Skip to main content Skip to search

Archives for Desert Foothills Accounting

Tax Reform?

The Congress Joint Conference Committee have reportedly reached agreement on a Tax Reform Bill that should be released soon.  It will be the biggest tax reform in 30 years.

We do not know all of the particulars of the Bill yet but below are a few tidbits:

  •   The top individual tax rate will be lowered from 39.6% to 37%
  • The top corporate tax rate will be lowered to 21%
  • The corporate alternative minimum tax (AMT) will be eliminated
  • The Individual Mandate for healthcare insurance will be eliminated
  • There will be a $10,000 limit on combined state/local income tax and property tax

If the Bill is signed into Tax Law before December 31, it will impact the 2018 year but NOT the 2017 tax year that we will be filing soon.  Stay tuned!!

Read more

Do you use a “Hotmail” address?

The Internal Revenue Service today warned taxpayers of a new email scam targeting Hotmail users that is being used to steal personal and financial information.

The phishing email subject line reads; “Internal Revenue Service Email No XXX and leads you to sign in to a fake page that then asks for personal information.  The IRS has received over 900 complaints about this new phishing scheme that seems to exclusively target Hotmail users. The suspect website associated with this scam has been shut down.

However, there may be similar schemes to other email users such as outlook and Gmail.  Individuals who receive unsolicited emails claiming to be from the IRS should forward it to phishing@irs.gov.  They should then delete the email. The IRS almost never contacts taxpayers via email to request personal or financial information.

Read more

Senate Passes Tax Bill

The U.S. Senate passed its version of tax reform early Saturday morning by a vote of 51-49, with all Democrats, both independents and one Republican voting no on the bill.  The bill, as approved, differs significantly from the version released from the Senate Finance Committee last week.

The Senate Bill also differs from the House Bill approved November 17.  This means that the two houses will have to hold a conference committee to reconcile the differences between the bills.  Both Houses will then have to vote and approve the legislation as passed.

The Senate legislation retains the same seven tax brackets, although most are lowered through 2025 to 10%, 12%, 22.5%, 25%, 32.5%, 35%,and 38.5%.  The child tax credit would be increased to $2,000 per child, and the income limits would be increased.

The Senate Bill allows individuals to deduct 23% of “domestic qualified business income” from pass-through entities such as partnerships and S Corporations.

The Bill also allows a $10,000 deduction for state property taxes. This is similar to the House Bill. Both Bills do not allow deductions for state income taxes.

The Bill also keeps the estate tax but doubles the current exemption amount.  The House Bill would eliminate the estate tax starting in 2023.

The Senate Bill also keeps the deduction for medical expenses while the House Bill eliminates it.  The Bill set an adjusted gross income (AGI) threshold at 7.5%.

The Bill lowers the top corporate rate from 35% to 20% with an effective date of 2019.

The Senate Bill would also repeal the individual mandate, which imposes a penalty on individuals who do not have health insurance.  The House Bill does not repeal the mandate.

The Senate Bill adopted a revised Alternative Minimum Tax for corporations and individuals, rather than repealing it as the House Bill does.

The Senate Bill’s limit on interest deductions is much more restrictive than the House version.

Both Bills make major changes to the rules affecting U.S. companies’ foreign earnings and the rules for those payments.

The final Bill approved by both Houses of Congress may be very different.  However, the similarities are beginning to show what may appear.  Please stay tuned and I will update as we hear what happens.  Please call our office if you would like to meet as planning is so very important this year!

 

Read more

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.

Read more

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!

 

Read more