TMTW #397 Don’t Miss the September 17th Deadline

Tax and Money Tip this Week:
Don’t Miss the September 17th Deadline
August 22, 2018 | No. 397

Final Filing Deadline Reminder

If you need to file a Form 1065 (partnership return), Form 1120S (S corporation return) or Form 1041 (fiduciary return), the deadline to file your 2017 return is September 17, 2018.  This assumes you had filed for an extension prior to April 17, 2018.

If you put your personal tax return on extension (Form 1040), you still have until October 15, 2018 to timely file your 2017 return.

As a reminder, putting your tax returns on extension can be a good thing—but penalties to miss the extension deadline can be steep.

Give us a call if you need help meeting your deadlines.

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

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TMTW #396 September 17, 2018 Tax Deadline: Individual Estimated Taxes and Tax Planning Checkups

 

Tax and Money Tip this Week:
September 17, 2018 Tax Deadlines: Individual Estimated Taxes and Tax Planning Checkups
August 15, 2018 | No. 396

This is the time of year in our CPA practice that I work with small business owners and individuals to perform tax checkups to help them project their tax liabilities for 2018 and make tax saving recommendations of moves they can make between now and year-end. Frequently, just defining the amount of taxes they owe via these planning services helps manage their cash flow so the businesses and individuals don’t have a big amount due and/or surprise each Spring when they prepare their tax returns.

Coming up September 17, 2018 is the date in which the 3rd installment for individuals that have income that is not taxed and withheld (like W-2 income) is due.

Self employed businesses, e.g. Proprietor Schedule C filers, folks that own S Corporations, Partnerships, LLCs, or other flow-through entities must estimate their unpaid income and/or self-employment taxes for the period January 1-August 31, 2018 and pay ½ of this amount to IRS and/or NC Dept of Revenue on September 17, 2018 and the other ½ of this amount on or before January 15, 2019.  (April 17th and June 15th of 2018 are also Quarterly Estimated Tax Payment dates that have also passed by if you weren’t aware)

The rules for estimated tax payments depend on your modified adjusted gross income for 2018. “Safety” estimates can be designed to avoid penalties and interest, optimize cash flow, and save taxes

 

Questions or Comments?

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.

Mark Vitek, CPA/PFS, CFP®
…until next week.

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TMTW #395- TCJA Changes to Your Tax-Free Supper Money

Tax and Money Tip of the Week:
TCJA Changes to Your Tax-Free Supper Money
August 8, 2018 | No. 395

​TCJA Changes to Your Tax-Free Supper Money

Here’s how the TCJA (The Tax Cuts and Jobs Act) applied its tax reform to your supper money meal allowances. Before tax reform, you deducted 100 percent of the supper money cost. Now, because of tax reform, your tax deduction for supper money is subject to a 50 percent cut for amounts paid during tax years 2018 through 2025.

The regulations allow supper money as an excludable fringe benefit when the benefit satisfies the following four conditions:

  1. You provide the benefit only occasionally.

 

  1. You pay no more than a reasonable amount.

 

  1. The meal enables you or the employee to work overtime.

 

  1. You do not calculate the benefit based on the number of hours worked. For example, a $20 allowance per hour of overtime is a no-no. You can’t do that. The way to provide the benefit is to give a discretionary meal allowance, such as $56.

If the payment of supper money does not meet the four rules, it is taxable compensation to the recipient, and if that’s an employee, the money is subject to withholding and payroll taxes.

Corporate owners and the self-employed qualify for the supper money allowance under the four rules explained above. The law does not discriminate. It makes supper money available to all who work in the business.

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.Questions or Comments?

Mark Vitek, CPA/PFS, CFP®
…until next time

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TMTW #394- Tax Reform Changes Affecting Partnerships and LLCs and Their Owners

Tax and Money Tip of the Week:
Tax Reform Changes Affecting Partnerships and LLCs and Their Owners
August 1, 2018 | No. 394

Tax Reform Changes Affecting Partnerships and LLCs and Their Owners

The Tax Cuts and Jobs Act (TCJA) includes several changes that affect partnerships and their partners, and LLCs that are treated as partnerships for tax purposes and their members. Most of the changes are good news. Here are five highlights:

1. Technical Termination Rule Repealed (Good)

Under prior law, a partnership or an LLC treated as a partnership for tax purposes was considered terminated for federal income tax purposes if, within a 12-month period, there was a sale or exchange of 50 percent or more of the partnership’s or LLC’s capital and profits interests. Fortunately, the TCJA repealed the technical termination rule, effective for partnership or LLC tax years beginning in 2018 and beyond. This is a permanent change.

2. Lower Tax Rates for Individual Partners and LLC Members (Good)

For 2018 through 2025, the TCJA retains seven tax rate brackets for ordinary income and net short-term capital gains recognized by individual taxpayers, including income and gains passed through to individual partners and LLC members. Six of the rates are lower than before. In 2026, the rates and brackets that were in place for 2017 are scheduled to return, but skeptics doubt that will happen.

3. Unchanged Rates for Long-Term Gains and Qualified Dividends (Not Good)

The TCJA retains the 0, 15, and 20 percent tax rates on long-term capital gains and qualified dividends recognized by individual taxpayers, including gains and dividends passed through to individual partners and LLC members. After 2018, these brackets will be indexed for inflation.

4. New Pass-Through Business Deduction (Good)

For tax years beginning in 2018-2025, the TCJA establishes a new deduction based on your share of qualified business income (QBI) passed through from a partnership or LLC. The deduction generally equals 20 percent of QBI, subject to restrictions that can apply at higher income levels.

5. New Limits on Deducting Business Losses (Not Good)

For 2018-2025, the TCJA made two changes to the rules for deducting an individual taxpayer’s business losses. Unfortunately, the changes are not in your favor.

For tax years beginning in 2018-2025, you cannot deduct an excess business loss in the current year. An excess business loss means the amount of a loss in excess of $250,000, or $500,000 if you are a married joint-filer. The excess business loss is carried over to the following tax year, and you can then deduct it under new rules for deducting net operating loss (NOL) carryforwards, explained below.

Key Point: This new loss disallowance rule applies after applying the passive activity loss (PAL) rules. So if the PAL rules disallow your business loss, you don’t get to use the new loss disallowance rule.

For NOLs arising in tax years beginning in 2018 and beyond, the TCJA stipulates that you generally cannot use an NOL carryover to shelter more than 80 percent of taxable income in the carryover year. Under prior law, you could generally use an NOL carryover to shelter up to 100 percent of your taxable income in the carryover year.

Another TCJA change stipulates that NOLs arising in tax years ending after 2017 generally cannot be carried back to an earlier tax year. You can carry such losses forward only. But you can carry them forward indefinitely. Under prior law, you could carry an NOL forward for no more than 20 years.

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.Questions or Comments?

Mark Vitek, CPA/PFS, CFP®
…until next time

 

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TMTW #393 Will Renting Your Home Destroy Your $250,000 Exclusion?

Tax and Money Tip of the Week:
Will Renting Your Home Destroy Your $250,000 Exclusion?
July 25, 2018 | No. 393

Will Renting Your Home Destroy Your $250,000 Exclusion?

The days when you could convert your rental property or vacation home to a principal residence and then use the full $250,000/$500,000 home-sale exclusion to avoid taxes are gone.

Here’s how the $250,000/$500,000 exclusion works today. You must divide your period of home ownership into two categories—qualified and nonqualified use:

  • Qualified use means the time you or your spouse uses the home as your principal residence.

 

  • Nonqualified use means any time on January 1, 2009, or later in which neither you nor your spouse (or your former spouse) uses the property as a primary residence.

You allocate gain on the sale of your home between the periods of qualified and nonqualified use, and the gain allocated to nonqualified use doesn’t qualify for the $250,000/$500,000 home-sale exclusion.

You have one important exception to the nonqualified use definition: nonqualified use does not include rental use during the five-year period that’s after the last date you or your spouse used the property as your principal residence.

In other words, if you live in your principal residence for two years or more and then rent it out for three years or less, the rental period is not a “period of nonqualified use,” and you qualify for the $250,000/$500,000 home-sale exclusion.

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.Questions or Comments?

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TMTW #392- New Tax Law is prodding rich to get divorced, fast

Tax and Money Tip of the Week:
New tax law is prodding rich to get divorced, fast
July 18, 2018 | No. 392

Click Here to read an article from the ‘The News and Observer’ regarding the new tax law that will eliminate a tax break for alimony payments.

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.Questions or Comments?

Mark Vitek, CPA/PFS, CFP®
…until next time

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TMTW #391- Your Home as ATM Loses Some Allure

Tax and Money Tip of the Week:
Your Home as ATM Loses Some Allure
July 11, 2018 | No. 391

Click Here to read about the changing rules on deductibility of home-equity loans from an article in The Wall Street Journal’.

You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.Questions or Comments?

Mark Vitek, CPA/PFS, CFP®
…until next time

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