Dear Friends, Clients, Colleagues:
Twenty-six years ago I took a risk and opened my own tax and accounting firm. It has been one of the most rewarding and challenging experiences of my life. Some of you may even remember meeting in my home to discuss taxes while my kids were running through my office. I am humbled to have grown this firm to where it is today, all thanks to my dedicated staff and loyal clients. I cannot be more grateful for the opportunity to serve your tax and accounting needs.
At this time, I am very pleased to announce that James Marshall, a colleague of many years, will be joining and ultimately taking over my practice. This will provide me with more time to spend with family and to pursue interests outside of accounting, including the remote possibility of tackling my wife’s to-do list.
I believe that James’ calm demeanor, work ethic, and extensive tax and accounting knowledge will be great assets in seamlessly transitioning the firm. James graduated from Penn State University in 1991 with a BS in Accounting & Finance. He joined the Big 4 Accounting Firm Price Waterhouse in 1992 (now PricewaterhouseCoopers – PwC) and subsequently completed a Masters in Taxation Degree at American University in 2010. Seeking more time with his family, James left PwC after 17 years and started J Marshall & Associates LLC in July 2008.
James grew up in Harrisburg, Pennsylvania. After graduating high school, James joined the Pennsylvania Air National Guard, serving our country for 29 years prior to retiring as a Lieutenant Colonel in December 2015. He has been married to his wife Camilla for 13 years and together they have two sons, James III, 10 and Joshua, 8.
Effective August 1, 2018, I became a member of J Marshall & Associates LLC. The combined firms will do business under the trade name of Marshall and Reumont CPAs. All staff at Reumont CPA, including myself, have transitioned to the combined firm and will continue to support your tax and accounting needs, headquartered at our Silver Spring office on Tech Road. Accordingly, you will not experience significant change other than the way we answer the phone or update our website.
We are excited about this change and are happy to field any questions or concerns that this time. I greatly value our relationship and I look forward to continuing them as I gradually transition into retirement over the next few years.
David A. Reumont CPA CFP CVA MAFF PFPS
David A. Reumont CPA, PC
A significant legislative issue related to health savings accounts (or HSAs) and high-deductible health insurance plans (or HDHPs) could impact you in the near future. The Contraceptive Equity Act was enacted in Maryland in 2016. Effective on Jan. 1, 2018, the Act mandates that male contraceptive services (vasectomies) must be covered as a preventive service — i.e., without any deductible or cost-sharing required.
HSA-qualified HDHPs are prohibited from covering any benefits before the deductible is met, except for IRS-approved preventive care services. This effectively means HSAs may be no longer available in Maryland, since the Contraceptive Equity Act made no exemption for HSA-qualified HDHPs. This would be a big loss to Marylanders as 2 out of 3 Americans rely upon the use of a HDHP in conjunction with an HSA account to combat rising health insurance costs.
I encourage you to read on if:
- You are an individual planning to make additional contributions into your HSA for calendar year 2018—either directly or via payroll deduction: You may want to delay your 2018 contributions until dust has settled. Meanwhile, perhaps you can top off your account for calendar year 2017 by making a direct contribution before April 15th if you have not already maxed out; if you do this, be sure to designate the contributions as catch up for year 2017.
- You are an individual who was planning to start an HSA account in 2018: Consider putting in just a few dollars or whatever minimum the financial institution will accept for the purpose of activating the account; then wait until dust has settled before making additional contributions.
Why the few dollars? To keep any penalties to a minimum while simultaneously trying to establish an earlier start date for your new HSA account so more of you upcoming medical expenses will qualify for payment via the HSA. For example, let's say you create an HSA account on 1/2/18 by contributing $5 and then sit tight. In between account creation and a legislative fix to allow contributions for 2018, your toboggan collides with a tree and you incur $1,200 in medical expenses. Your HDHP will not cover these expenses since you have not yet met your deductible. Having the HSA account in place before the accident may enable you to ultimately use pre-tax dollars to pay those bills. How do we figure that when you only have $5 in the account??
Once the dust settles, and the green light is back on for making contributions, you can put more money into the HSA account and then pay the bills directly from the HSA account. Or, if you've already paid the bills directly from your pocket, you can put more money into the HSA account and then reimburse yourself. Either way, you've saved money by using pre-tax dollars to pay. At a minimum, you've saved income taxes; if you contribute via a cafeteria plan at work, you've also saved social security and Medicare taxes.
- You work for a bank: Consider policy changes/exposures/client communications in regards to accepting new HSA accounts as well contributions for 2018 into HSA for Maryland residents.
- You are a payroll service provider: Consider policy changes/exposures/client communications in regards to accepting new HSA accounts as well contributions for 2018 into HSA for Maryland residents. A significant portion of HSA contributions occur via payroll activity—via employee cafeteria plan elections and/or via contributions employers "gift" on your behalf. HSA contributions made via payroll generally impact the calculation of social security and Medicare tax withholdings and employer match.
- You are a health insurance broker: Consider alerting employers to issue/helping evaluate exposures/employee communications and payroll strategies. Note, cessation of HSA contributions via a cafeteria plan will result in more tax to both employee and the employer (FICA match.)
If the IRS determines after Jan. 1, 2018 that male sterilization is a preventive service AND that position is treated retroactively, no further legislative action will be needed. However, if no such determination is made, new Maryland legislation would be required to preserve HSA contributions in Maryland.
Emergency legislation is expected to be introduced in the upcoming General Assembly session, which convenes on Jan. 10. If this legislation is passed in the 2018 session, there is still a strong possibility it will NOT BE retroactive to Jan. 1, 2018.
Please email Mari@reumontcpa.com if you have any questions.
"Tax Cuts and Jobs Act" (TCJA)
Congress has passed the tax reform law, commonly called the "Tax Cuts and Jobs Act" (TCJA). It is the biggest federal tax law overhaul in 31 years, and it has both good and bad news for taxpayers.
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While the changes are significant, there is one item in particular that all taxpayers should consider doing before December 31, 2017 and that is to pay all state income taxes and real estate income taxes due for 2017 or earlier years before December 31, 2017.
Beginning in 2018 the tax deduction for the combination of state, local and real estate taxes will be capped at $10,000 per year. The provision only pertains to schedule A expenses (itemized deductions).
So check your 2016 Form Schedule A and add together the real estate taxes and state income taxes. If the combination is greater than $10,000, pay your 2017 state estimated payments, any additional estimated state income taxes and any real estate taxes currently due before December 31, 2017. If you are unsure, please contact our firm as soon as possible.
Highlights of the new tax reform law:
Below are highlights of some of the most significant changes affecting individual and business taxpayers. Except where noted, these changes are effective for tax years beginning after December 31, 2017.
- • Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37% — through 2025
- • Near doubling of the standard deduction to $24,000 (married couples filing jointly), $18,000 (heads of households), and $12,000 (singles and married couples filing separately) — through 2025
- • Elimination of personal exemptions — through 2025
- • Doubling of the child tax credit to $2,000 and other modifications intended to help more taxpayers benefit from the credit — through 2025
- • Elimination of the individual mandate under the Affordable Care Act requiring taxpayers not covered by a qualifying health plan to pay a penalty — effective for months beginning after December 31, 2018
- • Reduction of the adjusted gross income (AGI) threshold for the medical expense deduction to 7.5% for regular and AMT purposes — for 2017 and 2018
- • New $10,000 limit on the deduction for state and local taxes (on a combined basis for property and income taxes; $5,000 for separate filers) — through 2025
- • Reduction of the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers), with certain exceptions — through 2025
- • Elimination of the deduction for interest on home equity debt — through 2025
- • Elimination of the personal casualty and theft loss deduction (with an exception for federally declared disasters) — through 2025
- • Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees and unreimbursed employee business expenses) — through 2025
- • Elimination of the AGI-based reduction of certain itemized deductions — through 2025
- • Elimination of the moving expense deduction (with an exception for members of the military in certain circumstances) — through 2025
- • Expansion of tax-free Section 529 plan distributions to include those used to pay qualifying elementary and secondary school expenses, up to $10,000 per student per tax year
- • AMT exemption increase, to $109,400 for joint filers, $70,300 for singles and heads of households, and $54,700 for separate filers — through 2025
- • Doubling of the gift and estate tax exemptions, to $10 million (expected to be $11.2 million for 2018 with inflation indexing) — through 2025
- • Replacement of graduated corporate tax rates ranging from 15% to 35% with a flat corporate rate of 21%
- • Repeal of the 20% corporate AMT
- • New 20% qualified business income deduction for owners of flow-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships — through 2025
- • Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after September 27, 2017, and before January 1, 2023
- • Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phase-out threshold to $2.5 million
- • Other enhancements to depreciation-related deductions
- • New disallowance of deductions for net interest expense in excess of 30% of the business's adjusted taxable income (exceptions apply)
- • New limits on net operating loss (NOL) deductions
- • Elimination of the Section 199 deduction, also commonly referred to as the domestic production activities deduction or manufacturers' deduction — effective for tax years beginning after December 31, 2017, for non-corporate taxpayers and for tax years beginning after December 31, 2018, for C corporation taxpayers
- • New rule limiting like-kind exchanges to real property that is not held primarily for sale
- • New tax credit for employer-paid family and medical leave — through 2019
- • New limitations on excessive employee compensation
- • New limitations on deductions for employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation
More to consider
This is just a brief overview of some of the most significant TCJA provisions. There are additional rules and limits that apply, and the law includes many additional provisions. Contact us to learn more about how these and other tax law changes will affect you in 2018 and beyond at 301-622-1200 or 31-475-0100.
© 2017 Reumontcpa.com
With many valuable tax provisions made permanent by last December's PATH Act while others were extended only temporarily, tax planning is more complicated, yet more important than ever. To save the most, you need to be sure you're taking advantage of every tax break you're entitled to.
This is exactly what our Tax Planning Guide is designed to help you do. We hope you find this complimentary copy helpful in understanding recent tax-related legislation and identifying steps you can take to reduce your personal and business tax liability. Click HERE to read our guide.
As you look through the guide, please note the strategies and tax law provisions that apply to your situation or that you would like to know more about. Then contact us with any questions you may have about these or other tax matters.