2040 Center Stone Ct. | Columbus, GA 31904 | Office 706.323.3643 | Fax 706.323.6266

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House and Senate lawmakers have started their August recess, leaving pending tax legislation for after Labor Day. In past years, September has been a busy month for tax legislation and this year is likely to be the same. Before leaving Capitol Hill, lawmakers took actions in several areas related to tax reform.


The IRS remains focused on an issue that doesn’t seem to be going away: the misclassification of workers as independent contractors rather than employees. Recently, the IRS issued still another fact sheet “reminding” employers about the importance of correctly classifying workers for purposes of federal employment taxes (FS-2017-9). Generally, employers must withhold income taxes, withhold and pay social security and Medicare taxes, and pay unemployment tax on wages paid to employees. They are lifted of these obligations entirely for independent contractors, with usually the only IRS-related responsibility being information reporting on amounts of $600 or more paid to a contractor.


A recent Tax Court decision and pending tax reform proposals have intersected in highlighting how stock sales can be timed for maximum tax advantage. The taxpayer in the recent case (Turan, TC Memo. 2017-141) failed to convince the Tax Court that he timely made an election with his broker to use the last-in-first-out (LIFO) method to set his cost-per-share cost basis for determining capital gains and losses on his stock trades on shares of the same company. As a result, he was required to calculate the capital gain or loss on his stock trades using the firm’s first-in-first-out (FIFO) “default” method, which, in his case, yielded a significant increase in tax liability for the year.


Country-by-Country (CbC) reporting is part of a larger initiative by the Organisation for Economic Cooperation and Development (OECD) known as the Base Erosion and Profit Shifting (BEPS) project. CbC reporting generally impacts large multi-national businesses. Because CbC is part of BEPS it is important to be familiar with the core concepts.


An eligible taxpayer can deduct qualified interest on a qualified student loan for an eligible student's qualified educational expenses at an eligible institution. The amount of the deduction is limited, and it is phased out for taxpayers whose modified adjusted gross income (AGI) exceeds certain thresholds.


As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important tax reporting and filing data for individuals, businesses and other taxpayers for the month of August 2017.


Individuals may contribute up to $5,500 to a traditional and a Roth IRA for 2016. This is the same limit as 2015. An individual age 50 and older can make a catch-up contribution of an additional $1,000 for the year. The contribution is limited to the taxpayer’s taxable compensation for the year, minus contributions to all non-Roth IRAs.


The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) made permanent many popular but previously temporary tax breaks for individuals and businesses. The PATH Act also enhanced many incentives. These enhancements should not be overlooked in tax planning both for 2016 and future years. Some of the enhancements are discussed here. If you have any questions about these or other tax breaks in the PATH Act, please contact our office. 


The IRS always urges taxpayers to pay their current tax liabilities when due, to avoid interest and penalties. Taxpayers who can’t pay the full amount are urged to pay as much as they can, for the same reason. But some taxpayers cannot pay their full tax liability by the normal April 15 deadline (April 18th in 2016 because of the intersection of a weekend and a District of Columbia holiday).


As the 2016 filing season gets underway, many individuals will be receiving new information returns from their employers and/or health insurance providers. The information returns reflect new reporting requirements put in place by the Affordable Care Act. Some taxpayers will need to wait to file their returns until they receive their information returns, but most taxpayers will not.


In recent years, identity theft has mushroomed and as the filing season starts, tax-related identity theft is especially prevalent. Identity thieves typically file fraudulent returns early in the filing season, before unsuspecting taxpayers file their legitimate returns. Criminals gamble that the IRS will not detect the false return and will issue a fraudulent refund.


Everyone in business must keep records. Among other things, good records will help a business prepare the business tax returns, and will support items reported on tax returns. Taxpayers also must keep their business records available for inspection by the IRS.


The IRS has issued the 2016 optional standard mileage rates for calculating the deductible costs of operating an automobile for business, charitable, medical, and moving purposes (Notice 2016-1; IR-2015-137). The decline in gas prices appeared to spur the drop in the optional rates.


A business that has employees must withhold income taxes on payments to each employee. Each employee must first fill out Form W-4, Employee’s Withholding Allowance Certificate, and provide it to the employer. On the form the employee can claim exemptions, such as the personal exemption or an exemption for a spouse or child, and determine the number of withholding allowances for the employee. Based on that information, the employer calculates the employee’s income tax withholding for the year.


After acknowledging earlier this year that hackers breached one of its popular online apps, the IRS has promised more identity theft protections in the 2016 filing season. The IRS, along with partners in the tax preparation community, has identified and tested more than 20 new data elements on returns to help detect and prevent identity-theft related filings. The agency is also working to prevent criminals from accessing tax-time financial products.


Eleventh-hour votes in Congress in December renewed a package of tax extenders for 2014, created new savings accounts for individuals with disabilities, cut the IRS’ budget, and more. At the same time, the votes helped to set the stage for the 114th Congress that convenes this month. Republicans have majorities in the House and Senate and have indicated that taxes are one of the top items on their agenda for 2015.


An LLC (limited liability company) is not a federal tax entity. LLCs are organized under state law. LLCs are not specifically mentioned in the Tax Code, and there are no special IRS regulations governing the taxation of LLCs comparable to the regulations for C corporations, S corporations, and partnerships. Instead, LLCs make an election to be taxed as a particular entity (or to be disregarded for tax purposes) by following the check-the-box business entity classification regulations. The election is filed on Form 8832, Entity Classification Election. The IRS will assign an entity classification by default if no election is made. A taxpayer who doesn't mind the IRS default entity classification does not necessarily need to file Form 8832.


When starting a business or changing an existing one there are several types of business entities to choose from, each of which offers its own advantages and disadvantages. Depending on the size of your business, one form may be more suitable than another. For example, a software firm consisting of one principal founder and several part time contractors and employees would be more suited to a sole proprietorship than a corporate or partnership form. But where there are multiple business members, the decision can become more complicated. One form of business that has become increasingly popular is called a limited liability company, or LLC.


The IRS has announced a new optional safe harbor method, effective for tax years beginning on or after January 1, 2013, for individuals to determine the amount of their deductible home office expenses (IR-2013-5, Rev. Proc. 2013-13). Being hailed by many as a long-overdue simplification option, taxpayers may now elect to determine their home office deduction by simply multiplying a prescribed rate by the square footage of the portion of the taxpayer's residence used for business purposes.


2040 Center Stone Ct. | Columbus, GA 31904 | Office 706.323.3643 | Fax 706.323.6266