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Archives for Desert Foothills Accounting

IRS Will Enforce Health Coverage Reporting on 2017 Returns

On Friday, the IRS updated the page on health care reporting requirements to taxpayers and tax practitioners.  the IRS will not accept electronically file 2017 individual returns unless the taxpayer indicates that they and everyone on their return had health care coverage, qualified for an exemption from coverage, or will make a shared-responsibility payment. The IRS also said any returns filed on paper that do not address the health coverage requirements may be suspended until the Service receives additional information and any refunds will be delayed

The 2017 filing season in 2018 will be the first time the IRS has enforced this requirement and will not accept tax returns that omit the information.  Last filing season, because of President Donald Trump’s executive order directing the government to limit burdens imposed by the Health Care Law caused the IRS to not enforce the health care requirement.

In 2018, the IRS determined that enforcing the rule when taxpayers file will make return filing easier on taxpayers and reduce refund delays.

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2018 Social Security Changes

The Social Security Administration (SSA) announced Friday that the maximum amount of wages in 2018 subject to the 6.2% Social Security Tax (old age, survivor, and disability insurance) will rise from the 2017 amount of $127,200 to a 2018 amount of $128,700, an increase of a little more than 1%.  By comparison, the 2017 wage base increased more than 7% over the 2016 wage base.

The maximum amount of Social Security tax a taxpayer could pay will therefore increase from $7,886.40 in 2017 to $7,979.40 in 2018 or an increase of $93.

The SSA also announced that Social Security beneficiaries will get a 2% increase in benefits in 2018, after receiving a 0.3% increase in 2017 benefits.  There was no increase for 2016. The average retiree will receive an increase of $27 each month.

A person who takes social security early can now earn $17,040 in 2018 before having their social security benefits reduced.  After a person earns the $17,040, they lose $1 in benefits for every $2 of earned income over that limit.

As before, there is no limit on the 1.45% of Medicare tax that wages are subject to in 2018. Please call our office if you have questions.

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Avoid Fraud In Your Small Business

Small businesses with less than 100 employees experience a median loss of $154,000 due to fraud according to the Association of Certified Fraud Examiners (ACFE).  This number is higher for small businesses than most large companies.

Employees and customers are just a few of the people who might be dishonest and take advantage of your small business.  Learn how to protect yourself!

Identity Theft

Identity Theft can cost your business thousands of dollars.  Fraudsters can steal your business identity and use it to access credit.

They might steal bank statements, financial statements and federal identification numbers (FEIN).

To prevent identity theft, make sure your sensitive statements are secure.  If you have hard copy physical documents, keep them locked in cabinets with limited access. If you have digital copies, you should use complex passwords.

Payroll Fraud

Payroll schemes are twice as likely to occur in a small business.  Dishonest employees may ask for payroll advances that are not repaid. They might also give you incorrect hours or have fellow employees clock in for them.  You should be diligent and ensure that employees are aware of a strict code of conduct. You should do background checks on employees and check references before hiring and allowing access to business records.

Money Fraud

Small businesses in certain industries dealing with the public may receive fake bills.  Be sure your employees know how to discover fraud and fake currency.

Return Fraud

Small businesses often receive returns for purchased merchandise.  Some people use the products and then return them for refunds.  Other fraudsters will steal merchandise and then return it for a profit.  It is important that you have merchandise in secure areas and do physical inventories often to ensure quantities are correct to avoid theft.

Worker’s Compensation Fraud

Most states require businesses to have workmen’s compensation the day they have employees.  When employees get hurt on the job, it is important that you document carefully what occurred and how the employee was hurt.  Dishonest employees may get hurt off the job and claim it was while working.  Others may claim a more severe injury than it is in order to be paid while off work.

Small businesses should have quality control procedures and employee manuals to avoid the types of fraud mentioned above.  Owners should have detailed records and document procedures to ensure their businesses are protected.

Please call our office if you have questions!

 

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How To Avoid Tax Traps with Inherited IRAs

An  inherited Individual Retirement Account (IRA) can be a tremendous boon to the beneficiary.  Who can’t use extra money in retirement!  Most inherited IRAs are cashed out within six months of the death of the family member.  If you do cash it out, there is no way for planning tax strategies! Without proper planning, federal and state taxes can take a sizable bite from the proceeds!

Options for Inherited IRAs:

  •  Take a lump sum distribution of the entire balance
  •   Roll the inherited IRA over into a new account and take the distributions over the longer of the life expectancy of the beneficiary or the decedent.

If the account owner died before reaching the date for RMDs (Required Minimum Distributions), the beneficiary has a third option of withdrawing all the funds by the end of the year containing the fifth anniversary of the decedent’s death (The Five Year Rule). In this case, the life expectancy of the beneficiary must be used.

Keep the Beneficiary Designation Up To Date!

Marriage, divorce and the birth of children can change estate plans.  The IRA will pass by beneficiary designation and not the Will.  Please make sure you keep the beneficiary as you want it.

Titling An Inherited IRA:

An inherited IRA must be titled with both the name of the decedent and the beneficiary plus the word “inherited”. For example, one might title an inherited IRA as “Jane Doe, deceased September 30, 2017, F/B/O Jimmy Doe, beneficiary”.  If you just change the name on the IRA, that is a “cash out” so DO NOT just retitle the inherited IRA to the beneficiary. Retitling the account is best done at the brokerage where the decedent held the IRA before the beneficiary rolls it over to his or her own brokerage.

If Decedent Had Turned 70 1/2 Years of Age and Started RMDs:

If the decedent had already turned age 70 1/2 and started taking required minimum distributions, the beneficiary MUST take the required minimum distribution before the end of that year or there is a 50% penalty and you still must take the distribution.

ROTH?

Consider the beneficiary’s age and if there are already ample retirement sources, converting the inherited IRA to a ROTH may be the way to go.

Please call our office BEFORE just cashing out the inherited IRA!

 

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