Walther CPA Newsletter April 2018

Walther CPA

Certified Public Accountants

www.walthercpa.com

easter

Casualty (Hurricane) Losses

Legislation enacted on Sept. 29, 2017, provided benefits for victims of hurricanes Harvey, Irma, and Maria. For qualified disaster-related personal casualty losses from those hurricanes, the act removes the requirement that personal casualty losses must exceed 10% of the taxpayer’s AGI to be deductible and allows nonitemizers to increase their standard deduction by the amount of their net disaster loss. Additionally, victims of the hurricanes can use their 2016 income to calculate the 2017 earned income tax credit and refundable portion of the child tax credit. The legislation waives the 10% penalty on pre-age-59½ retirement account payouts of “qualified hurricane distributions” of up to $100,000 in a tax year, and the income tax due on those distributions can be spread over a three-year period. Any amounts recontributed to the account during the three-year period will be treated as rollovers, and any tax previously paid on those amounts can be recovered by filing an amended Form 1040, U.S. Individual Income Tax Return. Victims with Sec. 401(k) accounts can borrow up to the lesser of $100,000 or 100% of the account balance, and loan repayments can be deferred.

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Highlights

Due April 17, 2018.

Individual, Trust, C Corporation Returns and Foreign Bank Account Reporting

The possible’s slow fuse is lit by the imagination.

Emily Dickinson
deductions_350_233_80

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Offshore Voluntary Disclosure Program To End In September

The IRS announced that it is closing the 2014 Offshore Voluntary Disclosure Program (OVDP) on Sept. 28, 2018. It also said it was announcing OVDP’s closure now so taxpayers with undisclosed foreign accounts who want to participate will be aware that they have to act to take advantage of it.

“All along, we have been clear that we would close the program at the appropriate time, and we have reached that point,” said Acting IRS Commissioner David Kautter in a prepared statement. “Those who still wish to come forward have time to do so.”

The IRS Criminal Investigation division has indicted 1,545 taxpayers for criminal violations related to international activities and it continues to fight offshore tax avoidance. The Criminal Investigation Voluntary Disclosure Program continues to exist, as do procedures for submitting delinquent FinCEN Forms 114, Report of Foreign Bank and Financial Accounts, and delinquent international information returns.

Taxpayers who were unaware of their filing obligations can continue to use the Streamlined Filing Compliance Procedures, although the IRS said it may end this program as well sometime in the future.

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The IRS Is Auditing A Lot Fewer Americans

The IRS audited 1 in about 160 individual tax returns in 2017, the lowest since 2002 and the sixth consecutive year that audits have declined, as budget cuts have reduced the number of staff at the federal agency.

The Internal Revenue Service—which has lost nearly a third of its enforcement employees since a 2010 peak, when it audited 1 in 90 individual returns—audited 0.62% of individual returns in the fiscal year that ended Sept. 30, according to IRS data.

The spending bill that Congress recently passed contains just over $11 billion for the IRS.

The bill appropriates $2.5 billion to the IRS for taxpayer services (compared with $2.2 billion last year), $4.9 billion for IRS enforcement activities (similar to last year).

The IRS also gets $3.6 billion for its operations (similar to last year).

For business systems modernization, the IRS gets $110 million (a cut from last year’s $290 million). The bill directs the IRS to make improvements to its 1-800 help line a priority and to allocate resources to improve its response time when communicating with taxpayers, “particularly with regard to victims of tax-related crimes.”

The bill also makes $320 million available to the IRS for carrying out changes made by last year’s tax overhaul legislation, but the IRS must submit to the House and Senate appropriations committees a spending plan for those funds before it can spend them.

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business-accounting-trends-2018

Walther CPA Newsletter March 2018

Walther CPA

Certified Public Accountants

www.walthercpa.com

St.-Patricks-Day_ss_554748031-790x400

FinCEN Announces Filing Deadline For 2017 FBARs

The FBAR due date also provides for an automatic six-month extension for filing the form to Oct. 15, 2018. FinCEN again explained that filers did not have to do anything to take advantage of the extension and need only file the return by Oct. 15 to comply.

Taxpayers who have a Form 114 filing requirement must file electronically on FinCEN’s Bank Secrecy Act (BSA) E-Filing System website.

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Due March 15th, 2018 

1120s- S Corporation Returns

1065- Partnership Returns

Courage is the capacity to confront what can be imagined

Leo Rosten
scam alert

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New Tax Refund Scam

Thieves are using phishing and other schemes to steal client data from tax professionals. Then, using that data, they file fraudulent tax returns and use the taxpayers’ real bank accounts to deposit erroneous tax refunds. Finally, the thieves, posing as IRS or other law enforcement, call attention to the error and ask taxpayers to return the money to them.

Thieves use various tactics. Criminals posing as debt collection agency officials acting on behalf of the IRS reach out to taxpayers to say a refund was deposited in error, and ask the taxpayers to forward the money to their collection agency.

Others have received an automated call with a recorded voice claiming to be from IRS; the caller threatens taxpayers with criminal fraud charges, an arrest warrant and a “blacklisting” of their Social Security Number. The recorded voice then gives the taxpayer a case number and a telephone number to call to return the refund.

Remember IRS collections ONLY occur through correspondence delivered by U.S. MAIL.

This is “Identity Theft” and form 14039 Identity Theft Affidavit should be filed with the IRS to obtain a PIN that will need to be used with all future Federal Tax filings to assure that the returns being filed are from the taxpayer .

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Gross Receipts Tax

A gross receipts tax by any other name is still a gross receipts tax – and it goes by a number of different names in the various states that have enacted it. Ohio calls its GRT the commercial activity tax, or CAT, Texas calls the state GRT a franchise tax or margin tax, Washington named its GRT the Business and Occupation Tax, and Nevada’s GRT is the Commerce Tax. And although New Mexico has a GRT, its characteristics are more similar to a broad-based sales tax. While some states see a GRT as a revenue enhancer or a simpler alternative to the corporate income tax, most economists see it in a negative light because of tax pyramiding. Pyramiding occurs when products and services are taxed each time they are purchased and sold by subsequent firms during the production process. The tax thus becomes part of the base in each subsequent sale, and final purchasers pay a higher tax because of the repeated taxation of the same inputs.

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Questions or comments? Email us at gary.walther@waltherpartners.com or call 281-591-7749

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Walther CPA Newsletter February 2018

Walther CPA

Certified Public Accountants

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valentines-day_650x400_71518530410

Rate Of Optional Withholding On Supplemental Wages

Because the new tax law lowered income tax rates beginning in 2018, the rate that employers should withhold on supplemental wages is also lowered from 25%, which was in effect from 2005 to 2017, to 22%. This new lower rate should be implemented as soon as possible, but no later than Feb. 15, 2018. Employers have the option to correct overwithholding at the old 25% rate for wages paid between Jan. 1 and Feb. 15 under the rules applicable to corrections of over collections of federal income tax.

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Due February 12th, 2018

Forms 940, 941, 943, 944 and/or 945 if you timely deposited all required payments.

Due February 28th, 2018

Forms 1096, 1098, 1099, (except form 1099-Misc reporting non employee compensation), and W-2G if you file paper forms.

Only those who will risk going too far can possibly find out how far one can go.

T.S. Eliot
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Tax Cuts And Jobs Act

Passed in December has certain provisions which offer expanded tax cuts.

One big plus is bonus depreciation. Under prior law, there was a 50 percent bonus depreciation for property placed in service in 2017, 40 percent for 2018, and 30 percent for 2019. Qualified property has to be new, not used.

Under the new law, there’s 100 percent bonus depreciation for property placed in service after Sept. 27, 2017, and before 2023, 80 percent for 2023, 60 percent for 2024, 40 percent for 2025 and 20 percent for 2026. The acquisition date for property purchased with a written contract is the date of the contract.

Qualified property includes property acquired by purchase if a taxpayer has not previously used the property, so the property does not have to be new, as long as it’s not acquired from a related party. A qualified property does not include property used in a business that is not subject to the net business interest expense limitation (see below), but it does include property used in farm business.

Section 179 expensing has also increased to include roofs, HVAC systems, fire protection, alarm systems and security systems, with the allowable expense increased from $500,000 to $1,000,000 in 2018, and the phase-out deduction increased to $2.5 million. These rules now include tangible personal property acquired for rental properties, furniture and appliances.

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IRS Closer To Obtaining Virtual Currency Records

Now that a federal district court has ruled that a narrower version of the IRS’s summons to Coinbase can be enforced, Coinbase’s customers should beware.

U.S. taxpayers who have traded in virtual currencies such as bitcoin, but have not reported and paid tax on the income or gains from those transactions, may face the heat as the IRS continues to press for greater tax compliance in the virtual currency arena.

Documents requested by the IRS

The government has been investigating the use of virtual currency that can be converted into traditional currency for the past several years. After the IRS issued Notice 2014-21, which took the position that transactions in virtual currency were property transactions that could result in gain or loss, it then served a John Doe summons on Coinbase Inc., a San Francisco-based virtual currency exchange company, in November 2016. (A John Doe summons, which is issued under Sec. 7609(f), does not name a taxpayer because the IRS does not know the person’s name.)

Most recently, on Nov. 30, 2017, after a lengthy summons enforcement proceeding, a federal district court issued an order granting in part and denying in part the IRS’s petition to enforce the summons. The court requires Coinbase to produce the following documents for accounts with at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any one year during the 2013 to 2015 period:

  1. The taxpayer identification number;
  2. Name;
  3. Birthdate;
  4. Address;
  5. Records of account activity; and
  6. All periodic statements.

Taxpayers who think they may have exposure would be wise to take steps to comply, such as participating in the IRS domestic or offshore voluntary disclosure programs, as opposed to waiting for the IRS to catch them.

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Walther CPA Newsletter January 2018

Walther CPA

Certified Public Accountants

www.walthercpa.com

happy new year

Modifications to Depreciation Limitations on Luxury Automobiles and Personal Use Property

TCJA increases the depreciation limitations that apply to listed property, such as luxury automobiles. For passenger automobiles that qualify as luxury automobiles (i.e., gross unloaded weight of 6,000 lbs or more) placed in service after December 31, 2017, and for which the additional first-year depreciation deduction is not claimed, the maximum amount of allowable depreciation is $10,000 for the year in which the vehicle is placed in service, $16,000 for the second year, $9,600 for the third year, and $5,760 for the fourth and later years in the recovery period. The limitations are indexed for inflation for luxury passenger automobiles placed in service after 2018.

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Tax Deadline

Estimated Tax due for Individuals

January 16, 2018

Quarterly Payroll Reports , 1099-misc, W-2’s & w-3’s due Jan 31, 2018

Not everything that is faced can be changed; but nothing can be changed
until it is faced

James Baldwin
business tax

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Tax Cuts and Jobs Act (TCJA) Impact on 2018 Tax returns

Some of the highlights of the new tax law include the following:

For Individuals

Tax Rates and Brackets. TCJA provides seven tax brackets, with most rates being two to three points lower than the ones under present law (the top rate goes from 39.6 percent to 37 percent). The top rate kicks in at $600,000 of taxable income for joint filers, $300,000 for married taxpayers filing separately, and $400,000 for all other individual taxpayers.

Capital Gain Rates and Net Investment Income Tax. Tax rates on capital gains and the 3.8 percent net investment income tax (NIIT) are unchanged by TCJA.

Personal Exemptions and Standard Deduction. TCJA repeals the personal exemption deductions, but nearly doubles the standard deduction amounts to $24,000 for joint filers and surviving spouses, $18,000 for heads of household, and $12,000 for single individuals and married filing separately (additional amounts for the elderly and blind are retained).

Passthrough Tax Break. TCJA creates a new 20 percent deduction for qualified business income from sole proprietorships, S corporations, partnerships, and LLCs taxed as partnerships. The deduction, which is available to both itemizers and nonitemizers, is claimed by individuals on their personal tax returns as a reduction to taxable income. The new tax break is subject to some complicated restrictions and limitations, but the rules that apply to individuals with taxable income at or below $157,500 ($315,000 for joint filers) are simpler and more permissive than the ones that apply above those thresholds.

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Questions or comments? Email us at gary.walther@waltherpartners.com or call 281-591-7749

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