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Tax Changes for 2017: A Checklist
Welcome, 2017! As the New Year rolls around, it's always a sure bet that there will be changes to current tax law and 2017 is no different. From health savings accounts to tax rate schedules and standard deductions, here's a checklist of tax changes to help you plan the year ahead.
For 2017, more than 50 tax provisions are affected by inflation adjustments, including personal exemptions, AMT exemption amounts, and foreign earned income exclusion.
While the tax rate structure, which ranges from 10 to 39.6 percent, remains the same as in 2016, tax-bracket thresholds increase for each filing status. Standard deductions and the personal exemption have also been adjusted upward to reflect inflation. For details see the article, "Tax Brackets, Deductions, and Exemptions for 2017," below.
Alternative Minimum Tax (AMT)
For 2017, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not subject to "kiddie tax" is $2,100.
Health Savings Accounts (HSAs)
A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care.
For calendar year 2017, a qualifying HDHP must have a deductible of at least $1,300 for self-only coverage or $2,600 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,550 for self-only coverage and $13,100 for family coverage.
Medical Savings Accounts (MSAs)
Self-only coverage. For taxable years beginning in 2017, the term "high deductible health plan" means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,250 and not more than $3,350 (same as 2016), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,500 (up $50 from 2016).
Penalty for not Maintaining Minimum Essential Health Coverage
AGI Limit for Deductible Medical Expenses
Eligible Long-Term Care Premiums
Foreign Earned Income Exclusion
Long-Term Capital Gains and Dividends
Pease and PEP (Personal Exemption Phaseout)
Estate and Gift Taxes
Individuals - Tax Credits
Earned Income Tax Credit
Child Tax Credits
The enhanced child tax credit was made permanent this year by the Protecting Americans from Tax Hikes Act of 2016 (PATH). In addition to a $1,000 credit per qualifying child, an additional refundable credit equal to 15 percent of earned income in excess of $3,000 has been available since 2009.
Child and Dependent Care Credit
Individuals - Education
American Opportunity Tax Credit and Lifetime Learning Credits
Interest on Educational Loans
Individuals - Retirement
Income Phase-out Ranges
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by an employer-sponsored retirement plan, the phase-out range increases to $99,000 to $119,000, up from $98,000 to $118,000. For an IRA contributor who is not covered by an employer-sponsored retirement plan and is married to someone who is covered, the deduction is phased out if the couple's modified AGI is between $186,000 and $196,000, up from $184,000 and $194,000.
The modified AGI phase-out range for taxpayers making contributions to a Roth IRA is $118,000 to $133,000 for singles and heads of household, up from $117,000 to $132,000. For married couples filing jointly, the income phase-out range is $186,000 to $196,000, up from $184,000 to $194,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Standard Mileage Rates
Section 179 Expensing
The 50 percent bonus depreciation has been extended through 2019. Businesses are able to depreciate 50 percent of the cost of equipment acquired and placed in service during 2015, 2016, and 2017. However, the bonus depreciation is reduced to 40 percent in 2018 and 30 percent in 2019.
Work Opportunity Tax Credit (WOTC)
Research & Development Tax Credit
Starting in 2017, businesses with less than $50 million in gross receipts are able to use this credit to offset alternative minimum tax. Certain start-up businesses that might not have any income tax liability will be able to offset payroll taxes with the credit as well.
Employee Health Insurance Expenses
For taxable years beginning in 2017, the dollar amount is $26,200. This amount is used for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit.
Employer-provided Transportation Fringe Benefits
While this checklist outlines important tax changes for 2017, additional changes in tax law are more than likely to arise during the year ahead. Don't hesitate to call if you want to get an early start on tax planning for 2017!
Paying Taxes on Household Help
If you employ someone to work for you around your house, it is important to consider the tax implications of this arrangement. While many people disregard the need to pay taxes on household employees, they do so at the risk of paying stiff tax penalties down the road.
As you will see, the rules for hiring household help are quite complex, even for a relatively minor employee, and a mistake can bring on a tax headache that most of us would prefer to avoid.
Commonly referred to as the "nanny tax", these rules apply to you only if (1) you pay someone for household work and (2) that worker is your employee.
Who Is a Household Employee?
If a worker is your employee, it does not matter whether the work is full-time or part-time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily or weekly basis or by the job.
If the worker controls how the work is done, the worker is not your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.
Also, if an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.
Can Your Employee Legally Work in the United States?
When you hire a household employee to work for you on a regular basis, he or she must complete USCIS Form I-9 Employment Eligibility Verification. It is your responsibility to verify that the employee is either a U.S. citizen or an alien who can legally work and then complete the employer part of the form. It is unlawful for you to knowingly hire or continue to employ a person who cannot legally work in the United States.
Keep the completed form for your records. Do not return the form to the U.S. Citizenship and Immigration Services (USCIS).
Do You Need to Pay Employment Taxes?
If you have a household employee, you may need to withhold and pay Social Security and Medicare taxes, or you may need to pay federal unemployment tax or both. Refer to this table for details:
If neither of these two contingencies applies, you do not need to pay any federal unemployment taxes. But you may still need to pay state unemployment taxes (see below).
You do not need to withhold federal income tax from your household employee's wages. But if your employee asks you to withhold it, you can choose to do so.
State Unemployment Taxes
Please contact us if you're not sure whether you need to pay state unemployment tax for your household employee. We'll also help you figure out whether you need to pay or collect other state employment taxes or carry workers' compensation insurance.
Social Security and Medicare Taxes
Social Security taxes pays for old-age, survivor, and disability benefits for workers and their families. The Medicare tax pays for hospital insurance.
Both you and your household employee may owe Social Security and Medicare taxes. Your share is 7.65 percent (6.2 percent for Social Security tax and 1.45 percent for Medicare tax) of the employee's Social Security and Medicare wages. Your employee's share is 6.2 percent for Social Security tax and 1.45 percent for Medicare tax.
You are responsible for payment of your employee's share of the taxes as well as your own. You can either withhold your employee's share from the employee's wages or pay it from your own funds. Note the limits in the table above.
Note: As of January 1, 2013, employers are responsible for withholding the 0.9% Additional Medicare Tax on an individual's wages paid in excess of $200,000 in a calendar year. An employer is required to begin withholding Additional Medicare Tax in the pay period in which it pays wages in excess of $200,000 to an employee. There is no employer match for Additional Medicare Tax.
Wages Not Counted
Do not count wages you pay to any of the following individuals as Social Security and Medicare wages:
Also, if your employee's Social Security and Medicare wages reach $127,200 in 2017 ($118,500 in 2016), then do not count any wages you pay that employee during the rest of the year as Social Security wages to figure Social Security tax. You should, however, continue to count the employee's cash wages as Medicare wages to figure Medicare tax. You figure federal income tax withholding on both cash and non-cash wages (based on their value), but do not count as wages any of the following items:
As you can see, tax considerations for household employees are complex; therefore, professional tax guidance is highly recommended. This is definitely an area where it's better to be safe than sorry. If you have any questions at all, please call.
Ensuring Financial Success for Your Business
Can you point your company in the direction of financial success, step on the gas, and then sit back and wait to arrive at your destination?
Not quite. You can't let your business run on autopilot and expect good results. Any business owner knows you need to make numerous adjustments along the way - decisions about pricing, hiring, investments, and so on.
So, how do you handle the array of questions facing you?
One way is through cost accounting.
Cost Accounting Helps You Make Informed Decisions
Cost accounting reports and determines the various costs associated with running your business. With cost accounting, you track the cost of all your business functions - raw materials, labor, inventory, and overhead, among others.
Cost accounting allows you to understand the following:
Is It Hard?
To monitor your company's costs with this method, you need to pay attention to the two types of costs in any business: fixed and variable.
Fixed costs don't fluctuate with changes in production or sales. They include:
Variable costs DO change with variations in production and sales. Variable costs include:
If you'd like to understand the ins and outs of your business better and create sound guidance for internal decision making, consider setting up a cost accounting system.
Please call if you need assistance setting up cost accounting and inventory systems, preparing budgets, cash flow management or any other matter related to ensuring the financial success of your business.
Is Canceled Debt Taxable?
Generally, debt that is forgiven or canceled by a lender is considered taxable income by the IRS and must be included as income on your tax return. Examples include a debt for which you are personally liable such as mortgage debt, credit card debt, and in some instances, student loan debt.
When that debt is forgiven, negotiated down (when you pay less than you owe), or canceled you will receive Form 1099-C, Cancellation of Debt, from your financial institution or credit union. Form 1099-C shows the amount of canceled or forgiven debt that was reported to the IRS. If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. Give the office a call if you have any questions regarding joint liability of canceled debt.
Creditors who forgive $600 or more of debt are required to issue this form. If you receive a Form 1099-C and the information is incorrect, contact the lender to make corrections.
If you receive a Form 1099-C, don't ignore it. You may not have to report that entire amount shown on Form 1099-C as income. The amount, if any, you must report depends on all the facts and circumstances. Generally, however, unless you meet one of the exceptions or exclusions discussed below, you must report any taxable canceled debt reported on Form 1099-C as ordinary income on:
Exceptions and Exclusions
If you had debt forgiven or canceled last year and receive a Form 1099-C, you might qualify for an exception or exclusion. If your canceled debt meets the requirements for an exception or exclusion, then you don't need to report your canceled debt on your tax return. Under the federal tax code, there are five exceptions and four exclusions. Here are the five most commonly used:
Note: The Mortgage Debt Relief Act of 2007, which applied to debt forgiven in calendar years 2007 through 2014, allowed taxpayers to exclude income from the discharge of debt on their principal residence. The PATH (Protecting Americans from Tax Hikes) Act extended this relief through the end of 2016.
Up to $2 million of forgiven debt was eligible for this exclusion ($1 million if married filing separately) and debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, also qualified for the relief.
If you exclude canceled debt from income under one of the exclusions listed above, you must reduce certain tax attributes (certain credits, losses, basis of assets, etc.), within limits, by the amount excluded. If this is the case, then you must file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the amount qualifying for exclusion and any corresponding reduction of those tax attributes.
Exceptions do not require you to reduce your tax attributes.
Don't hesitate to call if you have any questions about whether you qualify for debt cancellation relief.
Tax Tips for Older Americans
Everyone wants to save money on their taxes, and older Americans are no exception. If you're age 50 or older, here are seven tax tips that could help you do just that.
1. Standard Deduction for Seniors. If you and/or your spouse are 65 years old or older and you do not itemize your deductions, you can take advantage of a higher standard deduction amount. There is an additional increase in the standard deduction if either you or your spouse is blind.
2. Credit for the Elderly or Disabled. If you and/or your spouse are either 65 years or older--or under age 65 years old and are permanently and totally disabled--you may be able to take the Credit for Elderly or Disabled. The Credit is based on your age, filing status, and income and you must file using Form 1040 or Form 1040A to receive the Credit for the Elderly or Disabled. You cannot get the Credit for the Elderly or Disabled if you file using Form 1040EZ.
You may only take the credit if you meet the following requirements:
In 2016 your income on Form 1040 line 38 must be less than $17,500 ($20,000 if married filing jointly and only one spouse qualifies), $25,000 (married filing jointly and both qualify), or $12,500 (married filing separately and lived apart from your spouse for the entire year).
The non-taxable part of your Social Security or other nontaxable pensions, annuities or disability income is less than $5,000 (single, head of household, or qualifying widow/er with dependent child); $5,000 (married filing jointly and only one spouse qualifies); $7,500 (married filing jointly and both qualify); or $3,750 (married filing separately and lived apart from your spouse the entire year).
3. Medical and Dental Expenses Deduction. Starting in 2013, the amount of allowable medical expenses taxpayers must exceed before claiming medical expense deductions is 10 percent of adjusted gross income (AGI).
However, for tax years 2013 to 2016, the AGI threshold is still 7.5 percent of your AGI if you or your spouse is age 65 or older. You can only claim your medical and dental expenses if you itemize deductions on your federal tax return. You can't claim these expenses if you take the standard deduction. You can include only the expenses you paid in 2016. If you paid by check, the day you mailed or delivered the check is usually considered the date of payment.
4. Retirement account limits increase. Once you reach age 50, you are eligible to contribute (and defer paying tax on) up to $24,000 in 2017 (same as 2016). The amount includes the additional $6,000 "catch up" contribution for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan.
5. Early Withdrawal penalty eliminated. If you withdraw money from an IRA account before age 59 1/2 you generally must pay a 10 percent penalty (there are exceptions--call for details); however, once you reach age 59 1/2, there is no longer a penalty for early withdrawal. Furthermore, if you leave or are terminated from your job at age 55 or older (age 50 for public safety employees), you may withdraw money from a 401(k) without penalty--but you still have to pay tax on the additional income. To complicate matters, money withdrawn from an IRA is not exempt from the penalty.
6. Social Security Benefits. Americans can sign up for social security benefits as early as age 62--or wait to receive full benefits at age 66 or 67 (depending on your full retirement age). For some older Americans however, social security benefits may be taxable. How much of your income is taxed depends on the amount of your benefits plus any other income you receive. Generally, the more income you have coming in, the more likely it is that a portion of your social security benefits will be taxed. Therefore, when preparing your return, it is advisable to be especially careful when calculating the taxable amount of your Social Security.
7. Higher Income Tax Filing Threshold. Taxpayers who are 65 and older are allowed an income of $1,550 more ($1,250 married filing jointly) in 2016 before they need to file an income tax return. In other words, older taxpayers age 65 and older with income of $11,850 ($23,100 married filing jointly) or less may not need to file a tax return.
Don't hesitate to call the office if you have any questions about these and other tax deductions and credits available for older Americans.
Earlier Filing Deadlines in 2017 for Forms W-2 and 1099
Starting in 2017 employers and small businesses face an earlier filing deadline of January 31 for Forms W-2. The new January 31 filing deadline also applies to certain Forms 1099-MISC reporting non-employee compensation such as payments to independent contractors. Also of note is that the IRS must also hold some refunds until February 15.
A new federal law, aimed at making it easier for the IRS to detect and prevent refund fraud, will accelerate the W-2 filing deadline for employers to January 31. For similar reasons, the new law also requires the IRS to hold refunds involving two key refundable tax credits until at least February 15 (also new). Here are details on each of these key dates.
New January 31 Deadline for Employers
The Protecting Americans from Tax Hikes (PATH) Act, enacted last December, includes a new requirement for employers. They are now required to file their copies of Form W-2 submitted to the Social Security Administration, by January 31, as well as Forms 1099-MISC.
In the past, employers typically had until the end of February (if filing on paper) or the end of March (if filing electronically) to submit their copies of these forms. In addition, there are changes in requesting an extension to file the Form W-2. Only one 30-day extension to file Form W-2 is available, and this extension is not automatic.
If an extension is necessary, a Form 8809 Application for Extension of Time to File Information Returns must be completed as soon as you know an extension is necessary, but by January 31. Please carefully review the instructions for Form 8809, and call the office if you need more information.
The new accelerated deadline will help the IRS improve its efforts to spot errors on returns filed by taxpayers. Having these W-2s and 1099s earlier will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them. In many instances, this will enable the IRS to release tax refunds more quickly than in the past.
The January 31 deadline has long applied to employers furnishing copies of these forms to their employees and that date remains unchanged.
Some Refunds Delayed Until at Least February 15
Due to the PATH Act change, some people will be getting their refunds later than they have in the past. The new law requires the IRS to hold the refund for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until February 15.
Furthermore, by law, the IRS must hold the entire refund, not just the portion related to the EITC or ACTC.
Even with this change, taxpayers should file their returns as they normally do. Whether they are claiming the EITC or ACTC or not, taxpayers should not count on getting a refund by a certain date, especially when making major purchases or paying other financial obligations. Typically, the IRS issues more than nine out ten refunds in less than 21 days; however, some returns may be held for further review.
Please call if you have any questions about the earlier filing deadlines for Forms W-2 or 1099.
Tax Brackets, Deductions, and Exemptions for 2017
More than 50 tax provisions, including the tax rate schedules and other tax changes are adjusted for inflation in 2017. Let's take a look at the ones most likely to affect taxpayers like you.
The tax rate of 39.6 percent affects singles whose income exceeds $418,400 ($470,700 for married taxpayers filing a joint return), up from $415,050 and $466,950, respectively. The other marginal rates--10, 15, 25, 28, 33 and 35 percent--and related income tax thresholds--are found at IRS.gov.
The standard deduction remains at $6,350 for singles and married persons filing separate returns and $12,700 for married couples filing jointly. The standard deduction for heads of household rises to $9,350, up from $9,300 in 2016.
The limitation for itemized deductions to be claimed on tax year 2017 returns of individuals begins with incomes of $287,650 or more ($313,800 for married couples filing jointly).
The personal exemption for tax year 2017 remains at $4,050. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly.)
The Alternative Minimum Tax exemption amount for tax year 2017 is $54,300 and begins to phase out at $120,700 ($84,500, for married couples filing jointly for whom the exemption begins to phase out at $160,900). The 2016 exemption amount was $53,900 ($83,800 for married couples filing jointly). For tax year 2017, the 28 percent tax rate applies to taxpayers with taxable incomes above $187,800 ($93,900 for married individuals filing separately).
For 2017, the maximum Earned Income Credit amount is $6,318 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,269 for tax year 2016. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
Estates of decedents who die during 2017 have a basic exclusion amount of $5,490,000, up from a total of $5,450,000 for estates of decedents who died in 2016.
For 2017, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $149,000, up from $148,000 for 2016.
For tax year 2017, the foreign earned income exclusion is $102,100, up from $101,300 for tax year 2016.
The annual exclusion for gifts remains at $14,000 for 2017.
The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) increases to $2,600 up from $2,550 in 2016.
Under the small business health care tax credit, the maximum credit is phased out based on the employer's number of full-time equivalent employees in excess of 10 and the employer's average annual wages in excess of $26,200 for tax year 2017, up from $25,900 for 2016.
Need help with tax planning in 2017? Help is just a phone call away!
Special Tax Breaks for U. S. Armed Forces
Military personnel and their families face unique life challenges with their duties, expenses and transitions. As such, active members of the U.S. Armed Forces should be aware of all the special tax benefits that are available to them. Here are 10 of them:
1. Moving Expenses. If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you may be able to deduct some of your unreimbursed moving expenses.
2. Combat Pay. If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, military pay you received for military service during that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.
3. EITC. You can also elect to include your nontaxable combat pay in your "earned income" for purposes of claiming the Earned Income Tax Credit (EITC). For the 2016 tax season, the Earned Income Tax Credit may be worth up to $6,269 ($6,318 in 2017) for low-and moderate-income service members. A special computation method is available for those who receive nontaxable combat pay. Choosing to include it in taxable income may boost the EITC, meaning owing less tax or getting a larger refund.
4. Retirement Contributions.
An IRA or 401(k)-type plan might mean saving for retirement and cutting taxes too. Service members who contribute to a plan, such as the Thrift Savings Plan, may also be able to claim the Retirement Savings Contributions Credit.
5. Extension of Deadlines. An automatic extension to file a federal income tax return is available to U.S. service members stationed abroad. Also, those serving in a combat zone typically have until 180 days after they leave the combat zone to file and to pay any tax due. For more information please call the office.
6. Uniform Cost and Upkeep. If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.
7. Joint Returns. Both spouses normally must sign a joint income tax return, but if one spouse is absent due to certain military duty or conditions, the other spouse may be able to sign for him or her. A power of attorney is required in other instances. A military installation's legal office may be able to help.
8. Travel to Reserve Duty. If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.
9. ROTC Students. Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay, such as pay received during summer advanced camp, is taxable.
10. Transitioning Back to Civilian Life. You may be able to deduct some of the costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.
Help is just a phone call away.
Early Retirement Distributions and Your Taxes
Taxpayers may sometimes find themselves in situations when they need to withdraw money from their retirement plan early. What they may not realize is that taking money out early from your retirement plan may trigger an additional tax. Here are 10 things taxpayers should know about early withdrawals from retirement plans:
1. Payments you receive from your Individual Retirement Arrangement before you reach age 59 1/2 are generally considered early or premature distributions.
2. If you made a withdrawal from a plan last year, you must report the amount you withdrew to the IRS. You may have to pay income tax as well as an additional 10 percent tax on the amount you withdrew.
3. The additional 10 percent tax does not apply to nontaxable withdrawals. Nontaxable withdrawals include withdrawals of your cost to participate in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.
4. A rollover is a type of nontaxable withdrawal. You usually have 60 days to complete a rollover to make it tax-free. Generally, a rollover is a distribution to you of cash or other assets from one retirement plan that you contribute to another retirement plan. The amount you roll over is generally taxed when the new plan makes a distribution to you or your beneficiary.
5. If you made nondeductible contributions to an IRA and later take early distributions from your IRA, the portion of the distribution attributable to those nondeductible contributions is not taxed.
6. If you received an early distribution from a Roth IRA, the distribution attributable to your prior contributions is not taxed.
7. If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.
8. There are several exceptions to the additional 10 percent early distribution tax, such as when the distributions are used for the purchase of a first home (up to $10,000), for certain medical or educational expenses, or if you are totally and permanently disabled. Furthermore, some of the exceptions for retirement plans are different from the rules for IRAs. Please call for details.
9. If you make an early withdrawal, you may need to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with your federal tax return.
10. The rules for retirement plans can be complex. If you need assistance, don't hesitate to call.
Standard Mileage Rates for 2017
Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car, van, pickup or panel truck are:
The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.
These optional standard mileage rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than 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. Call if you need additional information about these and other special rules.
In addition, basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) Plan were also announced by the IRS.
If you have any questions about standard mileage rates or which driving activities you should keep track of as tax year 2017 begins, do not hesitate to call the office.
Ringing Out 2016 in QuickBooks
For the past year, you've been faithfully creating new records, entering transactions, and recording payments. You've run basic reports. You've done your collection duties. You may have even paid employees and submitted payroll taxes.
Now that another year has come and gone, if you haven't done so, it's time to wrap and review those work tasks that should have been completed by December 31. First up is your annual QuickBooks wrap-up.
Create and send year-end statements.
Figure 1: As your customers wrap up 2016, too, it's good to send statements to past-due accounts.
In an ideal world, all of the invoices that were due in December would be paid off by the end of the year. We all know that that's not usually the reality. Two reports can help you here: the A/R Aging Summary and Open Invoices.
If you didn't give everyone a chance to clear their accounts before December 31 by sending statements, do so now. Click Statements on the Home page (or Customers | Create Statements) to open the window pictured above.
You have multiple options here that are fairly self-explanatory. The screen above is set up to create statements for all customers who have an open balance as of the date you select, but not for inactive customers or those with a zero balance or no account activity.
That way, no one who's paid in full to date will receive a statement. Of course, if you didn't want statements created for anyone who's less than 30 days past due, you'd click in the box in front of Include only transactions over and enter a "30" in the following field.
Tip: You can also find out who is overdue by clicking on the Customers tab in the left vertical pane to open the Customer Information screen. Click on the down arrow to the right of the field just below Customers & Jobs. QuickBooks provides several filters for your list.
Reduce your inventory.
Figure 2: Want to discount all or selected items in your inventory by the same percentage or amount? Open the Customers menu and click Change Item Prices.
If you only sell a few products, you probably already know what didn't sell well in 2016. If your stable of products is larger, you can run QuickBooks reports like Inventory Stock Status by Item and Sales by Item Detail to identify your slow-sellers and discount them now. You may need to filter your reports to see the right data. Please call to discuss customization options if you're unsure of how to do this.
Clean up your contact lists.
If you don't maintain your customer and vendor lists, you'll eventually start wasting time scrolling through them when you enter transactions. So this would be a good time to designate those contacts that you've not dealt with in 2016 as Inactive (you can delete their records entirely, but we advise against that). Simply open a Customer record, for example, and click the small pencil icon in the upper right to edit it. Click on the box in front of Customer is inactive.
Send holiday greetings to customers and vendors.
If you didn't get around to doing this last month, then consider sending a greeting in January (Best Wishes for a Successful 2017!) when your customers' and vendors' lives have slowed down a bit. You're less likely to get lost in the crowd. If your lists are short enough, personalize these cards as much as possible. At least sign them by hand if you can.
Tip: You can print customer labels for your cards directly from QuickBooks. Open the File menu and then click Print Forms | Labels.
Run advanced reports.
Finally, if you're not already using a QuickBooks professional to create and analyze advanced financial reports (found in the Accountant & Taxes submenu of Reports) monthly or quarterly, then you should be. They're important, and they give you insight into your business financials that you can't get on your own. Please call if you need assistance with this task.
Thank you for being a client in 2016 and best wishes for a successful 2017!
Tax Due Dates for January 2017
All employers - Give your employees their copies of Form W-2 for 2016 by January 31, 2017. If an employee agreed to receive Form W-2 electronically, post it on a website accessible to the employee and notify the employee of the posting by January 31.
All Businesses - Give annual information statements to recipients of certain payments you made during 2016. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be issued electronically with the consent of the recipient.
Employees - who work for tips. If you received $20 or more in tips during December 2016, report them to your employer. You can use Form 4070, Employee's Report of Tips to Employer.
Employers - Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in December 2016.
Individuals - Make a payment of your estimated tax for 2016 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES. This is the final installment date for 2016 estimated tax. However, you do not have to make this payment if you file your 2016 return (Form 1040) and pay any tax due by January 31, 2017.
Employers - Nonpayroll Withholding. If the monthly deposit rule applies, deposit the tax for payments in December 2016.
Farmers and Fisherman - Pay your estimated tax for 2016 using Form 1040-ES. You have until April 18 to file your 2016 income tax return (Form 1040). If you do not pay your estimated tax by January 17, you must file your 2016 return and pay any tax due by March 1, 2017, to avoid an estimated tax penalty.
Employers - Federal unemployment tax. File Form 940 for 2016. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you already deposited the tax for the year in full and on time, you have until February 10 to file the return.
Farm Employers - File Form 943 to report social security and Medicare taxes and withheld income tax for 2016. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.
Certain Small Employers - File Form 944 to report Social Security and Medicare taxes and withheld income tax for 2016. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is $2,500 or more from 2016 but less than $2,500 for the fourth quarter, deposit any undeposited tax or pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.
Employers - Social Security, Medicare, and withheld income tax. File Form 941 for the fourth quarter of 2016. Deposit any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return.
Employers - Nonpayroll taxes. File Form 945 to report income tax withheld for 2016 on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, gambling winnings, and payments of Indian gaming profits to tribal members. Deposit any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.
Payers of Gambling Winnings - If you either paid reportable gambling winnings or withheld income tax from gambling winnings, give the winners their copies of Form W-2G.
Employers - Give your employees their copies of Form W-2 for 2016 by January 31, 2017. If an employee agreed to receive Form W-2 electronically, post it on a website accessible to the employee and notify the employee by January 31, 2017.
Businesses - Give annual information statements to recipients of certain payments made during 2016. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be issued electronically with the consent of the recipient. This due date only applies to certain types of payments.
Individuals - who must make estimated tax payments. If you did not pay your last installment of estimated tax by January 17, you may choose (but are not required) to file your income tax return (Form 1040) for 2016 by January 31. Filing your return and paying any tax due by January 31, 2017, prevents any penalty for late payment of the last installment. If you cannot file and pay your tax by January 31, file and pay your tax by April 18, 2017.
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