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A brief overview of the President-elect’s tax plan for individuals

 

Now that Donald Trump has been elected President of the United States and Republicans have retained control of both chambers of Congress, an overhaul of the U.S. tax code next year is likely. President-elect Trump’s tax reform plan, released earlier this year, includes the following changes that would affect individuals:

• Reducing the number of income tax brackets from seven to three, with rates on ordinary income of 12%, 25% and 33% (reducing rates for many taxpayers but resulting in a tax hike for certain single filers),
• Aligning the 0%, 15% and 20% long-term capital gains and qualified dividends rates with the new brackets,
• Eliminating the head of household filing status (which could cause rates to go up for some of these filers, who would have to file as singles),
• Abolishing the net investment income tax,
• Eliminating the personal exemption (but expanding child-related breaks),
• More than doubling the standard deduction, to $15,000 for singles and $30,000 for married couples filing jointly,
• Capping itemized deductions at $100,000 for single filers and $200,000 for joint filers,
• Abolishing the alternative minimum tax, and
• Abolishing the federal gift and estate tax, but disallowing the step-up in basis for estates worth more than $10 million.

The House Republicans’ plan is somewhat different. And because Republicans didn’t reach the 60 Senate members necessary to become filibuster-proof, they may need to compromise on some issues in order to get their legislation through the Senate. The bottom line is that exactly which proposals will make it into legislation and signed into law is uncertain, but major changes are just about a sure thing.

If it looks like you could be eligible for lower income tax rates next year, it may make sense to accelerate deductible expenses into 2016 (when they may be more valuable) and defer income to 2017 (when it might be subject to a lower tax rate). But if it looks like your rates could be higher next year, the opposite approach may be beneficial.

In either situation, there is some risk to these strategies, given the uncertainty as to exactly what tax law changes will be enacted. We can help you create the best year-end tax strategy based on how potential changes may affect your specific situation.

© 2016

Kansas City CPA | Gladstone CPA | Parkville CPA

Why you should have a CPA

Come tax time you may find yourself asking should I hire a Certified Professional Accountant (CPA) to prepare my income taxes this year?  The simple answer is YES, but let us explain why. Every year taxpayers fail to file their taxes and they make simple mistakes that can cost thousands of dollars.  A CPA can help reduce the number of errors and remind you of tax filing deadlines.  To sit for the CPA exam, a candidate must possess a certain education level geared towards accounting.  In addition to education, there are work experience requirements.  To maintain a license, a CPA is required to complete Continuing Professional Education Courses each year.  Under the AICPA a CPA has a code of ethics the must be adhered to and followed.

Choosing a Local CPA

Now that you have decided to use a professional let’s take a look at choosing the right CPA.  First, you will want to make sure the CPA license holder is, in fact, licensed.  Most states provide a means to check the credentials, but each state can be different.  For instance, in Missouri, a database is kept for each licensed individual, such as Shawn Williams, CPA.  You can also check on the status of the CPA Firm in the State of Missouri.  When you begin your search using terms such as Find a CPA or CPA near me you will be given a list of results, but how do you sort through this list?  There are some questions you should ask.  What is the policy in regards to satisfaction, i.e. if I am not satisfied with your services what are my remedies?  You will also want to check that the CPA and/or firm maintains Professional Insurance, this insurance is in addition to general liability.  Professional Insurance can be used when the CPA firm makes a mistake.  Another important question to ask about is billing procedure for general inquiries.  Some companies charge for every phone call or email.  The practice of this firm is not to charge for general inquiries and issues lasting less than 15 minutes.

Some other advantages of choosing a CPA for Income Tax Preparation:

  • Provide timely tax savings advice.
  • Provide family tax planning for issues such as children education, divorce, trust, and estates.
  • Act as a liaison between yourself and the Internal Revenue Service or State Government.
  • Guidance as it relates to deductible and non deductible retirement contributions.
  • Calculate future tax amounts including quarterly estimates and employer withholding.
  • Explain general income tax related questions.
  • Tax Notice response and Tax Audit support.

Zona Rosa’s 2016 Lighting Ceremony

It’s that time of year again; it’s holiday season. Time to start preparing for all of the fun and festive activities all over Kansas City. Zona Rosa is going to kick off their holiday season on Saturday, November 19, 2016, with their annual Northern Lights Holiday Lighting Ceremony.

That also means that tax season is just around the corner and it’s never too soon to start thinking about who you want to do your tax preparation this year. We are located in the Zona Rosa Shopping District, be sure to book your free consultation to see if we can help you out this year!

Help retain employees with tax-free fringe benefits

One way your business can find and keep valuable employees is to offer an attractive compensation package. Fringe benefits are an important incentive — especially those that are tax-free. Here’s a rundown of some common perks and their tax implications.

  • Medical coverage. If you maintain a health care plan for employees, coverage under the plan isn’t taxable to them. Employee contributions are excluded from income if pretax coverage is elected under a cafeteria plan. Otherwise, such amounts are included in their wages, but are deductible on a limited basis as itemized deductions. Employers must meet a number of requirements when providing coverage. For instance, benefits must be provided through a group health plan (fully insured or self-insured).
  • Disability insurance. Your premium payments aren’t included in employees’ income, nor are your contributions to a trust providing disability benefits. Employees’ premium payments (or other contributions to the plan) generally aren’t deductible by them or excludable from their income. However, they can make pretax contributions to a cafeteria plan for disability benefits, which are excludable from their income.
  • Long-term care insurance. Your premium payments aren’t taxable to employees. However, long-term care insurance can’t be provided through a cafeteria plan.
  • Life insurance. Your employees generally can exclude from gross income premiums you pay on up to $50,000 of qualified group term life insurance coverage. Premiums you pay for qualified coverage exceeding $50,000 are taxable to the extent they exceed the employee’s coverage contributions.
  • Dependent care. You can provide employees with tax-free dependent care assistance up to certain limits during the year.
  • Educational assistance. You can help employees on a tax-free basis through educational assistance plans (up to $5,250 per year), job-related educational assistance, and qualified scholarships.

Other tax-free benefits include adoption assistance (up to a certain amount), on-premises athletic facilities and meals provided occasionally to employees who work overtime. Contact us for more information about how to treat fringe benefits for tax purposes.

© 2016