TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

Business Tax Law Changes The following is my client letter addressing the Business Tax Law Changes in the Tax Cuts and Jobs Act of 2017: On December 22, the President signed into law the Tax Cuts and Jobs Act of 2017 (TCJA). The 503-page TCJA is the largest tax overhaul since the 1986 Tax Reform Act and it will affect almost every individual and business in the United States. Unlike the provisions for individuals, which generally expire after 2025, the business-related provisions in the TCJA are permanent and generally take effect in tax years beginning after 2017. For businesses, highlights of the TCJA include: (1) an increase in amounts that may be expensed under bonus depreciation and Section 179; (2) a 21 percent flat corporate tax rate; (3) a new business deduction for sole proprietorships and pass-through entities; and (4) the elimination of the corporate alternative minimum tax (AMT). Overview of TCJA Changes Affecting Businesses The following is a summary of some of t...

Tax Cuts and Jobs Act: Key provisions affecting businesses The recently passed tax reform bill, commonly referred to as the “Tax Cuts and Jobs Act” (TCJA), is the most expansive federal tax legislation since 1986. It includes a multitude of provisions that will have a major impact on businesses. Here’s a look at some of the most significant changes. They generally apply to tax years beginning after December 31, 2017, except where noted. Replacement of graduated corporate tax rates ranging from 15% to 35% with a flat corporate rate of 21% Repeal of the 20% corporate alternative minimum tax (AMT) New 20% qualified business income deduction for owners of flow-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships — through 2025 Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after September 27, 2017, and before January 1...

This is my client letter addressing Tax Reform: Dear Client: Congress is enacting the biggest tax reform law in thirty years, one that will make fundamental changes in the way you, your family and your business calculate your federal income tax bill, and the amount of federal tax you will pay. Since most of the changes will go into effect next year, there's still a narrow window of time before year-end to soften or avoid the impact of crackdowns and to best position yourself for the tax breaks that may be heading your way. Here's a quick rundown of last-minute moves you should think about making. Lower tax rates coming. The Tax Cuts and Jobs Act will reduce tax rates for many taxpayers, effective for the 2018 tax year. Additionally, many businesses, including those operated as passthroughs, such as partnerships, may see their tax bills cut. The general plan of action to take advantage of lower tax rates next year is to defer income into next year. Some possibilities foll...

This year’s company holiday party is probably tax deductible, but next year’s may not be Many businesses are hosting holiday parties for employees this time of year. It’s a great way to reward your staff for their hard work and have a little fun. And you can probably deduct 100% of your 2017 party’s cost as a meal and entertainment (M&E) expense. Next year may be a different story. The 100% deduction For 2017, businesses generally are limited to deducting 50% of allowable meal and entertainment expenses. But certain expenses are 100% deductible, including expenses: For recreational or social activities for employees, such as holiday parties and summer picnics, For food and beverages furnished at the workplace primarily for employees, and That are excludable from employees’ income as de minimis fringe benefits. There is one caveat for a 100% deduction: The entire staff must be invited. Otherwise, expenses are deductible under the regular business entertainment rules. ...

Should you buy a business vehicle before year end? One way to reduce your 2017 tax bill is to buy a business vehicle before year end. But don’t make a purchase without first looking at what your 2017 deduction would be and whether tax reform legislation could affect the tax benefit of a 2017 vs. 2018 purchase. Your 2017 deduction Business-related purchases of new or used vehicles may be eligible for Section 179 expensing, which allows you to immediately deduct, rather than depreciate over a period of years, some or all of the vehicle’s cost. But the size of your 2017 deduction will depend on several factors. One is the gross vehicle weight rating. The normal Sec. 179 expensing limit generally applies to vehicles with a gross vehicle weight rating of more than 14,000 pounds. The limit for 2017 is $510,000, and the break begins to phase out dollar-for-dollar when total asset acquisitions for the tax year exceed $2.03 million. But a $25,000 limit applies to SUVs rated at more th...

Here we go again: Hi, how are you and your family? I have been in search for someone bearing this name in your country therefore when i saw your name, i am pleased to contact you and determine how best we can assist each other. I am working with a savings company here in Ipoh, Perak of Malaysia as the manager of the warehouse department. I believe it is in my destiny for me to have come across your name. I have a business i wish to share with you. I believe it will interest you, because it is in connection with your name and you will benefit from it. A citizen of your country deposited a consignment of One Million, Seven Hundred and Fifty Thousand United States Dollars ($1,750,000.00), with the company i am working with in 2014 for 36 calendar months, and the due date for the deposit contract is 22nd of June 2017. Sadly, he died in a car accident in Japan. He was in Japan on a business trip where he met his end. The company headquarters’ boss does not know about his death. I kne...

Today, Pres. Trump unveiled the general outline for his new tax plan. Yes, to my great amazement, he is talking about simplification of the Internal Revenue Code. I do not know if Congress will let this happen, but the compliance cost of federal and state taxes is far too high and has become a large impediment on business growth in the economy in general. One way that simplification is being proposed is that there would be a reduction in the current seven tax brackets 23 tax brackets of 35%, 25% and 10%. Also itemize deductions, other than charitable donations and mortgage payments, would be eliminated. This means that medical deductions, state and local tax deductions, casualty and theft losses, and unreimbursed employee business expenses would be eliminated. As part of the simplification, there would be an elimination of the estate tax at the federal level. Although that would affect only a small amount of estates, it would eliminate tax planning for everyone's estate. Anothe...

As a tax attorney, I get frequent calls and emails from people concerned about calls from the IRS.Almost all of these are scams and not real. The IRS post some information on this website about the scammers, but the scammers are too fast in changing their tactics for the IRS. Unfortunately the IRS is now making it easier for the scammers. The IRS is now hired some collection agencies to try to collect money from taxpayers. Unfortunately, scammers are going to hop on this and many people are going to be fleeced out of their money. If anyone calls from the IRS, you should immediately get their name, telephone number and address. You should then contact your tax lawyer. The IRS is hired for private debt collection agencies: Conserve Pioneer credit Performant CBE group. Here in New Jersey, Pioneer credit has been a leading debt collector for the Division of Taxation. Unfortunately, they have many Rules and our quick to try any kind of collection activity permitted by the Division...

There is been a long-standing rule that attorneys and clients have a privilege for their communications under most circumstances. This is not true for tax return preparers, accountants and CPAs under many circumstances, particularly where it matters most-when the IRS is attacking a taxpayer for criminal sanctions or fraud. That is why it is crucial to have a tax attorney involved for giving documents to an accountant or tax preparer if there may be any issues. This is especially true during audit IRS collection matters. Unfortunately, another cases come down from the Tax Court defeating any claim of a client and CPA privilege. This was reported by Parker tax publishing in their latest newsletter: Taxpayer Had No Legitimate Expectation of Privacy in Records Held by CPA A district court denied a motion to suppress all evidence relating to tax records the IRS obtained from a taxpayer's CPA. The court rejected the taxpayer's argument that Code Sec. 7609 and the Code of Pro...

This is a scam notice received by clients that looks legitimate. The scam artists have taken the IRS logo and make the letter look like it's really from the IRS. It is not! If you click on the link it asked all kinds of personal information so the scam artist can empty your bank accounts, file fraudulent tax returns and even get credit cards in your name! If you receive any notices from the IRS you need to immediately contact a tax lawyer. Do not click on any of the hyperlinks! This is very serious!!!!!! From:  IRS-gov.us   < usa1.tax-payers.rvs@wwt.net > Date: Fri, Feb 17, 2017 at 8:24 PM Subject: Your IRS Data Require Immediate Action To:  usa1.tax-payers.rvs@wwt.net Dear IRS User, This is an Important Message regarding your IRS Filing, from the previous year and current year.Our system indicates you have some changes in your record with us and We will like you to Kindly follow the given instructions in order to comply with our ne...

Prohibiting citizens from traveling abroad was the hallmark of many communist countries such as East Germany, the Soviet Union, Cuba, North Korea and China. Now, the US joins this dishonorable crowd by prohibiting travel by American citizens. Specifically, Congress and the previous Obama administration passed a law authorizing the State Department to revoke a passport of an American citizen if $50,000 or more of taxes are due. The IRS has a public pronouncement on this: https://www.irs.gov/businesses/small-businesses-self-employed/revocation-or-denial-of-passport-in-case-of-certain-unpaid-taxes The IRS claims that sometime in 2017 they are going to implement this draconian policy. We now have a new Secretary of State, Rex Tillerson. He can simply tell the IRS that he is not going to revoke anyone's passport. President Trump can make an Executive Order prohibiting any regulations enforcing this misguided law. Finally, and more importantly, Congress should immediately repeal   ...

The “manufacturers’ deduction” isn’t just for manufacturers The Section 199 deduction is intended to encourage domestic manufacturing. In fact, it’s often referred to as the “manufacturers’ deduction.” But this potentially valuable tax break can be used by many other types of businesses besides manufacturing companies. Sec. 199 deduction 101 The Sec. 199 deduction, also called the “domestic production activities deduction,” is 9% of the lesser of qualified production activities income or taxable income. The deduction is also limited to 50% of W-2 wages paid by the taxpayer that are allocable to domestic production gross receipts. Yes, the deduction is available to traditional manufacturers. But businesses engaged in activities such as construction, engineering, architecture, computer software production and agricultural processing also may be eligible. The deduction isn’t allowed in determining net self-employment earnings and generally can’t reduce net income below zero. But ...

Why 2016 may be an especially good year to take bonus depreciation Bonus depreciation allows businesses to recover the costs of depreciable property more quickly by claiming additional first-year depreciation for qualified assets. The PATH Act, signed into law a little over a year ago, extended 50% bonus depreciation through 2017. Claiming this break is generally beneficial, though in some cases a business might save more tax in the long run if they forgo it. However, 2016 may be an especially good year to take bonus depreciation. Keep this in mind when you’re filing your 2016 tax return. Eligible assets New tangible property with a recovery period of 20 years or less (such as office furniture and equipment) qualifies for bonus depreciation. So does off-the-shelf computer software, water utility property and qualified improvement property. And beginning in 2016, the qualified improvement property doesn’t have to be leased It isn’t enough, however, to have acquired the proper...

Can you defer taxes on advance payments? Many businesses receive payment in advance for goods and services. Examples include magazine subscriptions, long-term supply contracts, organization memberships, computer software licenses and gift cards. Generally, advance payments are included in taxable income in the year they’re received, even if you defer a portion of the income for financial reporting purposes. But there are exceptions that might provide you some savings when you file your 2016 income tax return. Deferral opportunities The IRS allows limited deferral of income related to advance payments for: Goods or services, Intellectual property licenses or leases, Computer software sales, leases or licenses, Warranty contracts, Subscriptions, Certain organization memberships, Eligible gift card sales, and Any combination of the above. In the year you receive an advance payment (Year 1), you may defer the same amount of income you defer in an “applicable financial st...

Tax season for individuals starts January 23, 2017 for the 2016 return. Unfortunately, most individuals are facing increasingly complex and confusing tax laws. It is not just businesses that are suffering. The National Taxpayer Advocate has called for Congress to simplify the Internal Revenue Code which takes individuals and businesses more than 6 billion hours a year to comply with filing. The idea espoused by the Taxpayer Advocate the Congress was to have a neutral Tax Code and cut individual tax rates as well as business tax rates. This means that many of the exclusions, exemptions, deductions and credits would be eliminated as the trade-off for simplification and rate reduction.The recommendation is that Congress start with the tax code without any reductions and then only add back deductions, such as exclusion of capital gains on home sales, if the benefits outweigh the complexity of the provision. The idea is to have a simpler compliance mechanism and use tax is for collecting ...

Yesterday, the 115th Congress convened.The Republicans are in charge of both the House and Senate and there is been a lot of talk about tax reduction and "tax reform". Does this mean we will get tax simplification? Since President Reagan signed the Internal Revenue Code of 1986, there have been more than 30,000 changes, excluding Obama care. The fact is the Internal Revenue Code is ridiculously complex and far too much time and money spent in our society both by individuals and businesses in complying and planning for our burdensome tax laws. There definitely will be a push to lower corporate tax rates. This is good but let's also simplify our business tax structure. Even more unnecessary and confusing is the personal side of the Internal Revenue Code. For example the alternative minimum tax, designed to force a few wealthy millionaires of the late 1960s to pay tax, has now resulted in more than 1/4 of the middle class paying this burdensome tax. The AMT must go! Th...