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Tag Archive for Tax Cuts and Jobs Act

Repeal The Kiddie Tax: The Tax Cuts And Jobs Act Changed The Tax Calculation

Annette Nellen _ Kiddie Tax

The TCJA changed the tax calculation for the kiddie tax which results in the child possibly having a higher marginal tax rate than the parents. This was highlighted by survivors of deceased members of the military in that a pension a child received was subject to more tax in 2018 than in prior years. A report on Military.com, “This Year’s Tax Cut Cost Some Gold Star Families Dearly,” 4/23/19, included an example of a child paying tax of about $1,150 on the benefits but owing $5,400 for 2018. This child’s parent is in a lower bracket than 37%.

While the TCJA does make the calculation one where the child can compute the tax without the need for the parent’s return, using the tax rate schedule for trusts where the 37% bracket is reached at just below $13,000 is wrong. Query – Why didn’t Congress say to use a rate structure 20 times the trust income tax bracket or some other percentage?

This issue caught the attention of some in Congress with proposals offered for relief for these benefits. S. 1370 and H.R. 2481 propose to treat the benefits as earned income so they are only taxed at the child’s tax rate. H.R. 2716 would not apply the TCJA changes to these benefits (so apparently still taxed at the parent’s marginal tax rate). H.R. 1994, a retirement bill passed by the House in May 2019 would change the kiddie tax calculation back to pre-TCJA times.

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Is Your Business Still the Right Entity Under the New Tax Rule? Part 2

Blake Christian 2

More tips about determining the right corporate, partnership or other structure that’s best for your business—and where you are in life. Key Takeaways:

  • The legal structure of your business operations can have a significant impact on your annual income tax and estate planning.
  • When you and/or your heirs expect to be at or near the maximum income tax rates, you will generally want to leave appreciated and appreciating assets in the taxable estate, rather than transfer them prior to death.
  • In general, assets with the potential to appreciate in value should not be placed into an S or C Corporation.

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Expiring ITINs? What You Should Know!

Manasa Nadig ITIN

Many come to the United States on various work Visas and eventually bring their spouse and children to join them. Now these family members may not qualify for Social Security Numbers (SSN) and they have to apply for an Individual Taxpayer Identification Number (ITIN). The member of the family here on the work visa and consequentially an SSN can claim dependency credits and also be able to file jointly on their U.S. tax return with their spouse if conditions have been met and they qualify.

The 2017 Tax Cuts and Jobs Act now requires all applicants for Employer Identification Numbers to have either a Social Security Number or an ITIN. Non-resident individuals doing business in the US as a partner in a US partnership also require an ITIN to file their US tax returns and to be able to claim back taxes paid on their behalf by the US partnership.

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TCJA Guidance Report from Treasury Inspector General For Tax Administration

Annette Nellen Regarding Treasury Inspector General Report

On May 14, TIGTA released a report, Status of the Office of Chief Counsel’s Issuance of TCJA Guidance. It reviewed the process for issuing guidance on the 100+ provisions of the Tax Cuts and Jobs Act (P.L. 115-97; 12/22/17). It also lists the guidance issued through the end of March (83 items) and what is expected from that date (95 items). A good amount of this includes Treasury Decisions, meaning final regs of the numerous proposed regs issued so far. Here is the detail of what they still plan to issue:

44 Treasury Decisions
35 NPRMs
4 Revenue Rulings
6 Revenue Procedures
4 Notice
1 Announcement
1 Undetermined

Appendices to the report list the specific topics of the guidance.

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Does TCJA Tax Churches? Should It?

Edward Zelinsky Taxing The Church

Does the new federal tax law, commonly known as the Tax Cut and Jobs Act (TCJA), tax churches as some have argued? If so, is this tax appropriate?

The answers are “yes” and “yes.” The TCJA provisions taxing qualified transportation fringes treat secular and religious employers alike, including houses of worship. In a world of imperfect choices, the TCJA reasonably treats all employers fairly without entangling church and state inordinately.

Churches (including all houses of worship such as synagogues, temples and mosques) pay more taxes than many people believe. Churches do not pay property taxes or basic income taxes. But churches do pay the employer portion of federal social security (FICA) taxes for their non-clergy employees. Churches also often pay or collect state sales taxes on the tangible personal property they sell or purchase. In most states, churches also pay real estate conveyance taxes like other real estate purchasers and sellers.

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IRS Tax Reform Changes: Depreciation And Expensing For Businesses

Depreciation And Expensing Under TCJA

The Tax Cuts and Jobs Act changed some laws on depreciation and expensing. These changes can affect a business’s tax situation. Here are the highlights:

  • Businesses can immediately expense more under the new law.
  • Temporary 100 percent expensing for certain business assets (first year bonus depreciation).
  • Changes to depreciation limitations on luxury automobiles and personal use property.
  • The treatment of certain farm property changed.
  • Applicable recovery period for real property.
  • Use of alternative depreciation system for farming businesses.

Taxpayers can use a safe harbor method to figure depreciation deductions for passenger automobiles qualifying for the 100-percent additional first year depreciation deduction and subject to depreciation limitations. The safe harbor allows depreciation deductions for the excess amount during the recovery period subject to depreciation limitations applicable to passenger automobiles.

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Estate Tax Planning Under Tax Cuts And Jobs Act

Haik Chilingaryan- Estate Planning

Even though Estate Tax Planning is currently utilized by only high net worth individuals, historic trends have shown that the risk of a person’s estate being subject to the estate tax may be applicable to also those individuals with more modest estates. If the federal estate taxes are owed at a person’s death, the then dead individual (“decedent”) has considerably less money to pass to his or her heirs, given that nearly half of the taxable amount may be taxed. There are available avenues that may lessen the value of a person’s estate by the time of death and potentially escape the estate taxes altogether.

Estate taxes are determined by the Basic Exclusion Amount (“BEA”) that is in effect at the time of the person’s death. The way the IRS calculates estate taxes is it tallies up the total value of the estate, then determines whether any gifts were made in any particular year that may have exceeded the Annual Exclusion Amount (“AEA”) and arrives at the final figure of the amount of tax owed. Both the BEA and AEA are indexed with inflation.

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Tax Cuts and Jobs Act (H.R.) Changes Made To The Committee-Reported Bill During Floor Consideration

US Senate Finance Committee _ TCJA

Changes Made by the Perfecting Amendment (Hatch #1618)

(Note: All JCT estimates are relative to the committee-reported version of H.R. 1)

Modifications
Increased Pass-Through Deduction (Sec. 11011)

  • This provision increased the deduction for qualified business income on individual returns from 17.4 percent to 23 percent of such income.
  • JCT Estimate: Change would reduce revenues by an additional $114 billion over ten years.

Extended Bonus Depreciation (Sec. 13204)

  • This provision extends the bill’s five-year 100 percent expensing period for an additional four years, decreasing gradually over that time.
  • JCT Estimate: This change would decrease revenues by $35 billion over ten years.

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Best Business Entity Structure After Tax Reform – S-Corp And C-Corp

William Rogers

There’s no easy answer to this question, though the entity choice considerations have undergone some changes due to the new tax law. For tax years beginning in 2018 and beyond, the Tax Cuts and Jobs Act (TCJA) created a flat 21% federal income tax rate for C corporations. Under prior law, C corporations were taxed at rates as high as 35%. The TCJA also reduced individual income tax rates, which apply to sole proprietorships and pass-through entities, including partnerships, S corporations, and, typically, limited liability companies (LLCs). The top rate, however, dropped only slightly, from 39.6% to 37%.

On the surface, that may make choosing C corporation structure seem like a no-brainer. But there are many other considerations involved.

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IRS To Highlight Tax Reform Changes Affecting Small Businesses

IRS to highlight tax reform changes affecting small businesses

Small business owners, self-employed should plan now for new changes

With just a few months left in tax year 2018, the Internal Revenue Service today urges small business owners to learn about how the new tax law changes may affect them.

The Tax Cuts and Jobs Act, passed in December 2017, made tax law changes that will affect virtually every business and individual in 2018 and the years ahead. Among other things, the new law may change their tax rates and impact the quarterly estimated tax payments they are required to make during the year. Read more

Charitable Contributions

Kazim Qasim Charitable Contributions

With the change in the season and the return of fall, many people begin the act of making their homes less cluttered, and we will all begin to get donation requests in the mail.  As the weather cools, we tend to turn an eye towards end of year tax moves as well.  The Tax Cuts and Jobs Act of 2017 brought about many changes in how businesses and individuals are going to operate starting for 2018 onward.  With the deviations to the itemized deductions that we are all so used to, rethinking your charitable giving is a must. Read more

For Many Business Taxpayers, Time Is Running Out To Elect Out Of New 100-Percent Depreciation Deduction For 2017

IRS Time Is Running Out To Elect Out Of New 100 Depreciation Deduction

The Internal Revenue Service today reminds business taxpayers who placed qualifying property in service during 2017 but choose not to claim the new 100-percent depreciation deduction, that they have a limited time to file the required election with the IRS.

In general, individuals and calendar-year corporations must file the election with the IRS by Oct. 15, 2018. The new 100-percent deduction allows businesses to write off most depreciable business assets in the year they are placed in service. Read more