December 2017 Tax Newsletter
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Tax Alert Updates
How to Ace the FAFSA
Renew your ITIN now
Business tax: time to consider Section 179?
Why the Disabled Access Credit could apply to your business upgrades
The Free Application for Federal Student Aid (FAFSA) is a tool that students use to apply for more than $120 billion in federal funds. Unfortunately, each year many students miss out.
Even if you don't think you or your child qualify for federal aid, filling out a FAFSA is important because it could be used to determine eligibility for nonfederal aid and private funds.
FAFSA available October 1, 2017
Previously, the FAFSA was unavailable until January. A recent change makes the application available October 1, 2017. That's because the 2018-19 FAFSA can be completed with your 2016 tax info.
Avoid FAFSA mistakes
Don't forgo federal student aid by making one of the following common filing mistakes:
Mistake: Not reading the instructions or questions
Tip: Answer all questions – even if the answer is zero. If left blank, the question will be considered unanswered. Check the FAFSA website if you are unsure of definitions of key FAFSA terms.
Mistake: Incorrect, incomplete or non-matching data
Tip: Complete the FAFSA online. It takes only 3-5 days to process when submitted electronically. The online version has built-in safeguards that identify and prevent many errors.
Mistake: Not filing on time
Tip: Get the application submitted ASAP. The sooner you or your child gets started, the higher the likelihood of being awarded funds since many are distributed on a first-come, first-served basis.
Remember, students need to complete a FAFSA each year because eligibility does not carry over and can vary based on circumstances.
Contact us if you have questions.
If you have an Individual Taxpayer Identification Number (ITIN) rather than a Social Security number (SSN) you may need to take action or you'll be unable to file a tax return for 2017.
What to know about ITINs
ITINs are identification numbers issued by the U.S. government for individuals who do not qualify to receive an SSN. An ITIN can be used to file tax returns and is also a form of identification often required by banks, insurance companies and other institutions. Unfortunately, ITINs are also a source of identity fraud. To combat this, the 2015 PATH Act made substantial changes to the program. Now a number of ITINs will expire if not renewed by December 31, 2017.
No ITIN, no problem. If you do not have an ITIN, but have an SSN, this expiration does not affect you.
No tax return in past three years. ITINs that have not been used when filing a tax return at least once in the past three years will automatically expire on December 31, 2017.
Middle digits of 70, 71, 72 and 80 also expire. The new law creates a rolling expiration date for all issued ITINs. The key number to look for is in this position: 9xx-XX-xxxx. If your ITIN has any of those numbers, you'll need to renew it. Last year the middle digits of 78 and 79 expired.
Renew your ITIN
Don't wait until the last minute and then discover your tax return has been rejected and your refund is delayed because of an expired ITIN. To renew, fill out Form W-7 with the required support documents. To learn more, visit the ITIN information page on the IRS website.
Contact us for help.
Section 179 expensing can be a very powerful tax-planning tool for small- and medium-sized businesses acquiring capital assets. While it doesn't change the amount of depreciation you can take over the life of a capital purchase, it can change the timing by allowing you to deduct your purchase in the first year you place it in service.
Review these details if you're considering depreciating your business assets under Section 179:• Section 179 allows deducting the expense of up to $510,000 of qualified business purchases.
• A Section 179 deduction cannot create a loss for the business.
• A Section 179 deduction must be for business use. If an asset is not entirely used for business, the allowance is reduced.
• If you sell a Section 179 asset prior to the full depreciation period, you will have to record any sales proceeds as taxable income.
• Many states limit the use of this federal shifting of depreciation.
Taking Section 179 for capital purchases can be useful, but it's not for everyone. Using it for an immediate tax break means it'll no longer be available for future years.
Contact us for more information on Section 179.
Are you upgrading the offices or workspace of your small business? This may be an opportunity to make improvements to accommodate individuals with disabilities (including your own employees and visitors to the business premises) if you haven't done so already.
These accommodations are legally required for larger businesses. The improvements may be pricey, but there's a potential tax payoff.
Benefits of the Disabled Access Credit
If your small business qualifies under a special tax law provision, it can claim the Disabled Access Credit for half the cost. Specifically, the credit is available for making the business premises more accessible to disabled individuals. A "qualified small business" is one that had gross receipts of $1 million or less or didn't employ more than 30 full-time employees in the preceding tax year. The credit is essentially equal to 50 percent of the first $10,000 of qualified expenses. (Technically, the first $250 of expenses is excluded from the calculation, but then the credit applies to the first $10,250 of expenses.)
That means the maximum credit a qualified small business can claim in a given year is $5,000. Any excess may be carried back for one year and forward for up to 20 years.
The expenses need to be incurred to meet requirements established by the federal law protecting individuals who are disabled. Typically, the credit is claimed forcosts related to:Installing ramps
The credit also applies to material expenses needed for individuals with hearing or visual impairments, and for modifying equipment for their use.
Finally, the disabled access credit is claimed as part of the general business credit on the tax return of your small business. Remember that a credit is more valuable than a deduction because it reduces tax liability on a dollar-for-dollar basis.
Contact us for more information on this credit.