IRS Announces Start Date for Tax Filing Season
Jan 05,2020
The Internal Revenue Service (IRS) has announced that it will begin accepting and processing 2019 tax returns on Monday, January 27, 2020.  Individual tax filers will have until Wednesday, April 15, 2020 to file their 2019 tax returns and pay any tax owed unless they choose to file an extension. The IRS has a handy calendar containing an abundance of information and important dates. The IRS is encouraging taxpayers to file electronically as this flags common errors and highlights any missing information. It also encourages taxpayers who are due a refund to opt for direct deposit rather than a mailed check in order to get their refund more quickly.
Congress Repeals Nonprofit Employee Benefits Tax
Dec 31,2019
In 2017, Congress passed the Tax Cuts and Jobs Act. The tax law required associations and other tax-exempt organizations, such as churches, synagogues, hospitals and colleges, to pay a 21 percent unrelated business income tax (UBIT) on employee benefits, such as parking and transportation. Nonprofits grappled with the question of how to calculate their parking tax. The 21 percent tax also applied to mass-transit benefits such as subway passes, though the new regulations focused on parking. The provision was added because the legislation eliminated tax breaks for transportation-related fringe benefits from for-profit companies, and legislators wanted to treat all employers equally. After two years of advocacy by nonprofits to repeal what was considered by many to be a harmful tax, Congress has recognized that nonprofit employee benefits like parking and transit assistance are not a trade or business conducted for the production of income and therefore should not be regarded as...
2019 Tax Law Update: Highlights of Spending Package’s Tax Law Changes
Dec 27,2019
The federal government spending package, titled the Further Consolidated Appropriations Act, 2020, does more than just fund the government. It extends over 30 income tax provisions that had already expired or were due to expire at the end of 2019. The agreement on the spending package also includes the Taxpayer Certainty and Disaster Tax Relief Act (“Disaster Act”) and the Setting Every Community Up for Retirement Enhancement (SECURE) Act. Let’s look at some of the highlights. Extenders Here are some of the most widely relevant breaks that have been extended through 2020: The exclusion from gross income of discharge of qualified principal residence indebtedness; The treatment of mortgage insurance premiums as qualified residence interest for itemized deduction purposes - as part of the efforts to revive the housing market, Congress passed a law allowing a tax deduction for the cost of premiums for mortgage insurance (PMI) for homes and vacation...
Charitable Giving: How to Maximize the Effects and Benefits in 2019
Nov 19,2019
Giving to a charity is not only generous and needed but can bring significant tax deductions. Charitable giving is known as one of the most flexible tax planning tools because your choice of recipients is vast, and you can give at any time of the year (although deductions are based on IRS deadlines). As the holiday season approaches, now is the time to consider your charitable giving options. The Tax Cuts and Jobs Act (TCJA) has essentially doubled the standard deduction and limited or eliminated many itemized deductions (other than the charitable deduction) through 2025. Under current law, itemized deductions are limited to state and local taxes, mortgage interest, charity and certain casualty and gaming losses. For taxpayers with limited mortgage interest and who may be subject to the $10,000 SALT cap, it can take more than $14,000 of charitable contributions before the first dollar is deductible. As a result, some taxpayers...
Kiddie Tax: New Hazards, New Opportunities
Oct 04,2019
Despite its name, the “kiddie tax” is far from child’s play. And a change made by the Tax Cuts and Jobs Act (TCJA) puts some adult teeth into the tax. Now, children with unearned income may find themselves in a tax bracket higher than that of their parents. At the same time, the TCJA creates new opportunities for family income shifting. Income shifting discouraged At one time, parents could substantially reduce their families’ tax bills by transferring investments or other income-producing assets to their children in lower tax brackets. To discourage this strategy, Congress established the kiddie tax in 1986. The tax essentially eliminated the advantages of income shifting by taxing all but a small portion of a child’s unearned income at his or her parents’ marginal rate. When the kiddie tax was first enacted, it applied only to children under 14, but in 2007 Congress raised the age threshold...
Charitable IRA Rollover Eases Tax Pain of RMDs
Oct 04,2019
One downside of contributing to a traditional IRA is that, once you reach age 70½, you must begin taking required minimum distributions (RMDs) — and pay taxes on those distributions — whether you need the money or not. But if you’re charitably inclined, you can use a qualified charitable distribution (QCD) to avoid taxes on up to $100,000 in RMDs per year. Also known as a “charitable IRA rollover,” a QCD is a direct transfer from your IRA to an eligible charity. It counts as a distribution for RMD purposes, but it’s excluded from your income. And it has certain tax advantages over traditional charitable contributions. Advantage of QCDs over ordinary donations When you receive an RMD, it’s taxable to the extent it’s attributable to deductible contributions and earnings on those contributions. (Amounts attributable to nondeductible contributions are tax-free.) One strategy for reducing these taxes is to donate the taxable...
Meal, Travel and Entertainment Expenses: Know What’s Deductible and Properly Substantiate
Oct 04,2019
When owners, managers and salespeople attend trade shows, call on customers or evaluate suppliers, they may incur meal, travel and entertainment expenses. Many of these expenses may be deductible if they’re properly substantiated, but some of the rules have changed under the Tax Cuts and Jobs Act (TCJA). Entertainment expenses no longer deductible “Entertainment” expenses used to often be lumped in with meal and travel expenses, but the rules for entertainment expenses have changed dramatically under the TCJA. Specifically, it disallows deductions for most business-related entertainment expenses, including the cost of facilities used to entertain customers. Examples of nondeductible expenses under the TCJA include: Tickets to sporting events, License fees for stadium or arena seating rights, Private boxes at sporting events, Theater tickets, Golf club dues and greens fees, Company golf outings for customers, and Hunting, fishing, and sailing outings. Some business-related entertainment expenses may still be deductible, but only...
Did You Repair Your Business Property or Improve It?
Oct 04,2019
Repairs to tangible property, such as buildings, machinery, equipment or vehicles, can provide businesses a valuable current tax deduction — as long as the so-called repairs weren’t actually “improvements.” The costs of incidental repairs and maintenance can be immediately expensed and deducted on the current year’s income tax return. But costs incurred to improve tangible property must be capitalized and recovered through depreciation. Betterment, restoration or adaptation Generally, a cost must be depreciated if it results in an improvement to a building structure or any of its systems (for example, the plumbing or electrical system), or to other tangible property. An improvement occurs if there was a betterment, restoration or adaptation of the unit of property. Under the “betterment test,” you generally must depreciate amounts paid for work that is reasonably expected to materially increase the productivity, efficiency, strength, quality or output of a unit of property or that is...
You Need to Know: Wolters Kluwer Tax & Accounting/CCH Malware Attack and Software Outage
May 10,2019
May 10, 2019: You may have read recent news about a malware attack and software outage affecting accounting software company Wolters Kluwer CCH. Smith & Howard does not use Wolters Kluwer/CCH for storage or processing of client data; the outage and malware attack does not affect the data or efile capabilities of Smith & Howard clients.  
2018 Year-End Tax Planning for Individuals
Nov 21,2018
Nearly one year later, tax reform is still making headlines and we continue to learn more about its broad implications. Whether your previous tax filing posture was straightforward or complex, you will be impacted by the myriad of changes to the tax code. Now more than ever, it is imperative to thoughtfully consider year-end tax planning opportunities and ensure you are positioned to be in compliance with the new rules. 2018 year-end tax planning begins with a projection of your estimated income, deductions and tax liabilities for 2018 and 2019. You should review actual amounts from 2017 to assist you with these projections. There may be opportunities to accelerate or defer income or deductions to optimize your total tax liability. This Tax Letter is written to help you do just that. Tax planning for individuals also requires consideration of the tax consequences from any businesses conducted directly or indirectly by individual...

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