Month: February 2019

What All Business Owners Need to Know

BusinessOwners

The new Tax Cuts and Jobs Act (TCJA) law passed by Congress in 2017 has reshaped the landscape for not only individuals but also for business owners – especially those who own small businesses. The most significant change that will impact a proprietor may be the new deductible rate of 20 percent. This will include pass-through businesses such as S Corporations, partnerships and sole proprietorships. Revenue and expenses that they incur are “passed through” to the individual’s income tax return, which are subject to individual rates. This is a hefty reduction, considering that C Corporations pay a flat 21 percent.

Overview: You may be eligible to receive a 20% deduction on your pass-through income of your business

First-year bonus depreciation
One way businesses capitalize on tax savings is by depreciating property. The Act has doubled from 50 percent to 100 percent. Simply stated, businesses may now deduct the full amount of expenses on eligible equipment and property purchases, instead of writing off only a portion annually. Some of the qualified property includes business property such as computers and passenger automobiles and items used in a home-based business.

This applies to property purchased and placed in service after September 27, 2017. It is important to note that it will expire in 2022. Afterwards, the deduction percentage will be reduced.

A new cap on State and Local Tax Deductions (SALT)
If you have been able to lower your tax liability by deducting a significant amount in state and local taxes, you may be in for a big surprise this year. The IRS has now set a limit as to how much you can deduct: $10,000 annually.

This will include property, income and sales tax. If you itemize property tax you must choose between taking a deduction in either your income tax or sales tax. Since income tax is normally larger, most people choose to take the income tax deduction. Those who will be negatively impacted by this $10,000 cap are those who earn in excess of $100,000.

Deductions for pass-throughs and corporations
The government notes that nearly 95 percent of all businesses in the U.S. are pass-throughs. Most of these should all see a 20 percent deduction for pass-through and corporate entities.

Limitations on high-earners
The Act sets limits on how much people with high incomes can deduct:

  1. Professional service. In certain professional service industries, (health, law, consulting, etc.) the 20 percent deduction will start to phase out for individuals earning more than $315,000 (couples) and $157,500 for single filers. The deduction is completely phased out for couples earning $415,000, and for those filing single, it is $207,500.
  2. All industries. The Act has applied a different formula to calculate the limit for high-earning taxpayers in other industries. It is 50 percent of total wages paid or 25 percent of wages, plus 2.5 percent of the cost of tangible depreciable property.
  3. Other significant changes:
    • For most taxpayers, income averaging has been discarded
    • Unemployment income is now fully taxable ☹
    • IRA contribution deductions are limited
    • Social Security numbers are now required for all dependents on personal returns
    • Investment Tax Credit has been eliminated
    • Dividend exclusions have been repealed

    4. Should you use a tax preparer?
    You have invested more time, money and energy than you can recall in building and growing your business. To protect its solvency and integrity, you should give serious consideration to engaging a tax professional. Your schedule is already packed with time-consuming, high-energy meetings geared toward gaining a competitive advantage in the marketplace. The last thing you need is to miscalculate deductions or thresholds.

    Many business owners rarely think about taxes until the deadline approaches. In reality, it shouldn’t be viewed as a once-a-year frantic event. Instead, it should be top of mind all year long. Procrastination makes the entire tax return process more cumbersome than it should be. If your last-minute struggle leaves you bewildered, it may unfortunately be too late to engage a reputable tax preparation service; they may be burning the midnight oil with hundreds of other clients.

    Accurate bookkeeping = peace of mind
    Established in 1976, Tax Leaf, has been helping business owners and individuals with much more than tax return preparation. Their diverse professionals provide clients with professional, accurate bookkeeping and payroll services. Their cloud-based software will consolidate all the data at tax time. Finally, they are multi-lingual, speaking English, Spanish, Portuguese and Russian.font>

    Ready or not, tax season is quickly approaching. Do yourself a favor; let us help you get organized and compliant.

    For more info about the service visit Business Tax Return

Real Estate Agents Win Again

RealEstateAgents

Real Estate Professionals Pay Less Taxes in 2019
The Tax Cuts and Jobs Act has made sweeping changes across all industries and sectors; it was not designed to simply provide relief for individual taxpayers. Those who are in real estate will be delighted to learn they will pay less taxes because of the Act. Since this is a new law, it is critical that entrepreneurs and business owners understand its implications to discover how it will impact your tax liability – and find ways to reduce it. It’s safe to say the IRS won’t send you a check with a hefty refund because you failed to utilize all the legitimate deductions.

Consider the professional who established a pass-through entity, of either an LLC or S Corp. Thanks to the passage of the Act, a substantial change has been made in calculating the amount of tax you will owe. Now, agents may deduct up to 20 percent of qualified business income.

Save money; create a professional association One legitimate way to chisel down the amount of tax liability is one that may not be familiar to most. Typically, any funds in a real estate transaction must be paid to the agent, if he or she has a DBPR license in Florida. However, if the agent establishes a Professional Association (often known as a PA), the individual may receive the 20 percent pass-through income deduction on the profit on their income. That’s right: 20 percent! For example, if John Doe is classified as a professional association, it would be set up as: John Doe, P.A. A simple step like this is sure to lower your tax liability.

Depreciation
Many real estate agents may not know what items they can depreciate. Consequently, they end up paying entirely too much in taxes. For example, many are not taking advantage of a home office deduction. For those who fall in this category, you may depreciate a portion of your home.

Also, you may be able to depreciate your vehicle. Let’s consider that you purchased a $20,000 automobile and you use it 75 percent of the time for business. Calculating your mileage is the best way to determine the percentage. Now multiply $20,000 X 75 to arrive at $15,000. This amount is called your depreciable cost basis. You are allowed to depreciate $15,000 – but over time. Many real estate agents overlook thousands of dollars in legitimate annual depreciation costs because they are not aware of them, or they fail to keep proper documentation.

Why it is important to engage a tax expert?
Real estate agents know their business, inside and out. Similarly, tax professionals know their business. TaxLeaf, that has been operating in Florida for more than four decades, is one such firm. Interpreting this new legislation is best left to the experts. For example, the team at TaxLeaf would not be someone you would enlist to sell real estate on your behalf. In their 42 years, they have helped business owners navigate tax rules and regulations. Oftentimes, proprietors don’t want to admit they can’t handle their own taxes. This year, TaxLeaf anticipates more business than usual; they expect many real estate agents will try to demystify the

new tax reform law on their own. No doubt, agents will get caught up in a maze of codes. They may not understand Section 179 expensing, carried interest, and qualifying assets and a host of other tax terminology. TaxLeaf can explain those words and terms – that may seem like Greek to the average person – in simple, easy-to-understand language. Speaking of language, their team is multi-lingual; they speak English, Spanish, Portuguese and Russian.

Make things simple with accurate recordkeeping
Remember those New Year’s resolutions? People have good intentions but still put off tax preparation until the last few days before the deadline. Then it’s a fire drill; they frantically struggle to locate all those documents to demonstrate to the IRS what their income and expenses were for the year.

TaxLeaf has been helping business owners and individuals with much more than tax return preparation. Their diverse professionals provide business owners with professional, accurate bookkeeping and payroll services. You’ll get access to LeafCloud – a cool App that gives you online access to your most important tax documents and filings. No matter the language or the culture, TaxLeaf is ready to assist. Stop by at your convenience for a free, no obligation consultation.

Ready or not, tax season is here. Do yourself a favor; let us help you get organized and compliant.

Tax Season is Officially Open

taxseason2019

How the New Tax Reform Act will Affect You
The Internal Revenue Service is now open for the 2019 tax filing season. This year will be the beginning of an entirely new process for the agency, which is already processing 2018 federal tax returns. In spite of the government shutdown, the IRS is operating at full capacity.

What is different about this new tax-filing season?
Congress passed the Tax Cuts and Jobs Act in December 2017, the first major tax overhaul since President Reagan signed the Tax Reform Act of 1986. The goal was to simplify the tax filing process for not only individual taxpayers but also for businesses.

New forms, new changes
While the Act implemented a vast array of changes, the ones that will apply to most taxpayers deal with:

  • Child credit deductions (doubled)
  • Income tax brackets (adjusted to account for inflation)
  • Standard deductions (doubled)

Child credit
The 2018 tax reform act has doubled last year’s $1,000 deduction: it’s now $2,000 per qualifying child under age 17. There’s more good news; they increased the income thresholds. A married couple filing jointly may earn $400,000, and an individual filing as a single taxpayer can earn up to $200,000 and still take the deduction.

Tax Brackets
It would be simpler if everyone paid the exact same percentage in taxes, but it is doubtful it will happen in our lifetime. The IRS has calculated various ranges to determine tax liability. The Act still has seven tax brackets and seven marginal tax rates; however, it changed the income ranges within each range.

When you prepare your 2018 tax return you will notice that these marginal tax rates have shifted – in your favor! The percentage rate you will pay will be determined after deductions.

Standard deduction
The Act also doubles the standard deduction. For example, a single taxpayer’s deduction that was $6,350 in 2017 jumps to $12,000. For a married couple, it increases from $12,700 to $24,000 in 2018. Furthermore, the Act eliminated personal and dependent exemptions.

Don’t leave money on the table
Many business owners and individuals have been accustomed to ‘business as usual’ when filing taxes. After all, there have been no real changes in 33 years. For decades, they have relied on the same at-home tax preparation software. This is not a year to assume that was has worked in the past will still be good this year. If you want to reduce your tax liability – who doesn’t? – you should strongly consider contacting your local Tax or Accounting Office. To make sure you take advantage of all the available deductions, this may be perfect chance to make the switch to a professional, especially if you have complex tax issues.

Do I Need a CPA?
With all these new changes, you may need an expert to guide you through the process. This is our best advice in help you avoid mistakes and perhaps help lower your tax liability. Tax professionals don’t always have to be CPA’s. In fact, most people prefer a non-CPA to prepare their tax returns at a lower cost and a higher level of service. Check out TaxLeaf if you can. They have multiple locations throughout South Florida and Orlando. They understand tax credits and deductions. The best part, they’re human – unlike tax preparation software – and understand your situation best. Another bonus is that they offer a no-fee consultation, so stop by at your convenience and ask your toughest questions.

Accurate records = simplicity
Every year, millions of taxpayers struggle to keep better track of their income and expenses so they won’t be scouring through their filing cabinets and shoe boxes at midnight looking for receipts. TaxLeaf, founded in 1976, has been helping business owners and individuals with much more than tax return preparation. Their diverse professionals provide business owners with professional, accurate bookkeeping and payroll services. You’ll get access to

LeafCloud – a cool App that gives you online access to your most important tax documents and filings. No matter the language or the culture, TaxLeaf is here to help you this tax season. We have tax professionals that speak English, Spanish, Portuguese and Russian.

Ready or not, tax season is here. Do yourself a favor; let us help you get organized and compliant.