As hard as it is to believe that 2018 is nearly over, it’s the truth. For a lot of families, the news on the new tax laws bodes well, but the “experts” on television have made such a fuss that getting the truth out of the buzz words can be extremely difficult.
I know we have talked about it here for the last few months, but here’s some straight talk…
The new tax law delivers a host of benefits to taxpayers at all levels. For starters, not only is the top rate lowered from 39.6% to 37%, but that rate also kicks in at a higher income level. And, note that whatever new bracket you fall in, more of your taxable income will be hit with lower rates.
A hallmark of the new law is the near-doubling of the standard deduction to $12,000 on single returns, $18,000 for head-of-household filers and $24,000 on joint returns. Congressional analysts say bulking up the standard deduction will let more than 30 million taxpayers avoid the hassle of itemizing write-offs on their tax return because the bigger standard deduction would exceed their qualifying expenses.
Starting in 2018, the $1,000 tax credit for each child under age 17 is doubled to $2,000. Additionally, the new law significantly increases the income phase-out thresholds so that more higher-income families will pocket child credits. This is a HUGE change for many of our clients. And it doesn’t stop there – there is a new credit for older children and other dependents. So, there is much conversation to be had. Learn more here - https://www.tsbas.com/thenewchildcaretaxcredit
The law offers a different kind of relief to individuals who own pass-through entities—such as S corporations, partnerships and LLCs—which pass their income to their owners for tax purposes, as well as sole proprietors who report income on Schedule C of their tax returns. Starting in 2018, many of these taxpayers can deduct 20% of their qualifying income before figuring their tax bill. For a sole proprietor in the 24% bracket, for example, excluding 20% of income from taxation has the same effect of lowering the tax rate to 19.2%.
Now, all of that is great news, but it does come with one big “gotcha” and that’s the fact that, to maximize your savings and refunds, the smart money is on making moves before December 31st.
In years past, of course, retirement contributions after the first of the year helped many taxpayers to ensure a refund or to mitigate their tax bill. This year, though, with the various caps on state, local, and property taxes, I’m recommending to all my clients to make moves before December 31st.
Come in and let’s discuss if the new tax laws will have any negative effects on you and let’s stop that before it’s too late. Schedule online here - https://calendly.com/tsbas/taxcheckup
It’s difficult to believe that 2018 is nearly over, but this is true and with it comes a tremendous amount of uncertainty in the stock market and the world of taxes.
I’ve spoken with dozens of people recently that are concerned with the various challenges the new tax laws will impose on them – whether it’s the state, local, and property tax caps of $10,000 – which is a HUGE challenge in New York, as you know, or simply about if it makes sense to itemize anymore.
Here is a summary of the changes - https://www.tsbas.com/2018taxhighlights
Let me tell you, it’s going to be a messy tax season for a lot of people, whether you own a business or you’re earning a paycheck.
On the other hand, there are lot of places where you can still save a lot of money and mitigate your tax bill, but they’re not as readily apparent as they once were. For small businesses that have previously operated as a Schedule C and LLC, there are even more things to look at, and some may require changing the way you have traditionally looked at your business. You’re an S-Corp? Don’t worry, there are still conversations to be had!
There’s one other challenge that no one is talking about and that is whether or not the “off the shelf” software that a lot of taxpayers use is going to be up to the task of handling the changes in the Tax Code.
I’m optimistic that it will be, but I think it might still result in a lot of people missing out on deductions and credits they didn’t know they qualified for.
… and that’s what I wanted to tell you.
Between now and the first of the year, if you have any questions about how the new tax laws are going to impact you, I want you to reach out to me and my team. It’s even more critical than in years past, because so many “standard” deductions have been rethought or redesigned.
Professionally, I think there is every chance that most, if not all, of my clients can realize the same refunds or tax bills they have in year’s past, but strategies like making retirement contribution decisions in the spring have to change to managing these actions before December 31st.
So please, call and schedule a time to join us now, not after January 1st, and let’s make sure we keep money in your pocket. You can also schedule online here - https://calendly.com/tsbas/taxcheckup
Our work here can sometimes feel over the place – not that this is a bad thing.
In fact, it is one of the parts of my job that I find most interesting. It can be numbing to do the same thing over and over. Here, though, I get to work with many different clients who face many different issues, so helping them always comes in a unique form.
This is something that seems to be hitting many taxpayers as we rush toward the end of 2018. Many people have heard of the some of the tax law changes implemented by the Tax Cuts and Jobs Act, and many used some political calculus to determine how they felt about them. Now, however, they are getting much more interesting in knowing how those changes are going to affect them personally.
As we have said many times, there is not one answer that we can give to cover everyone. Personal answers will be needed. And those personal answers may also change how you go about that political calculus.
So if you need some of that one-on-one attention, please reach out to us BEFORE the calendar turns to 2019.
Now in the interests of continuing to be all over the place, here are a few quick-short items.
Ohio has become the first state in the nation to start accepting Bitcoin as tax payments from many businesses.
I am not an expert in cryptocurrency, so do not want to give any financial advice on how sound of an investment it is. I would only say that in general the volatility in Bitcoin’s value seen over this year goes to show that one should go into investing in this area with a realization of what kind of risk-reward spectrum you are on.
A move like this by a state, though, only adds legitimacy to the concept and helps the long-range forecast of success for these new currencies.
Maybe this could even lead to us one day understanding just what blockchain is anyway.
Now I’m not really sure if this time of year opens one up to higher risk of identity theft. There is definitely talk about it, though, as more people make more online transactions during the holiday season.
I am sure, however, that it does always do one good to take common-sense actions to protect your information no matter what the calendar says. And if your holiday shopping has made you realize that you should be taking some added measures, here is a little primer the IRS recently put out in the spirit of the season.
Late last week the IRS began an Instagram account. Now sure, I can’t find any real fault in the agency using as many means as it can to reach more people with more timely information, but it was never a platform I imagined was cut out for tax news dissemination.
And no one really wants a heap of tax professional selfies.
Some of us do have some rather cute cats, though …
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It is already widely known that the passage of the Tax Cuts and Jobs Act means fewer taxpayers will be itemizing deductions on their tax returns early next year. This means that I will not be spending a lot of time over the next month or so talking about last-minute moves one can make to improve your tax picture. For many, those options have been decrease. This also unfortunately means that I will not be steering as many people to make some late-year charitable donations and then enjoy the tax benefit.
Hopefully, most thought of that latter benefit as a corollary bonus and not the main impetus behind making those donations, for they are still needed.
Giving Tuesday just passed this week, and we are in the time of year when donations reach high levels as feelings of goodwill and hopes of peace drive many to help others. It is not the only time we have had those thoughts this year, though, as recovering from traumatic events like hurricanes and wildfires also necessitated leaning on the generosity of others.
And when you look at the amount of money that can be raised for such wonderful and worthy causes, it can be very heartening. So even if there is a larger chance that making such donations may no longer affect your tax picture, I still want to express the hope that it will not affect your inclination to give if you have the ability to do so.
At the same time, though, there are scammers out there trying to take advantage of this goodwill. It seems that every time a disaster comes along, there are stories of fraudulent people and organizations that pop up to collect money and not pass it along to those they were claiming to help. That is only bound to happen in this more general season of giving, too.
Although it may feel bad to question someone who is claiming to be doing a selfless act, it can do you good to implement a little due diligence and look up the credentials of an organization before making a donation. Sure, there are some large charities that we all know about and trust, but many smaller ones are also doing great work. You may support their mission and just not have known they existed.
So just to ensure that you can feel confident about where your money is going, the IRS offers a Tax Exempt Organization Search online. It provides information on an organization’s tax status, allowing you to confirm it is a tax-exempt entity and eligible to receive tax-deductible charitable contributions. It is an easy check at legitimacy, for if it is a legitimate entity, there is no reason why it would not have formally received tax-exempt status through the agency.
And as always, remember that if something feels fishy, it is worth investigating before you commit to anything. But when things don’t feel fishy, they can instead feel great and wonderful, so please commit to helping there.
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I promise I understand that this is a time when you don’t want to read much, so that this will be a short blog post. I also understand, though, if you want to pretend to take a long time to read it, for no one wants to work much this week and you can use it to kill time.
But I did want to talk a little bit about the concept of Thanksgiving. It is a time when we get to count the blessings in our life, often including wonderful things like our friends and family, but not always including work. This makes sense as we tend to revel in the things we choose to do and not the things that we often feel we have to do.
I, however, am very thankful for the work that I do.
And that is because of you, those of you who I get to serve as clients and those who think enough about what I have to say to read those words.
My job comes with the luxury of getting a first-hand view of the benefits that our work does for our clients. Whether it’s just clean, easy bookkeeping or guidance toward ever-growing profits, it is heartening to work with good people that I admire and to help good things happen for them. A lot of that work has felt extra special this year, too, as we prepare together to navigate a new tax landscape.
So this seemed an appropriate time to give a simple thanks for that opportunity.
Now get back to work … or at least make it look like you did.
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