Business Returns Due Dates Changing

Due to recent law change, the due dates for some of the business and information returns have changed.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Here’s what you need to know.

For C-corporations, the new due date will be April 15 (three and one-half months after the end of the taxable year). However, C-corporations with tax years ending on June 30 will continue to have a due date of September 15.

For partnership & LLC returns, the new due date will be March 15. Partnership returns will be allowed a six-month extension. So the extension due date will be September 15.

For S-corporations, the due date continues to be March 15. S-corporations may also request a six-month extension with the same extension due date of September 15.

Lastly, for FBAR (Form 114) re: foreign asset reporting, the new due date will be April 15 and you will be allowed to request a six-month extension up to October 15. However, you need to request an extension since it’s not automatic.

I bet you are thinking right now: “Why did they make these changes?” Honestly, the IRS got good intentions why they are changing the due dates. The goal is to line up with the business tax reality. Partnership & LLC returns were changed from April 15 to March 15 to give you time to prepare your personal returns. And that’s the same reason why the S-corporations continue to have a March 15 due date. On the other hand, for C-corporations, which are normally for bigger companies, they moved it forward to April 15 to give them additional time to prepare their returns.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

2017 Mileage Rate Reimbursements & Deductions

If you are going to use your car for business, charity, medical appointments, or moving during 2017, please be aware that the standard mileage rates for computing the deductible costs have changed.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Effective January 1, 2017, here are the rates to use to calculate reimbursements and deductions for the year:

• Business. The rate is 53.5¢ per mile for business miles driven (down from 54 cents in 2016).
• Charitable. For charitable services, it remains at 14¢.
• Medical and moving. The rate for medical and moving mileage is 17¢ per mile (down from 19 cents in 2016).

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Be Aware of These New Filing Payroll Deadlines

Happy New Year! Well, with new year comes with new rules.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

As you begin preparing your final payroll tax returns for 2016, take into account earlier due dates for two common reporting forms.

Forms W-2 for 2016 are due January 31st. The January 31 deadline applies to forms given to employees, as well as those submitted to the Social Security Administration. IRS late penalties will range from $50 – $530. Ouch! While CA will charge $50 per return. So watch out!

Forms 1099-MISC with non-employee compensation in Box 7 are due January 31st. The January 31 due dates applies to forms given to the recipients, as well as paper and electronic copies filed with the IRS. Please note that this due date applies only to 1099s that report amounts in box 7. The due dates (end of February) remain unchanged for the other boxes. Now, if you don’t have the proper information of the recipients, make sure you provide them a copy of the W-9 Request for Taxpayer Identification Number so they can fill it out and return it to you ASAP.

Why? Well, there is a $260 per return federal penalty for failure to file the 1099s. If filed within 30 days of the due date, the federal penalty is reduced to $50 per return. To make it worse, California conforms to these due dates. And they have their own applicable penalties. For 1099s it’s $100 for failure to file, $30 if filed within 30 days of the due date.

So watch out! Make sure you file the W-2s and 1099-Misc with non-employee compensation by January 31st to avoid incurring penalties.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

You’ve Received A Gift…What Now?

Imagine your rich parent or relative gives you a real estate property, vacant lot or stocks. And then a number of years later, your parent or relative dies and you decide to sell the gift. Your tax preparer says you’ll need to calculate capital gains on the sale, and asks for your basis to offset it with the sale. So here’s the question: “What’s your basis?”
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Basis is the amount of capital investment in the property which is commonly called the purchase costs. So when you sell a property or stocks received as a gift, the general rule is that your basis is the donor’s cost basis or purchase costs. So if you sell it for a gain, you need to use the donor’s basis or costs. But if you sell at a loss, your cost is the lower of the donor’s basis or the fair market value on the date you received the gift.
But without cost records, you have no way of proving the donor’s basis and no way of saving yourself tax dollars.
So what do you do? So next time, when you receive a gift, explain why you need the cost basis to make the conversation less awkward. No one likes to pay unnecessary taxes. So I recommend having the same conversation about the cost of valuable gifts you received in prior-years. That’s very important!
Now conversely, if you’re the gift-giver or the one giving the gifts, offer the additional gift of presenting the cost records to your recipient at the same time. Otherwise, you may end up giving an unintended gift to the IRS in the form of…unnecessary taxes.
There you have it. So next time, when you receive a valuable gift like a property, vacant lot or stocks, ask and inquire about the cost records so that at the time of sale, you will avoid unnecessary taxes.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

To Convert or Not To Convert…That Is The Question!

A tax client asked me: “Should I convert my IRA or retirement plan into a Roth IRA? That is a great question! However, as with any tax questions, it is impossible to have a definite answer when deciding whether to convert a traditional IRA or retirement plan into a Roth IRA.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

You will generally benefit from the Roth IRA conversion if ALL of the following applies to you:
• You don’t need to take withdrawals from your Roth IRA for at least 15 to 20 years;
• Your future tax rate when you take out withdrawals is the same or greater than the rate during the conversion and
• You can pay the tax on the conversion with non-retirement funds

If you meet all the criteria, congratulations! This is one powerful tax strategy that if you apply correctly, will definitely, build you tax-free wealth!

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

How Will Trump’s Tax Plan Affect You?

Donald Trump was elected the 45th President of the United States last night. You might be wondering: “How would that impact me tax-wise?”

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

If Trump makes good on his promises, here are the expected tax changes:

Reduce federal tax brackets – from seven to three tax brackets with rates of 12, 25 and 33%. Likewise, the top rate would fall from 39.6 to 33 %.

Standard deduction increase – from $6,300 to $15,000 for single filers and from $12,600 to $30,000 for married couples filing jointly. And there will be no more personal exemptions.

Itemized deductions limit – will be capped at $100k for single filers and $200k for married couples filing jointly.

Take out the 3.8% Medicare tax – this additional tax impacts high income taxpayers who have income over $200k for single filers and $250k for married couples filing jointly or taxpayers who sold appreciated real estate.

Cancel alternative minimum tax and estate tax – if this estate tax plan holds true, then you can make some arrangements the next 4 years to pass away accordingly.

Reduction of business tax rate – from 35% to 15%

15% business income tax rate – S-corporation, partnership or sole-proprietorship income reported on the personal tax will be taxed at 15%. What does that mean? High wage earner will be paying the 33% tax rate while self-employed will be paying 15% tax rate! That’s a huge difference! You better start working for yourself!

While all these changes look good on paper, this will increase our national debt by $7 trillion dollars because of tax revenue reduction. So the trillion dollar question then is, “what gives”? In order to offset this massive debt increase, the tax plan would require huge reductions in tax benefits from several industries. Which one? Your guess is as good as mine. One thing is for sure though, since the Republican party controls both House and Senate, Trump will be pushing for tax changes, it’s not an if, but when. Stay tuned.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Don’t Let The Tax Tail Wag The Financial Dog

Don’t let the tax tail wag the financial dog. That was a famous saying that means don’t make financial decisions based solely on tax considerations.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

When clients asked me about a particular tax issue that concerns cash and tax, I always tell them that “cash is king”. Tax is important, but cash will always trump tax! Pardon the pun, it was not intentional. Some tax reduction strategies make good financial sense. Others are simply bad ideas, often because tax considerations are allowed to override basic cash sense.

Here’s one example of the tax tail wagging the financial dog. Let’s say that you operate a sole proprietor consulting business. You want an additional tax deduction, so you decide to buy a $70,000 SUV that you don’t really need. If you’re in the 40% tax bracket and you deduct the entire amount, this purchase will reduce your taxes by $28,000 (40% of $70,000). But even after the tax savings, you will still shell out $42,000 ($70,000 minus $28,000) – and stuck with an SUV that you don’t really need.

Here are other examples that focus solely on tax considerations and ignore the bigger financial picture:

● You increase the size of your home mortgage just to get a larger tax deduction for mortgage interest.

● You don’t want to pay off a mortgage because you want to keep the interest deduction.

● Turning down extra income, because you don’t want to be “pushed into a higher tax bracket.”

As you can see, tax-reduction strategies are important in minimizing taxes. However, if you focus solely on the tax savings, you might lose sight of the overall financial picture. Because, you have to realize at the end of the day, “cash is king”.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Can I Take Out a Roth IRA To Pay For School?

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Here’s a tax question, I got from one of my clients:

Can I take out an early Roth IRA distributions to help pay for my son’s college education without a tax penalty?

Great question!

In regards to a Roth IRA, you can have an income and penalty tax-free distribution if you meet both rules:

1. 5-year holding period. You need to meet the 5-year holding period requirement. This once-in-a-lifetime satisfaction rule is only needed for the first Roth IRA contribution that you made. Any subsequent contributions will not start a new holding period. That’s huge! So what is the tax strategy? You need to open up a Roth IRA account ASAP so the 5-year clock starts ticking!

2. 10% penalty exceptions. You are not subject to the 10% withdrawal penalty if you meet the following exceptions:

a. Use it for college education
b. You are age 59 ½ or older
c. Distribution is due to death or disability
d. Distribution for first-time homebuyer

Please note, that this is not a complete list, but just a sample of some of the exceptions.

So to answer your tax question, you met the 10% tax penalty exception. However, you need to inquire about your first Roth IRA contribution date to confirm if you met the 5-year holding period. And if you did, congratulations! Tax-free is my favorite tax word!

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Three Missed Deductions in Real Estate

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

If you are a current rental investor, there is a good chance that you are not taking advantage of hidden rental deductions. Why is that? Because, the tax law is as clear as a “mud,” that’s why. On this video, you will learn three missed deductions that you can take advantage of the next time you file your taxes. Here goes:

1. Start-up costs – these are expenses that you acquire BEFORE you start your real estate investment activities. Examples are: attorney and CPA consulting fees, business formation, due diligence costs, research of real estate market including travel expenses to see potential investment.

2. Purchase statement’s closing costs – certain closing costs are considered 100% deductible (interest, PMI & insurance) while others may not be deductible at all (reserves). Some costs are amortized (points & appraisal), and still others will be included into your property costs (title charges, recording fees & transfer items).

3. Home office expense – must be used regularly and exclusively for your property rental and management affairs. You can use the simplified option by claiming a standard deduction of $5 multiplied by the square footage of the home office (maximum is 300 square feet).

There you go! These are three missed deductions that you can apply to your next year’s taxes in order to maximize your deductions and increase your tax savings.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog. Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Tax Strategies For Surviving Spouse When Selling A Home

Do you know someone that recently passed away and the surviving spouse wants to sell the home but was not sure about the tax issues?

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

The $500,000 capital gain exemption that applies to married couples also applies to unmarried surviving spouses if he/she meets the following rules:

1. Only one spouse must meet the two-year ownership test
2. BOTH spouses must meet the two-year USE test
3. Neither spouse used the exemption the last 2 years
4. Sale should happen within 2 years
5. Exemption will not apply if the spouse remarries before the sale within the two-year period
This is very important! The tax planning then is to sell the property first before you get married again!

There you have it! Make sure you apply these rules in order to claim the $500K capital gain exemption.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog. Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.