Marple & Marple, CPAs Holiday 2017

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1 Marple & Marple, CPAs Holiday 2017 We would like to wish all our clients and their families the very best for this holiday season! Status of Tax Law Reform Tax law reform has taken center stage for Republicans, currently holding a majority in both the House of Representatives and the Senate. (There are currently 240 Republican House members to 192 Democratic House members, with 1 house vacancy, and 52 Republican senators to 48 Democratic senators.) The House tax bill has passed the House of Representatives and Senate modifications to the House bill have made it through the Senate Finance Committee. The Senate may vote on the Senate version clearing the Senate Finance Committee, within the next couple of weeks. If the Senate approves Senate modifications to the House bill, both bills would head to a Joint Conference Committee for possible compromise. It is difficult to determine, at this stage, if tax reform legislation can be passed. We would expect, if tax reform legislation is passed, that the actual law would be effective beginning with 2018 tax years. 100 N. Fruitland Street Suite C Kennewick, WA Phone: (509) Fax: (509) Bob Marple Steve Marple Bob Marple Jr. Kent Toyoda Rosalie Willers Kyle Edberg Teresa Kesler Carol Guthrie Ginette Houchin Sue Anne Marple Yearend Tax Planning A Few Thoughts There are some significant changes proposed in both the House and Senate tax reform legislation. Changes include reduction or repeal of certain expenses, repeal of personal exemptions, increases and reductions to certain credits and increases to standard deductions. Expenses that may be repealed, suspended, or reduced include state income taxes, state sales tax, state

2 property taxes, tax preparation fees, investment management fees, alimony, and a number of other expenses. It may be possible to prepay some of these expenses. Please let us know if you should want to further evaluate prepayment and the possible tax benefits of doing so. Tax Law Creation The Process Information on how tax law is written and enacted is available from the U.S. Department of the Treasury s resource center. All legislation concerning taxes must originate in the House of Representatives. The House must usually take action on the legislation before the Senate can begin its consideration and propose modifications. Upon passing in the House of Representatives, the Senate will then take the House legislation and make modifications. Once the Senate has passed their proposed modifications, legislation (both House and Senate versions) will go to a Joint Conference Committee for compromise. The compromise legislation will then go back to the House and Senate for final vote and if approved would then be sent to the President. It may be easier to envision this process by flow chart, courtesy of CCH:

3 Firm Members Attend Thomson Reuters Users Conference Firm members Kyle Edberg and Robert Marple Jr. attended the 2017 annual Thomson Reuters users conference in Nashville, Tennessee. Our office uses, almost exclusively, Thomson Reuters software for CPA firms and converted to Thomson s software as a service during This conference was attended by over 1,700 individuals representing nearly 900 CPA firms across the country. Security and data protection were one of the focus areas of this conference. During one of the keynote presentations the audience of CPAs was surveyed to determine if attendees were familiar with 2-factor authentication for security and data protection. About half of the attendees were familiar with this proven security tool and about 10% of the attendees had already implemented this technology in their firms. We are proud to report that our firm had already implemented this technology, as offered by Thomson Reuters, in our efforts to protect our clients data. There are no 100% guarantees, with regard to protection from ID theft and systems breach, but 2-factor authentication adds a significant layer of security. If you are using online services such as banking or brokerage access, we encourage you to consider use of 2-factor authentication if it is available. We also recommend you familiarize yourself with the online use policies of your bank or brokerage. There have been cases where funds have been stolen and banks and brokerages have refused to pay back their clients because they were not completely following their online security policies. Mo Cheeks & The National Anthem Some of you may recognize the name Maurice (Mo) Cheeks. Mo is a retired NBA professional basketball player and has also spent some time coaching basketball. He will also be remembered for his leadership and a simple act of kindness in which he stepped forward to help a young lady singing our National Anthem. His act of kindness has been studied by management consultants and they have determined, based upon where Mo was on the basketball court at the time this happened, that he had 1.8 seconds to decide if he was going to step forward to help. We encourage you to watch the YouTube video:

4 Tax Law Reform Cost by Robert D. Marple Most would agree tax law reform is needed and long overdue. The complexity of current tax laws is simply mind numbing. Unfortunately, both the House and Senate tax reform bills will add significantly to our current U.S. federal debt of $20.5 trillion. The Joint Committee on Taxation estimates a $1.4 trillion to $1.9 trillion dollar increase over 10 years to our federal debt, if legislation similar to that proposed, is passed. (The theory behind lowering taxes is the economy will be stimulated and new revenue will eventually be created from business growth related to lower taxes.) I have written twice before, in our annual firm newsletter, about our country s debt. Once in 2009 (U.S. Government Spending A Crisis Coming) when our country s debt was $11.5 trillion and once in 2013 (Is Our Growing Country s Debt Catastrophic?) when our country s debt was $17 trillion. It is amazing to me how many people (including some very book smart people) are not concerned about our country s growing debt. (There was $7.9 trillion added to our country s debt during the 8 years of the Obama presidency and $5.8 trillion added during the 8 years of the Bush presidency.) It is difficult to imagine how our country s runaway debt is going to be paid. At some point, with a significant rise in interest rates, we may be unable to pay the interest alone on our debt. Tax cuts seem ill-timed and fiscally irresponsible unless tax revenues can rise significantly because of business growth. A much more prudent approach would seem to be the enactment of a simplified tax code with zero addition to our current debt. Tax Reform Proposals Provisions of the House Bill Lowers individual income tax rates Eliminates the deduction for personal exemptions Increases the standard deduction to $12,000 for single individuals from $6,350 Increases the standard deduction for those married to $24,000 from $12,700 Expands the existing child tax credit from $1,000 to $1,600 Eliminates certain itemized deductions including state sales tax, state income tax, and medical expenses and limits interest expense on new home mortgage debt Repeals the Alternative Minimum Tax Lowers the corporate tax rate to 20% Provides for a 25% maximum tax rate on business income of individuals Allows business to immediately write off the full cost of new equipment Doubles the current federal estate life-time exclusion Repeals federal estate tax in 6 years

5 The House proposals summary indicates they believe 9 out of 10 Americans will be able to file their federal individual income tax return on the following postcard: Tax Reform Proposals Senate Proposed Variations from House Bill Includes provisions for a top individual income tax bracket of 38.5% Increases the standard deduction for individuals to $18,000 Child tax credit is increased to $2,000 Home interest deduction available for interest on mortgages up to $1.0 million (interest deductions under the House bill would be limited to interest on a maximum of 500,000 of mortgage debt) Allows medical expenses as itemized deductions Doubles the current federal estate life-time exclusion but does not repeal estate tax The 35% bracket is substantially increased (an amazing $529,300 for MFJ filers), with this income previously taxed in the 39.6% bracket You create opportunities by performing, not complaining. Muriel Siebert Tech Review Galaxy Note 8 Smartphone by Robert D. Marple There are pretty much only two operating systems used for smart phones today, the Android OS and the Apple OS. If you already use one operating system, you are not likely to switch to the other. The Galaxy Note 8 is a truly amazing smartphone with features that might persuade you to consider a change to the Android OS.

6 The phone is excellent for taking notes with the removable pen included with the phone. I have used a number of digital pens over the years, and this pen is by far the best I have ever used. In addition, the camera on the phone is top quality including shots in low-light conditions. The note and camera features coupled with the large, high resolution display, make for a pretty compelling phone. Check with me next time you are in the office and I will be happy to show you the Note 8. Equifax Breach Fiasco Security breaches of online systems occur regularly but the scope of the Equifax breach is simply hard to fathom. According to the Equifax website, Equifax discovered they had been breached on July 29 th of this year through a website application vulnerability. This unauthorized access occurred from mid-may through July of this year. Most of the consumer information accessed includes names, Social Security numbers, birth dates, addresses, and in some instances, driver s licenses. In addition, credit card numbers for approximately 209,000 consumers were accessed. You can use the Equifax website to check to see if you have been impacted by this breach, but you must enter the last 6 digits of your Social Security number. Using any part of your Social Security number in a user name or password, in our opinion, is not a good practice. We make the following recommendations to protect yourself from ID theft and ID fraud: Consider freezing your credit accounts at the 4 major credit reporting agencies Protect your Social Security number and personal information by not leaving paper documents with this information out and unsecured (place in a safe, locked file cabinet or safe deposit box) Do not provide ID-theft sensitive information over the phone unless you are 100% certain you are speaking to someone who absolutely needs this information (if you are called by someone indicating to be an account representative requesting this information, hang up and call back using the phone number you have for your account) If making copies of documents with ID theft-sensitive information, redact this information from your copies If someone requests your Social Security number, determine if they really need it and only release it to someone as a last alternative Do not ID theft-sensitive information Routinely monitor your credit report for unauthorized new accounts and consider using

7 IRS Statistical Information 1040 Return Filing The Internal Revenue Service through Publication 4801 provides a Statistics of Income publication that estimates total dollar amounts for each entry field in Form The estimates for totals in each Form 1040 field are determined by statistical sampling methods. Provided below are the two pages of 2015 Form 1040 and the totals provided in these entry fields are in thousands of dollars.

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