sharing that rate with owners of “pass through” entities (sole proprietorships, partnerships and S corporations), but only for profits that are put back into the business.  
 
Based on campaign materials, a one-time reduced rate would also be available to encourage companies to repatriate earnings of foreign subsidiaries that are held offshore. Many more details about these corporate and international tax proposals are expected.
 
Year-end 2016
More immediately, the calendar is quickly turning to 2017. Congress will meet for a “lame duck” session and is expected to take up tax legislation. Exactly what tax legislation Congress will consider before year-end remains to be seen. Every lawmaker has his or her “key” legislation to advance before the year-end. They include:

·    Legislation to renew some expiring tax extenders, especially energy extenders.
·    Legislation to fund the federal government, including the IRS, through the end of the 2017 fiscal year.
·    Legislation to enhance retirement savings for individuals.
·    Legislation to help citrus farmers, small businesses and more.
 
Some of these bills, if passed and signed into law, could impact year-end tax planning. The expiring extenders include the popular higher tuition and fees deduction along with some targeted business incentives.  If these extenders are renewed, or made permanent, our office can assist you in maximizing their potential value in year-end tax planning. 
 
Another facet of year-end tax planning is looking ahead. President-elect Trump has proposed some significant changes to the Tax Code for individuals and businesses. If these proposals become law, especially any reduction in income tax rates, and are made retroactive to January 1, 2017, your tax planning definitely needs to be reviewed. Our office will work with you to maximize any potential tax savings.
 
Working with Congress

When the 115th Congress convenes in January 2017, it will find the GOP in control of both the House and Senate, therefore allowing Trump to move forward on his proposals more easily. It remains to be seen, however, what compromises will be necessary between Congress and the Trump Administration to find common ground. In particular, too, compromise will likely be needed to bring onboard both GOP fiscal conservatives who will want revenue offsets to pay for tax reduction, and Senate Democrats who have the filibuster rule to prevent passage of tax bills with fewer than 60 votes.  Beyond considering tax proposals one tax bill at a time, it remains to be seen whether proposals can be packaged within a broader mandate for "tax reform" and "tax simplification."
 
The information generally available now about President-elect Trump’s tax proposals is based largely on statements by him during the campaign and campaign materials. President-elect Trump will take office January 20, 2017. Between now and then, more details about his tax proposals may be available. Please contact our office if you have any questions.
 
Sincerely yours,
Suplee, Shea, Cramer & Rocklein, PA

 

 

 

2016 Year-End Tax Planning for Businesses

Posted by Admin Posted on Nov 23 2016

As businesses approach year end, each has a unique opportunity to save additional taxes through taking a variety of strategic steps. Businesses seeking to maximize tax benefits through 2016 year-end tax planning may want to consider several general strategies, such as use of traditional timing techniques for income and deductions, and the role of the tax extenders (those made permanent and those expiring at the end of 2016), as well as strategies targeted specifically to their particular business. 
 
As in past years, planning is uncertain because of the expiration of at least some popular but temporary tax breaks. Also added to the mix is the far-reaching Affordable Care Act (ACA) and whatever changes to 2017 the new Congress and Administration may make to the Tax Code. 
 
Tax Law Changes 
Changes to the tax laws in 2016 made by new IRS regulations and other guidance should also be considered in assessing year-end strategies for 2016. And year-end tax savings can be found in avoiding penalties, by knowing how to comply with some of the IRS’s news rules and regulations. 
 
PATH Act “Extenders.” The Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted at the end of 2015, made permanent many business-related provisions that had been up for renewal, including the 100-percent gain exclusion on qualified small business stock; the reduced, five-year recognition period for S corporation built-in gains tax; 15-year straight-line cost recovery for qualified leasehold improvements, restaurant property and retail improvements; charitable deductions for the contribution of food inventory and others. Perhaps most significant, especially for small businesses, enhancements starting in 2016 were added to both a permanently extended research credit and Code Sec. 179 expensing deduction. 
 
Five-year Extensions. The PATH Act extended several business-related provisions available for five-years, under the expectation that general tax reform will consider a more permanent fate. Among these provisions, bonus depreciation and the Work Opportunity Credit have widespread applicability. Notably, in addition to extending bonus depreciation, a number of modifications have been made that: 
·    reduce the bonus rate from 50 percent to 40 percent for property placed in service in 2018 and to 30 percent for property placed in service in 2019 (for 2016 and again for 2017 it remains at 50 percent); 
·    replaces the bonus allowance for qualified leasehold improvement property with a bonus allowance for additions and improvements to the interior of any nonresidential real property, effective for property placed in service after 2015; 
·    allows farmers to claim a 50 percent deduction in place of bonus depreciation on certain trees, vines, and plants in the year of planting or grafting rather than the placed-in-service year, effective for planting and grafting after 2015; 
·    reduces the $8,000 bump-up in the first year luxury car depreciation cap for passenger automobiles on which bonus depreciation is claimed to $6,400 for passenger automobiles placed in service in 2018 and $4,800 for passenger automobiles placed in service in 2019, and only if the taxpayer does not generally elect out of bonus depreciation; and 
·    extends long-term accounting method relief for bonus depreciation claimed on property placed in service in 2015 through 2019. 
 
Expiring at Year-End 2016. A handful of business-related tax breaks did not fare well by the PATH Act, being extended only through 2016. Further extensions remain uncertain. 2016 year-end strategies therefore should include, where appropriate, the acceleration of expenses to maximize use of: 
·    Film and TV production expense elections 
·    Energy efficient commercial buildings deductions 
·    Mine safety equipment expense elections 
·    Additional depreciation for biofuel plant property 

Revised Repair Regulations. The IRS issued final tangible property regulations (aka, the “repair regs”) over three years ago. They continue to control the accounting for costs to acquire, repair and improve tangible property. These “repair regs” impact virtually all asset-based businesses and have reverberated into 2016, with additional “clean-up” expected in 2017.
 
For 2016 year-end planning, qualifying for new safe harbors: a de minimis expensing safe harbor and a remodel-refresh safe harbor – both can yield substantial immediate deductions if followed.
 
Partnership Audit Rules. The Bipartisan Budget Act of 2015 (Budget Act) repealed the TEFRA unified partnership audit rules and replaces them with streamlined procedures. The Budget Act delayed the effective date of the new audit rules for returns filed for partnership tax years beginning after 2017. However, subject to certain exceptions, partnerships may choose to apply the new regime immediately to any partnership tax year beginning after November 2, 2015.
 
Business Use of Vehicles. Several year-end strategies for both business expense deductions for vehicles and the fringe-benefit use of vehicles by employees involve an awareness of certain rates and dollar caps that change annually. 2016 changes to the standard mileage rates and vehicle depreciation limits are critical to these strategies. 
 
Affordable Care Act 
Despite several delays and legislative tweaks, the basic structure of the ACA for businesses, both large and small, generally remains intact. If an employer is an applicable large employer (ALE), this triggers employer shared responsibility provisions and the employer information reporting provisions. Small businesses, too, are not unaffected by the ACA and should take the ACA into account in year-end planning. Some incentives under the ACA, including health reimbursement arrangements and small business health care tax credits, can help maximize tax savings for small businesses. Information reporting under the ACA continues to challenge all businesses.
 
Revised Deadlines
The due date for filing partnership and C corporation returns was modified by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. Generally applicable to returns for tax years beginning after December 31, 2015, both Forms 1120-S and 1065 are due on or before the 15th day of the third month following the close of the tax year (March 15 for calendar-year taxpayers). The due date for the filing of Form 1120 by C corporations is changed to the 15th day of the fourth month following the close of the tax year (April 15 for calendar-year taxpayers).
 
Many taxpayers and tax professionals have long advocated for these changes to return due dates. These staggered due dates were recommended not only to enable taxpayers to receive Schedule K-1 information in time to meet their initial filing deadlines. They also help even out the workflow faced by tax preparers both in dealing with initial deadlines and with extensions. Further, the revisions are expected to contribute to a reduction in the need for extended and amended individual income tax returns.
 
These are just some of the considerations that make up year-end tax planning for businesses. Please feel free to contact our office so we can discuss specific 2016 year-end tax strategies that might be particularly worthwhile for your business. 
 
Sincerely yours,
Suplee, Shea, Cramer & Rocklein, PA
 
 

 

 

2016 Year-end Tax planning for individuals

Posted by Admin Posted on Nov 23 2016

Although tax planning is a 12-month activity, year-end is traditionally the time to review tax strategies from the past and to revise them for the future. Year-end has also become a time when there is an increasing need to take a careful look at what’s changed within the tax law itself since the beginning of the year. Opportunities and pitfalls within these recent changes – as they impact each taxpayer’s unique situation—should not be overlooked. This is particularly the case during year-end 2016. Here are some of the many consideration that taxpayers should review as year-end 2016 approaches.
 
Data, including 2015 return 
Year-end planning should start with data collection and a review of prior year returns. This includes losses or other carryovers, estimated tax installments, and items that were unusual. Conversations about next year should include review of any plans for significant purchases or dispositions, as well as any possible life changes. Alternative minimum tax liability also needs to be explored as well as potential liability for the net investment income tax and the Additional Medicare Tax. 
 
Investments 
Taxpayers holding investments toward the end of the year, whether in the form of securities, real estate, collectibles, or other assets, often have an opportunity to reduce their overall tax bill by some strategic buying and selling (or like-kind exchanging). Balancing the existing tax rates within those considerations is part of that challenge: the ordinary income tax rates, the capital gain rates, the net investment income tax rate, and the alternative minimum tax (AMT), all play a role. 
 
Income caps on benefits 
Monitoring adjusted gross income (AGI) at year end can also pay dividends in qualifying for a number of tax benefits. Often tax savings can be realized by lowering income in one year at the expense of realizing a bit more in the other: in this case, either 2016 or 2017. Some of those tax benefits that get phased out depending upon the taxpayer’s AGI level include: 
·    itemized deductions 
·    personal exemptions 
·    education savings bond interest exclusion 
·    maximum child’s income on parent’s return (form 8814): 
·    medical savings account adjustments 
·    education credits
·    student loan interest deduction 
·    adoption credits 
·    maximum Roth IRA contributions 
·    maximum IRA contributions for individuals 
 
PATH Act “extenders” and more 
Year to year, the tax law changes; and with it, opportunities and pitfalls that need particular attention at year end. In many cases, these changes are accounted for based on a tax-year period. Once the current tax year is over, there often is no going back for a “do-over” for a missed opportunity or to correct a costly mistake. Year-end 2016 is no exception to this rule.
 
The Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted immediately before the start of 2016, permanently extended many tax incentives that were previously temporary, removing for the first time in many years the year-end concern over whether these incentives will be extended either retroactively for the current year or prospectively into the coming year. Not all of these “extenders” provisions were extended beyond 2016, however; and some were modified in the process. Others were extended for up to five years, deferring to “tax reform” a more lasting solution. Here’s a list of the major changes made by the PATH Act, especially focused on how they impact year-end transactions: 
·    permanent American Opportunity Tax Credit 
·    permanent teachers’ $250 “classroom” expense deduction 
·    permanent state and local sales tax deduction election, in lieu of state income taxes 
·    permanent exclusion for direct charitable donation of IRA funds of up to $100,000 
·    permanent 100-percent gain exclusion on qualified small business stock 
·    permanent conservation contributions benefits 
·    five-year solar energy property 
·    nonbusiness energy property credit through 2016 
·    fuel cell motor vehicle credit through 2016 
·    mortgage insurance premium deduction through 2016 
·    tuition and fees deduction through 2016
 
Life events 
Life events such as marriage, birth or adoption of a child, a new job or the loss of a job, and retirement, all impact year-end tax planning. A change in filing status will affect tax liability. The possibility of significant changes and/ or significant or unusual items of income or loss should be part of a year-end tax strategy. Additionally, taxpayers need to take a look into the future, into 2017, and predict, if possible, any events that could trigger significant income, losses or deductions.
 
Retirement strategies 
Taxpayers may want to take a look at a number of different provisions in anticipation of retirement, at the point of retirement, or after retirement. Many of these provisions have opportunities and deadlines associated with the concept of taxable year. Among others, these include contributions to employer plans, strategic use of IRAs and “required minimum distributions,” and timing Roth IRA conversions and reconversions to maximize your retirement nest egg. 
 
Affordable Care Act compliance 
The Affordable Care Act (ACA) imposes new requirements on individuals and tightens or eliminates some tax incentives. Year-end planning for individuals with regards to the ACA may generally be more prospective than retrospective but there are some year-end moves that may be valuable, particularly with health-related expenditures. 
 
Acceleration or delay 
Year-end tax planning, especially if done “at the eleventh hour,” requires some understanding of the timing rules: when income becomes taxable and when it may be deferred; and, likewise, when a deduction or credit is realized and when it may be deferred into next year or beyond.
 
Income acceleration/deferral. Taxpayers using the cash method basis of accounting can defer or accelerate income using a variety of strategies. These may include: 
·    sell appreciated assets 
·    receive bonuses before January 
·    sell outstanding installment contracts 
·    redeem U.S. Savings Bonds 
·    accelerate debt forgiveness income 
·    avoid mandatory like-kind exchange treatment 

Deduction acceleration/deferral. A cash basis taxpayer generally deducts an expense in the year it is paid, although prepayment of an expense generally will not accelerate a deduction. There are exceptions, including those made in connection with: 
·    January mortgage payment in December 
·    tuition prepayment 
·    estimated state taxes

A New Administration 
When the new Administration moves into Washington in January 2017, it is clear that changes will follow. How these changes will impact upon your long-term tax situation remains to be developed. That, and an eventual groundswell for tax reform, make the future more difficult to read than in prior years. Nevertheless, in looking toward the future, you should not lose sight of the short term tax dollars to be saved immediately through 2016 year-end strategies. 
 
Please feel free to call our offices if you have any questions about how year-end tax planning might help you save taxes. Our tax laws operate largely within the confines of “the taxable year.” Once 2016 is over, tax savings that are specific to 2016 may be gone forever.
 
Sincerely yours,
Suplee, Shea, Cramer & Rocklein, PA

 

 

 

 

Welcome to Our Blog!

Posted by Admin Posted on June 30 2016
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