The Tax Cuts and Jobs Act is going to be a "heavy lift" for the IRS, National Taxpayer Advocate Nina Olson has told Congress. The agency is strapped for cash and already has a huge workload, Olson sai...
Some employers and coverage providers have more time to distribute 2017 health coverage information returns to employees and enrollees, the IRS has announced. However, the deadline for filing these fo...
The IRS has urged travelers with seriously delinquent tax debt to either pay the taxes owed or enter into payment agreements to avoid jeopardizing their U.S. passports. The warning came shortly after ...
Final regulations just issued by the IRS help clarify electing out of the new centralized partnership audit regime. As of January 1, 2018, the new centralized partnership audit regime rules now govern...
U.S. Department of Labor announced the release of proposed regulations that would "expand the opportunity to offer employment-based health insurance to small businesses through Small Business Health P...
// // The District of Columbia Office of Tax and Revenue has issued a press release discussing the eligibility requirements for personal income taxpayers claiming the DC Earned Income Tax Credit (DC E...
// // The Maryland Department of Assessments and Taxation has issued a press release informing corporate income taxpayers that it is streamlining the annual business filing process by updating the pap...
// // A nonprofit organization (taxpayer) could purchase alcohol and alcoholic beverages exempt from Virginia retail sales and use tax from caterers, retail establishments, and Virginia Alcoholic Beve...
Welcome to the Alcorn & Cureton, Ltd Web Site.
Happy New Tax Year!
Our office hours are 8am to 5pm Monday thru Friday.
Do you have household help? If you hire a person to work in your house, they generally are an employee and you have to issue them a W-2 form. This includes cleaning and medical assistance people. As a household employer, you have the option of paying the Social Security taxes for him or her. If you hire someone at $10 an hour, and the net check to them is $10 per hour, then you are electing to pay the SS taxes for them. Under normal employment, employers must withhold 7.65% for the SS and Medicare taxes. If you did that, the $10 of pay would become $9.24, and that is the amount of the employees net paycheck. If you elect to pay the tax for the employee, the net check will be the $10.
You, as the employer, owe the federal government the payroll taxes, and you pay those on your personal income tax return you file in April. Since there is an employee portion of the SS taxes and an employer portion, the taxes due to be paid on your form 1040 are the double of 7.65%, or 15.3% of the wages paid.
When the W-2 is prepared, the taxable income has to be adjusted if you have elected to pay the SS taxes for the employee. If the pay is $100, and you did not withhold anything, then for the purposes of the W-2 form, you have paid your employee the $100 plus the 7.6% SS taxes, giving us taxable wages (box 1) of $107.65.
W-2 must be filed by Jan 31.
The New Tax law is Here!
The highlights of the bill for all of us 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.
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).
|The Gross National Debt|
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.