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New Tax Laws apply to 2018 returns

Most of the provisions of the Tax Cuts and Jobs Act of 2017 become effective with the filing of 2018 tax returns.   The new law makes sweeping changes to tax rates and deductions.   Below is a recap of the changes:

For Individuals
     • Lower Tax Rates
     • Elimination of Personal Exemptions
     • Doubling of the Child Tax Credits (also available to more taxpayers)
     • Higher Standard Deductions
     • Reduction or elimination of some Itemized Deductions
     • Lower estate taxes

For Businesses
     • Lower Corporate tax rates – top rate reduced from 35% to 21%
     • New 20% deduction for Qualified Business Income
     • Faster Depreciation write-offs
     • Elimination of Entertainment deductions

Tax Cuts and Jobs Act of 2017

Congress has enacted the biggest tax reform law in thirty years, one that will make fundamental changes in the way you, your family and your business calculate your federal income tax bill, and the amount of federal tax you will pay.  Most of these changes do not go in affect until tax year 2018.

Here's a quick rundown of some of the changes included in the Tax Cuts and Jobs Act.

Are You Ignoring Retirement?

That tends to happen when you are younger, retirement is far in the future, and you believe you have plenty of time to save for it. Some people ignore the issue until late in life and then have to scramble at the last minute to fund their retirement. Others even ignore the issue altogether, thinking their Social Security income (assuming they qualify for it) will take care of their retirement needs.

In this edition to our blog, we discuss the following issues related to retirement planning. 

• Predicting Social Security Income
• Planning for the Future
• Employer Retirement Plans
• Tax Incentive Retirement Savings Plans

If you would like to develop a comprehensive retirement plan, we are here ready to help!

New 1099 Penalty Rules for Not Filing 1099’s and 1095 Forms

                                                                                                                                                                                                                                                                      Don’t Fall Victim to new 1099 Penalties

This past summer, Congress passed a bill that substantially increased the penalties for failure to file information returns of the Form 1099’s and 1095’s.  The penalty for not filing a 1099 is $250 per form not filed.  We’ve answered a few questions to help you be more prepared.

Protecting Americans from Tax Hikes Act of 2015

The PATH Act does more than just extend expired tax provisions for another year. It makes many popular tax breaks permanent or extends them for two to five years. In doing so, the PATH Act provides some stability in planning.

Here’s a preview of what we cover in this addition to our blog.

• State and local sales tax deduction. Taxpayers can take an itemized deduction for state and local sales taxes, instead of for state and local income taxes. This tax break is now permanent and benefits Tennesseans.

• Educator expense deductions. Qualifying elementary and secondary school teachers can claim an above-the-line deduction for up to $250 per year of expenses paid or incurred for books, certain supplies, computer and other equipment and supplementary materials used in the classroom.

• Charitable giving from IRAs. The PATH Act makes permanent the provision that allows taxpayers who are age 70½ or older to make direct contributions from their IRAs to qualified charitable organizations up to $100,000 per tax year.

• Section 179 deduction. Tax law allows businesses to elect to immediately deduct — or expense — the cost of certain tangible personal property acquired and placed in service during the tax year.  Businesses can write-off up to $500,000 in qualified new or used assets by making this election.   The new law makes the higher limits permanent, indexing them for inflation beginning in 2016.

Please read our full article for an overview of the top 10 individual and business tax breaks and their cost to the government.

Back-to-School Tax Tips for Students and Parents

Article Highlights:

• Sec. 529 plans
• Coverdell Education Savings Accounts.
• The Lifetime Learning credit
• Qualified Education Loan Interest.

Going to college, and figuring out how to pay for it, can be stressful for students and parents. In recent years, Congress has provided a variety of tax incentives to help defray the cost of education. Some require long-term planning to become beneficial, while others provide current tax deductions or credits. The benefits may even cover vocational schools.

If your child is below college age, there are tax-advantaged plans that allow you to save for the cost of college. Although providing no tax benefit for contributions to the plans, they do provide tax-free accumulation; so the earlier they are established, the more you benefit from them.

Tips for Starting and Managing a Small Business

Anyone starting a new business should be aware of his or her federal tax responsibilities. There are several things you should know if you plan on opening a new business this year.

1. First, you must decide what type of business entity you are going to establish.
2. The type of business you operate will determine what taxes must be paid and how you pay them.
3. An employer identification number is used to identify a business entity. 
4. Good records will help ensure the successful operation of your new business.
5. Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses.

Between keeping track of the day-to-day requirements and monitoring growth and profit, it’s easy for small business owners to get overwhelmed. We have five helpful hints that will make accounting easier and make sure that you don’t miss any milestones or deadlines.

1. Business and personal expenses should be kept separate.
2. Don’t underestimate the difficulty of your taxes – hire a tax professional.
3. Be realistic about upcoming expenses.
4. Don’t forget your employees when calculating expenses.
5. Don’t lose sight of your Accounts Receivables.

Tax Implications of Same-Sex Marriage

Article Highlights:
     • All states are required to recognize and allow same-sex marriage
     • Married tax filing requirements
     • Potential tax benefits
     • Negative tax aspects

On June 26, the Supreme Court ruled that the Fourteenth Amendment to the Constitution requires all states to license marriages between two people of the same sex and to recognize same-sex marriages performed in other states.

This has wide-ranging implications for married individuals who reside in states that until now have not recognized same-sex marriage and for those who can now marry in their state, including employer-provided employee and spousal benefits, retirement issues, Social Security benefits, and of course tax issues.

Being married for tax purposes is not always beneficial, depending on a number of circumstances. There are many tax breaks available to legally married same-sex couples, such as the right to file a joint return, which can produce a lower combined tax than the total tax paid by same-sex spouses filing as single persons. However, there is a negative side as well. Many same-sex married couples, especially higher-income ones, may find that filing as married has unpleasant income tax ramifications.

Ever Wonder What a Tax Deduction Might Save You?

It is often difficult to determine exactly what benefit is derived from a tax deduction, as there is no straightforward answer. While some deductions are above-the-line, others may need to be itemized or exceed a certain amount before being deductible. The various factors involved cause tax benefits to vary for each individual’s particular situation.

Above-the-line deductions (such as IRA, alimony, moving expenses, and student loan interest) provide around a dollar deduction for every dollar claimed. On the other hand, itemized deductions, like medical expenses or investment interest, must exceed your standard deduction before any benefit can be derived.

Business deductions, the most beneficial deductions, are either employee business expenses or, in some cases, self-employed business expenses. For a small business, the deduction is calculated based upon your net income, self-employment tax rate, Medicare tax, and state income tax bracket. For example, the benefit for a taxpayer in the 25% tax bracket making less than $117,000 could be as much as 40.3% of the deduction.  If the deduction were $2,000, the tax savings could be as much as $806 or more.

For most non-business deductions, the savings are based upon your tax bracket.  For example, if you are in the 25% tax bracket, a $1,000 deduction would save you $250 in taxes.

Obamacare Mandates and the 2015 Tax Season

If you 1) are covered under Obamacare, 2) do not have health insurance, or 3) own a business that employs more than 50 employees, your tax return will become even more complicated.  However, if you have a) Medicare or b) an employer sponsored health insurance plan, you may not have any new forms to file.

If you have health insurance under Obamacare:
You will need to provide proof of ACA acceptable monthly insurance coverage. You will also need to provide the amount of monthly advance premium tax credit (APTC) you received. These amounts determine if you are entitled to additional PTC or if you must repay some of the APTC.

If you do not have health insurance:
You may be subject to a penalty. However, you may be eligible for over 30 possible exemptions, for which you may need to file an application for approval. If you do not qualify for an exemption, the penalty could be roughly 1% of your annual household income.

If your business employs over 50 full-time employees:
In 2016, employers with 50 or more full-time employees will be subject to penalty. For 2015, however, businesses with over 100 full-time employees are required to offer healthcare coverage. The tax penalty is complicated and could cost your business up to $250 per month per employee.