MARY M. LANK, CPA

Certified Public Accountants

Current Tax Issues and Notes



Beware of IRS Scams


The Internal Revenue Service has recently warned taxpayers of a quickly growing scam involving erroneous tax refunds being deposited into their bank accounts. The IRS also offered a step-by-step explanation for how to return the funds and avoid being scammed.


Following up on a Security Summit alert issued Feb. 2, the IRS issued this additional warning about the new scheme after discovering more tax practitioners’ computer files have been breached. In addition, the number of potential taxpayer victims jumped from a few hundred to several thousand in just days. The IRS Criminal Investigation division continues its investigation into the scope and breadth of this scheme.


These criminals have a new twist on an old scam. After stealing client data from tax professionals and filing fraudulent tax returns, these criminals use the taxpayers' real bank accounts for the deposit.


Thieves are then using various tactics to reclaim the refund from the taxpayers, and their versions of the scam may continue to evolve.



 

Tax Cuts and Jobs Act of 2017


Five Key Changes for Individuals -

  • State and local taxes – The new law has implemented a limitation on the amount of State and Local Taxes that may be deducted as part of your itemized deductions.  Beginning in 2018 taxpayers are limited to a maximum deduction of $10,000 for state and local taxes.  This includes state income taxes, real estate taxes on a first and second home, and excises taxes.  However it does not include real estate taxes paid for rental properties which are not affected.
  • Mortgage interest – The limit on home mortgage debt is reduced to $750,000. However, for debt incurred before Dec. 15, 2017, the $1,000,000 limit still applies. The higher pre-Act limit also applies to debt arising from refinancing pre-Dec. 15, 2017 debt, as long as the refinancing doesn’t increase the amount of the original loan. The law also removes the deduction for home equity debt, but there are still some exceptions.  If you have any home equity debt, or are considering it, please feel free to reach out to our office to discuss the limitations.
  • Miscellaneous deductions – The new law removes the miscellaneous deductions for items such as investment management fees, union dues, moving expenses, employee mileage, employee auto expenses, and uniforms.  This change can significantly impact sales individuals who previously would be able to deduct business mileage and business supplies.  We suggest you reach out to your employer regarding this issue of non-reimbursed expenses.  For further information on how this change will affect you please feel free to contact our office. 
  • New tax brackets and standard deduction – The new law has lowered the tax brackets rate by approximately 3%, lowering the maximum rate from 39.6% to 37%.  If you are a W-2 employee you should have already seen an decrease in your federal income tax withholdings as there are new withholding tables.  The law also increases the standard deduction to $24,000 for married couples and $12,000 for individuals, while removing the personal exemption amount of $4,050 per individual.
  • 199A (20% Deduction) – This deduction effects various entities including S-Corporations, Partnerships, Sole Proprietorships, LLCs and Rental Properties.  The general rule of this law is that there is a 20% deduction from income from a qualified trade or business.  The deduction, however, can be limited due to income levels and the type of business. This is the change that was most complicated.  For further information regarding how this deduction will affect your personal situation please reach out to our office.


 

Tax Cuts and Jobs Act of 2017


Five Key Changes for Businesses -

  • Flat Tax Rate – Gone are the days of a corporate tax bracket.  C-Corporations will now pay a flat 21% tax on any of their income.
  • Section 1031 – Section 1031 exchanges, more commonly referred to as “like-kind exchanges, are now only allowed for real estate transactions. This means you can no longer defer a gain or loss when the company trades-in a vehicle or equipment.
  • Disallowance of entertainment expenses – Corporations are no longer able to deduct expenses paid for entertainment.  Entertainment includes items such as tickets to sporting events, golfing, concert tickets, etc.  In other words the only entertainment expense allows is a 50% deduction for meals with a business purpose.
  • Depreciation rules – The limitation on the amount that can be expensed under section 179 is increased to $1,000,000 for 2018, and the phase out limit is increased to $2,500,000.  “Bonus depreciation”, which had previously allowed for 50% expensing, is increased to allow for 100% expensing for qualified property in placed in service from 9/27/17 – 1/1/23.
  • 199A (20% Deduction) – This deduction effects various entities including S-Corporations, Partnerships, Sole Proprietorships, LLCs and Rental Properties.  The general rule of this law is that there is a 20% deduction from income from a qualified trade or business.  The deduction, however, can be limited due to income levels and the type of business. This is the change that was most complicated.  For further information regarding how this deduction will affect your personal situation please reach out to our office.
 


 

Stop Tax Identity Theft in Its Tracks

 

Imagine after sending in your annual tax return, you receive a notice from the Internal Revenue Service saying that another return has already been filed using your name and Social Security number—and claiming a refund. Sound impossible? It can happen if you become one of a growing number of victims of tax return identity theft. According to one estimate, tax-related identity theft cases have soared more than 650% since 2008. At the least, this crime can lead to a delay in your refund, but the consequences may be much more serious. In addition, you may face a larger problem with identify theft if the scammer is also running up credit card debt or taking out loans in your name.


To avoid becoming a victim, we recommend steps such as safeguarding your Social Security number and other financial information, keeping an eye on changes to your credit ratings and taking precautions with electronic transfers of confidential information. Be sure to contact us if you believe you have been a victim of identity theft or would like advice on the best ways to secure your financial information as well as clicking to complete our Identity Theft Checklist.


 

 

Record Retention Guide

 

Storing tax records: How long is long enough?  Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this period of time.  However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit or even further. To be safe, click to use the following guidelines.



Do You Qualify for the Health Care Premium Tax Credit?


Individuals and families can buy private health insurance through affordable insurance exchanges, which are marketplaces where individuals can shop for private health insurance. If you purchase health insurance through an exchange, you may be eligible for a tax credit that will make your coverage more affordable.


The credit is aimed at middle-income individuals and families. A larger credit is available for older individuals whose coverage costs may be higher. The credit will be refundable, which means it can be used by people who pay little or no federal income tax. You can also arrange for the credit to be paid to your insurer in advance so that you have little or no out-of-pocket costs for your healthcare premiums. Are you eligible for the credit? We can help you find out and work with you to make the best use of your health insurance dollars. Call us today with all your questions about health care or any other tax or financial concerns.



Stamp Out Tax Season Stress!


Are you ready for tax time? There are a couple of steps you can take now to alleviate some of the stress of filing your return. Plan to get organized early. Begin by putting together a tax folder with W-2s from your employer, 1099s for other income you may have earned, bank and other financial statements and receipts for things like medical bills and charitable donations.


Once you’ve gathered all your important paperwork, this is a good time to meet with your CPA to talk about changes in your financial situation or in tax laws that may have an effect on your return.  Having this discussion early is key to avoiding surprises at tax time and a great time to get started on planning that can potentially minimize your tax bite and strengthen your

   

 

 

Wish You Had a Coach for Your New or Growing Business? We Can Help.


Are you launching a business or product line? You may have relied on us for years for timely and personalized tax advice, but you may not be aware that we help business owners start and expand their companies every day with several types of services. In fact, we frequently serve as a business coach or mentor for owners seeking help in their strategic planning, setting up payroll or other systems or selecting the best accounting software, among other projects. Due to our extensive contacts in the community, we can also recommend attorneys and bankers to work with your business.

 

We’ve seen the many kinds of challenges they face and we know how to implement the right solutions. And we’re business owners ourselves! Be sure to contact us to learn more about how we can help you achieve your business goals.

 

 

 Have Questions? We’re Here All Year!

 

Many clients see their CPAs at tax time, when the main focus is on completing and filing their tax return. As a result, they may not take the opportunity to ask questions about long-term tax planning or about other important financial concerns. The good news is that we are available to you all year. We have a full- time, year-round staff of experts with extensive expertise in a broad range of financial areas. We’re ready when you are to take some time reviewing your financial situation, helping you understand your options and make the best decisions. We’re also here in an emergency to help address unexpected financial concerns. So, give us a call to discuss your important financial issues whenever they arise.