If you are an employee (i.e., a W-2 wage earner) with substantial work-related business expenses, the Act was not kind to you. It suspended (and effectively repealed), for 2018 through 2025, all miscellaneous itemized deductions, which were previously only subject to a floor of 2% of adjusted gross income (AGI). Employee business expenses are included in that category of miscellaneous itemized deductions.  Read More

One small provision in the final tax reform bill could impact the way people save for the education expenses of their children and grandchildren using 529 Plans.

The new law allows greater amounts of tax-free savings than what’s permitted in a Coverdell Savings account—and the funds can be used for the same expenses. This creates an opportunity to shelter additional investment portfolio income from taxes by expanding the type of expenses that are eligible for reimbursement using 529 account funds. Read More

In summary, based on an analysis prepared by the Tax Policy Center, President Trump’s revised tax plan would cut taxes on every income level.  However, high wage earners will receive the biggest tax cuts, both in terms of dollars, as well as in percentage of income.  According to the analysis, the Trump revised tax plan would reduce the top individual income tax rate to 33 percent, and reduce the corporate rate to 15 percent.

The plan will allow owners of pass-through businesses (such as sole proprietorships, partnerships, and S corporations) to elect to be taxed at a flat rate of 15 percent, rather than under the regular individual income tax rates.  Capital gains and dividends would be taxed under the current preferential rate structure.  Distributions from “large” pass-through businesses received by owners who elected the 15 percent flat rate would be taxed as dividends. Read More

The beginning of the year marks the start of many new things: a new year, new business goals and new federal tax reform. What do the changes in tax law mean for California companies – especially in Silicon Valley?

In The Daily Journal, Carl Guardino (CEO of the Silicon Valley Leadership Group) likened the latest tax reform to the 1960s western, “The Good, the Bad and the Ugly” – and for good reason. While there are some changes that will benefit corporations, others will likely make it difficult for businesses in the area. Read More

After 31 years, Congress has passed major tax reform legislation and sent it to the President for his signature. The bill is the most significant tax reform in a generation and is intended to provide an additional catalyst to grow the economy and stimulate job growth and higher wages. For industrial products organizations in the manufacturing, aerospace and defense, chemical, and automotive sectors, the new provisions are significant and will likely impact their businesses for years to come. Read More

The media is abuzz with Tax Reform news, here to allay your confusion regarding the cut to some deductions and tax rates is my latest blog post. The media is abuzz with Tax Reform news, here to allay your confusion regarding the cut to some deductions and tax rates is my latest blog post.

The tax rates change has been the most publicized but there are many deductions on the chopping block that will drastically change how you prepare your taxes and/ or your bottom line.  Read More

The House has passed their version of the Tax Reform bill and the Senate Finance Committee has approved a bill which will now be debated, amended, and voted on by the full Senate. The bill passed by the Senate will be different from the one passed by the House. The differences will be ironed out by the joint House-Senate Compromise Committee and then voted on by the full House and Senate, which cannot be amended.

This process may not be completed until the end of the year which will not leave much time for taxpayers to do effective planning to minimize their 2017 taxes. Due to the uncertainty of the final law’s provisions, this article makes suggestions how taxpayers can minimize their 2017 taxes. Part I explains ways to minimize income and Part II explains ways to increase deductions. Read More

UPDATED 12/2/17: Tax reform is moving along. The House Ways and Means Committee introduced its bill – H.R. 1, on November 2 and the House passed it on November 16. The Senate Finance Committee released its proposal on November 9 and passed it on November 16. Late on 12/1/17, the Senate passed a bill that made numerous amendments to the bill passed by the Senate (see the list of amendments in this JCT document). Now the House and Senate need to create a conference committee to work out the differences among the bills and that version will go back to House and Senate for votes.  Or, perhaps the House will just pass the Senate version, but I don’t think so. I think there are some items the House doesn’t like such as the corporate rate reduction not starting until 2019.

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When you spend years acquiring compensation data on corporate tax executives you learn a lot! TaxConnections conducts a compensation study every two years given the enormity of the project. This requires an extraordinary amount of effort to compile information, match up technical responsibilities for specialized tax roles, organize the information by geographical regions, and make sense of a wide range of equity programs. We conduct compensation studies in order to help corporate management teams attract the tax talent they need. These studies are not money-makers given the great deal of time it takes to prepare them. It is difficult to obtain salary information as people must trust you in order to get the real story! We must also organize it in a fashion that makes sense when you step out of the realm of base plus bonus and into the realm of equity and perks which are as vast as the sea. What you need to know is the real story behind corporate tax compensation if you want to successfully retain and keep the very best tax talent on the market..

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The proposed small business tax rule changes are expected to be in place January 1, 2018 and will impact incorporated small businesses in Canada. These laws will hit those splitting income in families and saving assets inside corporations. To help our clients assess their exposure we have developed a Risk Assessment Tool (RAT). We hope you find the name amusing.

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Raising our Taxes and Killing Social Security via the Republican’s Proposal for an Inflation Tax in Tax Reform

This so-called “Tax Reform” is going to raise our tax burdens while killing social security.  The Republicans have proposed, and Democrats have agreed, that actual inflation should not be recognized in future years, limiting inflation adjustments of tax brackets to increase tax on persons who earn more because of inflation, and decreasing social security benefits by half over 20 years.  This Tax Reform, besides reducing retirement opportunities for public employees, imposes “Chained CPI” (also known as the inflation tax) upon social security benefits to keep them from increasing and upon tax brackets to keep them from increasing as well. But tax brackets not increasing is bad for taxpayers. Tax brackets that do not move up to account for actual inflation require a higher tax rate be paid on future income as actual inflation pushes it into the next bracket.

I thought Republicans wanted lower taxes imposed on people who sweat and toil? Or do Republicans actually want lower taxes only on idle passive investors?

What if I like organic apples?

How’s that again? “Chained CPI” is sold as the savior of Social Security (see Heritage Foundation explanation). The example employed by Heritage in favor of Chained CPI: if apples go up in price, then consumers stop eating apples and eat cheaper oranges instead. What if I prefer apples? What if I am allergic to oranges? To my actual point: it is not a ‘choice of apples versus oranges world. It’s a choice between quality and cheaper (generally imported) goods. Chained CPI over time eliminates the local farmer’s organic apples in favor of the imported, genetically modified, pesticide grown cheap apples. Chained CPI requires that we reduce lean meat (sorry vegans) in favor of affordable fast food.

Chained CPI is a system built on forcing a degrading quality of life onto retirees. 

Compounded over time, it’s a choice between affording medication and going without medication, giving up restaurant dates with my spouse in favor of TV dinners. The monthly annuity from social security, as little as it is relative to a 15.4% pay-in of salary (albeit capped, but so are benefits) over 40 years, could be cut significantly over 20 years (see New Republic explanation) in respect to what it can actually buy in today’s terms. In 20 years when my generations retirees wake up to this death by a thousand substitutions, the monthly social security annuity is so relatively inconsequential, it won’t be worth discussing any longer. Worse, over these 20 years, our tax bills will increase annually via the Chained CPI bracket creep that keeps brackets from adjusting upward as our wages hopefully increase. So inflationary tax takes away our ability to try to mitigate the loss of our catchup retirement and social security. We MUST work, if able, until we drop dead, assuming that we are not substituted for a cheaper wage worker.

Retired, Older Experience Hirer Inflation Than Younger Population  

The Congressional Research Service has published a study that finds that elderly persons actually experience higher inflation than younger ones (see CRS Research Report A Separate Consumer Price Index for the Elderly?).  Instead of going the wrong direction to a Chained CPI, the CRS suggests a CPI for the elderly spending patterns to be called CPI-E.

Follow the impact analysis of the 2018 tax updates after these pass by a team of experts who will map out how these affect your clients and what planning you need to do – TaxFacts Online.

Have a question? Contact William Byrnes

Your comments are welcome!

The tax reform bill, officially called “The Tax Cuts and Jobs Act,” H.R. 1, was released on Nov. 2, 2017. The bill contains many provisions affecting both individuals and businesses. If you use your automobile or other vehicle for work or business purposes, read on to learn about how it could have an impact on your mileage deduction.

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