Werkheiser Tax & Accounting Office

 

Tax rebates
Services
New Business Form
Loan Calculator
Calculators
2017/18 Changes
Links
Business Questions
Valuations
Defer tax

neillpic0515aa.jpg (40799 bytes) From the office of Neill Werkheiser  June 15, 2018

Are you greatly overpaying for tax preparation?  On a regular basis, friends of our existing tax prep clients learn of our office and say "I can't believe that I paid more than twice your fee at one of the major tax prep franchise offices last year".  For nearly 50 years, this office has prepared many thousands of individual and business tax returns of all types, and retains a loyal following.  That would not happen if we overcharged or performed shoddy work.  We stay abreast of tax law, employ the latest technology and security.  Plus, we maintain membership in professional societies to share ideas and opinions.

For the 2019 tax return filing season, our office will add to our expertise  to accommodate additional demand created by overwhelming tax law changes. No receptionist, nor plush carpets - but old fashioned courtesy and attention to detail at very affordable rates.  Make an appointment to come in prior to the busy season to discuss your tax matters.

Tax changes for 2018 - By now you know major tax law changes are in place for 2018 returns submitted in 2019!  We continue to await guidance from the IRS for interpreting the applicable business changes.  Stay tuned -

Individual and business tax law changes have been enacted for 2018.  This will affect tax returns submitted in 2019.  Most taxpayers will see a decrease in tax due under the new law - a few may see an increase.

Major business change - Section 1031 treatment (like kind exchanges) which allowed the trade-in of a truck, for example, on a replacement without recognizing gain, has ended for personal property.  It continues for real property.  This is a significant change! However, most personal property can now be expensed without depreciating over many years. 

If you operate a business as a proprietorship, partnership, S Corp or LLC, you will be entitled to shelter 20% of your Qualified Business Income (QBI) from income tax in 2018. However, many personal service businesses will not be eligible.  

Residents of NY, NJ and DE, all high graduated tax rate states, will fare worse than PA residents under the new law because PA is a relatively low, flat rate state.

Pennsylvania is one of the friendliest states for retirees - NJ and NY are not.  PA taxes no part of social security benefits and does not tax retirement benefits in most cases. Florida has no personal income tax.  However, it is important to establish residency in FL.

An IRA for 2017 may be opened as late as the regular filing deadline in April, 2018.  Most other retirement plans must be established in 2017 in order to claim a deduction on your 2017 income tax return.  Opening and funding earlier results in greater tax deferred growth.

Health Insurance legislation - For tax returns submitted in 2019,taxpayers must continue to certify that they had credible health insurance during 2018. If you purchased health insurance and received a federal subsidy, be aware that if your actual income is higher than the income amount you estimated, you will probably receive a smaller refund or have a premium tax due when your income tax return is submitted.  Premium Tax Credit, Form 8962, must be part of your tax return if you purchased health insurance through the federal government's exchange.  In addition, you may receive a Form 1095-B or 1095-C from your employer or insurance company.  If you purchased insurance from a marketplace insurer you will receive Form 1095-A which is needed to prepare Form 8962. The basic penalty for not having health insurance is currently$695 per adult. In most cases, the family maximum penalty is $2,085.  Some reasons for an exemption must be approved by governmental agencies - some can be claimed on your tax return without advance approval.

A.  Under age 59 1/2?  There are multiple ways to tap your IRA without incurring the 10% excess tax penalty.

B.  Have a small business "on the side"?  Is it really a business or is it a hobby?  The distinction makes a huge difference when reporting for tax purposes.

If you have unused passive losses from rental properties you own, recover and use the losses when you sell your property.

wnw@wneill.com

Tips you can use, below - Click the "Business Questions" link, above for business/investment questions.

Q.  Can I claim a tax deduction for losses in my traditional IRA account?

A.  Perhaps.  If the value of all your IRA's is less than your non-deductible contributions (basis), when you liquidate, you have a miscellaneous itemized deduction.  This is not likely, however.

Q. If I purchased or inherited shares of stock at $20/share and the stock increased to a high of $50/share during my ownership, can I claim a loss if I sold it in 2008 for $25/share?

A.  No, this is very much misunderstood.  You would have a taxable gain of $5/share.  This example assumes no reinvested dividends.  

Q.  Will the annual Gift Tax exclusion increase in 2017? Will I owe gift tax?

A.  It remains $14,000. Very few folks ever owe gift tax.  It is more likely you will need to submit a gift tax return, however.

Q. What is the Earned Income Tax credit?

A.  Sometimes referred to as "tax welfare", this credit provides a refundable payment to taxpayers with low earned income from wages and salary.  Strict rules apply.  As a result of  past abuse, taxpayers will now be required to file a "due diligence" report when claiming the credit.

Q.  Will I owe tax if I sell my home at a large gain?

A.   Probably not.  If you owned and lived in the home as your primary residence for any two of the past five years, you may have a gain of $250,000 (single) or $500,000 (married) without paying tax.  If your gain exceeds these amounts, you will have taxable gain.  Also, depreciation which was deducted or deductible on the part of your home used for business cannot be part of the excluded amount.

Q. Must my child's earnings be used to contribute to his or her Educational I.R.A.?

A.  No, while your child must have earnings from a summer job or babysitting, for example, you can actually provide the funds contributed to the I.R.A. for your child.   Interest, dividends & capital gains in these accounts can be withdrawn tax free to pay school expenses, including K - 12 education expenses such as private and parochial school costs.

Q.  Will I receive a tax benefit if I give appreciated shares of stock to a charitable organization?

A.   Yes, you will avoid the taxable gain that would be incurred if you sold the shares and donated the proceeds and can claim a charitable itemized deduction for the fair market value.     

Q.  When is a Gift Tax return required?

A.  If you made a gift with value of more than $14,000 to any one individual in 2017, you are required to file a gift tax return by April 15, 2018.  In most cases, no gift tax is due. Transferring your home to a child for less than appraised value constitutes a gift.

Q.  What is new for businesses?

A.  In 2017 the Sect. 179 deduction limit is $500,000.  Some lower limits apply for vehicles.  The limit has been raised for future years and bonus depreciation will apply to equipment that is new to you - previously, you had to be the first user of the equipment.

Q.  If I become ill and receive disability insurance benefits, must I pay tax on the benefits?

A.  Maybe yes - maybe no!  Generally, if your employer paid the insurance premiums or they were paid with pre-tax dollars, the benefits are taxable.  If you paid the premiums, benefits would not be taxable.   If your employer paid half the premiums, half the benefits will be taxable.

A great (federal tax) salary deferral opportunity for small businesses and the self- employed is available with very little administration - Click the link below.

  SIMPLE Salary deferral (401-k like) plan annual amount   SIMPLE Salary deferral (401-k like) plan annual amount

Located at 1430 Church Lane, near Nazareth, Easton, the Slate Belt, Stockertown & Tatamy, PA, since 1980.

Ask how we might be of service to you.

Tel. 610 253-5420

Cell 610 442-3696

Fax 1 866 577-3960

Email:

wnw@wneill.com

 

  .New business formation counseling.

Retirement plan - SEP, SIMPLE, Keogh, 401-K, IRA, Profit Sharing - guidance and set up.

Tax Return Prep. - Individual, Corporate, Partnership, Non-profit.

References upon request.