The Disaster Relief and Airport and Airway Extension Act of 2017 was just passed by Congress and signed by President Trump on September 29, 2017. Highlights of this law are as follows:
The Act includes significant relief to both individuals and businesses that were in disaster areas from Hurricanes Harvey, Irma and Maria. The significant provisions of the Act include:
- Charitable contribution deduction limitations have been eased resulting in higher amounts allowable
- Casualty loss deductions have been expanded
- A new wage tax credit is available for businesses
- Retirement plan withdrawals have been widened
- Earned income and child care credits have been increased
Wage Tax Credit
Businesses can claim a new employee retention tax credit of up to $2,400 for qualified wages paid to eligible employees.
Casualty Loss Deduction Expanded
Currently, losses not reimbursed by insurance are deductible if they exceed $100 and exceed 100% of adjusted gross income. Under the new law if you are in a disaster area from Hurricanes Harvey, Irma or Maria, the floor increases to $500 but the 10% limitation has been removed. If you do not itemize then your standard deduction is increased by the amount of your loss.
Retirement Withdrawals Eased
Qualified distributions for anyone in the hurricane disaster areas are exempt from the 10% early retirement plan withdrawal penalty, and no tax is required to be withheld. These amounts can be treated as loans if paid back within three years.
Earned Income and Child Tax Credits
Taxpayers can use previous year’s earned income during the disaster period to compute tax credits.
If you ever asked yourself if you are maximizing your medical tax deductions, chances are, you’ve overlooked some commonly missed and hidden opportunities. Here are some you may have disregarded to help you reduce your tax burden:
- Transportation and car expenses. You can deduct fees paid for transportation to and from appointments for medical care, including buses, taxis, planes, trains, and ambulance rides. You may also deduct your out-of-pocket expenses for use of your own personal vehicle, using either the actual amount you paid for gas and oil or a standard rate of $0.19 per mile. Parking garage fees and tolls paid while traveling to and from medical appointments are also deductible. Don’t have a record of when your appointments were? Just take a look at your explanation of benefits documents from your insurance to see what dates and locations your medical appointments were for the year.
- Trips to medical conferences related to you, your spouse, or a dependent. If you, your spouse, or a dependent is suffering from a chronic medical condition, you can deduct transportation fees and admission fees to conferences pertaining to that condition.
- Your fees paid for insurance premiums. While you can’t write off visits that your insurance has covered, you can deduct your portion paid for your premium.
- Fertility or sterilization expenses. Your fees paid for fertility treatments, pregnancy tests, or sterilization surgery not covered by insurance can be deducted from your taxes as a medical expense.
- Smoking cessation expenses. Programs for smoking cessation, nicotine gum or patches, and non-prescription aids to assist with stopping tobacco use are tax-deductible.
- Alternative treatments. Acupuncture and chiropractic care can be deducted from your tax burden as a medical expense.
- Assistive aids. Glasses, contacts, hearing aids, dentures, crutches, wheelchairs, and other assistive devices not covered by insurance may be deducted.
- Modifications to your home. Addition of ramps, railing, or other modifications or improvements to assist someone with a medical condition are tax-deductible.
- Diabetes supplies. You can deduct the amount paid for your diabetic testing device and strips, lancets, syringes, etc.
- Nursing mother supplies. Breast pumps and accessories to assist a nursing mother are tax-deductible.
These are just a few of the many commonly overlooked medical expense deductions. The good news is, you can file an amended return for any of the previous three tax years to recover your missed deductions. Contact us today to talk about how you can best maximize your medical expense deductions.
The Republican party released a 9 page tax plan framework this past week. While the document did not go into great details, it contained a lot of similar concepts that President Trump outlined during the election. We have reviewed this proposal and summarized most of the significant proposed changes.
- Tax brackets – The number of tax brackets will be decreased from 7 to 3. The rates will be 12%, 25% and 35% with the possibility of a negotiated higher rate.
- Standard deduction – This will increase to $24,000 for married filers and $12,000 for single filers. This is in connection with eliminating a lot of the existing itemized deductions, because statistics show that only 25% of taxpayers itemize.
- Exemptions – These will be eliminated as they are being combined with the increased standard deduction.
- Mortgage deduction – There is talk of reducing the maximum amount of a loan that qualifies for the interest deduction from $1,000,000 – $500,000.
- Tax deductions – Possibly the most controversial changes are here. The proposal calls for the elimination of state, local and property taxes. The hardest hit will be for taxpayers in high rate states.
- Repeals – The Alternative Minimum Tax and Estate Taxes are on the chopping block.
- Pass through entity tax rates – The rates for pass-through entities like Partnerships and S corporations will be reduced from the top individual marginal tax rate (presently about 40%) to 25% EXCEPT for service and professionals.
- Corporate tax rates – Decrease from 35% to 20%.
- Job Stimulation – Reducing corporate rates and making US tax rates more favorable than overseas should provide more capital for businesses to hire more US workers.
- Overseas Incentives – A new one time low rate tax on accumulated profits overseas will be spread over several years.
- Capital Improvements – A 100% deduction for all Capital Improvements over the next five years will be allowed. The goal is to stimulate business expansion.
- Interest Expense – The amount of the allowed deduction is proposed to be limited to some extent.
If you built your own business your attention may not always be focused on bookkeeping. Business owners often smartly delegate this to experts whenever possible. But profit focused small business owners often prefer a hands on and creative approach. The following are a list of bookkeeping techniques that any size business can use to benefit their books, their business, and their bottom line.
Scrutinize all invoices
Unpaid invoices are essentially a slow bleeding wound for a small business that can reduce revenue and productivity. The best way to counter this issue is to allocate specific resources to monitor invoices and organize information on late or unpaid invoices so you can track them down and get them paid. Some businesses hire an employee to take care of these invoices, an alternative for those without a lot of man power or cash to allocate is to assign an employee to handle the hunting down of invoice on a regular basis. Alternatively, you can save money by utilizing apps like Xero or Taxbot to give you a timely notification.
Monitor Accounts Receivable Monthly
As stated above clients owing you money for an extended period of time like a year is not late revenue, it is a loss. Making sure you stay aware of how much you are owed and allocating resources to receivables will keep you from having a cash poor business. Regular monthly check ups on your accounts and invoices using software or an app is essential to fiscal stability.
Keep Business and Personal Finances Separate
It is essential that you reorganize your finances and separate business and personal finances to avoid any sort of fiscal issues. By separating the two you can make it a lot easier on yourself and your business and provide you with structure. Even if you are the sole proprietor this sort of separation breeds a discipline necessary for running your own business.
If you have any concerns about bookkeeping and your small business contact the experts today.
Why Do Child Care Deductions/Credits Matter?
Tax credits for child care can help reduce the tax bill you owe the government by hundreds or even thousands of dollars. This virtually means you are getting part of the money you spend on childcare back each year. Understanding these laws is crucial as certain expenses count and many others do not. Understanding what does and doesn’t count can be the difference between filing your taxes properly and doing so incorrectly.
It’s also important to understand the benefits that these laws have on couples who are divorced that have children together. These laws allow the parent without custody to be able to claim the child as a dependent (exemption), child tax credit, & education credits. At the same time, the custodial parent is still allowed to claim the same child for Earned Income Credit, Head of Household filing status, and Day Care Credit.
These tax exemptions make it crucial for parents to understand which expenses related to child care and education they can claim and which they can’t.
Who Can Claim This Tax Credit?
To claim the tax credit for your child you must fill out the appropriate forms for your child and dependent care expenses which would include the Form 1040, Form 1040A, or Form 1040NR. In addition, you must pass each of the following tests as well:
- Qualifying Person Test – care must be provided by one or more people identified on Form 2441.
- Earned Income Test – You must have earned the income being claimed during that specific year.
- Work-Related Expense Test – You must pay child and dependent care expenses so that you can go to work or look for work.
- Joint-Return Test – Your filing status must be single, head of household, or qualifying widow(er) with a dependent child. If you are married you must file jointly unless an exception applies to you.
- Provider Identification Test – You must identify the care provider in your tax return.
Deductions are generally limited to $3,000 per person cared for or $6,000 for two people cared for.
Most households will be capped at a limit of $5,000 that’s deducted from their tax returns.
Who Is a Qualifying Person?
For the person to qualify for care that may be written off your taxes they must meet one or more of the following criteria:
- Your qualified person was under the age of 13 when the care was provided.
- Your spouse who wasn’t physically or mentally capable of caring for herself or himself and lived with you for more than half of the year — this person could not have made more than $4,050, filed a joint return, or you (and your spouse if filing jointly) were claimed as dependents on someone else’s tax return.
All income that is claimed off of tax returns must be earned income. This means that the income must come from a job that someone in the household has. So money earned through means such as pensions, annuities, social security payments, railroad retirement benefits, workers’ compensation, interest/dividends on investments, unemployment compensation, scholarship/fellowship grants, non-taxable workfare payments, child support payments received, income of a nonresident alien that isn’t connected with a US trade/business, does not qualify.
If you are able to check off all of these boxes then you have a situation where you can get deductions and credits for the money you spend on your childcare within the limits defined above.
The counties in bold have been added by the IRS in the past two days:
Updated 9/14/17 – Added counties of: Citrus, DeSoto, Glades, Hardee, Henry, Hernando, Highlands, Indian River, Lake, Marion, Martin, Okeechobee, Osceola, Seminole, Sumter and Volusia.
Updated 9/13/17 – Added counties of: Brevard, Orange, Pasco, Polk and St. Lucie counties.
The IRS has extended the filing of most returns for many Floridians impacted by Hurricane Irma until January 31, 2018.
Victims of Hurricane Irma
Following the recent disaster declaration issued by FEMA, the IRS announced today that affected taxpayers in the following Florida counties will receive tax relief: Broward, Charlotte, Clay, Collier, Duval, Flagler, Hillsborough, Lee, Manatee, Miami-Dade, Monroe, Palm Beach, Pinellas, Putnam, Sarasota and St. John’s.
Deadlines falling on or after September 4, 2017, and before January 31, 2018, are granted additional time to file through January 31, 2018. This includes businesses and taxpayers who had a valid extension to file their 2016 return that was due to run out on September 15, 2017, and October 16, 2017, respectively.
It also includes the quarterly estimated income tax payments originally due on September 15, 2017, and January 16, 2018, and the quarterly payroll and excise tax returns normally due on October 31, 2017. It also includes tax-exempt organizations that operate on a calendar-year basis and had an automatic extension due to run out on November 15, 2017. In addition, penalties on payroll and excise tax deposits due on or after September 4, 2017, and before September 21, 2017, will be abated as long as the deposits are made by September 19, 2017.
If you receive a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date that falls within the postponement period, please contact us immediately to abate the penalty.
Taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses (including tax-exempt organizations) whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.
Grant of Relief
Under section 7508A, the IRS gives affected taxpayers until January 31, 2018, to file most tax returns (including individual, corporate and estate and trust income tax returns; partnership returns, S corporation returns, trust returns; estate, gift and generation-skipping transfer tax returns; annual information returns of tax-exempt organizations; and employment and certain excise tax returns), that have either an original or extended due date occurring on or after September 4, 2017, and before January 31, 2018. Affected taxpayers that have an estimated income tax payment originally due on or after September 4, 2017, and before January 31, 2018, will not be subject to penalties for failure to pay estimated tax installments as long as such payments are paid on or before January 31, 2018. The IRS also gives affected taxpayers until January 31, 2018, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (August 20, 2007), that are due to be performed on or after September 4, 2017, and before January 31, 2018.
This relief also includes the filing of Form 5500 series returns, (that were required to be filed on or after September 4, 2017, and before January 31, 2018, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.
Unless an act is specifically listed in Rev. Proc. 2007-56, the postponement of time to file and pay does not apply to information returns in the W-2, 1094, 1095, 1097, 1098 or 1099 series; to Forms 1042-S, 3921, 3922, 8025 or 8027; or to employment and excise tax deposits. However, penalties on deposits due on or after September 4, 2017, and before September 19, 2017, will be abated as long as the tax deposits are made by September 19, 2017.
Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either the year in which the event occurred, or the prior year. See Publication 547 for details.
Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.
Affected taxpayers claiming the disaster loss on a 2016 return should put the Disaster Designation, “Florida, Hurricane Irma” at the top of the form so that the IRS can expedite the processing of the refund.
The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation, “Florida, Hurricane Irma” in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.
Please contact us if you have any questions!
Businesses across the globe are adapting to the information age at varying speeds. As usual, marketing is racing at the cutting edge of experimental technology, production steadily adopts things as technology is tested to their satisfaction, and finance departments are on every point along the spectrum. Depending on the company and the CFO for each organization, you could be spearheading mobile fintech or still making carbon copies of paper checks. If your office is still getting up to speed, here are three great bookkeeping tips for going paperless:
1. Scan Paper Documents
In a time where even potted plants have data storage, there’s no reason that spilled coffee should be able to menace your financial documents. For the documents you handle that is still on paper, you can save its contents for digital posterity simply by scanning it into your online files. This way, even if the physical copy is lost or destroyed, your records will still be complete.
2. The Company Card
One of the best ways to streamline paperless bookkeeping is to sort your online accounts. Expenses are much easier to track when everything in a single category is also charged to a single card. By ensuring that your company spenders are equipped with a designated card you can cut down on the reimbursement incidents where employees count on you to sort out payment method ‘after the fact’. This way, you have one account per project, team, or department to keep track of.
3. Invoice Electronically
If your company traditionally sends out paper invoices, it’s time to break tradition. Most clients will enthusiastically adopt the change and you can use this opportunity to streamline the payment process. Electronic invoices, often delivered through email, allow you to link directly to a payment portal which can further enhance your record keeping and customer service.
Properly managing business finances is hard work, and trying to do it on paper only makes it harder. If you’d like advice choosing from the dozens of available apps, platforms, and techniques to streamline your paperless bookkeeping, contact us today.