|Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.|
|Employer Responsibilities under the ACA|
The health care law contains tax provisions that affect employers. The size and structure of a workforce--small or large--helps determine which parts of the law apply to which employers. Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates during the year.
Two parts of the Affordable Care Act apply only to applicable large employers. These are the employer shared responsibility provisions and the employer information reporting provisions for offers of minimum essential coverage.
The number of employees an employer has during the current year determines whether it is an applicable large employer (ALE) for the following year. For example, you will use information about the size of your workforce during 2017 to determine if your organization is an ALE for 2018.
Applicable large employers are generally those with 50 or more full-time employees or full-time equivalent employees. Under the employer shared responsibility provision, ALEs are required to offer their full-time employees and dependents affordable coverage that provides minimum value. Employers with fewer than 50 full-time or full-time equivalent employees are not applicable large employers.
Who is a Full-time Employee?
There are many additional rules for determining who is a full-time employee, including what counts as hours of service, but in general:
Figuring the Size of the Workforce
To determine your workforce size for a year, you add your total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divide that total number by 12. If the result is 50 or more employees, you are an applicable large employer.
Employers with Fewer than 50 Employees
If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year.
Information Reporting (Including Self-Insured Employers)
All providers of health coverage, including employers that provide self-insured coverage, must file annual returns with the IRS reporting information about the coverage and about each covered individual. The coverage is reported on a Form 1095-B, Health Coverage and the employer must also furnish a copy of Form 1095-B to the employee by March 2, 2018 (this date reflects a 30-day extension from the original due date of January 31).
Certain employers may be eligible for the small business health care tax credit if they:
Employers with fewer than 50 full-time employees or full-time equivalent employees are not subject to the employer shared responsibility provisions.
Employers with 50 or More Employees
All employers including applicable large employers that provide self-insured health coverage must file an annual return for individuals they cover and provide a statement to responsible individuals.
Applicable large employers must file an annual return--and provide a statement to each full-time employee--reporting whether they offered health insurance, and if so, what insurance they offered their employees.
ALEs are required to furnish a statement to each full-time employee that includes the same information provided to the IRS by March 2, 2018. ALEs that file 250 or more information returns during the calendar year must file the returns electronically.
Employer Shared Responsibility Payment
ALEs are subject to the employer shared responsibility payment if at least one full-time employee receives the premium tax credit and any one these conditions apply. The ALE:
Questions? Don't hesitate to call for assistance.
|Tips for Getting Paid on Time|
For many business owners, collecting on your accounts receivables can be challenging especially as more people switch from established collection procedures to online payment methods. The good news is that you can take positive action to improve collection rates, shorten the aging days of your accounts receivable, help your business improve its cash flow and tighten up its credit and collections policies. While some of the tips discussed here may not be suitable for every business most can serve as general guidelines to give your company more financial stability.
Define Your Policy. Define and stick to concrete credit guidelines. Your sales force should not sell to customers who are not credit-worthy, or who have become delinquent. You should also clearly delineate what leeway salespeople have to vary from these guidelines in attempting to attract customers.
Clearly Explain Your Payment Policy. Invoices should contain clear written information about how much time customers have to pay, and what will happen if they exceed those limits.
Timing. The faster invoices are sent, the faster you receive payment. For most businesses, it's best to send an invoice when you complete the service or with a shipment, rather than in a separate mailing or online invoice days or weeks later.
Follow Through on Your Stated Terms. If your policy stipulates that late payers will go into collection after 60 days, then you must stick to that policy. A member of your staff (but not a salesperson) should call or email a reminder invoice or notice of late payment to all late payers and politely request payment. Accounts of those who exceed your payment deadlines should be penalized and/or sent into collection if that is your stated policy.
Train Staff Appropriately. The person you designate to make calls to delinquent customers must understand the seriousness of and the professionalism required for the task. When calling a delinquent payer, the caller should:
Switching to an Online Payment System. Studies show that customers and clients prefer to pay with debit and/or credit cards or EFTs vs. checks and to have multiple payment options (including traditional paper invoicing) available to them. Furthermore, when you use the latest online payment technology clients are more likely to feel that you run a more efficient streamlined operation and are "up-to-date."
If you are a business owner who is struggling to get paid on time or are ready to make the switch to an online invoicing and payment system, help is just a phone call away.
|What Income is Taxable?|
Are you wondering if there's a hard and fast rule about what income is taxable and what income is not taxable? The quick answer is that all income is taxable unless the law specifically excludes it. But as you might have guessed, there's more to it than that.
Taxable income includes any money you receive, such as wages and tips, but it can also include non-cash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return.
Here are some types of income that are usually not taxable:
In addition, some types of income are not taxable except under certain conditions, including:
Important Reminders about Tip Income
If you get tips on the job from customers, that income is subject to taxes. Here's what you should keep in mind when it comes to receiving tips on the job:
Bartering Income is Taxable
Bartering is the trading of one product or service for another. Small businesses sometimes barter to get products or services they need. For example, a plumber might trade plumbing work with a dentist for dental services. Typically, there is no exchange of cash.
If you barter, the value of products or services from bartering is taxable income. Here are four facts about bartering that you should be aware of:
1. Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The exchange must give a copy of the form to its members who barter and file a copy with the IRS.
2. Bartering income. Barter and trade dollars are the same as real dollars for tax purposes and must be reported on a tax return. Both parties must report as income the fair market value of the product or service they get.
3. Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.
4. Reporting rules. How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business.
If you have any questions about taxable and nontaxable income, don't hesitate to contact the office today.
|Tax Tips for Foreign Taxpayers|
If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship.
In addition, U.S. taxpayers with foreign accounts exceeding certain thresholds may be required to file Form FinCen114, known as the "FBAR" as well as Form 8938, also referred to as "FATCA."
Note: FBAR is not a tax form, but is due to the Treasury Department by April 17, 2018, and must be filed electronically through the BSA E-Filing System website. It may be extended to October 15.
Here's what else you need to know about reporting foreign income:
1. Report Worldwide Income. By law, Americans living abroad, as well as many non-U.S. citizens, must file a U.S. income tax return and report any worldwide income. Some key tax benefits, such as the foreign earned income exclusion, are only available to those who file U.S. returns.
2. Report Foreign Accounts and Assets. Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts.
3. File Required Tax Forms. In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, with their tax returns. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
Some taxpayers may need to file additional forms with the Treasury Department such as Form 8938, Statement of Specified Foreign Financial Assets or FinCEN Form 114 (formerly TD F 90-22.1), Report of Foreign Bank and Financial Accounts ("FBAR").
FBAR. Taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2017 (or in 2018 for next year's filing returns) must file a Treasury Department FinCEN Form 114 (formerly TD F 90-22.1), Report of Foreign Bank and Financial Accounts ("FBAR").
Form 8938. Generally, U.S. citizens, resident aliens, and certain nonresident aliens must report specified foreign financial assets on Form 8938, Statement of Specified Foreign Financial Assets if the aggregate value of those assets exceeds certain thresholds:
The threshold is higher for individuals who live outside the United States and thresholds are different for married and single taxpayers. In addition, penalties apply for failure to file accurately.
Please contact the office if you need additional information about thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided.
Note: An individual may have to file both forms, and separate penalties may apply for failure to file each form.
4. Review the Foreign Earned Income Exclusion. Many Americans who live and work abroad qualify for the foreign earned income exclusion when they file their tax return. This means taxpayers who qualify will not pay taxes on up to $102,100 of their wages and other foreign earned income they received in 2017 ($101,300 in 2016). Please contact the office if you have any questions about foreign earned income exclusion.
5. Don't Overlook Credits and Deductions. Taxpayers may be able to take either a credit or a deduction for income taxes paid to a foreign country. This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income. However, you cannot claim the additional child tax credit if you file Form 2555, Foreign Earned Income or Form 2555-EZ, Foreign Earned Income Exclusion.
6. Automatic Extension. U.S. citizens and resident aliens living abroad on April 17, 2018, qualified for an automatic two-month extension (until June 15) to file their 2017 federal income tax returns. The extension of time to file also applies to those serving in the military outside the U.S. Taxpayers must attach a statement to their returns explaining why they qualify for the extension.
7. Additional Extension of Time to File. U.S. citizens and resident aliens living abroad may be granted a filing extension of up to six months (October 15, 2018) by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return prior to the due date of the tax return (April 17, 2018). However, a taxpayer filing an extension must pay any tax due by the original date or be subject to late payment penalties and interest.
8. Get Tax Help. If you're a taxpayer or resident alien living abroad that needs help with tax filing issues, IRS notices, and tax bills, or have questions about foreign earned income and offshore financial assets in a bank or brokerage account, don't hesitate to call.
|IRS Scam Alert: Erroneous Refunds & Fake Calls|
Taxpayers should be aware of a new twist on an old scam involving erroneous tax refunds that are being deposited into their bank accounts. After stealing client data and filing fraudulent tax returns, these criminals use the taxpayers' real bank accounts to deposit refunds, then use various tactics to reclaim the refund from the taxpayers. Here's what you need to know.
Different Versions of the Scam
In one version of the scam, criminals posing as debt collection agency officials acting on behalf of the IRS contacted the taxpayers to say a refund was deposited in error, and they asked the taxpayers to forward the money to their collection agency.
In another version, the taxpayer who received the erroneous refund gets an automated call with a recorded voice saying he is from the IRS and threatens the taxpayer with criminal fraud charges, an arrest warrant and a "blacklisting" of their Social Security Number. The recorded voice gives the taxpayer a case number and a telephone number to call to return the refund.
What to do if your Tax Return is Rejected
Because this is a peak season for filing tax returns, taxpayers who file electronically may find that their tax return is rejected because a return bearing their Social Security number is already on file. If that's the case, taxpayers should follow the steps outlined below. If you need additional information, please read the IRS publication, Taxpayer Guide to Identity Theft and contact the office if you have any questions.
If you are a victim of identity theft, the Federal Trade Commission recommends taking these steps:
If your SSN is compromised and you know or suspect you are a victim of tax-related identity theft, the IRS recommends these additional steps:
If you previously contacted the IRS and did not have a resolution, don't hesitate to contact the office. You may also call the IRS at 1-800-908-4490 if you need specialized assistance.
Taxpayers unable to file electronically should mail a paper tax return along with Form 14039, Identity Theft Affidavit, stating they were victims of a tax preparer data breach.
How to Return an Erroneous Refund to the IRS
Taxpayers who receive the refunds should call the office immediately, as well as review the steps outlined in Tax Topic Number 161, Returning an Erroneous Refund, which includes IRS mailing addresses should there be a need to return paper checks.
Note: By law, interest may accrue on erroneous refunds.
If the erroneous refund was a direct deposit:
If the erroneous refund was a paper check and hasn't been cashed:
The erroneous refund was a paper check and you have cashed it:
Help is just a phone call away!
If you receive a refund in error, you will need to follow established procedures for returning it to the agency as soon as possible. You should also notify your financial institution because there may be a need to close bank accounts. If you need assistance with this or any other tax matter, don't hesitate to call.
|April 1 Deadline for Retirement Plan Distributions|
In most cases, taxpayers who turned 70 1/2 during 2017 must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Sunday, April 1, 2018.
The April 1 deadline applies to owners of traditional (including SEP and SIMPLE) IRAs but not Roth IRAs. Normally, it also applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.
The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by December 31. In other words, a taxpayer who turned 70 1/2 in 2017 (born after June 30, 1946, and before July 1, 1947) and receives the first required distribution (for 2017) on April 1, 2018, for example, must still receive the second RMD by December 31, 2018.
Affected taxpayers who turned 70 1/2 during 2017 must figure the RMD for the first year using the life expectancy as of their birthday in 2017 and their account balance on December 31, 2016. The trustee reports the year-end account value to the IRA owner on Form 5498, IRA Contribution Information in Box 5. Worksheets and life expectancy tables for making this computation can be found in the appendices to Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).
Most taxpayers use Table III (Uniform Lifetime) to figure their RMD. For a taxpayer who reached age 70 1/2 in 2017 and turned 71 before the end of the year, for example, the first required distribution would be based on a distribution period of 26.5 years. A separate table, Table II, applies to a taxpayer married to a spouse who is more than 10 years younger and is the taxpayer's only beneficiary. Both tables can be found in the appendices to Publication 590-B.
Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.
Taxpayers are encouraged to begin planning now for any distributions required during 2018. An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount in Box 12b on Form 5498. For a 2018 RMD, this amount would be on the 2017 Form 5498 that is normally issued in January 2018.
IRA owners can use a qualified charitable distribution (QCD) paid directly from an IRA to an eligible charity to meet part or all of their RMD obligation. Available only to IRA owners 70 1/2 or older, the maximum annual exclusion for QCDs is $100,000.
If you have any questions about QCDs or need more information about RMDs, don't hesitate to contact the office today.
|Revised Form W-4: Check your Withholding|
The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets. As such, a new version of Form W-4, Employee's Withholding Allowance Certificate, was released on February 28.
Taxpayers with less complex tax situations--single, married couples with only one job, or those who have no dependents, and who have not claimed itemized deductions, adjustments to income or tax credits--might not need to make any changes to their withholding or revise their Forms W-4.
Taxpayers with more complicated financial situations, however, might need to revise their W-4. Among the groups who should check their withholding are:
To determine whether changes to withholding should be made for 2018, taxpayers should first check the updated IRS Withholding Calculator to make sure they have the right amount of tax taken out of their paychecks. If a taxpayer needs to fill out a new Form W-4, they should do so and then submit the new Form W-4 to their employer.
The withholding changes do not affect 2017 tax returns due this April. However, having a completed 2017 tax return can help taxpayers work with the Withholding Calculator to determine their proper withholding for 2018 and avoid issues when they file next year.
If you have any questions about the amount you should be withholding on Form W-4, please call.
|There's Still Time to Make a 2017 IRA Contribution|
If you haven't contributed funds to an Individual Retirement Arrangement (IRA) for tax year 2017, or if you've put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 17 due date, not including extensions.
Be sure to tell the IRA trustee that the contribution is for 2017. Otherwise, the trustee may report the contribution as being for 2018 when they get your funds.
Generally, you can contribute up to $5,500 of your earnings for tax year 2017 (up to $6,500 if you are age 50 or older in 2017). You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.
Traditional IRA: You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you or your spouse, if filing jointly, are covered by an employer's pension plan.
Roth IRA: You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.
Saving for retirement should be part of everyone's financial plan and it's important to review your retirement goals every year in order to maximize savings. If you need help figuring out which retirement strategies are best for your situation, give the office a call.
|Do you Qualify for a Healthcare Exemption?|
With the 2018 tax filing season in full swing, it's not too early to think about how the health care law affects your taxes. The Affordable Care Act requires you and each member of your family to do at least one of the following:
If you meet certain criteria for the tax year, you may be exempt from the requirement to have minimum essential coverage. You will not have to make a shared responsibility payment for any month that you are exempt. Instead, you'll file Form 8965, Health Coverage Exemptions, with your federal income tax return. For any month that you do not qualify for a coverage exemption, you will need to have minimum essential coverage or make a shared responsibility payment. You may be exempt if you meet one of the following:
The Federally-facilitated Marketplace is no longer granting exemptions for members of a health care sharing ministry, members of Indian Tribes, and incarceration. Eligible individuals can still claim these exemptions on a tax return. For a full list of exemptions and how to claim them, please call.
Federal tax returns that do not reflect at least one of these options--reporting health care coverage, claiming a coverage exemption or reporting a shared responsibility payment--will be rejected if the return is filed electronically. If filed on paper, tax returns that do not reflect at least one of these options will take longer to process and any refunds will be delayed. You should respond promptly to IRS correspondence about your health care coverage.
To find out if you're eligible for a coverage exemption or must make a payment, don't hesitate to contact the office.
|Hurricane Victims may Qualify for EITC|
Taxpayers whose incomes dropped in 2017 due to last year's hurricanes--especially those who lived in areas affected by Hurricanes Harvey, Irma and Maria--may be eligible for the Earned Income Tax Credit (EITC). The EITC is a credit for low and moderate income workers and families. Here's how it works:
If you lived in one of the federally declared hurricane disaster areas during 2017, you may be able to use a special computation method that enables you to claim the EITC or claim a larger than usual credit. This special method is only available to people who lived in a hurricane disaster area.
Under this method, taxpayers whose incomes dropped in 2017 can choose to figure the credit using their 2016 earned income rather than their 2017 earned income. Eligible taxpayers should figure the credit both ways to see which yields the larger EITC.
About the EITC
The EITC helps working people who earned $53,930 or less for 2017 (adjusted annually for inflation). To claim the credit taxpayers must also meet other eligibility requirements.
The maximum refund is $6,318 refund for working families with qualifying children; however, actual credit amounts vary based on income, family size, and other factors. Workers without a qualifying child with incomes below $20,600 could also be eligible for a smaller credit of up to $510.
Because it is a refundable credit, those who qualify and claim it could pay less federal tax, pay no tax or may even get a refund. On average, EITC adds $2,445 to refunds. To take the credit, people must file a tax return, even if they owe no tax and even if they normally aren't required to file.
To qualify for the EITC, an eligible taxpayer must meet basic rules and have earned income from working for someone, being self-employed or running a business or farm. This includes home-based businesses, the sharing economy, and employment in the service, construction and agriculture industries. In addition, certain disability payments may qualify as earned income for EITC purposes.
Reminder: By law the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund--even the portion not associated with EITC or ACTC. This change helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.
For more information about the EITC and other refundable credits, don't hesitate to call.
|Tax Due Dates for March 2018|
Farmers and Fishermen - File your 2017 income tax return (Form 1040) and pay any tax due. However, you have until April 17 to file if you paid your 2017 estimated tax by January 16, 2018.
Employees who work for tips - If you received $20 or more in tips during February, report them to your employer. You can use Form 4070.
Employers - Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in February.
Employers - Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in February.
Partnerships - File a 2017 calendar year income tax return (Form 1065). Provide each partner with a copy of their Schedule K-1 (form 1065-B) or substitute Schedule K-1. To request an automatic 6-month extension of time to file the return, file Form 7004. Then file the return and provide each partner with a copy of their final or amended (if required) Schedule K-1 (Form 1065) by September 17.
S Corporations - File a 2017 calendar year income tax return (Form 1120S) and pay any tax due. Provide each shareholder with a copy of Schedule K-1 (Form 1120S), Shareholder's Share of Income, Credits, Deductions, etc., or a substitute Schedule K-1. If you want an automatic 6-month extension of time to file the return, file Form 7004 and deposit what you estimate you owe.
Electing large partnerships - File a 2017 calendar year return (Form 1065-B). Provide each partner with a copy of Schedule K-1 (Form 1065-B), Partner's Share of Income (Loss) From an Electing Large Partnership. This due date applies even if the partnership requests an extension of time to file the Form 7004.
S Corporation Election - File Form 2553, Election by a Small Business Corporation, to choose to be treated as an S corporation beginning with calendar year 2018. If Form 2553 is filed late, S treatment will begin with calendar year 2019.
Electronic filing of Forms 1097, 1098, 1099, 3921, and 3922 - File Forms 1097, 1098, 1099, 3921, and 3922 with the IRS (except a Form 1099-MISC reporting nonemployee compensation). This due date applies only if you file electronically. Otherwise, see February 28. The due date for giving the recipient these forms generally remains January 31.
Electronic Filing of Form W-2G - File copies of all the Form W-2G (Certain Gambling Winnings) you issued for 2017. This due date applies only if you electronically file. Otherwise, see February 28. The due date for giving the recipient these forms remains January 31.
Electronic Filing of Forms 8027 - File copies of all the Forms 8027 you issued for 2017. This due date applies only if you electronically file. Otherwise, see February 28.
Electronic Filing of Forms 1094-C and 1095-C and Forms 1094-B and 1094-B - If you're an applicable Large Employer, file electronic forms 1094-C and 1095-C with the IRS. For all other providers of essential minimum coverage, file electronic Forms 1094-B and 1095-B with the IRS. Otherwise, see February 28.
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