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Tax Corner - Blog

Firm Update

Posted by Admin Posted on Aug 06 2018

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. 


Best wishes,


David A. Reumont CPA CFP CVA MAFF PFPS
David A. Reumont CPA, PC

Maryland Back in the HSA Game for 2018

Posted by Admin Posted on Mar 07 2018

Great news--perhaps the IRS really does care!!

While the Maryland legislature still has work to do to  fix the “free vasectomies” insurance mandate for future years so as to not disqualify Health Savings Accounts-qualified High Deductible Health Plans, the IRS has granted retroactive relief for 2018 and for 2019  as well if needed.   So employees and individuals can once again make pre-tax contributions to their HSAs for 2018 and contributions made earlier this year will not be subjected to penalties.  Note—You must still have an otherwise HSA-qualified HDHP and the vasectomy clause must be the only reason for HSA disqualification.   Following is an excerpt from the IRS.

TRANSITION RELIEF
The Treasury Department and the IRS are aware that certain states require benefits for male sterilization or male contraceptives to be provided without a deductible, and that individuals have enrolled in health insurance policies and other arrangements that otherwise would qualify as HDHPs with the understanding that coverage for male sterilization or male contraceptives without a deductible did not disqualify the policies or arrangements from being HDHPs. The Treasury Department and IRS also understand that certain states may wish to change their laws that require benefits for male sterilization or male contraceptives to be provided without a deductible in response to this notice, but may be unable to do so in 2018 because of limitations on their legislative calendars or for other reasons. Until these states are able to change their laws, residents of these states may be unable to purchase health insurance coverage that qualifies as an HDHP and would be unable to deduct contributions to an HSA.

Accordingly, this notice provides transition relief for periods before 2020 (including periods before the issuance of this notice), to individuals who are, have been, or become participants in or beneficiaries of a health insurance policy or arrangement that provides benefits for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for an HDHP. For these periods, an individual will not be treated as failing to qualify as an eligible individual under section 223(c)(1) merely because the individual is covered by a health insurance policy or arrangement that fails to qualify as an HDHP under section 223(c)(2) solely because it provides (or provided) coverage for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for an HDHP.

Should you have any questions, Reumont CPA is here to help.

 

HSAs in Maryland are in Jeopardy

Posted by Admin Posted on Dec 30 2017

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)

Posted by Admin Posted on Dec 27 2017

"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. 

YOUR ACTION ITEM

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.

Individuals

  • • 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

Businesses

  • • 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

 

2017-2018 Tax Planning Guide

Posted by Admin Posted on Aug 07 2017

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. 

Treasury Accelerates Due Date for “Off-Shore” FBAR reporting FinCEN Form 114

Posted by Admin Posted on Oct 12 2016

 

If you have an ownership interest in or signature or other authority over a financial account located outside the US (aka, an “off-shore account”) with aggregate balances of $10K or more-- listen up!    Effective in 2017,  the Treasury Department has accelerated the date for filing FinCEN Form 114 (from June 30) to April 15th in order to align the FBAR with the filing deadline for individual income tax returns.     Again, you do not want to miss this deadline.  The penalties are (1) if non-willful, up to $10,000 or (2) if willful, up to the greater of $100,000 or 50% of the account balance; criminal penalties may also apply.   The good news is that you can request an extension to October 15th if necessary—but make sure you do so by  April 15th!   

 

Note:  Despite the alignment of due dates,  the FinCEN Form 114 is not attached to your Form 1040 individual income tax return.  Instead, it must be filed electronically at http://bsaefiling.fincen.treas.gov.  However, don’t forget to consider income generated by your off-shore accounts.  This may be taxable on your Form 1040.    US citizens and residents are responsible for reporting  their worldwide income on their tax returns, whether FinCEN 114 reporting is required or not.

 

And watch for personal FBAR filing requirements even when the money is not yours.  For instance, if you own over 50% of the stock of a corporation that has foreign accounts or if you have signature authority over foreign accounts belonging to your employer, you may have a personal reporting requirement in addition to your corporation having a filing requirement. 

 

And what does FBAR stand for?  Glad you asked:   Report of Foreign Bank and Financial Accounts

 


 

1040 Federal Refunds to Be Delayed for Some Taxpayers

Posted by Admin Posted on Oct 12 2016

 

Early filers eligible for the Earned Income Credit (EITC) or Additional Child Tax Credit (ACTC)  on their 2016 returns may experience a delay in receiving their refund.  A high percentage of fraudulent returns are submitted during the early days of tax season.  The IRS is implementing new measures to counteract this fraud.  As a result, refunds for early filers with the EITC and/or ACTC will be held until 2/15/17.   You can still file your returns early—just allow more time to received your anticipated refund if you are a very early filer.  Normal processing time is expected for all but the very early filers.

 


 

1099-Misc Reporting –Exclude Payments Made by Credit Card

Posted by Admin Posted on Oct 12 2016

 

We were surprised to find some tax preparers at the IRS National Tax Forum still confused on this one, so in case it slipped past your radar screen as well….  

 

Payments made by credit card are no longer subject to reporting on Form 1099-Misc.  Why?  A new form 1099-K was introduced wherein credit card processing companies became responsible for this reporting.  So ignore payments you made by credit card when (a) determining if there is a 1099 filing requirement and (b) when reporting the amount paid.    


 

IRS Accelerates Due Date for Forms W2 and some forms 1099-Misc

Posted by Admin Posted on Oct 12 2016

 

The IRS now requires that employers submit 2016 forms W2 and 1099-Misc with Box 7 “Nonemployee Compensation” forms to the IRS by January 31, 2017 regardless of whether you submit the forms electronically or via hardcopy.  In prior years, hardcopy submissions were due to the IRS at the end of February and electronic submissions were due the end of March.   No longer!  The objective of the accelerated due date is to help the IRS combat fraudulent 1040 income tax filings.   So if you are an estate, trust, employer, sole proprietor or possibly a landlord who may be required to file form 1099-Misc with Box 7,  please plan accordingly.   The penalties for late filing are quite significant.   And don’t forget payments to attorneys!  The IRS require that amounts of $600 or more paid for legal are to be reported on form 1099-Misc Box 7 “Nonemployee Compensation” whether paid directly to an attorney or to a law firm.   The due dates for other forms 1099 have not changed.   

 

Not sure if you have a filing requirement or need help with filing?  Call Reumont CPA.  


 

Montgomery County, MD Earned Sick & Safe Leave Law

Posted by Admin Posted on Oct 12 2016

The County’s new Earned Sick and Safe Law goes into effect on October 1. The law requires most employers in the County to provide earned sick and safe leave to employees for work performed in Montgomery County. The intent of the law is to provide employees with paid leave or time off to take care of things such as sickness, family illnesses or domestic violence.

Click HERE to learn more about the new law


 

Repair and Capitalization Guidelines - Updated

Posted by Admin Posted on Oct 11 2016

Changes are happening everyday to our tax laws and we wanted to make sure our clients are aware of all the changes. Please check back often for new updates that may affect you and/or your business. See below for new legislation that was recently passed that may have an inpact on your taxes.

Deduction and Capitalization of Expenditures Related to Tangible Personal Property

On September 19, 2013 the Internal Revenue Service issued new final Regulations Regarding Deduction and Capitalization of Expenditures Related to Tangible Personal Property. These Regulations are in effect for tax years beginning on or after January 1, 2014. The Internal Revenue Service also followed up with two additional Revenue procedures on January 24, 2014 and February 28, 2014 providing further clarification of certain areas in these new rules. These incredibly complex Regulations require you to keep much better records for repairs, maintenance, materials and supplies, and require you to specifically analyze each of these items costing over $2,500.00, assuming you do not have audited financial statements and make the annual de minimis safe harbor election in filing your timely filed (including extension) income tax returns. If you don’t have procedures in place the items costing over $200.00 would require additional analysis and the deduction for these items might be limited.

These new regulations apply to all businesses including rental properties, farms, sole proprietorships, partnerships, corporations (regular and S) and non-profits. So no matter what business form you are required to file, 1040 (individual), fiduciary (1041), partnership (1065), corporations (1120 or 1120S) or Non-Profits (990), these rules affect your tax return.

We are writing this letter to help you understand that if you do not analyze these individual items and classify them appropriately we will be required to spend substantial additional professional time, with substantial additional fees to do so.

Below is a summary of the new rules in effect for 2014 and what you will need to do to comply with the new IRS requirements with the election of the de minimis safe harbor election made with a timely filed tax return (including extension).

Materials and Supplies

The new Regulations allow your business to expense any individual material or supplies costing $200.00 or less (per invoice, or per item), or which you expect to last less than 12 months, or fuel, lubricants or any similar items that will be used in 12 months or less.

Action: Please add a new expense account to your accounting system titled “De Minimis Materials and Supplies” and enter any expense meeting the above qualifications in this account. Materials and supplies costing more than $200.00 that will need to be individually analyzed under the rules below to determine if they are qualified expenses to be deducted in the current year, capitalized until used or treated as equipment that must be depreciated over several years. Special rules apply for extra parts (rotable parts).

Equipment, Repairs and Maintenance

You are now allowed to write off any individual equipment item or equipment repair or maintenance item costing $500 or less (per invoice or per item). For buildings a different rule applies as discussed below.

Action: Please add a new expense account to your accounting system titled “De Minimis Equipment, Repairs and Maintenance” and enter any expense meeting the above qualifications in this account but refrain from adding any items above that cost to this account. Equipment, repair and maintenance items costing more than this will generally be required to be individually analyzed under the rules below to determine if they are qualified expenses, capitalized as materials supplies (deductible when used or disposed) or treated as equipment that must be depreciated over several years.

Building Repairs & Maintenance

If your building has a cost basis of $1,000,000 or less a special rule applies. Any repairs that are expected to occur more than once in ten years, and costing less than $10,000 individually may be written off as repairs.

Items that are not expected to be replaced more once in ten years must also be examined individually under the rules below to determine if they may be treated as expenses or depreciable assets.

Expenses Above the Limits

The IRS now requires you to examine each individual item outside of the above limits to determine if it has results in a betterment, restoration or adaptation of the main unit of property. A unit of property is now defined as the inter-related parts composing one larger unit.

For example a unit of property is a car composed of inter-related parts, so any repairs to the car must be examined as to whether they are a betterment, restoration or adaptation of the car as a whole rather than its individual components.

For buildings the test must first be applied to the building as a whole and then applied to its sub components of HVAC, plumbing, electrical, structure, elevators, security, fire protection or gas distribution.

Any costs resulting in betterment, restoration or adaptation under these rules must capitalize and depreciated; otherwise it is expensed as repairs.

Betterment is defined as fixing a condition that existed at purchase, or an increase in the physical size or capacity of an asset. Betterments must be capitalized and depreciated so they should be added to your building account.

restoration is generally defined as a cost to return a non-functional asset to use, the cost of rebuilding an asset after the end of its depreciable life or replacing a major component of the unit of property.

For example a transmission replacement would be the replacement of a major component of a unit of property of a truck and must be capitalized and depreciated.

Finally, an adaptation cost is incurred to change the function of a piece of equipment or property to a different use, and must also be capitalized and depreciated.

We are sending a sample accounting policy for the De Minimis safe harbor under these new rules which we recommend be adapted to your business for use in 2014 and after. You need to have a policy for each of your businesses. We will have a copy in a PDF and Word format available on our website, just complete the business or taxpayer’s name, print and sign it. Please send us a copy once completed for our files, and you need to keep the policy with your permanent records.

Also, we are enclosing a summary of the steps to analyze your expenses in applying these rules under the Repairs and Capitalization Guidelines of these new Regulations, which outlines the steps that need to be taken on each purchase. It is complicated but needs to be applied to each purchase.

These new Regulations require many additional steps and analysis and are generally unfriendly to small businesses. We would be happy to discuss them with you, please call us to schedule an appointment with you or your accounting staff to help you keep the costs of IRS compliance down.

Sincerely,

David A. Reumont CPA, PC.

Attachments:

Sample Capitalization Accounting Policy

Summary of the steps in applying the Repair and Capitalization Guidelines


 

2016-2017 Tax Planning Guide

Posted by Admin Posted on Sept 07 2016

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. 

Welcome to Our Blog!

Posted by Admin Posted on Mar 18 2015
This is the home of our new blog. Check back often for updates!