Monthly Newsletter. December 2018

Transcription

1 Mnthly Newsletter December 2018 In this issue The New Business Deductin Medicare Part D Open Enrllment 6 Last-Secnd Mney-Saving Tax Mves Retirement Cntributins Get a Bst in 2019 Unclaimed Prperty Tax filing reminders: January 15: 4th Quarter Estimated Payments Due The New Qualified Business Incme Deductin A new deductin is available t businesses with qualified business incme (QBI). While that's great news, new deductins (especially nes with lts f rules) can bring anxiety and cnfusin. Never fear! Ensuring yu receive a maximum deductin will cme dwn t prviding the prper infrmatin. Here is sme knwledge t help yu cut thrugh the cnfusin: What is the QBI deductin? In shrt, it's a 20 percent deductin against rdinary incme, taken n yur persnal tax return, that reduces qualified business incme earned fr mst pass-thrugh businesses (sle prprietrships, partnerships and S-crpratins). It's nt an itemized deductin, s yu can take it in additin t the standard deductin. T qualify withut limitatins, yur ttal taxable incme needs t be belw $157,500 ($315,000 fr married cuples) fr If yur incme exceeds the threshld, it gets cmplicated. What yu need t knw: If yur ttal taxable incme is abve the incme threshld, yur deductin may be limited r nullified. If yur incme is belw the threshld, the calculatin is pretty straightfrward. If nt, additinal phaseuts, limitatins and calculatins cme int play. The first limitatin t cnsider is whether r nt yur business is qualified. Certain specified service trades r businesses (SSTBs) are excluded frm the deductin altgether if taxable incme is ver the threshld. If yur business is nt an SSTB, ther calculatins related t W-2 wages and basis in qualified business prperty may be required. Schedule K-1s fr S-crpratins and partnerships have new cdes. Businesses with partners and sharehlders are nw required t reprt infrmatin related t the QBI

2 deductin n each Schedule K-1 they issue. Based n the draft versins f the frms, the new cdes will be in Bx 17 fr S-crpratins (V thrugh Z) and Bx 20 fr partnerships (Z thrugh AD). If yu receive a Schedule K-1, check t see if the new cdes have values assciated with them. If nt, cntact the issuing business t crrect the mistake. Schedule K-1s withut the required data will delay yur tax-return filing. Certain data needs t be cllected. Fr the mst part, the data required t calculate yur deductin will be included n the nrmal frms needed t file yur taxes. Here is list f cmmn dcumentatin t watch fr that may be required t calculate yur QBI deductin: Business financial statements Frms W-2 and W-3 issued by yur business Purchase infrmatin related t business assets Schedule K-1s Frms 1099-B with cst/basis infrmatin The sner yu clse yur bks, the better. The new deductin means mre wrk. Knwing yur final business net incme as sn as pssible gives yu extra time t wrk thrugh the additinal necessary calculatins. If yur business is required t issue Schedule K-1s, even mre time may be required. Mre guidance is expected frm the IRS. In August, the IRS published guidance t clear up sme f the cnfusin regarding the deductin, but it didn't cver everything. The American Institute f CPAs (AICPA) respnded with 11 specific items that still need t be addressed. With prper planning and preparatin, yu can rest easy knwing that btaining yur shiny, new QBI deductin is in gd hands. Medicare Part D Open Enrllment Open enrllment perid fr Medicare begins runs between Nvember 1, 2018 and December 15, If yu have Medicare Part A and/r Part B yu can get the ptinal Part D prescriptin cverage regardless f yur health r incme. A wrd f cautin - Medicare Part D is ptinal nly if yu have ther creditable prescriptin drug cverage. Creditable prescriptin drug cverage is any cverage that is expected t pay at least as much as Medicare s standard prescriptin drug cverage. This cverage is usually btained either thrugh a current r frmer emplyer, a unin, the Veterans Administratin r thrugh a separate health insurance plicy. Failure t sign up fr Medicare Part D when yu first becme eligible, r within 63 days f terminating ther cverage, will result in a lifetime penalty. This penalty is added t yur premium every mnth fr as lng as yu carry Medicare s it can becme quite cstly. The penalty is calculated using the Natinal base beneficiary premium x 1% fr each mnth withut cverage. The base premium is $33.19 in Fr example, if yu becme eligible fr Medicare and yur initial enrllment perid ended n June 30, 2016 yur penalty wuld be calculated as fllws:

3 June 2016 December 2018 equals 30 mnths x 1% = 30% 30% x $33.19 (base premium) = $9.96 (runded up t $10.00) penalty each mnth. This means yu will be paying an additinal $120 in 2019 and at least that amunt every year ging frward as the penalty is recalculated annually. Over a perid f 10 years, that amunts t an additinal $1,200 in penalties. 6 Last-Secnd Mney-Saving Tax Mves As 2018 winds dwn, there is still time t reduce yur ptential tax bligatin. Here are sme ideas t make yur 2018 tax return less f a burden n yur wallet: 1. Accelerate expenses. Individual taxpayers are n the cash basis fr incme tax purpses. This means yur incme is taxable when yu receive it and expenses cunt when yu pay them. Depending n yur situatin, shifting deductins between years can make a big difference n yur tax bill. With this knwledge, making additinal deductible payments prir t the end f the year may be a gd idea. Examples include prperty tax payments, mrtgage interest payments and charitable dnatins. 2. Make effective use f capital lsses. Up t $3,000 in capital lsses can be claimed each year t reduce yur rdinary incme. This lss limitatin is calculated after netting all yur capital lsses against any capital gains. When yu have mre lsses than gains, up t $3,000 can be used t reduce yur ther incme. With careful planning yu can take advantage f this lss amunt each year. 3. Fund tax-deferred retirement accunts. An easy way t reduce yur taxable incme is t fully fund retirement accunts that have tax-deferred status. The mst cmmn accunts are 401(k)s, 403(b)s and varius IRAs (traditinal, SEP and SIMPLE). 4. Take advantage f the annual gift exclusin. Fr 2018, yu may prvide gifts up t $15,000 t as many individuals as yu wish withut tax cnsequences. This culd include gifts f cash r prperty, including investments. Taking advantage f the annual exclusin is a great way t lwer yur taxable estate. 5. Give t charities. Cnsider making end-f-year dnatins t eligible charities. Dnatins f prperty in gd r better cnditin and yur charitable mileage are als deductible. Receiving prper dcumentatin that acknwledges yur cntributins is imprtant t ensure yu btain the full deductin. Have a plan by knwing yur ttal deductins fr the year t help yu decide hw much t dnate. Pulling sme dnatins planned fr 2019 int 2018 may be a gd strategy. 6. Dnate appreciated stck. By dnating appreciated stck wned ne year r lnger t a favrite charity, yu receive tw benefits. First, yu will nt have t claim the capital gain n the appreciatin f yur investment. Secnd, yu can claim the higher market value f the stck as yur cntributin amunt. The prcedure yu need t fllw t qualify yur dnatin f appreciated stck is fairly strict. Ask fr help frm yur brker and the charitable rganizatin t ensure it is dne crrectly.

4 This is a shrt list f sme f the ideas yu can use t lwer yur tax bligatin in If interested, please call fr help with reviewing yur situatin. Retirement Cntributins Get a Bst in 2019 Fr the first time since 2013, the IRS is raising the cntributins limits fr IRAs. The maximum cntributin fr 401(k) accunts and IRAs is increasing by $500 fr If yu have nt already dne s, nw is the time t plan fr cntributins int yur retirement accunts in Check ut the tables belw fr the new cntributin limits and Scial Security increases: Retirement Cntributin Limits Retirement Prgram Change Age 50 r lder catch up 401(k), 403(b), 457 plans $19,000 $18,500 +$500 add: $6,000 IRA: Rth $6,000 $5,500 +$500 add: $1,000 IRA: SIMPLE $13,000 $12,500 +$500 add: $3,000 IRA: Traditinal $6,000 $5,500 +$500 add: $1,000 Scial Security Item Change Wages subject t Scial Security $132,900 $128,400 +$4,500 Average estimated mnthly retirement benefit $1,461 $1,422 +$39 Annual Scial Security emplyee tax: $8, Dn't frget t accunt fr any matching prgrams ffered by yur emplyer as yu determine yur varius funding levels fr next year. Unclaimed Prperty Accrding t Credit Karma, ver $40 BILLION f unclaimed prperty is currently being held by state gvernments. That's a staggering amunt f mney - enugh t buy half f the Natinal Ftball League franchises. Nt included in that figure is prperty sitting with federal agencies and ther rganizatins. S what exactly is unclaimed prperty and hw d yu find ut if yu have any? Here is what yu need t knw: Specific types f unclaimed prperty include back wages, life insurance, pensins, tax refunds, bank accunts, mney rders, gift certificates and security depsits. Fr example, many states require banks t turn ver funds frm checking accunts that have been drmant fr ver three years. Tips fr managing unclaimed prperty

5 1. Search state and federal databases. Unfrtunately, there is n master database t search fr unclaimed prperty. There is a website called Missing Mney endrsed by the Natinal Assciatin f Unclaimed Prperty Administratrs (NAUPA) that can search mst states at nce, but each state maintains their wn database. Be sure t check all states where yu have been a resident. is the Illinis unclaimed prperty website. 2. Dn't pay a cmpany t search fr yu. Cmpanies are willing t search fr unclaimed prperty fr yu, but will charge a fee. All unclaimed prperty data is public infrmatin, s anything a search cmpany can find, yu can find as well. In mst cases, it's best t cnduct the search yurself. 3. Watch ut fr scams. Be wary f any ntices alerting yu t unclaimed prperty that can be yurs fr a fee. Often times these scams will ask yu t send them mney with the prmise f mre mney in return. The Federal Trade Cmmissin (FTC) has sme tips t help yu spt an impster. 4. Take steps t avid having yur prperty becme unclaimed. The best way t keep yur prperty is t prevent it frm becming unclaimed in the first place. Sme ways t d this is t actively manage bank accunts, ntify cmpanies when yu mve, clse ld accunts, and read all f yur mail s yu dn't miss a claim ntice. 5. File yur tax returns. Cnsider filing a tax return even if yur incme is belw the requirements t file. Unclaimed refunds with the IRS usually happen when a tax return isn't filed with ne f tw situatins: yur emplyer withheld incme tax frm yur wages r yu qualify fr a refundable prtin f the Earned Incme Tax Credit. The nly way t knw fr sure is by filing a tax return fr the year in questin. If yu have past tax returns t file, dn't wait verdue tax returns need t be filed within three years. Any unclaimed prperty due t yu is rightfully yurs and shuld already be in yur pcket. Perfrm regular searches t ensure that yur funds aren't sitting in a gvernment accunt. As always, shuld yu have any questins r cncerns regarding yur situatin please feel free t call This newsletter prvides business, financial, and tax infrmatin t clients and friends f ur firm. This general infrmatin shuld nt be acted upn withut first determining its applicatin t yur specific situatin. Fr further details n any article, please cntact us.