The Winners & Losers Of The New Tax Plan

Did you see the news re: the proposed tax plan last Wednesday?

Well, the more important questions are:
What does this new tax plan really mean to you?
And how is this going to affect you?

With proposals like this, they have a lot of work to do, before it becomes final. We don’t know if this is going to pass or if it passes, when it will be considered a law. So with that in mind, I would just tell you the winners and losers with this proposed tax plan. Here goes:

Winners
• Businesses with high tax rates – from 35% corporate income tax to 15%. That’s a tax savings of 20%. So for example you made $1 million in your business, your savings will be $200K.

• High-income earners – income around $470K then your tax rate will drop from 39.6% to 35%. Again, the difference is only 5%. However, if you made $1 million, the tax savings is $50K. But what if you made $1 million, then your savings will be $50K. That’s a huge windfall for the high-income earners.

• Multimillionaires who want “0” estate tax – this would take care of your taxes, if your estate is more than $5.5 million or $11 million for couples. Did you know that estate tax rate can be as high as 40%? So if your remaining estate is $1 million after the exemption, then you still need to pay $400K in death taxes. This is a huge windfall for the rich!

• People who are subject to AMT – AMT mean alternative minimum tax. Now, raise your hand if you think I just said a “greek word”. AMT was designed to keep the rich taxpayers from using loopholes to avoid paying taxes. There are some tax deductions that are added back for AMT purposes, examples are state tax withholding and r/e property taxes. So we can compare between the regular vs AMT tax. And we need to use the higher tax.

• Donald Trump – surprise, surprise! All the items that I just mentioned just now will have a huge impact on Donald Trump’s taxes. He got 564 business entities according to his financial disclosure form and he can take advantage of the 15% tax rate. Do you know why he hates AMT so much? Because on his 2005 leaked return, he paid an extra $31 million in AMT taxes.

Losers
• Upper-middle income people with high state tax rate – because the state tax that you are paying will not be tax deductible under the new proposed tax plan.

• Housing industry – by doubling the standard deduction and removing some of the itemized deductions, you might not be encouraged to buy homes.

• Non-profit and charitable organizations – similar with the housing industry, by doubling the standard deduction, there might be a fewer financial reasons to donate to charity.

• Middle-class taxpayers – the first 70% of the low-income population will not be paying nor will be filing taxes with this new plan. While the top 1% will have a huge windfall. And the middle-class will be squeezed in between and will be the one who will be paying the tax.

Now what? Are you confused yet? Here’s my advice to you:

• Turn your hobby into a business and
• Structure yourself as “self-employed”.

Why? Because self-employed will be taxed at 15% while an employee will be taxed at a higher tax rate of 35%.

Again, let me repeat, this is a tax proposal and we have no idea what will happen. But there’s one thing I know though, Trump’s proposed tax plan isn’t going to be easy. In the words of film director Martin Scorsese, there’s no such thing as simple. Simple is hard.

How Will The New Tax Plan Affect You?

Did you see the news re: the proposed tax plan? You might be thinking, what does this really mean? And how is this going to affect me?

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

The White House presented the new tax plan last Wednesday. And compared to what I’ve discussed last November, 2016, there were not a lot of surprises. Now, the thing with a proposal is, they have a lot of work to do, before it becomes final. Because as of right now, we don’t know if this is going to pass or if it passes when it will be a law. So with that in mind, I would not tell you about the highlights but would tell you instead the winners and losers with the proposed tax plan. Here goes:

Winners
• Businesses with high tax rates – from 35% corporate income tax to 15%
• High-income earners – income around $470K then your tax rate will drop from 39.6% to 35%
• People with creative CPAs – this might open up a tax loophole since taxpayers might want to be structured as an S-corporation or LLC instead of employees.
• Multimillionaires who want “0” estate tax – this would take care of your taxes, if your estate is more than $5.5 million or $11 million for couples.
• People who are subject to AMT – the one who will benefit the most are high-income earners that have deductions subject to AMT adjustments (meaning you need to add back your deductions because you are not getting any tax benefits for AMT purposes).
• Donald Trump – surprise, surprise! All the items that I just mentioned just now will have a huge impact on Donald Trump’s taxes.

Losers

• Upper-middle-income people with high state tax rate – because the state tax that you are paying will not be tax deductible.
• Non-profit and charitable organizations – with the new proposal, the charitable deductions will be limited.
• Taxpayers – national revenue would decrease by $6.2 trillion over a decade. That means a large increase in the national debt or huge decrease in federal spending.

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.

Last Chance To Claim Your 2013 Refund

Have you filed your 2013 tax returns yet? If you have not filed yet – STOP, and make sure you listen to this so you don’t lose your refund.

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

According to the IRS, if you are one of the nearly one million taxpayers who failed to file a return for 2013, then you are in danger of losing your refund. Tax law provides a three-year period limit beginning from the tax due date to claim a refund when no return is filed. That means, since your 2013 tax return due date was April 15, 2014, you are given up to three years from the due date, to file on or before the April tax deadline – April 18 of this year – or the chance to claim the refund is gone for good.
Now here’s the twist, for a refund – there’s a three-year limit, but if you owe money – there’s no time limit until you file your taxes. So what’s the LowerMyTaxNow tax strategy? File your 2013 tax returns before April 18.
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 To Avoid A Tax Scam

Do you know someone who got victimized by a tax scam? I got to tell you, for the victim, it’s pretty scary! Since by the time you figured out that something is not right, the IRS imposter already cleaned your wallet! So how can you avoid it?

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

Fake IRS phone call is one of the most common scams. You need to be careful of phone calls or voicemail messages from someone who claims to be from the IRS. Often these criminals will say that you owe money and they will demand immediate payment. Other times, they will lie to you and say you have a refund. They will ask for your bank information over the phone.

So in order for you not to fall for these scams, here are some tips that you can use:

IRS will NOT:
• Call you demanding that you pay them right now. IRS usually correspond via mail.
• Demand payment without giving you the chance to ask question or appeal the amount you owed.
• Ask for your debit or credit card numbers over the phone.
• Require you to pay your taxes with a prepaid debit card.
• Threaten to contact your local police to arrest you for non-payment of taxes.
• Threaten you with lawsuit.

If you don’t owe or think you don’t owe any tax, you should:
• Contact the Treasury Inspector General for Tax Administration or TIGTA. You can go to www.treasury.gov/tigta and use the TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
• Report what happened to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” to the comments of your report.

To summarize, tax scams usually reach it’s peak during tax season. So, in order for you not to fall for these scams, please review and use the tips that I’ve discussed so you can avoid being a victim.

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.

Did Your Name Change Last Year?

Did you get married, divorced or adopted a child last year? If yes, please make sure you do this important step, before filing your taxes.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

If you or your dependent had a name change last year, please notify the Social Security Administration (SSA) before you file your taxes with the IRS. If the name on your tax return does not match the SSA records, the IRS is likely to notify you about the mismatch. How does that affect you? Well, your expected refund could be delayed. So if you had a name change due to marriage, divorce, or child adoption, please file Form SS-5 with the SSA to update your information.
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.

Where Is My Refund?

Did you file your taxes already? And now you are waiting and wondering how you can check the status of your refunds.
Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

The IRS normally processes most tax returns in 21 days for electronic filings and 6 weeks for paper returns. You can use the “Where’s My Refund?” tool on IRS.gov to track the status of your return. The link is: https://www.irs.gov/refunds.
For CA residents, you can go to ftb.ca.gov and click “Where’s My Refund?”
Now, if you want an easier way to check the status of your refund, you can just go to my CPA website at dalmaciocpa.com, choose the “Links” tab and you will see the links for IRS and all the states to check your refund.
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.

HUD-1 Replaced By Two New Forms

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

The Consumer Financial Protection Bureau has created two new forms for borrowers applying for a mortgage loan. The new forms, Loan Estimate and Closing Disclosure, replaced the HUD-1 statements. The new forms have been in use since October 3, 2015.

The Loan Estimate must be given within three business days from the date you submit your loan application. It was designed to help borrowers understand the key features, costs and risks of the mortgage loan. On the other hand, the Closing Disclosure must be provided at least three business days before the loan closing date. It was created to help borrowers understand all the transaction costs of the loan. Part 1 of the Closing Disclosure looks the same as the Loan Estimate. The purpose of that is to make it easy for you to review if the estimated costs changed compared to the final closing costs.

So if ever you did any purchase, sale or refinance for this year. Make sure you provide your CPA or tax preparer the Closing Disclosure form that would show the purchase/sales price of the property and the related closing costs.

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.

Receipt of Tax Document After You Filed Your Taxes

Have you ever filed your taxes and after you received your refund, you got an additional tax documents in the mail?

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

If that ever happened to you, here are your two options:
1. File an amended return – if you received an additional W-2s, 1099s or K-1s (a K-1 shows your income portion from either an S-corporation, partnership, LLC or trust), then you need to amend your returns to report the additional income. Ignoring and not reporting the forms might result in increased additional interest and penalties.
2. Ignore the forms – if you received a form that shows a minimal income (interest or dividend income or losses on K-1s, then I would recommend ignoring the forms. Since amending the return would result in tax preparation fees, you need to determine if it makes sense to amend your returns.

There you have it! Now you know how to address it, if ever you receive a tax documents after filing your taxes.

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

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

What Do You Do If You Did Not Receive Your 1099?

Have you ever worked as an independent contractor and you were not given a 1099 form to report your income? What do you do? Do you report it or ignore it?

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

If that ever happened to you, my recommendation is to report your 1099 income. It does not matter if the one that hired you did not issue you a 1099, it’s still your responsibility to report the income. You might be thinking: “But the IRS did not receive a copy of the 1099, that means, I got tax-free income! No need to report it!”
Unfortunately, here are the tax traps that you need to consider:
1. Longer audit periods – if you did not report more than 25% of your income, the IRS have 6 years to audit your returns instead of 3 years.

2. Multiple-year audits – if you get audited, there is a potential that the IRS will go back three years or six years, if applicable to determine that you did not omit any income.

3. Interest & Penalty assessment – you will be assessed various interest and penalties based on the amount that you omitted. For every dollar that you saved from omitting the income, the IRS wants around $1.70 or more.

To summarize, not reporting your income can expose you to longer audit periods, multiple-year audits and penalty assessments. So please, report your income.

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

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

Five Items To Consider When Starting A New Business

Are you starting or planning a new business this year? If yes, make sure you consider these five items into account.

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

• Business plan. You need to outline who will own the business and what the legal structure will be, your qualifications to run the business, the competitive market you face, the products or services you will sell, and how you intend to advertise to prospective customers. Also, how much cash will you need to start up and where will those funds come from? These are important questions that you need to answer and address before starting your business. Keep this in mind: no answer, no business!

• Legal form. You can form a corporation, or operate as an LLC, a partnership, or a sole proprietorship. However, you need to consider both tax and non-tax reasons for selecting a given business structure. These means, you need to know your priority. Do you want to maximize tax deductions? Is the priority legal protection? Are you going to sell the business to a competitor in the next few years? Do you want to minimize your estate tax? Are you going to go public? So make sure you know the goal in mind.

• Location. If your business will consist only of online sales, then your corporate office can be wherever you are. However, if your business needs foot traffic to thrive, you’ll need to research rents and other costs such as utilities, as well as zoning and traffic restrictions.

• Taxes. You’ll have to work with the IRS, state tax agencies, and local governments to obtain permits and business licenses.

• Advisors. You need to create a business financial team that includes a banker, an insurance agent, an attorney, and yours truly, your favorite accountant. So make sure you involve your advisors early and frequently.

To recap, starting a new business can be very challenging, but by considering these five items, you can put yourself on the path of an aspiring business owner. Good luck!

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.