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  1. Qualified Business Income (Pass-Through) Deduction

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    The deduction is generally equal to 20% of your “qualified business income” (QBI) from a partnership, S corporation, or sole proprietorship, defined as the net amount of items of income, gain, deduction, and loss with respect to your trade or business. The business must be conducted within the U.S. to qualify, and specified investment-related items are not included, e.g., capital gains or losses, dividends, and interest income (unless the interest is properly allocable to the business). The trade or business of being an employee does not qualify. Also, QBI does not include reasonable compensation received from an S corporation, or a guaranteed payment received from a partnership for services provided to a partnership’s business.

    The deduction is taken “below the line,” i.e., it reduces your taxable income but not your adjusted gross income. But it is available regardless of whether you itemize deductions or take the standard deduction. In general, the deduction cannot exceed 20% of the excess of your taxable income over net capital gain. If QBI is less than zero it is treated as a loss from a qualified business in the following year.

    Rules are in place (discussed below) to deter high-income taxpayers from attempting to convert wages or other compensation for personal services into income eligible for the deduction.

    These rules involve “thresholds,” i.e. taxable income of over $157,500 ($315,000 for joint filers). If your taxable income is at least $50,000 above the threshold, i.e., it is at least $207,500 ($157,500 + $50,000), all of the net income from a specified service trade or business is excluded from QBI. (Joint filers would use an amount $100,000 above the $315,000 threshold, viz., $415,000.) For taxable incomes that are between the threshold amounts and the $207,500/$415,000 amounts, the exclusion from QBI of income from specified service trades or businesses is phased in. Specified service trades or businesses are trades or businesses involving the performance of services in the fields of health, law, consulting, athletics, financial or brokerage services, or where the principal asset is the reputation or skill of one or more employees or owners.

    Additionally, for taxpayers with taxable income more than the above thresholds, there is a limitation on the amount of the deduction that is based either on wages paid or wages paid plus a capital element. Here’s how it works: If your taxable income is at least $207,500 ($415,000 for joint filers), your deduction for QBI cannot exceed the greater of (1) 50% of your allocable share of the W-2 wages paid with respect to the qualified trade or business, or (2) the sum of 25% of such wages plus 2.5% of the unadjusted basis immediately after acquisition of tangible depreciable property used in the business (including real estate). For taxable incomes that are between the threshold amounts and the $207,500/$415,000 amounts, a phase-in of the limitation applies.

    Other limitations may apply in certain circumstances, e.g., for taxpayers with qualified cooperative dividends, qualified real estate investment trust (REIT) dividends, or income from publicly traded partnerships.

     

    © 2018 Thomson Reuters/Tax & Accounting. All Rights Reserved.

  2. Year-End Tax Planning for 2018

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    As the end of the year approaches, it is a good time to think of planning moves that will help lower your tax bill for this year and possibly the next. Year-end planning for 2018 takes place against the backdrop of new laws that make major changes in the tax rules for individuals and businesses. For individuals, there are new, lower income tax rates, a substantially increased standard deduction, severely limited itemized deductions and no personal exemptions, an increased child tax credit, and a watered-down alternative minimum tax (AMT), among many other changes. For businesses, the corporate tax rate is cut to 21%, the corporate AMT is gone, there are new limits on business interest deductions, and significantly liberalized expensing and depreciation rules. And there’s a new deduction for non-corporate taxpayers with qualified business income from pass-through entities.

    Year-End Tax Planning Moves for Individuals

    • Postpone income until 2019 and accelerate deductions into 2018 if doing so will enable you to claim larger deductions, credits, and other tax breaks for 2018 that are phased out over varying levels of adjusted gross income (AGI). These include deductible IRA contributions, child tax credits, higher education tax credits, and deductions for student loan interest. Postponing income also is desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances.

     If you believe a Roth IRA is better than a traditional IRA, consider converting traditional-IRA money     invested in beaten-down stocks (or mutual funds) into a Roth IRA in 2018 if eligible to do so. Keep in mind,     however, that such a conversion will increase your AGI for 2018, and possibly reduce tax breaks geared to AGI (or modified AGI).

    • It may be advantageous to try to arrange with your employer to defer, until early 2019, a bonus that may be coming your way. This could cut as well as defer your tax.
    • Beginning in 2018, many taxpayers who claimed itemized deductions year after year will no longer be able to do so. That’s because the basic standard deduction has been increased (to $24,000 for joint filers, $12,000 for singles, $18,000 for heads of household, and $12,000 for marrieds filing separately), and many itemized deductions have been cut back or abolished. No more than $10,000 of state and local taxes may be deducted; miscellaneous itemized deductions (e.g., tax preparation fees) and unreimbursed employee expenses are no longer deductible; and personal casualty and theft losses are deductible only if they’re attributable to a federally declared disaster and only to the extent the $100-per-casualty and 10%-of-AGI limits are met. You can still itemize medical expenses to the extent they exceed 7.5% of your adjusted gross income, state and local taxes up to $10,000, your charitable contributions, plus interest deductions on a restricted amount of qualifying residence debt, but payments of those items won’t save taxes if they don’t cumulatively exceed the new, higher standard deduction.
    • Consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase your 2018 deductions even if you don’t pay your credit card bill until after the end of the year.
    • If you expect to owe state and local income taxes when you file your return next year and you will be itemizing in 2018, consider asking your employer to increase withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2018. But remember that state and local tax deductions are limited to $10,000 per year, so this strategy is not a good one if to the extent it causes your 2018 state and local tax payments to exceed $10,000.
    • Take required minimum distributions (RMDs) from your IRA or 401(k) plan (or other employer-sponsored retirement plan). RMDs from IRAs must begin by April 1 of the year following the year you reach age 70-½. Failure to take a required withdrawal can result in a penalty of 50% of the amount of the RMD not withdrawn. Thus, if you turn age 70-½ in 2018, you can delay the first required distribution to 2019, but if you do, you will have to take a double distribution in 2019-the amount required for 2018 plus the amount required for 2019.
    • If you are age 70-½ or older by the end of 2018, have traditional IRAs, and particularly if you can’t itemize your deductions, consider making 2018 charitable donations via qualified charitable distributions from your IRAs. Such distributions are made directly to charities from your IRAs, and the amount of the contribution is neither included in your gross income nor deductible on Schedule A, Form 1040. But the amount of the qualified charitable distribution reduces the amount of your required minimum distribution, which can result in tax savings.
    • Consider increasing the amount you set aside for next year in your employer’s health flexible spending account (FSA) if you set aside too little for this year.
    • If you become eligible in December of 2018 to make health savings account (HSA) contributions, you can make a full year’s worth of deductible HSA contributions for 2018.
    • Make gifts sheltered by the annual gift tax exclusion before the end of the year if doing so may save gift and estate taxes. The exclusion applies to gifts of up to $15,000 made in 2018 to each of an unlimited number of individuals. You can’t carry over unused exclusions from one year to the next.

    Year-End Tax-Planning Moves for Businesses & Business Owners

    • For tax years beginning after 2017, taxpayers other than corporations may be entitled to a deduction of up to 20% of their qualified business income. For 2018, if taxable income exceeds $315,000 for a married couple filing jointly, or $157,500 for all other taxpayers, the deduction may be limited based on whether the taxpayer is engaged in a service-type trade or business (such as law, accounting, health, or consulting), the amount of W-2 wages paid by the trade or business, and/or the unadjusted basis of qualified property (such as machinery and equipment) held by the trade or business. The limitations are phased in for joint filers with taxable income between $315,000 and $415,000 and for all other taxpayers with taxable income between $157,500 and $207,500.
    • More “small businesses” are able to use the cash (as opposed to accrual) method of accounting in 2018 and later years than were allowed to do so in earlier years. To qualify as a “small business” a taxpayer must, among other things, satisfy a gross receipts test. Effective for tax years beginning after Dec. 31, 2017, the gross-receipts test is satisfied if, during a three-year testing period, average annual gross receipts don’t exceed $25 million (the dollar amount used to be $5 million). Cash method taxpayers may find it a lot easier to shift income, for example by holding off billings till next year or by accelerating expenses, for example, paying bills early or by making certain prepayments.
    • Businesses should consider making expenditures that qualify for the liberalized business property expensing option. For tax years beginning in 2018, the expensing limit is $1,000,000, and the investment ceiling limit is $2,500,000. Expensing is generally available for most depreciable property (other than buildings), and off-the-shelf computer software. For property placed in service in tax years beginning after Dec. 31, 2017, expensing also is available for qualified improvement property (generally, any interior improvement to a building’s interior, but not for enlargement of a building, elevators or escalators, or the internal structural framework), for roofs, and for HVAC, fire protection, alarm, and security systems.
    • Businesses also can claim a 100% bonus first year depreciation deduction for machinery and equipment-bought used (with some exceptions) or new-if purchased and placed in service this year. The 100% write-off is permitted without any proration based on the length of time that an asset is in service during the tax year. As a result, the 100% bonus first-year write-off is available even if qualifying assets are in service for only a few days in 2018.
    • To reduce 2018 taxable income, consider disposing of a passive activity in 2018 if doing so will allow you to deduct suspended passive activity losses.

     

    © 2018 Thomson Reuters/Tax & Accounting. All Rights Reserved.

  3. Tax Cuts and Jobs Act of 2017

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    The new tax law expands into many areas. Most of the changes are effective for tax years 2018-2025, but we will note where dates are different. Following are the changes that will affect most of our clients.

    Individuals

    Tax Rates

    • Individual tax rates will range from 10%-37%
    • Capital gains will still be taxed at 0%/15%/20%, depending on the individual’s level of income
    • The 3.8% net investment income tax and .9% additional Medicare tax remain intact

    The new tax rates alone will lower most individual’s tax liabilities. The highest rate for 2017 is 39.6%.

    Itemized Deductions

    • State income tax and real estate taxes are limited to a combined $10,000 deduction
    • Medical expense deduction threshold is reduced to 7.5% of AGI
    • Home mortgage interest to acquire a home is limited to $750,000 of debt – for any acquisition indebtedness that occurs after 12/15/17. Previously, acquisition indebtedness was limited to $1,000,000
    • No deduction for home equity interest
    • Miscellaneous itemized deductions have been suspended (this includes unreimbursed employee expenses, investment fees, safe deposit box rental, among others)
    • Casualty and theft losses have been suspended (unless in a Federally declared disaster area)
    • There is no income limitation phase-out for itemized deductions

    Standard Deduction

    For those that do not itemize (or may not anymore because of the state and local income tax deduction limitation), the standard deduction is increasing to:

    • $12,000 for single and married filing separately filers
    • $18,000 for head of households
    • $24,000 for married filing jointly and qualifying widow(er)s

    Exemptions

    Both the personal and dependency have been suspended

    Credits

    • The child tax credit increased to $2,000
    • The phase-out for the credit has increased to $400,000 for married filing jointly and $200,000 for all others
    • A $500 credit may be allowed for certain non-child dependents (e.g. your dependent college student)

    These credits partially make up for the loss of the exemptions for many taxpayers. The credit is a dollar-for-dollar tax savings, rather than the exemption which was a deduction from income. Many individuals could not previously take the $1,000 child tax credit because the income threshold was much lower.

    Some higher income taxpayers may be able to take this credit, when previously their exemptions were partially phased-out.

    Alimony

    Alimony will no longer be a deduction for the payor or taxable income to the recipient, for divorces that take place after 12/31/2018. Anyone already divorced through 12/31/18 with alimony in the decree can still take this deduction.

    Businesses

    Tax Rates

    The tax rates for all C-corporations is reduced to 21%. Because the majority of our business clients are pass-through entities (S-corps and partnerships) many are asking if they should convert to a C-corp.

    The main drawback that still exists to C-corps is the double taxation. Even though the tax rate on net income is lower than the individual rate, any drawings distributed to the owners are taxed again at the capital gains rate. For most of our small business clients, this creates an effective rate just as high as the individual rate.

     Pass-Throughs

    Many of our clients will be able to take advantage of a new deduction for pass-through entities and self-employed individuals. The IRS regulations need to come out before we can go into too much detail on how the deduction will be determined and who is eligible. However, for those that can, 20% of the qualified business income will be a deduction.

    Depreciation, Section 179, and Bonus Depreciation

    • Passenger autos placed in service after 12/31/2017 can deduct $10,000 of depreciation in the first-year, $16,000 for the second year, $9,600 for the third year, and $5,760 for the fourth and later years
    • Section 179 is increased to $1 million for property placed in service after 12/31/2017. The threshold phase-out begins at $2.5 million
    • Bonus depreciation, for eligible property, has been extended with increased cost recovery to 100% for property placed in service 9/28/2017 – 12/31/2022.

    Bonus depreciation is no longer restricted to “new” assets only. Purchases of used equipment will now qualify.

    There are differences as to when you can take Section 179, and when bonus depreciation is allowed. We will maximize the tax benefit available when we prepare your return.

    Other Changes to Business Taxes

    • Interest expense in excess of 30% of adjusted taxable income is not deductible (adjusted taxable income does not include the depreciation deduction)
    • The Domestic Production Activities Deduction (DPAD) has been repealed
    • Like-kind exchanges are limited to real estate
    • Deductions for entertainment are not allowed (NOTE – business meals may be defined as a form of entertainment.  We will update our website once the IRS has finalized regulations in this area.)
  4. Taxpayers and Businesses Warned About Scam in Rhode Island

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    Rhode Island Department of Revenue Division of Taxation

    ADV 2017-6                                                                 ADVISORY FOR TAX PROFESSIONALS
    TAX ADMINISTRATION                                                                                  AUGUST 29, 2017

    Taxpayers and businesses warned about scam in Rhode Island
    Caller claims to be from Rhode Island Division of Taxation, seeks to access taxpayer’s home

    PROVIDENCE, R.I. –The Rhode Island Tax Administrator today urged taxpayers, businesses, and tax professionals to be on guard against a scam from someone claiming to be from the Rhode Island Division of Taxation.

    In the scam, which the Division learned of late last week, the caller left a voicemail message for a taxpayer. In that message, the caller asserted that the Rhode Island Division of Taxation had received several complaints that the taxpayer was operating a small business out of his home. As a result, the caller claimed, the Division would be sending an agent to the taxpayer’s home to conduct an audit and full investigation.

    “We do not conduct audits or investigations in this manner,” said Rhode Island Tax Administrator Neena S. Savage. “Taxpayers – including individuals and businesses – need to be aware that this sort of phone call is a scam. The caller, under false pretenses, probably wants to gain access to your home or your office to obtain personal information, money, or both,” Savage said.

    Similar scams have been reported this summer by the Internal Revenue Service, as well as by the state tax agencies in Alabama, Michigan, and Washington.

    “If you receive this sort of call, don’t provide any personal information. Write down the caller’s name and contact information. Then hang up and contact law enforcement as well as the appropriate tax agency to let them know what happened,” Savage said. “If you receive this sort of call through a recorded message – either the call itself is a pre-recorded message, or a message is left on your voicemail – do not respond to it,” she said.

    POINTS TO CONSIDER

    The Tax Administrator asks individuals and businesses to keep the following points in mind:

    • The Rhode Island Division of Taxation makes its first contact with a taxpayer by mail – not by phone, email, or social media. “When we first get in touch with a taxpayer, whether the taxpayer is an individual or a business, we send a written letter stating the auditor’s name and contact
      information, the type of tax (such as sales tax, use tax, corporate income tax, or individual income tax), the period involved (typically one or more specific years), and a list of records that the taxpayer will have to assemble,” Savage said.
    • The Rhode Island Division of Taxation does not conduct audits or examinations at your personal residence (unless it’s registered with the Division as a bona fide business address). Also, all Rhode Island Division of Taxation employees have picture IDs.
    • No Rhode Island Division of Taxation employee collects money from taxpayers on-site at their homes or at their businesses. “Division of Taxation employees who visit businesses in the ordinary course of their duties will never ask for payments to satisfy outstanding tax bills. Instead, the employee will go back to the office, issue a bill, and mail it to the taxpayer,” Savage said. The taxpayer will then typically have a period of time to challenge the bill, and will be advised of his or her rights, she said.

    “Remember: The Rhode Island Division of Taxation will never demand immediate payment, will never threaten you, and will always make first contact with a taxpayer by U.S. mail, never by phone, email or social media. And if a person comes to your place of business or your home claiming to be from the Division of Taxation and demanding an immediate payment, do not pay them,” she said. “That person is an imposter.” You can report them to one of the numbers below.

    • The Rhode Island Division of Taxation at (401) 574-8829 between 8:30 a.m. and 4:00 p.m.
      business days.
    • The Rhode Island Attorney General’s Office at (401) 274-4400.
    • The Rhode Island State Police at (401) 444-1000.
    • Your local police department.

     For more information

    The Rhode Island Division of Taxation office is located at One Capitol Hill in Providence, R.I., diagonally across from the Smith Street entrance to the State House, and is open to the public from 8:30 a.m. to 3:30 p.m. business days. For more information, contact the Division of Taxation at (401) 574‐8829.

  5. Farewell Announcement from Matthew

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    Today I am confirming that I will retire on May 15, 2017…Yes, I am smiling!

    No standard letter or announcement for me; instead, I offer you the following:

    First I need to thank some people…

    • Many thanks to my partner of 20 years, Mike Muto, for his many contributions to my success and who endured these many years of my life story. We have worked together since November 1989 – longer than some marriages! He most certainly will bring the firm to even greater heights of professional achievement.
    • And many kisses of gratitude to my long-time firm caretakers – Pat and Sheri.
    • Over the years, many staff contributed to my growth and brought success to the firm – many thanks to all of you – especially to my current victims – Jennifer, Mellanie, Tara, Alissa, Fran and Cory. And our associate, Glenn.
    • Thank you also… to my son, Michael, for keeping the firm’s network at optimum and free from the malicious! And to my daughter, Lucia, who instigated the firm’s organization revolution. And…most of the firm’s graphics were from my creative son, Kendall.
    • To all my client friends and professional friends – you are the reason for my desire to be the best CPA/advisor that I could be…thank you for your confidence.
    • And…you all know this…without the loving support of my wife, Karen, I would not be here today.

    And now some thoughts…

    If you in a moment of reflection miss me, know that I will miss you too. Withdrawal from the daily contact with my partner, staff, clients and business associates is a frightful proposition. Can one simply leave – never to return? No – whenever I am called to serve, I will be there!

    I leave the firm in the very capable hands of Mike Muto and the rest of the staff at Muto, Vollucci & Co., Ltd. They are an amazing team who all share the same goal…to give the client the best service possible. We have ensured that the transition will be smooth, and I am always only a phone call away.

    Will lack of professional mental activity be a catalyst for self-doubt and feelings of inadequacy? I will miss being needed in the ways that came to me daily at work.

    If you do not concentrate on moving forward, then you will find yourself going backwards….and I believe it is better to travel. As Ralph Waldo Emerson once said, “Life is a journey, not a destination.” A professional life is a life of ever progressing in acumen – a life in retirement offers time to “re-tool” and progress on different paths.

    I will miss the office family, but now will happily spend more time at home with the family. Grandchildren are the best medicine for the retirement blues.

    Past generations became “old” at 65 and accepted retirement as a consequence of the age and the custom. Some who were subjected to an early retirement because of diminished opportunity found a succor they had not anticipated. Many in today’s economy are experiencing a state of unemployment, which is a bitter premature replacement of the status of retirement. Others simply ran away from responsibility in an ill-advised quest for a change.

    Accepting that my time is now for more whimsical daily endeavors brings peace to the decision process.

    My plan for the future spans a life at least to 105 years – that expanse encourages “big thinking” to avoid 35 years of boredom. Will a wish list needing three years of attention bring some “at home” discipline?

    Much needed re-attention to physical well-being is a hope that retirement can bring time to employ. Will one of my questions to the meaning of life be…Is golf in my future?

    Will I ever need new clothes again? I have enough tee-shirts to last to 105.

    I love the thought of experiencing Key West during tax season!

    Peace and Love Always,

    /M

  6. 2017 Payroll Tax Rates & New Wage Limits

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    January 1, 2017

    The following are the changes in payroll taxes effective January 1, 2017:

    Employee Withholdings Rate Taxable Wage Base Per Person
    Social Security 6.2% Maximum wages: $127,200
    Medicare 1.45% No limit
    Additional Medicare Tax 0.9% Wages over $200,000
    Federal Withholding Use withholding tables in Publication 15 dated January, 2017
    RI Withholding Use withholding tables in RI Booklet dated January, 2017
    TDI 1.2% Maximum wages: $68,100
     
    Employer Payroll Taxes
    Social Security 6.2% Maximum wages: $127,200
    Medicare 1.45% No limit
    SUTA Assigned rate* Maximum wages: $22,400
    New Employer Rate SUTA 1.83% Maximum wages: $22,400
    JDF 0.21% Maximum wages: $22,400
    FUTA 0.6% Maximum wages:  $7,000

     

    *DET will let you know what your SUTA rate is by January, 2017

    If you have any questions, please contact us.

     

  7. Net Investment Income Tax: How Does It Affect You?

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    The Tax Adviser

    By Chris Varjabedian, Woodland Hills, Calif.
    November 1, 2016

    Editor: Mark G. Cook, CPA, MBA, CGMA

    The net investment income tax imposed by Sec. 1411 is a 3.8% tax on the lesser of (1) net investment income or (2) the excess of modified adjusted gross income (MAGI) over a threshold amount, which is discussed later. Under Sec. 1411(d), MAGI is defined as adjusted gross income increased by the amount excluded from gross income under Sec. 911(a)(1) (the foreign earned income exclusion) over the amount of deductions or exclusions disallowed under Sec. 911(d)(6) (denial of a double tax benefit from excluded foreign earned income). The net investment income tax went into effect for tax years beginning on or after Jan. 1, 2013, and is more likely to affect wealthier individuals, but can also affect individuals of more moderate means who have a spike in income in a particular year.

    Investment income for purposes of the net investment income tax includes:

    • Annuity distributions;

    • Dividends;

    • Income from passive activities;

    • Interest and net gain, to the extent taken into account in computing taxable income, from the disposition of property other than property held in a trade or business to which the net investment income tax does not apply;

    • Rents; and

    • Royalties.

    Income such as salaries and wages, IRA distributions, self-employment income, gain on sale of an active interest in a partnership or S corporation, capital gains from the sale of a principal residence excluded under Sec. 121, tax-exempt interest, and veterans benefits are excluded.

    As noted above, the net investment income tax applies to an individual taxpayer only when the taxpayer’s MAGI exceeds a threshold amount. The thresholds for each type of affected taxpayer are as follows:

    • Single: $200,000;

    • Married filing jointly: $250,000; and

    • Married filing separately: $125,000.

    Other Ways to Minimize Net Investment Income Tax

    Taxpayers can avoid the net investment income tax by avoiding income that is subject to the tax and by keeping their MAGI below the applicable threshold amount. Ways to achieve these goals include:

    Roth IRA conversions: Withdrawals from Roth IRAs, unlike withdrawals from traditional IRAs and qualified plans, are not includible in MAGI for purposes of the net investment income tax, so a withdrawal from a Roth IRA will not cause other income to be subject to the tax. However, the deemed distribution in the year of conversion is included in MAGI, so a taxpayer may want to do conversions over a number of years to avoid having the conversion trigger the tax.

    Installment sales: Deferring gains by spreading the proceeds through installments will defer application of the 3.8% tax on the gains or possibly avoid the tax by keeping MAGI under the threshold in any year.

    Charitable contributions: By donating appreciated securities held more than one year to approved charities, taxpayers may avoid tax on any related gains while still benefiting from the deduction.

    Municipal bonds: These will reduce both net investment income tax and MAGI.

    Tax-deferred annuities: Earnings from this type of annuity are not taxed until withdrawn.

    Life insurance: Paid-out death benefits are generally exempt from the 3.8% tax because they are excluded from gross income.

    Rental real estate: Income can be offset by depreciation deductions.

    Oil and gas investments: Income from oil and gas investments can be offset by deductions for intangible drilling costs and depletion.

    The net investment income tax, targeted primarily toward the wealthy, is an additional tax on top of regular tax liability. Fortunately, proper planning and the assistance of a tax professional may allow this tax to be deferred, reduced, or, in some cases, avoided completely.

    EditorNotes

    Mark Cook is the lead tax partner with SingerLewak LLP in Irvine, Calif.

    Unless otherwise noted, contributors are members of or associated with SingerLewak LLP.

     

  8. Security Awareness for Taxpayers

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    IRS Logo

    TAXES. SECURITY. TOGETHER.

    The IRS, the states and the tax industry are committed to protecting you from identity theft. We’ve strengthened our partnership to fight a common enemy – the criminals – and to devote ourselves to a common goal – serving you. Working together, we’ve made many changes to combat identity theft, and we are making progress. However, cybercriminals are constantly evolving, and so must we. The IRS is working hand-in-hand with your state revenue officials, your tax software provider and your tax preparer. But, we need your help. We need you to join with us. By taking a few simple steps, you can better protect your personal and financial data online and at home.

    Please consider these steps to protect yourselves from identity thieves:

    Keep Your Computer Secure

    Use security software and make sure it updates automatically; essential tools include:

    • Firewall
      • Virus/malware protection
      • File encryption for sensitive data
      • Treat your personal information like cash, don’t leave it lying around
    • Check out companies to find out who you’re really dealing with
    • Give personal information only over encrypted websites – look for “https” addresses.
    • Use strong passwords and protect them
    • Back up your files

    Avoid Phishing and Malware

    • Avoid phishing emails, texts or calls that appear to be from the IRS and companies you know and trust, go directly to their websites instead
    • Don’t open attachments in emails unless you know who sent it and what it is
    • Download and install software only from websites you know and trust
    • Use a pop-up blocker
    • Talk to your family about safe computing

    Protect Personal Information

    Don’t routinely carry your social security card or documents with your SSN. Do not overshare personal information on social media. Information about past addresses, a new car, a new home and your children help identity thieves pose as you. Keep old tax returns and tax records under lock and key or encrypted if electronic. Shred tax documents before trashing.

    Avoid IRS Impersonators. The IRS will not call you with threats of jail or lawsuits. The IRS will not send you an unsolicited email suggesting you have a refund or that you need to update your account. The IRS will not request any sensitive information online. These are all scams, and they are persistent. Don’t fall for them. Forward IRS-related scam emails to phishing@irs.gov. Report IRS-impersonation telephone calls at www.tigta.gov.

    Additional steps:

    • Check your credit report annually; check your bank and credit card statements often;
    • Review your Social Security Administration records annually: Sign up for My Social Security at www.ssa.gov.
    • If you are an identity theft victim whose tax account is affected, review www.irs.gov/identitytheft for details.

    Publication 4524 (Rev. 9-2015) Catalog Number 48359Q Department of the Treasury Internal Revenue Service www.irs.gov

  9. IRS Releases 2017 Health Savings Account Limits

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    By Sally P. Schreiber, J.D. April 29, 2016

    The IRS issued the inflation-adjusted figures for calendar year 2017 for the annual contribution limits for health savings accounts (HSAs) and the minimum deductible amounts and maximum out-of-pocket expense amounts for high-deductible health plans (Rev. Proc. 2016-28).

    Under Sec. 223, individuals who participate in a health plan with a high deductible are permitted a deduction for contributions to HSAs set up to help pay their medical expenses. The contribution deduction limit is subject to an annual inflation adjustment. For 2017, the annual limit on deductible contributions is $3,400 for individuals with self-only coverage (a $50 increase from 2016) and $6,750 for family coverage (unchanged from 2016).

    To be eligible to contribute to an HSA, an individual must participate in a “high deductible health plan,” which is a health plan with an annual deductible that is not less than a certain limit each year and for which the annual out-of-pocket expenses, including deductibles, co-payments, and other amounts, but excluding premiums, does not exceed a certain limit each year (Sec. 223(c)). These limits are also subject to annual inflation adjustments.

    For 2017, the lower limit on the annual deductible under a high-deductible plan is $1,300 for self-only coverage and $2,600 for family coverage, the same as for 2016. The upper limit for out-of-pocket expenses is $6,550 for self-only coverage and $13,100 for family coverage, both unchanged from 2016.

    Sally P. Schreiber (sschreiber@aicpa.org) is a Tax Adviser senior editor.

    See more at: http://www.thetaxadviser.com/news/2016/apr/2017-inflation-adjustments-for-hsas-201614343.html#sthash.hYvPstRE.dpuf

  10. IRS Issues 2016 and Revised 2015 Vehicle Depreciation Limits

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    By Paul Bonner April 1, 2016

    The IRS on Friday issued guidance providing revised limits for the amount of depreciation taxpayers can take for the first year they use a passenger automobile (including a truck or van) for business in 2015 and the new depreciation limits for 2015. The guidance also includes the lease inclusion amounts that vehicle lessees must include in income for 2016 (Rev. Proc. 2016-23).

    The revisions apply to passenger vehicles that were placed in service during 2015 and to which 50% bonus depreciation applies. They were necessitated by retroactive extension of bonus depreciation for 2015 by the Protecting Americans From Tax Hikes Act of 2015, P.L. 114-113. Accordingly, the first-year depreciation limitation for 2015 is increased by $8,000. For passenger automobiles (other than trucks or vans) placed in service during calendar 2015 to which 50% bonus depreciation applies, the depreciation limit under Sec. 280F(d)(7) is $11,160 for the first year. The corresponding figure for trucks and vans is $11,460.

    For passenger automobiles (other than trucks or vans) placed in service in service during calendar 2016 to which bonus depreciation does not apply, the depreciation limit under Sec. 280F(d)(7) is $3,160 for the first tax year; $5,100 for the second year; $3,050 for the third year; and $1,875 for each successive year. For passenger automobiles (other than trucks or vans) placed in service in service during calendar 2016 to which bonus depreciation applies, the first year limit is $11,160; the limits for the other years are the same.

    For trucks and vans to which bonus depreciation does not apply, the limit is $3,560 for the first tax year; $5,700 for the second tax year; $3,350 for the third tax year; and $2,075 for each successive tax year. For trucks and vans to which bonus depreciation applies, the first year limit is $11,560; the limits for the other years are the same.

    Sec. 280F(c) limits deductions for the cost of leasing automobiles, expressed as an income inclusion amount according to a formula and tables prescribed under Regs. Sec. 1.280F-7. The revenue procedure provides an updated table of the amounts to be included in income by lessees of passenger automobiles and another for trucks and vans, in both cases with lease terms that begin in calendar year 2016.

    Paul Bonner (pbonner@aicpa.org) is a Tax Adviser senior editor.

    See more at: http://www.thetaxadviser.com/news/2016/apr/2016-vehicle-depreciation-limits.html#sthash.qFXBXTKV.dpuf