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Volume 36; Disaster Relief, Sales Tax and Minimum Wage Updates, Tax Planning for Young Professionals

Posted by Admin Posted on Sept 28 2017

 

DISASTER RELIEF


Written by: Marci Gietl, CPA

Taxpayers in certain counties within Florida and Texas affected by the recent hurricanes or associated flooding may be eligible for additional filing extensions until January 31, 2018. The provisions apply if the individual’s primary residence or the entity’s principal place of business is located in an affected area. The provisions also apply if the records necessary to file are located in such an area. The extensions impact not only filing deadlines of returns, but also provide for late payment penalty relief for certain tax payments. Please contact us to discuss these provisions if you think you may qualify.

UPDATES - Sales Tax on Deliveries and City of St Louis Minimum Wage


Written by: Renee Vuylsteke, Enrolled Agent
                        
           

In July 2016, the Missouri Department of Revenue announced delivery fees were subject to sale tax if they were part of the taxable sale of goods even if separately stated effective July 29, 2016.

On July 5, 2017 the governor signed Missouri Senate Bill 16 which excludes usual and customary delivery charges from sales and use tax. Effective August 28, 2017, delivery charges that are stated separately from the sale price will not be subject to sales and use tax.

On May 5, 2017, the City of St. Louis raised the minimum wage from $7.70 to $10 an hour for covered employers. Effective August 28, 2017, the legislation preempted the City’s law and minimum wage will return back to the State of Missouri’s minimum wage of $7.70 an hour for the City of St. Louis.

           

TAX PLANNING FOR YOUNG PROFESSIONALS AND BUSINESS OWNERS


Written by: Marci Gietl, CPA

As you start and grow in your career or with a new business venture, it’s important to not only consider your tax compliance requirements but also tax planning to reduce your tax obligations.

Employer Benefits:

As an employee, ensure that you have a full understanding of the benefits your employer offers and how you can utilize them as many lead to tax savings. As a business owner, consider these benefits to offer employees that may have maintenance costs associated with them but provide you not only with tax deductions but could have payroll tax savings as well. As a business owner looking to establish any of these plans, ensure you have proper documentation of the plan in compliance with IRS regulations.

  • Cafeteria Plan: Typically cover health costs or dependent care benefits. Withheld pre-tax (before federal and state income tax) and also before FICA taxes.
  • Education: Employers may establish plans to reimburse employees for education related expenses. Expenses for non-job related education up to $5,250 annually can be excluded from federal and state income taxes, FICA and FUTA taxes. Amounts that are job-related are not limited by IRS regulations.
  • Retirement: Pre-tax accounts allow you to save federal and state taxes currently with funds being taxable upon distribution. (Caution: Early distributions may be subject to penalties.) After-tax accounts (Roths) are tax currently but grow tax-free and if proper terms are met, are distributed tax-free. Bonus to the employee may be matching dollars from the employer of part or all of your contributions and depending on your level of income, you may qualify for a retirement savings tax credit! Employer may benefit upon setting up the plan from a tax credit for doing so.

Retirement:

Retirement accounts may be viewed at times as just another source of savings to tap into when funds are needed. However, it’s important to understand the potential consequences of doing so and how some planning may reduce the effects of a distribution. For example, funds withdrawn from a 401(k) plan used for a first-time home purchase would be subjected to a 10% early withdrawal penalty as well as regular federal and state income taxes. A distribution from an IRA for the same purpose up to a maximum of $10,000 would still be subject to regular income taxes but would avoid the 10% penalty. There are other exceptions to the penalty that apply only to IRAs and not 401(k) withdrawals as well. One way to plan for this is to rollover any old 401(k) plans from previous jobs into IRAs before the need arises.   

Additionally, consideration should be given to converting traditional IRAs into Roth IRAs either in a lump sum or over a number of years depending on your tax bracket and ability to pay the taxes. The benefits of then having these funds in the Roth are as mentioned earlier for the funds to grow tax-free and eventually be distributed as such. Tax planning can help you determine if this is the right move for you.

Business Obligations:

Tax planning as a new business owner should not just factor in federal and state income taxes, but should also consider other taxes that your business may generate: self-employment tax, payroll taxes, sales tax, excise tax, etc. The nature of your business will determine your tax obligations, but tax planning can help you understand the differences in these taxes and especially what income is subject to or expenses are deductible against each of these. Documenting all income and expenses thoroughly can allow for better planning to reduce these obligations but also to ensure proper compliance to avoid unnecessary penalties and interest.

Please contact us to further discuss any of this information.

IMPORTANT TAX DATES TO REMEMBER


We want to remind you of important tax due dates and deadlines that are just around the corner.

If you have an extended return due in the coming months please have your information to us for tax preparation as soon as possible.

Here is a recap of important dates to keep in mind as 2017 progresses:

  • October 2, 2017 - Form 1041, if extended 
  • October 16, 2017 - Form 1040, if extended 
  • January 16, 2018 - 2017 4th quarter estimate payment    
                     
INTERACT WITH US ON THE WEB

Visit our website. Explore all the new features at www.brcpallc.com and don't forget to like us on Facebook and LinkedIn to keep up with all the latest tax news.

 
Becker and Rosen CPAs, LLC Disclaimer

This newsletter is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call us if you have questions. 

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For your convenience, this newsletter may contain hyperlinks to websites and servers maintained by third parties. We do not control, evaluate, endorse or guarantee content found in those sites. We do not assume any responsibility or liability for the actions, products, services and content of these sites or the parties that operate them. Your use of such sites is entirely at your own risk.

 

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