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Important changes to the child tax credit

Posted by Admin Posted on June 25 2021

Recently, there were changes made to the child tax credit that will benefit many taxpayers. As part of the American Rescue Plan Act that was enacted in March 2021, the child tax credit:

  • Amount has increased for certain taxpayers
  • Is fully refundable (meaning you can receive it even if you don’t owe the IRS)
  • May be partially received in monthly payments

The new law also raised the age of qualifying children to 17 from 16, meaning some families will be able to take advantage of the credit longer.

The IRS will pay half the credit in the form of advance monthly payments beginning July 15. Taxpayers will then claim the other half when they file their 2021 income tax return.

Though these tax changes are temporary and only apply to the 2021 tax year, they may present important cashflow and financial planning opportunities today. It is also important to note that the monthly advance of the child tax credit is a significant change. The credit is normally part of your income tax return and would reduce your tax liability. The choice to have the child tax credit advanced will affect your refund or amount due when you file your return. To avoid any surprises, please contact our office.

Qualifications and how much to expect

The child tax credit and advance payments are based on several factors, including the age of your children and your income.

  • The credit for children ages five and younger is up to $3,600 –– with up to $300 received in monthly payments.
  • The credit for children ages six to 17 is up to $3,000 –– with up to $250 received in monthly payments.

To qualify for the child tax credit monthly payments, you (and your spouse if you file a joint tax return) must have:

  • Filed a 2019 or 2020 tax return and claimed the child tax credit or given the IRS your information using the non-filer tool
  • A main home in the U.S. for more than half the year or file a joint return with a spouse who has a main home in the U.S. for more than half the year
  • A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number
  • Income less than certain limits

You can take full advantage of the credit if your income (specifically, your modified adjusted gross income) is less than $75,000 for single filers, $150,000 for married filing jointly filers and $112,500 for head of household filers. The credit begins to phase out above those thresholds.

Higher-income families (e.g., married filing jointly couples with $400,000 or less in income or other filers with $200,000 or less in income) will generally get the same credit as prior law (generally $2,000 per qualifying child) but may also choose to receive monthly payments.

Taxpayers generally won’t need to do anything to receive any advance payments as the IRS will use the information it has on file to start issuing the payments.

IRS’s child tax credit update portal

Using the IRS’s child tax credit and update portal, taxpayers can update their information to reflect any new information that might impact their child tax credit amount, such as filing status or number of children. Parents may also use the online portal to elect out of the advance payments or check on the status of payments.

The IRS also has a non-filer portal to use for certain situations.

Let us help you.

With any tax law change, it’s important to revisit your full financial roadmap. We can help you determine how much credit you may be entitled to and whether advance payments are appropriate. How you choose to receive the credit (partially advanced via monthly payments or solely on your next year’s return) could have many impacts to your financial plans.

Please contact our office today at 941-366-3600 to discuss your specific situation. As always, planning ahead can help you maximize your family’s financial situation and position you for greater success.

 

Online tools to manage advance Child Tax Credit payments

Posted by Admin Posted on June 22 2021

IRS has announced that there are 2 new online tools available to taxpayers wanting to manage their Child Tax Credit payments. 

Taxpayers wanting to find out if they qualify for child tax credit payments, as well as update their eligibility information, including unenrolling from receiving advance child tax credit payments, are now able to do so on irs.gov website.

Click here to read more about the latest IRS announcement.

Clarification of Tax Treatment of Forgiveness of Covered Loans

Posted by Admin Posted on Dec 28 2020

The Consolidated Appropriations Act, 2021 expands the Paycheck Protection Program (PPP) established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, that provides loans (covered loan) to assist small businesses with certain expenses incurred during the economic challenges due to the COVID-19 emergency. The Consolidated Appropriations Act, 2021 also clarifies the deductibility of certain expenses paid for with funds from a loan under PPP and the tax impact on income for the forgiveness of the related debt.

 

The Consolidated Appropriations Act, 2021 clarifies that:

 

  • no amount is included in the gross income of the eligible recipient due to the debt forgiveness

 

  • no deduction is denied, no tax attribute is reduced, and no basis increase is denied because of the exclusion from gross income, and

 

  • in the case of an eligible recipient that is a partnership or S corporation—

 

  • any amount excluded from income is treated as tax exempt income, and in general, any increase in the adjusted basis of a partner’s interest in a partnership with respect to any amount excluded from income is equal to the partner’s distributive share of deductions resulting from costs giving rise to the forgiveness.

 

This clarification under the Consolidated Appropriations Act, 2021 is effective for tax years ending after March 27, 2020, the date of enactment for the CARES Act. This clarification also applies to any subsequent Payroll Protection Loans for tax years ending after the date of enactment of the Consolidated Appropriations Act, 2021.

 

The expanded list of eligible expense under the Consolidated Appropriations Act, 2021 includes:

 

  • payroll costs

 

  • certain healthcare benefits

 

  • interest on mortgage obligations

 

  • rent

 

  • utilities  

 

  • interest on any other debt obligations

 

  • operations expenses

 

  • property damage

 

  • supplier costs

 

  • worker protection expenses

 

The Consolidated Appropriations Act, 2021, also provides a simplified process for recipients of a covered loan of not more than $150,000 to apply for loan forgiveness.

 

Please call our office if you have any questions on covered loans under the Paycheck Protection Program and the expanded relief provided by the Consolidated Appropriations Act, 2021.

Employee Retention Credit Extended and Expanded

Posted by Admin Posted on Dec 28 2020

The Consolidated Appropriations Act, 2021 extends and expands the employee retention credit first created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The employee retention credit is designed to encourage businesses to keep workers on their payroll and support small businesses and nonprofits through the Coronavirus economic emergency.

 

Eligible employers may claim the credit against employment taxes equal to a percentage of qualified wages paid to employees who are not working due to the employer’s full or partial suspension of business or a significant decline in gross receipts.

 

Calendar Quarters Beginning After December 31. 2020

 

For calendar quarters beginning after December 31, 2020, the amount of the credit is increased from 50% to 70% of qualified wages. The limitation per employee is also increased from amounts paid up to $10,000 per year to amounts paid up to $10,000 per quarter. Eligible wages are wages paid between March 12, 2020, and July 1, 2021, extended from January 1, 2021.

 

In addition, the definition of an eligible employer is more inclusive under the Consolidated Appropriations Act, 2021 and thereby allows a greater number of employers to qualify.

 

An eligible employer is defined as:

 

  • An employer whose trade or business is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease (COVID-19); or

 

  • An employer that experiences a 20% decline (down from 50%) in gross receipts for the calendar quarter compared to the same quarter in 2019.

 

However, if the employer was not in existence as of the beginning of the same calendar quarter in 2019, then the employer may use the same calendar quarter in 2020. Employers also have an election to determine if they meet the gross receipts test based on the immediately preceding quarter.

 

Qualified wages are based on the business’s average number of full-time employees in 2019.

 

  • Small employers, those that had 500 or fewer employees (up from 100), may receive the credit for wages paid to employees whether or not they are providing services to the employer.

 

  • Large employers, those that had more than 500 (up from 100) employees, may only receive the credit for wages paid to employees for time the employees are not providing services to the employer.

 

There are special rules for seasonal workers. If an employer is eligible due to a full or partial suspension of operations, only wages paid while operations are suspended count as qualified wages.

 

Employers must report their qualified wages on their federal employment tax returns, usually Form 941, Employer's Quarterly Federal Tax Return. They can reduce their required deposits of payroll taxes withheld from employees’ wages by the amount of the credit. They can also request an advance of the employee retention credit by submitting Form 7200.

 

No Double Benefit

 

There are limitations when considering an eligible employer's ability to claim the employee retention credit. This credit is impacted by other credit and relief provisions as follows:

 

  • wages that are paid for with forgiven Payroll Protection Program (PPP) proceeds cannot qualify for the employee retention credit;

 

  • qualifying wages for this credit cannot include wages for which the employer received a tax credit for paid sick and family leave; and

 

  • employees are not counted for this credit if the employer is allowed a work opportunity tax credit.

 

Contact Us

 

Because of the enhancements and expansion of the employee retention credit, your business may now have an opportunity to take the advantage of this tax benefit. Please call our office to discuss the employee retention credit and other business tax relief under the Consolidated Appropriations Act, 2021.

Additional 2020 Recovery Rebates for Individuals

Posted by Admin Posted on Dec 28 2020

As part of the massive Consolidated Appropriations Act, 2021, Congress has included another round of stimulus payments. Eligible individuals will receive $600 ($1,200 for joint filers) plus $600 for each dependent child.

 

Similar to the stimulus payment under the CARES Act, the amount of each payment is phased out by $5 for every $100 in excess of a threshold amount. This threshold amount is based upon 2019 adjusted gross income. The phaseout begins at $75,000 for single filers, $112,500 for heads of households, and $150,000 for joint filers. Thus, the payments are completely phased out for single filers with 2019 adjusted gross income over $99,000, heads of household with $136,500, and joint filers with $198,000. 

 

In order to be eligible for a stimulus payment, the individual must not be:

 

  • a nonresident alien,

 

  • able to be claimed as a dependent on another taxpayer’s return,

 

  • an estate or trust, and

 

  • must have included a Social Security number for both the taxpayer, the taxpayer’s spouse, and eligible children (or an adoption taxpayer identification number, where appropriate).

 

The advance credit is based on the adjusted gross income reported and the qualifying children claimed on the eligible individual’s 2019 return. The IRS will make the payment via electronic funds transfer to the bank account that the payee authorized, on or after January 1, 2019, for the delivery of a refund,or payment of taxes. However, if an individual has not filed a 2019 return by the time the payments are determined, the payment is based on information provided by the Social Security Administration, Railroad Retirement Board, or Secretary of Veterans Affairs for calendar year 2019.

 

As soon as practicable after the IRS distributes any payment to an eligible taxpayer, the IRS will send a notice bymail to the taxpayer’s last known address. The notice will indicate the method by which the payment was made, the amount of the payment, anda phone number to contact at the IRS to report any failureto receive such payment.

 

If you have any questions on the stimulus payments, please call our office. We are here to help you. 

2021 Tax Planning - Net Operating Losses

Posted by Admin Posted on Nov 16 2020

Taxpayers have an opportunity to utilize net operating losses (NOLs) generated on their personal and corporate tax returns generated in tax year 2021 by carrying forward the losses. The usage of the loss carryover is subject to certain limitations.

 

Net operating losses (NOLs) and limitations. An NOL is generally determined by subtracting deductions from gross income. For NOLs arising in tax years beginning after 2020, the loss carryforward period is unlimited. However, the carryforward may only offset 80 percent of taxable income. There is no carryback period, except for farming losses and non-life insurance company (property and casualty insurance company) losses, which have a two-year carryback period. The 80 percent limitation does not apply to non-life insurance companies. Taxable income for the percentage limitation is computed without regard certain deductions, including capital losses, qualified business income and foreign-derived intangible income.

 

For losses from tax years beginning before 2018, there is a 20-year carry forward period and no percent limitation. Under the CARES Act net operating losses (NOLs) arising in tax years beginning in 2018, 2019, and 2020 have a five-year carryback period and an unlimited carryforward period. The provision limiting an NOL deduction to 80 percent of taxable income does not apply to NOLs arising in these years.  

 

Reporting procedures. In calculating the amount of an NOL or an NOL carryover, a noncorporate taxpayer (an individual, trust or estate) and C corporation must make several adjustments to adjusted gross income and taxable income. In order to deduct an NOL, the taxpayer must file the appropriate form or statements with the IRS, depending on whether the NOL is being carried back to a prior year or carried forward to a future year.

 

If the NOL is carried forward, the NOL is entered as a deduction on the return in the first carryforward year and a recalculation of taxable income is not required. To file a carryback claim, a taxpayer can file an amended income tax return for the carryback year or a tentative refund claim. If an NOL is carried back, the taxable income in the carryback year is recomputed to determine the refund due in the carryback year.

 

Irrevocable elections to waive the loss carryback period for certain taxpayers. For tax years beginning after 2020, a taxpayer in the farming business and non-life insurance companies can make an irrevocable election to waive the two-year carryback period. An election to waive carryback of a NOL may make sense for a number of reasons, even though it postpones the NOL deduction. Waiving the carryback could benefit a taxpayer who experienced low income years before the loss year and expects high income tax liability in the years after the loss year. 

 

If you have any questions related to the NOL rules and the impact to your individual or corporate income tax return, please call our office. We can help you determine the best timing for claiming a net operating loss and making any necessary elections and reporting requirements.

 

Sincerely,



Suplee, Shea, Cramer & Rocklein, PA

2020 Year-End Tax Planning for Individuals

Posted by Admin Posted on Nov 16 2020

As the end of 2020 approaches, we can all agree that this year is unlike any other. The coronavirus pandemic and natural disasters have had a significant impact on the tax situation for many taxpayers. In response to the health and economic impact of the coronavirus pandemic, Congress passed two major pieces of legislation - the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. More relief may be forthcoming. In addition, we might expect future tax law changes following the election. As such, each individual taxpayer should consider the unique challenges and opportunities that this year presents.  

 

Economic Impact Payment

 

If an individual missed the extension for non-filers, the credit may be taken on the 2020 Form 1040 for the full amount to which they are entitled. Taxpayers who received more than the amount to which they are entitled do not have to repay it unless they were not eligible to receive it in the first place, e.g. deceased individuals or non-resident aliens. A person claimed as a dependent in 2018 or 2019 may also be entitled to the refundable credit if they are not claimed as a dependent in 2020 even though their parent received the $500 credit for the earlier year.

 

Retirement

 

The CARES Act allows penalty free distributions made during the 2020 calendar year of up to $100,000 for COVID-related expenses. Any income attributable to an early withdrawal is subject to tax over a three-year period, and taxpayers may recontribute the withdrawn amounts to a qualified retirement plan without regard to annual caps on contributions if made within three years.

 

The maximum loan amount from a retirement account is increased from the lesser of $50,000 or 50% of vested balance to the lesser of $100,000 or 100% of vested balance for qualified individuals. This increase applies to loans made between March 27, 2020 and December 31, 2020. In addition, qualified individuals may delay loan payments due after March 27, 2020 and before December 31, 2020 for one year. A qualified individual is an individual (or the spouse of an individual) diagnosed with COVID-19 with a CDC-approved test, or who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced hours due to the virus.

 

There is a temporary waiver of required minimum distributions for the 2020 calendar year. However, because of recent changes to retirement accounts, such as the increased age to begin RMDs, the end to the 70 ½ age limit for contributions to an IRA, and the shortened distribution period for non-spouse inherited IRAs, taxpayers are encouraged to review strategies for continuing to make IRA contributions and to reevaluate their beneficiary designations.

 

Charitable Deductions

 

For 85% of taxpayers who do not itemize, a $300 above-the-line deduction for cash contributions is available for 2020. However, the law is unclear if the $300 amount applies for both individual and joint returns or whether it is available beyond 2020.

 

For 2020 only, the limit for itemized charitable deductions is increased from 60% to 100% of adjusted gross income.

 

Although the CARES Act eliminated the required minimum distribution for 2020, taxpayers over age 70 ½ may still make a direct contribution to a charity from their IRA of up to $100,000 in 2020 and thereby reduce their adjusted gross income.

 

Student Loans

 

For payments made before January 1, 2021, employers may reimburse employees for principal and interest on student loans of up to $5,250 as part of an education reimbursement program.

 

Kiddie Tax

 

Changes under the Tax Cuts and Jobs Act (TCJA), that were meant to simplify the application of the kiddie tax, had the unintended consequence of increasing the tax on the unearned income, such as military death benefits, of children in low-income families. As a result, the kiddie tax reverts to rules prior to TCJA, using the parents' tax rate for tax years after 2019. However, a taxpayer may elect to apply the parent’s tax rate to 2018 and 2019 thereby providing an opportunity to amend a prior year’s return.

 

Disaster Relief

 

Several tax law provisions may help taxpayers recover financially from the impact of a disaster, especially when the federal government declares their location to be a major disaster area. Depending on the circumstances, the IRS may grant additional time to file returns and pay taxes. Both individuals and businesses can elect to claim casualty losses related to a disaster on the tax return for the previous year and thereby receive needed funds more quickly. Although the Covid-19 pandemic is a federally declared disaster and qualifies for a casualty loss deduction in 2020 (or the prior year, if elected) the IRS must provide further clarification on what losses qualify and for what time period.

 

Expiring Provisions

 

Taxpayers might consider taking advantage of these tax benefits in 2020 before they expire. In some cases, these benefits were retroactively applied. In which case, it might be useful to amend prior year’s returns if the savings are significant enough.

 

  • Exclusion from income for the forgiveness of debt on a principal residence. The exclusion now applies to discharges of qualified principal residence indebtedness occurring before January 1, 2021, or discharges that are subject to an arrangement that is entered into and evidenced in writing before January 1, 2021.

 

  • Mortgage insurance premium deduction. Premiums paid or accrued after January 1, 2018, for qualified mortgage insurance in connection with acquisition indebtedness are deductible as home mortgage interest (qualified residence interest). The deduction is subject to the taxpayers adjusted gross income (AGI) limits.

 

  • Above-the-line deduction for tuition and fees. The tuition and fees deduction may be claimed for qualified tuition and related expenses paid for the enrollment or attendance at an eligible education institution. The student may be the taxpayer, the taxpayer's spouse, or the taxpayer's dependent.

 

  • Nonbusiness energy property credit. The nonrefundable nonbusiness energy property credit is available for qualified energy efficient improvements or property placed in service before January 1, 2021. Qualified energy efficiency improvements include energy-efficient exterior windows, doors and skylights; roofs (metal and asphalt) and roof products; and insulation. Residential energy property includes energy-efficient heating and air conditioning systems; water heaters (natural gas, propane or oil); and biomass stoves.

 

  • Reduced 7.5 percent threshold for medical expense. If it is possible and the expenses are significant, accelerate the payment of medical expenses into 2020. The threshold rises to 10% of adjusted gross income in 2021.

 

  • Health coverage tax credit (HCTC). Eligible individuals can receive a tax credit to offset the cost of their monthly health insurance premiums for 2020 if they have qualified health coverage for the HCTC.

 

Contact Us

 

Because of the retroactive changes to tax rules, the possibility of more changes after the election and with the continuing challenge of the pandemic, there is no one size fits all for tax planning and any strategy may have unintended consequences if the taxpayer’s situation is not evaluated holistically considering the changing landscape. Please call our office to schedule an appointment to discuss your year-end strategy.

 

Sincerely,



Suplee, Shea, Cramer & Rocklein, PA

2020 Year-End Tax Planning for Businesses

Posted by Admin Posted on Nov 16 2020

We can all agree that 2020 is unlike any other year. As we consider tax-planning strategies for the year end, major uncertainty continues concerning the severity of the pandemic and length of the economic recovery. Although Congress passed two major pieces of legislation in response to the health and economic impact of the coronavirus pandemic, it remains unclear if additional relief is forthcoming. In addition, some regularly expiring tax provisions are due to expire again at the end of 2020. In the meantime, the IRS continues to release significant guidance on provisions of the Tax Cuts and Jobs Act. As such, each business should consider the unique challenges and possible opportunities that this year presents.

 

COVID Relief

 

In addition to providing resources to the health community to help contain and combat the virus, the Families First Coronavirus Response Act offered employees and self-employed individuals affected by the pandemic with guaranteed paid sick leave. Provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act also included numerous tax benefits for businesses. Here are highlights for tax planning consideration at 2020 year-end.

 

  • The Paycheck Protection Program (PPP). Under the Cares Act, a recipient of a covered loan can receive forgiveness of indebtedness on a PPP loan in an amount equal to the sum of payments made for qualified expenses. According to IRS guidance, the business expenses related to forgivable PPP loans are not deductible. However, lawmakers state that this was not their intent. Congress will need to address the deductibility of these expenses in future legislation to clearly make these expenses deductible.

 

  • Employee Retention Credits. The employee retention credit is designed to encourage businesses to keep employees on their payroll and is available for qualified wages paid through the end of 2020. This credit is very similar to the paid leave credits granted to employers under the Families First Coronavirus Response Act with some changes to the requirements. Most significantly, neither the employee nor the employer has to be directly impacted by the infection. Employers can reduce their required deposits of payroll taxes withheld from employees’ wages by the amount of the credit or request an advance of the employee retention credit. Eligible employers may use the employee retention credit with other relief such as payroll tax deferral which may affect deposits and advances.

 

  • Deferred Payroll Tax Payments. Payroll taxes due from the period beginning on March 27, 2020 and ending on December 31, 2020, can be deferred. The total payroll taxes incurred by employers, and 50 percent of payroll taxes incurred by self-employed persons qualify for the deferral. Half of the deferred payroll taxes are due on December 31, 2021, with the remainder due on December 31, 2022.

 

  • Executive Memorandum on Withholding. President Trump has authorized employers to defer the withholding of the employee’s share of Social Security taxes through the end of 2020. However, unless Congress forgives the repayment of these taxes, they will have to be repaid in the first quarter of 2021. It is unclear as to how the deferred tax would be collected from individuals who are no longer employed when the taxes come due. Employers that are concerned with the administration and collection of the deferred taxes continue to withhold the taxes from their employees.

 

Tax Cuts and Jobs Act modified under the CARES Act

 

Several tax provisions under the Tax Cuts and Jobs Act were modified by the CARES Act for 2020 and earlier years providing opportunities to amend prior year returns. A 15-year recovery period is retroactively assigned to qualified improvement property placed in service after December 31, 2017 allowing the property to be depreciated over 15 years or, alternatively to qualify for 100 percent bonus depreciation. Net operating losses (NOLs) arising in tax years beginning in 2018, 2019, and 2020 now have a five-year carryback period with an unlimited carryforward period and are not limited to 80 percent of taxable income. The business interest deduction limit increased from 30 to 50 percent of the taxpayer’s adjusted taxable income for the 2019 and 2020 tax years with special rules for partners and partnerships. The limitation on the deduction of excess business losses for noncorporate taxpayers does not apply for tax years beginning in 2018, 2019, and 2020. Corporations can accelerate the recovery of refundable AMT credits which allows corporations to claim a refund immediately and obtain additional cash flow during the COVID-19 emergency.

 

Expiring Provisions

 

Taxpayers might consider taking advantage of the following tax benefits in 2020 before they expire. In some cases, these benefits were retroactively applied. In which case, it may be useful to amend prior year’s returns if the savings are significant enough.

 

  • The Work Opportunity Credit terminates for wages paid to workers that begin work for an employer after December 31, 2020.

 

  • A deduction is allowed for all or part of the cost of energy efficient commercial building property (i.e., certain major energy-savings improvements made to domestic commercial buildings) placed in service after December 31, 2017 and before January 1, 2020.

 

  • A three-year extension of the energy-efficient homes credit is available to eligible contractors for new homes manufactured after December 31, 2017 through December 31, 2020.

 

Contact Us

 

There is no one size fits all for tax planning and any strategy may have unintended consequences if the taxpayer’s situation is not evaluated holistically considering changing landscape. Traditional methods for postponing income and accelerating deductions may not be the best option if tax rates rise after an election year. Please call our office to discuss all your options.

 

Sincerely,



Suplee, Shea, Cramer & Rocklein, PA
 

Economic Impact Payments

Posted by Admin Posted on Mar 31 2020

Internal Revenue Service has issued additional information pertaining to the issuance of economic impact payments, also known as stimulus checks, and we highly recommend that you visit the IRS website for up to date information on coronavirus relief. Please click below for more detail:

Economic impact payments - what you need to know

Filing and payment extension FAQ during COVID-19 emergency

Posted by Admin Posted on Mar 25 2020

Dear clients and friends,

We hope you are all staying safe and healthy during this unprecedented time.  CODIV-19 has changed the definition of normal, and one of them is filing taxes on April 15th. As you are all aware, the IRS has extended the filing deadline and payment deadline of some returns to July 15th. On March 24th, the IRS has published Frequently Asked Questions pertaining to the new filing deadline. Please use the IRS website (click bold text above) to learn more. 

As always, should you have any questions, feel free to contact us.

Consolidated Appropriations Act of 2020

Posted by Admin Posted on Jan 07 2020

Dear Clients and Friends,

Congress recently passed Consolidated Appropriations act of 2020, which included various tax extenders as well as the SECURE Act affecting retirement plans.  Please click below to read more.

Consolidated Appropriations Act of 2020

2019 Luxury Auto Depreciation Caps and Lease Inclusion Amounts

Posted by Admin Posted on Nov 20 2019

Dear Clients and Friends:

 

If you use your vehicle for business purposes, the Internal Revenue Service allows you to write off some of the vehicle's cost. By depreciating your vehicle, you deduct a specified amount of your taxable income to account for the vehicle's loss of value for each year of use. The IRS sets annual depreciation caps for luxury vehicle owners who opt for the actual cost method over the standard mileage rate.

 

Depreciation Caps

 

The luxury car depreciation caps for a passenger car placed in service in 2019 limit annual depreciation deductions to:

 

  • $10,100 for the first year without bonus depreciation
  • $18,100 for the first year with bonus depreciation
  • $16,100 for the second year
  • $9,700 for the third year
  • $5,760 for the fourth through sixth year

 

The first-year cap for a passenger car acquired before September 28, 2017 and placed in service in 2019 is $14,900 if bonus depreciation is claimed.

 

The luxury car depreciation caps for SUVs, trucks, and vans placed in service in 2019 limit annual depreciation deductions to:

 

  • $10,100 for the first year without bonus depreciation
  • $18,100 for the first year with bonus depreciation
  • $16,100 for the second year
  • $9,700 for the third year
  • $5,760 for the fourth through sixth year

 

The first-year cap for an SUV, truck, or van acquired before September 28, 2017 and placed in service in 2019 is $14,900 if bonus depreciation is claimed.

 

If depreciation exceeds the annual cap, the excess depreciation is deducted beginning in the year after the vehicle’s regular depreciation period ends.

 

The annual cap for this excess depreciation is:

 

  • $5,760 for passenger cars and
  • $5,760 for SUVS, trucks, and vans.

 

Lease Inclusion Amounts

 

If a vehicle is first leased in 2019, a taxpayer must add a lease inclusion amount to gross income in each year of the lease if its fair market value at the time of the lease is more than:

 

  • $50,000 for passenger cars and
  • $50,000 for SUVS, trucks, and vans.

 

The 2019 lease inclusion tables provide the lease inclusion amounts for each year of the lease.

 

The lease inclusion amount results in a permanent reduction in the taxpayer’s deduction for the lease payments.

 

Vehicles Exempt from Depreciation Caps and Lease Inclusion Amounts

 

The depreciation caps and lease inclusion amounts do not apply to:

 

  • cars with an unloaded gross vehicle weight of more than 6,000 pounds; or
  • SUVs, trucks and vans with a gross vehicle weight rating (GVWR) of more than 6,000 pounds

 

Taxpayers always have the option of using the standard mileage rates rather than calculating the actual costs of using their vehicle. The deduction is calculated by multiplying the standard mileage rate by the number of business miles traveled.

 

Our office can help you compare the benefits of using the business standard mileage rate or the actual expense method.

 

Sincerely,

Suplee, Shea, Cramer & Rocklein, PA

2019 Year-End Tax Planning for Individuals

Posted by Admin Posted on Nov 20 2019

Dear Clients and Friends:

 

As the end of 2019 approaches, more and more information and guidance is released by the IRS relating to the Tax Cuts and Jobs Act, as well as guidance relating to a number of different areas not impacted by the landmark tax reform act. While one of the claimed benefits of tax reform was the simplification of filing and the lowering of income tax rates, there are still many steps that individuals can take that can lower their tax bills. 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 over the last couple of years. 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 2020 should consider deferring income to 2020 and accelerating deductions into 2019. While tax brackets seem as though they will be relatively stable for the next few years, individual circumstances could mean a shift in brackets from year to year.

 

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. Tax rates on investments are also impacted by the total amount of your income, so a determination should be made of the best time to sell investments. 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.

 

2019 tax law changes. Nearly all of the provisions of TCJA came into effect during 2018. However, there are many new tax laws that came into effect in 2019 that individuals should be aware of.

 

  • Alimony. One very significant change that came into effect January 1, 2019, is the treatment of alimony. Beginning with divorces and separation agreements entered into after December 31, 2018, alimony or separate maintenance payments are no longer deductible by the payor, nor includible in the income of the payee. This change does not affect divorce or separation agreements entered into before 2019, nor those altered after 2018 where the changed method of taxation is not expressly stated to apply.

 

  • Medical expenses. The floor for claiming deductions for medical expenses increased to 10 percent for 2019 after TCJA lowered it to 7.5 percent for all taxpayers for two years.

 

Remember that the below significant changes came into effect in 2018 under TCJA:

 

  • State and local taxes. TCJA limits the deduction for state and local taxes to $10,000 per year.

 

  • Increased standard deduction. One of the most broadly impactful provisions of TCJA was the near doubling of the standard deduction for all taxpayers. For 2019, the standard deduction amounts are $24,400 for joint filers, $18,350 for heads of households, and $12,200 for all other individual filers. This increased amount makes it less likely that it is more advantageous for individuals to itemize deductions.

 

  • Miscellaneous itemized deductions. TCJA eliminated miscellaneous itemized deductions for individuals. This includes deductions for unreimbursed employee expenses.

 

There are still actions that can be taken with regard to all of these new rules, many of which can still be completed before the end of the year.

 

Withholding. TCJA significantly impacted employee withholding, and taxpayers who didn’t adjust it in 2018 found themselves with a large tax bill when filing returns in 2019. The IRS gave some relief from penalties for not withholding enough during 2018, but it is unlikely to do so again for 2019. There is still time at the end of 2019 to check withholding status and correct it, but only if action is taken quickly.

 

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 is 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 2019 is over, tax savings that are specific to this year may be gone forever.

 

Sincerely,

Suplee, Shea, Cramer & Rocklein, PA

2019 Year-End Tax Planning for Businesses

Posted by Admin Posted on Nov 20 2019

Dear Clients and Friends:

 

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 situation.

 

For the 2019 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 2017, most temporary credits and deductions were permanently extended several years ago. A handful of other credits expire in 2019 through 2021.

 

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 2019 may be particularly fruitful are the following:

 

Business credits and deductions. Many business-related tax credits and deductions that were periodically scheduled to expire were permanently extended in 2015. Others were twice extended one year for both 2016 and 2017, and are not available for the 2019 filing season unless extender legislation is enacted. A few were extended for a five-year period. Some others were modified and extended by TCJA. 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. Many of the provisions now periodically extended relate to energy-related activities, or specific industries, but it is important to make sure that any credits are considered in light of their availability.

 

Depreciation and expensing. TCJA made some significant changes to encourage business to expand and invest in new property. First-year depreciation allowances on certain business property, or bonus depreciation, has fluctuated over the last few years, but TCJA provides for 100 percent bonus depreciation for property placed in service before 2023. Additionally, the limitation on expensing certain depreciable assets has been increased to $1 million, with a $2.5 million investment limitation (subject to annual inflation adjustments). While 2019 is not necessarily the last time these benefits will be available, there has been no better time to take advantage of them

 

Qualified business income deduction. Beginning in 2018, business owners are allowed to deduct up to 20 percent of their qualified business income (QBI) from sole proprietorships, partnerships, trusts and S corporations. This is one of the centerpieces of TCJA, and broadly applies to many taxpayers. The IRS has released comprehensive guidance on the deduction, which provides a great deal of clarification on the requirements of the deduction. This is a completely new deduction, with new documentation requirements, which may require a year-end review of records. The credit also is reduced, and eventually eliminated, for certain businesses once the income exceeds certain amounts, so a year-end review may be helpful to get the most out of the deduction.

 

Cash method of accounting. Another provision arising from TCJA was a more permissive adoption of the cash method of accounting. Beginning in 2018, corporations with gross receipts up to $25 million ($26 million for 2019) can use the method, which is up from $1 million in prior years. Many of the traditional end-of-year planning techniques relating to timing, such as income deferral or income acceleration, are made easier where the cash method of accounting is used.

 

Family Leave Credit. TCJA also created a new credit for employers making family leave payments to employees. The credit is only available to employers who have a written policy in place for the payment and credit. The credit expires after 2019, barring legislation to extend it, so employers who make these payments, and want to claim the credit should make sure to do so while they can.

 

These are just some of the considerations that can yield tax savings for your business as year-end 2019 approaches. Please feel free to contact our offices so we can discuss specific 2019 year-end strategies that might be particularly worthwhile for your business.

 

Sincerely,

Suplee, Shea, Cramer & Rocklein, PA

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. 

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.

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.

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

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   

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

Welcome to Our Blog!

Posted by Admin Posted on June 30 2016
This is the home of our new blog. Check back often for updates!