March 2018 Online Advisor

We have just posted the MARCH 2018 issue of the ONLINE ADVISOR newsletter on our website. Here are a few headlines from that issue. To read any of these articles, click on the link at the end of this email.

ALERT: EXPIRED HOME AND EDUCATION TAX BREAKS REVIVED
Congress passed a federal budget bill in early February that temporarily revived several expired tax breaks for the 2017 tax year. Find out what’s included.

NEW TAX LEGISLATION REQUIRES PLANNING
With every simplification in the Tax Cuts and Jobs Act (TCJA), there are many more tax issues that still require planning to realize extra tax benefits. Here are seven of them.

TAX CHECKLIST FOR BUSINESS STARTUPS
Complying with regulations and tax requirements can be tricky when it comes to startups. You can make it a little easier with this checklist of things you’ll need to consider.

Just click here to read the full articles.

The 2018 NEW YEAR TAX PLANNING LETTER has been published.

Dear Client,

We have just posted the 2018 NEW YEAR TAX PLANNING LETTER on our website. Here are headlines from the Letter. To read any of these articles, click on this link:
http://www.planningtips.com/Planning_Tips.asp?Co_ID=42935&Tip_ID=4422

ARE YOU READY FOR THE 2018 TAX ACT CHANGES?
Major tax law changes are capturing the headlines lately, and with good reason. Early proposals from the House and Senate varied widely but were reconciled in December 2017. Soon after, the Tax Cuts and Jobs Act was signed into law. There’s only one thing left for you to do now: start preparing for 2018 and beyond.

WHAT’S NEW IN 2018
Here’s a quick review of some of the tax changes you’ll see from 2017 to 2018 as a result of inflation adjustments and tax law changes.

WANT TO KEEP MORE OF YOUR MONEY?
Effective financial planning is all about knowing how your income will be taxed, and understanding what moves will help you keep as much money as possible.

Just click on the link below to read the full articles.
http://www.planningtips.com/Planning_Tips.asp?Co_ID=42935&Tip_ID=4422

THE TAX REFORM BILL PASSED CONGRESS – What should I do?

Phil L. Liberatore CPA, A Professional Corporation is working hard to keep you informed and up to date on current tax and accounting news potentially affecting you, your families and your business.

THE TAX REFORM BILL PASSED CONGRESS

– What should I do?
Congress has put a bow on the biggest tax cut bill since 1986.It is estimated that 80% of tax payers will see some form of a reduction in their tax bill.

The legislation will go into effect Jan. 1, 2018. Tax filings for the 2017 year will largely resemble your 2016 tax return.

OUR RECOMMENDATIONS:

  1. Take a close look at your state income taxes that could be due for 2017. If you own your home and itemize your tax deductions, consider winter property tax bill by December 31, 2017.  If you typically owe state income taxes, consider making an estimated tax payment by the end of December. The state and local income tax deductions will be limited to $10,000 in 2018.

To get an idea of what you paid for these taxes in 2016, refer to your 2016 taxes SCHEDULE A of form 1040, lines 5-8.

EXAMPLE: If your total state and local tax deduction for 2016 was 12,000, you will only be able to take up to $10,000 in deductions for 2018.

  1. Maximize your charitable organization donations. If you and your family have gotten in the habit of giving charitably, consider making your donation by December 31, 2017. This may also include ‘in-kind’ donations such as cars, etc.
  1. Consider paying down your home equity loans.They will no longer be deductible in 2018.
  1. Consider making a mortgage payment before December 31, 2017. This will increase your mortgage interest deduction for 2017.
  1. Prepare all of your 2017 miscellaneous tax deductions. They are being phased out in 2018. This includes unreimbursed work-related expenses, home office expenses, and tax preparation expenses. Have them ready for your tax return.
  1. Pay your medical bills. If you itemize, and have significant medical expenses, consider paying your medical bills. The threshold for medical expenses has actually been lowered for 2017 – 2018 to 7.5%.

FOR INDIVIDUALS:

1. Lowers (many) individual rates: The bill preserves seven tax brackets, but changes the rates that apply to: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
Today’s rates are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.

Here’s how income tax brackets will align according to the new rates:
– 10% (income up to $9,525 for individuals; up to $19,050 for married couples filing jointly)
– 12% (over $9,525 to $38,700; over $19,050 to $77,400 for couples)
– 22% (over $38,700 to $82,500; over $77,400 to $165,000 for couples)
– 24% (over $82,500 to $157,500; over $165,000 to $315,000 for couples)
– 32% (over $157,500 to $200,000; over $315,000 to $400,000 for couples)
– 35% (over $200,000 to $500,000; over $400,000 to $600,000 for couples)
– 37% (over $500,000; over $600,000 for couples)

The effect: It’s expected that the Treasury Department will come out with withholding tables in January, taxpayers might see the effect in their paychecks in February 2018.

2. Capital gains tax rates remain largely unchanged:The system for taxing capital gains and qualified dividends did not change under the act but the brackets will be adjusted.

3. Nearly doubles the standard deduction: For single filers, the bill increases it to $12,000 from $6,350 currently; for married couples filing jointly it increases to $24,000 from $12,700.

The effect: The percentage of filers who choose to itemize would drop sharply, since the only reason to do so is if your deductions exceed your standard deduction.

4. Eliminates personal exemptions: Today you’re allowed to claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. Doing so lowers your taxable income and thus your tax burden. The tax bill eliminates that option.

The effect: For families with three or more kids, that could mute if not negate any tax relief they might get as a result of other provisions in the bill.

5. Expands child tax credit: The credit is doubled to $2,000 for children under 17. It also would be made available to high earners because the bill would raise the income threshold under which filers may claim the full credit to $200,000 for single parents, up from $75,000 today; and to $400,000 for married couples, up from $110,000 today.

The effect: More Families will be able to get refundable child tax credits.

6. Eliminates mandate to buy health insurance:There would no longer be a penalty for not buying health insurance.

7. Changes to Itemized Deductions:

  1. Caps the state and local tax deduction: the final bill limits the state and local tax deduction for anyone who itemizes at $10,000. *For 2017 the deduction is unlimited for your state and local property taxes plus income or sales taxes.

The effect: If you own your home and itemize your tax deductions, you may be effected by this change, follow our recommendation on paying both real estate installments and any other state taxes you may be subject to in 2017. To get an idea of what you paid for these taxes in 2016, see your 2016 taxes SCHEDULE A of form 1040, lines 5-8.

EXAMPLE: if your total state and local tax deduction for 2017 will be 12,000, you will only be able to take $10,000 in deductions for 2018.

  1. Lowers cap on mortgage interest deduction: If you take out a new mortgage on a first or second home you would only be allowed to deduct the interest on debt up to $750,000, down from $1 million today. The bill would no longer allow a deduction for the interest on home equity loans, currently that’s allowed on loans up to $100,000.

The effect: Homeowners who already have a mortgage would be unaffected by the change. New mortgages taken after December 15 2018 will be fall under the limitation.

  1. No Major changes to the charitable donation deduction: The charitable donation deduction will remain in place with some adjustments upwards on limits for cash gifts. The charitable mileage rate will remain 14 cents per mile.

The effect: Currently, if you itemize your deductions, you can deduct certain donations to qualified charitable organizations.

  1. Miscellaneous itemized deductions: All miscellaneous itemized deductions subject to the 2% floor under current law are repealed.

The effect: Taxpayers who normally claim significant miscellaneous expenses (e.g. unreimbursed work-related expenses, home office expenses, and tax preparation expenses) will not be able to claim them anymore.

  1. Medical expenses: The act reduced the threshold for deduction of medical expenses to 7.5% of adjusted gross income for 2017 and 2018.

The medical expense deduction will remain in place with a lower floor of 7.5% for tax years 2017 and 2018. That means it is retroactive to 2017.

8. Curbs who’s hit by AMT: The AMT (Alternative Minimum Tax) is a secondary tax put in place in the 1960s to prevent the wealthy from artificially reducing their tax bill through the use of tax preference items. It is reduced by raising the income exemption levels to $70,300 for singles, up from $54,300 today; and to $109,400, up from $84,500, for married couples.

9. 529 College savings plans are expanded: Under the passed bill, up to $10,000 of 529 savings plans can be used per student for public, private and religious elementary and secondary schools, as well as home school students.

10. No changes to the college and tuition credits:  The American Opportunity Credit (AOC) and Lifetime Learning Credit (LLC) remain unchanged under the passed bill.

11. No change to the exclusion of gain from sale of your home: There are no changes to the current law, you can still exclude up to $250,000 ($500,000 for married taxpayers) in capital gains from the sale of your home so long as you have owned and resided in the house for at least two of the last five years.

12. Exempts almost everybody from the estate tax: The tax bill essentially eliminates estate tax for all but the smallest number of people by doubling the amount of money exempt from the estate tax – currently set at $5.49 million for individuals, and $10.98 million for married couples. This measure will likely affect owners of businesses and farms who pass on those assets to their children.

FOR BUSINESSES:

  1. Corporate Tax Relief: Under the passed bill, the corporate tax rate would be lowered to 21% (presently 35%) beginning in January 1 2018. This will effect Corporations which do not pass through their income pay tax on profits at the corporate level.
  1. Pass-Through Entities: Businesses use structures like limited liability companies (LLCs) or S corporations to pass income through to the owners without paying tax at the company level. Under the passed bill, owners of pass-through companies (e.g. S corporations, partnerships, and LLCs) and sole proprietors will be taxed at their individual tax rates less a 20% deduction (to bring the rate lower) for business-related income (subject to certain wage limits and exceptions). Phase-ins begin at $157,500 for individual taxpayers and $315,000 for married taxpayers filing jointly.

Please contact me with any questions or concerns as I will strategize to ensure that you maximize your tax savings.

Sincerely,

Phil Liberatore

DECEMBER 2017 ONLINE ADVISOR

We have just posted the DECEMBER 2017 issue of the ONLINE ADVISOR newsletter on our website. Here are a few headlines from that issue. To read any of these articles, click on the link at the end of this email.

GET READY TO SAVE MORE IN 2018
Good news! You can save more for retirement using tax-advantaged accounts, thanks to the IRS contribution rate boost. Here’s what you need to know to start saving more.

BUSINESS YEAR-END TAX MOVES
It’s not too late to get your business in the best possible position for the 2017 filing season. Consider these possible deductions and other year-end tax moves.

DON’T DIG YOURSELF INTO HOLIDAY DEBT
It’s easier than you think to overspend during the holiday season. This year, try staying on budget with these helpful, money-saving tips.

Just click on the link below to read the full articles.

http://www.planningtips.com/Planning_Tips.asp?Co_ID=42935&Tip_ID=6850

Update on Equifax Cyber-Security Data Breach

This is bigger than we orginally thought.

Not only was banking information and account numbers stolen, this time the hackers got a lot more than that… watch this short video clip that Phil recorded to find out more:

Also, if you haven’t yet checked to see if you were impacted, click here to find out.

We want to make sure you are completely in-the-know and protected. Feel free to give us a call if you’ve got any other questions concerning this, or the new IRS scams that Phil mentions in the video.

We are here to serve and look out for you, your family and your business.

Thank you for being the best part of Philip L. Liberatore, CPA.

October 2017 Online Advisor Released

We have just released the October 2017 issue of the Online Advisor and this month it’s packed with trending and emerging topics including “Tax Loss Harvesting Tips,” “Business Taxes—Time to Consider Section 179?” and “How to Fix Your Overfunded Account.” Get a glimpse of the articles are below and for full articles, just click on the link at the end of this article.

5 TAX-LOSS HARVESTING TIPS
If you’d like to get the most out of your financial portfolio, consider this tax strategy. Take a look at the best ways you can use losses to reduce short-term gains.

BUSINESS TAX: TIME TO CONSIDER SECTION 179?
Are you thinking about depreciating business assets? Find out more on how Section 179 works and whether or not using it is a good move to make this tax season.

HOW TO ACE THE FAFSA
A recent change makes the FAFSA available Oct. 1. Learn the common mistakes students make when filling it out and the best ways to avoid them.

HOW TO FIX YOUR OVERFUNDED ACCOUNT
Overfunding happens. Find out how and what steps you can take to fix the problem with your IRA or 401(k).

Just click on the link below to read the full articles.

www.planningtips.com

Phil Liberatore, CPA, Discusses the Deplorable Weaknesses of the IRS

Between 2011 and 2016, a shocking approximation of 9,176 IRS employees were investigated for not completely paying their taxes. Alternatively, 99 percent of employees investigated for not fully paying taxes continue to work there, and only 74 of the agency’s workers were terminated, according to The Daily Caller News Foundation’s Investigative Group.

Phil Liberatore of Liberatore CPA rebukes this type of behavior, stating that “the IRS is at the heart of the bureaucratic mess in Washington. The US Inspector General’s findings of IRS employees within the IRS with unpaid tax bills and tax cheats is the tip of the iceberg. The agency doesn’t hold its own employees to the same standards as the US taxpayer.”

Liberatore goes on to assert, “in our over 30 years of experience, we have witnessed firsthand the organizational nightmare in the IRS. Many of our clients will come in with notices showing they owe huge sums to the IRS, and it turns out they were errors in the IRS’s calculations.” Liberatore has a zero-tolerance policy on the little time they set aside for their fellow hardworking citizens, which further invalidates their reliability and overall accuracy. He claims, “Compounding the problem is the terrible customer service the US taxpayers are forced to deal with. The agency has cut its walk-in office locations and wait-times on the phone are excessively long. The US taxpayers deserve better.”

Although the IRS has many flaws and deficiencies that are hindering them from accurately serving the American people, Liberatore is optimistic that there is still a chance to improve. He articulates that “the agency is long overdue for reform which will bring accountability to the IRS, and hold them to the same standards as everyone else in the US.”

Phil and his team at Liberatore CPA will be closely monitoring this problem and provide updates as they become available.

JULY 2017 Online Advisor just published

We have just posted the JULY 2017 issue of the ONLINE ADVISOR newsletter on our website. Here are a few headlines from that issue. To read any of these articles, click on the link at the end of this email.

TAX-FREE INCOME

Paying taxes may not be something many of us look forward to, but it’s nice to know that some areas of tax law still benefit taxpayers. Make sure you’re taking advantage of all the benefits that apply to your situation.

REAP THE BENEITS OF HIRING YOUR CHILD FOR THE SUMMER

It’s summertime and most teenagers are eager to make some money. Make sure you understand the tax benefits of hiring your child to work for your company.

HOW MUCH DO YOU NEED TO RETIRE?

The statistics regarding retirement preparedness in the U.S. are staggering. The vast majority of Americans have saved very little towards retirement. Learn three actions you can take to better prepare for your golden years.

ZOMBIE PAYER – KEEP YOUR AUTOMATIC PAYMENTS IN CONTROL

It’s becoming so common to use automatic payments to pay for the products and services we use, that we risk becoming zombie payers. Paying attention to your bills will help you maintain control of your finances.

Just click here to read the full articles.

 

A great read…Check out our June 2017 On Line Advisor

We have just posted the JUNE 2017 issue of the ONLINE ADVISOR newsletter on our website. Here are a few headlines from that issue. To read any of these articles, click on the link at the end of this email.

KEEP YOUR AUDIT FEARS IN CHECK

Many people worry about being audited by the IRS. Learn why your chances of being targeted for an audit are now lower than they’ve been in years.

DONATE STOCK TO LOWER YOUR TAX BURDEN

Learn why donating stock, rather than writing a check, to a charity can have greater tax benefits.

IS YOUR BUSINESS WAVING A RED FLAG AT THE IRS?

The chances that your business will be audited by the IRS are pretty low, but it’s still wise to know what triggers business audits so you can avoid them whenever possible.

DON’T OVERLOOK CURB APPEAL

If you’re considering putting your house on the market, take a look at the exterior appearance of your home. Sprucing it up could help you raise your asking price.

Just click here to read the full articles.

Insights Into The Main Street Fairness Act Bipartisan Efforts Growing to Help US Small Businesses

A new tax bill was introduced last quarter in the senate by Senator Susan Collins of Maine (R) and Senator Bill Nelson of Florida (D) called The Main Street Fairness Act. The bill seeks to provide federal tax parity between pass-through businesses (such as S-Corps, LLC’s and Partnerships) and C-corporations. It would essentially guarantee the tax rate for small businesses is never higher than that of a large corporation. This is a bipartisan bill, which is an encouraging sign of increased support for much-needed tax reform.

As is the case for most Liberatore CPA clients, most small businesses are organized as “pass-through entities” and profits are passed-through to the business owner(s). They are then taxed at an individual tax basis on the individual income tax returns (the form 1040 in this case).

Under current law, the top individual tax rate is 39.6%, while corporations pay a much lower corporate tax rate of 35%. This makes an already uneven playing field even less competitive, as corporations tend to have more access to funds and other resources.

The Main Street Fairness Act would prevent these pass-through companies from being taxed at a higher rate than C-corporations. Instead, income from pass-through businesses would be treated like corporations’ income.

The bill comes on the heels of increased focus on tax reform in Washington. Recently President Trump’s proposal on tax reform was presented by Treasury Secretary Steven Mnuchin and Gary Cohn, Director of National Economic Council, that seeks to reduce the corporate tax rate even further from 35% down to 15%. Congress is also working to pass tax-reform legislation. A version of the senators’ bill was previously introduced in the House of Representatives by Vern Buchanan (FL). House Republicans’ “Better Way Tax Reform Blueprint” that was introduced last summer, states that it builds on concepts from the small-business bill, according to Accounting Today. The tax-reform blueprint aims to lower taxes across the board, but it does not seem to provide for tax parity between small businesses and corporations. The blueprint aims to lower the top tax rate for individuals to 33%, the top tax rate for pass-through businesses to 25%, and the top rate for corporations to 20%.

Philip L. Liberatore CPA Observation
The proposal could potentially yield a significant tax savings for small business owners. At present, only income below $37,950 a year is currently taxed at 15% or less. Income earned through the pass-through entity would be able to benefit of the lower corporate tax rate. This specifically refers to an individual’s distributive share of “active business income” from a pass-through entity (excluding his or her “reasonable compensation” from providing services to such entity), where the top rate would be equivalent to the Corporate tax rate. It is encouraging to see bipartisan support building for much needed tax reform that could be a monumental shift for small-businesses nationwide.

In the senator’s joint statement, Senator Susan Collins said “small businesses employ more than half of all workers and have generated approximately two-thirds of our country’s net new jobs since the 1970s. Unfortunately, our nation’s small businesses face a higher tax burden that affects their ability to compete with large firms in the marketplace. Our legislation will help keep small businesses strong by ensuring that they do not pay a higher tax rate than large companies.” Collins further noted, “Keeping small businesses healthy keeps Americans employed and the economy strong.”

According to the same joint statement, small businesses generate half of the U.S. GDP, 54% of all U.S. sales, 41% of private sector payroll, and one-third of the country’s export value.

As is the way of doing business in Washington, legislation can take a long time to become law. We’ll follow the ongoing efforts in Washington aimed at tax reform legislation and alert you when it hits any big milestones. If you feel strongly about this legislation, make sure to reach out to your senators and representatives and make certain your voice is heard.