Chapter Newsletter News from your KENTUCKY Chapter

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1 Chapter Newsletter News from your KENTUCKY Chapter Fall 2018 A Message from the Chapter President What a year it has been in the world of tax! I don t know about you, but I have participated in more continuing education classes than I ever have before. Between Sales Tax Reform in the Bluegrass and the Tax Cuts and Jobs Act on the federal level, there has been so much to learn and absorb. There are also lots of opportunities to serve our clients, with the knowledge that we have. Every time our law makers try to simplify the tax code, it s job security for us! NATP National Conference in Anaheim, California Board of Directors Penny Wade Smith, President Martha Nest, Vice President Melinda Epperson, Secretary Kathy Hawboldt, Treasurer Norman Tyree Joy Parham Farid Rezaei Dale McNew Christopher Russell Sharon Cullop Joe White What Talented KY NATP Members We Have! Jennifer Coupal of Lexington labored six months to complete this beautiful quilt. And it was all for a good cause! She then donated the quilt to the charity auction at the NATP National Conference, raising $600 for the Breast Cancer Angels of Anaheim. Congratulations to the Kentucky Chapter for receiving an honorable mention at the NATP National Conference for our outreach to members and non-members in the Commonwealth. Jennifer Coupal, CPA, of Lexington, with the beautiful quilt she made for the charity auction. Education Committee: Martha Nest & Penny Wade Smith, Co-Chairs Membership Committee: Jennifer Sheets, Chair Nominating Committee: Kathy Hawboldt, Chair Financial Review Committee: Farid Rezaei, Chair IN THIS ISSUE Postcard + 6 QBID Ky Income Tax Reform Ky Sales Tax Reform Newsletter courtesy of Jennifer Sheets & Penny Wade Smith. 1

2 Postcard Susie Gainous, IRS Stakeholder Liaison will review the new postcard at the KY NATP Annual Meeting on 9/28/18 in Bowling Green. In late June, the IRS and the Treasury Department released a new, postcard-sized version of the classic Form 1040, with the goal of replacing the current 1040, and the current Form 1040A, and Form 1040EZ, for the next tax season. It takes a building block approach, according to the IRS, removing all information that isn t strictly necessary, and placing it on a series of supplemental schedules. The Front of the Postcard Note that while the form is postcard-sized, it asks for the taxpayer s Social Security number, and so would need to be mailed in a closed envelope. The Back of the Postcard This side is primarily dedicated to reporting income and claiming the taxpayer s refund. Schedule 1: Additional Income and Adjustments to Income Schedule 2: Tax Schedule 3: Nonrefundable Credits Schedule 4: Other Taxes Schedule 5: Other Payments and Refundable Credits Schedule 6: Foreign Address and Third-Party Designee 2

3 Hello QBID!! The Qualified Business Income Deduction (QBID) is one of the more difficult provisions of the Tax Cuts & Jobs Act. Generally, businesses organized as sole proprietorships, partnerships, limited liability companies, and S corporations are treated for federal income tax purposes as pass-through entities subject to tax at the individual owner level rather than the entity level (Sec 701; Sec 1363). These taxpayer businesses are eligible for QBID. Eligible taxpayers can deduct 20% of qualified business income (QBI) from taxable income. However, the following three limitations may reduce or eliminate the deduction: 1) 20% of taxable income limit; 2) W2 wage limit; and 3) Specified service trade or business limit. 20%-of-Income Limit QBID cannot exceed 20% of taxable income less net capital gain. W-2 Wage Limit For taxpayers with taxable income greater than $315,000 (MFJ) or $157,500 (S/MFS), the deduction is additionally limited to the greater of 1. 50% of the W2 wages of the qualified trade or business; or 2. 25% of the W2 wages of the qualified trade or business, plus 2.5% of the unadjusted basis immediately after acquisition of all qualified property. Specified Service Trade or Business If the taxpayer is a Specified Service Trade or Business and the owner s taxable income is greater than $415,000 (MFJ) or $207,500 (S/MFS), then the deduction is reduced. JOIN US IN BOWLING GREEN! 3

4 Haves Have Nots Haves E-File required for more than 25 withholding statements E-File required for corporations & pass-through entities with $1M gross receipts. Adopted TCJA NOL provisions. Adopted TCJA Net Interest Expense Limitations. Flat tax rate of 5% for individuals and corporations A credit for Kentucky property tax paid on inventory Have Nots No Bonus depreciation adopted Adopted TCJA provisions repealing DPAD. No QBID adopted Moving Expenses repealed with TCJA Alimony income and deduction repealed with TCJA (2019) Health and long-term care insurance deductions have been eliminated Master Tobacco Settlement payments eliminated Pension exclusion reduced to $31,110 Medical & dental expenses as an itemized deduction have been eliminated Taxes as an itemized deduction have been eliminated Investment interest deduction has been eliminated Casualty and theft losses as an itemized deduction have been eliminated Gambling losses as an itemized deduction have been eliminated Miscellaneous deductions subject to 2% have been eliminated. $10 Personal tax credit has been eliminated. 4

5 Taxable Admissions o Bowling Centers o Health Spa o Swimming Pool o Golf Courses o Recreational Centers o Weight Training o Skating Rinks o Tennis Courts o Sports League Fees o Rental Facilities o Locker Rentals o Fishing Tournaments o Gun Clubs o Bingo o Zip Lines o Camp & RV Parks Non-taxable Admissions o Team membership fees o Professional & fraternal order membership o Instructor led recreational classes o Instructor led educational classes o Daycare o Summer camp o Music & dance lessons o Driver s license fees o Sales solely to benefit elementary and secondary schools Taxable Services o Landscapers o Small animal veterinarians o Janitorial services (commercial and residential) Extended Warranties o Contracts Sold after 7/1/18 o Tangible & Digital Property Labor & Installation o When installing tangible property o When installing fixtures on real property For more information on Kentucky income and sales tax reform 5

6 Annual Meeting On-Line Registration Click 6