I S S U E 1 A U G U S T Aloha,

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1 We are looking for new members. Here are just a few great reasons you I S S U E 1 A U G U S T should tell them to join. Access to Unmatched Enrichment Nation s leading tax resources with huge collections of resources and products. Stay current with Industry Updates Professional Network with tens of thousands tax professionals I N S I D E T H I S I S S U E : President s Message 1 Tax Update 2 Tax Cut & Jobs Act 3 for Families Aloha, Another tax season is behind us and hopefully everybody has slowed their pace a little and enjoyed the summer with their families and friends. Of course, there s always some clients that file extensions and then drag their feet until the last minute again, so tax season isn t really over. But then again, it never really is, is it? There s always something else to be done, something to learn, something to get ready for, something and fortunately for all of us, NATP is always looking for good topics to present at our education events to help keep us all informed and on our toes, ready for whatever comes at us. Our next Waikele Clubhouse event is Sept 20 th and the topic is LLC/S-corp issues, and there are a lot of them. The Waikele events are usually smaller, a more intimate gathering, giving us more opportunity for Q&A and discussion. If you haven t checked one out before, maybe you should give it a try as there will be something there for everyone. Our Annual Conference is Nov 14 th and the National 1040 Update the following two days. You won t want to miss this 3-day event at the Hilton Waikiki Beach Hotel (the old Prince Kuhio Hotel). We ll have lots of good topics at the annual conference, and the 1040 update promises to deliver lots of details about the Tax Reform Act of We re going to have another networking event immediately following the Annual Conference, from 5-6pm, so please plan to join us and get to know each other better. Tax Cut & Jobs Act for Businesses September Breakfast Meeting Form Upcoming Meetings & Events NATP Chapter Board Numbers Join NATP Personally, I think some of our best speakers come from our own chapter, and we ll have a few of them sharing at these events. Some of us have years of experience and a wealth of knowledge we could share. All of us probably learned something this past tax season, when an unusual matter came across our desk. Perhaps you would consider sharing some of your knowledge with the rest of us and be a speaker at one of our upcoming events? Maybe join forces with another person and make it a duo presentation? Or maybe you would be more interested in joining the board and being part of the team to select topics and speakers for our upcoming events? You might be thinking you don t have anything to share, or you don t have any experience, or you re just too busy. But we re always looking for new topics and new blood. Besides, until you try, you won t know how much you have to share, or how good you might be at it. Maybe you re a natural? Jump On! Try it you might like it! All my Aloha, Sue Sowders, President

2 Hawaii Department of Tax News P A G E 2 10 IRS Liaison News IRS Urges Individuals to Get a Paycheck Check-Up Individuals should determine whether or not they need to adjust the withholding on their wages in light of key tax reform changes. The IRS has recently issued a variety of news releases encouraging individuals to do a paycheck checkup using the Withholding Calculator on the IRS website, to find out if a withholding adjustment is needed. The IRS has also published a number of Tax Reform Tax Tips to encourage individuals in different tax situations check their income tax withholding. Recent tips include: Tax Tip , for taxpayers who received a large refund on their 2017 income tax; Tax Tip , for taxpayers with high incomes or complex returns; Tax Tip and Tax Tip , for taxpayers with children or who support other dependents; Tax Tip , with a reminder about completing and submitting to the employer a new Form W-4 if a taxpayer needs to adjust withholding. Act 41, Session Laws of Hawaii 2018 (Act 41) clarifies the in the State requirement by creating a bright-line rule for businesses that lack a physical presence in Hawaii. Specifically, Act 41 provides that a person is engaging in business in the State, regardless of whether the person is physically present in the State, if in the current or preceding calendar year: (1) The person has gross income of $100,000 or more from the sale of tangible personal property delivered in the State, services used or consumed in the State, or intangible property used in the State; or (2) The person has entered into 200 or more separate transactions involving tangible personal property delivered in the State, services used or consumed in the State, or intangible property used in the State % on taxable income over $200,000. A taxpayer will therefore be required to maintain a GET license, file GET returns, and remit GET to the State if any of the following applies: (1) Taxpayer has a physical presence1 in Hawaii; (2) In the current or preceding calendar year, taxpayer has gross income or gross proceeds of $100,000 or more from any of the following, or combination of the following, activities: a. Tangible property delivered in Hawaii; b. Services used or consumed in Hawaii2 ; or c. Intangible property used in Hawaii; or (3) In the current or preceding calendar year, taxpayer has entered into 200 or more separate transactions involving any of the following, or combination of the following, activities: a. Tangible property delivered in Hawaii; b. Services used or consumed in Hawaii; or c. Intangible property used in Hawaii. DEPARTMENT OF TAXATION ANNOUNCEMENT NO

3 P A G E 3 Tax Cuts and Job Act (TCJA): Impact on Individuals & Families Source: CCH Client Letters The Tax Cuts and Jobs Act makes sweeping tax changes that impact virtually all taxpayers. For individual taxpayers and their families, changes include a decrease in the tax rates, repeal of the personal exemption, increase in the standard deduction, modification to itemized deductions, and doubling of the child tax credit. Under the Tax Cuts and Jobs Act, personal exemptions are repealed ($4,050 in 2017) for 2018 through Instead, the Tax Cuts and Jobs Act provides for a near doubling of the standard deduction. For tax year 2018, it increases the standard deduction from $13,000 to $24,000 for married individuals filing a joint return; $9,550 to $18,000 for head-of-household filers; and $6,500 to $12,000 for all other individuals. These standard deduction amounts are indexed for inflation for tax years beginning after The additional standard deduction for the elderly and the blind ($1,300 for married taxpayers, $1,600 for single taxpayers) is retained. Itemized deductions Mortgage interest deduction. The Tax Cuts and Jobs Act limits the mortgage interest deduction to interest on $750,000 of acquisition indebtedness ($375,000 in the case of married taxpayers filing separately), for tax years beginning 2018 through For acquisition indebtedness incurred before December 15, 2017, the Tax Cuts and Jobs Act allows current homeowners to keep the current limitation of $1 million ($500,000 in the case of married taxpayers filing separately). Taxpayers may continue to include mortgage interest on second homes, but within those lower dollar caps. However, no interest deduction will be allowed for interest on home equity indebtedness. State and local taxes. The Tax Cuts and Jobs Act limits annual itemized deductions for all nonbusiness state and local taxes deductions, including property taxes, to $10,000 ($5,000 for married taxpayer filing a separate return) for 2018 through Sales taxes may be included as an alternative to claiming state and local income taxes. Miscellaneous itemized deductions. The Tax Cuts and Jobs Act repeals all miscellaneous itemized deductions for tax years 2018 through 2025 that are subject to the two-percent floor under current law. Medical expenses. The Tax Cuts and Jobs Act lowers the threshold for the deduction to 7.5 percent of adjusted gross income (AGI) for tax years 2017 and Casualty losses. For tax years 2018 through 2025, a casualty loss will only be allowed to the extent it is attributable to a federally declared disaster.

4 P A G E 4 Tax Cuts and Job Act (TCJA): What it means for Businesses Source: CCH Client Letters The Tax Cuts and Jobs Act was signed by President Trump on December 22. The Act makes sweeping changes to the U.S. tax code and impacts virtually every taxpayer. For businesses, tax benefits include a reduction in the corporate tax rate, increase in the bonus depreciation allowance, an enhancement to the Code Sec. 179 expense and repeal of the alternative minimum tax. Owners of partnerships, S corporations, and sole proprietorships are allowed a temporary deduction as a percentage of qualified income of pass-through entities, subject to a number of limitations and qualifications. On the other hand, numerous business tax preferences are eliminated. Corporate Taxes A reduced 21-percent corporate tax rate is permanent beginning in Also, the 80- percent and 70-percent dividends received deductions under current law are reduced to 65-percent and 50-percent, respectively. The Tax Cuts and Jobs Act also repeals the alternative minimum tax on corporations. Bonus Depreciation The bonus depreciation rate has fluctuated wildly over the last 15 years, from as low as zero percent to as high as 100 percent. It is often seen as a means to incentivize business growth and job creation. The Tax Cuts and Jobs Act temporarily increases the 50- percent "bonus depreciation" allowance to 100 percent. It also removes the requirement that the original use of qualified property must commence with the taxpayer, thus allowing bonus depreciation on the purchase of used property. Section 179 Expensing The Tax Cuts and Jobs Act sets the Code Sec. 179 dollar limitation at $1 million and the investment limitation at $2.5 million. Although the differences between bonus depreciation and Code Sec. 179 expensing would now be narrowed if both offer 100-percent write-offs for new or used property, some advantages and disadvantages for each will remain. For example, Code Sec. 179 property is subject to recapture if business use of the property during a tax year falls to 50 percent or less; but Code Sec. 179 allows a taxpayer to elect to expense only particular qualifying assets within any asset class.

5 V O L U M E 1, I S S U E 1 P A G E 5 Deductions and Credits Numerous business tax preferences are eliminated. These include the Code Sec. 199 domestic production activities deduction, non-real property like-kind exchanges, and more. Additionally, the rules for business meals are revised, as are the rules for the rehabilitation credit. However, the Tax Cuts and Jobs Act leaves the research and development credit in place, but requires five-year amortization of research and development expenditures. It also creates a temporary credit for employers paying employees who are on family and medical leave. Interest Deductions In an attempt to "level the playing field" between businesses that capitalize through equity and those that borrow, the Tax Cuts and Jobs Act generally caps the deduction for net interest expenses at 30 percent of adjusted taxable income, among other criteria. Exceptions exist for small businesses, including an exemption for businesses with average gross receipts of $25 million or less. Pass-Through Businesses Currently, up to the end of 2017, owners of partnerships, S corporations, and sole proprietorships as "pass-through" entities pay tax at the individual rates, with the highest rate at 39.6 percent. The Tax Cuts and Jobs Act allows a temporary deduction in an amount equal to 20 percent of qualified income of pass-through entities, subject to a number of limitations and qualifications. The Tax Cuts and Jobs Act contains rules that will prevent pass-through owners particularly service providers such as accountants, doctors, lawyers, etc. from converting their compensation income taxed at higher rates into profits taxed at the lower rate. Net Operating Losses The Tax Cuts and Jobs Act modifies current rules for net operating losses (NOLs). Generally, NOLs will be limited to 80 percent of taxable income for losses arising in tax years beginning after December 31, It also denies the carryback for NOLs in most cases while providing for an indefinite carryforward, subject to the percentage limitation.

6 P A G E 6 NATIONAL ASSOCIATION OF TAX PROFESSIONALS LLC/S-corp Issues Speaker: Susan Sowders, CPA 7:30 10:00 AM September 20, 2018 (2 hr. CPE) Breakfast Buffet Starts at 7:30am EARN 2 CPE (Based on a 50 minute hour) Questions? Call Sue Sowders ph# Return this portion with check payable to: NATP-HAWAII, Uhiuala St., Kapolei, HI By September 14, 2018 Reserve NATP member seats@ $30.00 each HAWAII CHAPTER Clubhouse at Waikele, Ko olau Dining Room Total: $ Reserve NON- member seats@ $35.00 each Total: $ (Non-members joining NATP by Sept. 21, 2017 will receive member s discount on this and all future 2017 Hawaii Chapter activities.) NAME: PHONE: PTIN

7 NATP Hawaii Conference to be held on November 14, 2018 P A G E 7 We are looking forward to a funfilled and educational conference this year. We ve listened to your suggestions on topics from last year s survey and have already secured speakers for this event. We will also be having a session for a panel discussion on a specific topic which we ve previously done at our breakfast meetings and thought that it would be great to conduct with a larger group. We encourage members to participate. In addition, we will be holding a networking event after the conference again. This gives members a chance to mingle with others, ask each other questions and exchange contact information. There will be door prizes, appetizers and drinks. You will also have the opportunity to win drink tickets at the conference. Topics SNEAK PEAK Death & Taxes Sale of Business Sale of Real Estate Speakers Cost Linda Takayama, Director of Hawaii Department of Tax Tom Yamashika, Tax Foundation Katy Williams, IRS Liaison $125 Members $150 Non-Members Includes: Hot Lunch and Valet Upcoming Meetings & Events Sept. 20, 2017 Breakfast Waikele Country Club; 7:30 a.m. Breakfast; 8:00 a.m. Speaker Sue Sowders, CPA Nov.14, 2017 Annual NATP HI Chapter Hilton Waikiki Beach Hotel on Kuhio Ave. Nov , 2017 NATP 1040 Update and Beyond

8 NATP Hawaii Chapter Sue Sowders, President Charmaine Apa, Communications Dir Join NATP Your NATP Chapter Board Members President: Sue Sowders, CPA Vice President: Hank Erwin, EA Secretary: Pat Ernce, EA Treasurer: Joanne Chang, EA Janet Reyes, CPA Oahu Kathy Mannoia (Founder)- Maui Pat Ernce, EA (Founder)- Oahu Paul Caster, EA Oahu Sandy Salamoni-Lane, EA Big Island Charmaine Apa, EA Oahu Lordis Gawzner, EA Oahu Kenyata McCoy, CPA Oahu Lisa Fossum Big Island P A G E 8 NATP Member Benefits NATP strives to bring you success in your business through many member benefits designed for the busy tax professional. Research Services Remember to use your FREE research answer. Our on-site staff of federal tax specialists answers over 30,000 questions every year on a variety of complex tax issues and will provide supporting documentation at no extra charge. Plus, members get one FREE answer every calendar year and discounted rates on subsequent answers. Tax Store Supplies and educational material for the tax professional. The NATP Tax Store is the one-stop shop for your business needs plus members get a discount! Publications Get the latest tax news and updates. We make complex tax issues easy to understand with the TAXPRO Weekly , TAXPRO Monthly newsletter, TAXPRO Journal and Chapter News yours FREE with membership. Education Flexible choices to give you the CPE course you want. Choose from outstanding live workshops, self-study and webinars. Members get discounted rates on all our education. Representation & Advocacy Your views are represented. NATP works to protect your right to practice and shares your concerns and views with key IRS personnel and government officials. NATP Affinity Partners Group Buying Power! Get great prices on insurance, credit card processing, collections, office supplies and much more. Chapters Another FREE Member Benefit Not only do you get this great newsletter, but our Chapter also provides you with great networking opportunities, educational events, state government representation and more!