12 Dec NEWSLETTER – DECEMBER 2019
NEWSLETTER – December 2019
I am very grateful that we have had a great team for many years striving to provide quality, timely service for you. Over the course of this year, we implemented a strategy to increase focus on serving our clients. We also made some changes to create capacity for serving our clients even better. Part of this process is to identify our core values, which can be illustrated in this graphic. We strive to provide you with the sound and timely advice and look forward to helping you plan for this upcoming year. Let us know how we can assist you.
~ Duane Culver
Reminder That Our South Office Has Relocated:
Since August, we are no longer using the Gezon location. We renovated a new office a mile north on Clyde Park Ave. Phone numbers have not changed but please familiarize yourselves with the new address:
Culver CPA – South Office 4211 Clyde Park Ave SW, Wyoming, MI 49509
Our Main Office location has not changed: 1419 Coit Ave NE, Grand Rapids, MI 49505
You can watch a short video on YouTube https://www.youtube.com/watch?v=Ymz9EU9kjUE
Individual Tax Concerns
Minimizing Individual Taxes:
Reducing the amount of income received and increasing the amount of deductions, are two methods of minimizing taxes. There is little chance of new tax legislation during what is left of 2019 or even in 2020, so tax rates are not likely to change. Thus, there is little advantage to postponing ordinary income, as rates are not likely to go lower! For taxpayers whose income fluctuates from year to year, it would be wise to examine the impact of sales of investment items. For taxpayers who think they may have lower income in 2020, it would be smart to hold off on a sale of a capital gains item if their income is at or near a threshold for a higher capital gains bracket.
The Tax Cuts and Jobs Act nearly doubled the amount of the standard deduction, and the amount of state and local taxes that can be claimed as an itemized deduction is capped at $10,000. The result is a drastic reduction of taxpayers who itemize deductions.
A way to maximize the amount of deductions is to develop a bunching strategy.
This involves accumulating charitable contributions, or even medical expenses, from two years into one year. For example, a taxpayer can make double the normal annual charitable contributions in one year and then skip the next year in order to help surpass the standard deduction amount.
The same strategy might be used for medical expenses where the timing is somewhat flexible, such as elective procedures (remember that purely cosmetic procedures are not deductible). The floor for medical expense deduction is 10% of Adjusted Gross Income. It is much easier to beat the standard deduction amount if both charitable contributions and medical expenses are bunched in the same year.
Other considerations include:
- Maximizing education credits
- Increasing 401(k) contributions
- IRA contributions
- Teacher deductions
Withholding and Estimated Tax Penalties:
Many individual taxpayers were shocked to discover that the withholding they used prior to the tax reform was inadequate for 2018. As a result, some taxpayers who formerly received refunds found themselves with tax bills when they filed. The IRS provides a calculator on its website to determine if enough taxes are being withheld. For more comprehensive evaluation of your withholding and tax liability, and what adjustments to make, contact our office for a tax planning session.
Life Cycle Changes Important to Year-End Planning:
- Change in Filing Status – marriage, divorce, death or head of household status
- Birth of Child
- Child too old for tax credit
- Child who has outgrown the “kiddie” tax
- Changes in medical expenses
- Moving/relocation (only for military)
- College and other tuition expenses
- Employment changes
- Personal bankruptcy
- Business success (or failure)
Please be sure to communicate with your tax professional when any of the above circumstances affect your life. They may have a big impact on the resulting tax strategies.
Required Minimum Distribution:
Individuals who have reached age 70 ½ during 2019 and are retired should make sure that they are making their required minimum distributions (RMDs) from IRAs. The first RMDs must be made by April 1, 2020. Failure to take the RMD could result in a penalty equal to 50% of the RMD amount. To minimize the tax of IRA contributions after age 70 ½, individuals may send a portion of their distributions directly to a charity tax free. Questions? Please contact your tax professional.
Business Tax Concerns
Qualified Business Income Deduction:
One of the biggest changes from the Tax Cuts and Jobs Act was the allowance of a 20 percent deduction of qualified business income for owners of sole proprietorships and passthrough entities. This is the qualified business income deduction, and it can apply very generally to most types of businesses, but there are some restrictions.
Certain specified business areas are restricted
Where the business involves the performance of services in health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets or any trade or business where the principal asset is the reputation or skill or one or more of its employees or owners, the amount of the deduction is phased out where the taxpayer’s taxable income exceeds certain thresholds.
For 2019 the thresholds begin at $321,400 for joint filers and $160,700 for single. Taxpayers in one of the specified areas may want to explore ways to defer income to 2020 if they are near the phase-out threshold.
Be Alert to Scams:
You can use the above weblink to read more about possible tax scams. Meanwhile, if you receive any letter, email or phone call regarding your tax circumstances, please contact your preferred professional. We can help.
A Scam That Targets Businesses
Email phishing scams appear to be from someone you know within your business but contain viruses and malware. Because small business owners think their size protects them, they are often targeted. About 38% of email phishing scams target businesses with 250 employees or fewer, compared to 25% targeting businesses with over 2,500 employees. The red flags that can help you identify a phishing email vary. Commonly, subject lines will start with “RE:” so the recipient thinks it’s a reply to an email they sent previously. They might also read “FW: scanned document attached,” but the attachment is a ZIP file, not a PDF. Look for other small discrepancies like the name in the “From” section being different in the body of the email, or simple grammar errors and spelling mistakes that don’t read like the alleged sender.
Depreciation and Expensing:
The Tax Cuts and Job Acts provided very generous depreciation and expensing limitations. Businesses may want to take advantage of 100 percent first-year depreciation on machinery and equipment purchased during the year. Additionally, Code Sec. 179 expensing has an investment limitation of $2,550,000 for 2019, with a dollar limitation of $1,020,000.
These provisions do not apply to 2019 only, so there may be time to take advantage of them in later years. However, if a business is considering expanding capacity or acquiring new equipment, there has never been a better time to do so than in 2019, from a tax benefit standpoint.
Employers have certain employment tax responsibilities that must be paid and forms which must be filed.
Employment taxes include the following:
- Social security and Medicare taxes
- Federal income tax withholding
- Federal unemployment (FUTA) tax
Employers must report wages paid to employees on form W2 by January 31st.
When workers are independent contractors instead of employees, the business must report wages on form 1099 by January 31st.
Culver CPA Group enjoys serving our business clientele. We want to help you to process the reporting and filing of wages. Please contact us for a quote for this service.
Continue Using Our Tools To Make Your Life Easier:
SCHEDULING TOOL www.culvercpagroup.com/scheduler
Choose “Tax Appointment”, and then Employee/Location, to check the calendars of your tax professional. Book your own tax appointment and get automated email reminders. It will require an Email address from you, but you also have the option to include your cell number in order to receive reminder texts.
TEXTING TOOL 616.456.6464
You can text directly to our main office phone line. The message goes to our front office receptionists. Please first identify yourself and then text your message. The receptionist can respond or inform your preferred professional.
NETCLIENT CUSTOMER PORTAL https://culvercpagroup.com/client-portal/
A customer portal is an online tool that requires a User Name and Password to access. You also have the option to link a cellphone as an added security feature. After you login, you can access your tax documents, you can also send sensitive documents to us using the File Exchange module. This enables you to avoid sending documents via public email servers that can be hacked. Contact us to get started with this tool. An email account is required.