Eligible taxpayers may now deduct up to 20 percent of certain business income from domestic businesses operated as sole proprietorships or through partnerships, S corporations, trusts, and estates. The deduction may also be claimed on certain dividends. Eligible taxpayers can claim the deduction for the first time on the 2018 federal income tax return they file in 2019. This provision is the result of tax reform legislation passed in December 2017. See full post here:
During the annual Sales Tax Holiday, a variety of back-to-school essentials are exempt from the state’s 6% Sales Tax and any applicable local taxes. Tax free items range from clothing, accessories, and shoes to school supplies, backpacks, and computers. Shoppers will also find tax free items for the home and dorm room. See full post here: https://dor.sc.gov/taxfreeweekend
“Under the Bipartisan Budget Act of 2018 which was signed in February 2018, a number of tax credits for residential energy efficiency that had expired at the end of 2016 were renewed. Tax credits for non-business energy property are now available retroactive to purchases made through December 31, 2017. Tax credits for all residential renewable energy products have been extended through December 31, 2021, and feature a gradual step down in the credit value.”
What tax credits are available?
Bipartisan Budget Act of 2018 (BBA), signed February 9, 2018, reinstated the nonbusiness energy property credit for 2017, and it reinstated the residential energy efficient property credit for qualified small wind energy property costs, qualified geothermal heat pump property costs, and qualified fuel cell property costs to the end of 2021. You may claim these credits on your 2017 tax return if you otherwise meet the criteria. If you have already filed your return, you will need to file an amended return (Form 1040X) to claim these credits.
If you have any questions about these tax credit or to see if you quality please feel free to give our office a call at 843-332-4121.
“The Internal Revenue Service announced today that the nation’s tax season will begin Monday, January 29, 2018. The nation’s tax deadline will be April 17 this year. The IRS expects the earliest EITC/ACTC (Earned Income Tax Credit/Additional Child Tax Credit) related refunds to be available in taxpayer bank accounts or on debit cards starting on February 27, 2018, if they chose direct deposit and their are no other issues with the tax return.” See the IRS announcement in it’s entirety here: https://www.irs.gov/newsroom/2018-tax-filing-season-begins-jan-29-tax-returns-due-april-17-help-available-for-taxpayers
The IRS issued a statement on their website (irs.gov) on Sunday, December 26, 2017 regarding withholding for 2018:
“The IRS is working to develop withholding guidance to implement the tax reform bill signed into law on December 22. We anticipate issuing the initial withholding guidance in January, and employers and payroll service providers will be encouraged to implement the changes in February. The IRS emphasizes this information will be designed to work with the existing Forms W-4 that employees have already filed, and no further action by taxpayers is needed at this time.
Use of the new 2018 withholding guidelines will allow taxpayers to begin seeing the changes in their paychecks as early as February. In the meantime, employers and payroll service providers should continue to use the existing 2017 withholding tables and systems.”
See original post here: https://www.irs.gov/newsroom/irs-statement-withholding-for-2018
Specifically look at Question #19 in the FAQ section to see how to calculate the credit. In order to claim the credit you will need to keep your fuel purchase and maintenance receipts throughout the year. We recommend making copies of the receipts if they are printed on thermal paper (gas station fuel pump receipts) as this type of paper will degrade quickly and you won’t be able to read it. If you have any questions about the new credit call our office at 843-332-4121 and we’ll be happy to help you.
Link to ssa post: https://www.ssa.gov/news/press/releases/#/post/10-2017-1
Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 66 million Americans will increase 2.0 percent in 2018, the Social Security Administration announced today.
The 2.0 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 61 million Social Security beneficiaries in January 2018. Increased payments to more than 8 million SSI beneficiaries will begin on December 29, 2017. (Note: some people receive both Social Security and SSI benefits) The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $128,700 from $127,200. Of the estimated 175 million workers who will pay Social Security taxes in 2018, about 12 million will pay more because of the increase in the taxable maximum.
Information about Medicare changes for 2018, when announced, will be available at www.medicare.gov.
Of all the retirement plans available to small business owners, the SIMPLE IRA plan (Savings Incentive Match PLan for Employees) is the easiest to set up and the least expensive to manage. The catch is that you’ll need to set it up by October 1st. Here’s what you need to know.
What is a SIMPLE IRA Plan?
SIMPLE IRA Plans are intended to encourage small business employers to offer retirement coverage to their employees. Self-employed business owners are able to contribute both as employee and employer, with both contributions made from self-employment earnings. In addition, if living expenses are covered by your day job (or your spouse’s job), you would be free to put all of your sideline earnings, up to the ceiling, into SIMPLE IRA plan retirement investments.
How does a SIMPLE IRA Plan Work?
A SIMPLE IRA plan is easier to set up and operate than most other plans in that contributions go into an IRA you set up. Requirements for reporting to the IRS and other agencies are minimal as well. Your plan’s custodian, typically an investment institution, has the reporting duties and the process for figuring the deductible contribution is a bit easier than with other plans.
SIMPLE IRA plans calculate contributions in two steps:
1. Employee out-of-salary contribution
The limit on this “elective deferral” is $12,500 in 2017, after which it can rise further with the cost of living.
Catch-up. Owner-employees age 50 or older can make an additional $3,000 deductible “catch-up” contribution (for a total of $15,500) as an employee in 2017.
2. Employer “matching” contribution
The employer match equals a maximum of three percent of employee’s earnings.
Example An owner-employee age 50 or over in 2017 with self-employment earnings of $40,000 could contribute and deduct $12,500 as employee plus an additional $3,000 employee catch up contribution, plus a $1,200 (3 percent of $40,000) employer match, for a total of $16,700.
Are there any Downsides to SIMPLE IRA Plans?
Because investments are through an IRA you must work through a financial institution acting, which acts as the trustee or custodian. As such, you are not in direct control and will generally have fewer investment options than if you were your own trustee, as is the case with a 401(k).
You also cannot set up the SIMPLE IRA plan after the calendar year ends and still be able to take advantage of the tax benefits on that year’s tax return, as is allowed with Simplified Employee Pension Plans, or SEPs. Generally, to make a SIMPLE IRA plan effective for a year, it must be set up by October 1 of that year. A later date is allowed only when the business is started after October 1 and the SIMPLE IRA plan must be set up as soon as it is administratively feasible.
Furthermore, once self-employment earnings become significant however, other retirement plans may be more advantageous than a SIMPLE IRA retirement plan.
Example If you are under 50 with $50,000 of self-employment earnings in 2017, you could contribute $12,500 as employee to your SIMPLE IRA plan plus an additional 3 percent of $50,000 as an employer contribution, for a total of $14,000. In contrast, a 401(k) plan would allow a $31,000 contribution.With $100,000 of earnings, the total for a SIMPLE IRA Plan would be $15,500 and $43,500 for a 401(k).
If the SIMPLE IRA plan is set up for a sideline business and you’re already vested in a 401(k) in another business or as an employee the total amount you can put into the SIMPLE IRA plan and the 401(k) combined (in 2017) can’t be more than $18,000 or $23,500 if catch-up contributions are made to the 401(k) by someone age 50 or over. So, someone under age 50 who puts $9,000 in her 401(k) can’t put more than $9,000 in her SIMPLE IRA plan for 2017. The same limit applies if you have a SIMPLE IRA plan while also contributing as an employee to a 403(b) annuity (typically for government employees and teachers in public and private schools).
How to Get Started Setting up a SIMPLE IRA Plan
You can set up a SIMPLE IRA plan account on your own; however, most people turn to financial institutions. SIMPLE IRA Plans are offered by the same financial institutions that offer any other IRAs and 401(k) plans.
You can expect the institution to give you a plan document and an adoption agreement. In the adoption agreement, you will choose an “effective date,” which is the start date for payments out of salary or business earnings. Again, that date can’t be later than October 1 of the year you adopt the plan, except for a business formed after October 1.
Another key document is the Salary Reduction Agreement, which briefly describes how money goes into your SIMPLE IRA plan. You need such an agreement even if you pay yourself business profits rather than salary. Printed guidance on operating the SIMPLE IRA plan may also be provided. You will also be establishing a SIMPLE IRA plan account for yourself as participant.
Ready to Explore Retirement Plan Options for your Small Business?
SIMPLE IRA Plans are an excellent choice for home-based businesses and ideal for full-time employees or homemakers who make a modest income from a sideline business and work well for small business owners who don’t want to spend a lot of time and pay high administration fees associated with more complex retirement plans.
If you are a business owner interested in discussing retirement plan options for your small business, don’t hesitate to contact the office today.
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The hardest thing in the world to understand is the income tax.
The difference between death and taxes is death doesn't get worse every time Congress meets.