Samuel P. Freeman, CPA

03/21/2019

Home equity loan interest
Taxpayers can no longer deduct interest paid on most home equity loans unless they used the loan proceeds to buy, build or substantially improve their main home or second home

03/05/2019

Seniors who turned 70½ last year must start receiving retirement plan payments by April 1

11/01/2018

401(k) contribution limit increases to $19,000 for 2019; IRA limit increases to $6,000 WASHINGTON — The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019. Highlights of Changes for 2019 The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000. The limit on annual contributions to an IRA, which last increased in 2013, is increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000. The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver’s credit all increased for 2019. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) more info email [email protected]

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08/31/2016

IRS Urges Taxpayers to Check Their Withholding; New Factors Increase Importance of Mid-Year Check Up
IRS YouTube Video:
IRS Withholding Calculator: English | Spanish
WASHINGTON — The Internal Revenue Service today encouraged taxpayers to consider a mid-year tax withholding checkup following several new factors that could affect their refunds in 2017. Taking a closer look at the taxes being withheld can help ensure the right amount is withheld, either for tax refund purposes or to avoid an unexpected tax bill next year.
The withholding review takes on even more importance this year given a new tax law change that requires the IRS to hold refunds a few weeks for some early filers in 2017 claiming the Earned Income Tax Credit and the Additional Child Tax Credit. In addition, the IRS and state tax administrators continue to strengthen identity theft and refund fraud protections, which means some tax returns could again face additional review time next year to protect against fraud.
"With these changes, it makes good sense on many different levels to check on your withholding and plan ahead for next tax season," said IRS Commissioner John Koskinen. "It's a personal choice if you want to have extra money withheld to get a bigger tax refund, but you have options available if you prefer to have a smaller refund next year and more take-home money now."
So far in 2016, the IRS has issued more than 102 million tax refunds out of 140 million total individual returns processed, with the average refund well over $2,700. Historically, the refund figure has increased over time in size.
By adjusting the Form W-4, Employee’s Withholding Allowance Certificate, taxpayers can ensure that the right amount is taken out of their pay throughout the year so that they don’t pay too much tax and have to wait until they file their tax return to get any refund. Employers use the form to figure the amount of federal income tax to be withheld from pay.
Some Refunds Delayed in 2017
When considering refund issues, the IRS wants taxpayers to be aware several factors could affect the timing of their tax refunds next year.
A major change will affect some early tax filers claiming two key credits who won't see their refunds until after Feb. 15.
Beginning in 2017, a new law requires the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) until mid-February. Under the change required by Congress in the Protecting Americans from Tax Hikes (PATH) Act, the IRS must hold the entire refund – even the portion not associated with the EITC and ACTC -- until at least Feb. 15. This change helps ensure that taxpayers get the refund they are owed by giving the agency more time to help detect and prevent fraud.
As in past years, the IRS will begin accepting and processing tax returns once the filing season begins. All taxpayers should file as usual, and tax return preparers should also submit returns as they normally do. Even though the IRS cannot issue refunds for some early filers until at least Feb. 15, the IRS reminds taxpayers that most refunds will still be issued within the normal timeframe: 21 days or less, after being accepted for processing by the IRS.
''This is an important change to be aware of for some taxpayers used to getting an early refund," Koskinen said. "We'll be focusing on awareness of this change throughout the fall, but it's important for taxpayers who might be affected by this to be aware of the change for their planning purposes. Although we still expect to issue most refunds within 21 days, we don't want people caught by surprise if they get their refund a few weeks later than previous years."
Stronger Security Filters and Tax Refund Processing
As the IRS steps up its efforts to combat identity theft and tax refund fraud through its many processing filters, legitimate refund returns sometimes get delayed. While the IRS is working diligently to stop fraudulent refunds from being issued, it is also focused on releasing legitimate refunds as quickly as possible.
The IRS, state tax agencies and the private sector tax industry continue to work together to fight fraud through their unprecedented Security Summit partnership. Additional safeguards will be set in place for the upcoming 2017 filing season.
"These increased security screenings are invisible to most taxpayers," Koskinen said. "But we want people to be aware we are taking additional steps to protect taxpayers from identity theft, and that sometimes means the real taxpayers face a slight delay in their refunds. As we continue improving our processes and working with the states and the tax industry, we will stop more fraud while also fine-tuning our tools to reduce the number of innocent taxpayers who might see a refund delay. "
The agency encourages taxpayers to check their tax withholding now. Whether they prefer more earned money during the year or a large refund, checking withholding can ensure people don’t receive an unexpected tax bill next year. Making these checks in the late summer or early fall can give taxpayers enough time to adjust their withholdings before the tax year ends in December.
Changes in Circumstances and Advance Premium Tax Credits
There are also some important reminders for taxpayers who receive advance payments of the Premium Tax Credit under the Affordable Care Act.
People who have advance payments of the premium tax credit made to their insurance company on their behalf should report life changes to their Marketplace. Changes in circumstances that should be reported include moving to a new address and changes to income or family size. Reporting these changes will help individuals avoid large differences between the advance credit payments and the amount of the premium tax credit allowed on their tax return, which may affect their refund or balance due.
People Working in the Shared Economy
The IRS encourages people in the shared economy who also have a job with an employer to take a close look at their withholding, which can help avoid unexpected tax issues with their income from such things as driving a car or renting a home.
Making a Withholding Adjustment
In many cases, a new Form W-4, Employee’s Withholding Allowance Certificate, is all that is needed to make an adjustment. Taxpayers submit it to their employer, and the employer uses the form to figure the amount of federal income tax to be withheld from pay
The IRS offers several online resources to help taxpayers bring taxes paid closer to what is owed. They are available anytime on IRS.gov. They include:
• IRS Withholding Calculator – Online tool helps determine the correct amount of tax to withhold.
• IRS Publication 505 – Tax Withholding and Estimated Tax.
• Tax Withholding – Complete information on withholding, estimated taxes, FAQs, more.
Self-employed taxpayers, including those involved in the sharing economy, can use the Form 1040-ES worksheet to correctly figure their estimated tax payments. If they also work for an employer, they can often forgo making these quarterly payments by instead having more tax taken out of their pay.

08/29/2016

5 Reasons Your Small Business Needs an Accountant

As a small-business owner, you probably thrive in a DIY environment; but the more hats you wear, the less you’ll accomplish successfully. Accounting is one of the most important areas for keeping your company profitable. As you start out and your company grows, software can only take you so far. Accountants can help your company move forward. Below are reasons why your business needs an accountant in all stages of your growth.

1. Your business is in the startup phase

There are many things to think about when you’re just starting out:

Business structure
Business plan
Bank accounts
Government regulations
Location
Financing

You might think it’s too early to hire an accountant, but the way you set up your operations can have a serious impact on your future success. An accountant can help you determine the most appropriate business structure, analyze your business plan for financial compatibility, and assist you with making sound financial decisions throughout the startup process so you don’t have to spend more money to correct mistakes later.

2. Your business has employees

In the first few years of operation, you may not feel you have enough work for an accountant. The truth, though, is that an accountant will have the specialized knowledge to make your money work for you even though you don’t have a huge workforce. The accountant can:

Help ensure employees and independent contractors are classified correctly
Oversee payroll and payment processes
Create appropriate timelines for sending W2s and 1099 forms

3. Your business structure requires audits

Not all small businesses are required to conduct audits, but unless you consult with an accountant you might not know until it’s too late. Publicly owned businesses are required to comply with the Sarbanes–Oxley Act (SOX), and private companies that are preparing for an initial public offering might also need to comply with certain SOX provisions. Furthermore, all businesses should comply with local generally accepted accounting principles (GAAP). Hiring an accountant can ensure your records are compliant with the appropriate regulations.

4. Your lender requests a financial statement

The Small Business Administration reports that small businesses borrowed over $6 billion last year. At some point your business will probably need additional funding, whether it’s for expansion, new equipment, purchasing property, or even establishing an emergency fund. Before you approach a lender, having an accountant prepare a financial statement can increase your chances of getting approved.

5. Your budget is falling short

According to the Bureau of Labor Statistics, about half of all businesses will fail within five years of opening. Although there are many factors related to failure, not meeting budget goals can decrease the chances of your business survival. Having an accountant on hand to analyze your budget, assist in making changes and catch errors will help you make sure your budget is on target for success.

Questions to ask yourself before hiring an accountant:

Does your business planning match your financial forecast?
Have you read the tax code?
Do you have enough time to take care of all of the accounting duties yourself?
Are you sure your employees are classified correctly?
Do you know what auditors look for when conducting an audit?
Do you know what needs to be in a financial statement?
Is your budget working for you?

If you answered “no” to any of these questions, you can benefit from hiring an accountant.

How to find an accountant

You could do a quick Google search, but how would you know if the accountant is qualified? There are numerous databases of accountants, but to ensure that the accountant you choose has the knowledge and experience you need, look for a certified public accountant (CPA). These professionals will have passed a rigorous CPA exam and are licensed by the state in which they work. Enrolled agents are another option for tax preparation and tax resolution. Enrollment agents are authorized by the federal government to represent taxpayers before the IRS. They specialize in taxes, whereas CPAs often specialize in tax, accounting, and financial services to businesses in the state in which they are certified.

01/08/2016

The new year rings in new minimum wage rates, as well as new ACA reporting requirements. Keep in mind that January 2016 brings ACA reporting for ALEs—therefore, all ALE employers will have to provide every employee with a Form 1095-C by January 31, 2016.

Due to a low consumer price increase this year, many rates stay the same. However, there will be some important changes. Here’s a rundown of the changes in the most commonly used rates and limits.

State Minimum Wage Changes*

State 2016
California $10.00
Connecticut $9.60
DC $11.50 eff. 7/1/16
Hawaii $8.50
Maryland $8.75
Massachusetts $10.00
Michigan $8.50
Nebraska $9.00
New York $9.00
Rhode Island $9.60
South Dakota $8.55
Vermont $9.60
West Virginia 8.75

*Only states with changes for 2016 are shown. All are effective 1/1/2016 except as noted.

State Unemployment Insurance Wage Base Changes*

State 2016
Colorado $12,200
Iowa $28,300
Kansas $14,000
Kentucky $10,200
Minnesota $31,000
Montana $30,500
Nevada $28,200
New Jersey $32,600
New York $10,700
North Carolina $22,300
Oklahoma $17,500
Pennsylvania $9,500
Vermont $16,800
Washington $44,000

*Only states with changes for 2016 are shown.

2016 Rates

Item

2015

2016

Social Security
$118,500

$118,500

– F**A (6.2%)
$7,347.00

$7,347.00

– Medicare (1.45%)
$200,000

$200,000

– Medicare (2.35%)
> $200,000

> $200,000


Domestic Worker Threshold
$1,900

$2,000


Elections Workers
$1,600

$1,700


Transit Passes / Van Pool / Bike
$130 / $130 / $20

$130 / $130 / $20


Parking
$250

$255


415(b)(1)(A) Defined Benefit Max
$215,000

$215,000


Max Contribution
$53,000

$53,000


Education Assistance
$5,250

not released


Roth Limits
$183,000-$193,000 MAGI (joint)

$184,000-$194,000

– 401(k)
$18,000

$18,000

– 403(b)
$18,000

$18,000

– 408(p)
$12,500

$12,500


414(v) Catch-Up
$6,000

$6,000


414(v) Catch-Up Simple
$3,000

$3,000


IRA
$5,500-6,500 < 50

$5,500-$6,500 > 50


Foreign Income Exclusion
$100,800

$101,300


Minimum Annual Comp 408
$600

$600


Adoption Exclusion Limits Tax Credit
$13,400

$13,460

– Phase Out AGI
$201,010

$201,920

– Total Exclusion AGI
$241,010

$241,920


Definition of Control Employee
$215,000 / $105,000

$215,000 / $105,000

– Corp Officer
$105,000

$105,000

– Earnings Test
$210,000

$210,000


Definition of Highly Comp.
$120,000

$120,000

– Key Employee Top Heavy Plan
$170,000

$170,000

– FSA
$2,550

$2,550


Long-Term Premiums
– < 40
$380

$380

– 40-50
$710

$710

– 50-60
$1,430

$1,430

– 60-70
$3,800

$3,800

– > 70
$4,750

$4,750


Limitations
– Highly Compensated 414
$120,000

$120,000

– Annual Compensation Limits
– 414, 404, 408 SEP
$265,000

$265,000

– Annual Compensation Limits
– 401 GVT plans in effect 7/1/93
$395,000

$395,000

– FSA
$2,550

$2,550


HSA
– Annual Deduction Limit Single/Family
$1,300 / $,2600

$1,300 / $2,600

– Maximum Out-of-Pocket Single/Family
$6,450 / $12,900

$6,550 / $13,100

– Maximum Annual Contribution Single/Family
$3,350 / $6,650

$3,350 / $6,750

– Maximum Annual Catch-Up (55)
$1,000

$1,000




Foreign Income Exclusions

Maximum Foreign Earned

Income Exclusion

Housing Limit

Base Housing

Max Foreign Cost Exclusion

2013
$97,600

$29,280

$15,616

$13,664

2014
$99,200

$29,760

$15,872

$13,888

2015
$100,800

$30,240

$16,128

$14,112

2016
$101,300

N/A

N/A

N

08/29/2015

02/26/2012

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