berkowitz pollack brant advisors and accountants

New Rules for Tax Treatment of Motor Vehicle Use in 2018 by Flor Escudero, CPA

Posted on July 11, 2018 by Flor Escudero

The use of a motor vehicle can sometimes provide individuals and businesses with tax benefits. Here is what taxpayers need to know for 2018.

Increased Standard Mileage Rates

Taxpayers have the option to deduct the actual use of their cars, vans, pickups and panel trucks for multiple purposes or, they may simply apply the standard mileage rates, which the IRS resets annually. Following are the standard mileage rates for 2018:

  • 54.5 cents for every mile driven for business purposes,
  • 18 cents per mile driven for medical purposes, and
  • 14 cents per mile driven in service of a charitable organization, including travel to and from volunteer work

Taxpayers may not use these rates for more than four motor vehicles they use simultaneously. Nor may they use the business travel rate if they previously used a depreciation method under the Modified Accelerated Cost Recovery System or after they claimed a Section 179 deduction for that vehicle.

Temporary Elimination of Deductions Other Vehicle Expenses

Between Jan. 1, 2018, and Dec. 31, 2025, the IRS will not permit taxpayers to deduct job-related moving expenses, including the miles a taxpayer travels in his or her automobile as part of the move, unless the taxpayer is a member of the Armed Forces of the United States.

In addition, the Tax Cuts and Jobs Act temporarily eliminates all un-reimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel. Therefore, taxpayers may not apply the business standard mileage rate to claim an itemized deduction for un-reimbursed employee travel expenses.

Increased Depreciation Limits

The Tax Cuts and Jobs Act increases the depreciation limitations for passenger automobiles placed in service after Dec. 31, 2017, for purposes of computing the allowance under a fixed and variable rate plan. The maximum standard automobile cost may not exceed $50,000 for passenger automobiles, trucks and vans placed in service after Dec. 31, 2017. Previously, the maximum standard automobile cost was $27,300 for passenger automobiles and $31,000 for trucks and vans.

About the Author: Flor Escudero, CPA, is a senior manager of Tax Services with Berkowitz Pollack Brant, where she provides domestic and international tax guidance to businesses and high-net-worth individuals. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.

 

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.

Does your Business Qualify for a Work Opportunity Tax Credit? by Michael Hirsch, JD, LLM

Posted on June 26, 2018 by Michael Hirsch,

According to the U.S. Department of Labor, the number of available job openings in April 2018 exceeded the number of unemployed individuals for the first time since 2000. In this robust labor market, businesses should not forget the Work Opportunity Tax Credit (WOTC) that is available to them when they hire veterans and other specific classifications of workers for whom significant barriers to employment may exist.

A business may qualify for the WOTC when they hire workers who fall into any of the following categories:

  • Unemployed veterans
  • Ex-felons
  • Recipients of qualified long-term unemployment benefits
  • Recipients of Supplemental Security Income (SSI)
  • Recipient of long-term family assistance
  • Recipients of Qualified IV-A Temporary Assistance for Needy Families (TANF)
  • Recipients of food stamps (SNAP)
  • Summer youth employees living in Empowerment Zones
  • Designated community residents living in Empowerment Zones or Rural Renewal Counties
  • Vocational rehabilitation referrals

The actual amount of the credit is limited to the amount of the business income tax liability or social security tax owed. Calculating the credit is based on the worker’s classification and a percentage of the “qualified wages” the business paid to them during their first two years of employment. For example, a business may take into account up to $12,000 of the wages it pays in the first year to a qualified veteran who is entitled to compensation for a service-connected disability and who was released or discharged from the military less than one year prior to the hiring date. When the workers is a certified summer employee, the first-year wages for purposes of calculating the WOTC is limited to $3,000.

To qualify for the Work Opportunity Tax Credit, an employer must first request certification from the state workforce agency within 28 days after an eligible employee begins work. It is possible for tax-exempt organizations to qualify for WOTC when they hire veterans.

About the Author: Michael Hirsch, JD, LLM, is a senior manager of Tax Services with Berkowitz Pollack Brant’s state and local tax (SALT) practice, where he helps individual and business to meet their corporate, state and local tax reporting requirements. He can be reached at the CPA firm’s Fort Lauderdale, Fla., office at (954) 712-7000, or via email at info@bpbcpa.com.

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.

Many Fiscal-Year Corporations will Pay a Blended Tax Rate for 2017 and 2018 by Cherry Laufenberg, CPA

Posted on June 22, 2018 by Cherry Laufenberg

While the Tax Cuts and Jobs Act (TCJA) reduces the corporate rate from a high of 35 percent to a flat 21 percent for calendar years beginning after Dec. 31, 2017, businesses whose fiscal years include Jan. 1, 2018, will pay federal income tax in 2017 and 2018 using a blended tax rate.

To determine their income tax liabilities for fiscal years that include Jan. 1, 2018, applicable corporations must first calculate their tax for the entire taxable fiscal year using the rates that were in effect prior to the TCJA. Next, they must calculate their tax using the new 21 percent rate and proportion each tax amount based on the number of days in the taxable year when the different rates were in effect.  The sum of these two amounts will be the corporation’s fiscal year federal income tax.

If a fiscal-year corporation did not use the blended rate when filing their 2017 federal tax returns, it should speak with its accountants and consider filing an amended return to reflect this change.

In addition, barring the enactment of any new laws, refund payments issued to, and credit elect and refund offset transactions for, corporations claiming refundable prior year minimum tax liability on returns processed on or after Oct. 1, 2017, and on or before Sept. 30, 2018, will be reduced by a 6.6 percent sequestration rate for fiscal year 2018.

About the Author: Cherry Laufenberg, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant, where she works with corporations, pass-through entities, trusts and foreign entities.  She can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at info@bpbcpa.com.

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.

New Laws Make Tax Withholding Check-Ups More Important than Ever by Nancy M. Valdes, CPA

Posted on June 13, 2018 by Nancy Valdes

Preventative care is critical to averting serious (and often costly) emergencies. Just as annual medical exams can help prevent disease, and proactive vehicle maintenance can protect against major automobile repairs, regular check-ups with accountants can help individuals avoid a surprise tax bill and penalties come the April tax-filing deadline.

One benefit of a mid-year tax check-up is to confirm that you are paying the government your fair share of taxes through estimated payments and/or withholding from paychecks in compliance with the U.S.’s pay-as-you-go system of taxation. This is more important than ever in light of the new tax laws that went into effect on Jan. 1, 2018. Some provisions of the Tax Cuts and Jobs Act (TCJA) that affect workers include a reduction in the federal tax rates, a substantial increase in the standard deduction and various modifications to many of the itemized deductions that qualifying taxpayers may have claimed in the past. In addition, the TCJA lowers the corporate tax rate and introduces a complex tax regime for sole proprietors and pass-through business entities.

Following are some considerations individuals should address with their advisors and accountants during a mid-year tax check-up.

I am a Salaried Employee who Receives a W-2

Salaried workers must complete IRS Form W-4 to help their employers calculate how much taxes to withhold from their wages and pay on their behalf directly to the government. The amount withheld will depend on various factors, including the employee’s taxable earnings, marital status, number of dependents, and the credits and deductions to which he or she may be entitled. While a W-4 is required for all new employees, workers can update these forms anytime during a year to reflect changes in their lives, such as a new marriage, a divorce or the birth of a child, which, in turn, may affect their withholding amount.

If you are a salaried employee who also has unearned income from investments, rental property, a second job or other non-wage sources, you may elect to have your employer withhold additional tax from your paycheck to reduce your risk of an unexpected tax bill. However, if your employer withholds too much tax from your paycheck, you may be entitled to a tax refund. As exciting as it may seem to receive money back from the government, you should remember that a refund is essentially a return of the money you willingly loaned to the government, interest-free, the prior year.

I am an Independent Contractor who Receives a 1099

Independent contractors, also called freelancers or gig workers, bear the responsibility for reporting and paying taxes on all income they earn, including earnings received in cash, less any deduction or credits to which they may be entitled.

Under most circumstances, if you qualify as an independent contractor, you should consider pre-paying your self-employment tax, income, Social Security and Medicare tax liabilities by making four quarterly estimated tax payments directly to the IRS in April, June, September and January. Alternatively, if you also have a salaried job, you may elect to update your Form W-4 to have your employer withhold additional tax from your paycheck to account for the untaxed income you earn as an independent contractor.

I am a Self-Employed Owner of a Pass-Through Business

Income earned by pass-through businesses organized as S Corporations, partnerships, LLCs and sole proprietorships typically flows directly from the businesses to their individual owners, who pay the resulting income tax liabilities and self-employment taxes, at their individual income tax rates. However, as a business owner, you may qualify to deduct certain expenses from your gross income and ultimately reduce the amount of tax you owe.

For 2018, the TCJA introduces a new potential tax savings for owners of pass-through businesses in the form of a 20 percent deduction on certain qualified business income (QBI). Meeting the eligibility requirements for this deduction depends on a taxpayer’s line of business, the type and amount of income they earn, as well as the amount of W-2 wages the business pays to employees and the depreciable income-producing property it owns. Due to the complexity of this provision of the new tax law, it behooves owners of pass-through businesses to engage the counsel of professional accountants and tax advisors, in order to develop an appropriate strategy that meets their unique circumstances and maximizes their potential tax savings.

I Itemized Deductions on my 2017 Tax Returns

Because the TCJA nearly doubles the standard deduction for tax years beginning in 2018, it is expected that far fewer taxpayers will itemize their deductions in the future. However, should you continue to itemize, you should be aware that the new law limits, and in some cases eliminates, some of the deductions you may have taken in the past.  For example, gone are deductions for moving expenses; fees paid to legal, tax and financial advisors; and theft and casualty losses that occur outside a federal disaster area declared by the president. In addition, there is now a $10,000 limit on the amount of state and local taxes you may deduct on your federal tax returns as well as a cap on the amount of casualty losses you may deduct and the size of a mortgage loan for which you may deduct interest. With these changes in mind, it may make sense for you to meet with a tax advisor who can project whether it makes sense for you to continue itemizing deductions in the future.

Tax reform is a game-changer that can have a significant effect on individuals’ tax bills, especially when considering how they earn wages, the types of income they earn and the way in which they structure any business entities in which they have an ownership interest. If you have not already addressed the impact of tax reform on your situation, you still have time to meet with qualified accountants to put into place an appropriate strategy to maximize tax efficiency for the remainder of the year.

 

About the Author: Nancy M. Valdes, CPA, is a senior manager with Berkowitz Pollack Brant’s Tax Services practice, where she works with U.S. and foreign-based entrepreneurs and closely held businesses to manage cash flow, protect assets and maintain tax efficiency.  She can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.

Florida Farms, Businesses May Now Apply for Hurricane Recovery Sales and Fuel Tax Refunds and Exemptions by Karen A. Lake, CPA

Posted on June 05, 2018 by Karen Lake

The Florida Department of Revenue recently published the following forms for qualifying businesses to apply for tax relief that the state legislature created in response to the 2017 hurricane season.

Form DR-26SIAG allows farming and agricultural business to apply for a refund of sales tax paid on purchases of materials used to repair or replace nonresidential farm buildings and/or agricultural fencing damaged by Hurricane Irma. Nonresidential farm buildings refer to temporary or permanent buildings or support structures used primarily for agricultural purposes and not intended to be used as a residential dwelling. This may include a barn, a greenhouse, a shade house, a farm office or a storage building. The refund applies to building materials purchased between September 10, 2017, and May 31, 2018.

Form DR-26IF provides farming and agricultural businesses with a method to apply for a partial refund on fuel tax paid for agricultural shipments made between September 10, 2017, and June 30, 2018. The refund of .02 cent fuel tax and 0.125 inspection fee for fuel placed in storage tank may apply to farms, nurseries, orchards, vineyards, gardens, apiaries or nonfarm facilities that transported agricultural products to or from a processing or storage facility that is involved in the production, preparation, cleaning or packaging of crops, livestock, related products, and other agricultural products.

Form DR-26SIGEN applies to nursing homes and assisted living facilities that purchased generators or other emergency power equipment between July 1, 2017, and December 31, 2018. The amount of the refund can be as much as $15,000 in sales tax and surtax paid for the purchase of qualifying equipment made to a single facility.

Applying for Florida tax refunds and exemptions requires businesses to gather and submit a significant amount of detailed supporting documentation. The tax accountants and advisors with Berkowitz Pollack Brant have deep experience helping clients prepare and submit these requests on the state and federal levels.

About the Author: Karen A. Lake, CPA, is SALT (state and local tax) specialist and an associate director of Tax Services with Berkowitz Pollack Brant, where she helps individuals and businesses navigate complex federal, state and local tax laws, and credits and incentives. She can be reached at the firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.

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