No One’s Sure Who Qualifies for the New Tax Law

No One’s Sure Who Qualifies for the New Tax Law

As briefly touched upon earlier this week, when it comes to the recently instated Republican tax law, one thing is clear: from business owners and CPA’s, to the IRS themselves, no one really knows who exactly qualifies for the promised deduction. Established to give small businesses an easier tax break, the general idea of the bill is to provide a 20% deduction to taxpayers with an income falling below $157,500 for single filers, or $315,000 for joint accounts. However, rise above that threshold and things get tricky – a reduced deduction only applying to certain professions, before cutting off altogether at an income of $207,500 for singles, or $415,000 for married couples. What are those certain professions? Currently, no one’s quite sure – a lax interpretation that could cost the U.S. Treasury over $415 billion in deductible tax dollars by 2025 unless more specification becomes available. While the letter of the bill disqualifies industries like law, health, financial, brokerage, athletics, and consulting, the finer details of which job falls into which category is not specified, causing many businesses to find themselves entrapped in a massive grey area. For instance, questions like if veterinarian services count as “health care”, or if a life coach can be grouped under “consulting” same as a consultant for a hedge-fund – thereby making both ineligible for the deduction – are surfacing. Another problem that has tax officials scrambling, is what the law means when it disqualifies any business where the “principle asset” is the “reputation or skill of one or more employees or owners”. According to Matt Turkstra from the Associated General Contractors of...
5 Ways to Give More to Charities

5 Ways to Give More to Charities

You love giving to others, but sometimes just don’t have the cash to share with your favorite charities. Instead of feeling guilty for skipping out on a donation, why not try these five ways you can still give to non-profits and receive charitable tax deductions. Donate Stock I’m sure you’ve donated food and clothing to a charity before, but did you know that you can also donate stock? Instead of selling appreciated stock and giving the earnings to a charitable organization, avoid losing money on taxes by donating the stock itself. As non-profits don’t have to pay capital gains tax, through gifting an appreciated stock to a charity, the entire value will be preserved while you avoid having to pay extra on taxes! Open a Donor-Advised Fund If you want to give to multiple charities or don’t have a specific amount in mind, opening a Donor-Advised Fund (DAF) is a great way to always have money set aside for your donations and get tax deductions that same year. Simply choose a DAF sponsor, invest in one of their many pre-approved options, and then submit a grant request when you’re ready to donate the money! Like all investments, however, there is risk involved as the value of your DAF can rise or fall with the economy – which is why it’s often smarter to invest in low-risk opportunities if you’re planning to withdraw the money sooner rather than later, or vice versa. Create a Charity Budget As the needs of a non-profit are year-round, treating charitable donations like any other expense and budgeting them out accordingly can not only help...
Small Businesses Could Start Paying Their CPA’s More

Small Businesses Could Start Paying Their CPA’s More

According to Democrat Sen. Ron Wyden, the Ranking Member of the Senate Finance Committee, ever since the introduction of the new Republican tax law, small businesses are predicted to spend more on their accountant fees this year than on growing their own business. Placing the blame firmly on the complexity of the bill, Wyden reasons that small business owners will be needing the assistance of their tax professionals now, more than ever, just to learn how to comply with their 2018 taxes – claiming that “Main Street job creators will be lucky if they figure out how to calculate their deduction any time soon”. According to the new tax law, there’s a 20% deduction to be had, but only for certain professionals falling within specific income brackets. For instance, engineers, architects, and bakers qualify, but only receive the full deduction if their net income falls below $157,500 for singles, and $315,000 for joint filers. Eligibility ceases altogether when a single taxpayer earns $207,500, or $415,000 for married couples. “Republicans claim to want less government intervention, but with their new tax law they picked winners and losers—architects are in, accountants are out; engineers made the cut, doctors did not—leaving business owners wondering whether or not they were blacklisted,” says Wyden. “What good is a deduction if money spent in annual fees to your accountant far exceed the tax break?” A report done by the Businesses for Responsible Tax Reform found that recent polls place small businesses under apprehension regarding whether or not the tax code will actually help them. When asked: 69% of business owners said they would not hire a...
Don’t Miss Out on This $1.1 Billion Tax Return

Don’t Miss Out on This $1.1 Billion Tax Return

With less than a week until April 17th – the tax deadline for many individuals – time is running out for taxpayers who wish to claim their 2014 income tax returns, but still have yet to file for that year. The standard return only remaining viable for a period of three years, beginning at the original tax due date, the IRS has issued a reminder that all 2014 refunds not collected by April 17th, 2018 will go straight into the U.S. Treasury. An amount, mind you, that the IRS estimates to equal a total of $1.1 billion in as-of-yet unclaimed tax refunds – the standard midpoint for each individual claim totaling at roughly $847. “We’re trying to connect a million people with their share of $1.1 billion in unclaimed refunds for 2014,” Acting IRS Commissioner, David Kautter, says. “Time is running out for people who haven’t filed tax returns to claim their refunds. Students, part-time workers, and many others may have overlooked filing for 2014. And there’s no penalty for filing a late return if you’re due a refund.” Plus, if you’re a low or moderate-income worker, you could be missing out on a lot more than just your return by failing to file this tax period. Designed to help families and individuals with smaller incomes, the Earned Income Tax Credit (EITC) is a secondary refund that could value as high as $6,143 for taxpayers falling below the following income thresholds: $14,590 ($20,020 if filing jointly) for people without qualifying children; $38,511 ($43,941 if filing jointly) for those with one qualifying child; $43,756 ($49,186 if filing jointly) for people...
2018’s 2nd Quarter Interest Rates are Rising

2018’s 2nd Quarter Interest Rates are Rising

The IRS has announced an increase in interest rates for over-payments and under-payments falling within the 2nd quarter. This change – scheduled to take effect on April 1st, 2018 – will apply to those corporations with erroneous tax payments, while non-corporate taxpayers will continue to pay the federal short-term rate (currently 2.10%), plus 3 percentage points. This year’s 2nd quarter interest rates will be as follows: 5% for non-corporate over-payments, and 4% for corporate ones. 2.5% for any over-payment amount made by a corporation that exceeds $10,000. 5% for average under-payments (both corporate and non-corporate). 7% for large corporate under-payments that exceed $100,000. As the IRS announces over-payment and under-payment interest rates every tax quarter, some may find the constant change stressful – especially if those interest rates apply to them. Thankfully, however, according to the Internal Revenue Code, there is a method to the madness. To predict interest estimates, the first step is to understand that typically all corporate quarterly interest numbers are determined by calculating the nation’s federal short-term rates, and then adding on an additional percentage, depending on the erroneous payment amount. For corporations with an average under-payment, the interest is an extra 3% added onto the federal short-term rate, while for over-payments, it’s an additional 2%. For under-payments over $100,000, the interest rate is 5% on top of the federal short-term rate, while for over-payments exceeding $10,000, it’s only an extra 0.5%. Want help avoiding interest charges altogether? Let us handle your bookkeeping so you can rest easy knowing that you’ll never pay too much or too little for your payroll taxes! Call us during...
All About California’s New Salary Ban

All About California’s New Salary Ban

California has a new salary history ban and for some state employers, the specifics can be a little confusing. Established in late 2017 with the intention of eliminating previous wage bias in the workplace, according to the California Labor Code section 432.2, under the new ban employers are restricted from “relying on the salary history information of an applicant for employment as a factor in determining whether to offer employment to an applicant or what salary to offer an applicant.” In simpler terms, you can’t ask an applicant about their previous salary history. But what about those special circumstances? To help avoid the unintentional breaking of state law, here’s everything you need to know about what employers can and cannot ask. What is Not Allowed The obvious ban against employers directly questioning an applicant about their salary history aside, there are a few situations that might fall into more of a grey area but are just as illegal. Take job recruiters, for example. As requesting salary info through any form is not allowed, learning of an applicant’s previous wage through a third-party agent is equally unlawful and the employer can be held liable – even if salary histories of prospective employees were collected by recruiters without the company’s knowledge. Another instance includes asking a candidate about previous benefits received; and while queries as to the benefit amount is illegal, the ban is unclear as to whether questions about which benefits an applicant might lose if they become an employee, are unlawful as well. Our advice? Play it safe and avoid the question altogether. What is Allowed Exceptions to the...
Are You Taking Advantage of Penalty Abatement?

Are You Taking Advantage of Penalty Abatement?

Here’s some good news for taxpayers with three or more consecutive years of great compliance history: if you had a clean tax record prior to recent penalties, you can apply to have those fees waved through the First-Time Penalty Abatement Program (FTA). Created in 2001 by the IRS, the FTA is a program designed to reward compliant taxpayers by waiving penalties ranging from failure to file and pay, to failure to deposit. And though it’s only applicable for a single tax period or year, anyone with a good compliance history can apply for an FTA. Surprisingly, however, few people actually know of interest abatement, much less take advantage of it. According to the Treasury Inspector General for Tax Administration, only 8% of taxpayers in America applied for and received an FTA in 2012. To combat this, as of this year, the IRS is currently exploring the possibility of automating FTA waivers, but in the meantime, one can now request and receive an FTA through a simple phone call, while the IRS also seeks to promote abatement awareness by inserting informational pamphlets on the back of tax notices. One thing is clear though: tax professionals need to understand the rules surrounding FTAs. For one, clients need to understand that fee abatement only applies to certain failure to file, pay, and deposit penalties, and never estimated tax or return accuracy fees. For another, tax professionals should first seek Reasonable Cause Penalty Abatement whenever applicable (IRS error or late payments due to hardships, for example) before pursuing an FTA, as one can then save First-Time Abatement for another time. To do this,...
Small Businesses and Wages are Growing

Small Businesses and Wages are Growing

Never has the time for small business expansion been this opportune. According to this year’s National Federation of Independent Business (NFIB) survey, optimism and growth amongst small businesses is the highest it’s been since 1973 – nearly a third of Main Street agreeing that now is the time to upsize. For many, it’s the new GOP tax plan passed in December that can be attributed to sparking the increase of small business optimism. For others, it’s the equal rise in wages. In the same study conducted by the NFIB, roughly 31% of small businesses have reported paying more in employee wages, while prices have also risen by 11% – both the highest numbers the nation has seen in years. Job availability, too, has improved slowly over time and continues to climb, giving American workers yet another reason to celebrate. However, while an increase in money circulation usually means a healthier economy, the rapid growth in wages has some on Wall Street feeling a little apprehensive. With fear of inflation present in everyone’s mind, the DOW has suffered some tumultuous weeks of incredible highs and lows in the past few months, though it continues to remain up by 32% since President Trump came into office. Meanwhile, the Federal Reserve continues to maintain its eight-year-trend of keeping interest rates low in an effort to help the economy in the delicate stages of growth, and as of now, it seems to be working. Still, with the shortage of workers to fill those new jobs and many employers finding themselves spending more to recruit and retain the employees available, many wonder if its...
Understanding Offer in Compromise (OIC)

Understanding Offer in Compromise (OIC)

It’s a scary thing: to realize you owe more taxes than you can possibly pay off. But before you panic, did you know that the IRS has a policy to assist in just such cases, outside of a loan or payment plan? Known as an Offer in Compromise (OIC), if a taxpayer finds that their tax liability exceeds their funds or feel they don’t owe the amount due, they can seek to either lower or completely settle the debt with the IRS by qualifying for one of three conditions. These conditions – determined through an in-depth examination into the specifics of each case – are as follows… Doubt as to Collectability Most commonly seen in OICs, a taxpayer would file under Doubt as to Collectability if they’re unable to pay the full liability debt due to a lack of money, or if doing so would reduce them to an unsuitable living situation. To be eligible for a compromise under Collectability, an investigation by the IRS into the taxpayer’s financial situation would be had – evaluating values such as income, expenses, liabilities, and assets – before comparing the numbers to local and national standards of living, known as “allowable living expenses”, which include costs of food, clothing, housing, utilities, transportation, medical bills, and education. If it’s found improbable through this comparison that the taxpayer can pay their debt in full, the IRS is more likely to accept an OIC. Doubt as to Liability If the taxpayer has the financial capability to pay their tax due, but feel that the amount is incorrect or invalid, they can contest the debt through...
The Student Debt Problem (Part 2)

The Student Debt Problem (Part 2)

Earlier this week we brought you the first installment to our two-part series covering the rising issue of student debt in America, where we discovered how school loans became so expensive – an article you can find here. Today, we bring you Part Two, in which we follow the money to see just who profits off of each loan… Where Does the Money Go? For starters, a large majority of each loan goes towards the colleges themselves – funding tuition, dorm costs, etc. But ever since Congress took a step back from student-aid, however, allowing private companies a larger say with less restrictions, the entire educational system has turned into a giant profit wheel. In fact, through higher interest rates, upcharges, and hidden fees, nearly everyone on Wall Street now has a share in the earnings. As a student loan is nearly the only consumer debt that can’t be discharged under bankruptcy, banks now lock in a steady income of interest rates and penalties, while debt collectors can also cash in on commissions earned from overdue payments. Meanwhile, the government, through a policy known as Administrative Offset, can potentially withhold up to 15% in federal payments to students behind on their debts (including income such as tax refunds, Social Security, and disability checks), in addition to profiting off of the interest rates of its own government-held loans. According to the Government Accountability Office, these federal loans could bring the government up to $66 billion in income, just from those issued between a five-year period. Sallie Mae itself created its own off-branch company called Navient, designed to only facilitate private...

Pin It on Pinterest