Dear Friends and Clients,
I want to thank everyone for a successful tax season! I appreciate all my clients, from the basic 1040's to my large businesses!
A reminder to all my clients (both current and soon-to-be), now is the time for us to be discussing tax and financial planning for 2019 and future years. Planning for Estates, Trusts, Investment Strategies, Retirement, and day-to-day cash flow budgeting are all things that should be discussed and planned before they have to dealt with when no planning has been done.
Some other notes:
For anyone making quarterly payments, the next payment for 2019 is due June 15.
For those of you with Corporations, many of you come in after year end. Better planning and tax savings can be done if we are in contact on a year-round basis.
I truly enjoyed seeing everyone this tax season. I hope to see many of you throughout the year for ongoing financial "checkups" to maximize your fiscal health in 2019!
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.