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Tax Tip of the Week | No. 404 | Top 10 Regulatory Issues for 2017 April 26, 2017

Posted by bradstreetblogger in : General, Tax Tip, Taxes , add a comment

Tax Tip of the Week | April 26, 2017 | No. 404 | Top 10 Regulatory Issues for 2017

Tax season is over and we now need to look forward to 2017 issues. We have now seen where the new administration and GOP led Congress is trying to make changes.  For the balance of 2017 we will be keeping you updated on what we see as the “Top 10 Regulatory Issues for 2017”:

1.    Tax Reform
Reducing individual and corporate tax rates, a cap of 20% on capital gains, the elimination of the estate tax and the permanent ability to write off capital expenses appear to be major goals in 2017.

2.    The Affordable Care Act (ACA)
The “repeal and replacement of the ACA” was a central theme of President Trump’s campaign. We will be looking to see what the “replacement” will look like.

3.    Wage/Hour Compliance
Uncertainty still surrounds the Dept. of Labor’s Final Overtime Rule.  Numerous states and some cities are looking at adapting their own minimum wage rates. Trump has also voiced general support of federal minimum wage increases.

4.    Immigration Reform
Executive Orders have already been made by Trump to implement another of his major campaign promises.  A new Form I-9 was released on January 22, 2017 to strengthen the compliance of documented workers.  We expect more regulations to be passed in 2017.

5.    Retirement
The Dept of Labor’s Fiduciary Rule which will change the way financial advisors try to help their clients may be changed or repealed in 2017. Proposals have been made to create more generous tax credits for small business to offer qualified retirement plans.  Social Security is expected to garner attention.  Adjustments to Social Security include raising the retirement age, cutting benefits, raising the payroll tax cap and reducing the annual cost-of-living adjustment.

6.    Employment Regulations
Paid sick and family leave laws, maternity leave and EEOC rules to ensure equal pay should be areas of scrutiny during 2017.

7.    Payments
Even though the “smart chip” on credit cards was introduced in 2015 to help facilitate faster payments and reduce cyber theft, the technology has still not been fully implemented.  Also look for expansion of same-day ACH payments for real-time transactions.

8.    Cybersecurity
The growing problem of identity thefts and frauds along with the hacking of business and government databases should see increasing regulations to help curtail these crimes.

9.    Paycards
Payroll cards are an increasingly popular method for many workers to receive their wages.  The Consumer Financial Protection Bureau has issued a 1,689 page set of final rules that will go into effect October 1, 2017.

10.    Infrastructure Initiatives
One of President Trump’s key campaign promises was a $1 trillion infrastructure initiative to build/improve roads, bridges, broadband networks, etc.  Assuming he can find the funding for these projects, it would provide a major opportunity for small business owners and workers in 2017 and beyond.

Who knows what will happen in 2017—-but it should be an exciting year! We will keep you posted.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 403 | Is it a Business or a Hobby? April 19, 2017

Posted by bradstreetblogger in : Deductions, General, Tax Planning Tips, Tax Tip, Taxes , add a comment

Tax Tip of the Week | April 19, 2017 | No. 403 | Is it a Business or a Hobby?

An issue we deal with all the time with our client’s is to help them distinguish if an activity is a Business or a Hobby. The difference is, legitimate business losses are potentially fully deductible.  If the activity is deemed to be a hobby by the IRS, then you can only deduct legitimate hobby expense up to the amount of your hobby income.

Sometimes it is hard to make a determination.  Activities related to horse racing, horse shows, auto racing or auto restoration draw particular scrutiny by the IRS.

The following is a nine part test the IRS considers in deciding whether a taxpayer is running a business genuinely designed to make money or merely a hobby:

1.    You carry on the activity in a businesslike manner.

2.    The time and effort you put into the activity indicate you intend to make it profitable.

3.    You depend on the income for your livelihood.

4.    Your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).

5.    You change your methods of operation in an attempt to improve profitability.

6.    You (or your advisers) have the knowledge needed to carry on the activity as a successful business.

7.    You were successful in making a profit in similar activities in the past.

8.    The activity makes a profit in some years (The guideline is profitable 3 out of the last 5 years).

9.    You can expect to make a future profit from the appreciation of the assets used in the activity.

As usual, when considering this and other tax situations it comes down to making sure it passes the “Smell Test”.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW…until next week.

Tax Tip of the Week | No. 402 | Filing for an Extension April 12, 2017

Posted by bradstreetblogger in : Tax Deadlines, Tax Planning Tips, Tax Preparation, Taxes, Uncategorized , add a comment

Tax Tip of the Week | April 12, 2017 | No. 402 | Filing for an Extension

If you haven’t filed your tax return by now, you should probably consider filing for an extension. It is a lot easier to file for an extension than it is to amend a return later for a mistake you made trying to rush your return to completion. Even more costly is if the IRS finds a mistake you made and assesses underpayment penalties and interest.

To file for an extension, you simply need to submit Form 4868. After submitting this form, you now have until October 16, 2017 to timely file your return.  Note, however, an extension of time to file is not an extension of time to pay.  If you suspect you will owe some taxes, you must send a payment along with the extension.  This is true for your federal, state and city returns.

Ohio will automatically accept the federal extension. Some cities, however, require a special city extension form. Also, some cities will not allow extensions if you only have W2 income.  Be sure to check with your work and/or resident cities before April 15th.

Another reason to file for extension is that some speculate your chances for an audit decreases for extended returns. How?  One of the methods the IRS uses to select a return for audit is to select a random sample of returns filed by April 17th.   If your return is not in that sample—then you don’t get picked!

Editor’s Note:  One of the pledges I make to all my clients is that my personal return will be the last one filed each year. When my most procrastinating client’s return is filed on October 16th —-mine is right behind it!  And has been that way for nearly 20 years!

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW…until next week.

Tax Tip of the Week | No. 401 | Tax Rules When You Sell Your Home April 5, 2017

Posted by bradstreetblogger in : Deductions, General, Tax Planning Tips, Tax Tip, Taxes , add a comment

Tax Tip of the Week | April 5, 2017 | No. 401 | Tax Rules When You Sell Your Home

The tax rules regarding the sale of your primary residence have been the same for many years, however, a lot of people still don’t understand the tax implications of selling their home. The following is a brief summary of what you need to know:

Taxpayers can exclude up to $250,000 ($500,000 if married) of gain on the sale of a home if all three of the following are satisfied:
1) The taxpayer owned the home for at least two years during the 5-year period ending on the date of sale,
2) The taxpayer used the home as a principal residence for at least two years during the 5-year period ending on the date of sale, and
3) The taxpayer did not exclude gain from the sale of another home during the 2-year period ending on the date of sale.

Reduced exclusion. If the taxpayer does not meet the 2-year ownership and use tests, or has already excluded gain from the sale of another home during the 2-year period prior to the sale of a current home, the taxpayer may qualify for a reduced exclusion if the primary reason for the sale is due to:
1) A change in place of employment,
2) Health reasons,
3) Unforeseen circumstances

Examples of unforeseen circumstances that may qualify for a reduced exclusion include:
• Involuntary conversion of home.
• Natural or man-made disasters, acts of war, or terrorism.
• Death.
• Unemployment.
• Change of employment resulting in an inability to pay reasonable basic living expenses.
• Divorce or legal separation.
• Multiple births resulting from the same pregnancy.
• Any other event the IRS determines to be an unforeseen circumstance.

In a recent IRS Letter Ruling, the taxpayers were married and had one child when they purchased their two bedroom condominium. One bedroom was used as the child’s bedroom, the husband’s office in home, and as a guest room. After the purchase of this residence, the wife became pregnant and gave birth to a second child. The taxpayers sold their residence so that they could move to a larger home to accommodate their growing family.

The IRS concluded that the occurrence of unforeseen circumstances was the primary reason for the sale and that the suitability of their residence as a principal residence materially changed. Accordingly, the gain on the sale of the residence, which the taxpayers owned and used as a principal residence for less than two of the preceding five years, qualified for the reduced maximum exclusion.

As always, let us know if you have any questions.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.