Monday, January 15, 2018

Trump Tax Changes compared with current tax

A Guide to the Tax Change

Saturday, January 13, 2018

Withholding Tables 2018

WASHINGTON — The Internal Revenue Service today released Notice 1036, which updates the income-tax withholding tables for 2018 reflecting changes made by the tax reform legislation enacted last month. This is the first in a series of steps that IRS will take to help improve the accuracy of withholding following major changes made by the new tax law.

The updated withholding information, posted today on IRS.gov, shows the new rates for employers to use during 2018. Employers should begin using the 2018 withholding tables as soon as possible, but not later than Feb. 15, 2018. They should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.

Many employees will begin to see increases in their paychecks to reflect the new law in February. The time it will take for employees to see the changes in their paychecks will vary depending on how quickly the new tables are implemented by their employers and how often they are paid — generally weekly, biweekly or monthly.
 
The new withholding tables are designed to work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances. This will minimize burden on taxpayers and employers. Employees do not have to do anything at this time.

“The IRS appreciates the help from the payroll community working with us on these important changes,” said Acting IRS Commissioner David Kautter. “Payroll withholding can be complicated, and the needs of taxpayers vary based on their personal financial situation. In the weeks ahead, the IRS will be providing more information to help people understand and review these changes."

The new law makes a number of changes for 2018 that affect individual taxpayers. The new tables reflect the increase in the standard deduction, repeal of personal exemptions and changes in tax rates and brackets.

For people with simpler tax situations, the new tables are designed to produce the correct amount of tax withholding. The revisions are also aimed at avoiding over- and under-withholding of tax as much as possible.
To help people determine their withholding, the IRS is revising the withholding tax calculator on IRS.gov. The IRS anticipates this calculator should be available by the end of February. Taxpayers are encouraged to use the calculator to adjust their withholding once it is released.

The IRS is also working on revising the Form W-4. Form W-4 and the revised calculator will reflect additional changes in the new law, such as changes in available itemized deductions, increases in the child tax credit, the new dependent credit and repeal of dependent exemptions.

The calculator and new Form W-4 can be used by employees who wish to update their withholding in response to the new law or changes in their personal circumstances in 2018, and by workers starting a new job. Until a new Form W-4 is issued, employees and employers should continue to use the 2017 Form W-4.

In addition, the IRS will help educate taxpayers about the new withholding guidelines and the calculator. The effort will be designed to help workers ensure that they are not having too much or too little withholding taken out of their pay.

For 2019, the IRS anticipates making further changes involving withholding. The IRS will work with the business and payroll community to encourage workers to file new Forms W-4 next year and share information on changes in the new tax law that impact withholding.

Thursday, January 11, 2018

Florida's Minimum Wage Increases

Florida's minimum wage increased to $8.25 per hour on January 1, 2018.  Florida's 2018 minimum wage also increased for tipped employees to $5.23 per hour.

In 2004, Florida voters approved a constitutional amendment which created Florida's minimum wage.  The minimum wage applies to all employees in the state who are covered by the federal minimum wage.
Florida law requires the Florida Department of Economic Opportunity to calculate a minimum wage rate each year. The annual calculation is based on the percentage increase in the federal Consumer
Price Index for Urban Wage Earners and Clerical Workers in the South Region for the 12-month
period prior to September 1, 2017.
Employers must pay their employees the hourly state minimum wage for all hours worked in Florida.  The definitions of employer, employee, and wage for state purposes are the same as those established under the federal Fair Labor Standards Act (FLSA).
Employees who are not paid the minimum wage may bring a civil action against the employer or
any person violating Florida's minimum wage law. The state attorney general may also bring an
enforcement action to enforce the minimum wage.
Florida Statutes also require employers who must pay their employees the Florida minimum wage to
post a minimum wage notice in a conspicuous and accessible place in each establishment
where these employees work. This poster requirement is in addition to the federal requirement
to post a notice of the federal minimum wage.

Friday, January 05, 2018

Filing Season

The IRS will begin accepting tax returns on Jan. 29. The nation’s tax deadline will be April 17 this year – so taxpayers will have two additional days to file beyond April 15. 

Saturday, December 30, 2017

Happy New Year!

Happy New Year everyone!  See you in 2018

Thursday, December 28, 2017

Late S Election for a corp that did not file the S election timely

Rev. Proc. 2013-30 facilitates the grant of relief to late-filing entities by consolidating numerous other revenue procedures into one revenue procedure and extending relief in certain circumstances. This procedure provides guidance for relief for late:

  • S corporation elections,
  • Electing Small Business Trust (ESBT) elections,
  • Qualified Subchapter S Trust (QSST) elections,
  • Qualified Subchapter S Subsidiary (QSub) elections, and
  • Corporate classification elections which the entity intended to take effect on the same date that the S corporation election would take effect.
Generally, the relief under the revenue procedure can be granted when the entity fails to qualify solely because it failed to file the appropriate election under Subchapter S timely with the applicable IRS Campus and all returns reported income consistently as if the election was in effect. Please note that for purposes of this guidance, the “effective date” is the date the election is intended to be effective.

In addition, the revenue procedure also increases the timeframe that allows relief, from 24 months from the due date of the election, to 3 years and 75 days of the effective date of the election. 

To assist in determining if an entity qualifies for late election relief, Rev. Proc. 2013-30 includes flow charts, as well as specific guidance for each of the five categories listed above.

If an entity does not qualify for relief under Rev. Proc. 2013-30, the entity may request relief by requesting a private letter ruling. The procedural requirements for requesting a letter ruling and the associated fees are described in Rev. Proc. 2016-1 (PDF) (or its successor).

Again, it is important to know that Rev. Proc. 2013-30 relief is only for late elections that would otherwise be valid. For example, the S election must still contain signatures from all of the shareholders. Also, if there was an invalid shareholder or the corporation was not qualified during any part of the tax year, the S election is not valid for that year. However, for certain inadvertent invalid S corporation elections or QSub elections, relief may be obtained from National Office under IRC §1362(f). 

General Relief Rules for S Corporation Elections


The following requirements must be met in order to qualify for late S corporation election relief by a corporation or entity classified as a corporation:

  • The entity intended to be classified as an S corporation, is an eligible entity, and failed to qualify as an S corporation solely because the election was not timely;
  • The entity has reasonable cause for its failure to make the election timely;
  • The entity and all shareholders reported their income consistent with an S corporation election in effect for the year the election should have been made and all subsequent years; and
  • Less than 3 years and 75 days have passed since the effective date of the election (See the Exception to the 3 Years and 75 Day Rule section below).
In addition, if the electing entity is requesting a late corporate classification election to be effective on the same date that the S corporation election was intended to be effective, the requesting entity must also meet the following additional requirements:

  • The entity is an eligible entity as defined in Treas. Reg. § 301.7701-3(a);
  • The entity failed to qualify as a corporation solely because Form 8832 was not timely filed; and
  • The entity timely filed all required federal tax returns consistent with its requested classification as an S corporation.
If the entity qualifies and files timely in accordance with Rev. Proc. 2013-30, the Campus can grant late election relief. If the entity does not qualify under the provisions of the Revenue Procedure, its only recourse is to request a private letter ruling.   

Exception to the 3 Years and 75 Days Rule


Certain entities can qualify for the exception to the 3 years and 75 day rule when:

  • The entity is a corporation (i.e., not an LLC seeking an entity classification election);
  • The entity failed to qualify as an S corporation solely because the election was not timely field;
  • The corporation and all its shareholders reported their income consistent with S corporation status for the year the S election should have been made and for every subsequent taxable year (if any);
  • At least 6 months has elapsed since the date on which the corporation filed its tax return for the first year the corporation intended to be an S corporation;
  • Neither the corporation nor any of its shareholders was notified by the IRS of any problems regarding the S corporation status within 6 months of the date on which the Form 1120S for the first year was timely filed; and
  • The completed Election form includes the statements as described in the revenue procedure.  
Although this exception exists, it is unlikely many situations will qualify since the current system is set up to notify the corporation of the problem with its filing requirement when the return rejects in processing. It could apply to a case where it did not go through normal processing.

Thursday, December 21, 2017

2017 Tax Law and 34 effects of the new tax law

It's official. Congress has ushered through the first major tax overhaul since Ronald Reagan was president.

The measure, which now awaits President Trump's signature, is about to shake up life for millions of Americans. It will redistribute the country's wealth. It could sway decisions about whether to buy a home, or where to send kids to school. It could even affect when unhappy couples decide to get a divorce.
As the bill becomes law, here are 34 things you need to know.

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1. This is the first significant reform of the U.S. tax code since 1986.
Reagan signed major legislation for corporations and individuals in 1986. Since then, serious tax reform has eluded Republicans, though they repeatedly called for it as the tax code became longer and more arcane.
2. Changes have been made to both individual and corporate tax rates.
Individual provisions in the new legislation technically expire by the end of 2025, though some people expect that a future Congress won't actually let them lapse. Most of the corporate provisions are permanent.
3. Tax reform will increase deficits by $1.46 trillion over the next decade.
That's the net number that's been crunched by the nonpartisan Joint Committee on Taxation. The future law's contribution to the debt will likely be even higher if individual tax cuts are re-upped in eight years.
4. There are still seven tax brackets for individuals, but the rates have changed.
Americans will continue to be placed in one of seven tax brackets based on their income. But the rates for some of these brackets have been lowered. The new rates are: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Find out where you fit here.
5. The standard deduction has essentially been doubled.
Republicans want fewer people to itemize their taxes. To achieve this, they've nearly doubled the standard deduction. For single filers, the standard deduction has increased from $6,350 to $12,000; for married couples filing jointly, it's increased from $12,700 to $24,000.
6. The personal exemption is gone.
Previously, you could claim a $4,050 personal exemption for yourself, your spouse and each of your dependents, which lowered your taxable income. No longer. For some families, the elimination of the personal exemption will reduce or negate the tax relief they get from other parts of the reform package.
7. The state and local tax deduction now has a cap.
The state and local tax deduction, or SALT, remains in place for those who itemize their taxes -- but now there's a $10,000 cap. Previously, filers could deduct an unlimited amount for state and local property taxes, plus income or sales taxes.
8. The child tax credit has been expanded.
The child tax credit has doubled to $2,000 for children under 17. It's also now available, in full, to more people. The entire credit can be claimed by single parents who make up to $200,000, and married couples who make up to $400,000.
9. There's a new tax credit for non-child dependents, like elderly parents.
Taxpayers may now claim a $500 temporary credit for non-child dependents. This can apply to a number of people adults support, such as children over age 17, elderly parents or adult children with a disability.
10. Fewer people will have to deal with the alternative minimum tax.
The alternative minimum tax, a parallel tax system that ensures people who receive a lot of tax breaks still pay some federal income taxes, remains in place for individuals. But fewer people will have to worry about calculating their tax liability under the AMT moving forward. The exemption has been raised to $70,300 for singles, and to $109,400 for married couples.
11. And the mortgage interest deduction has been lowered.
Current homeowners are in the clear. But from now on, anyone buying a new home will only be able to deduct the first $750,000 of their mortgage debt. That's down from $1 million. This is likely to affect people looking for homes in more expensive coastal regions.
12. None of this will affect your 2017 taxes.
Americans won't need to worry about these changes when they start filing their 2017 tax returns in about a month. The new laws will first be applied to 2018 taxes.
13. By the way, you can still deduct student loan interest.
The deduction for student loan interest, which is up to $2,500 per year, is safe.
14. You can still deduct medical expenses.
The deduction for medical expenses wasn't cut. In fact, it's been expanded for two years. In that time, filers can deduct medical expenses that add up to more than 7.5% of adjusted gross income. In the past, the threshold for most Americans was 10% of adjusted gross income.
15. If you're a teacher, you can still deduct classroom supplies.
The deduction for teachers who spend their own money on school supplies was left alone. Educators can continue to deduct up to $250 to offset what they spend on classroom materials.
16. The electric car tax credit lives on.
Drivers of plug-in electric vehicles can still claim a credit of up to $7,500. Just as before, the full amount is good only on the first 200,000 electric cars sold by each automaker. GM, Nissan and Tesla are expected to reach that number some time next year.
17. Home sellers who turn a profit keep their tax break.
Homeowners who sell their house for a gain will still be able to exclude up to $500,000 (or $250,000 for single filers) from capital gains, so long as they're selling their primary home and have lived there for two of the past five years.
18. 529 savings accounts can be used in new ways.
In the past, funds invested in 529 savings accounts wasn't taxed -- but it could only be used for college expenses. Now, up to $10,000 can be distributed annually to cover the cost of sending a child to a "public, private or religious elementary or secondary school." This change is a win for Education Secretary Betsy DeVos.
19. And tuition waivers for grad students remain tax-free.
Graduate students still won't have to pay income taxes on the tuition waiver they get from their schools. Such waivers are typically awarded to teaching and research assistants.
20. But say goodbye to the tax deduction for alimony payments.
Alimony payments, which are codified in divorce agreements and go to the ex-spouse who earns less money, are no longer deductible for the person who writes the checks. This provision will apply to couples who sign divorce or separation paperwork after December 31, 2018.
21. The deduction for moving expenses is also gone ...
There may be some exceptions for members of the military. But most people will no longer be able to deduct the cost of their U-Haul when they move for work.
22. As is the tax preparation deduction ...
Before tax reform passed, people could deduct the cost of having their taxes prepared by a professional, or the money they spent on tax prep software. That break has been eliminated.
23. ... The disaster deduction ...
Losses sustained due to a fire, storm, shipwreck or theft that aren't covered by insurance used to be deductible, assuming they exceeded 10% of adjusted gross income. But now through 2025, people can only claim that deduction if they've been affected by an official national disaster. That would make someone whose house was destroyed by a California wildfire potentially eligible for some relief, while disqualifying the victim of a random house fire.
24. ... And the reimbursement for bicycle commuters.
The tax code used to let you to knock off up to $20 from your income per month for the costs of bicycle commuting to work, assuming you weren't enrolled in a commuter benefit program. That's gone.
25. Almost everyone is now exempt from the estate tax.
Before tax reform, few estates were subject to the estate tax, which applies to the transfer of property after someone dies. Now, even fewer people have to deal with it. The amount of money exempt from the tax -- previously set at $5.49 million for individuals, and at $10.98 million for married couples -- has been doubled.
26. Adjustments for inflation will be slower.
The new legislation uses "chained CPI" to measure inflation. It's a slower measure than what was used before. Over time, that will raise more money for the federal government, but deductions, credits and exemptions will be worth less.
27. Oh, and the individual mandate on health insurance has been scrapped.
Republicans failed to repeal Obamacare earlier this year, but they managed to get rid of one of the health law's key provisions with tax reform. The elimination of the individual mandate, which penalizes people who do not have health care, goes into effect in 2019. The Congressional Budget Office has predicted that as a result, 13 million fewer people will have insurance coverage by 2027, and premiums will go up by about 10% most years.
28. You won't be able to file your tax return on a postcard.
Trump said H&R Block would go out of business after tax reform because filing taxes would become so simple. Not quite. While doubling the standard deduction will ease the process for some individuals, there's still a web of deductions and credits to work through. And for small businesses, filing could become even more complicated.
29. The corporate tax rate is coming down.
The corporate tax rate has been cut from 35% to 21% starting next year. The alternative minimum tax for corporations has been thrown out altogether. Earnings are expected to go up as a result.
30. Pass-through entities will also get a break.
The tax burden by owners, partners and shareholders of S-corporations, LLCs and partnerships -- who pay their share of the business' taxes through their individual tax returns -- has been lowered via a 20% deduction. The legislation includes a rule to ensure owners don't game the system, but tax experts remain concerned about abuse of this provision.
31. Not all CEOs think they'll use their savings to create jobs, though.
Just 14% of CEOs surveyed by Yale University said their companies plan to make large, immediate capital investments in the United States following tax reform. Capital investments, like building plants and upgrading equipment, can spur hiring.
32. Plus, the way multinational corporations are taxed is about to change.
The U.S. is switching to a territorial system of taxation, which means companies won't owe federal taxes on income they make offshore. To help the transition, companies will be required to pay a one-time, low tax rate on their existing overseas profits -- 15.5% on cash assets and 8% on non-cash assets, like equipment in which profits were invested.
33. By the way, there's a provision to rein in executive pay at nonprofits.
The legislation includes a new 21% excise tax on nonprofit employers for salaries they pay out above $1 million. That may mean some well-paid executives at nonprofits take a pay cut.
34. Businesses won't be able to write off sexual harassment settlements.
New Jersey Democratic Senator Bob Menendez's amendment born of the #MeToo moment made it all the way through. Companies can no longer deduct any settlements, payouts or attorney's fees related to sexual harassment if the payments are subject to non-disclosure agreements.
-- Thanks to CNNMoney With contributions from Jeanne Sahadi, Kathryn Vasel, Tami Luhby, Anna Bahney, Jackie Wattles, Katie Lobosco, Lydia DePillis and Matt Egan.

Monday, December 18, 2017

January 31 deadlines

Early Due Dates for W-2, W-3 and Form 1099-MISC
Employers face a January 31, 2018, due date for filing 2017 Forms W-2 and W-3 with the Social Security Administration. This date applies to both electronic and paper filers.
Form 1099-MISC is due to the IRS and individuals by January 31 when reporting non-employee compensation payments in box 7.
Penalties for failure to file correct information returns or furnish correct payee statements have increased and are now subject to inflationary adjustments. These increased penalties are effective for information returns required to be filed after December 31, 2015.

Form 1098-T Reporting Changes and Limited Penalty Relief for 2017 Returns
Eligible educational institutions are required to report the total amount of payments received for qualified tuition and related expenses from all sources during the calendar year on Form 1098-T, Tuition Statement.
Announcement 2016-42 provides relief from penalties under Section 6721 and 6722 to 2017 Forms 1098-T. The IRS will not impose penalties on eligible education institutions that report the aggregate amount billed (instead of amount received) for qualified tuition and related expenses on 2017 Form 1098-T.  

Thursday, December 14, 2017

Standard Mileage Rates for 2018

Standard Mileage Rates for 2018 Up from Rates for 2017 
WASHINGTON ― The Internal Revenue Service today issued the 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2018, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
  • 54.5 cents for every mile of business travel driven, up 1 cent from the rate for 2017.
  • 18 cents per mile driven for medical or moving purposes, up 1 cent from the rate for 2017.
  • 14 cents per mile driven in service of charitable organizations.
The business mileage rate and the medical and moving expense rates each increased 1 cent per mile from the rates for 2017. The charitable rate is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.  These and other requirements are described in Rev. Proc. 2010-51.
Notice 2018-03, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan. 

Wednesday, December 13, 2017

Getting ready to file taxes in the new year

Resources on IRS.gov Help Taxpayers Get Ready to File Taxes
With the tax filing season right around the corner, the IRS encourages taxpayers to visit IRS.gov for tax tools and resources. Taxpayers can resolve nearly every tax issue on the IRS website.
IRS.gov provides many self-service tools and features, including these six: