Carol McAtee's Blog

Renting Out a Vacation Home

Tax rules on rental income from second homes can be complicated, particularly if you rent the home out for several months of the year, but also use the home yourself.

There is, however, one provision that is not complicated. Homeowners who rent out their property for 14 or fewer days a year can pocket the rental income, tax-free.

Known as the “Master’s exemption,” it is used by homeowners near the Augusta National Golf Club in Augusta, GA who rent out their homes during the Master’s Tournament (for as much as $20,000!). It is also used by homeowners who rent out their homes for movie productions or those whose residences are located near Super Bowl sites or national political conventions.

Tip:If you live close to a vacation destination such as the beach or mountains, you may be able to make some extra cash by renting out your home (principal residence) when you go on vacation–as long as it’s two weeks or less. And, although you can’t take depreciation or deduct for maintenance, you can deduct mortgage interest, property taxes, and casualty losses on Schedule A (1040), Itemized Deductions.

In general, income from rental of a vacation home for 15 days or longer must be reported on your tax return on Schedule E, Supplemental Income and Loss. Your rental income may also be subject to the net investment income tax. You should also keep in mind that the definition of a “vacation home” is not limited to a house. Apartments, condominiums, mobile homes, and boats are also considered vacation homes in the eyes of the IRS.

Further, the IRS states that a vacation home is considered a residence if personal use exceeds 14 days or more than 10 percent of the total days it is rented to others (if that figure is greater). When you use a vacation home as your residence and also rent it to others, you must divide the expenses between rental use and personal use, and you may not deduct the rental portion of the expenses in excess of the rental income.

Example:Let’s say you own a beach house and rent it out during the summer, typically between mid-June and mid-September. You and your family also vacation at the house for one week in October and two weeks in December. The rest of the time the house is unused.The family uses the house for 21 days and it is rented out to others for 121 days for a total of 142 days of use during the year. In this scenario, 85 percent of expenses such as mortgage interest, property taxes, maintenance, utilities, and depreciation can be written off against the rental income on Schedule E. As for the remaining 15 percent of expenses, only the owner’s mortgage interest and property taxes are deductible on Schedule A.

Questions about vacation home rental income? Please call and speak to a tax and accounting professional today.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

What to do if you haven’t filed a Tax Return

Tuesday, April 18, 2017, was the tax deadline for most taxpayers to file their tax returns. If you haven’t filed a 2016 tax return yet, don’t delay. There’s still time–and it’s not as difficult as you think.

Here’s What to Do When Your Return Is Late

First, gather any and all information related to income and deductions for the tax years for which a return is required to be filed, then call the office.

If you’re owed money, then the sooner you file, the sooner you’ll get your refund. If you owe taxes, you should file and pay as soon as you can, which will stop the interest and penalties that you will owe.

If you owe money but can’t pay the IRS in full, you should pay as much as you can when you file your tax return to minimize penalties and interest.

Don’t Ignore a Tax Bill

The IRS will work with taxpayers suffering financial hardship. If you continue to ignore your tax bill, the IRS may take collection action.

Payment Options – Ways to Make a Payment

There are several different ways to make a payment on your taxes. Payments can be made by credit card, electronic funds transfer, check, money order, cashier’s check, or cash. If you pay your federal taxes using a major credit card or debit card, there is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee.

Payment Options – For Those Who Can’t Pay in Full

Taxpayers unable to pay all taxes due on a tax bill are encouraged to pay as much as possible. By paying as much as possible now, the amount of interest and penalties owed will be less than if you do not pay anything at all. Based on individual circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, a temporary delay, or an offer in compromise. Please call if you have questions about any of these options.

When it comes to paying your tax bill, it is important to review all your options; the interest rate on a loan or credit card may be lower than the combination of penalties and interest imposed by the Internal Revenue Code. You should pay as much as possible before entering into an installment agreement.

For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. Taxpayers who need more time to pay can set up either a short-term payment extension or a monthly payment plan. Most people can set up a payment plan using the Online Payment Agreement tool on IRS.gov.

• A short-term extension gives a taxpayer an additional 60 to 120 days to pay. No fee is charged, but the late-payment penalty plus interest will apply. Generally, taxpayers will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.
• A monthly payment plan or installment agreement gives a taxpayer more time to pay. However, penalties and interest will continue to be charged on the unpaid portion of the debt throughout the duration of the installment agreement/payment plan.Taxpayers who owe $50,000 or less in combined tax, penalties and interest can apply for and receive immediate notification of approval through an online, IRS web-based application. Balances over $50,000 require taxpayers to complete a financial statement to determine the monthly payment amount for an installment plan.

  A user fee will also be charged if the installment agreement is approved. The fee (effective January 1, 2017) is normally $225 but is reduced to $107 if taxpayers agree to make their monthly payments electronically through electronic funds withdrawal. The fee is $43 for eligible low-and-moderate-income taxpayers.

• Individual taxpayers who do not have a bank account or credit card and need to pay their tax bill using cash, are now able to make a payment at one or more than 7,000 7-Eleven stores nationwide. Individuals wishing to take advantage of this payment option should visit the IRS.gov payments page, select the cash option in the other ways you can pay section and follow the instructions.

What Happens If You Don’t File a Past Due Return or Contact the IRS?

It’s important to understand the ramifications of not filing a past due return and the steps that the IRS will take. Taxpayers who continue to not file a required return and fail to respond to IRS requests for a return may be considered for a variety of enforcement actions–including substantial penalties and fees (see article below for additional information on this topic).

Don’t Ignore your Tax Return!

If you haven’t filed a tax return yet, call the office today to schedule an appointment as soon as possible.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

Estimated Tax Payments: Q & A

Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, and rent, as well as gains from the sale of assets, prizes and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough. If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

How do I know if I need to file quarterly individual estimated tax payments?

If you owed additional tax for the prior tax year, you may have to make estimated tax payments for the current tax year. The first estimated payment for 2017 is due April 18, 2017.

If you are filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.

If you are filing as a corporation you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return.

If you had a tax liability for the prior year, you may have to pay estimated tax for the current year; however, if you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings.

Note: There are special rules for farmers, fishermen, certain household employers, and certain higher taxpayers.

Who Does Not Have To Pay Estimated Tax

You do not have to pay estimated tax for the current year if you meet all three of the following conditions:

• You had no tax liability for the prior year
• You were a U.S. citizen or resident for the whole year
• Your prior tax year covered a 12-month period

If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings. To do this, file a new Form W-4 with your employer. There is a special line on Form W-4 for you to enter the additional amount you want your employer to withhold.

You had no tax liability for the prior year if your total tax was zero or you did not have to file an income tax return.

How Do I Figure Estimated Tax?

To figure your estimated tax, you must figure out your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year. If you estimated your earnings too high, simply complete another Form 1040-ES, Estimated Tax for Individuals worksheet to refigure your estimated tax for the next quarter. If you estimated your earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated tax for the next quarter.

Try to estimate your income as accurately as you can to avoid penalties due to underpayment. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90 percent of the tax for the current year, or 100 percent of the tax shown on the return for the prior year, whichever is smaller.

Tip: When figuring your estimated tax for the current year, it may be helpful to use your income, deductions, and credits for the prior year as a starting point. Use your prior year’s federal tax return as a guide and use the worksheet in Form 1040-ES to figure your estimated tax.

You must make adjustments both for changes in your own situation and for recent changes in the tax law.

When Do I Pay Estimated Taxes?

For estimated tax purposes, the year is divided into four payment periods and each period has a specific payment due date. For the 2017 tax year, these dates are April 18, June 15, September 15, and January 16, 2018. You do not have to pay estimated taxes in January if you file your 2017 tax return by January 31, 2018, and pay the entire balance due with your return.

Note: If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.

The easiest way for individuals as well as businesses to pay their estimated federal taxes is to use the Electronic Federal Tax Payment System (EFTPS). Make ALL of your federal tax payments including federal tax deposits (FTDs), installment agreement and estimated tax payments using EFTPS. If it is easier to pay your estimated taxes weekly, bi-weekly, monthly, etc. you can, as long as you have paid enough in by the end of the quarter. Using EFTPS, you can access a history of your payments, so you know how much and when you made your estimated tax payments.

Please call if you are not sure whether you need to make an estimated tax payment or need assistance setting up EFTPS.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

Last Minute Filing Tips for 2016 Tax Returns

1. Stop Procrastinating. Resist the temptation to put off your taxes until the very last minute. It takes time to prepare accurate returns and additional information may be needed from you to complete your tax return.

2. Include All Income. If you had a side job in addition to a regular job, you might have received a Form 1099-MISC. Make sure you include that income when you file your tax return because you may owe additional taxes on it. If you forget to include it you may be liable for penalties and interest on the unreported income.

3. File on Time or Request an Extension. This year’s tax deadline is April 18. If the clock runs out, you can get an automatic six-month extension, bringing the filing date to October 16, 2017. You should keep in mind, however, that filing the extension itself does not give you more time to pay any taxes due. You will still owe interest on any amount not paid by the April deadline, plus a late-payment penalty if you have not paid at least 90 percent of your total tax by that date.

4. Don’t Panic If You Can’t Pay. If you can’t immediately pay the taxes you owe, there are several alternatives. You can apply for an IRS installment agreement, suggesting your own monthly payment amount and due date, and getting a reduced late payment penalty rate. You also have various options for charging your balance on a credit card. There is no IRS fee for credit card payments, but processing companies generally charge a convenience fee. Electronic filers with a balance due can file early and authorize the government’s financial agent to take the money directly from their checking or savings account on the April due date, with no fee.

5. Don’t forget to check the box for healthcare coverage. Checking the box on line 61 of Form 1040 shows that you had healthcare for all 12 months during the tax year (2016). The IRS will still process your tax return if you forget to check the box but this applies ONLY to 2016 tax returns–and you’re not off the hook for any penalty you might owe.

6. Sign and Double Check Your Return. The IRS will not process tax returns that aren’t signed, so make sure that you sign and date your return. You should also double check your social security number, as well as any electronic payment or direct deposit numbers, and finally, make sure that your filing status is correct.

Remember: To avoid delays, get your tax documents to the office as soon as you can.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

Should you File an Extension on your Tax Return?

If you’ve been procrastinating when it comes to preparing and filing your tax return this year you might be considering filing an extension. While obtaining a 6-month extension to file is relatively easy–and there are legitimate reasons for doing so–there are also some downsides. If you need more time to file your tax return this year, here’s what you need to know about filing an extension.

What is an Extension?

An extension of time to file is a formal way to request additional time from the IRS to file your tax return, which in 2017, is due on April 18. Anyone can request an extension, and you don’t have to explain why you are asking for more time.

Note: Special rules may apply if you are serving in a combat zone or a qualified hazardous duty area or living outside the United States. Please call the office if you need more information.

Individuals are automatically granted an additional six months to file their tax returns. In 2017, the extended due date is October 16. Businesses can also request an extension. In 2017, the deadline for most businesses (whose tax returns were due March 15) is September 15th (October 16 for C-corporations).

Caution: Taxpayers should be aware that an extension of time to file your return does not grant you any extension of time to pay your taxes. In 2017, April 18 is the deadline for most to pay taxes owed and avoid penalty and interest charges.

What are the Pros and Cons of Filing an Extension?

As with most things, there are pros and cons to filing an extension. Let’s take a look at the pros of getting an extension to file first.

Pros

1. You can avoid a late-filing penalty if you file an extension. The late-filing penalty is equal to 5 percent per month on any tax due plus a late-payment penalty of half a percent per month.

Tip: If you are owed a refund and file late, there is no penalty for late filing.

2. You can also avoid the failure-to-file penalty if you file an extension. If you file your return more than 60 days after the due date (or extended due date), the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time.

3. You are able to file a more accurate–and complete–tax return. Rather than rushing to prepare your return (and possibly making mistakes), you will have an extra 6 months to gather required tax records. This is helpful if you are still waiting for tax documents that haven’t arrived or need more time to organize your tax documents in support of any deductions you might be eligible for.

4. If your tax return is complicated (for example, if you need to recharacterize your Roth IRA conversion or depreciate equipment), then your accountant will have more time available to work on your return.

5. If you are self-employed, you’ll have extra time to fund a retirement plan. Individual 401(k) and SIMPLE plans must have been set up during the tax year for which you are filing, but it’s possible to fund the plan as late as the extended due date for your prior year tax return. SEP IRA plans may be opened and funded for the previous year by the extended tax return due date as long as an extension has been filed.

6. You are still able to receive a tax refund when you file past the extension due date. Filers have three years from the date of the original due date (April 18, 2017) to claim a tax refund. However, if you file an extension you’ll have an additional six months to claim your refund. In other words, the statute of limitations for refunds is also extended.

Cons

And now for the cons of filing an extension…

1. If you are expecting a refund, you’ll have to wait longer than you would if you filed on time.

2. Extra time to file is not extra time to pay. If you don’t pay a least 90 percent of the tax due now, you will be liable for late-payment penalties and interest. The failure-to-pay penalty is one-half of one percent for each month, or part of a month, up to a maximum of 25 percent of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full. If you are not able to pay, the IRS has a number of options for payment arrangements. Please call the office for details.

3. When you request an extension, you will need to estimate your tax due for the year based on information available at the time you file the extension. If you disregard this, your extension could be denied, and if you filed the extension at the last minute assuming it would be approved (but wasn’t), you might owe late-filing penalties as well.

4. Dealing with your tax return won’t be any easier 6 months from now. You will still need to gather your receipts, bank records, retirement statements and other tax documents–and file a return.

Need to File an Extension? Don’t Wait.

Time is running out. If you feel that you need more time to prepare your federal tax return, then filing an extension of time to file might be the best decision. If you have any questions or are wondering if you need an extension of time to file your tax return, don’t hesitate to call.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAs

Whether you are self-employed or an employee, if you use a vehicle for business, you get the benefit of tax deductions…

Deducting Business-Related Vehicle Expenses

Ordinarily, expenses related to use of a car, van, pickup or panel truck for business can be deducted as transportation expenses. (Use of larger vehicles, such as tractor-trailers, is treated differently and is not part of this discussion.). In order to claim a deduction for business use of a car or truck, a taxpayer must have ordinary and necessary costs related to one or more of the following:

*Traveling from one work location to another within the taxpayer’s tax home area. (Generally, the tax home is the entire city or general area where the taxpayer’s main place of business is located, regardless of where he or she resides.)

*Visiting customers.

*Attending a business meeting away from the regular workplace.

*Getting from home to a temporary workplace when the taxpayer has one or more regular places of work. (These temporary workplaces can be either within or outside taxpayer’s tax home area.)

Expenses related to travel away from home overnight are travel expenses. These expenses are discussed in Chapter One of IRS Publication 463, “Travel, Entertainment, Gift, and Car Expenses.” However, if a taxpayer uses a car while traveling away from home overnight on business, the rules for claiming car or truck expenses are the same as stated above.

It is important to note that costs related to travel between a taxpayer’s home and regular place of work are commuting expenses and are not deductible.

There are two choices for claiming deductions:

1. Deduct the actual business-related costs of gas, oil, lubrication, repairs, tires, supplies, parking, tolls, drivers’ salaries, and depreciation.

2. Use the standard mileage deduction in 2016 and simply multiply 54 cents by the number of business miles traveled during the year. Your actual parking fees and tolls are deducted separately under this method.

Which Method Is Better?

For some taxpayers, using the standard mileage rate produces a larger deduction. Others fare better tax-wise by deducting actual expenses.

Tip: The actual cost method allows you to claim accelerated depreciation on your car, subject to limits and restrictions not discussed here.

The standard mileage amount includes an allowance for depreciation. Opting for the standard mileage method allows you to bypass certain limits and restrictions and is simpler, however, it is  often less advantageous in dollar terms.

Caution: The standard rate may understate your costs, especially if you use the car 100 percent for business, or close to that percentage.

Generally, the standard mileage method benefits taxpayers who have less expensive cars or who travel a large number of business miles.

How to Make Tax Time Easier

Keep careful records of your travel expenses and record your mileage in a logbook. If you don’t know the number of miles driven and the total amount you spent on the car, your tax advisor won’t be able to determine which of the two options is more advantageous for you at tax time.

Furthermore, the tax law requires that you keep travel expense records and that you show business versus personal use on your tax return. If you use the actual cost method for your auto deductions, you must keep receipts.

Tip: Consider using a separate credit card for business, to simplify your recordkeeping.

Tip: You can also deduct the interest you pay to finance a business-use car if you’re self-employed.

Note: Self-employed individuals and employees who use their cars for business can deduct auto expenses if they either (1) don’t get reimbursed, or (2) are reimbursed under an employer’s “non-accountable” reimbursement plan. In the case of employees, expenses are deductible to the extent that auto expenses (together with other “miscellaneous itemized deductions”) exceed 2 percent of adjusted gross income.

Call today and find out which deduction method is best for your business-use car.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAs

Are you one of the millions of Americans who hasn’t filed (or even started) your taxes yet? With the April 18th tax filing deadline quickly approaching, here is some last minute tax advice for you…

        Last Minute Filing Tips for 2016 Tax Returns

1. Stop Procrastinating. Resist the temptation to put off your taxes until the very last minute. It takes time to prepare accurate returns and you may find that additional information is needed to complete your tax return.

2. Include All Income. If you had a side job in addition to a regular job, you might have received a Form 1099-MISC. Make sure you include that income when you file your tax return because you may owe additional taxes on it. If you forget to include it you may be liable for penalties and interest on the unreported income.

3. File on Time or Request an Extension. This year’s tax deadline is April 18th. If the clock runs out, you can get an automatic six-month extension, bringing the filing date to October 16, 2017. You should keep in mind, however, that filing the extension itself does not give you more time to pay any taxes due. You will still owe interest on any amount not paid by the April 18th deadline, plus a late-payment penalty if you have not paid at least 90 percent of your total tax by that date.

Please call us for assistance if you need to file an extension.

4. Don’t Panic If You Can’t Pay. If you can’t immediately pay the taxes you owe, there are several alternatives. You can apply for an IRS installment agreement, suggesting your own monthly payment amount and due date, and getting a reduced late payment penalty rate.

You also have various options for charging your balance on a credit card.

Again, please call us for assistance with determining is the best payment method for you and assistance in filing an installment agreement request.

5. Sign and Double Check Your Return. The IRS will not process tax returns that aren’t signed, so make sure that you sign and date your return. You should also double check your social security number, as well as any electronic payment or direct deposit numbers, and finally, make sure that your filing status is correct.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAs

This week, we are sharing the highlights of the Cost of Living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2017 …

            Retirement Contributions Limits for 2017

In general, income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the saver’s credit all increased for 2017. Contribution limits for SIMPLE retirement accounts for self-employed persons remains unchanged at $12,500.

Traditional IRAs

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions; however, if during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply. Here are the phase-out ranges for 2017:

• For single taxpayers covered by a workplace retirement plan, the phase-out range is $62,000 to $72,000, up from $61,000 to $71,000.
• For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $99,000 to $119,000, up from $98,000 to $118,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $186,000 and $196,000, up from $184,000 and $194,000.
• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Roth IRAs

The income 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.

Saver’s Credit

The income limit for the saver’s credit (also known as the retirement savings contributions credit) for low- and moderate-income workers is $62,000 for married couples filing jointly, up from $61,500; $46,500 for heads of household, up from $46,125; and $31,000 for singles and married individuals filing separately, up from $30,750.

Limitations that remain unchanged from 2016

• The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
• The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

If you have any questions about retirement contributions or pension plans, please contact our office for assistance

.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAS

Attention business owners…Whether you file as a corporation or sole proprietor, in this post we want to share the basics you need to keep in mind about tax changes for 2016…

            2016 Recap: Tax Provisions for Businesses

Standard Mileage Rates
The standard mileage rates in 2016 are as follows: 54 cents per business mile driven, 19 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.

Health Care Tax Credit for Small Businesses
Small business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $52,000 (adjusted annually for inflation) in 2016.

In 2016 (as in 2015 and 2014), the tax credit is worth up to 50 percent of your contribution toward employees’ premium costs (up to 35 percent for tax-exempt employers). For tax years 2010 through 2013, the maximum credit was 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities.

Section 179 Expensing and Depreciation
The Section 179 expense deduction was made permanent at $500,000 by the Protecting Americans from Tax Hikes Act of 2015 (PATH). For equipment purchases, the maximum deduction is $500,000 of the first $2.01 million of qualifying equipment placed in service during the current tax year. The deduction is phased out dollar for dollar on amounts exceeding the $2 million threshold amount (indexed for inflation) and eliminated above amounts exceeding $2.5 million. In addition, Section 179 is now indexed to inflation in increments of $10,000 for future tax years.

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. The standard business depreciation amount is 24 cents per mile.

Work Opportunity Tax Credit (WOTC)
Extended through 2019, the Work Opportunity Tax Credit has been modified and enhanced for employers who hire long-term unemployed individuals (unemployed for 27 weeks or more) and is generally equal to 40 percent of the first $6,000 of wages paid to a new hire.

SIMPLE IRA Plan Contributions
Contribution limits for SIMPLE IRA plans increased to $12,500 for persons under age 50 and $15,500 for persons age 50 or older in 2016. The maximum compensation used to determine contributions increases to $265,000.

Please call us for more in depth information and for help in understanding which deductions and tax credits you are entitled to.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.