If your tax refund is less than you anticipated, you are not alone. In a report issued by the Treasury Department on February 14, the average refund it is paying in 2019 has dropped to $1,949 from $2,135 in the prior year. In addition, the number of returns filed so far has dropped from 13.5 million last year to 11.4 million this year for the same period.
BHT&D Certified Public Accountants Blog
Ever since tax reform was passed, over a year ago, taxpayers have been uncertain whether rental property will be classified as a trade or business for purposes of qualifying for the new IRC Sec 199A 20% pass-through deduction (commonly referred to as the 199A deduction).
Finally, on January 18, 2019, the IRS issued a notice which provided “safe harbor” conditions under which a rental real estate activity will be treated as a trade or business for purposes of the 199A deduction.
It’s important to note that this notice prescribes several conditions that must be met for a rental real estate enterprise (a tax term introduced by the IRS in this notice) to be deemed to be a trade or business and eligible for the section 199A 20% deduction. For purposes of this safe harbor, a rental real estate enterprise is defined as an interest in real property held for the production of rents and may consist of an interest in multiple properties.
S corporation compensation requirements are often misunderstood and abused by owner-shareholders. An S corporation is a type of business structure in which the business does not pay income tax at the corporate level and instead distributes (passes through) the income, gains, losses, and deductions to the shareholders for inclusion on their individual income tax returns. If there are gains, these distributions are considered return on investment and therefore are not subject to self-employment taxes.
However, if stockholders also work in the business, they are supposed to take reasonable compensation for their services in the form of wages, and of course, wages are subject to FICA (Social Security and Medicare) and other payroll taxes. This is where some owner-shareholders err by not paying themselves a reasonable compensation for the services they provide, some out of unfamiliarity with the requirements and some purposely to avoid the payroll taxes.
On Friday, December 14, 2018, Governor Rick Snyder signed revisions to both the Mandatory Paid Medical Leave Act and the Improved Workforce Opportunity Wage Act (minimum wage). These revisions gradually phase in upcoming increases in minimum wage rate and enact mandatory paid sick leave.
The minimum wage rate will now increase from $9.25 per hour to $9.45 per hour in 2019, with annual increases thereafter up to $12.05 in 2030. The minimum wage rate for tipped employees will remain at 38% of the hourly minimum wage, increasing to $4.58 per hour by 2030.
2% or more shareholders of an S-corporation (and family members) are not treated as an employee when it comes to most benefits. Please see the table below for benefits that are taxable and for benefits that are tax-free to a 2% or more shareholder (and family members) of an S-corporation:
Alimony is the term used for payments to a separated spouse or ex-spouse as part of a divorce or separation agreement. Since 1985, to be alimony for tax purposes, the payments:
- Must be in cash, paid to the spouse, ex-spouse, or a third party on behalf of a spouse or ex-spouse;
- Must be required by a decree or instrument incident to a divorce, a written separation agreement, or a support decree;
Tax reform has changed the way most taxpayers need to think about and plan for their taxes. It is no longer business as usual. Advanced planning will become very important long before tax time next year.
For most taxpayers, the most significant change is the increase in their standard deduction, which on the surface seems like a big benefit. But, don’t overlook the fact that the same tax reform that nearly doubled the standard deduction took away the personal exemption as a deduction.
At BHT&D CPAs, we get many questions regarding the documentation required to deduct charitable donations. The documentation required depends on the type and amount of the donation.
- If the cash donation is $250 or less, you may use any of the following as proof of donation:
Although the drop of the corporate tax rate from a top rate of 35% to a flat rate of 21% may be one of the most talked about provisions of the Tax Cuts and Jobs Act (TCJA), C corporations aren’t the only type of entity significantly benefiting from the new law. Owners of non-corporate “pass-through” entities may see some major — albeit temporary — relief in the form of a new deduction for a portion of qualified business income (QBI).
It’s fair time in Michigan and summer 2018 is all set for some great fun! Throughout Michigan, communities of all sizes bring out rides for kids and adults, special food, entertainment and prime livestock.
Coming up in July, two fairs that BHT&D CPAs has close relationships with are the Ionia Free Fair and Barry County Fair.