tag:blogger.com,1999:blog-53645022024-02-18T21:37:10.146-05:00TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)WebSite:http:// www.TaxEsq.com (856) 665-2121
Tax and Business law information. IRS audits. Small Business Tax Audits. IRS tax collections. IRS bank levy. IRS wage execution. Offer in Compromise. IRS Installment Agreement. New Jersey Sales Tax. NJ tax audit.
LLC formation. Set-up LLC, Corporation PartnershipAnonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comBlogger459125tag:blogger.com,1999:blog-5364502.post-17616647132755366062018-10-22T11:28:00.001-04:002018-10-22T11:28:39.329-04:00<h2 style="font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
Selling your business? Defer — and possibly reduce — tax with an installment sale</h2>
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You’ve spent years building your company and now are ready to move on to something else, whether launching a new business, taking advantage of another career opportunity or retiring. Whatever your plans, you want to get the return from your business that you’ve earned from all of the time and money you’ve put into it.<br />
That means not only getting a good price, but also minimizing the tax hit on the proceeds. One option that can help you defer tax and perhaps even reduce it is an installment sale.<br />
<strong>Tax benefits</strong><br />
With an installment sale, you don’t receive a lump sum payment when the deal closes. Instead, you receive installment payments over a period of time, spreading the gain over a number of years.<br />
This generally defers tax, because you pay most of the tax liability as you receive the payments. Usually tax deferral is beneficial, but it could be especially beneficial if it would allow you to stay under the thresholds for triggering the 3.8% net investment income tax (NIIT) or the 20% long-term capital gains rate.<br />
For 2018, taxpayers with modified adjusted gross income (MAGI) over $200,000 per year ($250,000 for married filing jointly and $125,000 for married filing separately) will owe NIIT on some or all of their investment income. And the 20% long-term capital gains rate kicks in when 2018 taxable income exceeds $425,800 for singles, $452,400 for heads of households and $479,000 for joint filers (half that for separate filers).<br />
<strong>Other benefits</strong><br />
An installment sale also might help you close a deal or get a better price for your business. For instance, an installment sale might appeal to a buyer that lacks sufficient cash to pay the price you’re looking for in a lump sum.<br />
Or a buyer might be concerned about the ongoing success of your business without you at the helm or because of changing market or other economic factors. An installment sale that includes a contingent amount based on the business’s performance might be the solution.<br />
<strong>Tax risks</strong><br />
An installment sale isn’t without tax risk for sellers. For example, depreciation recapture must be reported as gain in the year of sale, no matter how much cash you receive. So you could owe tax that year without receiving enough cash proceeds from the sale to pay the tax. If depreciation recapture is an issue, be sure you have cash from another source to pay the tax.<br />
It’s also important to keep in mind that, if tax rates increase, the overall tax could end up being more. With tax rates currently quite low historically, there might be a greater chance that they could rise in the future. Weigh this risk carefully against the potential benefits of an installment sale.<br />
<strong>Pluses and minuses</strong><br />
As you can see, installment sales have both pluses and minuses. To determine whether one is right for you and your business — and find out about other tax-smart options — please contact me at 856-665-2121<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-22022143334049723802018-10-15T12:30:00.000-04:002018-10-15T12:30:19.275-04:00Business Expenses unde Tax Reform<h2 style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
Now’s the time to review your business expenses</h2>
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As we approach the end of the year, it’s a good idea to review your business’s expenses for deductibility. At the same time, consider whether your business would benefit from accelerating certain expenses into this year.</div>
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Be sure to evaluate the impact of the Tax Cuts and Jobs Act (TCJA), which reduces or eliminates many deductions. In some cases, it may be necessary or desirable to change your expense and reimbursement policies.</div>
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<strong>What’s deductible, anyway?</strong></div>
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There’s no master list of deductible business expenses in the Internal Revenue Code (IRC). Although some deductions are expressly authorized or excluded, most are governed by the general rule of IRC Sec. 162, which permits businesses to deduct their “ordinary and necessary” expenses.</div>
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An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your business. (It need not be indispensable.) Even if an expense is ordinary and necessary, it may not be deductible if the IRS considers it lavish or extravagant.</div>
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<strong>What did the TCJA change?</strong></div>
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The TCJA contains many provisions that affect the deductibility of business expenses. Significant changes include these deductions:</div>
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<strong>Meals and entertainment. </strong>The act eliminates most deductions for entertainment expenses, but retains the 50% deduction for business meals. What about business meals provided in connection with nondeductible entertainment? In a recent notice, the IRS clarified that such meals continue to be 50% deductible, provided they’re purchased separately from the entertainment or their cost is separately stated on invoices or receipts.</div>
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<strong>Transportation. </strong>The act eliminates most deductions for qualified transportation fringe benefits, such as parking, vanpooling and transit passes. This change may lead some employers to discontinue these benefits, although others will continue to provide them because 1) they’re a valuable employee benefit (they’re still tax-free to employees) or 2) they’re required by local law.</div>
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<strong>Employee expenses. </strong>The act suspends employee deductions for unreimbursed job expenses — previously treated as miscellaneous itemized deductions — through 2025. Some businesses may want to implement a reimbursement plan for these expenses. So long as the plan meets IRS requirements, reimbursements are deductible by the business and tax-free to employees.</div>
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<strong>Need help?</strong></div>
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The deductibility of certain expenses, such as employee wages or office supplies, is obvious. In other cases, it may be necessary to consult IRS rulings or court cases for guidance. For assistance, please contact me at (856) 665-2121.</div>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-18741086926446175082018-10-12T10:57:00.001-04:002018-10-12T10:57:30.793-04:002018 Year-End Tax Planning<h3>
Year-End Tax Planning - 2018</h3>
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Year-end planning for 2018 takes place against the backdrop of a new tax law — the Tax Cuts and Jobs Act — that make major changes in the tax rules for individuals and businesses. For individuals, there are new, lower income tax rates, a substantially increased standard deduction, severely limited itemized deductions and no personal exemptions, an increased child tax credit, and a watered-down alternative minimum tax (AMT), among many other changes. For businesses, the corporate tax rate is cut to 21%, the corporate AMT is gone, there are new limits on business interest deductions, and significantly liberalized expensing and depreciation rules. And there's a new deduction for non-corporate taxpayers with qualified business income from pass-through entities.<br />
We have compiled a checklist of actions based on current tax rules that may help you save tax dollars if you act before year-end. Not all actions will apply in your particular situation, but you (or a family member) will likely benefit from many of them. We can narrow down the specific actions that you can take once we meet with you to tailor a particular plan. In the meantime, please review the following list and contact us at your earliest convenience so that we can advise you on which tax-saving moves to make:<br />
<strong>Year-End Tax Planning Moves for Individuals</strong> <br />
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<li>Higher-income earners must be wary of the 3.8% surtax on certain unearned income. The surtax is 3.8% of the lesser of: <br /><br />
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<li>Net investment income (NII), or</li>
<li>The excess of modified adjusted gross income (MAGI) over a threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 in any other case).</li>
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As year-end nears, a taxpayer's approach to minimizing or eliminating the 3.8% surtax will depend on his estimated MAGI and NII for the year. Some taxpayers should consider ways to minimize (e.g., through deferral) additional NII for the balance of the year, others should try to see if they can reduce MAGI other than NII, and other individuals will need to consider ways to minimize both NII and other types of MAGI.</li>
<li>The 0.9% additional Medicare tax also may require higher-income earners to take year-end actions. It applies to individuals for whom the sum of their wages received with respect to employment and their self-employment income is in excess of an unindexed threshold amount ($250,000 for joint filers, $125,000 for married couples filing separately, and $200,000 in any other case). Employers must withhold the additional Medicare tax from wages in excess of $200,000 regardless of filing status or other income. Self-employed persons must take it into account in figuring estimated tax. There could be situations where an employee may need to have more withheld toward the end of the year to cover the tax. For example, if an individual earns $200,000 from one employer during the first half of the year and a like amount from another employer during the balance of the year, he or she would owe the additional Medicare tax, but there would be no withholding by either employer for the additional Medicare tax since wages from each employer don't exceed $200,000.</li>
<li>Long-term capital gain from sales of assets held for over one year is taxed at 0%, 15% or 20%, depending on the taxpayer's taxable income. The 0% rate generally applies to the excess of long-term capital gain over any short term capital loss to the extent that it, when added to regular taxable income, is not more than the "maximum zero rate amount" (e.g., $77,200 for a married couple). If the 0% rate applies to long-term capital gains you took earlier this year—for example, you are a joint filer who made a profit of $5,000 on the sale of stock bought in 2009, and other taxable income for 2018 is $70,000—then before year-end, try not to sell assets yielding a capital loss because the first $5,000 of such losses won't yield a benefit this year. And if you hold long-term appreciated-in-value assets, consider selling enough of them to generate long-term capital gains sheltered by the 0% rate.</li>
<li>Postpone income until 2019 and accelerate deductions into 2018 if doing so will enable you to claim larger deductions, credits, and other tax breaks for 2018 that are phased out over varying levels of adjusted gross income (AGI). These include deductible IRA contributions, child tax credits, higher education tax credits, and deductions for student loan interest. Postponing income also is desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income into 2018. For example, that may be the case where a person will have a more favorable filing status this year than next (e.g., head of household versus individual filing status), or expects to be in a higher tax bracket next year.</li>
<li>If you believe a Roth IRA is better than a traditional IRA, consider converting traditional-IRA money invested in beaten-down stocks (or mutual funds) into a Roth IRA if eligible to do so. Keep in mind, however, that such a conversion will increase your AGI for 2018, and possibly reduce tax breaks geared to AGI (or modified AGI).</li>
<li>It may be advantageous to try to arrange with your employer to defer, until early 2019, a bonus that may be coming your way. This could cut as well as defer your tax.</li>
<li>Beginning in 2018, many taxpayers who claimed itemized deductions year after year will no longer be able to do so. That's because the basic standard deduction has been increased (to $24,000 for joint filers, $12,000 for singles, $18,000 for heads of household, and $12,000 for marrieds filing separately), and many itemized deductions have been cut back or abolished. No more than $10,000 of state and local taxes may be deducted; miscellaneous itemized deductions (e.g., tax preparation fees) and unreimbursed employee expenses are no longer deductible; and personal casualty and theft losses are deductible only if they're attributable to a federally declared disaster and only to the extent the $100-per-casualty and 10%-of-AGI limits are met. You can still itemize medical expenses to the extent they exceed 7.5% of your adjusted gross income, state and local taxes up to $10,000, your charitable contributions, plus interest deductions on a restricted amount of qualifying residence debt, but payments of those items won't save taxes if they don't cumulatively exceed the new, higher standard deduction.</li>
<li>Some taxpayers may be able to work around the new reality by applying a "bunching strategy" to pull or push discretionary medical expenses and charitable contributions into the year where they will do some tax good. For example, if a taxpayer knows he or she will be able to itemize deductions this year but not next year, the taxpayer may be able to make two years' worth of charitable contributions this year, instead of spreading out donations over 2018 and 2019.</li>
<li>Consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase your 2018 deductions even if you don't pay your credit card bill until after the end of the year.</li>
<li>If you expect to owe state and local income taxes when you file your return next year and you will be itemizing in 2018, consider asking your employer to increase withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2018. But remember that state and local tax deductions are limited to $10,000 per year, so this strategy is not a good one if to the extent it causes your 2018 state and local tax payments to exceed $10,000.</li>
<li>Take required minimum distributions (RMDs) from your IRA or 401(k) plan (or other employer-sponsored retirement plan). RMDs from IRAs must begin by April 1 of the year following the year you reach age 70-½. (That start date also applies to company plans, but non-5% company owners who continue working may defer RMDs until April 1 following the year they retire.) Failure to take a required withdrawal can result in a penalty of 50% of the amount of the RMD not withdrawn. Thus, if you turn age 70-½ in 2018, you can delay the first required distribution to 2019, but if you do, you will have to take a double distribution in 2019-the amount required for 2018 plus the amount required for 2019. Think twice before delaying 2018 distributions to 2019, as bunching income into 2019 might push you into a higher tax bracket or have a detrimental impact on various income tax deductions that are reduced at higher income levels. However, it could be beneficial to take both distributions in 2019 if you will be in a substantially lower bracket that year.</li>
<li>If you are age 70-½ or older by the end of 2018, have traditional IRAs, and particularly if you can't itemize your deductions, consider making 2018 charitable donations via qualified charitable distributions from your IRAs. Such distributions are made directly to charities from your IRAs, and the amount of the contribution is neither included in your gross income nor deductible on Schedule A, Form 1040. But the amount of the qualified charitable distribution reduces the amount of your required minimum distribution, resulting in tax savings.</li>
<li>If you were younger than age 70-½ at the end of 2018, you anticipate that in the year that you turn 70-½ and/or in later years you will not itemize your deductions, and you don't have any traditional IRAs, establish and contribute as much as you can to one or more traditional IRAs in 2018. If the immediately previous sentence applies to you, except that you already have one or more traditional IRAs, make maximum contributions to one or more traditional IRAs in 2018. Then, when you reach age 70-½, do the steps in the immediately preceding bullet point. Doing all of this will allow you to, in effect, convert nondeductible charitable contributions that you make in the year you turn 70-½ and later years, into deductible-in-2018 IRA contributions and reductions of gross income from age 70-½ and later year distributions from the IRAs.</li>
<li>Take an eligible rollover distribution from a qualified retirement plan before the end of 2018 if you are facing a penalty for underpayment of estimated tax and having your employer increase your withholding is unavailable or won't sufficiently address the problem. Income tax will be withheld from the distribution and will be applied toward the taxes owed for 2018. You can then timely roll over the gross amount of the distribution, i.e., the net amount you received plus the amount of withheld tax, to a traditional IRA. No part of the distribution will be includible in income for 2018, but the withheld tax will be applied pro rata over the full 2018 tax year to reduce previous underpayments of estimated tax.</li>
<li>Consider increasing the amount you set aside for next year in your employer's health flexible spending account (FSA) if you set aside too little for this year.</li>
<li>If you become eligible in December of 2018 to make health savings account (HSA) contributions, you can make a full year's worth of deductible HSA contributions for 2018.</li>
<li>Make gifts sheltered by the annual gift tax exclusion before the end of the year and thereby save gift and estate taxes. The exclusion applies to gifts of up to $15,000 made in 2018 to each of an unlimited number of individuals. You can't carry over unused exclusions from one year to the next. Such transfers may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax.</li>
<li>If you were in an area affected by Hurricane Florence or any other federally declared disaster area, and you suffered uninsured or unreimbursed disaster-related losses, keep in mind you can choose to claim them on either the return for the year the loss occurred (in this instance, the 2018 return normally filed next year), or the return for the prior year (2017).</li>
<li>If you were in an area affected by Hurricane Florence or any other federally declared disaster area, you may want to settle an insurance or damage claim in 2018 in order to maximize your casualty loss deduction this year.</li>
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<strong>Year-End Tax-Planning Moves for Businesses & Business Owners</strong> <br />
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<li>For tax years beginning after 2017, taxpayers other than corporations may be entitled to a deduction of up to 20% of their qualified business income. For 2018, if taxable income exceeds $315,000 for a married couple filing jointly, or $157,500 for all other taxpayers, the deduction may be limited based on whether the taxpayer is engaged in a service-type trade or business (such as law, accounting, health, or consulting), the amount of W-2 wages paid by the trade or business, and/or the unadjusted basis of qualified property (such as machinery and equipment) held by the trade or business. The limitations are phased in for joint filers with taxable income between $315,000 and $415,000 and for all other taxpayers with taxable income between $157,500 and $207,500.</li>
<li>Taxpayers may be able to achieve significant savings by deferring income or accelerating deductions so as to come under the dollar thresholds (or be subject to a smaller phaseout of the deduction) for 2018. Depending on their business model, taxpayers also may be able increase the new deduction by increasing W-2 wages before year-end. The rules are quite complex, so don't make a move in this area without consulting your tax adviser.</li>
<li>More "small businesses" are able to use the cash (as opposed to accrual) method of accounting in 2018 and later years than were allowed to do so in earlier years. To qualify as a "small business" a taxpayer must, among other things, satisfy a gross receipts test. Effective for tax years beginning after Dec. 31, 2017, the gross-receipts test is satisfied if, during a three-year testing period, average annual gross receipts don't exceed $25 million (the dollar amount used to be $5 million). Cash method taxpayers may find it a lot easier to shift income, for example by holding off billings till next year or by accelerating expenses, for example, paying bills early or by making certain prepayments.</li>
<li>Businesses should consider making expenditures that qualify for the liberalized business property expensing option. For tax years beginning in 2018, the expensing limit is $1,000,000, and the investment ceiling limit is $2,500,000. Expensing is generally available for most depreciable property (other than buildings), and off-the-shelf computer software. For property placed in service in tax years beginning after Dec. 31, 2017, expensing also is available for qualified improvement property (generally, any interior improvement to a building's interior, but not for enlargement of a building, elevators or escalators, or the internal structural framework), for roofs, and for HVAC, fire protection, alarm, and security systems. The generous dollar ceilings that apply this year mean that many small and medium sized businesses that make timely purchases will be able to currently deduct most if not all their outlays for machinery and equipment. What's more, the expensing deduction is not prorated for the time that the asset is in service during the year. The fact that the expensing deduction may be claimed in full (if you are otherwise eligible to take it) regardless of how long the property is held during the year can be a potent tool for year-end tax planning. Thus, property acquired and placed in service in the last days of 2018, rather than at the beginning of 2019, can result in a full expensing deduction for 2018.</li>
<li>Businesses also can claim a 100% bonus first year depreciation deduction for machinery and equipment—bought used (with some exceptions) or new—if purchased and placed in service this year. The 100% writeoff is permitted without any proration based on the length of time that an asset is in service during the tax year. As a result, the 100% bonus first-year writeoff is available even if qualifying assets are in service for only a few days in 2018.</li>
<li>Businesses may be able to take advantage of the de minimis safe harbor election (also known as the book-tax conformity election) to expense the costs of lower-cost assets and materials and supplies, assuming the costs don't have to be capitalized under the Code Sec. 263A uniform capitalization (UNICAP) rules. To qualify for the election, the cost of a unit of property can't exceed $5,000 if the taxpayer has an applicable financial statement (AFS; e.g., a certified audited financial statement along with an independent CPA's report). If there's no AFS, the cost of a unit of property can't exceed $2,500. Where the UNICAP rules aren't an issue, consider purchasing such qualifying items before the end of 2018.</li>
<li>A corporation (other than a "large" corporation) that anticipates a small net operating loss (NOL) for 2018 (and substantial net income in 2019) may find it worthwhile to accelerate just enough of its 2019 income (or to defer just enough of its 2018 deductions) to create a small amount of net income for 2018. This will permit the corporation to base its 2019 estimated tax installments on the relatively small amount of income shown on its 2018 return, rather than having to pay estimated taxes based on 100% of its much larger 2019 taxable income.</li>
<li>To reduce 2018 taxable income, consider deferring a debt-cancellation event until 2019.</li>
<li>To reduce 2018 taxable income, consider disposing of a passive activity in 2018 if doing so will allow you to deduct suspended passive activity losses.</li>
</ul>
These are just some of the year-end steps that can be taken to save taxes. Again, by contacting us, we can tailor a particular plan that will work best for you.<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-25963909737115951552018-10-08T11:11:00.001-04:002018-10-08T11:11:52.806-04:00Tax-Free Employee Benefits<div style="color: #005da2; text-transform: uppercase;">
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Tax-free fringe benefits help small businesses and their employees</h2>
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In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options.<br />
<strong>Insurance</strong><br />
Businesses can provide their employees with various types of insurance on a tax-free basis. Here are some of the most common:<br />
<strong>Health insurance.</strong> If you maintain a health care plan for employees, coverage under the plan isn’t taxable to them. Employee contributions are excluded from income if pretax coverage is elected under a cafeteria plan. Otherwise, such amounts are included in their wages but may be deductible on a limited basis as an itemized deduction.<br />
<strong>Disability insurance.</strong> Your premium payments aren’t included in employees’ income, nor are your contributions to a trust providing disability benefits. Employees’ premium payments (or other contributions to the plan) generally aren’t deductible by them or excludable from their income. However, they can make pretax contributions to a cafeteria plan for disability benefits, which are excludable from their income.<br />
<strong>Long-term care insurance.</strong> Your premium payments aren’t taxable to employees. However, long-term care insurance can’t be provided through a cafeteria plan.<br />
<strong>Life insurance.</strong> Your employees generally can exclude from gross income premiums you pay on up to $50,000 of qualified group term life insurance coverage. Premiums you pay for qualified coverage exceeding $50,000 are taxable to the extent they exceed the employee’s coverage contributions.<br />
<strong>Other types of tax-advantaged benefits</strong><br />
Insurance isn’t the only type of tax-free benefit you can provide — but the tax treatment of certain benefits has changed under the Tax Cuts and Jobs Act:<br />
<strong>Dependent care assistance.</strong> You can provide employees with tax-free dependent care assistance up to $5,000 for 2018 through a dependent care Flexible Spending Account (FSA), also known as a Dependent Care Assistance Program (DCAP).<br />
<strong>Adoption assistance.</strong> For employees who’re adopting children, you can offer an employee adoption assistance program. Employees can exclude from their taxable income up to $13,810 of adoption benefits in 2018.<br />
<strong>Educational assistance.</strong> You can help employees on a tax-free basis through educational assistance plans (up to $5,250 per year), job-related educational assistance and qualified scholarships.<br />
<strong>Moving expense reimbursement.</strong> Before the TCJA, if you reimbursed employees for qualifying job-related moving expenses, the reimbursement could be excluded from the employee’s income. The TCJA suspends this break for 2018 through 2025. However, such reimbursements may still be deductible by your business.<br />
<strong>Transportation benefits.</strong> Qualified employee transportation fringe benefits, such as parking allowances, mass transit passes and vanpooling, are tax-free to recipient employees. However, the TCJA suspends through 2025 the business deduction for providing such benefits. It also suspends the tax-free benefit of up to $20 a month for bicycle commuting.<br />
<strong>Varying tax treatment</strong><br />
As you can see, the tax treatment of fringe benefits varies. Contact me at (856) 665-2121 for more information.<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-59233168819178710232018-10-01T12:30:00.000-04:002018-10-01T12:30:44.719-04:00Cost Segregation Study helps lower taxes<h2 style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
Could a cost segregation study help you accelerate depreciation deductions?</h2>
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Businesses that acquire, construct or substantially improve a building — or did so in previous years — should consider a cost segregation study. It may allow you to accelerate depreciation deductions, thus reducing taxes and boosting cash flow. And the potential benefits are now even greater due to enhancements to certain depreciation-related breaks under the Tax Cuts and Jobs Act (TCJA).</div>
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<strong>Real property vs. tangible personal property</strong></div>
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IRS rules generally allow you to depreciate commercial buildings over 39 years (27½ years for residential properties). Most times, you’ll depreciate a building’s structural components — such as walls, windows, HVAC systems, elevators, plumbing, and wiring — along with the building. Personal property — such as equipment, machinery, furniture, and fixtures — is eligible for accelerated depreciation, usually over five or seven years. And land improvements — fences, outdoor lighting and parking lots, for example — are depreciable over 15 years.<br />
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<b>Too often, businesses allocate all or most of a building’s acquisition or construction costs to real property, overlooking opportunities to allocate costs to shorter-lived personal property or land improvements.</b> In some cases — computers or furniture, for instance — the distinction between real and personal property is obvious. But often the line between the two is less clear. Items that appear to be part of a building may, in fact, be personal property, like a removable wall and floor coverings, removable partitions, awnings and canopies, window treatments, signs, and decorative lighting.<br />
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In addition, certain items that otherwise would be treated as real property may qualify as personal property if they serve more of a business function than a structural purpose. This includes reinforced flooring to support heavy manufacturing equipment, electrical or plumbing installations required to operate specialized equipment or dedicated cooling systems for data processing rooms.</div>
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A cost segregation study combines accounting and engineering techniques to identify building costs that are properly allocable to tangible personal property rather than real property. Although the relative costs and benefits of a cost segregation study depend on your particular facts and circumstances, it can be a valuable investment.<br />
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<strong>Depreciation break enhancements</strong></div>
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Last year’s TCJA enhances certain depreciation-related tax breaks, which may also enhance the benefits of a cost segregation study. Among other things, the act permanently increased limits on Section 179 expensing. Sec. 179 allows you to immediately deduct the entire cost of qualifying equipment or other fixed assets up to specified thresholds.<br />
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The TCJA also expanded 15-year-property treatment to apply to qualified improvement property. Previously this break was limited to qualified leasehold-improvement, retail-improvement, and restaurant property. And it temporarily increased first-year bonus depreciation to 100% (from 50%).<br />
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<strong>Assess the potential savings</strong></div>
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Cost segregation studies may yield substantial benefits, but they’re not right for every business. To find out whether a study would be worthwhile for yours, call me at (856) 665-2121 for help assessing the potential tax savings.</div>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-30892878956713046762018-09-28T12:24:00.004-04:002018-09-28T12:24:57.652-04:00Passport Denials For Past Due Taxes<h3>
State Department denying passports!<br /><br />Under President Obama's urging, Congress in 2015 passed a nefarious law denying passports to taxpayers owing $50,000 or more To the IRS. The State Department is now issuing letters denying passports to individuals owing taxes.<br />
<br />
If you owe taxes to the IRS you need to immediately contact a tax attorney to fight the issue to prevent losing your existing passport were being denied a passport renewal!<br /><br />Here is a letter issued this week from the State Department:<br /><br /></h3>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjI7lRlpqjcl6g8wAadqGcpFn2T_Gv89C2874k4XLsvREYBnYXTENdfqln2QGM2sETO9Q7a88iEzFPyFVewlAWtKuIiHwfGQcTm6T2SeJUuy_tEWXCmavA53ohYf4uBF6HROik7/s1600/Passport+Denial+Letter.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1600" data-original-width="1243" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjI7lRlpqjcl6g8wAadqGcpFn2T_Gv89C2874k4XLsvREYBnYXTENdfqln2QGM2sETO9Q7a88iEzFPyFVewlAWtKuIiHwfGQcTm6T2SeJUuy_tEWXCmavA53ohYf4uBF6HROik7/s320/Passport+Denial+Letter.jpg" width="248" /></a></div>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-67259056926194314922018-09-24T11:11:00.001-04:002018-09-24T11:11:33.363-04:00Business Identity Theft<h2 style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
Businesses aren’t immune to tax identity theft</h2>
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<img src="https://www.checkpointmarketing.net/docs/09_24_18_585781404_SBTB_560x292.jpg" /></div>
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Tax identity theft may seem like a problem only for individual taxpayers. But, according to the IRS, increasingly businesses are also becoming victims. And identity thieves have become more sophisticated, knowing filing practices, the tax code and the best ways to get valuable data.<br />
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<strong>How it works</strong></div>
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In tax identity theft, a taxpayer’s identifying information (such as Social Security number) is used to fraudulently obtain a refund or commit other crimes. <em>Business</em> tax identity theft occurs when a criminal uses the identifying information of a business to obtain tax benefits or to enable individual tax identity theft schemes.<br />
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<b style="color: #666666;">For example, a thief could use an Employer Identification Number (EIN) to file a fraudulent business tax return and claim a refund.</b><span style="color: #666666;"> Or a</span><span style="color: red;"><i><b> fraudster may report income and withholding for fake employees on false W-2 forms. Then, he or she can file fraudulent individual tax returns for these “employees” to claim refunds.</b></i></span></div>
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The consequences can include significant dollar amounts, lost time sorting out the mess and damage to your reputation.<br />
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<strong>Red flags</strong></div>
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There are some red flags that indicate possible tax identity theft. For example, your business’s identity may have been compromised if:</div>
<ul style="background-color: white; font-family: arial, helvetica, sans-serif; font-size: 14px;">
<li style="color: #666666; padding-bottom: 8px;">Your business doesn’t receive expected or routine mailings from the IRS,</li>
<li style="color: #666666; padding-bottom: 8px;">You receive an IRS notice that doesn’t relate to anything your business submitted, that’s about fictitious employees or that’s related to a defunct, closed or dormant business after all account balances have been paid,</li>
<li style="padding-bottom: 8px;"><span style="color: red;">The IRS rejects an e-filed return or an extension-to-file request, saying it already has a return with that identification number — or the IRS accepts it as an <em>amended</em> return,</span></li>
<li style="color: #666666; padding-bottom: 8px;">You receive an IRS letter stating that more than one tax return has been filed in your business’s name, or</li>
<li style="color: #666666; padding-bottom: 0px;">You receive a notice from the IRS that you have a balance due when you haven’t yet filed a return.</li>
</ul>
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Keep in mind, though, that some of these could be the result of a simple error, such as an inadvertent transposition of numbers. Nevertheless, you should contact the IRS immediately if you receive any notices or letters from the agency that you believe might indicate that someone has fraudulently used your Employer Identification Number.<br />
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<strong>Prevention tips</strong></div>
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Businesses should take steps such as the following to protect their own information as well as that of their employees:</div>
<ul style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; font-size: 14px;">
<li style="padding-bottom: 8px;">Provide training to accounting, human resources and other employees to educate them on the latest tax fraud schemes and how to spot phishing emails.</li>
<li style="padding-bottom: 8px;">Use secure methods to send W-2 forms to employees.</li>
<li style="padding-bottom: 0px;">Implement risk management strategies designed to flag suspicious communications.</li>
</ul>
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Of course, identity theft can go beyond tax identity theft, so be sure to have a comprehensive plan in place to protect the data of your business, your employees and your customers. If you’re concerned your business has become a victim, or you have questions about prevention, please contact me</div>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-55843116841895401702018-09-21T21:24:00.000-04:002018-09-21T21:24:24.038-04:00Medical Expense Tax Issues<img src="https://www.checkpointmarketing.net/docs/IFF_Medical_Expenses_628x1425.jpg" /><div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-7155962959422845622018-09-17T10:21:00.001-04:002018-09-17T10:21:55.109-04:00Reimbursing Employees for Business Expenses<h2 style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
Be sure your employee travel expense reimbursements will pass muster with the IRS</h2>
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<img src="https://www.checkpointmarketing.net/docs/09_17_18_616133094_SBTB_560x292.jpg" /></div>
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Does your business reimburse employees’ work-related travel expenses? If you do, you know that it can help you attract and retain employees. If you don’t, you might want to start, because changes under the Tax Cuts and Jobs Act (TCJA) make such reimbursements even more attractive to employees. Travel reimbursements also come with tax benefits, but only if you follow a method that passes muster with the IRS.</div>
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<strong><br /></strong>
<strong>The TCJA’s impact</strong><br />
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<b>Before the TCJA</b>, unreimbursed work-related travel expenses generally were deductible on an employee’s individual tax return (subject to a 50% limit for meals and entertainment) as a miscellaneous itemized deduction. However, many employees weren’t able to benefit from the deduction because either they didn’t itemize deductions or they didn’t have enough miscellaneous itemized expenses to exceed the 2% of adjusted gross income (AGI) floor that applied.<br />
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<b>For 2018 through 2025, the TCJA suspends miscellaneous itemized deductions subject to the 2% of AGI floor. That means even employees who itemize deductions and have enough expenses that they would exceed the floor won’t be able to enjoy a tax deduction for business travel. Therefore, business travel expense reimbursements are now more important to employees.</b><br />
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<strong>The potential tax benefits</strong><br />
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Your business can deduct qualifying reimbursements, and they’re excluded from the employee’s taxable income. The deduction is subject to a 50% limit for meals. But, under the TCJA, <i><b>entertainment expenses are no longer deductible. That means your business does not get a deduction for entertainment expenses even if you reimburse an employee.</b></i><br />
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To be deductible and excludable, travel expenses must be legitimate business expenses and the reimbursements must comply with IRS rules. You can use either an accountable plan or the per diem method to ensure compliance.<br />
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<strong>Reimbursing actual expenses</strong><br />
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An accountable plan is a <b>formal arrangement</b> to advance, reimburse or provide allowances for business expenses. To qualify as “accountable,” your plan must meet the following criteria:</div>
<ul style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; font-size: 14px;">
<li style="padding-bottom: 8px;">Payments must be for “ordinary and necessary” business expenses.</li>
<li style="padding-bottom: 8px;">Employees must substantiate these expenses — including amounts, times and places — ideally at least monthly.</li>
<li style="padding-bottom: 0px;">Employees must return any advances or allowances they can’t substantiate within a reasonable time, typically 120 days.</li>
</ul>
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<span style="color: #666666; font-family: arial, helvetica, sans-serif;"><span style="font-size: 14px;"><b>Note: A plan can be as simple as a page outlining what is reimbursed and how. It does not have to be a fancy and complicated plan!</b></span></span></div>
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The IRS will treat plans that fail to meet these conditions as nonaccountable, transforming all reimbursements into wages taxable to the employee, subject to income taxes (employee) and employment taxes (employer and employee).<br />
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<strong>Keeping it simple</strong></div>
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With the per diem method, instead of tracking actual expenses, you use IRS tables to determine reimbursements for lodging, meals and incidental expenses, or just for meals and incidental expenses, based on location. (If you don’t go with the per diem method for lodging, you’ll need receipts to substantiate those expenses.)<br />
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Be sure you don’t pay employees <em>more </em>than the appropriate per diem amount. The IRS imposes heavy penalties on businesses that routinely overpay per diems.<br />
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<strong>What’s right for your business?</strong></div>
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To learn more about business travel expense deductions and reimbursements post-TCJA, contact us. Call me at (856) 665-2121 and I can help you determine whether you should reimburse such expenses and which reimbursement option is better for you.</div>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-90714041161998049272018-09-10T15:11:00.003-04:002018-09-10T15:11:44.047-04:002018 Q4 tax calendar: Key deadlines for businesses and other employers<h2 style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
2018 Q4 tax calendar: Key deadlines for businesses and other employers</h2>
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<img src="https://www.checkpointmarketing.net/docs/09_10_18_865411160_SBTB_560x292.jpg" /></div>
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Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.</div>
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<strong>October 15</strong></div>
<ul style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; font-size: 14px;">
<li style="padding-bottom: 0px;">If a calendar-year C corporation that filed an automatic six-month extension:<ul>
<li style="padding-bottom: 8px; padding-top: 7px;">File a 2017 income tax return (Form 1120) and pay any tax, interest and penalties due.</li>
<li style="padding-bottom: 0px;">Make contributions for 2017 to certain employer-sponsored retirement plans.</li>
</ul>
</li>
</ul>
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<strong>October 31</strong></div>
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<li style="padding-bottom: 0px;">Report income tax withholding and FICA taxes for third quarter 2018 (Form 941) and pay any tax due. (See exception below under “November 13.”)</li>
</ul>
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<strong>November 13</strong></div>
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<li style="padding-bottom: 0px;">Report income tax withholding and FICA taxes for third quarter 2018 (Form 941), if you deposited on time and in full all of the associated taxes due.</li>
</ul>
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<strong>December 17</strong></div>
<ul style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; font-size: 14px;">
<li style="padding-bottom: 0px;">If a calendar-year C corporation, pay the fourth installment of 2018 estimated income taxes</li>
</ul>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-59784823639369943462018-08-27T11:01:00.001-04:002018-08-27T11:01:01.791-04:00Simple IRA - good for small businesses<h2 style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
Keep it SIMPLE: A tax-advantaged retirement plan solution for small businesses</h2>
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<img src="https://www.checkpointmarketing.net/docs/08_27_18_945782942_SBTB_560x292.jpg" /></div>
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If your small business doesn’t offer its employees a retirement plan, you may want to consider a SIMPLE IRA. Offering a retirement plan can provide your business with valuable tax deductions and help you attract and retain employees. For a variety of reasons, a SIMPLE IRA can be a particularly appealing option for small businesses. The deadline for setting one up for this year is October 1, 2018.</div>
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<strong>The basics</strong></div>
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SIMPLE stands for “savings incentive match plan for employees.” As the name implies, these plans are simple to set up and administer. Unlike 401(k) plans, SIMPLE IRAs don’t require annual filings or discrimination testing.</div>
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SIMPLE IRAs are available to businesses with 100 or fewer employees. Employers must contribute and employees have the option to contribute. The contributions are pretax, and accounts can grow tax-deferred like a traditional IRA or 401(k) plan, with distributions taxed when taken in retirement.</div>
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As the employer, you can choose from two contribution options:</div>
<ol style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; font-size: 14px;">
<li style="padding-bottom: 8px;"><strong>Make a “nonelective” contribution equal to 2% of compensation for all eligible employees.</strong>You must make the contribution regardless of whether the employee contributes. This applies to compensation up to the annual limit of $275,000 for 2018 (annually adjusted for inflation).</li>
<li style="padding-bottom: 0px;"><strong>Match employee contributions up to 3% of compensation.</strong> Here, you contribute only if the employee contributes. This isn’t subject to the annual compensation limit.</li>
</ol>
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Employees are immediately 100% vested in all SIMPLE IRA contributions.</div>
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<strong>Employee contribution limits</strong></div>
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Any employee who has compensation of at least $5,000 in any prior two years, and is reasonably expected to earn $5,000 in the current year, can elect to have a percentage of compensation put into a SIMPLE IRA.</div>
<div style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; font-size: 14px;">
SIMPLE IRAs offer greater income deferral opportunities than ordinary IRAs, but lower limits than 401(k)s. An employee may contribute up to $12,500 to a SIMPLE IRA in 2018. Employees age 50 or older can also make a catch-up contribution of up to $3,000. This compares to $5,500 and $1,000, respectively, for ordinary IRAs, and to $18,500 and $6,000 for 401(k)s. (Some or all of these limits may increase for 2019 under annual cost-of-living adjustments.)</div>
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<strong>You’ve got options</strong></div>
<div style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; font-size: 14px;">
A SIMPLE IRA might be a good choice for your small business, but it isn’t the only option. The more-complex 401(k) plan we’ve already mentioned is one alternative. Some others are a Simplified Employee Pension (SEP) and a defined-benefit pension plan. These two plans don’t allow employee contributions and have other pluses and minuses. Call me at (856) 665-2121 to learn more about a SIMPLE IRA or to hear about other retirement plan alternatives for your business.</div>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-26616569252386280262018-08-13T13:14:00.000-04:002018-08-13T13:14:04.048-04:00Cash vx. Accrual - what is the right accounting method?<h2 style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
Choosing the right accounting method for tax purposes</h2>
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<img src="https://www.checkpointmarketing.net/docs/08_13_18_516732937_SBTB_560x292.jpg" /></div>
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The Tax Cuts and Jobs Act (TCJA) liberalized the eligibility rules for using the cash method of accounting, making this method — which is simpler than the accrual method — available to more businesses. Now the IRS has provided procedures a small business taxpayer can use to obtain automatic consent to change its method of accounting under the TCJA. If you have the option to use either accounting method, it pays to consider whether switching methods would be beneficial.</div>
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<strong>Cash vs. accrual</strong></div>
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Generally, cash-basis businesses recognize income when it’s received and deduct expenses when they’re paid. Accrual-basis businesses, on the other hand, recognize income when it’s earned and deduct expenses when they’re incurred, without regard to the timing of cash receipts or payments.</div>
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In most cases, a business is permitted to use the cash method of accounting for tax purposes unless it’s:</div>
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<li style="padding-bottom: 8px;">Expressly <em>prohibited</em> from using the cash method, or</li>
<li style="padding-bottom: 0px;">Expressly <em>required</em> to use the accrual method.</li>
</ol>
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<strong>Cash method advantages</strong></div>
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The cash method offers several advantages, including:</div>
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<strong>Simplicity.</strong> It’s easier and cheaper to implement and maintain.</div>
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<strong>Tax-planning flexibility.</strong> It offers greater flexibility to control the timing of income and deductible expenses. For example, it allows you to defer income to next year by delaying invoices or to shift deductions into this year by accelerating the payment of expenses. An accrual-basis business doesn’t enjoy this flexibility. For example, to defer income, delaying invoices wouldn’t be enough; the business would have to put off shipping products or performing services.</div>
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<strong>Cash flow benefits.</strong> Because income is taxed in the year it’s received, the cash method does a better job of ensuring that a business has the funds it needs to pay its tax bill.</div>
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<strong>Accrual method advantages</strong></div>
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In some cases, the accrual method may offer tax advantages. For example, accrual-basis businesses may be able to use certain tax-planning strategies that aren’t available to cash-basis businesses, such as deducting year-end bonuses that are paid within the first 2½ months of the following year and deferring income on certain advance payments.</div>
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The accrual method also does a better job of matching income and expenses, so it provides a more accurate picture of a business’s financial performance. That’s why it’s required under Generally Accepted Accounting Principles (GAAP).</div>
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If your business prepares GAAP-compliant financial statements, you can still use the cash method for tax purposes. But weigh the cost of maintaining two sets of books against the potential tax benefits.</div>
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<strong>Making a change</strong></div>
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Keep in mind that cash and accrual are the two primary tax accounting methods, but they’re not the only ones. Some businesses may qualify for a different method, such as a hybrid of the cash and accrual methods.</div>
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I can work with your accountant and tax preparer to help you decide which accounting method is best for your business, </div>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-82992273415673873552018-08-10T10:45:00.003-04:002018-08-10T10:45:53.029-04:00Directors and Officers should be Insured<img src="https://www.checkpointmarketing.net/docs/IFF_DOinsurance_628x1000.jpg" /><div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-58388216985755337092018-08-07T15:06:00.001-04:002018-08-07T15:06:37.738-04:00Family Business Planning can save tax <h2 style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
An FLP can save tax in a family business succession</h2>
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One of the biggest concerns for family business owners is succession planning — transferring ownership and control of the company to the next generation. Often, the best time tax-wise to start transferring ownership is long before the owner is ready to give up control of the business.</div>
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A family limited partnership (FLP) can help owners enjoy the tax benefits of gradually transferring ownership yet allow them to retain control of the business.</div>
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<strong>How it works</strong></div>
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To establish an FLP, you transfer your ownership interests to a partnership in exchange for both general and limited partnership interests. You then transfer limited partnership interests to your children.</div>
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You retain the general partnership interest, which may be as little as 1% of the assets. But as general partner, you can still run day-to-day operations and make business decisions.</div>
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<strong>Tax benefits</strong></div>
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As you transfer the FLP interests, their value is removed from your taxable estate. What’s more, the future business income and asset appreciation associated with those interests move to the next generation.</div>
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Because your children hold limited partnership interests, they have no control over the FLP, and thus no control over the business. They also can’t sell their interests without your consent or force the FLP’s liquidation.</div>
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The lack of control and lack of an outside market for the FLP interests generally mean the interests can be valued at a discount — so greater portions of the business can be transferred before triggering gift tax. For example, if the discount is 25%, in 2018 you could gift an FLP interest equal to as much as $20,000 tax-free because the discounted value wouldn’t exceed the $15,000 annual gift tax exclusion.</div>
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To transfer interests in excess of the annual exclusion, you can apply your lifetime gift tax exemption. And 2018 may be a particularly good year to do so, because the Tax Cuts and Jobs Act raised it to a record-high $11.18 million. The exemption is scheduled to be indexed for inflation through 2025 and then drop back down to an inflation-adjusted $5 million in 2026. While Congress could extend the higher exemption, using as much of it as possible now may be tax-smart.</div>
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There also may be income tax benefits. The FLP’s income will flow through to the partners for income tax purposes. Your children may be in a lower tax bracket, potentially reducing the amount of income tax paid overall by the family.</div>
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<strong>FLP risks</strong></div>
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Perhaps the biggest downside is that the IRS scrutinizes FLPs. If it determines that discounts were excessive or that your FLP had no valid business purpose beyond minimizing taxes, it could assess additional taxes, interest and penalties.</div>
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The IRS pays close attention to how FLPs are administered. Lack of attention to partnership formalities, for example, can indicate that an FLP was set up solely as a tax-reduction strategy.</div>
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<strong>Right for you?</strong></div>
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An FLP can be an effective succession and estate planning tool, but it isn’t risk free. Please call me at (856) 665-2121 whether an FLP is right for you.</div>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-83432358539650043512018-08-01T10:40:00.002-04:002018-08-01T10:40:45.790-04:00Capital Gain Tax Rate to be adjusted by inflation?<h1>
Trump administration considers taking inflation into account when taxing capital gains</h1>
<i>As reported by Reuters:</i><br />
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The Trump administration is considering bypassing Congress to grant a $100 billion tax cut (as projected over a decade) to taxpayers by taking inflation into account when determining capital gains tax liabilities, the New York Times reported on Monday, July 30.<br />
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The 20% capital gains tax rate is currently applied to the difference between an asset's value when it is purchased and when it is sold. But the calculation does not take the effects of inflation into account, which can raise the size of the tax bill significantly depending on the inflation rate.<br />
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Quoting from an interview with Treasury Secretary Steven Mnuchin, the newspaper said the Administration could change the definition of "cost" used to calculate capital gains, allowing taxpayers to adjust the value of an asset for inflation when it is sold. "If it can't get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we'll consider that", Mnuchin was quoted by the Times as saying. "We are studying that internally, and we are also studying the economic costs and the impact on growth."<br />
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Treasury officials were not immediately available to comment on the report, which said the Administration has not concluded whether it has the authority to make such a change.<br />
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<b>Comment:</b><br />
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<i>Since the Internal Revenue Code is legislation which is required to be instituted in the House of Representatives according to the Constitution it does not seem that President Trump can make an executive order simply changing tax law. Adjusting the capital gain rate for inflation may make sense, but this can only be done by Congress.</i><div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-72066703530667098692018-07-31T16:08:00.002-04:002018-07-31T16:08:25.400-04:00Home Office Deduction after Tax Reform<h2 style="font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
Do you qualify for the home office deduction?</h2>
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Under the Tax Cuts and Jobs Act,<i><b><span style="color: red;"> employees can no longer claim the home office deduction.</span></b></i> If, however, you run a business from your home or are otherwise self-employed and use part of your home for business purposes, the home office deduction may still be available to you.<br />
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<strong>Home-related expenses</strong><br />
Homeowners know that they can claim itemized deductions for property tax and mortgage interest on their principal residences, subject to certain limits. Most other home-related expenses, such as utilities, insurance and repairs, aren’t deductible.<br />
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But if you use part of your home for business purposes, you may be entitled to deduct a portion of these expenses, as well as depreciation. Or you might be able to claim the simplified home office deduction of $5 per square foot, up to 300 square feet ($1,500).<br />
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<strong>Regular and exclusive use</strong><br />
You might qualify for the home office deduction if part of your home is used as your principal place of business “regularly and exclusively,” defined as follows:<br />
<strong>1. Regular use. </strong>You use a specific area of your home for business on a regular basis. Incidental or occasional business use is <em>not</em> regular use.<br />
<strong>2. Exclusive use.</strong> You use the specific area of your home <em>only</em> for business. It’s not necessary for the space to be physically partitioned off. But, you don’t meet the requirements if the area is used both for business and personal purposes, such as a home office that also serves as a guest bedroom.<br />
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<b><i>Regular and exclusive business use of the space isn’t, however, the only criteria.</i></b><br />
<b><i><br /></i></b> <strong>Principal place of business</strong><br />
Your home office will qualify as your principal place of business if you 1) use the space exclusively and regularly for administrative or management activities of your business, and 2) don’t have another fixed location where you conduct substantial administrative or management activities.<br />
Examples of activities that are administrative or managerial in nature include:<br />
<ul>
<li>Billing customers, clients or patients,</li>
<li>Keeping books and records,</li>
<li>Ordering supplies,</li>
<li>Setting up appointments, and</li>
<li>Forwarding orders or writing reports.</li>
</ul>
<strong>Meetings or storage</strong><br />
If your home isn’t your principal place of business, you may still be able to deduct home office expenses if you physically meet with patients, clients or customers on your premises. The use of your home must be substantial and integral to the business conducted.<br />
Alternatively, you may be able to claim the home office deduction if you have a storage area in your home — or in a separate free-standing structure (such as a studio, workshop, garage or barn) — that’s used exclusively and regularly for your business.<br />
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<strong>Valuable tax-savings</strong><br />
The home office deduction can provide a valuable tax-saving opportunity for business owners and other self-employed taxpayers who work from home. If you’re not sure whether you qualify or if you have other questions, please contact me at (856) 665-2121<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-88008485481977038812018-07-18T08:43:00.000-04:002018-07-18T08:43:03.860-04:00Hign Tax States Sue Federal Government<br />
<b>The high tax States, including New Jersey, are suing the Federal Government because of the Tax Reform Act. They are arguing the $10k cap on State and Local Taxes is somehow Unconstitutional. They will lose. There is no right to have a Federal Tax Deduction for local taxes. It would be surprising if the Courts side with the States. Here is a good article on the lawsuit from Thompson-Reuters:</b><br />
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<i>NEW YORK, (Reuters) - Four U.S. states sued the federal government on Tuesday to void the new $10,000 cap on the federal deduction for state and local taxes, included as part of the President Donald Trump's 2017 tax overhaul.</i><br />
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<i>The lawsuit by New York, Connecticut, Maryland and New Jersey came seven months after Trump signed into law the $1.5 trillion overhaul, which also lowered taxes for many wealthy Americans and slashed the corporate tax rate.</i><br />
<i>It also adds to the many legal battles between Democratic-led and -leaning states, including several that impose comparatively high taxes, and the Trump administration.</i><br />
<i>Andrew Cuomo, New York's Democratic governor, said in a statement: "The federal government is hellbent on using New York as a piggy bank to pay for corporate tax cuts and I will not stand for it".</i><br />
<i>The U.S. Department of the Treasury, which along with Treasury Secretary Steven Mnuchin is among the defendants, was not immediately available for comment.</i><br />
<i>Taxpayers had before this year enjoyed an unlimited federal deduction for state and local taxes, or the SALT deduction.</i><br />
<i>But under the cap, individuals and married taxpayers filing jointly who itemize deductions may deduct only up to $10,000 annually for state and local income, property and sales taxes.</i><br />
<i>Critics say the cap disproportionately harms high-tax states, many of which lean Democratic.</i><br />
<i>Voters in New York, Connecticut, Maryland and New Jersey favored Hillary Clinton, a Democrat, in the 2016 presidential election.</i><br />
<i>According to the lawsuit, capping the SALT deduction will force New York taxpayers alone to pay an additional $14.3 billion in federal taxes this year, and another $121 billion through 2025, when the cap is scheduled to expire.</i><br />
<i>The states said the cap will depress home prices, spending, job growth and economic growth, and impede their ability to pay for essential services such as schools, hospitals, police, and road and bridge construction and maintenance.</i><br />
<i>They also said it "effectively eviscerates" a deduction that has been on the books since 1861, and unconstitutionally intrudes on state sovereignty.</i><br />
<i>The lawsuit was filed in the U.S. District Court in Manhattan.</i><br />
<i>In May, the Treasury Department said it would propose regulations aimed at states trying to circumvent the cap.</i><br />
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<i>New York, Connecticut and New Jersey had already adopted measures allowing taxpayers to fund local governments by making deductible charitable contributions to specified funds instead of paying taxes.</i><div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-33391236283634497232018-07-17T16:47:00.000-04:002018-07-17T16:47:03.791-04:00How to Avoid the !00% (6672 VCivil Penalty) for Employment Taxes<div style="color: #005da2; text-transform: uppercase;">
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How to avoid getting hit with payroll tax penalties</h2>
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For small businesses, managing payroll can be one of the most arduous tasks. Adding to the burden earlier this year was adjusting income tax withholding based on the new tables issued by the IRS. (Those tables account for changes under the Tax Cuts and Jobs Act.) But it’s crucial not only to <em>withhold</em> the appropriate taxes — including both income tax and employment taxes — but also to <em>remit</em> them on time to the federal government.<br />
If you don’t, you, personally, could face harsh penalties. This is true even if your business is an entity that normally shields owners from personal liability, such as a corporation or limited liability company.<br />
<strong>The 100% penalty</strong><br />
Employers must withhold federal income and employment taxes (such as Social Security) as well as applicable state and local taxes on wages paid to their employees. The federal taxes must then be remitted to the federal government according to a deposit schedule.<br />
If a business makes payments late, there are escalating penalties. And if it fails to make them, the Trust Fund Recovery Penalty could apply. Under this penalty, also known as the 100% penalty, the IRS can assess the entire unpaid amount against a “responsible person.”<br />
The corporate veil won’t shield corporate owners in this instance. The liability protections that owners of corporations — and limited liability companies — typically have don’t apply to payroll tax debts.<br />
When the IRS assesses the 100% penalty, it can file a lien or take levy or seizure action against personal assets of a responsible person.<br />
<strong>“Responsible person,” defined</strong><br />
The penalty can be assessed against a shareholder, owner, director, officer or employee. In some cases, it can be assessed against a third party. The IRS can also go after more than one person. To be liable, an individual or party must:<br />
<ol>
<li>Be responsible for collecting, accounting for and remitting withheld federal taxes, and</li>
<li>Willfully fail to remit those taxes. That means intentionally, deliberately, voluntarily and knowingly disregarding the requirements of the law.</li>
</ol>
<strong>Prevention is the best medicine</strong><br />
When it comes to the 100% penalty, prevention is the best medicine. So make sure that federal taxes are being properly withheld from employees’ paychecks and are being timely remitted to the federal government. (It’s a good idea to also check state and local requirements and potential penalties.)<br />
If you aren’t already using a payroll service, consider hiring one. A good payroll service provider relieves you of the burden of withholding the proper amounts, taking care of the tax payments and handling recordkeeping. Contact us for more information.<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-20314363025785983062018-07-16T13:00:00.000-04:002018-07-16T13:00:46.735-04:00New Tax Law Qualified Business Income Dedcution<img src="https://www.checkpointmarketing.net/docs/07_16_18_497986520_SBTB_560x292.jpg" /><br />
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Close-up on the new QBI deduction’s wage limit</h2>
The Tax Cuts and Jobs Act (TCJA) provides a valuable new tax break to noncorporate owners of pass-through entities: a deduction for a portion of qualified business income (QBI). The deduction generally applies to income from sole proprietorships, partnerships, S corporations and, typically, limited liability companies (LLCs). It can equal as much as 20% of QBI. But once taxable income exceeds $315,000 for married couples filing jointly or $157,500 for other filers, a wage limit begins to phase in.<br />
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<strong>Full vs. partial phase-in</strong><br />
When the wage limit is fully phased in, at $415,000 for joint filers and $207,500 for other filers, the QBI deduction generally can’t exceed the <em>greater</em> of the owner’s share of:<br />
<ul>
<li>50% of the amount of W-2 wages paid to employees during the tax year, or</li>
<li>The sum of 25% of W-2 wages plus 2.5% of the cost of qualified business property (QBP).</li>
</ul>
When the wage limit applies but isn’t yet fully phased in, the amount of the limit is reduced and the final deduction is calculated as follows:<br />
<ol>
<li>The difference between taxable income and the applicable threshold is divided by $100,000 for joint filers or $50,000 for other filers.</li>
<li>The resulting percentage is multiplied by the difference between the gross deduction and the fully wage-limited deduction.</li>
<li>The result is subtracted from the gross deduction to determine the final deduction.</li>
</ol>
<strong>Some examples</strong><br />
Let’s say Chris and Leslie have taxable income of $600,000. This includes $300,000 of QBI from Chris’s pass-through business, which pays $100,000 in wages and has $200,000 of QBP. The gross deduction would be $60,000 (20% of $300,000), but the wage limit applies in full because the married couple’s taxable income exceeds the $415,000 top of the phase-in range for joint filers. Computing the deduction is fairly straightforward in this situation.<br />
The first option for the wage limit calculation is $50,000 (50% of $100,000). The second option is $30,000 (25% of $100,000 + 2.5% of $200,000). So the wage limit — and the deduction — is $50,000.<br />
What if Chris and Leslie’s taxable income falls <em>within</em> the phase-in range? The calculation is a bit more complicated. Let’s say their taxable income is $400,000. The full wage limit is still $50,000, but only 85% of the full limit applies:<br />
($400,000 taxable income - $315,000 threshold)/$100,000 = 85%<br />
To calculate the amount of their deduction, the couple must first calculate 85% of the difference between the gross deduction of $60,000 and the fully wage-limited deduction of $50,000:<br />
($60,000 - $50,000) × 85% = $8,500<br />
That amount is subtracted from the $60,000 gross deduction for a final deduction of $51,500.<br />
<strong>That’s not all</strong><br />
Be aware that another restriction may apply: For income from “specified service businesses,” the QBI deduction is reduced if an owner’s taxable income falls within the applicable income range and <em>eliminated </em>if income exceeds it. Please contact me at (856) 665-2121 to learn whether your business is a specified service business or if you have other questions about the QBI deduction.<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-44178647606922975822018-07-16T09:25:00.000-04:002018-07-16T09:25:03.716-04:00Back from my Cruise - Frequent Flyer Miles Not Taxable!<img src="https://www.checkpointmarketing.net/docs/IFF_FFmiles_628x860.jpg" /><div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-56663250960123529692018-07-02T14:13:00.000-04:002018-07-02T14:13:13.349-04:00Does Your Online Business Need to Collect Sales Tax><h2 style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
Does your business have to begin collecting sales tax on all out-of-state online sales?</h2>
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You’ve probably heard about the recent U.S. Supreme Court decision allowing state and local governments to impose sales taxes on more out-of-state online sales. The ruling in <em>South Dakota v. Wayfair, Inc.</em> is welcome news for brick-and-mortar retailers, who felt previous rulings gave an unfair advantage to their online competitors. And state and local governments are pleased to potentially be able to collect more sales tax.<br />
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But for businesses with out-of-state online sales that haven’t had to collect sales tax from out-of-state customers in the past, the decision brings many questions and concerns.<br />
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<strong>What the requirements used to be</strong></div>
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Even before <em>Wayfair</em>, a state could require an out-of-state business to collect sales tax from its residents on online sales if the business had a “substantial nexus” — or connection — with the state. The nexus requirement is part of the Commerce Clause of the U.S. Constitution.</div>
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Previous Supreme Court rulings had found that a <em>physical </em>presence in a state (such as retail outlets, employees or property) was necessary to establish substantial nexus within a particular State. As a result, some online retailers have already been collecting tax from out-of-state customers, while others have not had to.<br />
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<strong>What has changed</strong></div>
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In <em>Wayfair,</em> South Dakota had enacted a law requiring out-of-state retailers that made at least 200 sales or sales totaling at least $100,000 in the state to collect and remit sales tax. The Supreme Court found that the physical presence rule is “unsound and incorrect,” and that the South Dakota tax satisfies the substantial nexus requirement.<br />
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The Court said that the physical presence rule puts businesses with a physical presence at a competitive disadvantage compared with remote sellers that needn’t charge customers for taxes.</div>
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In addition, the Court found that the physical presence rule treats sellers differently for arbitrary reasons. A business with a few items of inventory in a small warehouse in a state is subject to sales tax on all of its sales in the state, while a business with a pervasive online presence but no physical presence isn’t subject to the same tax for the sales of the same items.<br />
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<strong>What the decision means</strong></div>
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<em>Wayfair</em> doesn’t necessarily mean that you must immediately begin collecting sales tax on online sales to all of your out-of-state customers. You’ll be required to collect such taxes only if the particular state requires it. Some states already have laws on the books similar to South Dakota’s, but many states will need to revise or enact legislation. Some States, such as Connecticut already have a new law requiring some online vendors to collect sales tax.<br />
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Also, keep in mind that the substantial nexus requirement isn’t the only principle in the Commerce Clause doctrine that can invalidate a state tax. The others weren’t argued in <em>Wayfair,</em> but the Court observed that South Dakota’s tax system included several features that seem designed to prevent discrimination against or undue burdens on interstate commerce, such as a prohibition against the retroactive application and a safe harbor for taxpayers who do only limited business in the state.</div>
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Note: There are many planning opportunities to limit or eliminate your company's exposure to this disastrous ruling. It requires immediate action. Please call me at 856 665-2121.</div>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-25424085700344586162018-06-25T11:01:00.000-04:002018-06-25T11:01:54.909-04:00LLC vs. C Corporation vx. S Corporation under the new Tax Cuts<h2 style="background-color: white; color: #666666; font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
Choosing the best business entity structure post-TCJA</h2>
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For tax years beginning in 2018 and beyond, the Tax Cuts and Jobs Act (TCJA) created a flat 21% federal income tax rate for C corporations. Under prior law, C corporations were taxed at rates as high as 35%. The TCJA also reduced individual income tax rates, which apply to sole proprietorships and pass-through entities, including partnerships, S corporations, and, typically, limited liability companies (LLCs). The top rate, however, dropped only slightly, from 39.6% to 37%.</div>
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<b><i>On the surface, that may make choosing C corporation structure seem like a no-brainer. But there are many other considerations involved.</i></b></div>
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<strong>Conventional wisdom</strong></div>
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Under prior tax law, conventional wisdom was that most small businesses should be set up as sole proprietorships or pass-through entities to avoid the double taxation of C corporations: A C corporation pays entity-level income tax and then shareholders pay tax on dividends — and on capital gains when they sell the stock. For pass-through entities, there’s no federal income tax at the entity level.<br />
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Although C corporations are still potentially subject to double taxation under the TCJA, their new 21% tax rate helps make up for it. This issue is further complicated, however, by another provision of the TCJA that allows noncorporate owners of pass-through entities to take a deduction equal to as much as 20% of qualified business income (QBI), subject to various limits. But, unless Congress extends it, the break is available only for tax years beginning in 2018 through 2025.<br />
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There’s no one-size-fits-all answer when deciding how to structure a business. The best choice depends on your business’s unique situation and your situation as an owner.</div>
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<strong>3 common scenarios</strong></div>
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Here are three common scenarios and the entity-choice implications:</div>
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<strong>1. Business generates tax losses.</strong> For a business that consistently generates losses, there’s no tax advantage to operating as a C corporation. Losses from C corporations can’t be deducted by their owners. A pass-through entity will generally make more sense because losses pass through to the owners’ personal tax returns.</div>
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<strong>2. Business distributes all profits to owners.</strong> For a profitable business that pays out all income to the owners, operating as a pass-through entity generally will be better if significant QBI deductions are available. If not, it’s probably a toss-up in terms of tax liability.</div>
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<strong>3. Business retains all profits to finance growth.</strong> For a business that’s profitable but holds on to its profits to fund future growth strategies, operating as a C corporation generally will be advantageous if the corporation is a qualified small business (QSB). Why? A 100% gain exclusion may be available for QSB stock sale gains. If QSB status is unavailable, operating as a C corporation is still probably preferred — unless significant QBI deductions would be available at the owner level.</div>
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<strong>Many considerations</strong></div>
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These are only some of the issues to consider when making the C corporation vs. pass-through entity choice. I can help you evaluate your options.</div>
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<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-73530919783616281232018-06-21T17:39:00.000-04:002018-06-21T17:39:02.421-04:00Sales tax Disaster for Small Online Businesses<h2>
Supreme Court issues an Opinion Allowing States to Force online US Retailers to Collect Sales Tax</h2>
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What a disaster for US online businesses! In <i>SD v. Wayfair, </i>the US Supreme Court slapped online retailers the burden of collecting Sales Tax on sales out-of-state. This means small businesses must comply with thousands of state and local sales tax rates and the different laws of each jurisdiction. This was backed by the big online companies such as Amazon, Apple, Walmart, as well as the big storefront retailers.</div>
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Compliance will be next to impossible with expensive services and will drive small US online companies out of business, jacking-up prices for consumers. The large online companies and non-US companies will have a big advantage. Starting a new online business means many people will choose a foreign entity and complicated ownership structures to remain competitive.</div>
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Poor decision!</div>
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The full case:</div>
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https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf</div>
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Newspaper Summary:</div>
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https://nypost.com/2018/06/21/supreme-court-says-states-can-force-online-shoppers-to-pay-sales-tax/</div>
<div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-19618235043308140292018-06-18T11:48:00.001-04:002018-06-18T11:48:06.173-04:00Key deadlines for businesses and other employers<h2 style="font-family: Arial, Helvetica, sans-serif; line-height: 28px;">
2018 Q3 tax calendar: Key deadlines for businesses and other employers<img src="https://www.checkpointmarketing.net/docs/06_18_18_865411160_SBTB_560x292.jpg" /></h2>
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Here are some of the key tax-related deadlines affecting businesses and other employers during the second quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.<br />
<strong>July 31</strong><br />
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<li>Report income tax withholding and FICA taxes for second quarter 2018 (Form 941), and pay any tax due. (See the exception below, under “August 10.”)</li>
<li>File a 2017 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.</li>
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<strong>August 10 </strong><br />
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<li>Report income tax withholding and FICA taxes for second quarter 2018 (Form 941), if you deposited on time and in full all of the associated taxes due.</li>
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<strong>September 17 </strong><br />
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<li>If a calendar-year C corporation, pay the third installment of 2018 estimated income taxes.</li>
<li>If a calendar-year S corporation or partnership that filed an automatic six-month extension:<ul>
<li style="padding-top: 7px;">File a 2017 income tax return (Form 1120S, Form 1065 or Form 1065-B) and pay any tax, interest and penalties due.</li>
<li>Make contributions for 2017 to certain employer-sponsored retirement plans.</li>
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<br /><div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.comtag:blogger.com,1999:blog-5364502.post-16813820070777346202018-06-15T12:04:00.003-04:002018-06-15T12:04:43.581-04:00Midyear - Tax and Financial Checkup<img src="https://www.checkpointmarketing.net/docs/IFF_Midyear_628x1115.jpg" /><div class="blogger-post-footer">see: http://www.TaxEsq.com</div>Anonymoushttp://www.blogger.com/profile/18368503684577766925noreply@blogger.com