An individual, estate, and trust generally must reduce the amount of any charitable contribution deduction by the amount of any state and local tax (SALT) credit he or she receives or expects to the r...
Much-anticipated proposed regulations provide guidance for U.S. shareholders determining the amount of global intangible low-taxed income (GILTI) to include in gross income. The Tax Cuts and Jobs Act ...
Interim guidance and transition rules have been released regarding the special rule requiring exempt organizations that have unrelated business taxable income from operating more than one unrelated bu...
Taxpayers can rely on new guidance related to the limitation on the deduction for employee compensation in excess of $1 million. Specifically, the guidance addresses:the definition of a covered employ...
The IRS clarified who is a "qualifying relative" for the new $500 dependent credit and head of household filing status for tax years 2018-2025. The new rules will continue to use the inflati...
Employer payments or reimbursements in 2018 for employees’ moving expenses incurred prior to 2018 are excluded from the employee’s wages for income and employment tax purposes.The Tax Cuts...
New temporary rules clarify a six-year spread period for Code Sec. 481(a)adjustments after an eligible terminated S corporation changes from a cash to an accrual method of accounting. These rules...
President Donald Trump has declared a federal disaster area in North Carolina. The disaster is due to Hurricane Florence, which began on September 7, 2018.The disaster area includes the following coun...
The IRS has released long-awaited guidance on new Code Sec. 199A, commonly known as the "pass-through deduction" or the "qualified business income deduction." Taxpayers can re...
The IRS has issued final regulations regarding the designation and authority of the partnership representative under the centralized partnership audit regime. The final regulations make a number of ch...
Proposed regulations address the new 100-percent depreciation deduction that allows businesses to write off most depreciable business assets in the year they are placed in service.BackgroundThe Tax Cu...
Proposed regulations provide rules for determining the Code Sec. 965 inclusion amount of a U.S. shareholder of a foreign corporation with deferred foreign income. The tax imposed on the incl...
The IRS has released proposed regulations governing the centralized partnership audit regime. These regulations replace some existing proposed rules to reflect changes made by the Tax Technical Correc...
The Departments of Health and Human Services, Labor, and Treasury have amended the definition of short-term, limited-duration individual health insurance coverage, by allowing such coverage to last up...
The IRS has modified the safe harbor for computing deductible mortgage interest under Code Sec. 163 and real property taxes under Code Sec. 164(a)(1) by homeowners participating in...
The IRS has extended filing and payment deadlines for certain California taxpayers affected by wildfires. Taxpayers in Shasta County may qualify for tax relief.Extended DeadlinesIndividuals and busine...
The IRS has provided relief to taxpayers who took out private student loans to finance attendance at a school owned by Corinthian College, Inc. (CCI) or American Career Institutes, Inc. (ACI). Under t...
The IRS will provide automatic consent to a small business taxpayer’s application to change to the cash method of accounting. Eligible small business taxpayers, as defined by the Tax Cuts and Jo...
Tax-exempt organizations, other than charities exempt under Code Sec. 501(c)(3), will soon be able to stop reporting the names and addresses of contributors on Schedule B when filing their inform...
Taxpayers will be able to file federal income taxes starting next filing season on a new postcard-sized Form 1040. The IRS officially released the draft 2018 Form 1040 on June 29.Draft Form 1040The ne...
The IRS has proposed amendments to the tax preparer due diligence regulations to reflect a recent law change. The Tax Cuts and Jobs Act ( P.L. 115-97) expanded the scope of the due diligence pena...
The Treasury Department and the IRS plan to issue regulations clarifying that certain estate and nongrantor trust expenses remain deductible and are not subject to the miscellaneous itemized deduction...
The IRS has urged certain veterans who received disability severance payments after January 17, 1991, and included that payment as income that they should file Form 1040X, Amended U.S. Individual Inco...
The IRS, along with Security Summit partners, offered important tips dubbed "Security Six"protections to help tax professionals protect their computers and email as well as safeguard sensitive ta...
The District of Columbia Office of Tax and Revenue (OTR) has issued a press release stating that effective October 29, 2018, all importers who engage in selling motor fuel in the District, and/or brin...
Maryland sales and use tax economic nexus thresholds apply on October 1, 2018. The emergency rule with the thresholds expires March 30, 2019.Economic Nexus ThresholdsA remote seller has economic nexus...
The Virginia interest rates for the fourth quarter of 2018 will remain at 7% for bothtax underpayments (assessments), andtax overpayments (refunds).Rate for Underpayments of Estimated Tax AdditionFor ...
Welcome to the Alcorn & Cureton, Ltd Web Site.
We are currently scheduling tax planning appointments to see how the new law will affect you. Included in the 2017 tax return package we gave you, we did a computation of what your 2018 taxes will be like based on a static model using your 2017 information. If your income is changing or you have large capital gains, you may want to come in and have us calculate what your 2018 taxes might be.
The two magic words for 2018 are QCDs and QOZs.
For those over age 70 1/2, you can make your charitable contributions directly out of your IRA. These Qualified Charitable Distributions do not add to your Gross Income and are not limited as far as your deductions go. The max QCD is $100,000 per year.
The hot new topic for 2018 is Qualified Opportunity Zones. You can completly defer capital gains if you invest the money into a QOZ. These are not yet readliy avaialble, but will be coming soon. Stay tuned.....
The highlights of the new 2018 tax law are-
Top tax bracket drops from 39.6 to 37%. But the Medicare surtax of .9% and the Net Investment Income Tax of 3.8% continue.
The medical deduction remains as does the charitable contribution deduction, but with minor limitation differences.
SALT (State and Local Tax Deductions) will be limited to $10,000 per return. This is probably the biggest change for most of our clients. However, those that were in AMT (Alternative Minimum Tax) were already losing some of their SALT deductions. Those joint returns in the $200k to $400k were almost always in AMT. The AMT will continue with higher thresholds.
With the changes in the itemized deductions, those over age 70 1/2 will want to consider making their charitable contributions directly out of their IRA accounts. Gives you maore bang for the buck, and helps keep your AGI down for the purposes of calculating your Medicare premiums. As your AGI increases, so do your Medicare premiums (both Part B & D).
Personal exemptions are gone, but replaced with child credits and a higher standard deduction.
The tax rates decrease somewhat. There are still 7 rate brackets, but there is a shift in the rates somewhat downward.
The "kiddie tax" on your dependents (up to age 24) has been increased. Instead of using the parent's tax rates, we will use the Trust tax rates, which get to the top bracket at just $12,500 of taxable income.
Mortgage interest continues, but interest on new mortgages over $750,000 will not be allowed. Residence and 2nd home. Does not apply to rental properties. Home Equity interest will not be deductible.
Planning Point-If you have little mortgage interest and if you don't do a lot of charitable contributions or medical expenses, you may be using the standard deduction instead of itemizing. You may want to group your deductions to get a better effect. For example, you have your full $10,000 of State and local taxes, so if you are a joint return, you need $14,000 of medical or charitable deductions to start itemizing. If you normally do $10k of charitable contributions, you should bundle those within years, doing zero one year and $20k in the following year, and alternate as such through the years. On a single return, your standard deduction is $12,000, so if you have your $10k of SALT, you only need $2,000 of deductions to start itemizing.
The most complex part of the new law for us is the idea of Pass thru Income. The following is our basic simplistic take on the law-
The Pass Thru Deduction is a deduction on the personal income tax return after AGI but before Taxable income of 20% of Qualified Business Income. QBI is basically the taxable income of the Sch C, partnership or S Corp.
Then, there are limitations on that 20%.
You can take the greater of 50% of the W-2 wages in the business
25% of the W-2 wages plus 2.5% of the unadjusted basis of depreciable property* in the business
If you are a 25% owner of the company, you get allocated 25% of the wages and property for the purpose of this computation.
The individual's W-2 or Guaranteed Payment to Partner (GPP) does not count as part of his QBI. GPPs also don't count as wages for the purposes of the limitation.
The ability to use the 50% of Wages rule phases out on the individual's return if his Taxable income is higher than $157,500 single, $315,000 joint. The top of the phase out income range is $207,500 single and $415,000 joint. So joint return with $500,000 TI would not be able to use the 50% of wages rule, and would have to use the 25% of wages + 2.5% of property rule.
If it is a service business, the rules are tighter.
The deduction for all service businesses starts to phase out when the client's income exceeds $157,500 single, $315,000 MFJ. Phase out is complete at $207,500 single and $415,000 joint.
Service businesses are defined as any trade or business involving the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of 1 or more of its employees.
Apparently engineering and architecture are not considered a service business for the purpose of this deduction and we guess they would fall under the normal business rules, where you can always take the 2% of wages + 2.5% of property.
So for high income people, if the business income is not from services, they will always be able to use the 25% of wages + 2.5% of assets limitation. If a service business, they get nothing if over the income caps.
*The definition of depreciable property for this purpose is anything depreciable up to the later of being fully depreciated OR over 10 yrs old. So a 7 year old truck fully depreciated would still count, and we would use its original basis before depreciation.
For S Corps, the planning will be whether to take smaller W-2s in order to increase the QBI from the K-1, keeping in mind that the limitations are based on the corporate W-2 expense.
An owner of an S corp with $100,000 income and no assets would not get a deduction if there were no wages. If he or she took $50,000 in wages, the remaining $50,000 of business income would be eligible for the deduction, $10,000. If wages were $25,000 and S Corp profit was $75,000 we would compute a deduction of $15,000, but limited to 50% of wages $12,500.
For a partnership, every dollar we pay out as a GPP reduces the QBI and does not increase the W-2 wages for the purposes of the limitation. So if we have a partnership with $25,000 wages to employees, $100,000 net income and no assets, we would get a deduction of $20,000, but limited to 50% of wages, or $12,500. If we pay out $50,000 as GPP, the partnership income is now $50,000, so the max deduction would be $10,000. It appears that we do not want GPPs if we have partners that might be eligible for the deduction.
The Corporate income tax rate drops to 21%.
Miscellaneous itemized deductions are gone for 2018. Your unreimbursed employee expenses and brokerage fees will not be deductible.
The Federal Estate Tax exclusion jumps to over $11 million a person. But some states, such as Maryland and DC still have much lower thresholds for when the estate tax starts. The annual gift tax exclusion amount goes from $14,000 to $15,000 in 2018.
Section 529 Tuition Plans will be able to be used for pre-college educational expenses, up to $10,000 a year, starting in 2018.
Virginia is sending out letters to all trusts that file in VA regarding electronic filing. You do not need to worry about that, in that we will electronically file your 2017 Fiduciary returns.
Yes, we generally recommend that you put a Freeze on your credit reports due to the Equifax security breech. To freeze your Equifax reports, go to www.freeze.equifax.com
Virginia is moving towards almost all payments to the state have to be electronic. For businesses, everything has to be paid electroncially, and individuals with Virginia estimated payments of over $15,000 per quarter or $60,000 for the year must pay electronically. You can make these payments through the VA Dept of Taxation web site. (https://tax.virginia.gov/).
You can upload your investment information directly into your tax return by using our Intuit Link system. Let us know that you want to have your interest, dividends and stock sales imported directly in, and we will send you an invite to register with Intuit and select the accounts you want to upload.
Starting a business? We can help. Generally we recommend that most businesses start as an LLC (Limited Liability Company). If there is only one owner, it will be a single member LLC and the income and expenses will just be reported on the owner's tax returns. If there is more than one owner, the LLC will be taxed as a partnership and will file a partnership income tax return. The entity itself does not pay income taxes, in that the income flows through to the owners on their tax returns.
The LLC form of business helps protect you from legal liability if done correctly. Most businesses can benefit from that, especially high risk activities such as real estate (rentals, construction and flipping), restaurants and services.
LLCs generally have to register with the State and you want to obtain a Federal Employer ID number (EIN) from the IRS. That way you do not need to use your Social Security Number.
The IRS does NOT call you to say they are suing you, taking you to court or demanding you make a payment to them today. These are scams. The IRS warns that there are now scam IRS CP-2000 notices (tax adjustments) being emailed out. The IRS also does NOT send out emails regarding a tax refunds or rebates or request that you set up a PIN number in order to get your refund. These are phishing schemes and phone scams, and you should not respond to them and NEVER, NEVER, NEVER click on a link from one of those emails. Never make a payement to the I.R.S., in that all payments to the goverment are paid to the U.S. Treasury. If your notice or call says antyhing different, it is fake. PLEASE REPORT THESE TO http://www.treasury.gov/tigta/contact_report_scam.shtml
A wonderful video on this is
Setting up a 529 Plan for your kids or grandchildren? While there is not a Federal tax deduction, there are state tax deductions available if set up with your state of residence or its approved plan. You can maximize your state tax deductions by splitting the accounts between husband and wife (Virginia) or by the different type of plans (Maryland).
Transmit your data to us safely and securely. Use our File Share Portal. The File Share link is at the bottom of this page.
With the increase in Capital Gains Rates, Sec 1031 Exchanges are coming back in style. If you have a planned sale of Real Estate that will generate large capital gains, give us a call and we can discuss how you can defer the tax on those gains to a later date.
Virginia Employers, including individuals with rental properties, must file a BPOL license with your county or city by March 1. Landlords with properties in DC must file a Franchise Tax return. Every jurisdiction has its own rules on this. Fairfax County requires a business license if you rent three or more residential properties or one commercial property.
Get a heads up on the new laws-subscribe to our NEWSLETTER. Our monthly newsletter will be emailed to you each and every month. Click on the Subscribe button at the bottom of the page. This is a free client service that we want you to take advantage of. There are always a lot of good tax planning ideas in each monthly newsletter.
Thinking about using a Tax Relief company to reduce your balance due to the IRS? Check out the news article, in Links on the top menu line, then in News.
Are you (personally or your business) subject to the Use Tax to your state? Check out our article on this in the Newsletter section.
Are you maximizing your retirement plan deductions? Is all of your estate planning (wills, trusts and medical directives) up to date? Please make sure that we have the current version of your Will and Trust documents.
Are you selling your investment real estate? Don't pay taxes on the gain-do a Section 1031 Exchange. Never think about selling your real estate without talking to us first.
Be sure to catch our monthly newsletter, updated on the first of each month. Clicking on the Newsletter tab above can access the newsletter. We provide this newsletter service for you to keep up with the latest changes in the tax laws and newest ideas for tax and financial planning.
Need Tax Information? We have the complete CCH TAX GUIDE accessible at the INFO CENTER tab above. This complete tax book has information on individual, business and even non-for-profit taxes, with a full search feature.
We have added many new calculators in our FINANCIAL TOOLS section (tab above) including a full 1040 tax calculator, estate planning and mortgage loan calculators, including refinance savings computations and amortization schedules. There are so many powerful calculators; you will be able to calculate things that you never thought existed!
Driving directions to our office can be found in the CONTACTS section.
In addition to providing you with a profile of our firm and the services we provide, this Website has been designed to become a helpful resource tool to you, our valued clients and visitors. Our dedication to superior client service has brought us to the Internet as we endeavor to continue to provide the highest quality professional service and guidance.
As you browse through our Website, you will see that not only have we highlighted background information on our firm and the services we provide, but have also included useful resources such as informative articles (in our Newsletter section) and interactive financial calculators (in our Financial Tools section). Check out the nifty refinancing calculators to determine if you should refinance now, and how much it may save you.
In addition, we have taken the time to gather many links to external Websites that we felt would be of interest to our clients and visitors (in our Internet Links section).
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While browsing through our Website, please feel free to contact us with any questions or comments you may have - we'd love to hear from you. We pride ourselves on being proactive and responsive to our clients' inquiries and suggestions.
NEW EXPANDED FTP SIZE! UP TO 1 gig. Need to send us a large QuickBooks or other file? Use our File Share program. Click on the File Share logo below and click on the New User Registration button. Please be sure to remember your sign in name and password that you set up. You will then be able to send up any file up to 1gig in size. If you registered before June 18, 2012, you will need to update your registration. If you try to upload something and you get a "not enough space" message, please give us a call. On some days we get a large amount of data in and the box overflows.
Special note to our File Share users. To improve security, the portal requires a fairly current browser version. If your browswer is IE 10 or prior, you will get a "cannot find page" error message. If you do, please update your browser (they are free, and you should not be using an older version anyway).
If you are uploading your QuickBooks file, we suggest that you send a Portable Copy (.QBM) in that it is smaller and contains less data than a regular Backup file (.QBB). It also does not contain your sensitive customer data. Please note that you also need to send us your current QB password.