Trump’s 2024 Tax Plan: Key Highlights Explained

Posted on by William A Olson, CPA

Donald Trump’s 2024 tax plan includes several key proposals aimed at reducing tax burdens for individuals and businesses while encouraging domestic production. The main highlights are:

  1. Extension of the 2017 Tax Cuts and Jobs Act (TCJA): Trump proposes making the individual and estate tax cuts from the TCJA permanent. This includes maintaining the lower tax rates, higher standard deduction, and the reduced estate tax thresholds, which are set to expire after 2025 under current law​.
  2. Reduction in Corporate Tax Rates: He suggests lowering the corporate tax rate from the current 21% to 20% and potentially as low as 15% for companies manufacturing in the U.S. This aims to incentivize domestic production and job creation​.
  3. Elimination of Specific Taxes: Trump has proposed removing taxes on Social Security benefits, which currently apply to a portion of benefits for some retirees. Additionally, he has floated the idea of making tipped income and overtime pay tax-exempt, which could benefit service industry workers and low-income earners​.

As with all proposals, these changes are not guaranteed. Because of slim Republican margins in the House and Senate, I expect modifications to these proposals as they move through Congress.

Mid Year Tax Planning

Posted on by William A Olson, CPA

We are getting very close to the end of the third quarter in 2016 and if your tax bill for 2016 is likely to be much higher (or lower) than it was in 2015, now is the best time to take a look and adjust your income tax withholdings or estimated tax payments. It is also a good time to look at ways to potentially reduce your taxes due for 2016 and potentially save thousands of dollars.

There are several things that can be done before the end of the year and only a scant few things that can be done after 12/31 to reduce your tax bill so now is the time to look at things like:

  1. Deferring your income if you are going to be in a lower tax bracket in 2017 (moving bonus payments from 2016 to 2017).
  2. Accelerating income if you are going to be a higher tax bracket in 2017 (offer clients an early pay discount).
  3. Accelerating deductions from 2017 to 2016 (pay your property tax bill due in 2017 in 2016 or make your fourth quarter State estimated tax payment in 2016).
  4. Deferring deductions from 2016 to 2017 (pay your property tax bill due in 2017 in 2017 or make your fourth quarter State estimated tax payment in 2017).

There are also credits available for things like installing solar panels on your house… if you are thinking about doing that, doing it now will lower your 2016 tax bill.

Contact me today if you would like to see what options are available to you and how to minimize your tax bill.

William A. Olson CPA, 734-377-3641

Have you received an IRS notice?

Posted on by William A Olson, CPA

Here’s what to do. The full article from IRS.gov is copied below.

What to do if You Get a Notice from the IRS

IRS Summertime Tax Tip 2014-01, July 2, 2014

Each year the IRS mails millions of notices. Here’s what you should do if you receive a notice from the IRS:

  1. Don’t ignore it. You can respond to most IRS notices quickly and easily. And it’s important that you reply promptly.
  2. IRS notices usually deal with a specific issue about your tax return or tax account. For example, it may say the IRS has corrected an error on your tax return. Or it may ask you for more information.
  3. Read it carefully and follow the instructions about what you need to do.
  4. If it says that the IRS corrected your tax return, review the information in the notice and compare it to your tax return.If you agree, you don’t need to reply unless a payment is due.

    If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.

  5. You can handle most notices without calling or visiting the IRS. If you do have questions, call the phone number in the upper right corner of the notice. Make sure you have a copy of your tax return and the notice with you when you call.

  6. Keep copies of any notices you get from the IRS.
  7. Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not contact taxpayers by email, text or social media about their tax return or tax account.

For more on this topic visit IRS.gov. Click on ‘Responding to a Notice’ at the bottom left of the home page. Also see Publication 594, The IRS Collection Process. You can get it on IRS.gov or call 800-TAX-FORM (800-829-3676) to get it by mail.

Additional IRS Resources:

 

William A. Olson, CPA: Contact me at wolsoncpa.com

Mid-year Tax Planning (re-post)

Posted on by William A Olson, CPA

There are always things you can be doing throughout the year to lower your tax bill at year end. Full year tax projections are a great way to see how what you do now will make your life easier come tax time in 2015 and they can be updated as your circumstances change… contact me at any time if you would like one prepared for you.

As an additional resource, here is an article from Kiplinger with some good ideas you can implement right now.

William A. Olson, CPA: Contact me at wolsoncpa.com

2014 Standard Mileage Rates (IRS)

Posted on by William A Olson, CPA

Here they are.

2014 Standard Mileage Rates

IR-2013-95, Dec. 6, 2013

WASHINGTON — The Internal Revenue Service today issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates.  The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.  In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.  Notice 2013-80contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

William A. Olson, CPA: Contact me at wolsoncpa.com

4 Tax Planning Moves to Make Before Year End (from Market Watch)

Posted on by William A Olson, CPA

With the end of the year approaching, it’s time to make some moves to lower your 2013 tax bill. This is the second installment of our two-part series on that subject (also see: Tax moves to make before Christmas).

Strategy: Prepay Deductible Expenditures

If you itemize deductions, accelerating some deductible expenditures into this year to produce higher 2013 write-offs makes sense if you expect to be in the same or lower tax bracket next year. (See the tables at the end of this column for the 2013 and 2014 federal income tax brackets.)

January House Payment: Accelerating the house payment that’s due in January will give you 13 months’ worth of deductible interest in 2013 (unless you’ve already been following the prepayment drill). You can use the same strategy with a vacation home.

State and Local Taxes: Prepaying state and local income and property taxes that are due early next year can reduce your 2013 federal income tax bill, because your total itemized deductions will be that much higher.

Charitable Donations: Prepaying charitable donations that you would otherwise make next year can reduce your 2013 federal income tax bill, because your total itemized deductions will be that much higher. Donations charged to credit cards before year-end will count as 2013 contributions.

Medical Expenses and Miscellaneous Deduction Items: Consider prepaying expenses that are subject to deduction limits based on your AGI. The two prime candidates are medical expenses and miscellaneous itemized deductions. As explained earlier, medical costs are deductible only to the extent they exceed 10% of AGI for most people. However, if you or your spouse will be 65 or older as of year-end, the deduction threshold is a more-manageable 7.5% of AGI. Miscellaneous deductions—for investment expenses, job-hunting expenses, fees for tax preparation and advice, and unreimbursed employee business expenses—count only to the extent they exceed 2% of AGI. If you can bunch these kinds of expenditures into a single calendar year, you’ll have a fighting chance of clearing the 2%-of-AGI hurdle and getting some tax savings.

Warning: Prepaying Is Not a No-Brainer: The prepayment strategy can backfire if you will owe the alternative minimum tax (AMT) for this year. That’s because write-offs for state and local income and property taxes are completely disallowed under the AMT rules and so are miscellaneous itemized deductions. So prepaying these expenses may do little or no tax-saving good for AMT victims. Solution: ask your tax adviser if you’re in the AMT mode before prepaying taxes or miscellaneous deduction items.

Strategy: Make Major Year-end Purchases and Deduct Sales Taxes

If you live in a state with low or no personal income taxes, consider making the choice to deduct state and local general sales taxes instead of state and local income taxes on your 2013 return. Most people who choose the sales tax option will use an IRS-provided table to calculate their allowable sales tax deduction. However, if you’ve hoarded receipts from your 2013 purchases, you can use your actual sales tax amounts if that results in a bigger write-off.

Even if you’re stuck with using the IRS table, you can still deduct actual sales taxes on a major purchase such as a motor vehicle (car, truck, SUV, van, motorcycle, off-road vehicle, motor home, or recreational vehicle), a boat, an aircraft, a home (including a mobile prefabricated home), or a substantial addition to or major renovation of a home. You can also include state and local general sales taxes paid for a leased motor vehicle. So making a major purchase (or motor vehicle lease) between now and year-end could give you a bigger sales tax deduction and cut this year’s federal income tax bill.

Remember: the sales tax write-off only helps if you itemize. And if you’re hit with the AMT, you’ll lose some or all of the tax-saving benefit.

Strategy: Prepay College Tuition

If your 2013 AGI allows you to qualify for the American Opportunity college credit (maximum of $2,500) or the Lifetime Learning higher education credit (maximum of $2,000), consider prepaying college tuition bills that are not due until early 2014 if that would result in a bigger credit on this year’s Form 1040. Specifically, you can claim a 2013 credit based on prepaying tuition for academic periods that begin in January through March of next year.

  • The American Opportunity credit is phased out (reduced or completely eliminated) if your modified adjusted gross income (MAGI) is too high. The phase-out range for unmarried individuals is between MAGI of $80,000 and $90,000. The range for married joint filers is between MAGI of $160,000 and $180,000. MAGI means “regular” AGI, from the last line on page 1 of your Form 1040, increased by certain tax-exempt income from outside the U.S. which you probably don’t have.
  • Like the American Opportunity credit, the Lifetime Learning credit is also phased out if your MAGI is too high. However, the Lifetime Learning credit phase-out ranges are much lower, which means they are much more likely to affect you. The 2013 phase-out range for unmarried individuals is between MAGI of $53,000 and $63,000. The 2013 range for married joint filers is between MAGI of $107,000 and $127,000.

If your MAGI is too high to be eligible for the Lifetime Learning credit, you might still qualify to deduct up to $2,000 or $4,000 of college tuition costs. If so, consider prepaying tuition bills that are not due until early 2014 if that would result in a bigger deduction on this year’s Form 1040. As with the credits, your 2013 deduction can be based on prepaying tuition for academic periods that begin in the first three months of 2014.

Strategy: Give to Charity

If you have charitable instincts, here are two suggestions.

Donate Appreciated Stock; Sell Losers and Donate Cash: If you have appreciated stock or mutual fund shares (currently worth more than you paid for them) that you’ve held in a taxable brokerage firm account for over a year, consider donating them, instead of cash, to IRS-approved charities. You can generally claim an itemized charitable deduction for the full market value at the time of the donation and avoid any capital gains tax hit. On the other hand, don’t donate loser stocks. Sell them, book the resulting capital loss, and donate the cash sales proceeds. That way, you can generally deduct the full amount of the cash donation while keeping the tax-saving capital loss for yourself.

Remember: you must itemize deductions to gain any tax-saving benefit from charitable donations, except for donations out of an IRA, as explained immediately below.

If You’ve Reached Age 70 1/2: Donate from Your IRA: You can make up to $100,000 in cash donations to IRS-approved charities directly out of your IRA, if you’ll be 70 1/2 or older by year-end. Such direct-from-your-IRA donations are called qualified charitable distributions, or QCDs. Because they are tax-free, and no deductions are allowed for them, QCDs don’t directly affect your tax bill However, they count as withdrawals for purposes of meeting the required minimum distribution (RMD) rules that apply to your traditional IRAs after age 70 1/2. So you can avoid taxes by arranging for tax-free QCDs in place of taxable RMDs. Note that the QCD privilege will expire at the end of this year unless Congress extends it.

Don’t Overlook Estate Planning

For 2013, the unified federal gift and estate tax exemption is a relatively generous $5.25 million, and the federal estate tax rate is a historically reasonable 40%. Even if you already have an estate plan, it may need updating to reflect the current estate and gift tax rules. You may also have state estate tax issues that need to be addressed. Finally, you may need to make some changes for reasons that have nothing to do with taxes (births, deaths, and so forth). Contact your estate planning pro if you think your plan might need a tune-up. Year-end is a good time to do it.

Click here for the full article.

2013 changes to your Income Taxes

Posted on by William A Olson, CPA

Even in a year with no changes to the tax laws, it’s often a good idea to do an income tax projection at some point during the year to see if there are ways to lower your tax liability or to avoid interest and penalties for underpayment. The article below details seven significant changes to the Federal Income Tax that may affect you.

Seven significant new income tax law changes went into effect at the beginning of the year as a result of two pieces of legislation: The 2010 Health Care Reform Act and the American Taxpayer Relief Act of 2012.

Although the new laws are primarily designed to increase taxes for those with higher levels of income, everyone with earned income is affected. With the first seven months of 2013 behind us, have you begun planning for these changes?

Increased Social Security tax

At a basic level, anyone with earned income has seen a reduction in take-home pay this year as a result of the first tax law change. The employee Social Security tax rate, which was reduced from 6.2% to 4.2% in 2011 and 2012, is back to 6.2%.

Combined with the increase in the maximum Social Security wage base from $110,100 in 2012 to $113,700 in 2013, maximum Social Security tax withholding has increased from $4,624.20 in 2012 to $7,049.40 in 2013. This has resulted in a total paycheck reduction of $2,425.20 for individuals reaching the maximum wage base.

Six changes for high income levels

There are a total of six changes to be aware of once your income exceeds the $200,000 single or $250,000 married filing joint (MFJ) levels. Two of the changes begin at these levels, two at $250,000 (single) or $300,000 (MFJ), and two at $400,000 (single) or $450,000 (MFJ), with different definitions of income associated with each change.

A summary of the six changes, which are also included on the 2013 Individual Federal Income-Based Tax Law Changes spreadsheet, including the income types and applicable income threshold amounts, follows:

1. Medicare earned income tax increase

The Medicare tax on earned income increased from 1.45% in 2012 to 2.35% in 2013 on earned income exceeding $200,000 (single) or $250,000 (MFJ) if modified adjusted gross income (MAGI) also exceeds these threshold amounts. While the percentage increase of 0.9% is about half of the Social Security tax rate increase of 2%, unlike the calculation of Social Security tax which is capped at a maximum wage base, there’s no limit on the amount of wages that are subject to the Medicare tax.

2. New Medicare investment income tax

The Medicare investment income tax is a brand new tax that penalizes individuals with MAGI exceeding $200,000 (single) or $250,000 (MFJ) with taxable interest, dividends, and capital gains, as well as rental, royalty, and nonqualified annuity income, otherwise known as “investment income.” A surcharge of 3.8% is assessed on the lesser of net investment income or MAGI in excess of the applicable threshold amounts.

3. Itemized deductions limitation

Repealed in 2010, the itemized deductions limitation was reintroduced this year to the dismay of individuals with adjusted gross income (AGI) exceeding $250,000 (single) or $300,000 (MFJ). It reduces otherwise allowable itemized deductions by 3% of the amount by which AGI exceeds the threshold amounts with some exceptions.

4. Personal exemption phase out

Also repealed in 2010, the personal exemption phase out reduces the personal exemption amount of $3,900 per individual in 2013. The amount of the reduction is 2% for each $2,500 in excess of AGI threshold amounts of $250,000 (single) or $300,000 (MFJ).

5. Income tax bracket increase

Individuals with taxable income (TI) of $400,000 (single) or $450,000 (MFJ) will see an increase of 4.6% in their top tax bracket, with the 2012 top bracket of 35% increasing to 39.6% in 2013 on income exceeding these thresholds.

6. Long-term capital gains and qualified dividends tax rate increase

The federal income-tax rate on long-term (assets held longer than one year) capital gains and qualified dividends increased from 15% to 20% for individuals with TI exceeding $400,000 (single) or $450,000 (MFJ).

When applicable, any one, let alone a combination, of the foregoing seven income tax law changes can result in a sizable increase in your 2013 federal income tax liability compared with 2012.

If you haven’t had a 2013 income tax projection prepared to determine the potential impact of the various changes on your tax situation, now’s the time to get it done. Trust me; you don’t want to wait until your 2013 tax returns have been prepared to unveil the damage.

Article above reposted from here.

Year End Tax Planning

Posted on by William A Olson, CPA

The 2013 tax year is almost over and it is the perfect time to do some end of year tax planning… before it is too late. Many tax planning decisions can only be made before December 31st.

The first step is to estimate or project your tax liability based on the information you have now recognizing that the final numbers are subject to change. The second step is to play the “what-if” game.

  • What if I sell my Ford stock for a capital gain?
  • What if I wait to pay my winter tax bill until next year?
  • What if I buy a new computer for my business?
  • What if my bonus is 50% bigger than it was last year?

The ultimate goal of a good tax plan is to lower your overall liability. But a secondary goal is to make sure you are not going to get penalized for underpaying your liability for the current year. Either way, the objective is to save you money.

Good tax planning can you save you substantial amounts of money… and help you avoid tax penalties and interest. I offer my clients a comprehensive tax plan based on your individual circumstances. Contact me today to get yours.