Qualifying for Innocent Spouse Relief

Innocent Spouse Relief is a tax settlement option available to certain spouses who believe they should not be held responsible for a tax liability incurred by their partner. Although both members of a married couple are normally held jointly responsible for any tax debt they acquire as a couple, this is not necessarily the case when one spouse inaccurately reports income or deductions without the other spouse’s knowledge. In this case, the IRS may release the unknowing spouse from responsibility for the tax debt, provided that spouse meets certain specific qualifying criteria. Over recent years, the application procedure for obtaining Innocent Spouse Relief has been streamlined, making it a more viable tax relief option for spouses who qualify.

The IRS offers three basic types of Innocent Spouse Relief, each with its own set of qualifying criteria. These options, which cover both married and divorced taxpayers, as well as several different reporting scenarios are outlined below:

General Relief

The General Relief option is available when income has been underreported on a joint tax return without the knowledge of the spouse requesting Innocent Spouse Relief.  This underreporting may be the result of an outright omission of income or the inaccurate reporting of tax deductions. In either case, the request for relief must be filed within two years from the date the innocent spouse is informed of their taxpayer rights. In addition, it must include documentation that the tax liability resulting from the underreporting of income is inequitable. The General Relief option is available to spouses who are legally married, divorced or widowed.

Separate Liability Relief

Separate Liability Relief is used by a spouse who has not been part of the same household as the non-requesting spouse for a minimum of 12 months prior to the time the petition for relief is filed. Furthermore, the requesting spouse must either be divorced or legally separated at the time of the filing. In the case of Separate Liability Relief, the existing tax debt is allocated between the spouses in question, with each spouse being assigned a specific responsibility for paying their portion of the amount owed while, at the same time, being relieved of any responsibility for paying the portion that is allocated to the other spouse.

Deficiency Allocation Relief

Deficiency Allocation Relief, which is also called Equitable Spouse Relief, may apply in addition to one of the other two Innocent Spouse Relief options or when neither of the other measures is applicable. Deficiency Allocation Relief is most often granted when one spouse has misappropriated funds that were designated to make a tax payment without the other spouse’s knowledge.

The most inmportant factor in determining whether a spouse qualifies for Innocent Spouse Relief is knowledge of the reporting error. In most cases, the spouse requesting tax relief must be unaware of the improperly reported income. However, if the requesting spouse is aware of the underreporting of income by their spouse, but does not know the source of the income, they are still eligible to file for Innocent Spouse Relief. No matter what your specific situation, if you feel you are being unfairly held accountable for the tax burden of a spouse, the professionals at Las Vegas Bookkeeping can help you determine your eligibility and apply for any available tax relief.

If you feel that you may be a candidate for Innocent Spouse Relief, the licensed accountants and bookkeepers at Las Vegas Bookkeeping can evaluate your specific situation and recommend the best course of action for you to receive it. Contact the professionals at Las Vegas Bookkeeping by phone at (702) 945-2757 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Get your Innocent Spouse Relief request submitted before applicable time constraints expire!

How to Handle Your Tax Bill

Having just passed the tax filing deadline, many taxpayers are faced with a tax debt that they are unable to pay. Tax amounts owed for 2018 are due and payable on April 15th even for those taxpayers who have applied for a six-month extension. The extension applies only to the filing of the tax return and does not affect the payment of the tax amount due. In fact, this amount will accrue interest at an annual rate equal to the federal short term interest rate plus 3% from the date of the filing deadline until the tax balance is paid in full. This being the case, it is important for taxpayers to face back tax balances head on and explore all available methods to resolve them in order to avoid the negative consequences of compounding interest charges.

The following are some of the options available for handling an outstanding tax balance:

1)      Pay the full amount of the tax balance due.

Perhaps the easiest way to resolve a back tax balance is to explore the options available for paying the full tax amount owed. These options include, among other things, taking out an ordinary bank loan or an equity loan, withdrawing funds from a retirement account, putting the balance owed on a credit card, or refinancing a home. The negative aspect of each of these methods is that they involve paying interest on the amount borrowed. They will, however, satisfy the IRS requirement for paying taxes owed and will therefore avoid the possible initiation of aggressive collection activities.

 

2)     Request a short term extension.

In the case where a taxpayer expects to have the necessary funds to pay a tax balance in full within 120 days from the date those taxes are due, they can request short term administration extension. Such extensions are granted almost automatically and, while interest will continue to accrue on the tax balance owed during the period of the extension, the IRS will not initiate any collection activities during this time.

 

3)     Pursue one of the IRS tax settlement options.

One such tax settlement option is the IRS Installment Agreement which is a tax resolution plan that allows for payment of an outstanding tax balance over a period of time rather than all at once. Approval for this settlement plan is almost automatic if the tax balance is less than $10,000 and the taxpayer is in good standing with the IRS. The length of the repayment period and the amount of the payment are usually based on the taxpayer’s financial status and the balance of taxes owed.  A second tax settlement option, called the Partial Payment Installment Agreement, is available for taxpayers who can submit documentation that they are unable to pay the full amount of their back tax balance. As with the full-payment Installment Agreement, the Partial Payment Installment Agreement is based on the taxpayer’s financial situation and the total amount of taxes owed. Another tax resolution alternative is the Offer in Compromise which, like the Partial Payment Installment Agreement, settles an outstanding tax balance for less than the full amount owed. This option is only granted to taxpayers who meet very specific acceptance criteria and who are very unlikely to be able to pay the full balanced of their tax debt within a reasonable period of time.

If you have a tax balance that you are unable to pay, the licensed accountants and at Las Vegas Bookkeeping can help your determine the best course of action for resolving it. Contact us by phone at (702) 945-2757 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Back tax balances accrue interest which only increases the tax balance that is already owed. So, don’t wait! Contact the licensed professionals at Las Vegas Bookkeeping to get the tax resolution process underway!

Don’t Miss Out on These Valuable Tax Credits!

One of the best ways to save valuable tax dollars is to take advantage of the many tax credits and tax deductions provided by the IRS tax code. Some of these tax breaks were eliminated with the passage of the Tax Cuts and Jobs Act of 2017 but many still remain. Although both tax deductions and tax credits reduce overall tax liability, tax credits are the more valuable of the two because they provide for a dollar for dollar reduction in taxes owed while deductions only provide a percentage decrease in taxable income based on the taxpayer’s tax bracket.

The following are a few tax credits that you will not want to miss!

·        Earned Income Tax Credit

The Earned Income Tax Credit is designed to help individuals and families with low to moderate incomes save valuable tax dollars. Although this tax credit is available to any taxpayer who meets certain specified income requirements, it is most beneficial to those with dependent children. The income ceilings for receiving the Earned Income Tax Credit run from $20,950 for married couples filing jointly with no children to $54,884 for those with three children. Income limits for single or head of household filers are slightly less for the same number of dependent children. One further restriction is that taxpayers with over $3500 of annual investment income are ineligible to receive the credit. In terms of the 2018 tax benefit, families with three or more dependents received a maximum Earned Income Tax Credit of $6431 while those with two, one and zero dependents received maximum credit amounts of $5716, $3461 and $519 respectively (note the big leap in going from one child to no children). Both income limits and maximum tax credit amounts have been increased slightly for 2019.

·        Child Tax Credit

The Child Tax Credit is a tax credit designed to reimburse working taxpayers for expenses incurred in providing care for dependent children under the age of 17. Under the provisions of the Tax Cuts and Jobs Act, the Child Tax Credit can be worth up to $2,000 for each qualitfying child. In addition, it provides for a refundable amount of 15% of any earned income that exceeds $2,500 up to a maximum of $1400. The Child Tax Credit is available to all taxpayers, with phase out limits that begin at $200,000 and $400,000 for single and joint filers respectively.

·        Premium Tax Credit

The Premium Tax Credit is a tax credit designed to help low to moderate income taxpayers cover premiums for health insurance policies purchased through the Health Insurance Marketplace. Marketplace computes the amount of the tax credit at the time a policy is purchased, with lower income individuals and families receiving larger credit amounts. At that time, the enrolling taxpayer can choose to have monthly health insurance premiums reduced by advance payment of the Premium Tax Credit or to receive the entire tax benefit at the time the annual income tax return is filed. In either case, the taxpayer must complete Form 8962 and file it with the income tax return at tax time. If the tax credit is more than the taxes owed, a refund will be issued. On the other hand, if the amount of the advance credit payments is greater than the allowable amount of the tax credit, the difference will either be subtracted from the tax refund amount or added to the tax balance due at the time of filing.

The licensed professionals at Las Vegas Bookkeeping are experts in the area of tax planning and can help you save you valuable tax dollars by taking advantage of all tax breaks that apply to your particular financial situation. Receive a free, no obligation consultation by emailing tina@lasvegasbookkeeping.com or calling us at (702) 945-2757. Don’t wait! Let the tax professionals at Las Vegas Bookkeeping help you get your financial affairs in order so you can achieve the maximum possible tax advantage!

Tax Season 2019 Survival Guide

Tax Season 2019 is primed to be a tax season to remember for all who are involved with taxes in any way. In addition to the fact that the Internal Revenue Service is coming back from the effects of a 35-day government shutdown, its workers must process the first tax returns since the enactment of the Tax Cuts and Jobs Act of 2017. Taxpayers and tax preparers will also be faced with applying the provisions of this major piece of tax legislation for the first time. Outlined below are a few of the circumstances that will make for an interesting few months in the area of taxes!

·        New Form 1040

The IRS has introduced a new Form 1040 which will be used for the first time during the current filing season. This new Form 1040 will replace the old Form 1040 as well as Forms 1040A and 1040EZ. It includes six additional schedules in addition to the old Schedules A, B, C, D. E and F.

·        Communication Backlog

Due the fact that IRS fax systems, phone lines and manned taxpayer assistance centers were closed for over a month, many taxpayers were left with unanswered questions about the implications of the Tax Cuts and Jobs Act, the newly revised Form 1040 and a multitude of other issues. And, although the agency is now operating at full capacity, the backlog created by the shutdown is expected to impede current channels of communication. In addition, the IRS reportedly accumulated over five million pieces of mail during the time it was shut down.

·        Rescheduling of Appointments

All IRS appointments and hearings that were scheduled during the government shutdown must be rescheduled now that the agency is operating at full capacity. However, because of the length of time that the IRS was closed, there is a significant backlog in this area. This means that projected wait times for rescheduling appointments might be quite lengthy.

·        Refunds

Tax refunds are expected to be issued on about the same schedule that they have been issued in previous years. Refund amounts, however, may be affected by the impact of the provisions of the Tax Cuts and Jobs Act. Although it is estimated that approximately 95% of all taxpayers received some sort of tax cut, no one knows for sure how these cuts will impact tax refund amounts.

·        United States Tax Court

The United States Tax Court resumed full operations on Monday, January 28th following the end of the government shutdown. However, due to the length of time that operations were suspended, taxpayers who had dealings with the Court may experience certain problems. For example, the IRS has said that, although deadlines for filing appeals and petitions were not extended during the shutdown, mail sent to the Court during this time period may have been returned. If this is case, the Court advises the taxpayer to resend the document and include proof of the mailing date for the first attempt. In addition, the agency has said that it will review penalty assessments issued for back tax balances that were being disputed in Tax Court cases that were pending during the shutdown. Depending on the outcome of the review, they may then request a penalty abatement.

·        Filing Deadlines

Tax filing deadlines were not affected by the recent government shutdown and remain as follows:

January 28th – Official opening of tax filing season

January 31st – Filing deadline for W-2s and Forms 1099-MISC Copy A with Nonemployee Compensation

February 15th – Paper filing deadline for Forms 1096 and Forms 1099-MISC Copy B

March 15th – Filing deadline for Partnership returns (Form 1065) and S-Corporation returns (Form 1120-S).

April 1st Electronic filing deadline for Forms 1096 and Forms 1099-MISC Copy B

April 15th – Filing deadline personal tax returns, tax extension requests (April 17th for residents in Maine or Massachusetts) and corporate tax returns

 The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business navigate Tax Season 2019 without a hitch or a hiccup. So don’t wait! Contact us by email at tina@lasvegasbookkeeping.com or by phone at (702) 945-2757 or to receive a free, no obligation consultation. Get a jump start on Tax Season 2019 by contacting the professionals at Las Vegas Bookkeeping today!

The Government Shutdown and Tax Season 2019

Since the IRS is a government agency, the ongoing government shutdown has had, and will continue to have, a significant effect on the services it offers taxpayers. While start dates and filing deadlines have not been pushed back, other agency functions have been reduced or curtailed altogether. With this in mind, the following are a few things taxpayers should know as they move forward into Tax Season 2019.

1)      Start Dates and Tax Filing Deadlines

At this point, the IRS has announced that all previously set 2019 start dates and filing deadlines will remain unchanged and are as follows:

·        January 28th – Official start date of tax filing season

·        January 31st – Filing deadline for W-2s and Forms 1099-MISC Copy A with Nonemployee Compensation

·        February 15th – Filing deadline for Forms 1096 and 1099-MISC Copy B

(paper filing)

·        March 15th – Filing deadline for Partnership returns (Form 1065) and S-Corporation returns (Form 1120-S).

·        April 1st Filing deadline for Forms 1096 and 1099-MISC Copy B

(electronic filing)

·        April 15th – Filing deadline and tax extension request deadline for personal tax returns (April 17th for residents in Maine or Massachusetts) and corporate tax returns

2)     United States Tax Court

The United States Tax Court was officially closed on December 28, 2018 and will remain closed until further notice from the IRS. This means that all disputes and petitions that would normally be brought before this court will be backlogged until the shutdown is over.

3)     Tax Refunds

Although the IRS originally announced that income tax refunds would not be processed during the government shutdown, they have recently amended this statement to say that the tax refund process will not be interrupted. This change comes as a result of a policy statement issued by the White House Office of Management and Budget saying that the IRS will issue tax refunds even if the shutdown continues into tax filing season.

4)     Collections

There will be no non-automated collection activity during the shutdown. Automated collection activity will proceed without interruption. Although this may be good news for some delinquent taxpayers, automated tax debt collection will continue uninterrupeted.

5)     Audit Examinations

Audit examinations will not take place during the government shutdown although some exceptions may apply.

6)     Transcript Requests

As of January 2, 2019, the IRS began processing transcript requests made through the Income Verification Express Service, a program used by lending institutions to verify a borrower’s income. Prior to this date, taxpayers had no way of obtaining the routine income documentation necessary for financing or refinancing mortgages or obtaining other types of loans. Although this service is now up and running in spite of the government shutdown, the IRS has stated that transcript requests might take longer than the standard 72 hours to process.

The licensed accountants and bookkeepers at Las Vegas Bookkeeping are prepared to help your business meet all of its tax obligations during, and in spite, of the government shutdown! Although some IRS functions have been affected, our licensed bookkeepers and accountants know how to navigate the system so that your business does not miss a beat. So don’t wait! Contact the professionals at Las Vegas Bookkeeping today to get your 2019 tax affairs underway. Email us at tina@lasvegasbookkeeping.com or call us at (702) 945-2757 to receive a free, no obligation consultation.

Tax Cutting Strategies For The Home Stretch

With the end of the tax year fast approaching, taxpayers are heading into the home stretch in the area of tax planning. Although there is less than a month left in 2018, there may well be some last minute opportunities available for saving valuable tax dollars. Because of the new higher standard deduction, several of these possibilities involve bundling deductions in order to make use of the tax advantage provided by itemizing. Others include making use of various tax sheltered accounts and managing capital gains. No matter what tax saving measures are employed, it is almost certain that ignoring such opportunities will result in paying a higher tax bill than would otherwise be the case.

The following are some tax saving measures that might be used to help to save tax dollars in the last few weeks of 2018:

·        Maximize the Tax Benefits of Realizing Capital Gains and Losses

Since the IRS allows taxpayers to deduct up to $3000 of short-term capital losses against ordinary income, the end of the year is a good time to examine investment accounts to see if there are any losers that need to be dumped. In addition, taxpayers should look at potential capital losses with an eye toward canceling out capital gains that have been realized during the year. As always timing is important in making capital gains decisions. Whenever possible, net capital gains should be realized in years of lower income and net capital losses in years of higher income, a consideration that becomes especially important as the calendar year comes to a close.

·        Utilize the Full Tax Benefits Provided by Retirement Accounts

IRA contributions, which are available to anyone who has earned income for the tax year in question, are tax deductible at both the federal and the state levels. This being the case, valuable tax dollars can be saved by maximizing the annual IRA contribution limit of $5,500. The same is true for 401(k) contributions which have an annual contribution limit of $18,500 with a limit of $55,000 for contributions from all sources. Since contributions to 401(k) plans are made with pretax dollars, they provide a valuable tax break by reducing a contributing taxpayer’s annual income by the exact amount of the contribution. Contributions to both traditional and Roth IRAs can be made up until the 2019 April 15th filing deadline while 401(k) contributions must normally be made on or before December 31st.

·        Consider Bundling Tax Deductions

While the increase of the standard deduction from $6,350 in 2017 to $12,000 in 2018 provides a tax break to those who claim it, the increase makes it harder to achieve a tax advantage by itemizing deductions. As a result, many taxpayers are looking at the possibility of bunching into a single year tax deductions that would normally be spread over several years. Such deductions include such tax deductible items as mortgage payments, property taxes, medical expenses and charitable contributions, among other things. In every case, thought should be given to tax brackets as well as both present and future income before making a decision to postpone or accelerate any given tax deduction.

The licensed accountants and bookkeepers at Las Vegas Bookkeeping are experts in the area of tax planning and can help you implement tax strategies that will save you valuable tax dollars. Receive a free, no obligation consultation by emailing us at tina@lasvegasbookkeeping.com or calling us at (702) 514-4048. Don’t hesitate! Let the tax professionals at Las Vegas Bookkeeping help you get your financial affairs in order so you can achieve that maximum possible tax advantage for 2018!

Some Important Capital Considerations

Capital gains taxes often amount to a sizable part of an individual’s tax burden. With this being the case, it is important for taxpayers to be familiar with the various tax planning strategies that are available for reducing the impact of capital gains taxes on the overall tax obligation. Although these strategies are important all year long, they are especially important during the fourth quarter when there is still time to make certain tax saving moves that will reduce tax dollars owed for the current year. Such moves include the pairing and timing strategies discussed below in addition to certain more sophisticated moves most often used by high income individuals or those who have experienced a significant taxable event.

Pairing Strategies

Capital gains can be used to offset ordinary income and/or capitals losses according to certain IRS guidelines described below.

·        Up to $3000 in capital losses can be used to offset ordinary income with the ability to carry forward into future tax years any capital losses that are not used to offset capital gains.

·        Since long term capital gains tax brackets range from 0% to 20% (to be indexed for inflation after 2018) while ordinary income tax brackets range from 0% to a high of 39.6%, the greatest tax advantage is obtained by pairing capital losses with ordinary income up to the $3000 limit.

·        Capital losses in excess of $3000 are used to offset capital gains, with short term losses used to cancel short term capital gains and long term capital losses used to offset long term gains. Once this is accomplished any leftover gains or losses are simply paired against each other.

·        Since short term capital gains are taxed as ordinary income rather than at the lower capital gains tax rates, assets that have realized a gain should be held a minimum of twelve months whenever possible.

Timing Strategies

Because capital gains tax rates are based on income, timing can be an important consideration in realizing capital gains and losses, especially when an expected increase or decrease in income is on the horizon.

·        A taxpayer who expects to realize a net capital loss for the year would probably want or realize that loss in the current tax year if a decrease in income is projected for the upcoming year. If an increase in income is projected, the loss might be better realized in the current year. These considerations are typically less critical for long term capital gains where the income limits for the various tax brackets are much broader than those for ordinary income.

·        In the same way, taxpayers who are expecting to realize a net capital gain would want to realize the gain in the current tax year when an increase in income is projected and in the next year if a decrease in income is projected. Again, for long term capital gains, these considerations are only important when the gain would push the taxpayer into the next higher capital gains tax bracket. 

·        A final timing consideration comes into to pay with respect to the Net Investment Income Tax that is still in effect. This surtax of 3.8% applies to the lesser of net investment income for the year or the amount by which the taxpayer’s adjusted gross income exceeds the threshold of $200,000 ($250,000 for a married couple). Timing decisions related to the realizing of capital gains should attempt to avoid this extra tax whenever possible.

The Certified Public Accountants and Enrolled Agents Las Vegas Bookkeeping are familiar with all of various tax planning strategies available for reducing capital gains taxes and are prepared to help each client apply them to achieve the maximum tax advantage possible for their specific situation. Don’t delay! Contact the tax professionals at Las Vegas Bookkeeping today discuss possible year-end tax planning strategies. Schedule a free, no obligation consultation by emailing us at Tina@lasvegasbookkeeping.com or calling us at (702)514-4048.

Some Important Mid-Year Tax Moves

With tax season over and the halfway mark of the calendar year fast approaching, now is a good time to evaluate last year’s tax strategies in light of what changes might be needed in the current year. A mid-year tax check is especially important this year due to the passage of the Tax Cuts and Jobs Act at the end of 2017. Many of the provisions of this sweeping piece of tax legislation became effective at the beginning of 2018 and will affect some of the choices taxpayers make going forward.

In particular, the doubling of the standard deduction and the loss of personal exemptions stipulated in this tax law should prompt individual taxpayers to take a close look at tax deductions and tax credits claimed in previous years to see if they will provide the same tax benefits under the new legislation. The following is a list of some mid-year tax considerations that are directly affected by the provisions of the Tax Cuts and Jobs Act:

·        Charitable Giving

With the doubling of the standard deduction, the incentives associated with charitable giving have changed. Under the new tax law, fewer taxpayers will benefit from gifts to charity because the sum total of all charitable deductions must now be higher in order provide a greater tax advantage than that provided by claiming the standard deduction. With this in mind, it might be advantageous for taxpayers to consider bundling charitable gifts into a single year instead of claiming them over a period of several years. Bundling would make it more likely that the tax benefits provided by the charitable giving would exceed the benefits of the standard deduction for the year in which the contributions are claimed.

 

·        Expenses Associated with Home Ownership

Under the provisions of the new tax reform bill, taxpayers are allowed to deduct interest on a maximum of $750,000 of mortgage debt (down from $1,000,000 prior to the passage of the bill). In addition, the allowable deduction for property taxes has been reduced to a maximum deduction of $10,000 for all property taxes combined with state and local sales and income taxes. At the same time, the bill eliminates the deduction for home equity loan interest. With these three hits to the tax advantages of home ownership, summer might be a good time for taxpayers to consider the possibility of downsizing to a dwelling with associated expenses that would be covered by the provisions of the new tax law. 

 

·        Medical Expenses

After much debate, the Tax Cuts and Jobs Act held the threshold for claiming the medical and dental expense deduction at 7.5 % of adjusted gross income for the 2018 tax year. However, this threshold is set to increase to 10 % of adjusted gross income as of January, 2019. With this ceiling increase on the horizon, taxpayers might be wise to think about the timing of optional medical and dental procedures in order to achieve the maximum possible tax advantage. For example, if an optional procedure would push the medical/dental expense total above 7.5% for 2018, it might be wise to schedule that procedure before the end of the calendar year to take advantage of the lower ceiling.  That being said, summer is often a good time to schedule such procedures, especially for school age children.

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702)514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today.

Guideline For Retaining Tax Documents

Now that the 2018 tax deadlines have passed, it is a good time to think about what to do with the tax documents associated with 2017 tax returns. In general, it is recommended that receipts and statements that could be used to substantiate items reported on a tax return be kept until the statute of limitations for that return expires. However, the length of this statue may vary according to the particular circumstances associated with the return. In addition, documents pertaining to such things as property and securities should be kept beyond the statute of limitations. Since the IRS and the United States Tax Court operate under the assumption that a taxpayer is guilty of tax fraud if they are unable to provide proof of the items claimed on a tax return, it is crucial to know and understand the guidelines associated with retaining tax documents.

In general, the IRS will only audit a tax return within three years from the deadline for submitting the return or from the date the return is actually submitted, whichever comes later. However, this limitation period may be extended to six years if the return incudes foreign asset income that exceeds $5000 or a deduction for a bad debt or a worthless security. It may also be extended to the six year mark in the case where gross income is underreported by more than 25%. The audit limit for an intentionally fraudulent tax return is indefinite. Based on these time constraints, tax documents should be kept for a minimum of three years to seven years from the time a tax return is submitted, depending on the nature of the return.

The following are some more specific guidelines pertaining to the length of time various documents should be retained for tax purposes:  

·        Tax Returns and Supporting Documentation

Tax returns and all associated tax information should be kept for a minimum of seven years in order to exceed the statute of limitations period for an IRS audit. Supporting documentation includes W-2s and 1099s as well as checks and payment records that are necessary to support any credits or deductions claimed on the returns.

·        Bank and Credit Card Statements

Since bank and credit card statements are not considered to be sufficient documentation for items reported to the IRS, they do not need to be held for any specified time period.  

·        Employment Tax Records

Employment tax records should be kept for a minimum of four years from the date the tax is due or the date it is paid, whichever comes later.

·        Records Related to Property Transactions

Property tax records should be retained until the expiration of the IRS statute of limitations for the tax year in which a property is sold or disposed of by some other means. Such records are needed to calculate depletion, amortization and depreciation for tax purposes and to determine the net capital gain or loss that has resulted from owning the property. It should be noted that, in the case of a nontaxable property exchange, it is necessary to hold the records of the old property as well as the one acquired in the exchange.

·        Brokerage Statements

Brokerage statements should be kept indefinitely due to the fact that the cost basis of a security must be reported at the time of sale. This requires brokerage statements documenting the security’s complete transaction history.

·        IRA Records

IRA transaction records, including those for Roth IRAs, should be kept until all funds are withdrawn from the account and the account is closed.

·        Business Contracts

All business contracts, including partnership agreements, property records and commission and royalty structures, among other things, should be kept indefinitely.

It should be noted that documents that are no longer needed to substantiate items reported on tax returns may be needed for other purposes. Various entities such as lenders, other creditors and insurance companies have their own time and documentation requirements that may differ from those of the IRS.                 

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702) 514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today

Repatriation in Full Swing

As a direct result of the huge reduction in corporate tax rates that went into effect at the beginning of the year, many companies who have long held money overseas are now bringing it back to the United States. The Tax Cuts and Jobs Act that was passed in December of 2017 and became effective on January 1, 2018 provided for a permanent reduction of the corporate tax rate from 35% to 21%. In addition to this whopping 40% decrease, the law also provided for a 15.5 % repatriation tax rate on cash assets. As was to be expected, these newly initiated tax advantages have resulted in a surge of cash being brought back in to the country over the last few months.

Apple, which had previously held over 90% of its total cash assets on foreign soil, was one of the first companies to capitalize on the benefits of the new tax law. Almost as soon as the legislation was in place, they paid a tax bill of more than $38 million to move over $250 billion in foreign earnings back into the United States. Announcing that they would use some of this money to create jobs and build a new campus, CEO Tim Cook said that the company has a “deep sense of responsibility to give back to the country and the people who make our success possible.” Although Apple’s foreign holdings would have been taxed even if they had left them overseas, they saved over $43 billion tax dollars above and beyond what they would have paid if the repatriation taken place before the new tax law became effective.

Although some analysts point out that the financial impact of Apples’ repatriation might not be as much as is expected, few can dispute the idea that bringing oversees dollars back into the country will have a positive effect on the economy. In fact, Daniel Ives, head of technology research at GBH Insights has gone on record saying that he believes over 70 % of all cash brought back into the country as a result of the new tax law will be used for capital returns. Apple alone has promised to create over 20,000 new jobs which is an increase of over 20% from the approximately 84,000 people already in their employ at the end of last year. In addition, they have announced that they will increase capital expenditures over the next five years and have recently added an additional $4 billion dollars to a company-sponsored fund that supports United States manufacturing.

Although the Apple repatriation represents the largest amount by a single entity, other companies have been quick to follow suit. In fact, Daniel Ives of GBH Insights estimates that technology companies alone have approximately $600 billion in overseas holdings with over 50% of that expected to be brought back into the county in 2018 alone. Another estimate by the Macquarie Research Institute suggests the total of $860 will be repatriated across all sectors before the year comes to a close.

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702) 514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today.

2018 Tax Planning Tips

With a new tax law in effect as of January 1st, effective tax planning for the coming year will require a whole new approach. The Republican tax reform proposal that was voted into law at the end of 2017 includes some sweeping changes that affect both individuals and businesses. This being the case, taxpayers can only hope to maximize their tax advantage in the coming year by becoming familiar with the provisions of Trump’s tax bill and adjusting tax strategies accordingly. While it is always wise to look at what impact financial events of a previous year have had on taxes owed, this year that impact will have to be analyzed with an eye on the potential effects of the new tax law.

The following are helpful tax planning tips for the coming year:

1)      Be aware of the new tax brackets.

The new tax reform plan still has seven tax brackets (the same as the old plan), with the tax rates for each bracket mostly lower. However, the income limits of the tax brackets have changed significantly. These changes represent an important tax planning consideration, especially as they relate to realizing capital gains and capital losses and accelerating or deferring income.

2)     Become familiar with changes to 529 plans.

The limit for contributing to 529 plans without a gift tax assessment has been increased from $14,000 to $15,000. In addition, the new tax law allows taxpayers to use 529 funds to cover elementary and high school tuition with a limit of $10,000 per year per beneficiary. This new provision provides a significant tax saving opportunity for those individuals who are living in states where portions of 529 plan contributions are exempt from the state income tax.

3)     Make use of the more lenient medical expense deduction.

The new tax law allows taxpayers to deduct medical expenses that are in excess of 7.5 % of their adjusted gross income. This amount represents an increase in the medical expense deduction from 2017 which only allowed a tax deduction for unreimbursed medical expenses that were in excess of 10% of adjusted gross income.

4)     Weigh other changes to the tax code that may affect taxes owed.

In addition to the items outlined above, there are numerous other changes to the tax code that will impact taxpayers in different ways. For example, the tax deductions for job-related moving expenses and home equity loan interest have been eliminated and the threshold for writing off mortgage interest has been reduced. Because changes such as these will affect tax related decisions as they present themselves, it is important for taxpayers to be familiar with the provisions of the new tax bill as the year gets underway.

In addition to being aware of the tax changes initiated by Trump’s tax plan, it is important, as always, to keep good records and track tax-related expenses all year long rather than scrambling to get things together at tax time. This kind of careful record- keeping, combined with making use of the tax advantages that are built into the tax code, have the potential to provide a significant savings of tax dollars. With income tax representing one of the major expenses for many households, these tax-related tasks take on a very important role.

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702)514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today.

New Tax Law Brings Major Change

The provisions of the new tax law, many of which went into effect as of January 1st, are broad and extensive. This being the case, both business and individual taxpayers would be well advised to understand the ramifications of these sweeping changes before making important tax planning decisions. Although most of the changes go into effect at the beginning of 2018, some have future initiation dates. In addition to starting at different times, some of the provisions also have phase out periods which adds another twist to the tax planning mix. The following list highlights some of major changes targeted by the new tax law organized according to activation date.

Individuals

Retroactive

·        Increase in Medical Expense Deduction

Retroactive to include the 2017 tax year, taxpayers can deduct out-of-pocket medical expenses that exceed 7.5 percent of adjusted gross income. This is down from 10 percent which was the threshold prior to the passage of this legislation.

Effective Immediately

·        Expansion of Child Tax Credit

The new tax law provides for the expansion of the Child Tax Credit from $1000 to $2000 and increases the amount of the refundable portion to $1400.

·        Doubling of Estate Tax Exemption

The Republican tax bill increases the annual estate tax exclusion from $5 million to $10 million ($20 for couples with appropriate tax planning strategies). These amounts are indexed to inflation and will remain in effect until 2025. At this time, in the absence of further legislation, the estate tax exclusion will revert back to the previous base, also indexed to inflation.

·        Increase in Alternative Minimum Tax Exemption

The new tax law provides a break for high income earners who are affected by the Alternative minimum Tax. Under the provisions of the new legislation, the exemption amount is increased from $54,300 to $70,300 for single taxpayers and from $84,500 to $109,400 for married couples filing jointly. In addition, the income threshold at which the tax begins to pause out is increased dramatically – from $120,700 to $500,000 for single filers and from $160,900 to $1 million for married couples filing joint returns.  

Future Start Dates

·        Repeal of Individual Mandate

Although the Affordable Care Act will remain in effect, the provision that requires most Americans to be covered by a basic level health insurance will be repealed on January 1, 2019. As of that date, individuals will no longer be penalized for not carrying health insurance and business will not be required to provide health insurance for their employees.

·        Cancelation of Alimony Deduction for New Divorces

As of January 1, 2019, alimony payments for new divorces will no longer be tax deductible for the person making the payments and the person receiving the payments will no longer have to count them as taxable income.

Businesses

Retroactive

·        Allowance for Immediate Capital Expensing

The new tax law allows for the deduction the full amount of any capital expenditure during the tax year that purchase is made. This provision is retroactive to January 27, 2017 and continues until the end of 2022, at which time it will be phased out at the rate of 20% per year.

Effective Immediately

·        Limitation on Interest Deduction

Beginning this year, the interest deduction will be limited to 30% of earnings before interest, taxes, depreciation and amortization. On January 1, 2022, the reduction of income by depreciation and amortization will drop off and the interest deduction will increase to 30% of income, reduced only by interest and taxes.

·        Allowance for Repatriation of Foreign Income

Under the provisions of the new tax law, foreign earnings that have accumulated overseas will be charged a repatriation tax of 15.5 % for cash assets and 8.0 % for illiquid assets. Although the onetime tax will be levied immediately, companies are given the option of paying the tax bill over a period of eight years.

Future Start Date

·        Provision for Amortization of R&D Investment

As of January 1, 2022, companies will be required to amortize research and development expenditures over a period of five years rather than writing off the entire amount of the expense in the year it is made.

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702)514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today.

Senate and House Compromise on Tax Reform

With a vote of 51 to 49, the Senate voted in favor of its version of HR 1, leading the way to the passage President Trump’s $1.5 trillion tax cut package. Since the approval of the Senate’s tax reform plan follows the approval of the House version, the path is now open for the two houses of Congress to work out their differences and agree on a piece of tax legislation that President Trump can then sign into law. If the process goes as the Republicans hope it will, they will be victorious in approving the most significant tax overhaul in over three decades.

Although the Senate and House tax reform plans target the same issues, they often differ on how these items should be treated. One of the major difference is that the House bill makes the new tax adjustments permanent for both businesses and individuals while the Senate bill provides for the expiration of most of the individual tax changes at the end of 2025. The following is a list of some of the important areas targeted by the Republican tax reform packages with an indication of how the House and Senate plans differ:

·        Both tax plans suggest a significant increase to the standard deduction but differ slightly on the amounts of the increase. The House bill raises the standard deduction to $12,200 ($18,300 for HOH and $24,400 for couples filing jointly) while the Senate bill increases it to $12,000 ($18,000 for HOH and $24,000 for couples filing jointly).

·        The House bill proposes four tax brackets with the top marginal tax rate held at 39.6% while the Senate bill keeps the current seven tax brackets but reduces the top marginal rate to 38.5%.

·        The House bill proposes eliminating the tax deduction for medical expenses while the Senate bill keeps it with a cut-off of 7.5 % for the next two tax years.

·        The House bill increases the child tax credit to $1600 for each child under the age of 17 while the Senate bill increases it to $2000 for each child under the age of 18. Both tax reform plans make the first $1000 refundable.        

While the House and Senate tax plans differ on the key points outlined above they are in agreement on the following items: 1) elimination of the additional personal exemption, 2) elimination of exemptions for spouse and dependents, 3) elimination of the additional deduction for the blind, disabled or elderly (over 65), 4) elimination of the sales tax deduction and/or the state and local income tax deduction, 5) retention of the charitable donation deduction, 6) retention of the property tax deduction with a cap at $10,000, 7) elimination of the tax deductions for home office expenses, unreimbursed employee expenses and tax preparation services 8) elimination of tax deductions for student loan interest and moving expenses and 9) exclusion of the first $250,000 of capital gains from the sale of a home that has been lived in for five out of eight of the previous years (allowed once every five years, House bill subject to income phase out). 

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702)514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today.

House Passes Major Tax Bill

This past Thursday, on November 16th, 2017, the House passed a major tax reform plan. Although no Democrats voted in favor of the bill, it passed with nine Republican votes in excess of the number needed to push it though. The bill, which is over 440 pages in length, was first introduced on November 2nd, meaning that House members deliberated for only a little over two weeks before taking a vote. Now that the House tax proposal has passed, the Senate will work on its version which will include the repeal of the individual health care mandate of the Affordable Care Act, a provision that was not included in the House plan. Following this, the two groups will try to work out a compromise plan that members of both houses of Congress can agree on.

Some of the most important points of the House tax reform plan include tax cuts for businesses, large and small. The House tax bill proposes a permanent cut to the corporate tax rate from 35% to 20%. According to the plan, corporations would also get certain other tax breaks such as the ability to deduct the full purchase price of capital expenditures for the next five years. On the international front, businesses will be able to repatriate money held oversees at a tax rate of 12% and, from the passage of the bill forward, will only be taxed on money made in the United States.

In addition to the tax benefits it holds for large corporations, the House tax bill will also benefit pass-through entities by lowering the top tax rate for income passed through to the tax returns of business owners. If the provisions of the House bill are accepted, the income from pass-through entities such as LLCs and S-Corporations will be taxed at a top tax rate of 25% rather than the current top rate of 39.6%. The final House tax plan also provides for a low 9% tax rate on the first $75,000 of income for businesses owners with an income of less than $150,000. This provision is accompanied by a five-year phase-in period.

For individual taxpayers, the bill simplifies the tax code by reducing the number of tax brackets to from seven to four. The new brackets would be 12%, 25%, 35% and 39% for married couples who earn more $1 million per year. Most itemized tax deductions such has those for medical expenses, moving expenses and the cost of tax preparation services would go away. Only the tax deductions for charitable contributions and mortgage interest would remain, with the ceiling on the mortgage interest reduced to $500,000 from its current $1,000,000.  

One of the main tax advantages lost with the House tax plan is the ability to deduct state and local income and property taxes. The loss of this tax deduction, called the SALT deduction, is especially significant for taxpayers who live in high tax rate states such as New York and California. On the flip side, the bill adds in a new tax credit called the Family Flexibility Credit which amounts to $300 for each taxpayer and spouse over the next five years. In addition, it almost doubles the standard deduction, from 2017 amounts $6,350 and $12,700 for individuals and married couples respectively, to $12,000 for each individual and $24,000 for each married couple

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702)514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today.

Fourth Quarter Tax Planning Strategies

As 2017 comes to a close, there are some important tax planning strategies that prudent taxpayers may want to consider. Such strategies have the ability to save valuable tax dollars in the current tax year and/or to create an advantageous tax situation for the coming year. Year-end tax moves such as gifting assets, making charitable contributions, moving funds into or out of tax sheltered retirement plans and realizing capital gains and losses are all actions that should be considered in order to achieve the maximum possible tax advantage. Before the new tax year begins, taxpayers may also want to think about such things as changing withholding choices or adjusting the amount of estimated tax payments.

The following is a list of several important year-end tax considerations:

·        Maximize 401(k) and IRA Contributions

The 2017 contribution limit is $18,000 for 401(k) plans and $5,500 for IRAs ($24,000 and $6,500 respectively for individuals over 60). If these contribution limits have not been met by the end of the year, a taxpayer might be wise to think about the possibility of depositing whatever additional funds are allowed, thus reducing taxable income by the amount of the contribution.

·        Evaluate Capital Gains and Losses

Capital losses can be used to offset ordinary income up to a maximum of $3,000 per year or, dollar for dollar, to cancel out capital gains that have been made during the year. Both of these options save tax dollars by canceling out gains that would otherwise be counted as ordinary taxable income. The offsetting of capital gains with capitals losses is a year-end strategy often used by investors who use capital losses to offset investment gains in order to lighten the tax burden produced by the gains. Capital losses that are not used up in any calendar year can be carried forward to future tax years with no time limitations.

·        Defer End-of-Year Income

If a lower income is expected in a future tax year, a taxpayer should be consider the possibility of deferring income until after the first of that year. Although this is tax planning strategy that is most often used by businesses, it is sometimes available to individual taxpayers as in the case of deferring the receipt of a year-end bonus or postponing the sale of an appreciated asset. Deferring end-of-the-year income to a lower income year creates a tax advantage in that the deferred income will be then be subjected to a lower tax rate.

·        Meet Year-End Deadlines

In order to avoid penalties and/or maximize benefits, there are a number of tax related matters require consideration before the end of a calendar year. One of these is the required minimum distribution from an IRA which must be taken before December 31st every year after a taxpayer reaches the age of 70½. The amount of this distribution, which is determined by the IRS, is subject to a 50% excise tax if not distributed according to the set requirements. Another tax related item that is often regulated by calendar year time constrains is that of flex spending accounts. While the money placed in these accounts offers a tax advantage in that it is exempt from taxation, it is often lost if not used before December 31st. Taxpayers should therefore check the balances in these accounts before the year comes to a close.

Although tax planning strategies are always important, they are even more important as the tax year comes to a close because they affect the final balance sheet that is carried forward into tax season. To ignore available year-end tax moves such as those listed above almost automatically means that a taxpayer will report a higher taxable income and thus be taxed at a higher tax rate than would otherwise be the case.  

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702)514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today.

IRS Reverses ACA Declaration Requirement

The IRS has recently announced that it will reverse its position on enforcing the ACA declaration requirement. Although the agency accepted tax returns that failed to indicate healthcare coverage during the 2017 filing season, they have recently stated that this information will be required in order for a return to be processed in 2018. An IRS spokesperson clarified the reason for the change, noting that the process “reflects the requirements of the ACA and the IRS’s obligation to administer the healthcare law.” They also maintain that declaring health coverage at the time a return is filed makes filing easier and reduces the possibility of a refund delay.

The requirements of the Affordable Care Act state that every taxpayer must demonstrate that they have “essential minimum” healthcare coverage. Forms of coverage that fulfill this requirement include Medicare, Medicaid, TRICARE, VA benefits, health insurance provided by an employer, privately purchased health insurance and health insurance obtained though the Health Insurance Marketplace. If one of these forms of coverage is not in place, the taxpayer must either obtain a waiver based on demonstrating a financial hardship or be subject to the assessment of a penalty. The penalty, which is referred to as the shared individual responsibility payment, is the greater of 2.5% of the taxpayer’s adjusted gross income or $695 per adult and $347.50 child up to a maximum of $2085.

Although President Trump signed an executive order earlier this year giving executive departments and agencies the authority to roll back certain aspects of Obamacare, the IRS has actually stepped up enforcement. While 2017 tax returns were processed even when line 61 indicating health care coverage was left blank, this will not be the case in for the upcoming tax season. In fact the IRS recently issued an official statement indicating that the 2108 filing season will be the first time the IRS will not accept tax returns that omit healthcare information. They have said that electronically filled and paper returns with this omission will be thrown out, thus delaying the receipt of any refund associated with the return. In addition to stepping up enforcement for the current tax year, the agency has recently sent out letters to over 130,000 taxpayers who did indicate healthcare coverage on their 2014 and/or 2015 tax returns.

Only time will tell how all of this will play out. Republican Congressmen have launched several attempts to repeal and replace the Affordable Healthcare Act but, to date, have been unsuccessful. This means that the IRS requirement that taxpayers indicate their healthcare coverage on their 2017 tax returns will stand as the 2018 tax season approaches. Although none of the more serious tax collection techniques such as tax liens or tax levies apply to meeting this requirement, the threat of a withheld tax refund may well be enough to force taxpayers into compliance on this issue.

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702)514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today

New Push for Tax Reform

President Trump and his “Big Six” tax team have recently announced the basic framework of the tax plan that they plan to present to Congress sometime in the near future. Although many changes are expected as negotiations progress, the main talking points of the proposed tax relief measure appear to have been set. These include, among other things, providing tax relief for middle income earners, making the tax environment more favorable for business and simplification of the tax code.

The following are some of the major changes that are expected to be included in the Republican tax proposal:

  • Increase in the Standard Deduction

The plan will suggest increasing the amount of the standard deduction from the current $6350 ($12,700 for married couples) to $12,000 ($24,000 for married couples). This increase will widen the “zero” tax bracket by effectively doubling the amount of income that is exempt from taxation.

  • Reduction in Number of Tax Brackets

The Republican tax proposal suggests reducing the number of tax brackets from seven to three with the new brackets set at 12%, 25% and 35%. Income ranges for the new brackets are of key importance but are yet to be determined.

  • Elimination of Most Itemized Deductions

The new tax plan will eliminate most tax deductions other than those for mortgage interest and charitable contributions. Under the new tax proposal, taxpayers will no longer be able to take a tax deduction for local and state income taxes, medical expenses or real estate taxes, among other things.

  • Increase in the Child Tax Credit

Although the new credit amount and income phase-out limits have been not been announced, Trump’s tax team has said that their tax proposal will include a significant increase in the child care tax credit which is currently set at $1000. The plan will also include a $500 tax credit for dependents who are not children.

  • Elimination of the Federal Estate Tax

The proposal calls for the elimination of the federal estate tax which is currently imposed on estates valued at more than $5.49 million.

  • Introduction of Set Tax Rate for Pass-through Business Entities

The new tax plan would provide for the taxation of pass-through entities such as partnerships, S-corporations and sole proprietorships at a rate of 25% rather than at the individual income tax rates of the company owners. Since this is lower than the top personal income tax rate, the provision would be paired with measures aimed at preventing the characterization of personal income as business income.

  • Reduction of the Corporate Income Tax Rate

Under the new tax relief plan, the corporate income tax rate would be reduced to 20% from the current rate of 38.91%. Coupled with the new lower tax rate, corporations would lose many of their current tax credits.

  • Elimination of Repatriation Taxes

The Republican tax proposal suggests eliminating the current tax on repatriation of foreign funds and replacing it with a onetime repatriation tax. The one time repatriation tax would be at a much lower rate than the current repatriation tax rate. Under the proposed tax plan, United States companies would only pay taxes on profits earned inside the county.

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702) 514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today.

Tax Relief for Hurricane Victims

IRS Commissioner John Koskinen has announced that the IRS will “move quickly to provide tax relief” to the victims of the hurricanes that recently ravaged Texas as well as various states and territories of the southeastern United States. Payment and filing deadlines have already been pushed back for 18 counties in Texas that were hit by Hurricane Harvey as well as 16 Florida counties, two Puerto Rican municipalities and several islands that were damaged by Hurricane Irma. According to Commissioner Koskinen, the IRS will continue to assess the damage caused by these two storms and may implement tax relief measures for other areas as additional data is received.

The following is a list of the tax relief measures that have already been implemented:

Texas

  • Any tax filing or tax payment deadline that occurred after August 23, 2017 has now been moved to January 31, 2018.  This includes personal and business income tax returns on extension as well as quarterly estimated tax payments that were originally due on September 15, 2017 and January 16, 2018.

  • Late deposit penalties will be waived for deposits of federal payroll taxes and federal excise taxes due on or after October 31, 2017. Penalties were also waived for deposits of federal payroll taxes and federal excise taxes that were due on or after August 23rd and before September 7th as long as the deposits were made by September 7th.

Florida, Puerto Rico and the Virgin Islands

  • Any tax filing or tax payment deadline that occurred after September 4, 2017 in Florida and September 5, 2017 in Puerto Rico and the Virgin Islands has now been moved to January 31, 2018.  This tax relief measure includes quarterly estimated tax payments that were originally due on September 15, 2017 and January 16, 2018 as well as business and personal income tax returns for which an extension had been filed.

  • Late deposit penalties will be waived for deposits of federal payroll taxes and federal excise taxes that were due during the first 15 days of the officially designated disaster period.

It should be noted that any taxpayer who has an address of record in any of the officially designated disaster areas will automatically receive the IRS tax relief measures described above. No application process is necessary. If a late payment penalty or a late filing penalty is imposed in error, a penalty abatement should be easily obtained by calling the phone number listed on the IRS Notice.

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702) 514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today.

The Amazon Sales Tax Debate

The online sales tax debate has been back in the news since June when the State of South Carolina filed a claim against Amazon stating that the company owed over $12.5 million in back sales taxes from the first quarter of 2016. Although Amazon maintains that the suit has absolutely no merit based on existing tax law, South Carolina insists that the $12.5 million constitutes a valid back tax balance and that interest and penalties will continue to accrue until the outstanding tax liability is paid in full. According to state tax officials, Amazon should have been collecting sales tax from sales made through third party sellers, which they failed to do. On the other side of the debate, Amazon maintains that they were not required to collect tax on the sale of these items since they were not selling them directly.   

Amazon already collects and pays the required sales tax amounts on items that it sells directly with the tax rates for these transactions determined by the state and local governments to which the sales are made. Although the online seller only charged a sales tax on items sold to customers in five states in 2011, it currently collects the tax from buyers in the District of Columbia and all 45 states that have a state sales tax. As is to be expected, no sales taxes are collected from online customers in Alaska, Delaware, Montana, New Hampshire and Oregon, states that do not have a sales tax in the first place. This is different from the situation that exists in most other countries where the there is a uniform sales tax rate. In these countries, Amazon collects the same sales tax percentage from all online customers.

However, it is not the direct sales discussed above that are the focus of the online sales tax debate. Rather, it is the sales made through third party vendors who currently make up over 50% of Amazon’s sales volume. As of 2017, the online retailer only collects sales tax on third party sales in four of the 41 states that have a sales tax even though it has an actual physical presence in the form of a distribution center or a subsidiary in some of the states where no tax is collected. Some state tax officials, such as those in South Carolina, argue that not requiring Amazon to collect taxes from sales made by third party sellers gives them a competitive advantage over storefront retailers who are required to add sales tax based on preset state and local sales tax rates. Although Amazon says that it would support some form of federal sales tax legislation as long as it was fair across the board, no such legislation has been passed as yet.

The licensed accountants and bookkeepers at Las Vegas Bookkeeping have the knowledge and expertise to help your business run smoothly and efficiently. Contact us by phone at (702)514-4048 or by email at tina@lasvegasbookkeeping.com to receive a free, no obligation consultation. Don’t wait! Streamline your business operations by contacting the professionals at Las Vegas Bookkeeping today.

E-Commerce

Two Underutilized Tax Breaks

The utilization of tax credits and tax deductions is one of the most effective ways to reduce taxable income and save tax dollars. However, in spite of their usefulness, many tax breaks are underutilized due to their obscurity. Even once they are identified, eligibility can sometimes be difficult to document. As a result, many taxpayers fail to receive the full tax advantage offered by some of the lesser known tax credits and tax deductions, two of which are highlighted below:

Conservation Easement Tax Deductions

The Conservation Easement Tax Deduction is a tax incentive that was created for the purpose of protecting land from unwanted development. An enhanced version of the law that established this tax break, passed in 2015, allows taxpayers who donate such parcels of land to claim a tax deduction equal to as much as 50% of their adjusted gross income for any given year. It comes with the additional provision that land donors can carry amounts that exceed this ceiling forward for up to 15 years from the date of the initial contribution. This same law gives farmers and ranchers the ability for deduct up to 100% of their annual income for conservation easement contributions with the same 15-year carryforward stipulation.

Although the potential tax savings are significant, this tax incentive is nevertheless often overlooked due to that fact that owners of vacant land frequently do not have sufficient taxable income to warrant its use. What many taxpayers fail to realize is that there are conservation easement tax strategies in place that allow partners who are not original landowners to receive the tax benefits associated with conservation easement donations. This being the case, non-landowners should investigate the possibility of using charitable land donations to offset sizable taxable transactions and periods of high income.

Charitable Gifts of Appreciated Property

A Charitable Gift of Appreciated Property is a second tax break that is very often underutilized. For high income taxpayers as well as those facing the tax consequences of a sizable taxable transaction, a charitable contribution of appreciated property can offer a significant tax benefit. In general, a taxpayer who makes such a donation receives a charitable tax deduction equal to the current market value of the donated asset with the added benefit of avoiding paying capital gains taxes on any appreciated value of the contribution if it was sold for a profit.

Although appreciated investments are probably the most common asset donated to charity, such contributions can also come in the form of land or real estate, among other things. Even when the profits from the sale of such items are taxed at more favorable long term capital gains rates, combined state and federal income taxes can amount to as much as 35% of the sale price. This makes donating such assets to charity a desirable tax planning strategy for certain types of taxpayers. In addition to the tax benefits received by the donor, a Charitable Gift of Appreciated Property provides the charitable recipient of the donation with all of the benefits associated with the donated asset.

Conservation Easement Deductions and Charitable Gifts of Appreciated Property are just two of many lesser known tax incentives that can provide a significant tax advantage to a taxpayer who meets the required quantification criteria. This being the case, a prudent taxpayer is always wise look at all possible ways to reduce taxable income and save valuables tax dollars. However, since many tax credits and tax deductions are obscure and complicated to decipher, taking full advantage of available tax breaks is often best accomplished with the help of a qualified tax professional.

If your business is need of expert tax or accounting services, the experienced staff members of our Las Vegas CPA firm can provide you with the help you are looking for. To schedule a free consultation, fill out our online request form or call us toll free at (702)514-4048. Don’t hesitate! Get your business financial affairs back on track by contacting the professionals at our Las Vegas CPA firm today.