The currency may be virtual but the tax is very real....

This post was originally published May 12, 2021:

The currency may be virtual but the tax is very real....

This has been the most interesting tax season thus far, to say the least. Many of us thought that last year brought challenges, with the pandemic disrupting our lives and businesses. As tax professionals, we have clients that depend on us for answers and it is up to us to stay on top of the everchanging tax landscape. Last year, we scrambled to understand the Cares Act and how the tax law changes affected our business and individual clients. The IRS, and eventually state jurisdictions, provided an unprecedented 3 month extension of time to file - rightfully so, considering the pressure everyone was under and the disruption that COVID-19 had caused.

This year, however, it was a bit different. With a change in our President, came a change in full cabinet, senate majority and members of congress. We experienced a shift in the tax landscape which trickled down to the "every day Joe" when it came to tax compliance. This resulting form the American Rescue Plan. A change in tax law that occurred in the middle of tax season. WHAAAAT?? It's like changing the rules of football at half-time. But what can we do? Our BEST! We stay on top of the changes - advise clients to hold off on filing in certain situations, provide expectations of what’s to come, prepare them for good news, etc.

Now we’re facing more challenges and changes. Another overhaul of the tax code. The Tax Cuts and Jobs Act was HUGE and a lot to take in. It helped small business, it helped America, it lowered taxes and encouraged investment in the United States. We are now facing the possibility of severe tax hikes. What is being passed as a tax on the “wealthy” does not really appear to be so. This will affect many Americans, especially the middle-class (if there even is such a thing anymore).

CARES ACT AT A GLANCE

TRUMP SIGNS $2 TRILLION BILL FOR AMERICAN CITIZENS AND BUSINESSES

In an historic bill, President Trump approved an unprecedented $2 Trillion Relief Bill Friday, March 28th, 2020.

What appeared to be a sudden shut down of the American Economy, millions of Americans were left without jobs, without hope and without cash. On a seemingly daily basis, more American families are not sure of what the future holds as small businesses are left with no choice but to close their doors due to the mandatory shut down of non-essential businesses throughout the nation. While unemployment may be a “band-aid” relief option for many families, the economy may be suffering for an undetermined amount of time.

The CARES Act was introduced to bridge the gap between uncertainty and cash flow. Eligible small businesses can tap into the 2.2 Trillion Dollar Bill to keep employees on payroll, keep the lights on and keep the doors open (or at least the rent paid if it is a non-essential business).

The bill offers two types of loans - the Economic Injury Disaster Loan (EIDL) under section 7(b) and the Paycheck Protection Program (PPP) under section 7(a). With each offering their own unique benefits (grant component, loan forgiveness, loan maximums, rates, interest rates and covered periods) it is important to review your business financials to ensure you are maximizing your borrowing potential.

Want to learn more about the application process, schedule a time with me - > HERE <-

Paycheck Checkup Time

Paycheck Checkup Time

the IRS has provided a Withholding Calculator for you to use to make sure you avoid that unpleasant tax liability surprise everybody dreads.  It is surprisingly quite user friendly and all you need is to provide a handful of basic information to make sure you are in perfect paycheck health and no, you will not have to turn your head and cough. 

Trump Tax Plan - The Saga Continues

In a surprising sweep of 227 - 205; the House passed the $1.5 Trillion tax bill on Thursday, November 16th, favoring large corporations and pass through entities.   Under the House tax bill,  top corporate rates will be reduced to 20 percent from 35 and certain pass-through entities will enjoy a 25% rate.   

With it, however, comes a plethora of changes for the everyday taxpayer.  Many deductions are wiped away, such as the State and Local Tax Deduction, Personal Exemption and All Other Itemized Deductions.  So, all those out of pocket expenses you incur for work are now just a fact of life.  Student loan deductions are also completely eliminated  The seven tax brackets we currently have are condensed to only four, however, the top rate stays at 39.6%. 

The Joint Committee on Taxation predicts that individual taxpayers making under $75,000 will see a rise in average tax rates, due to phase outs and other provisions, by 2027.

For a detailed summary and comparison of the Senate and House bill click here.... NATP's Tax Cuts and Jobs Act Analysis....

.. and so the saga continues. 

 

Don't miss the new tax deadlines!

They say lighting doesn't strike twice, however, this year's 1040 tax deadline is once again extended to April 18.  Furthermore, it just so happens that April 15 falls on a Sunday in 2018, so there is yet another extension.  Now, to address the 2017 filing season deadlines; recently enacted legislation had introduced new due dates across the board for the 2016 tax year.  Although some had no change (1040, 1120S), it is important to note that many others have. The below list highlights calendar year taxpayers as well as other miscellaneous filings.    

March 15 (Extension September 15):

-      Form 1065, Return of Partnership Income (Previous Due Date April 15)

-      Form 1120S, Return for an S Corporation (No Change)

April 15 (Extension October 15):

-      Form 1040, Individual Income Tax Return (No change)

-      FinCEN Form 114, Foreign Bank and Financial Accountants Report (Previous Due Date June 30)     

-      Form 1120, Corporation Income Tax Return (Previous Due Date March 15)

-      Form 1041, Return for Estates and Trusts (No Change)

Information Returns: W-2's and 1099-MISC forms were always required to be provided to recipients by January 31st but filing deadlines were set to February 28th and March 31st, if paper filed and e-filed, respectively.  Now the due date for filing has been pushed up to January 31st. 

With all the changes, it may be easy to overlook a deadline, be sure to mark your calendars to avoid any late filing penalties!  Happy Filing! 

$26.5 Million Tax Bill

$26.5 Million Tax Bill

It was business as usual at Nisanov Tax Service when the phone rang on a random Thursday.  On the other end was a recorded message notifying me of my outstanding debt to the Internal Revenue Service and their multiple failed attempts at collecting said debt.  I apparently had to return this phone call immediately, otherwise, I would be arrested.  Being amused by this message and interested in how this would play out, I decided to call the number as instructed and “turn myself in.” I was immediately connected to an “agent” claiming to be from the “Crime Investigation Unit” who proceeded to ask for my name and phone number.  Providing an alias and a bogus phone number, the “agent” was quickly angered and instructed me to “expletive” myself.  Not quite the response I’m accustomed to from the IRS.

Do you have a foreign financial account? Did you disclose it?

Do you have a foreign financial account? Did you disclose it?

With the tax deadline upon us and the Panama Papers' prevalence, many taxpayer may be wondering what reporting requirements they may have missed.  A little known form, FinCEN Form 114, has been gaining a lot of traction in recent years as more people find themselves falling into the filing requirement category. What is this form you ask? The FinCEN Form 114 is the revamped version of the Foreign Bank Account Report Form TD F 90-22.1 or "FBAR", as it is better known, which has been around since the 1970's.  It wasn't until 2004, when Congress had introduced new penalties for non-willful violations and even more stringent penalties (including criminal) for willful ones, that more taxpayers began to comply with the meticulous filing requirement.  In brief, if you have an interest in or signature authority over a foreign financial account, you must file if the aggregate balance of all of your foreign financial accounts exceed $10,000 USD ...

GOP Debate - Tax Reform

GOP Debate - Tax Reform

Just off the heels of the Republican National Debate, where the topic of discussion was the US economy, candidates emphasized their vigorous determination of balancing the budget and shaving trillions off of our national debt.  Proposals of eliminating government agencies (the IRS being one of them) and holding various arms of government accountable for frivolous spending (practiced for decades) were a few of the steps candidates would take to achieve this goal.   

IRS Announces inflation adjustments for 2016 tax year

IRS Announces inflation adjustments for 2016 tax year

The Internal Revenue Service has recently announced the 2016 annual inflation adjustments for more than 50 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2015-53 provides details about these annual adjustments.

The tax items for tax year 2016 of greatest interest to most taxpayers include the following dollar amounts:

2016 taxable wage base to remain at $118,500

The Social Security Administration has announced that the 2016 taxable wage base for the Social Security portion of FICA will remain $118,500. The 6.2% Social Security tax is payable by both employers and employees; in 2016, the maximum tax is $7,347. This is the first time since the 2009 - 2011 period where the wage base has stagnated for more than one fiscal period. 

Keep in mind that there is no ceiling to the Medicare tax which is currently at 1.45% of earnings.  The tax increases to 2.35% for employee earnings in excess of $200,000. 

Curious about historical wage bases? Check out the link below and explore how your social security contributions are working for you:

https://www.ssa.gov/planners/maxtax.html