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• Corporate Alternative Minimum Tax (AMT) repealed;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• The net operating loss (NOL) carryback repealed, NOL deduction amount limited;
• The domestic production activities deduction is repealed;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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No matter your reason for taking the leap as an entrepreneur, you will encounter a number of concerns as you progress. It’s important that you know how to recognize and handle these concerns so as to avoid derailing your business.

In dealing with many small and medium-sized businesses over the years, we have been able to distill some of these concerns down to four of the most common questions.

At some point in your business journey, you will find yourself asking a variation of the following:

1. How will I achieve what I want in my personal life?
2. How will my business help me achieve my goals?
3. Do I really have control over business performance and numbers?
4. How do I get more from my business?

In this post, we will help you navigate these concerns and emerge from the other side a better business owner.

How will I achieve what I want in my personal life?

Running your own business should be about achieving personal freedom.

Freedom to work on what you want, when you want. Finding joy in the day-to-day is the ultimate goal for many entrepreneurs.

So, to get to the heart of what you truly want out of your business – and how it impacts both your personal and professional life – ask yourself the following:

• Why did I start my business?
• How is my business organized?
• Do I feel I am on track with my goals?
• What keeps me up at night?
• What do I do in my spare time?

Once you have a handle on why you’re in business for yourself, and where your passions lie out with your business, you can start working on balancing the two. Otherwise, the business will consume you.

How will my business help me achieve my goals?

In order to achieve your personal and professional goals via your business, you must be the one in charge.

Now, this might seem a little strange given that you own your business; who else would be in charge?

But the truth is, your business can quickly take on a life of its own if you let it.

You must be the one in control, rather than taking a back seat and letting the business drive you. If you’re achieving success almost by accident, then you and your business are driving blind without a strategy or a roadmap.

Your goals will go unfulfilled if you don’t treat your business as more than just as means of making ends meet.

Do I really have control over business performance and numbers?

We know it can feel like you don’t; that your numbers can spiral out of control amidst the day-to-day of running your business.

But you can and you must take control of those numbers, and by extension, the performance of your business.

You should:

• Know exactly what your numbers are for the month
• Have complete clarity on which products or services are selling well (or not)
• Understand what’s in your financial statements, and what those numbers mean
• Know how much tax you’re going to pay, well ahead of the due date

When you do, you can actually look forward to meeting with your accountant!

How do I get more from my business?

When you have a handle on your goals, you’re building a business geared towards meeting those goals, and you’re accurately tracking your numbers at least monthly, you will get more from your business.

It’s really that simple!

You can then look forward to scaling your business, hiring employees (if you want), outsourcing work, spending time working on your business rather than in it, taking a day off now and again, and even taking a vacation.

Let’s Address Those Concerns

If any of those concerns are keeping you up at night, then here’s how we can help:

1. Personal Goal Setting

We can help you get to the very heart of the reason why you went into business in the first place. We will determine what your goals were, and how they have changed (if they have at all).

If your business has taken on a life of its own, we’ll find out why, and how far you are from achieving the goals you had when you started.

By taking you through a personal goal questionnaire and a one-on-one meeting with one of our advisers, we can develop a report that will show you what you want to achieve, what’s missing, and how you can go about accomplishing your goals.

We’ll then help you devise a specific plan of action – one with dates, milestones, and clear responsibilities.

2. Business Planning & Strategy

We want to help you take control of your business. No more autopilot, no more backseat driving.

Together we will develop a business plan and strategy that will have you questioning everything, and testing what you think you know.

We won’t focus solely on ‘best practices’; rather, we will help you find your industry’s ‘next practices’.

What’s more, we want to instil a belief in you, your team, and your mission that will see you carry out this plan to fruition.

3. Monitor KPIs

It’s no use merely glancing at your income statement in order to monitor your business. That’s a bit like watching a hockey game by only looking at the final scoreboard. To get the bigger picture, you must look at the activity within the game.

We will help you map and monitor your progress by focusing on a few Key Performance Indicators.

These will be tailored to your business, meaning no generic indicators or reports. Only valuable and actionable information.

4. Profitability & Cash Flow Improvement

Finally, we will help you get to grips with your profitability and cash flow by getting you up and running on cloud accounting software.

Everything will be real-time and instantly trackable by both you and us, meaning we can spot any potential cash flow issues, so that you can take action ahead of time.

How Can Checkbox Help You Become Great?

In his book, Good to Great, Jim Collins wrote:

“Greatness is not a function of circumstance. Greatness, as it turns out, is largely a matter of conscious choice and discipline.”

We can guide you to greatness. We only ask for your conscious choice to work together, and your discipline to meet, review, and check in.

You can grow a great business. Let us help. Contact us today to get started.

The post The Four Biggest Questions You’ll Ask Yourself as a Business Owner appeared first on Checkbox Accounting.

Many employers outsource their payroll and related tax duties to third-party payers such as payroll service providers (PSP) and reporting agents (RA). Reputable third-party payers can help employers streamline their business operations by collecting and timely depositing payroll taxes on the employer’s behalf and filing required payroll tax returns with state and federal authorities.

Though most of these businesses provide very good service, there are, unfortunately, some who do not have their clients’ best interests at heart. Over the past few months, a number of these individuals and companies around the country have been prosecuted for stealing funds intended for the payment of payroll taxes. Examples of these successful prosecutions can be found on IRS.gov.

Like employers who handle their own payroll duties, employers who outsource this function are still legally responsible for any and all payroll taxes due. This includes any federal income taxes withheld as well as both the employer and employee’s share of social security and Medicare taxes. This is true even if the employer forwards tax amounts to a PSP or RA to make the required deposits or payments. For an overview of how the duties and obligations of agents, reporting agents and payroll service providers differ from one another, see the Third Party Arrangement Chart on IRS.gov.

Here are some steps employers can take to protect themselves from unscrupulous third-party payers.

-Enroll in the Electronic Federal Tax Payment System  and make sure the PSP or RA uses EFTPS to make tax deposits. Available free from the Treasury Department, EFTPS gives employers safe and easy online access to their payment history when deposits are made under their Employer Identification Number, enabling them to monitor whether their third-party payer is properly carrying out their tax deposit responsibilities. It also gives them the option of making any missed deposits themselves, as well as paying other individual and business taxes electronically, either online or by phone. To enroll or for more information, call toll-free 800-555-4477or visit www.eftps.gov.

-Refrain from substituting the third-party’s address for the employer’s address. Though employers are allowed to and have the option of making or agreeing to such a change, the IRS recommends that employer’s continue to use their own address as the address on record with the tax agency. Doing so ensures that the employer will continue to receive bills, notices and other account-related correspondence from the IRS. It also gives employers a way to monitor the third-party payer and easily spot any improper diversion of funds.

-Contact the IRS about any bills or notices and do so as soon as possible. This is especially important if it involves a payment that the employer believes was made or should have been made by a third-party payer. Call the number on the bill, write to the IRS office that sent the bill, contact the IRS business tax hotline at 800-829-4933 or visit a local IRS office. See Receiving a Bill from the IRS on IRS.gov for more information.

-For employers who choose to use a reporting agent, be aware of the special rules that apply to RAs. Among other things, reporting agents are generally required to use EFTPS and file payroll tax returns electronically. They are also required to provide employers with a written statement detailing the employer’s responsibilities including a reminder that the employer, not the reporting agent, is still legally required to timely file returns and pay any tax due. This statement must be provided upon entering into a contract with the employer and at least quarterly after that. See Reporting Agents File on IRS.gov for more information.

Become familiar with the tax due dates that apply to employers, and use the Small Business Tax Calendar to keep track of these key dates.

The post Tips for Employers Who Outsource Payroll Duties appeared first on Checkbox Accounting.

1. If you file late and owe federal taxes, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.

2. The failure-to-file penalty is usually much more than the failure-to-pay penalty. In most cases, it’s 10 times more, so if you can’t pay what you owe by the due date, you should still file your tax return on time and pay as much as you can. You should try other options to pay, such as getting a loan or paying by credit card. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan with the IRS using the Online Payment Agreement tool on IRS.gov.

3. The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.

5. The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.

6. If the 5 percent failure-to-file penalty and the 0.5 percent failure-to-pay penalty both apply in any month, the maximum penalty amount charged for that month is 5 percent.

7. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time.

The post Tax Alert: Eight Facts about Penalties for Filing and Paying Late appeared first on Checkbox Accounting.

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.

The post Tax Scams to be on Alert About appeared first on Checkbox Accounting.

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.

This is important because the name on your tax return must match SSA records. If they don’t, you’re likely to get a letter from the IRS about the mismatch. And if you expect a refund, this may delay when you’ll get it.

Be sure to contact SSA if:
– You got married or divorced and you changed your name.
– A dependent you claim had a name change. For example, this would apply if you adopted a child and that child’s last name changed.

File Form SS-5, Application for a Social Security Card, with the SSA to let them know about a name change. You can get the form on SSA.gov by calling 800-772-1213 or at an SSA office.

You can file Form SS-5 at an SSA office or by mail. Your new card will have the same SSN as before but will show your new name.

If you have an adopted child who does not have a SSN, use a temporary Adoption Taxpayer Identification Number on your tax form. You can apply for an ATIN by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. Get the form on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

The post Report Name Change Before You File Taxes appeared first on Checkbox Accounting.

The IRS deputy commissioner for services and enforcement, Steven T. Miller, said in a written memo to the National Federation of Independent Business that no reconciliation will be required on 2012 or future business tax returns. The IRS previously said in October of last year that no return entry would be required for 2011 tax returns, although they left a line on the returns saying “For 2011, enter 0.”

We previously advised our business clients to separately track their cash receipts from merchant card payments beginning in 2012. Please be advised that you are now no longer required to do this reconciliation.

If you have any questions regarding this alert please feel free to contact us.

The post IRS Eliminates the 1099 – K Line on all Business Tax Returns appeared first on Checkbox Accounting.