Thanks for Being a Part of Our Firm’s Family!

At this time of year, we sit down with our families to acknowledge all the many things that have made us thankful throughout the year. Since we consider you a member of our firm’s family, we want to take the chance to express our gratitude to you for giving us the opportunity to serve you.

We get a great deal of satisfaction from working with clients, whether we’re helping you identify tax-saving opportunities, plan for college or retirement, address critical business concerns or tackle any number of other financial issues. So please accept our sincere thanks for your business! We look forward to continuing our valued relationship with you in the coming year. Please remember that we’re always here to help when you need us.

HOUSE GOP PROPOSES MASSIVE TAX CODE OVERHAUL

 

On November 2nd, the House Republicans unveiled their proposed tax code.  The bill would impact every individual and business in some way.  Some taxpayers will be “winners” and some will be “losers”.  The plan, if passed, would lower the individual tax rates, repeal multiple tax credits and deductions, eliminate alternative minimum tax (AMT), abolish the federal estate tax after 2023, adjust the child tax credit and boost business expensing.

INDIVIDUAL TAXATION:

Tax Rates

New individual tax brackets:
Capture

The current tax treatment of qualified dividends and capital gains will remain the same.

Standard Deductions and Personal Exemptions

The standard deduction would increase to $24,400 for married filing jointly and $12,200 for single filers.  the current law allows $13,000 for married filing jointly and $6,500 for single filers.

The bill would also eliminate the deduction for personal exemptions.

Deductions and Credits

The following currently allowable deductions will be eliminated:

  • State and local income tax
  • Alimony payments
  • Student loan interest
  • Medical expenses
  • Moving expenses

The following expenses would still be allowed, however, they would be limited:

  • Home mortgage interest (limited to interest on new mortgages up to $500k, on one residence only)
  • Real estate taxes (limited to $10,000)

The child tax credit would increase from $1,000 to $1,600.  The bill would also add a credit of $300 for each non-child dependent or parent for five years, after which that provision would expire.

Retirement

The bill keeps the current rules for 401(k) and other retirement plans in place.  However, they would eliminate the ability for taxpayers to recharacterize traditional IRA contributions to a ROTH IRA.

Federal Estate Tax

The bill would double the federal estate tax exemption and completely eliminate the estate tax after six years.  Currently, the maximum estate tax rate is 40% with a $5 million exclusion (married couples can combine for a $10 million exclusion).

Alternative Minimum Tax

The bill would eliminate AMT completely.

 

BUSINESS TAXATION:

  • The top corporate tax rate would be reduced from 35% to 20%.
  • The bill would create the ability to expense five year property immediately (rather than depreciating under MACRS).
  • The Section 179 limitation would increase from $500,000 to $5 million and phase-out amount of $20 million in qualified expenditures.
  • The bill would eliminate Code Section 199 domestic production activities deduction, non-real property like-kind exchanges and other deductions, but would leave the research and development credit.
  • Currently, owners of partnerships, S corporations and sole proprietorships pay tax at the individual rates (up to 39.6%).  The bill proposes a 25% tax rate for pass-through income.  There will likely be limitations on the businesses that can claim this rate to avoid abuse of the lower tax by individuals.

 

 

Highly Anticipated Tax Reform Framework Released

After nearly a year of anticipation following President Trump’s triumphant victory in last year’s presidential election, the initial framework for the crafting of tax reform legislation was released today.

The proposal would nearly double the standard deduction to $12,000 for single filers and $24,000 for married taxpayers filing jointly, reduce the number of tax brackets from seven to three (12%, 25% and 35%) and provide a larger child tax credit.  At President Trump’s insistence that the wealthiest American’s taxes don’t decrease, which likely includes himself, there may be a higher fourth tax bracket.  This would be in addition to the 3.8% Medicare surtax on investment income enacted as part of the ACA law under President Obama which affects individuals with a modified AGI that exceeds $200,000 (or $250,000 if married filing jointly).  Most itemized deductions would be eliminated, including state and local taxes, while the deduction for charitable gifts and mortgage interest would be preserved.

The proposed corporate tax rate would be reduced from 35% to 20% while pass-through income (S-corporations and partnerships) would be capped at 25% in lieu of the current 39.6% top individual rate.  However, Treasury Secretary Steven Mnuchin suggested some service companies, including accounting firms, won’t benefit from the lower pass-through rate.

For the further details, you can view the tax reform framework in its entirety here.

2017 Ohio Sales Tax Holiday

The state of Ohio has enacted a one-time only sales tax holiday to take place this summer. The holiday begins on Friday, August 4th, 2017 at 12:01am and concludes Sunday, August 6th, 2017 at 11:59pm. During these three days, there will be no sales tax on the following items: clothing priced at $75 or less, school supplies priced at $20 or less, and school instructional materials priced at $20 or less.

Keep in mind there are a few stipulations to this holiday. Most notably, any item used in a trade or business is not eligible for the tax exemption. For example, school supplies such as binders and notebooks to be used in a business are ineligible. Additionally, clothing accessories including jewelry and handbags do not qualify as clothing and are therefore not exempt from sales tax.

Items sold by mail, phone, or the Internet will qualify for the tax holiday if the consumer orders and pays for the item and the retailer accepts the order during the holiday period.  Shipping and handling charges shall also be exempt from sales tax if all items in the order qualify for the exemption. If some of the items in the order are ineligible, sales tax will be charged on the shipping and handling costs of those specific items.

Tom Henderson Earns CPA Designation

ARM wishes to congratulate Tom Henderson on passing the CPA exam and earning the designation of Certified Public Accountant. This designation identifies those individuals who have met the rigorous experience and ethical requirements, and have successfully passed the CPA examination, which covers the areas of audit, regulation, finance, and business. Great job, Tom!

 

ARM CPA RACES TO EXCELLENCE IN THE “DERBY CITY”

Ary Roepcke Mulchaey (ARM CPA) was among the more than 50 global accounting firms attending BKR International’s annual Americas Regional Meeting in Louisville, Kentucky, June 3-6. ARM CPA is an independent member of BKR, one of the world’s leading global associations of accounting and business advisory firms. For more than 25 years, BKR has connected members and their clients with global experts and resources.

With the theme of “Racing to Excellence,” the conference featured experts on accounting firm innovation and transformation. Monday keynote speaker Gary Adamson, a nationally renowned consultant and former managing partner of a top CPA firm, shared new insights on linking firm strategy to compensation. Dr. Roman Yampolskiy, associate professor at the Speed School of Engineering, University of Louisville, covered artificial intelligence (AI) and how AI is directly affecting the accounting profession. Other topics presented included outsourcing options for commodity work and using data to drive growth strategy.

“Accounting is a data-driven profession, and this conference highlighted how we can better leverage this data to improve all aspects of leading successful firms,” noted David Goldner, BKR International’s Americas Regional Chair and managing partner of Gross, Mendelsohn in Baltimore, Maryland.

Eric Mulchaey, Assurance Partner at ARM CPA, said, “All of our fellow members in BKR are more than willing to share their successes and failures for our mutual benefit. It’s a unique opportunity to meet with colleagues who are our peers, not our competitors, and truly want us to succeed.”

“BKR events are structured to support continual learning and member collaboration,” said Maureen Schwartz, BKR’s Executive Director. “We strive to keep our members at the forefront of the ever-evolving accounting profession through cutting-edge programs and opportunities to learn from one another in a fun and dynamic environment.”

About ARM CPA

Ary Roepcke Mulchaey makes it a point to know your markets, capabilities and expectations so that we can anticipate and respond to your rapidly changing business needs. We have the experience, resources and knowledge to build on your organization’s assets while ensuring that your values and vision drive the process.

Responsive, resourceful and practical, we are always looking out for your interests and providing proactive advice, often ahead of market trends. We measure our success by one essential benchmark – client satisfaction. We pride ourselves on the number of long-term relationships we have with our clients, many of whom have been with our firm since our founding in 1979.

About BKR

BKR International is one of the Top 10 leading global associations of independent accounting and business advisory firms, representing the expertise of more than 160 independent accounting and business advisory firms in over 500 offices and 80 countries. For more information visit www.bkr.com or follow BKR on LinkedIn.

Have Questions? We’re Here All Year!

Many clients see their CPAs at tax time, when the main focus is on completing and filing their tax return. As a result, they may not take the opportunity to ask questions about long-term tax planning or about other important financial concerns. The good news is that we are available to you all year. We have a full-time, year-round staff of experts with extensive expertise in a broad range of financial areas. We’re ready when you are to take some time reviewing your financial situation, helping you understand your options and make the best decisions. We’re also here in an emergency to help address unexpected financial concerns. So, give us a call to discuss your important financial issues whenever they arise.

Volunteer Tax Breaks

If you are a volunteer worker for a charity, you should be aware that your generosity may entitle you to some tax breaks.

Although no tax deduction is allowed for the value of services you perform for a charitable organization, some deductions are permitted for out-of-pocket costs you incur while performing the services (subject to the deduction limit that generally applies to charitable contributions). This includes items such as:

  • Away-from-home travel expenses while performing services for a charity (out-of-pocket round-trip travel cost, taxi fares and other costs of transportation between the airport or station and hotel, plus lodging and meals). However, these expenses aren’t deductible if there’s a significant element of personal pleasure associated with the travel, or if your services for a charity involve lobbying activities.
  • The cost of entertaining others on behalf of a charity, such as wining and dining a potential large contributor (but the cost of your own entertainment or meal is not deductible).
  • If you use your car while performing services for a charitable organization you may deduct your actual unreimbursed expenses directly attributable to the services, such as gas and oil costs. Alternatively, you may deduct a flat 14¢ per mile for charitable use of your car. In either event, you may also deduct parking fees and tolls.
  • You can deduct the cost of a uniform you wear when you do volunteer work for the charity, as long as the uniform has no general utility (e.g., a volunteer ambulance worker’s jumpsuit). You can also deduct the cost of cleaning the uniform.

No charitable deduction is allowed for a contribution of $250 or more unless you substantiate the contribution by a written acknowledgment from the charitable organization. The acknowledgment generally must include the amount of cash, a description of any property contributed, and whether you got anything in return for your contribution. This presents a problem where you as a volunteer make a contribution on behalf of rather than directly to a charity. One way around this is for the charity to pay for the expenses and then be reimbursed by you (or you can make the donation before the expense is incurred). If this isn’t possible, you can safeguard your deductions as follows:

  • Get written documentation from the charity about the nature of your volunteering activity and the need for related expenses to be paid. For example, if you travel out of town as a volunteer, get a letter from the charity explaining why you’re needed at the out-of-town location.
  • If you are out-of-pocket for substantial amounts, you should submit a statement of expenses and, preferably, a copy of the receipts, to the charity, and arrange for the charity to acknowledge in writing the amount of the contribution.
  • You should maintain detailed records of your out-of-pocket expenses—receipts plus a written record of the time, place, amount, and charitable purpose of the expense.

Statute of Limitations on Back Taxes

If you owe back taxes, how long does the IRS have to assess and collect them? The answer varies based on the situation. In many cases, the IRS has three years from the date a return was due or when it was filed, whichever comes later, to assess how much you owe, and up to 10 years to collect that amount. When a very large item is omitted from the return, the assessment period can last up to six years. However, if fraud or attempted tax evasion is involved or if a return was never filed, then there is no statute of limitations on how long the IRS can take to make an assessment.

If you haven’t paid taxes or filed a return, we can assist you in fixing the problem. We can prepare your returns and help you address any outstanding tax concerns. We can also work with you to tackle broader financial or other issues that you may be facing. Reach out to us today for more information.

Do You Have Foreign Assets? FBAR May Apply to You

Are you aware of the nature of all your investments, domestic and international? Do you know if you have foreign accounts with an aggregate value higher than $10,000 at any time during the calendar year? U.S. taxpayers (including individuals and business entities) are required to report on foreign assets or investments they hold in offshore accounts. Under the Bank Secrecy Act, you may be required to e-file what is known as the FBAR directly with the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department. Given the diversity of assets that many people hold, we advise against assuming that the FBAR rules don’t apply to you. If you’re not sure, we can help you determine the answers.

As is often the case with tax laws, there are some exceptions and intricacies to the FBAR rules, so be sure to contact our office for more details. We can help you understand whether the rules apply to you and what you need to do to comply with them.