IRS failed to fix another tax reform ‘glitch’

Another consequence of congress’s decision to rush the Tax Cut and Jobs Act of 2017 is the large number of ‘typos’ and errors in the actual statutory text. Normally, congress would pass a technical corrections bill in the aftermath of such a large piece of legislation but the political climate in the nations capital is making that much more difficult than normal. As a result, we are still finding and addressing many ‘glitches’ in the nearly two-year piece of legislation.

The must recent glitch concerns the retail sector and prevents the 100% first year expensing intended by the congress on certain property common in the restaurant and retail industries.  While the IRS could have minimized the problem with new rules, the Service decided against addressing this issue effectively sending it back to congress for correction.

In the interim, taxpayers may be denied a popular tax incentive unless congress can pass corrections before taxes are due next year.

Recent Supreme Court case emboldens states to test limits of taxing authority

A recent Supreme Court opinion is likely to embolden states to test the limits of their taxing authority by limiting the ways taxpayers can challenge the taxes in court. In Franchise Tax Board of California v. Hyatt, Justice Thomas, writing for the Court, held that states have an inherent sovereign immunity protecting them from law suits in other states. Therefore, according to Thomas, plaintiffs can only sue states in other states if the potential defendant state itself decides to waive the immunity.

While, on the surface, this may not seem likely to impact state tax laws, it is expected that the change will permit states to push the limits of what states have historically been allowed to do. Therefore, it is easy to see how states could use this new precedent to increase the scope and number of enforcement actions against people in other jurisdictions that may owe taxes to the state.

Nobody knows for certain what the long term impact of Hyatt will be but it is definitely something businesses should consider; especially as the new rules for the collection of interstate sales tax begin to emerge from the various states.

If you have any questions or concerns about this topic or any legal or tax matter, contact P. Christopher Wegner at 239.449.9200 or cwegner@wegnerlawfirm.com. You can also visit www.wegnerlawfirm.com any time of day to learn about the law firm is helping businesses grow.

IRS turns to artificial intelligence to identify potential audits

The Internal Revenue Service is adding artificial intelligence (or “AI”) to the agency’s tool box for identifying potential audits or criminal tax evaders. The AI works by taking in all available information from past and present IRS audits and prosecutions to discover any pattern of factors that results in more changes at audit or convictions for tax fraud.

The AI will then apply any patterns when reviewing new tax returns and mark any that the computer thinks demonstrate increased likelihood of significant changes under audit or criminal conviction.

As voluntary compliance with US tax code is declining and the number of tax returns the IRS most process, expect the Service to turn to more and more advanced technology like AI in its fight to collect as much money as possible.

If you want advice on avoiding problems in the future or you under audit and need help now, contact P. Christopher Wegner at 239.449.9200 or cwegner@wegnerlawfirm.com.

 

How much should you expect to pay on taxes in 2019

While we are not yet out of 2018, it is about time to begin thinking about 2019 liabilities. (That said, there is still time to lower your 2018 taxes by deferring income and accelerating expenses, etc.).

Before we can design a tax strategy for you and your business, it may help to get an idea of what your rates could be:

2018 tax brackets and income ranges for single taxpayers

  • 10%: $0 to $9,525 of taxable income
  • 12%: $9,526 to $38,700
  • 22%: $38,701 to $82,500
  • 24%: $82,501 to $157,500
  • 32%: $157,501 to $200,000
  • 35%: $200,001 to $500,000
  • 37%: over $500,000
  • Standard deduction: $12,000

2018 tax brackets and income ranges for married taxpayers filing jointly and surviving spouses

  • 10%: $0 to $19,050 of taxable income
  • 12%: $19,051 to $77,400
  • 22%: $77,401 to $165,000
  • 24%: $165,001 to $315,000
  • 32%: $315,001 to $400,000
  • 35%: $400,001 to $600,000
  • 37%: over $600,000
  • Standard deduction: $24,000

2018 tax brackets and income ranges for taxpayers filing as head of household

  • 10%: $0 to $13,600 of taxable income
  • 12%: $13,601 to $51,800
  • 22%: $51,801 to $82,500
  • 24%: $82,501 to $157,500
  • 32%: $157,501 to $200,000
  • 35%: $200,001 to $500,000
  • 37%: over $500,000
  • Standard deduction: $18,000

Tax brackets and deductions from Business Insiderhttps://www.msn.com/en-us/money/taxes/how-the-new-gop-tax-law-will-affect-your-finances-next-year/ar-BBQ1vNi?ocid=spartanntp

Contact Wegner Law PLLC today to learn what we can do for you.

End of Year Tax Planning

End of year tax planning can reduce your taxes significantly for both this year and next (and beyond) with minimum investment of time and money. With the new tax laws passed last year, there are even more reasons to reevaluate your “tax circumstances.” From deferring taxes on large end of the year payments to shifting income into lower tax brackets, end of year tax planning is something small business owners should be taking advantage of now.

To learn more, contact P. Christopher Wegner today at 239 449 9200 or cwegner@wegnerlawfirm.com.

The reindeer have a good lawyer.

Senators attempt to delay Wayfair

A small number of Senators have put forth a bill that would prohibit states from imposing sales tax on out of state retailers with less than $10 million in annual sales until the states can agree on how best to implement the new taxes.

North Dakota v. Wayfair, Inc. is the recent Supreme Court case holding that states can impose sales tax on out of state retailers. This proposed legislation is one of the many different ways that federal and state governments are dealing with this drastic change.

To learn more about Wegner Law PLLC or contact us with questions, visit www.wegnerlawfirm.com or call P. Christopher Wegner at 239 449 9200 today. You may also email Chris at cwegner@wegnerlawfirm.com for more information.

Section 199A Sumary

With the introduction of the new tax law at the beginning of this year taxpayers should review any changes that may impact their taxes. One of the most significant additions that will effect many business and business owners is Section 199A. Below is a brief outline of the law and how to apply it to individual taxpayers. After reading, if you have any questions contact Wegner Law PLLC for more information

  • Reduces taxes on all qualified income
  • Deduction applies to Adjusted Gross Income (“below the line”)
  • Deduction does not apply to wages received by the taxpayer
  • Applies to pass-through entities, including:
    • Limited liability companies taxed as subchapter S corporations

    • Limited liability companies taxed as partnerships

    • Partnerships (including, general partnerships, limited partnerships, limited liability partnerships, etc.}

    • Corporations taxed as subchapter S corporations

    • Sole proprietorships

    • Single Member Limited Liability Companies (not taxed as a subchapter S corporation).

  • Does not apply to:
    • Trusts or RIETS
    • “Specified Services” over $315,000 (or $157,000 for single filers) such as:
      • Traditional service professions such as doctors, attorneys, accountants, actuaries and consultants
      • Traditional service professions such as doctors, attorneys, accountants, actuaries and consultants
      • Financial services
      • Athletes
      • “[A]ny trade or business where the principal asset is the reputation or skill” of the owner”
        • Definition specifically excludes engineers and architects from definition of Specified Services
      • Deduction is also limited for all other income over $315,000[5] (or $157,000 for single filers), over $315,000 (or $157,000 for single filers) deduction limited to the lessor of:
        • 20 percent of qualified business income with respect to the qualified trade or business; or

        • The greater of:

          • 50 percent of the W-2 wages with respect to the qualified trade or business; or

          • the sum of 25 percent of the W-2 wages with respect to the qualified trade or business, plus 2.5 percent of the unadjusted basis immediately after acquisition of all qualified property.

        • For purposes of determining the amount to use in calculating the limitation, include all W-2 wages (even to the taxpayer/owner of the business)

Applying Section 199A

1.     Does taxpayer work in a specified service trade or business?

If taxable income is less than $157,500 / $315,000 taxpayer receives full 20% deduction.

If taxable income is greater than $157,500 / $315,000 but less than $207,500 / $415,000 then a partial deduction is available.

If taxable income is over than $207,500 / $415,000 than taxpayer receives no deduction.

2.    All other businesses

If taxable income is less than $157,500 / $315,000 then the 20% deduction is fully available.

If taxable income is greater than $157,500 / $315,000 but less than $207,500 / $415,000 then a partial deduction is available with the W-2 and depreciable asset limit calculations phase in.

If taxable income is greater than $207,500 / $415,000 then the 20% deduction is compared to the full W-2 and depreciable asset limit calculations.