Tax Reform Changes - How will they affect you?

When you file your 2018 tax returns – about a year from now – your return will look very different.  Here are a few of the biggest changes that may affect you.

 

Individual Tax

• Individual tax rates will range from 10% to 37%.
• Standard deduction increases and personal and dependent exemptions eliminated
• The Child Tax Credit increased and a new Dependent Credit created.

Disappearing deductions: Beginning with the 2018 tax year, you will no longer be able to deduct:

• State income tax and property taxes above $10,000 per year in total;
• Moving expenses (with an exception for certain military);
• Employee business expenses such as mileage, travel, entertainment, home office expenses, union dues, tax preparation fees, and investment fees, among others;
• Mortgage interest beyond interest on $750,000 of acquisition debt (if you buy a new home); and
• Mortgage interest paid on equity debt (all homeowners).

Some new benefits for individuals include:

• Medical expense Adjusted Gross Income (AGI) threshold will temporarily drop to 7.5% of AGI for 2017 and 2018;
• Alternative Minimum Tax (AMT) threshold increased;
• A deduction for qualified business income for passthrough entity owners;
• Recharacterization to an IRA cannot be used to undo a Roth conversion;
• The estate tax exclusion has increased to $10 million (adjusted for inflation); and
• Annual gift tax exclusion remains the same ($14,000 for 2017 and $15,000 for 2018), but the maximum rate on gifts is 35%.

Small Business Tax

• Corporate tax rate will be a flat 21% for 2018
• Up to 20% deduction from net business income for a sole proprietorship, LLC (excluding those taxed as a C corporation), partnership, S corporation, and rental activity. The rules are complex but there is a lot of planning that we can do to maximize this deduction for you.
• Corporate Alternative Minimum Tax (AMT) repealed;
  
• IRC §179 expensing and bonus depreciation increased;
• Deductible business interest reduced;
• The net operating loss (NOL) carryback repealed, NOL deduction amount limited;
• The domestic production activities deduction is repealed;
• IRC §1031 treatment is limited to certain real property; and
• Entertainment expenses are disallowed.

We are here if you would like to discuss how the changes apply to your unique situation >> Contact Us

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For nonprofits, it can be all too easy to overlook the importance of such filings, viewing it as a necessary evil – a dull and dry “must do” on the end of year checklist.

However, one form in particular – the 990 – should be considered a truly great opportunity (more on that later).

But first…

What is the 990?

For those of you unaware, the Form 990 was designed to allow both the IRS and the public to evaluate tax-exempt organizations and how they operate. It collects information about the nonprofit’s mission, programs, and of course finances.

And more recently, the 990 has been amended to gather even more information about nonprofits, including the compensation of board members and staff, the disclosure of any potential conflicts of interest, and financial accountability and the avoidance of fraud.

Who Needs to File a 990?

Large nonprofit organizations with gross receipts of $50,000 and over must file Form 990 or 990-EZ.

And smaller nonprofits with gross receipts of less than $50,000 must file Form 990-N so that they can retain their tax-exempt status.

Is Anyone Exempt?

Churches, religious schools, missions and missionary organizations are exempt from filing the Form 990.

Subsidiaries of nonprofits are also exempt if a group return is filed by the parent organization, as are some state institutions and Government corporations.

Remember, the 990 is Public Information

Now, remember earlier when we mentioned that filing the Form 990 is potentially a great opportunity for nonprofits? Well, here’s why.

It’s public information.

This means this “must-do” piece of paperwork can actually act as a platform from which you can shout about and celebrate your organization’s accomplishments and social impact.

What’s more, the form is available through a variety of internet platforms, such as Charity Navigator and Guidestar. You can therefore be certain that many donors and grantors alike will use the form’s information to vet charitable organizations.

So, when you reach the section of the form where you are required to describe your program accomplishments and activities, think of it as free advertising.

Grasp that opportunity with both hands; tell your story and frame your mission in such a way that it will resonate with readers.

Go Beyond Compliance

You will more than likely need to file the Form 990 every year. Nonprofits that go three years without filing the form can actually lose their tax-exempt status, with no appeal process.

You need to be compliant when completing your year-end paperwork, and we can help with that. But we can also help advise you as you go from being merely compliant to leveraging the opportunity for positive PR afforded by this form.

Contact us at Checkbox to find out more.

The post Form 990 – A Necessary Evil or a Great Opportunity? appeared first on Checkbox Accounting.

1. Don’t panic. You often only need to respond to take care of a notice.

2. There are many reasons why the IRS may send a letter or notice. It typically is about a specific issue on your federal tax return or tax account. A notice may tell you about changes to your account or ask you for more information. It could also tell you that you must make a payment.

3. Each notice has specific instructions about what you need to do.

4. You may get a notice that states the IRS has made a change or correction to your tax return. If you do, review the information and compare it with your original return.

5. If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.

6. If you do not agree with the notice, it’s important for you to respond. You should write a letter to explain why you disagree. Include any information and documents you want the IRS to consider. Mail your reply with the bottom tear-off portion of the notice. Send it to the address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

7. You shouldn’t have to call or visit an IRS office for most notices. If you do have questions, call the phone number in the upper right-hand corner of the notice. Have a copy of your tax return and the notice with you when you call. This will help the IRS answer your questions.

8. Keep copies of any notices you receive with your other tax records.

9. The IRS sends letters and notices by mail. We do not contact people by email or social media to ask for personal or financial information.

10. For more on this topic visit IRS.gov. Click on the link ‘Responding to a Notice’ at the bottom of the home page. Also, see Publication 594, The IRS Collection Process. You can get it on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

 Sometimes a second pair of eyes reviewing your bookkeeper’s work can reduce the crackdown you see above. We can schedule a free business consultation with you to review your current methods and develop a lasting partnership.

Contact Us Today

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WASHINGTON ― The Internal Revenue Service today announced the adoption of a “Taxpayer Bill of Rights” that will become a cornerstone document to provide the nation’s taxpayers with a better understanding of their rights.

The Taxpayer Bill of Rights takes the multiple existing rights embedded in the tax code and groups them into 10 broad categories, making them more visible and easier for taxpayers to find on IRS.gov.

Publication 1, “Your Rights as a Taxpayer,” has been updated with the 10 rights and will be sent to millions of taxpayers this year when they receive IRS notices on issues ranging from audits to collection. The rights will also be publicly visible in all IRS facilities for taxpayers and employees to see.

“The Taxpayer Bill of Rights contains fundamental information to help taxpayers,” said IRS Commissioner John A. Koskinen. “These are core concepts about which taxpayers should be aware. Respecting taxpayer rights continues to be a top priority for IRS employees, and the new Taxpayer Bill of Rights summarizes these important protections in a clearer, more understandable format than ever before.”

The IRS released the Taxpayer Bill of Rights following extensive discussions with the Taxpayer Advocate Service, an independent office inside the IRS that represents the interests of U.S. taxpayers. Since 2007, adopting a Taxpayer Bill of Rights has been a goal of National Taxpayer Advocate Nina E. Olson, and it was listed as the Advocate’s top priority in her most recent Annual Report to Congress.

“Congress has passed multiple pieces of legislation with the title of ‘Taxpayer Bill of Rights,’” Olson said. “However, taxpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS and even fewer can name their rights. I believe the list of core taxpayer rights the IRS is announcing today will help taxpayers better understand their rights in dealing with the tax system.”

The tax code includes numerous taxpayer rights, but they are scattered throughout the code, making it difficult for people to track and understand. Similar to the U.S. Constitution’s Bill of Rights, the Taxpayer Bill of Rights contains 10 provisions. They are:

1. The Right to Be Informed

2. The Right to Quality Service

3. The Right to Pay No More than the Correct Amount of Tax

4. The Right to Challenge the IRS’s Position and Be Heard

5. The Right to Appeal an IRS Decision in an Independent Forum

6. The Right to Finality

7. The Right to Privacy

8. The Right to Confidentiality

9. The Right to Retain Representation

10. The Right to a Fair and Just Tax System

The rights have been incorporated into a redesigned version of Publication 1, a document that is routinely included in IRS correspondence with taxpayers. Millions of these mailings go out each year. The new version has been added to IRS.gov, and print copies will start being included in IRS correspondence in the near future.

The timing of the updated Publication 1 with the Taxpayer Bill of Rights is critical because the IRS is in the peak of its correspondence mailing season as taxpayers start to receive follow-up correspondence from the 2014 filing season. The publication initially will be available in English and Spanish, and updated versions will soon be available in Chinese, Korean, Russian and Vietnamese.

The IRS has also created a special section of IRS.gov to highlight the 10 rights. The web site will continue to be updated with information as it becomes available, and taxpayers will be able to easily find the Bill of Rights from the front page. The IRS internal web site for employees is adding a special section so people inside the IRS have easy access as well.

As part of this effort, the IRS will add posters and signs in coming months to its public offices so taxpayers visiting the IRS can easily see and read the information.

“This information is critically important for taxpayers to read and understand,” Koskinen said. “We encourage people to take a moment to read the Taxpayer Bill of Rights, especially when they are interacting with the IRS. While these rights have always been there for taxpayers, we think the time is right to highlight and showcase these rights for people to plainly see.”

“I also want to emphasize that the concept of taxpayer rights is not a new one for IRS employees; they embrace it in their work every day,” Koskinen added. “But our establishment of the Taxpayer Bill of Rights is also a clear reminder that all of the IRS takes seriously our responsibility to treat taxpayers fairly.

Koskinen added, “The Taxpayer Bill of Rights will serve as an important education tool, and we plan to highlight it in many different forums and venues.”

Here at CPA Corporation we strive to keep you informed!

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Do not give out social security, bank, or credit card numbers over the telephone or by email to anyone who cannot verify they are our employees. Have your clients ask the agent to confirm information on the tax notice we mailed to them or hang up and contact us immediately to talk to a live agent. We heard from people who received phone calls from scammers impersonating the Internal Revenue Service (IRS), telling the “would-be victims” that they owed taxes and, if the taxes not paid, they would be arrested. These scammers also told the taxpayers that the State of California would do the same and about their personal information and how much money they could immediately pay.

This is the second warning we issued in recent months. In October, we alerted the public of a report that scammers contacted elderly people in Beverly Hills and informed them they received a red light traffic ticket that was referred to us for collections. The scammer instructed the victims to load money on a prepaid debit card and send it to a bogus address. The scammer refers victims to an actual FTB phone number for reference.

Other scammers claim to represent FTB to lure people into revealing personal and financial information. This type of scam is called “phishing” and is aimed at getting personal information to commit identity theft. These types of scams often involve an email that masquerades as an offer to check the status of your state income tax refund.

State Controller John Chiang partnered with nonprofit groups and other state offices to help people understand current scams plaguing consumers and taxpayers. He held more than a dozen events designed specifically to help seniors protect their financial information. For more information about upcoming seminars, go to sco.ca.gov and search for tax scam seminars.

We take the safety and security of taxpayer information very seriously. If your clients receive a questionable contact from us, they should consider the following:

1. While we call people who owe taxes, we never ask taxpayers for personal identification numbers, passwords, or similar access information for credit cards, bank accounts, or other financial information.
2. If your client knows they don’t owe taxes or never receive a billing notice from us your client can verify account information by accessing MyFTBAccount or calling us directly at 800.852.5711 to review their account.
3. Our criminal investigators never solicit payment from debtors under the threat of incarceration.
4. We do not have the ability to process funds from third-party issued debit cards, prepaid credit cards, or wire transfers.
5. Taxpayers should only make state tax payments to us through our normal payment channels: online Web Pay or credit card services; or by mail with personal check, money order, cashier’s check, or Western Union Quick Collect payments.

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Abusive Return Preparer
Taxpayers should be very careful when choosing a tax preparer. While most preparers provide excellent service to their clients, a few unscrupulous return preparers file false and fraudulent tax returns and ultimately defraud their clients. It is important to know that even if someone else prepares your return, you are ultimately responsible for all the information on the tax return.

Abusive Tax Schemes
Abusive tax scheme originally took the structure of fraudulent domestic and foreign trust arrangements. However, these schemes have evolved into sophisticated arrangements to give the appearance that taxpayers are not in control of their money. However, the taxpayers receive their funds through debit/credit cards or fictitious loans. These schemes often involve offshore banking and sometimes establish scam corporations or entities.

Nonfiler Enforcement
There have always been individuals who, for a variety of reasons, argue taxes are voluntary or illegal.  The courts have repeatedly rejected their arguments as frivolous and routinely impose financial penalties for raising such frivolous arguments.  Take the time to learn the truth about frivolous tax arguments.

All Program and Emphasis Areas for Criminal Investigation
Criminal Investigation has categorized their investigative cases into specific program and emphasis areas of fraud. Examples of case summaries written from public record documents where cases were prosecuted can be viewed on the various program and emphasis area web pages.

Tax Scams – How to Report Them
To help the public recognize and avoid abusive tax schemes, the IRS offers an abundance of educational materials. Participating in an illegal scheme to avoid paying taxes can result in imprisonment and fines, as well as the repayment of taxes owed with penalties and interest. Education is the best way to avoid the pitfalls of these “too good to be true” tax scams.

Criminal Investigation (CI) Home Page

Report Suspected Tax Fraud Activity!

The post IRS Tax Fraud Alerts appeared first on Checkbox Accounting.

The IRS does not initiate contact with taxpayers by e-mail or social media channels to request personal or financial information. Never share confidential information via e-mail with someone alleging to be the IRS. If you receive a suspicious e-mail claiming to be from the IRS, or directing you to an IRS site, do not reply, do not open any attachments, and do not click on any links.

For more information on these scams and what to watch for, go to:

www.irs.gov/uac/Newsroom/Beware-of-Bogus-IRS-Emails

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This can be a serious issue if you don’t use great care in your bookkeeping.  Many of the businesses that receive these notifications are able to go back through their books and provide explanations as to why the ratios are off.  Internet sales, for example, would result in higher numbers of credit card transactions versus cash.  A change in tax ID number may also set off alarms.  There are a number of perfectly valid reasons that the ratios could differ.  The IRS allows businesses to explain and fix errors in their reporting.  Because of this, small business owners need to be particularly careful in their documentation.  If your numbers are different than industry averages, you need to be able to explain why.

While some argue that cracking down on small businesses – the backbone of America’s industry – is not the answer, statistics are speaking otherwise.  The IRS has found that more than $450 billion in taxes goes uncollected.  Of this, nearly a third of that can be accounted for by under-reporting in small businesses.  The IRS wrote that the goal is to “ensure that people who are non-compliant don’t get an unfair advantage over those that play by the rules and follow the law.”  As long as they are careful in their bookkeeping, this crackdown can actually be a benefit to small businesses around the country.

 Sometimes a second pair of eyes reviewing your bookkeeper’s work can reduce the crackdown you see above. We can schedule a free business consultation with you to review your current methods and develop a lasting partnership.

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