Dear Friends and Clients,
I hope everyone had a happy and prosperous 2018. As we gear up for this year’s taxes, a few reminders:
For anyone making quarterly payments, the final payment for 2018 is due Jan 15.
For those of you with Corporations where we deal with salary issues, we need to be in touch soon to determine a salary and related payroll taxes (quarterly reports are due Jan 31).
Also for those of you with Corporations, as soon as you have your records compiled (or however we deal with it), please get in touch. And please remember to file your annual report with Sunbiz by May 1 for $150. After that there is a $400 penalty. THIS IS FOR BUSINESSES ONLY.
Most of you will be waiting until late Feb to mid-March (if that) to receive all your tax documents. In the meantime please compile all information that you can (medical bills and charitable donations being the main ones).
In regards to the above, while most of you know that the standard deduction has approximately doubled, I still suggest compiling your deductions as you had in prior years, and we will then use whatever method is more advantageous for you.
For those of you who would like a 2018 organizer, please e-mail me and we will send one out to you.
I look forward to seeing everyone this tax season. Please call if you have any questions.
A new tax scam is out there - hackers file a fraudulent return with your information and have the deposit made into YOUR bank account. They then get in touch claiming to be the IRS with instructions on where to refund the money to (their own account of course). If this happens (or you see any IRS deposit that you don't know about), get in touch with me and we'll handle it correctly.FYI, the IRS will never get in touch with you by phone or e-mail. They always correspond first by mail.
On December 22, 2017, The Tax Cuts and Job Act of 2017 was passed into law.
While there are plenty of more details, some of the main items are as follows:
For tax year beginning 2018, the Standard Deduction has closed to doubled, while personal exemptions have been eliminated. And while most of the actual itemized deductions were kept (with some tweaks, such as state and local property/taxes capped at $10k, and limits on mortgage interest, among others), many taxpayers will be better of using the standard deduction as opposed to itemizing. Maybe the biggest lost deduction is investment fees, which for many clients is substantial, depending on their portfolio.
However, the change with the biggest impact is definitely the corporate provisions. C-Corps are now taxed at 21% (down from 35%). But that’s still not the biggest change.
That’s reserved for Section 199A – Pass Thru Tax Breaks
The rules here are complex, but basically this is a new deduction for small business owners of 20% of “net qualified business income.” There are a bunch of limitations (anyone who says this is tax “simplification” is flat out lying). But this can be a huge deduction for small business owners (Sole proprietors, S-Corps, LLC’s, and (maybe) real estate investors). Some of the limitations involve the owners total taxable income, W-2 wages paid, and depreciable property owned.
And in case you were thinking, “I’ll just convert to a C-Corp for the 21% rate”, that will probably not be to your benefit, as then you have the choice of taking the money out as payroll and being subject to large employment taxes (avoiding that is very often the reason for going S-Corp in the first place), or taking the money out as a dividend, and being subject to double taxation on it.
The last quarter of 2018 will be a busy one for tax planning.