March 2018 Tax Newsletter
February 2018 Tax Newsletter
January 2018 Tax Newsletter
First Quarter 2017 Tax Deadlines
Time to Plan for Inflation-Adjusted 2017 Tax Numbers
Making the Most of Your Tax Refund
Can Bartering be an Effective Business Strategy?
Traveling for Business? Lock in Your Deductions.
Tax return filing season has arrived, which means it's time to mark your calendar for these 2017 tax deadlines.
• February 28 - Payers must file information returns (except certain Forms 1099-MISC) with the IRS. (Except for certain Forms 1099-MISC, March 31 is the deadline if filing electronically.
• March 2 - Large employers must furnish Form 1095-B and Form 1095-C to employees.
• March 15 - 2016 calendar-year S corporation Form 1120S income tax returns are due.
• March 15 - 2016 calendar-year partnerships Form 1065 income tax returns are due.
• March 31 - Forms 1095-B and 1095-C due to the IRS, if filing electronically. (Employers who have 250 or more employees are required to file electronically.)
Each year, certain tax figures are adjusted for inflation. While most figures are unchanged versus 2016, there is more than a 7% increase to the maximum earnings subject to social security tax. Take note of these numbers to use in your 2017 planning.
The maximum earnings subject to social security tax in 2017 is $127,200. The earnings limit for those under full retirement age increases to $16,920 for 2017.
The "nanny tax" threshold remains $2,000 in 2017. If you pay household employees $2,000 or more during the year, you're generally responsible for payroll taxes.
The "kiddie tax" threshold remains $2,100 for 2017. If you have a child under the age of 19 (under age 24 for full-time students) who has more than $2,100 of unearned income, such as dividends and interest income, the excess could be taxed at your highest rate in 2017.
The maximum individual retirement account (IRA) contribution you can make in 2017 remains unchanged at $5,500 if you are under age 50 and $6,500 if you are 50 or older.
The maximum amount of wages employees can contribute to a 401(k) plan remains at $18,000, with an additional $6,000 if you are 50 or older. The 2017 maximum contribution for SIMPLE plans is $12,500 and and an additional $3,000 if you are 50 or older.
The maximum you can contribute to a health savings account remains unchanged in 2017 at $3,400 for individuals and $6,750 for families. The catch-up contribution if you're age 55 or older is $1,000.
When you're an applicable large employer (generally, when you employ 50 or more full-time workers and equivalents), you're required to provide information about health coverage to the IRS and to your employees. The IRS extended the date on which two of these forms are due to your employees. Instead of being due January 31, Form 1095-B, Health Coverage, and Form 1095-C, Employer Provided Health Insurance Offer and Coverage, are now due March 2, 2017. There is no change to the February 28, 2017, due date for filing paper forms with the IRS, nor the March 31, 2017, due date for filing electronically.
If you are expecting a tax refund, you might consider investing your refund or using it to increase your financial security. While everyone's needs are different, here are some optional uses of your refund that may work for you.• Contribute your refund to your employer's 401(k) plan. If your employer offers a matching contribution, that's an immediate return on your money in addition to deferring taxes on your contribution. And, funds in the plan grow free of tax until withdrawal.
• Use your refund to pay down credit card balances - you'll earn a guaranteed double-digit return.
• Consider investing your refund in your child's education. Both Section 529 college savings plans and education savings accounts offer tax-advantaged ways to save for college costs.
• Take full advantage of your IRA options for retirement savings. Both Traditional and Roth IRAs are great ways to save for retirement.
• If you've maximized your retirement and education savings, and your credit cards are under control, put your refund in diversified investments that make sense for your age and financial situation.
• Ask yourself if getting a big refund every year is a smart idea. Would you rather invest your money during the year instead of making an interest-free loan to the government? If so, consider filing an updated Form W-4 with your employer.
Contact us if you have questions about getting more out of your tax refund.
Have you ever thought about bartering as a way to get the goods and services you need for your business? A growing number of businesses are finding ways to use the bartering system as a means to avoid using up their company's cash.
A simple bartering arrangement involves two parties trading items of similar value. For example, let's say your business owns a building located next to a telephone company. An internet service provider might be interested in storing its services in an unused portion of your basement. Instead of paying rent, they offer to provide you with a high-speed internet connection and website.
Complicated bartering may now take place through bartering clubs that give members credits for items or services they contribute. Members can then use the credits to pay for goods or services offered by other club members. This service offers a convenience to businesses, as it can be difficult to find the businesses that offer what you are looking for when searching on your own.
It's important to note that there are income tax consequences to bartering. To be safe, view your trades as if cash changed hands, since the goods and services are valued for tax purposes at their fair market values and taxed accordingly. Also, a bartering arrangement does not always result in a deduction immediately equal to the income you recognized. You might provide a service and recognize income immediately in exchange for some equipment you will end up depreciating over several years.
Please contact us if you need more information about implementing bartering as a strategy to help your business.
The ability to deduct expenses on your tax return often boils down to whether you've kept the proper records or not. This is especially true when it comes to write-offs for travel and entertainment expenses. Tax law has a special set of rules for these expenses. Here's what you need to know.
• Understand the basics. Generally, you're required to substantiate expenses for traveling away from home on business, including meals and lodging, local transportation, and entertainment and business gifts. The specific information you'll need for each expense consists of five items.
1. The amount
2. The time and place
3. The business purpose
4. The business relationship of the person being entertained
5. The date and description of business gifts.
• Do it now. Records for travel and entertainment expenses must be "contemporaneous." Although this doesn't mean you have to log your expenses as soon as you shut off your car engine, you can't wait until tax filing day, either. Compiling the records on a weekly basis is generally sufficient.
• Be adequate. Another requirement for travel and entertainment expense deductions is that records must be "adequate." According to the IRS, adequate evidence shows the amount, date, place and main character of the expense. For example, keep receipts from hotels when you stay overnight on business, and restaurant and bar tabs for entertaining business clients. Credit card statements can also corroborate the receipts. As a last resort, the IRS says you may offer a written or oral statement containing specific information to help prove an element of the expense with other supporting evidence.
The IRS has a long history of targeting travel and entertainment expenses during audits. Make sure you establish a record keeping system that will stand up to scrutiny.