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...
2018 Year-End Tax Planning for Businesses
Nov 21,2018
Businesses of all sizes, across all industries, have been impacted by the monumental changes to the federal tax code. To maximize tax savings and ensure compliance with the new rules, businesses need to engage in year-end planning conversations now. Certain tax savings opportunities may apply regardless of how your business is structured, while others may apply only to a particular type of business organization. No matter the type of business entity you operate, year-end tax planning should consider all possibilities to effectively lower your total tax liability. On December 22, 2017, President Trump signed sweeping federal tax reform into law. Tax reform has significantly changed the U.S. tax system for both individuals and businesses. Some of the most impactful measures from tax reform impacting businesses include: The corporate rate was permanently reduced from 35 percent to 21 percent. The availability of cash method accounting has been expanded to small businesses....
IRS Issues Guidance on Meals and Entertainment
Oct 04,2018
Since the Tax Cuts & Jobs Act was passed in late 2017, there has been much discussion about the deductibility of business entertainment expenses. While the TCJA eliminated deductions for business expenses related to entertainment, amusement and recreation activities, one key provision was left in place: businesses are still allowed to deduct 50% of the cost of food and beverages provided during or at entertainment events, if purchased separately from the entertainment or if the cost is stated separately from the cost of the entertainment. In addition, the Act did not eliminate the general 50% deductibility of food and beverage expenses associated with operating a trade or business. Specific tests must be met to maintain deductibility. Those tests include: The expense is ordinary and necessary and paid in carrying on a trade or business; The expense is not lavish or extravagant; The taxpayer or an employee is present when the...
Marc Azar Provides Insights on Uncertainty Regarding the Tax Cuts and Jobs Act
Jul 11,2018
In a recent collaboration with Accounting Today, Smith & Howard Tax Partner, Marc Azar, discussed how CPAs are planning around the recently enacted Tax Cuts and Jobs Act of 2018. “We’re having conversations with all our clients as to the effects of tax reform on their 2018 taxes. It’s enough to get their 2017 taxes done, let alone figure out the implications of the TCJA on their 2018 taxes,” said Azar. To read Marc’s article, Two Tax Seasons at Once, click here.
Department of Revenue Reopens Applications for Georgia HEART Tax Credit
Jul 09,2018
Updated November 15, 2018. The Georgia HEART (Helping Enhance Access to Rural Treatment) program awards Georgia income tax credits to taxpayers who contribute to qualified rural hospital organizations located in Georgia. Much like the Georgia income tax credits for School Scholarship Organizations, the amount available for tax credits is limited and has a filing deadline. The original deadline was June 30, however, the Department of Revenue (DOR) reopened applications on November 15, 2018. The DOR has the authority to reopen applications when it has been determined the aggregate dollar amount donated does not meet the pre-approval cap. You and/or your business may be able to take advantage of these credits. Here’s what you need to know: Items to Note Since the DOR has Reopened Applications: Proposed regulations issued in August 2018 state the deduction must be reduced by the benefit received (credit on state tax). C corporations can get the benefit...

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