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 Los Angeles 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 Los Angeles Bookkeeping today discuss possible year-end tax planning strategies. Schedule a free, no obligation consultation by emailing us at james@labookkeeping.com or calling us at (714) 509-5683.

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) 945-2757 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) 945-2757 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) 945-2757 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) 945-2757 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) 945-2757 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) 945-2757 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) 945-2757 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)945-2757 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)945-2757 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) 945-2757 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) 945-2757 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)945-2757 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) 954-2757. Don’t hesitate! Get your business financial affairs back on track by contacting the professionals at our Las Vegas CPA firm today.

New Twist to IRS Tax Appeal Process

Earlier this week, the IRS announced that its Office of Appeals would begin to pilot a new video conference option for resolving an IRS tax appeal. With over 100,000 taxpayers filing tax appeals each year, the agency is hoping that this new program will reduce response time as well as help to lighten the work load of IRS employees who are operating with reduced resources. Prior to the initiation of this new web-based alternative, a taxpayer or their representative would have to travel to an IRS office in order to have a face-to-face meeting with an IRS appeals representative. The only other option was to discuss the matter by phone which often did not result in a satisfactory resolution of the matter at hand.

An IRS tax appeal is most often initiated when a business or individual taxpayer disagrees with a determination made by the IRS as the result of an IRS tax audit. At the end of the audit process, the IRS sends the audited entity a copy of the auditor’s ruling together with a formal written letter outlining the specific steps necessary to appeal the results. The letter states that, in order to be considered, a written appeal must be submitted within 30 days of the date shown on the communication from the IRS. It must include a specific lists of the items for which there is disagreement, the reason for the disagreement and any facts or laws that support the taxpayer’s position. Once this statement is submitted together with a signed perjury statement, the IRS may take up to 90 days to respond.

If the written request for appeal is accepted, an appeal hearing is scheduled. To prepare, the business or individual being audited should submit a Federal Freedom of Information Act letter requesting the full auditor’s report and follow this up by collecting and organizing documentation to support each item being questioned. Prior to the recent IRS video conferencing initiative, these appeal hearings were conducted in one of two ways - over the phone with supporting documentation submitted by mail or face-to-face at an IRS office. Both of these previous alternatives are accompanied by logistical shortcomings which will hopefully be resolved with the new web-based solution.

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) 945-2757 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 Warns of New Tax Scams

Although telephone tax scams have been around for years, there are some new angles being implemented. One involves demanding payment of a tax that doesn’t even exist, while another directs taxpayers to pay tax liabilities using iTunes Gift Cards or other types of prepaid debit cards. In response to the rise of such threats, IRS Commissioner John Koskinen recently issued a statement warning taxpayers to “remain vigilant and not fall prey to … aggressive calls demanding immediate payment of a tax supposedly owed.”

Some of the telephone tax scams that have popped up fairly recently are highlighted below:

  • “Federal Student Tax” Scam

This scam, which targets students, involves phone calls demanding payment of a fake tax called the “Federal Student Tax.” Although the tax doesn’t even exist, the scammers sound believable because they usually have obtained some legitimate piece of information such as the name of the school the taxpayer attends. The caller typically demands that the tax be paid using some untraceable method such as a MoneyGram and threatens legal action if the money is not received.

  • iTunes Gift Card Tax Scam

This scam, which has cost targeted taxpayers over $1.4 million, involves a scammer impersonating an IRS employee demanding the payment of back taxes using an Apple iTunes Gift Card. Other similar scams insist that tax payments be made using any one of a variety of other types of prepaid cards such as Reloadit, MoneyPak or Green Dot.

  • IRS Impersonation Tax Scam

This scam consists of callers presenting themselves as IRS representatives threatening targeted taxpayers with arrest if they don’t pay outstanding tax balances though the use of a prepaid debit card. The scammers claim that certified letters have been previously sent and that the debit card purchase is somehow linked to the Electronic Federal Tax Payment System which, of course, it is not. Part of the scam includes a warning that the taxpayer should not contact the IRS or their tax preparer until after the tax is paid.

To avoid falling prey to these and other tax scams, taxpayers should be aware that the IRS never demands payment of taxes over the phone or asks for personal information for the purpose of verifying a person’s identity. They will also never ask for debit or credit card numbers or threaten arrest if taxes are not paid. The IRS urges anyone who receives such a call to just hang up and not call back. If a tax collection message comes in the form of an email, the recipient is warned not to click on any links or supply any personal information. Taxpayers beware! Although tax season is officially over, tax scammers are as active as ever!

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)945-2757 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 Implications of Trump’s Tax Plan

At the end last month the Trump team released a somewhat sketchy version of their proposed tax plan. Although it was only a single page summary and contained few specific details, the major bullet points of the proposal were quite clear. Outlined below are some of the major tax code changes contained in Trump’s tax plan:

1) Reduce the corporate income tax rate from 35% to 15%. This 15 % rate would also be made available to pass though entities such as partnerships and limited liability companies.

2) Reduce the top individual income tax rate form 39.6% to 35%.

3) Simplify the tax code for individual filers by reducing the number of individual income tax brackets from seven to three – 10%, 25% and 35%.

4) Eliminate the 3.8% Net Investment Income Tax that is imposed on certain types of passive income such as interest, dividends and capital gains for those taxpayers with adjusted gross incomes above certain threshold amounts.

5) Eliminate the Estate Tax which is currently levied on individual estates in excess of $5.5 million dollars.

6) Eliminate the Alternative Minimum Tax.

7) Eliminate the federal income tax deduction for state and local income taxes.

8) Eliminate the ability of employers to exclude employer paid health insurance premiums from their taxable income.

9) Institute a territorial system of business taxation where companies would only pay taxes on profits earned in the continental United States.

10) Establish a tax holiday for the purpose of allowing companies to repatriate foreign cash reserves at a reduced tax rate.

11) Double the amount of the standard deduction

12) Eliminate most itemized deductions with the exception of the deductions for charitable contributions and home mortgage interest.

Although proponents of Trump’s tax plan say that it will more than pay for itself by encouraging business activity and expanding the economy, critics maintain that this is not the case. In fact, a group of analysts at the Tax policy Center recently released a statement claiming that the proposed plan would reduce federal tax revenues by more than six trillion dollars over the next decade. Secretary of the Treasury, Steven Mnuchin, countered this opinion with the assertion that the Trump tax proposal will have the overall effect of lowering the ratio of debt to gross domestic product by stimulating the growth of the economy. Only time will tell which portions of this tax proposal are actually put into action and what effect they will have.

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)945-2757 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.

Don’t Waste Tax Dollars!

With 2017 tax rates ranging from 10% for those in the lowest tax bracket to a high of 39.6% for the highest wage earners, income taxes amount to a huge “expense” for most American taxpayers. A wage earner with a $50000 income, which is somewhere in the middle of the 25% tax bracket, can expect to pay over $12000 in federal income taxes alone! This being the case, it is important for individuals to be aware of the many ways available to save tax dollars and, on the flip side, to carefully avoid the pitfalls that can result in paying taxes in excess of what would otherwise be owed.

One of the easiest ways to save tax dollars is to take advantage of tax credits and tax deductions offered by the IRS and various state tax agencies. A tax credit offers a dollar for dollar reduction in the tax amount owed while a tax deduction reduces taxes by a certain percentage, normally determined by the marginal tax rate for that particular taxpayer. Available tax credits, which vary from year to year, are available for such things as child care costs, education expenses, caring for elderly or disabled family members and various energy saving improvements, among other things. Deductions include the standard deduction as well as numerous others including charitable contributions, medical expenses, tax preparer and financial adviser fees and unreimbursed employee expenses, to name only a few. Although they operate differently, both tax credits and tax deductions are valuable tax breaks that can provide taxpayers who know how to use them effectively with significant tax savings.

A second major tax saving opportunity is to make use of effective tax planning strategies. Many components of the tax system are time sensitive, thus making it possible to save tax dollars simply by adjusting the timing of certain tax related decisions. Some of the many tax considerations that are particularly affected by timing are the sale of investment properties and other investment assets, Roth conversions, gifting and 401(k) and IRA distributions. Timing can also be used to shield capital gains from taxation by pairing them with capital losses or using any one of a number of advanced tax planning strategies such as a 1031 Exchange or a zero cash investment transaction. Tax planning is also important for businesses and includes such considerations as buy-sell agreements, family succession transfers, captive insurance plans and defined benefit and contribution plans, among many others.

A third and final way to save valuable tax dollars is to meet tax filing and tax payment deadlines in order to avoid the penalties and interest associated with the late filing of a tax return and the late payment of taxes due. Failure to File and Failure to Pay Penalties are charged for each month or partial month that a return is late or that a back tax balance is owed. The penalty rate for Failure to File is 5% of the outstanding tax liability up to a maximum of 25% of the tax amount owed. Failure to Pay Penalties are assessed at a rate of 0.5% of the back tax balance with no ceiling on the amount that can be charged. Together with the interest that is assessed on any overdue tax balance, these penalties compound over time and can add a significant additional tax burden that is easily avoided by following the IRS guidelines.

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) 945-2757 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.

Private Agencies to Begin Collecting Tax Debt

Earlier this month, Congress gave the IRS the go ahead to begin using private collection agencies to collect back taxes. Although proponents of privatizing tax debt collection say that it will help to generate extra tax revenue, opponents are quick to point out its shortcomings. National Taxpayer Advocate, Nina Olsen, highlights the fact that over three fourths of delinquent tax accounts that could potentially be turned over to private collection agencies belong to taxpayers that are below the poverty line. For this reason, she believes the program will not accomplish its intended objective of increasing tax revenue. According to Olsen, the previous attempt to generate tax revenue through the use of private collection agencies which took place under the administration of George W. Bush “undermined effective tax administration, jeopardized taxpayer rights protections,” and actually ended up losing money.

Listed below are some of the specifics of this new policy:

Which taxpayers will be assigned to private collection agencies?

Only those taxpayers who have several years’ worth of unpaid tax debt and who have been subjected to numerous collection attempts by the IRS will be assigned to an outside debt collection agency.  

How will taxpayers be notified IRS?

Taxpayers will receive an official IRS Letter notifying them that their federal tax accounts are being turned over to a private collection agency and identifying the agency that will be handling their account. The letter will also include a copy of the IRS publication, What to Expect When the IRS Assigns Your Account to a Private Collection Agency.

How will the debt collection agencies communicate with the taxpayers?

Following the official IRS Letter, the debt collection agency will send its own written communication to the taxpayer. Once they have sent the letter, they will then be able to contact the delinquent taxpayer by phone.

How will the private collection process be regulated?

The private collection agencies will be regulated by the Fair Debt Collection Practices Act and must follow the all of the requirements set forth in this piece of legislation. These provisions include, among other things, being courteous, respecting the taxpayer’s rights, and not making contact at times and places “known or which should be known to be inconvenient to the consumer.”

What debt collection agencies are being used?

The following are the only debt collection agencies being used by the IRS: CBE Group (Cedar Falls, Iowa), Conserve (Fairport, New York), Performant (Livermore, California) and Pioneer (Horseheads, New York).

How many taxpayers will be assigned to private collection agencies?

For the first four weeks, each tax debt collection agency will be assigned 100 taxpayers per week. Following the initial break-in period, each private agency will service the accounts of 1000 taxpayers per week.

It is important to know that, although private collection agencies will be helping with collection of back taxes, they will not be given the power to initiate any type of enforced collection activity to achieve their goal. Only the IRS will have the power to place a tax lien, issue a tax levy or set up a wage garnishment. In addition, all back tax payments will be made directly to the IRS and not to the private collection agency handling the account. Any tax debt payments that are made using a credit or debit card should only be made using the payment options on the IRS website.  

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)945-2757 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.

Paying Your Income Tax Bill

With the close of Tax Season 2017 less than a month away, it is likely that many taxpayers will end up being faced with a tax bill in excess of what they are able to pay. When this situation occurs and your tax bill exceeds your available financial resources, the best approach is to face the situation head on. To ignore the problem and hope that it will go away will only make matters worse. Not only will this approach result in an increased back tax balance due to the continued accumulation of penalties and interest, but it could ultimately result in the initiation of a tax lien or some other type of enforced collection activity by the IRS.

One of the easiest options for paying a tax bill when the necessary funds are not immediately available is to request short term administrative extension. This agreement postpones the payment of the tax amount due for 120 days, at which time the balance must be paid in full. However, although payment of the tax balance is postponed, a failure-to-pay penalty of one-half of one percent of the tax amount due will be charged each month during the grace period. Other no hassle payment options include charging the tax debt to a credit card, withdrawing the necessary funds from a retirement account or taking out a bank loan to cover the tax amount owed. When considering any of the aforementioned choices, the cost of borrowing should be weighed against any interest or penalties that will be assessed by the IRS or state tax agency.

In the absence of a borrowing alternative, a taxpayer who is short on financial resources can request setting up an IRS Installment Agreement. Such an agreement provides a means of paying off a back tax balance by making regular monthly installment payments. Although a small origination fee is charged, approval for this tax settlement option is almost automatic as long as the requesting taxpayer owes less than $10,000 and is in otherwise good standing with the IRS. The taxpayer is normally allowed to set the amount of the monthly installment payment as long as it will result in the full balance of the tax debt being paid off within five years form the date the agreement is initiated.  

Tax resolution options which involve settling a tax debt for less than full amount owed are harder to obtain but may be a viable alternative for taxpayers who meet certain specific qualifying criteria set by the IRS. Such partial payment tax settlement options include the IRS Offer in Compromise and the IRS Partial Payment Installment Agreement, among others. In general, the IRS only grants these tax settlement options when they determine that the taxpayer in question is very unlikely to be able to pay the full balance of the tax debt they have accumulated within a reasonable period of time.

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)945-2757 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