Social Security benefits will increase in 2019 by 2.8% for cost-of-living. 67 million Americans will benefit from the change.
Wages subject to Social Security tax will increase to $132,900 in 2019 (up from $128,400 in 2018). This will cost high-income taxpayers an additional $279 in Social Security tax in 2019. (That amount matched by the employer for a total additional cost of $558).
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Ref: Chief Counsel Advise 201816010
Amounts in “tip boxes” distributed to the employees should be included in the employees’ wages and subject to FICA/Medicare and similar employee/er withholdings as they are paid.
The employer can file Form 8846 and claim a tax credit equal to FICA/Medicare taxes paid by the employer in reference to those tips.
Thank you to all of our clients for a great tax season. For you “newbies,” we are here year-round for your tax/accounting needs. Let us know if we can be of assistance.
For the 25% of you on extension: Mark your calendar with these due dates… OCTOBER 15 is the final date for individual extensions. SEPTEMBER 15 is the final due date for most calendar-year-end business entities.
Let us know if you have questions on the new 2018 tax laws.
Source: Bipartisan Budget Act of 2018 (BBA)
BBA defines a California wildfire disaster area as those declared as Presidential disaster areas under the Stafford Act between the dates Jan 1, 2017 and Jan 18, 2018.
Casualty loss: The 10% of adjusted gross income limitation is eliminated allowing more of the net deduction (after insurance reimbursement) as a tax deduction. Also, for taxpayers who don’t itemize, the casualty loss can be added to their standard deduction.
IRA penalty waived: Subject to dollar limitations, the ten percent early IRA penalty is waived for amounts used to replace damaged property in the California wildfire disaster zones. (Traditional IRA withdrawals are still subject to income tax).
For declared California wildfire disaster zones, see the FEMA web page.
Reference: HR 1, “Tax Cuts and Jobs Act.”
There’s a LOT of contradictory media articles on the subject of prepayment of California property taxes due April 2018. Here’s an excerpt from Parkers Tax Bulletin:
Caution: The Conference Bill includes a provision blocking taxpayers from prepaying state and local income tax relating to the 2018 tax year in 2017 in order to circumvent the new limitation on the deduction. Specifically, the bill provides that, in the case of an amount paid in a tax year beginning before January 1, 2018, with respect to a state or local income tax imposed for a tax year beginning after December 31, 2017, the payment will be treated as paid on the last day of the tax year for which such tax is imposed for purposes of applying the provision limiting the dollar amount of the deduction.
Our analysis: As CA starts its fiscal year 7/1/17, the taxes payable in April are for a tax year beginning before 12/31/17 and should be ok.
So… in PLAIN LANGUAGE: You CAN pay your 2nd installment of your 2017 property taxes (due by April 2018) before 12/31/2017 (postmark) and deduct in 2017 UNLESS you are subject to Alternative Minimum Tax in 2017. You CANNOT pay your December 2018 (first) installment of your 2018 property taxes early. The CA counties won’t take the payment and the IRS won’t let you deduct it.
Problem solved!
Source: SB 833; Welfare and Institutions Code Sec 14009.5
Effective for Medi-Cal recipients who die on or after January 1, 2017: Medi-Cal can now only make a recovery claim against estate assets subject to probate that were owned by the decedent at the time of death. (Before this change, all assets owned at death were subject to estate recovery claims).
Short summary: If the Medi-Cal recipient has placed his/her residence in a revocable trust (e.g., a “living trust”), it is not an asset which will be subject to probate and Medi-Cal won’t be able to make a recovery claim against it.
There are other details in this process. Please contact us if you would like a referral to an estate/trust attorney who can give you professional guidance in your particular situation.
Source: CA R&TC Sec 19172, 19172.5 and like IRC.
Significant penalties apply to pass-through entities which miss their extended filing deadline of September 15, 2017. After that point, the extension is not valid. The penalty for a partnership with two partners filing on November 15, 2017 would be:
Federal: 8 months * $195/partner* 2 partners = $3,120
California: 8 months * $18 * 2 partners = $288
Total late filing penalties based on number of partners = $3,408.
DON’T MISS THE EXTENDED DUE DATE OF SEPTEMBER 15! (Be sure we have your partnership or corporate information no later than September 1, 2017 for the 2016 tax year).
Reference: Chief Counsel Advice 201724025
An S corporation used a PEO to “lease” its employees with the contracted understanding that the PEO would remit all payroll taxes to the IRS. The PEO failed to pay those taxes and the IRS concluded that they were still the liability of the S corporation employer in spite of its contract with the PEO.
The CCA did point out that IF the PEO goes through the process of being certified by the IRS, becoming a CPEO, then the S corporation would NOT have been held responsible for the CPEO’s failure to remit the taxes to the IRS.
Take away: If you’re using a PEO for “employee leasing,” be sure that they have gone through the process of being certified with the IRS and are a CPEO.
Ref; Sec 2702 and Reg 25.2702
QPRT are often used to remove a primary residence from a large estate as well as asset protection. The rules for establishing are complex and care should be taken to engage an attorney well-versed in their formation. QPRT are typically more “flexible” that often thought including:
We can discuss this at length as well as provide referrals to Martindale A-rated attorneys to help in establishing such a trust if it meets your tax needs.
