That's right...the Tax Cuts and Jobs Act of 2017 eliminated the deductions for all client entertainment and modified many of the deductions for meals. While these are legitimate expenses for many businesses, they have long been a target of IRS audits.
What is still deductible? The occasional office holiday party or summer picnic that includes all employees is still fully deductible. The quiet client business meal that includes the client and a taxpayer while discussing business matters continues to be a 50 percent deductible expense. And meals provided for the convenience of the employer or during business travel is now a 50 percent deductible expense.
Gone are all expenses incurred at sporting events, theaters, country clubs and such. Also eliminated are deductions for charitable events, even if they are used to promote the business.
Businesses should review their accounting policies as soon as possible to verify that these expenses are properly recorded and available for review for tax reporting. Please contact our office for suggestions on how to ease into these new reporting requirements.
It's the time of year for the barrage of advertisements for free or "inexpensive" tax preparation services. A few years ago, the ads claimed "that it doesn't take a genius to prepare your taxes". This year, the ad includes IBM Watson, indicating that perhaps some degree of genius might be required.
Preparing basic tax returns does not require either a genius or Watson. It requires real people that listen to your concerns. It is usually by listening to our clients that we learn of new deductions or new situations that need to be addressed.
If your long term planning includes a goal to develop a strong household financial base and develop a good financial acumen, it's time to consider the services of a CPA. Whether you are starting your own business, trying to structure your investment or retirement plans, or just need to talk through your financial situation, you will find that a CPA has the skills that you will need.
No, we're probably not all geniuses - but all CPAs are required to pass the rigorous Uniform CPA exam, after completing many years of undergraduate and usually graduate level coursework. On an ongoing basis, we are required to meet certain experience requirements, licensing, and annual continuing education requirements.
We are here to listen to your concerns when your spouse passes away or your child is going through a difficult divorce. We enjoy hearing about your your new job, your new grandchild or your latest business dream - because all of that has an impact on your financial goals.
Come in...we're open for business...all year.
January is a great time to clean out the closets and the desks. Elsewhere on on our site, you will find our record retention guidelines for tax and financial documents. This is a good starting point.
Have you considered creating an organized electronic filing system? It's really quite easy and will free you of the burden of organizing, filing and storing paper documents.
To start with, think about how you would organize a filing cabinet if you were using paper files. Perhaps you would have a file drawer for each year, and within that drawer, you would have a folder for each company, bank or other type of document. The same theory holds true for filing electronically. Start by creating the folders that will hold the documents that you will be filing. And then, create one additional folder that will temporarily hold the scanned documents.
The next step is to invest in a good scanner (which can also serve as a printer/copier). Ideally, you will want one that has both a flatbed scanner and a document feeder. Be sure to set up your scanner to scan as a pdf type document rather than a picture file. Then, ready, set, scan. An easy enough task to do while watching an afternoon movie or game. As the documents are scanned into your temporary scan folder, name them appropriately. Once you have a bunch of documents scanned, simply "file" them into their appropriate folders that you have set up.
The next step is to download the documents that you normally receive electronically. Remember, if you ever choose to close a bank or brokerage account, your access will be permanent lost! Again, file these into the appropriate folders that you ahve set up.
Once the new system becomes a habit, you will realize how easy this is to maintain. Another advantage is that if you need to refer to a document, it is so easy to find! And, be sure your discarded documents that contain sensitive financial information are shredded before they make their way to the recycle bin.
January is a busy month for small businesses - it's housekeeping time! And, it's time to prepare and file Forms 1099 for vendors and subcontractors.
Vendors and subcontractors that you pay $600 or more in a calendar year must receive a Form 1099. There are two exemptions - payments to corporations and payments made by credit card.
The starting point is to obtain a completed Form W-9 from the vendor or subcontractor. This form collects the necessary information to prepare the Forms 1099. A writeable pdf copy of this form is available at the IRS website - https://www.irs.gov/pub/irs-pdf/fw9.pdf.
Steep penalties are imposed for failure to timely file Forms 1099. The penalty depends upon the business situation and the delay in filing, but can be as high as $530 per vendor. In addition, when filing your annual income tax return for the business, the business owner is required to note if they filed all required Forms 1099. Failure to respond to this question correctly is a red flag issue for the IRS.
Filing Forms 1099 is one of the regulatory burdens imposed upon small businesses, but it is a process that is here to stay. Call our office today if you need assistance!
There are a lot of stories swirling around the internet about what folks should be doing before we ring in 2018. The most important lesson here is that there is no "one size fits all" solution for tax planning.
Prepay state income or property taxes? Maybe, but only if you are not subject to AMT. Property taxes that are not yet assessed - i.e. you don't have a invoice yet, are not deductible.
Defer income to 2018 or accelerate business expenses in 2017? Maybe, depending upon your income level.
Prepay miscellaneous itemized deductions - definitely, if you have an invoice for them. These go away completely after 2017.
Prepay charitable pledges and contributions - maybe, if you will not be itemizing deductions in the future due to the higher standard deduction.
The new tax bill has lots of nuances - call us today for advice for your particular situation.
It appears that the 2017 Tax Cuts and Jobs Act will be signed into law by President Trump this week. Attached is an outline of some of the key elements that apply to individual taxpayers.
Some taxpayers will want to consider shifting income into 2018 if possible and accelerating the payment of certain deductions. However, we caution that this is a very complex piece of legislation, particularly for business taxpayers. Some of the provisions will be subject to IRS regulations and requirements that will not be published for several months. For the impact on your particular situation, please contact our office to speak to myself or Tim Dorss.
Selected Highlights for Individuals
Tax Cuts and Jobs Act of 2017
(as of December 20, 2017)
All provisions are effective for years AFTER 2017
- Ordinary income rates for high earners decline
- Capital gain/qualified dividend tax rates largely unchanged
- 20 % deduction of qualified business income from partnerships, S Corporations and sole proprietorships (personal service businesses excluded)
- Standard deduction increased and personal exemptions repealed
- Enhancement of child tax credits
- Deduction for moving expenses and reimbursements repealed
- Repeal of overall limitation on itemized deductions (Pease limit)
- Limited deduction for income and property taxes to $10,000
- Mortgage interest limitations
- $750,000 limit, effective for debt incurred after Dec 15, 2017
- No deduction home equity loans
- Miscellaneous itemized deductions repealed
- Personal deductions for casualty & theft losses repealed, except presidentially declared disaster areas
- Estate and gift tax exclusion increased to $11,200,000
- Alimony deduction and inclusion for new agreements repealed
- Alternative Minimum Tax exemptions increased
- Kiddie Tax simplifed – will use trust tax rates
- ACA penalty permanently repealed for years after 2018
Most of the individual provisions expire after 2025
Do you really know where your charity dollars go? Some charitable organizations do a great job of efficiently getting the dollars to the need. Others have high overhead, big executive salaries and fancy office space.
Before you write that check, check the facts at a reliable source such as www.charitynavigator.org. If you wish to deduct your contribution, you should also check their IRS status at https://www.irs.gov/charities-non-profits/search-for-charities.
For many of us, 2017 has been a prosperous year. However, there are many still in need - for that consider your local food bank. If you are served by a volunteer rescue or fire group, don't overlook their needs - the cost of providing quality equipment and supplies is great. If you enjoy the art, theatre, or musical presentations, consider them as well - ticket prices are only a small portion of their revenue.
Happy Holidays and Best Wishes for 2018!
It's time for small business owners to tend to their housekeeping - financial housekeeping, that is. A little time spent now to clean up your financial records will have your business ready to timely file 2017 tax returns and reports. More importantly, you will start 2018 with a clean slate.
Small businesses that are succesful are usually those that invest time and effort into a good bookkeeping and reporting system. At Rogers & Associates, we can assist - all of our professionals are certified by QuickBooks as ProAdvisors.
Contact us today for your free "get acquainted" meeting!
Did you know that our professionals are Certified ProAdvisors? Each year, we complete the extensive training provided by QuickBooks so that we can provide support for our small business clients.
Many small business owners purchase an accounting package, but are at a loss in getting it properly set up. An accounting package, like QuickBooks, should be a time saver for you. It should also help you run your business more efficiently and provide reports that steer your business in the right direction. But it will become a huge source of frustration if you don't get started properly.
Our professionals can assist in getting your QuickBooks file set up properly to begin with and provide ongoing training and support. Call us today to see how you can get started!
We all do our best to cover our homes and personal property with appropriate insurance in the event of a casualty. But even with our best efforts, some losses remain. For those instances, it may be possible to claim a tax deduction for the loss.
So, what is deductible? Surprisingly, it is not the cost to rebuild or replace the property. Generally, the deductible amount is the reduction in fair market value, less any insurance reimbursement. Let's try a few examples:
You live in a lovely waterfront home by the shore. Hurricane Jupiter spares your home, but wipes out your dock, which is not covered by your insurance plan. You had hoped to replace the dock one day anyway, because it was old and worn. The cost of replacing the new dock will be $15,000. But, the fair market value of the old dock was only about $2,000. Unfortunately, your deduction is limited to the fair market value loss of $2,000.
Your dream home is located in a wooded area in the southwest hills. Firestorm Lucifer spares your home and outbuildings, but nearly all of your beautiful hillside is destroyed by fire. This situation is a little tricker - you will need to measure the fair market value of the property - both before and after the incident. For this purpose, you will likely need to engage an appraiser to evaluate the loss in value. If your property included marketable timber, you might also need to engage a professional timber appraiser.
There are many other special situations that will require analysis. If you have had the misfortune of a recent casualty loss, please contact us to see if you might have a deductible loss.
Last week, the President signed into law the Disaster Tax Relief and Airport and Airway Extension Act of 2017 providing multiple tax relief measures to victims of Hurricanes Harvey, Irma, and Maria. In addition to increasing the amount of deductions for personal casualty losses and making the deduction available to taxpayers who take the standard deduction, the Act also provides for employment-related tax credits, relaxes retirement plan rules, suspends limitations on charitable contributions, and makes it easier for taxpayers to meet income requirements for the earned income tax credit and the child tax credit.
Enhancements to Casualty Loss Deduction Rules:
Generally, the deduction for a casualty loss of personal-use property is subject to a $100 reduction rule (only losses above $100 are counted) and the loss is limited to the extent it exceeds 10 percent of the taxpayer's adjusted gross income. The new law removes the 10 percent of adjusted gross income limitation, but increases the $100 floor to $500. It also allows individuals to claim a casualty loss even if they do not itemize their deductions by adding the amount of the loss to their standard deduction.To qualify, a loss must be attributable to a federally declared disaster and occur in an area determined by the President to warrant assistance by the federal government under the Stafford Act.
Employee Retention Tax Credit Available to Businesses:
The act provides that eligible employers with an employee retention credit of 40 percent of qualified wages with respect to each eligible employee for 2017. The amount of qualified wages which may be taken into account cannot exceed $6,000 paid to an eligible individual (making the maximum credit $2,400 per eligible employee).
Retirement Plan Rules Relaxed:
The Act contains relief provisions regarding withdrawals from retirement plans and retirement plan loans.
The rules regarding these deductions are complex. If you think you might qualify, please contact our office for information regarding documenting your loss and other considerations.
Virginia will begin a period of tax amnesty on September 13th. This is a rare opportunity for those with past due taxes to catch up on their payments and eliminate some or all of the late charges. During the amnesty period, all penalties and half of the interest will be waived upon the payment of the taxpayer's remaining balance. That's the carrot. Upon the conclusion of the amnesty period, any remaining amounts due will be hit hard with an additional 20 percent penalty. That's the stick!
Who qualifies: Taxpayers with bills that were assessed on or before June 15, 2017. Most taxpayers that have qualifying assessments will receive a notice by mail.
Deadline: The amnesty period begins on September 13, 2017 and ends on November 14, 2017.
How: Taxpayers with past due assessments must pay all of the tax due and half of the interest due. No application form is necessary - the payments may be made on the Virginia tax website.
If you think you might qualify or have additional questions, please call our office for assistance.
Are you suffering from crazy P@s$w0rd rules? Hang in there...the NIST (that's the government agency in charge of telling us how to handle our passwords) is in the process of issuing new recommendations. Gone are the requirements to change your password every 90 days and to use crazy combinations of letters and characters. New recommendations suggest checking your password against an easy to hack list and using a long phrase, such as Ilovemykidsandmydogsnameis nellybecauseiliveinnellysford.
Let's hope the software folks catch up on these revisions soon. Now, if we could just get a standard user name protocal, so we wouldn't have to remember so many different user names!!
Your baby is off to college and you are patting yourself on the back for filling up her 529 education account. What do you do now?
First of all, this is an area that the IRS loves to audit - so, you must save the receipts for the expenses that will be covered by the 529 account withdrawals. That being said, the list of covered expenses is generous. In addition to tuition and fees, you may cover room and board, technology needs, and required books and supplies.
If your child is not using the institution's room and board plan, their expenses may still be covered within the budget for their school. You can generally find this in the financial aid section of the school's website.
We used to have three sales tax holidays in Virginia - all for a different purpose and all at a different time. One, for hurricane preparedness, one for school shoppers, and one for energy savings. Sensibly, these were all combined into one holiday, and it's next weekend! Here's the who, what, when and where:
Who - anyone. You don't have to have a student in school or actually be in a hurricane.
What - School supplies, clothing and footwear; hurricane preparedness items (batteries, generators, flashlights, chainsaws), and Energy Star or Water Sense appliances and fixtures. For a complete list of what counts and what doesn't refer to the Virginia Tax Department guidelines: https://tax.virginia.gov/sites/default/files/inline-files/2017-sales-tax-holiday-guidelines.pdf.
When - August 4-6, 2017.
Where - any Virginia stores as well as online retailers. If you order online, you must place the order during the sales tax holiday period. The delivery can be after the period.
Does your teen have a job this summer? Most teens can claim exempt status on their employee forms (IRS Form W-4 and VA Form VA-4). Claiming exempt status will put more money in their take home check and eliminate the need to file a tax return in the spring to claim a refund.
And, this is a great time to introduce your child to the banking system. If they are old enough to work, they are old enough to learn how to manage a bank account. These are important life skills.
I have fond memories of my Father proudly taking me to the bank on a regular basis when he would handle his weekly banking and visit with the bank manager, who was a family friend. And, occasionally, my Father would have reason to visit the bank president, who kept a parrot in his office. Allegedly, the parrot was in charge of loan approvals!
Once, while away at a summer teen camp far from home in Montana, I was short on funds. As I had always done, I went to the local bank to cash a check (yes, kids, this is before ATMs). When the bank teller politely explained that they didn't accept out of town checks from teenagers, I politely asked to see the bank manager. Again, the bank manager politely explained that they didn't accept out of town checks from teenagers. With full confidence, I simply explained that a phone call to the manager of my local bank would confirm that my check was indeed good. The surprised manager made the call on my behalf and the check was approved!
The moral of this little story is that the many years of accompanying my Father to the bank gave me the confidence to handle this situation on my own at the young age of 16. The simple act of including your teen in your financial activities will help them to be confident and financially smart when they are on their own.
Are you building or remodeling? A little known tax credit is available for all Virginia residents - the residence does not have to include a person with special needs.
Tax credit funds are available in amounts up to $5,000 for various accessibility features. For more information, contact our office or visit the DHCD site at DHCD accessibility information.
According to IRS records, there are unclaimed refunds totaling 1 billion for people who failed to file their 2013 returns. If you haven't filed, you have until April 15, 2017 to file a claim to receive your potential 2013 refund.
One of the big changes for filing this year is the new deadline for LLC and Partnership tax returns. These were previously due in April - but that caused some headaches for members that needed the K-1 Forms to file their individual returns. Don't overlook the filing date - even if the Partnership or LLC doesn't owe any money directly to the IRS, the late filing penalties are steep - $195 per partner per month that the filing is delayed.
Yes, filing season has begun. There has been some confusing information in the media regarding the filing season. Our firm has already filed several returns for 2016. This is the perfect time to file small business returns that do not need to wait for outside tax forms to arrive. The small business owner that files in January will be able to quickly close out their books for the past year and be ready to begin their accounting for the new year.
While most folks are getting ready for the holidays, we're busy getting ready for tax season!
If you are considering a change in your tax provider, this is the perfect time to contact us for your FREE consultation. If you decide to make a change, we'll have everything set up before we get into our busy tax season.
Have you been preparing your own returns? Perhaps you have this uneasy feeling that something isn't quite right or that you are missing out on deductions. It might be time to turn to a CPA.
Whatever your concern, we look forward to discussing your needs with you.
If your summer plans include a move, be sure to change your address with the IRS. If they send a notice to your old address and you don't respond, it could be a real problem!
As with any government interaction, there is a special form for this - Form 8822. Form 8822B is also available for business moves. You can access it at IRS Form 8822.
If you are receiving Social Security or Medicare benefits, you can make a change online at www.SSA.gov.
Sadly, this is no longer an elite group. Many clients are now asking what they can do - either after they have learned of a breach or proactively.
First of all, the IRS has some excellent resources. If you have been a victim or meet certain other criteria, you can consider getting an IP Pin for tax filings. They also provide a location now to include your driver's license number in the electronic data filed with your return to provide a secondary layer of identification. Find more on their website at : https://www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft.
Upon request, our firm provides clients with a portal for sending and receiving documents and tax returns. This is more secure and reliable than mail services. You should also consider using electronic account access for your banking and investment accounts. Be sure to save your monthly and annual account statements in pdf form - once the account is closed, the access is closed as well.
Finally, there is nothing better than common sense. Be as careful with your financial data as you would with a small child crossing a busy street. Use strong passwords and change them frequently. Scan and save all sensitive documents - shred the paper copies. Back up your computer data frequently and save a backup in your bank deposit box. Look out - a thief is coming your way!
Many cultures have a tradition of cleaning house before certain holidays. This is part of the penitential period that precedes many religous holidays. Of course, it's also a good excuse to clean house.
As we approach the holiday season and year end, its a good time to clean your financial "house". Do you have stocks that are in paper form or held in "drip" accounts? At one time, these were very popular. However, they are difficult for your executor or trustee to manage if you become incompacitated.
Contact your investment advisor or brokerage firm to arrange for these investments to be transferred to your existing investment account. Or, if you don't have one, arrange for a low cost account with an investment firm such as Schwab or E*Trade to hold these investments.
Last week Congress passed a three month extension of federal funding for our highways. Another "kick the can down the road" piece of legislation.
Among the many riders to this dubious legislation were two tax provisions. One of them changes the filing date for partnership returns from April 15th to March 15th. This is a change that the American Institute for CPAs had been advocating for many years. The hope is that taxpayers that invest in partnerships or limited liability companies will receive their K-1s earlier. We'll see!
The other tax related rider was a requirement for large estates to provide the beneficiaries and the IRS with a statement showing the basis of the property they inherited. This is likely a good idea wrapped in poorly thought out legislation. You see, it's effective immediately - but it will take the IRS at least 12 to 18 months to issue the necessary regulations and/or forms that will be needed to accomplish this. Gee, thanks Congress.
This is the time of year that many taxpayers receive what is called a CP2000 letter from our dear folks at the IRS. These letters are a bit scary - usually many pages long with calculations of proposed changes to your tax returns. I'm not sure of the actual statistics, but I would venture to say that at least 90 percent of these notices are inaccurate.
The notices are a result of the IRS computers matching the income and deductionsreported on the return with the information reported to them by payers on Forms 1099, W-2, etc. While taxpayers do occassionally overlook an item of income, the usual explanation is that the item was reported elsewhere on the return or in a different amount and the computers aren't smart enough to make the match.
The important thing to do with these notices is not to ignore them! They won't go away and tend to get pretty smelly with age. We generally recommend to our clients that they provide us with a limited power of attorney allowing us to communicate with the IRS on their behalf to resolve the issue.
To the extent adjustments to the return, a similar adjustment must be reported to the state. This is generally handled via an amended state return.
This matching process is now the primary enforcement tool of the IRS. The current audit rate is less than 1 percent of all taxpayers. Those taxpayers that are self-employed or have large incomes have a higher chance of audit than the general population.