Month: January 2019

Don’t be misinformed in 2018 regarding ACA (Affordable Care Act)

Posted on January 29, 2019March 8, 2019 by PM Editor

One of the biggest benefits (besides adjusting income tax brackets and their respective percentages) of the Tax Cut Jobs Act (TCJA) Trumpeted by the Trump administration was the repeal of the “individual mandate penalty”. However, although other provisions of the tax bill took effect in 2018, the individual mandate penalty, which penalized taxpayers that did not carry health insurance for at least 9 months out of the year, will not be eliminated until the 2019 tax year.

Despite strong opposition to the penalty as being extremely unfair to the poorest of taxpayers (80% of those who paid the penalty earned less than $50,000/yr.), the penalty has increased steadily since it’s 2014 debut.

The Individual Mandate Penalty Started Out Small But Has Grown Over Time

• In 2014, the punishment was $95 per uninsured adult ($47.50 per child), up to $285 per family, OR 1 percent of household income. The IRS released statistics that among filers who owed a penalty for the tax year ending 2014, the average penalty was $210.

• In 2015, the penalty would be raised to $325 per uninsured adult ($162.50 per child), up to $975 per family, OR 2 percent of household income. The IRS released statistics that among filers who owed a penalty for the tax year ending 2015, the average penalty rose over 125% year-to-year to $470.

• In 2016, the penalty was again significantly raised to $695 per uninsured adult ($347.50 per child), up to $2,085 per family, or 2.5 percent of household income.

The 2.5 percent of household income penalty has remained constant since 2016, and in 2018 will remain at $695 per uninsured adult ($347.50 per child), up to $2,085 per family, or 2.5 percent of household income.

In closing, it is important to remember that although the individual mandate penalty was eliminated as part of the tax cut legislation passed in December 2017, this penalty assessed by the IRS will still be in effect for the tax year 2018.

Monday, Monday..So Good To Me

Posted on January 26, 2019February 20, 2019 by PM Editor

Monday, Monday, so good to me
Monday mornin´, it was all I hoped it would be
Oh Monday mornin´, Monday mornin´ couldn´t guarantee
That Monday evenin´ you would still be here with me

-The Mamas & The Papas

Short-term relief as Trump and Dems reach a temporary deal to end partial shutdown

Amid the ongoing political chaos in Washington a comprise was reached to end the partial government shutdown. But will the “relief” still be here with us past “Monday evenin’ (February 18th) as the measure signed by The President appears to be only active for three weeks, ending on Friday February 15th. What then? Nobody knows… What we do know is that 100’s of thousands of federal government employees will be singing “Monday, Monday…” this coming week, which comes with no “…guarantee” that they won’t be furloughed again in less than a month.

Backlogged IRS

News of the temporary relief agreement couldn’t have come at a better time for the Internal Revenue Service, who after years of being de-funded and being already depleted of resources is set to kick-off the start of Tax Filing Season come Monday. Officials at the I.R.S. had already briefed some congressional members Friday morning of the dire state of the agency which had piled up millions of documents as well as leaving millions of calls unanswered. It makes for a powder keg and stressed work environment, when even with the agency’s operational capacity being restored during it’s most crucial time of the year, the prospects that Monday evenin’ of February 18th the political circus may be replaying itself.

Business Owner Retirement Plans

Posted on January 16, 2019February 20, 2019 by PM Editor

Retirement Plan Options For Business Owners

Business owners, who are often burdened with many challenges building and running their businesses, too often miss special retirement plan opportunities available to businesses, instead electing to rely on their personal retirement plans instead. Below are a few options that business owners should consider.

Profit-Sharing Plan (DPSP)

A profit–sharing plan, also known as a deferred profit–sharing plan or DPSP, is a defined contribution plan under which the plan may provide, or the employer may determine, annually, how much will be contributed to the plan (out of profits or otherwise). Under this plan, an employee receives a percentage of a company’s profits based on its quarterly or annual earnings. The plan contains a formula for allocating to each participant a portion of each annual contribution. A profit-sharing plan may include a 401(k) feature.

Simplified Employee Pension Plan (SEPs)

SEP plans are ones in which an employer contributes on a tax-favored basis to IRAs owned by its employees. If the employer meets certain conditions, it isn’t subject to the reporting and disclosure requirements of most retirement plans. One of the distinctive advantages of a SEP plan, is that they can be established in one year and contributions are deductible as late as the due date of income tax returns for the previous year, including extensions.

Per the IRS rules regarding participation, Employees must be included in the SEP plan if they have:

attained age 21;
worked for your business in at least 3 of the last 5 years;
received at least $600 in compensation (in 2016 – 2019) from your business for the year.

Your plan may use less restrictive requirements, for example age 18 or three months of service, to determine which employees are eligible.

Defined Benefit Plans

Also known as a traditional pension plan, Defined Benefit plans promise the participant a specified monthly benefit at retirement. These plans can state an exact dollar amount (e.g. $1000 per month at retirement) with a maximum annual benefit capped at $220,000 (as of 2018) or 100% of the average earned income for the highest three consecutive years, whichever is less. Most often, the benefit amount is calculated through a plan formula that considers such factors as salary and service. Like SEPs, business owners and plan participants can make deductible contributions until the due date of income tax returns for the previous year, including extensions.

Retirement planning can be a daunting task for even the most sophisticated business owners, therefore it is always a good idea to consult a tax professional like those found at TaxPM who can help you review, and if necessary revise your retirement planning strategies.

IRS confirmed it will process tax returns beginning Jan. 28

Posted on January 8, 2019February 20, 2019 by PM Editor

Despite the ongoing government shutdown, Office of Management and Budget Director Russell Vought issued a statement yesterday that tax refunds will go out as scheduled, unlike in previous shutdowns. The Internal Revenue Service has given the green light to processing returns as it set the date to being accepting returns beginning Jan 28th.

IRS Commissioner Chuck Rettig said on Monday, “we are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown. I appreciate the hard work of the employees and their commitment to the taxpayers during this period.” The IRS doesn’t normally issue refunds during a shutdown, however Rettig said the IRS has “consistently been of the view that it has the authority to pay refunds despite a lapse in annual appropriations.”

The IRS closure during the partial government shutdown couldn’t have come at worse time for taxpayers looking for answers to the changes brought about by the Tax Cuts and Jobs Act of 2017 signed by President Donald Trump on Dec. 20, 2017. With almost 90% of the IRS workforce on furlough it’s unlikely that many taxpayers will be able to reach the IRS for help during the ongoing shutdown.

The filing deadline to submit 2018 tax returns is Monday, April 15 for most taxpayers. Taxpayers in in Maine and Massachusetts are granted a couple of extra days due to the Patriots’ Day holiday on April 15, likewise those residing in the District of Columbia where Emancipation Day holiday is being observed on April 16 also do not have to file until April 17th.

Significant changes to Personal Exemptions & Standard Deduction

Posted on January 4, 2019February 20, 2019 by PM Editor

The Tax Cuts and Jobs Act (TCJA) passed late 2017 has brought with it some significant changes to both personal exemptions and standard deduction for tax years 2018 through 2025 which are outlined below.

No More Personal Exemptions

By and large personal tax exemptions and the standard deduction have looked the same for quite some time. However, with the passage of the Tax Cuts and Jobs Act (TCJA) many individual taxpayers may find themselves confused by the changes.

For 2017, taxpayers can claim a personal exemption of $4,050 each for themselves, their spouses and any dependents. If they choose not to itemize, they can take a standard deduction based on their filing status: $6,350 for singles and separate filers, $9,350 for head of household filers, and $12,700 for married couples filing jointly.

For 2018 through 2025, the TCJA suspends personal exemptions but roughly doubles the standard deduction amounts to $12,000 for singles and separate filers, $18,000 for heads of households, and $24,000 for joint filers. The standard deduction amounts will be adjusted for inflation beginning in 2019.

For some taxpayers, the increased standard deduction could compensate for the elimination of the exemptions and possibly even provide some additional tax savings. But for those with many dependents or who are used to itemizing deductions, these changes could result in a higher tax bill — depending in part on the extent to which they can benefit from family tax credits.