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Keeping you up to date with what we have to offer is important to us. Stay tuned for more information on how current changes can effect your business or personal taxes.

Education and Tax Changes

Education: Tax Changes You Need to Know As students gear up to head back to school, there are some changes to education deductions that could save or cost you more in taxes and even raise college tuition costs. Here is what you need to know to get up to speed: What is gone Continuing Education as an itemized deduction: In previous years, you could deduct expenses paid for job-related continuing education as a miscellaneous itemized deduction. This deduction has been eliminated. However, if your employer will pay for the education, they can cover up to $5,250 tax-free. Home equity line of credit (HELOC) interest for education expenses: A popular method of generating cash to pay for school expenses is taking out a HELOC. Beginning in 2018, you can only deduct HELOC interest if you use the loan proceeds to buy, build or substantially improve your home. This means that if you plan to obtain HELOC for purposes of paying for education expenses, the interest will not be deductible. What’s new 529 plans cover K-12 tuition: Funds from Section 529 savings plans can now be used tax-free to pay for up to $10,000 in K-12 private school tuition per year. Books, supplies or other K-12 expenses are not included in this change, but they are still eligible as legitimate college expenses. Be careful — not all states have adopted the K-12 inclusion, so they might still be taxable at the state level. Endowment tax of 1.4 percent on certain private colleges: Congress added an investment income tax on private colleges that have large endowments. The tax is expected to impact... read more

A Tax Surprise Is No Fun!

Is a Tax Surprise Waiting for You? Often lost in the excitement of large-scale tax change is how they can negatively impact some individual situations. Check out the questions below to see if you might be in for a tax surprise this year. Will you pay more than $10,000 in state and local taxes? Previously, you could take a full deduction for all state income, sales and property taxes as an itemized deduction. That deduction is now capped at $10,000 per year. Take a look at your 2017 itemized deductions to see if your state and local taxes were greater than the new cap. If so, you will now lose any excess amount over $10,000 as a deduction. Do you pay for work expenses? Before this year, employees were able to deduct work expenses (business mileage, uniforms, continuing education and other non-reimbursed expenses) as an itemized deduction. These deductions are now gone. If you typically pay for job related expenses, you might be on the hook for more taxes. Employees who deduct business use of their homes may be impacted even more.   Do you own a small business? There are many business tax changes for 2018. Bonus depreciation and Section 179 expensing are expanded, the domestic production activities deduction (DPAD) is eliminated, and there is a new qualified business income deduction for pass-through entities. It is a near certainty that one or more of these changes will affect your business taxes. Did you adjust your withholding allowances? When the tax cuts were finalized, the IRS adjusted the withholding tables as best they could to fit with your current... read more

Personal Information – Protecting Your Good Name Online

Are you Sharing Too Much Information Online? In today’s digital age, it is impossible to avoid the internet. Even if you don’t have a computer and actively avoid social media, there is information about you in some corner of the web. Here are some tips to help you manage your digital footprint: Actively manage your security settings. Every app, social media site and web browser have multiple layers of privacy and security settings. When you download a new app or register with a new site, don’t simply trust the default settings. Look through the options yourself to ensure you are comfortable with the level of privacy. One thing to watch for with apps on your phone is location settings. Some apps will track your location even when the app isn’t running.   Protect your online image. Career search firms now have strategies built entirely around recruiting through social media. According to LinkedIn, more than 20,000 companies use their platform to attract new talent. In addition to recruiting, human resource departments will vet prospective employees by reviewing social media profiles. What you share and how you portray yourself on social media is extremely important to your career. Pay attention to what others post about you, as well. If you are uncomfortable with what they are sharing, have a conversation with them and ask that it be taken down.   Set boundaries for yourself. According to the Pew Research Center, 74 percent of Facebook users visit the site on a daily basis. And 51 percent say they visit multiple times per day. Try to find the balance that allows you to... read more

Accounting System for A New Business

Setting up Your Business Accounting System You’ve done the hard work. You have a new business idea or you’ve found an existing business to purchase. Want to help ensure your business success? Pay attention to correctly setting up your business’ accounting system. Here’s how: Consider business entity. Choosing the right legal and tax entity for your business is important. Consult experts to discuss your options. On the tax side, sole proprietors use a Form 1040 Schedule C to report their activity, while other business entities such as S-Corporations and Partnerships file informational returns and pass-through profits to your individual tax return. C-Corporations require separate tax returns without pass-through of profits onto your personal tax return. Determine if you’ll use cash versus accrual basis. There are different approved methods of accounting. You will need to determine which is best for you. Sometimes your business dictates a required method, but not always. The basic difference lies in when you can book revenue and expense. One method (cash) is based upon when you actually receive or make payment. While the accrual method allows capturing this same information when there is an established obligation. Separate your books. If starting a business from scratch, remember to set up separate bank accounts and recordkeeping. IRS auditors are quick to disallow expenses when your business expenses are mingled together with personal expenses. The same is true with credit cards. Use a separate credit card for your business transactions.   Use sub-ledgers. Well-run businesses understand the need to organize elements of their business into accounting categories. These categories often use their own reporting system called sub-ledgers. Common... read more

Financial Health

Ideas to Improve Your Financial Health No-one likes to be blindsided by financial hardship. Listed here are 10 ideas to help ensure your financial situation stays healthy. Create a safety net. Plan to have a minimum savings balance to cover at least three months’ of expenses (ideally, this should be six to 12 months). If your reserves are light, start saving now. Even if it is a little amount, it can get you on the right track. Develop a budget. At least once a year develop a basic budget. Set goals and try to hit them. If this seems overwhelming, start simple. What is coming in and what goes out each month? Becoming aware is the first step to improving your financial health. Make your spouse a financial partner. If you die, does your significant other know where everything is? Can he/she pay the bills? Does he know where account numbers are? Does your spouse know who you use to help with things? If not, it is time to start talking.   Review your beneficiaries. Once a year review beneficiaries on all accounts. This includes retirement accounts as well as names on wills and estate plans. The legal hassle created without this review can be devastating to your surviving family. This is especially important if you had a recent life event (marriage, divorce, birth or death). Maximize your benefits. Make sure you review your retirement plans to maximize any employer match in your account. Also review your plan’s administrative expenses. If they are too high they can cost you thousands of dollars over your lifetime. Create a disaster plan.... read more

Student Loan Tax Traps

Student Loan Forgiveness Creates New Tax Trap There’s a new student loan repayment program that forgives some student loan debt if other payments are made. This new debt forgiveness is creating a tax surprise for the unsuspecting student. Here is what you need to know. The debt forgiveness program dilemma To combat the hardship of high student loan debt, a popular new repayment option is the income-based repayment plan. These plans limit monthly payment amounts to a percentage of discretionary income. They also limit the number of repayment years. If your loan is not paid by a pre-determined future date and you’ve been making the payments as agreed, the balance of the loan is forgiven. While the prospect of having a portion of the debt canceled is enticing, it can create an unexpected tax burden if you are not prepared. Here’s why it may be a problem: Canceled debt is considered taxable income. When a portion of a loan is forgiven, that amount is considered taxable income in the year in which the debt is cancelled. While there are exceptions, this is the general tax rule. A 1099-C is issued to you and the IRS. Upon the forgiveness of the student loan debt, the loan servicing company will issue a Form 1099-C titled “Cancellation of Debt”. A copy of the form will be delivered to both you and the IRS informing both parties of the amount of forgiven debt. This amount needs to be included on your Form 1040. Taxes are due at filing. The entire amount will likely be taxed at the taxpayer’s highest marginal tax rate. This... read more

We’re Debt-Free!

Become Debt-Free The average household carries $137,063 in debt, while the median household income is less than $60,000, according to data from the Federal Reserve and U.S. Labor Department. While it’s easy to get into debt, it can be hard to get out. Here are five tips personal finance experts recommend to lower your debt burden: List and prioritize Create a list all of your debts by amount owed and the interest rate you are paying. Then prioritize your repayment based on one of two strategies: The Avalanche. Focus on paying the debt with the highest interest rate first, to minimize the total interest you’ll pay. The Snowball. Focus on paying the debt with the smallest balance first. While this may seem counterintuitive, it’s recommended for those who have difficulty sticking to a repayment plan. The smallest balance gets paid off sooner and then its debt repayments can be devoted to the next debt. This gives you a powerful psychological boost and sense of achievement. Pay more Pay more than the minimum amount due. Your lender receives more interest income from you if you pay the minimum, but that’s not what you want. Think of ways you can increase your income to make the extra payments, such as: Taking a second job or freelancing. Asking for a raise at work. Devoting extra cash to debt repayment, such as your refund check. Spend less Review your monthly expenses to find things that you can eliminate to increase your debt repayment. You can reward yourself by renewing these luxuries, but only after you’ve paid off what you owe. You could cut... read more

Business Partnership – A Good Plan?

Elements of a Good Business Partnership Like a bundle of sticks, good business partners support each other and are less likely to crack under strain together than on their own. In fact, companies with multiple owners have a stronger chance of surviving their first five years than sole proprietorships, according to U.S. Small Business Administration data. Yet sole proprietorships are more common than partnerships, making up more than 70 percent of all businesses. That’s because while good partnerships are strong, they can be hard to make. Here are some elements that good business partnerships require: A shared vision Business partnerships need a shared vision. If there are differences in vision, make an honest effort to find compromise. If you want to start a restaurant and your partner envisions a fine dining experience with French cuisine, while you want an American bistro, you are going to be disagreeing over everything from pricing and marketing to hiring and décor. Compatible strengths Different people bring different skills and personalities to a business. There is no stronger glue to hold a business partnership together than when partners need and rely on each other’s abilities. Suppose one person is great at accounting and inventory management, and another is a natural at sales and marketing. Each is free to focus on what they are good at and can appreciate that their partner will pick up the slack in the areas where they are weak. Defined roles and limitations Before going into business, outline who will have what responsibilities. Agree which things need consensus and which do not. Having this understanding upfront will help resolve future... read more

Whether to Amend Your Tax Return

Is It Worth It to Amend Your Return? Whether it makes sense to amend your return depends on which of these situations you’re in: If you owe the IRS If you discover an omission on your tax return that results in you owing additional tax, you need to correct it with an amendment and provide the tax due. Don’t delay if this is your situation. If the IRS discovers the omission before you do, they may add interest and penalties to your bill. If you are due a refund If you find a mistake that should result in getting a larger refund check, you can claim it by filing an amended return. But there are several reasons it may not be worth it. It may open a can of worms. In many cases, amending your federal return means also amending your state returns. Multiply the hassle if the error spans across two or more years. It puts a spotlight on you. While your original return may have passed through the IRS’s automated system without a hitch, now that it’s amended you can virtually guarantee it will get a closer look. If you have anything else in your return that can trigger an audit, like business deductions, charitable donations, or other credits, this can be a concern. It may take a long time to get a refund. The IRS tries to process your original return within three weeks. No such luck for an amended return. It can take several months to get an amended return processed and see that extra refund, even as long as 1½ years in rare cases.... read more

New Parents and Tax Breaks

Five Tax Breaks for New Parents New parents have their work cut out for them. Not only are they dealing with lost sleep, they also face the extra cost of raising a child. At least there are a lot of potential tax breaks available to them. Check out this list and share it with any new parents you know. Child Tax Credit Tax law changes this year not only double the size of the Child Tax Credit, they make it available to more parents than ever before. The credit increases to $2,000 from $1,000 (with $1,400 of it being refundable even if no tax is owed). Meanwhile, the eligibility phaseout threshold increases sharply to $400,000 from $110,000 for married joint filers (and to $200,000 for single taxpayers). Child and Dependent Care Credit If you pay a nanny, babysitter, daycare or a relative to take care of your child while you and your spouse are at work, you can claim the Child and Dependent Care Credit. It’s up to $1,050 on $3,000 in expenses for one child and twice that for two or more children. The key is that you and your spouse (if you are married) must both be working, and you can’t claim expenses for overnight care. Below the kiddie tax threshold If you have property that produces income, such as bonds, stocks, mutual funds, interest or realized capital gains, you can lower your tax by transferring a certain amount of that income to your children. Why? Your child has a lower tax rate than you do on unearned income. This works up to a certain dollar limit... read more

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