Year: 2017

Quick Action May Save You Hundreds of Dollars in Tax Savings

Prepaying Qualified Deductions in 2017 May Save You Hundreds of Dollars in Taxes!!

Now that the tax bill has passed both the house and the senate, it will soon be signed by the president and become the law of the land.  Now that we have information regarding the final version there are some things even middle-income taxpayers who itemize may consider doing before year end. 

The standard deductions have increased from $6,350 to $12,000 and $12,700 to $24,000 for single and joint filers, respectively.  By moving payments for medical bills, state and local income taxes, property taxes, and/or charitable contributions to 2017, you could save taxes.

For example, let’s assume you file jointly and currently have itemized deductions of $14,000 for 2017.  Because the standard deduction for 2017 is $12,700, you can use IRS Form Schedule A to increase your deductions by $1,300 ($14,000 – $12,700).  If you are in the 15% tax bracket, your federal tax savings is $195 ($1,300 x 15%).  Remember that in 2018 you will have a standard deduction of $24,000.  If your itemized deductions are under $24,000, it gives you no benefit to use Form Schedule A because it is to your advantage to take the standard deduction.  Let’s assume you had the ability to pay for charitable contributions and/or property taxes you would normally pay in 2018 in 2017.  In this example we will assume you prepaid $2,000 in charitable contributions and $1,500 in property taxes that you would have normally paid in 2018 by December 31, 2017.  By doing so, you would be able to save an additional $525 in federal income taxes in 2017.  Those same deductions would give you no benefit in 2018 because the standard deduction is being increased by $11,300.  Paying those amounts in 2018 would do nothing to decrease your tax liability.  By prepaying those charitable contributions and property taxes in 2017, you get a 15% return on your money (tax savings of $525).

So, if your itemized deductions for 2017 exceed the standard deduction but will not likely exceed the standard deduction of $24,000 in 2018, it could be to your advantage to prepay medical expenses, income and property taxes, and charitable contributions to enjoy a one-time tax savings that could mean hundreds of dollars of tax savings.

Five Things to Know about Estimated Taxes and Withholding

Five Things to Know about

Estimated Taxes and Withholding

(IRS Tax Tip 2017-70)

With 10 million taxpayers a year facing estimated tax penalties, the IRS offers some simple tips to help prevent a surprise at tax time.

People pay taxes on income through withholding on their paycheck or through estimated tax payments. Taxpayers who pay enough tax throughout the year can avoid a large tax bill and penalties when they file their return.

Taxpayers should make estimated tax payments if:

  • The tax withheld from their income does not cover their tax for the year.
  • They have income without withholdings. Some examples are interest, dividends, alimony, self-employment income, capital gains, prizes or awards.

Here are five actions taxpayers can take to avoid a large bill and estimated tax penalties when they file their return. They can:

  • Use Form 1040-ES. Individuals, sole proprietors, partners and S corporation shareholders can use  this form to figure estimated tax. This form helps someone calculate their expected income, taxes, deductions and credits for the year. They can then figure their estimated tax payments.  
  • Use the Withholding Calculator on IRS.gov. This tool helps users figure how much money their employer should withhold from their pay so they don’t have too much or too little tax withheld. The results from the calculator can also help them fill out their Form W-4. Taxpayers whose income isn’t paid evenly throughout the year, can check Publication 505 instead of the calculator.  
  • Have more tax withheld. Taxpayers with a regular paycheck can have more tax withheld from it. To do this, they must fill out a new Form W-4 and give it to their employer. This is a good option for taxpayers who participate in a sharing economy activity as a side job or part-time business.  
  • Use estimated payments to pay other taxes. Self-employed individuals can make estimated tax payments to pay both income tax and self-employment tax. Self-employment tax includes Social Security and Medicare.  
  • Use Form W-4P. Generally, pension and annuity plans withhold tax from retirees’ payments. Recipients of these payments can adjust their withholding using Form W-4P and give it to their payer.

Taxpayers Should Be Wary of Unsolicited Calls from the IRS

Taxpayers Should Be Wary of

Unsolicited Calls from the IRS

(IRS Tax Tip 2017-53)

Unsolicited Calls from the IRS

Taxpayers who get an unexpected or unsolicited phone call from the IRS should be wary – it’s probably a scam. Phone calls continue to be one of the most common ways that thieves try to get taxpayers to provide personal information. These scammers then use that information to gain access to the victim’s bank or other account. 

When a taxpayer answers the phone, it might be a recording or an actual person claiming to be from the IRS. Sometimes the scammer tells the taxpayer they owe money and must pay right away. They might also say the person has a refund waiting, and then they ask for bank account information over the phone.

Taxpayers should not take the bait and fall for this trick. Here are several tips that will help taxpayers avoid becoming a scam victim.

The real IRS will not:

  • Call to demand immediate payment
  • Call someone if they owe taxes without first sending a bill in the mail
  • Demand tax payment and not allow the taxpayer to question or appeal the amount owed
  • Require that someone pay their taxes a certain way, such as with a prepaid debit card
  • Ask for credit or debit card numbers over the phone
  • Threaten to bring in local police or other agencies to arrest a taxpayer who doesn’t pay
  • Threaten a lawsuit

Taxpayers who don’t owe taxes or who have no reason to think they do should follow these steps:

  • Use the Treasury Inspector General for Tax Administration’s IRS Impersonation Scam Reporting web page to report the incident.
  • Report it to the Federal Trade Commission with the FTC Complaint Assistant on FTC.gov. 
  • Taxpayers who think they might actually owe taxes should follow these steps:
  • Ask for a call back number and an employee badge number.
  • Call the IRS at 1-800-829-1040.

Every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are the Taxpayer Bill of Rights.

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How to Protect Yourself from the Equifax Data Breach

How to Protect Yourself from the Equifax Data Breach

The massive Equifax breach means consumers need to be on guard against data thieves. The credit-rating company hack earlier this year left approximately 143 million people’s personal information exposed and vulnerable. Here are the steps you take to help protect yourself in the wake of this event.

1)      Determine the exposure of your information: Go to Equifax”s website here and follow the instructions provided. You’ll need your Social Security number handy to complete the check and to tell if you”ve been impacted by the breach.

2)      Enroll for free credit monitoring: Regardless of exposure, consumers who have information under Equifax are entitled to free credit monitoring for one year, along with other monitoring and protective services. You can learn more about what is available here.

3)      Monitor your credit reports and accounts for unusual activity: Equifax, Experian and TransUnion, the three major credit reporting companies, are required to supply you with a credit report free of charge once every 12 months. Go to AnnualCreditReport.com and request them. Once you have the reports, monitor them to ensure there are no unauthorized accounts, incorrect personal information or credit inquiries you didn’t initiate. These are signs of fraud and you should follow up on them to ensure you weren’t the victim of identity theft.

4)      Consider implementing a credit freeze: If you see suspicious activity or are highly concerned, you can place a credit freeze to help deter an identity thief from opening new accounts in your name. Visit the consumer information section of the Federal Trade Commission website to learn more about credit freezes and how to activate one.

5)      Set up fraud alerts: Fraud alerts require potential creditors to verify your identity before they can open an account, issue a new card or increase a credit limit. Remember that fraud alerts won’t necessarily prevent identity theft, but they will make it much harder for someone with your personal information to use it.

 

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Reimagining Entire Industries with Artificial Intelligence

Artificial Intelligence

About a year ago, at an Artificial Intelligence (AI) Conference in Cambridge in the U.K., Dr. Stephen Hawking noted that, “Success in creating AI could be the biggest event in the history of our civilization … either the best or the worst thing, ever to happen to humanity. We do not yet know which.”

The question remains unanswered, even as the AI sector continues to boom. Most of the major advances in AI that we are experiencing originated from research centers and startups – many based in the U.K. It is interesting to note that major U.S. technology leaders like Microsoft, Google and Twitter have entered this arena by acquiring some of the U.K.’s brightest AI stars.

Simply stated, AI is changing many of the ways businesses engage with their customers – whether with “chatbots” providing customer service, or by automated virtual assistants, or using technology to power self-driving automobiles. The advances in this sector are transforming operations at businesses of all sizes. This burgeoning industry has made major strides in helping businesses – especially small businesses – operate more effectively with social media. It used to be that analyzing social dialogue to identify and prioritize consumer targets was a tedious and lengthy process. With an AI software interface, the job takes minutes rather than days.

The blossoming of the AI sector has produced tools that are both super-efficient and inexpensive, offering major benefits to many small businesses. Now, routine customer service, sales and human resource tasks can be automated. As AI takes off, we can expect to see it making major inroads into areas of specific expertise, such as law and medical diagnostics. Expect to see virtual lawyers offer cheaper solutions to traditional legal practitioners. These bots can search law files and resolve complex immigration or employment law questions in minutes – research tasks that would have taken a paralegal many billable hours. Likewise, medical diagnostic AI tools can make assessments faster and often with a greater degree of accuracy than medical professionals.

Cybersecurity is another area where expectations run high for AI applications. In the never-ending battle to counter and defeat complex computer hacking schemes, machine learning is expected to continue to play an important role in combating increasingly sophisticated plots and uncovering potential vulnerabilities before cybercrooks strike.

Ethical Concerns

There are many issues – both ethical and legislative – that will need to be resolved as AI continues to grow and expand throughout the global business world. Some industry observers worry that AI will make many occupations in IT obsolete; others believe that AI will create new jobs by freeing human beings from routine tasks to allow them to focus on the “higher value” cognitive skills that currently elude chatbots and virtual assistants. Some find the proliferation of profiling AI tools – programs that are used to prioritize sales prospects or job candidates based on their LinkedIn profiles – unsettling. Champions of such assessment tools believe they merely speed up the interactions that take place between people, and do so with much less error and bias.

Whether we like it or not, AI is here to stay and is likely to be a game-changer in the way we do business in the near future.

Healthcare Reform Update

Healthcare Reform Update

The Affordable Care Act (ACA) – also known as Obamacare – was not the perfect solution to the nation’s need for affordable healthcare, but it did increase the availability of quality, affordable healthcare for small businesses. Companies that had struggled for years – not only to find affordable health insurance for their workers but also to negotiate double-digit premium increases every year – were relieved to have choices and manageable premium rate increases.  Following Trump’s inauguration, Republican attempts to repeal the ACA without providing an alternative solution recreated the nightmare for many small firms. The administration’s ultimate failure to kill Obamacare ended up being a relief for many entrepreneurs and small business owners, but many issues remain unresolved. Healthcare Reform.

Business owners see the need for a bipartisan effort to develop realistic and affordable solutions, which would enable the small business sector to thrive and continue to fuel our nation’s economic growth. Here are some of the concerns that leaders have identified:

  • A recent report from the Congressional Budget Office on the fiscal impact of the Federal government yanking the cost-sharing subsidies that support the ACA marketplaces (a revision that would most likely occur if Republicans continue to gut the ACA) suggests that insurance premiums for small businesses would increase an average of 20 percent next year growing to a 25 percent increase by 2020. Although the Federal government is required by current laws to pay these subsidies, President Trump has indicated he wants to stop these subsidies by any means possible as part of his mission to dismantle the ACA. The CBO has calculated that the potential economic impact on the federal deficit could be as much as $194 billion, because a move like this would require consumers to obtain additional tax credits to offset their premium payments.
  • The elimination of cost-sharing subsidies would likely lead many insurance companies to exit the individual insurance market, and could disrupt the health insurance marketplace and leave small business owners with limited access to affordable health insurance options.
  • Small business advocates oppose the introduction of any measures that would result in separate risk pools for the healthy and the sick, and want to see measures to encourage businesses to establish association health plans.
  • Sector leaders want to see steps taken to expand Medicaid. ACA already had provided coverage to an additional 14 million previously uninsured Americans – a total that includes an estimated 2 million small business employees.
  • Entrepreneurs want to see healthcare tax equity measures in place for the self-employed to allow them to deduct healthcare expenses from FICA tax obligations.

The small business segment is hailed as the champion of job-creation in the United States. If it is to continue in this vital role, lawmakers must expand efforts to do more to reform healthcare insurance.

Benefits of Delaying Retirement Number Many

Benefits of Delaying Retirement

Traditionally, retirement was short and peaceful. People worked jobs that were hard on the body – such as farming, manufacturing, tradesmen or railroad workers. If you made it to retirement, you were relieved to have the chance to wind down your days in restful repose.

That all changed in the latter part of the 20th century. Retirees began to take advantage of affordable travel opportunities enabled by cars that could drive great distances and highways that could accommodate them, as well as regional intracontinental airlines. In the 1980s, exercise became a popular pastime and retirees could be found at fitness clubs, aerobics classes and racquetball courts. There was a sweet spot in time when retirement was short enough not to outlive savings and retirees were healthy enough to enjoy an active leisure life.

But a lot of things have changed over the past 30 years. More jobs are automated and life expectancy rates, especially for people who reach age 65, are longer than ever. By middle age, it is common to have developed one or more chronic conditions, making a long retirement a less-than-healthy one. Furthermore, we experienced a pretty severe recession and slow economic recovery, when many pre-retirees had to dig into their savings just to stay above water.

Another area that has changed is the transition from employer-sponsored pensions to 401(k) plans. This has fostered a different way of looking at retirement. Back when many workers had pensions, all they had to do was accumulate enough credits and they could retire with a guaranteed stream of income for life. That gave people something to look forward to. Now, with self-directed retirement plans, workers know that the longer they work the more they can save and the longer their investments have time to grow – which actually creates an incentive to work longer. Another reason people tend to work until at least age 65 is so they don’t have to pay for their own healthcare insurance, for which premiums have grown exponentially over the past 15 years.

In addition, the longer we earn an income the longer we can delay drawing Social Security benefits. Once you start taking a benefit, that payout level remains permanent throughout your life. However, the longer you wait, the higher the payout. In fact, people who delay to age 70 can take advantage of Delayed Retirement Credits, which increase their level of payout 5.5 percent to 8 percent a year past full retirement age.

Now that people are living longer, many are healthy enough to continue working longer as well. Plenty of employees want to continue working not only for the money, but for social interaction and intellectual engagement. When retirement was 10 years or less, that seemed like enough time to wind down and relax. But with today’s workers facing 30 years or more in retirement, the prospect of not having a regular place to go, people to see, and work to do for a few decades isn’t quite as appealing.

However, what if you hate your job and can’t imagine staying on past traditional retirement age? A recent study found that people who changed jobs in their 50s were more likely to work longer. In some scenarios, using well-earned experience can translate into a more rewarding job opportunity. Consider that even if you don’t earn more money, a lateral move could still yield higher financial rewards if you enjoy the new job and want to continue working there indefinitely.

Some retirees decide to go back to work because they’ve had a bit of fun but find they miss the day-to-day routine of work and having a broader network of interpersonal relationships. In fact, they often find their experience and expertise was sorely missed, and in some situations, are more valued by their colleagues. This might not happen in all cases, but the lure of renewing friendships, professional appreciation and additional income offer compelling reasons to come out of retirement.

 

The Clock is Ticking

Some investment commentators have been predicting that the bull market is about to plunge and turn bearish ever since this long-running bull market launched back in March 2009. At some juncture, the naysayers will be right. Perhaps what’s most significant is the way stock prices have remained so steady throughout 2017. Despite a few short bursts of anxiety-fueled market declines – events like the surprise Brexit vote – the market has stayed in the tightest range we’ve seen since 1965. Traders note that the average daily trading range for 2017 has been 0.55 percent – the lowest on record.

This environment of extreme calm is not only very unusual, it also suggests that the return to a more normal pattern of daily swings is statistically well overdue and could happen in the near future. Recent political and economic news have triggered analysis and predictions on what we might expect in the coming weeks. The following are a few key talking points around the industry.

  • Executives at major corporations are distancing themselves and their corporations from the president. The post-Charlottesville furor that arose after President Trump failed to explicitly condemn white supremacist organizations for their violent acts, ended up with many chief executives stepping down from the president’s business advisory councils. Other corporate leaders at major manufacturing companies and financial institutions have spoken publicly about their support for inclusivity, diversity and tolerance. It remains to be seen if this resurgence of the role of businesses in the national political and social debate will have any impact on Wall Street or will end the so-called “Trump bump” effect on the stock market.
  • Some market strategists don’t think major change is coming regardless of what happens in Washington. They tend to downplay Trump’s ability to ruffle Wall Street. Others trying to measure investor sentiment think there is a shift, and that investors are becoming increasingly nervous.
  • Geo-political turmoil and tragedy overseas in Barcelona and Finland, as well as political protest at home, have reminded us of sad realities. Various financial news outlets have undertaken their own research to measure sentiments and track investor fear. Some report escalating levels of investor concern, and others reference the VIX index – Wall Street’s so-called gauge of fear – which has remained very low despite a few recent hiccups.
  • The stock market remains linked to the U.S. economy even if factors like the Federal Reserve’s very low interest rates have been significant in the bull run’s longevity. The expansion of the economy continues – steady if unspectacular – helping to make this the second-longest rally investors have ever seen. Will it continue? At this juncture, statistically we are overdue for a correction, and every day added to the bull run makes it more likely that its days are numbered.

The commentary above is intended to be general observations only. Bear in mind, that not even the smartest, most experienced brokers on Wall Street can tell you when the tide will turn. If you think it might be time to retune your portfolio strategy, make sure to get expert advice from your tax and investment advisors before you act. 

Strategies to Run a Localized and Location-Based Marketing Campaign

The potential for localized and location-based marketing is high – especially with estimates of retail sales from “beacon-triggered messages”, which grew from $4.1 billion to $44.4 billion between 2015 and 2016, according to Statista. Coupled with 77 percent of U.S. citizens having a smartphone, based on a November 2016 Pew Research Center survey, the ability to reach consumers is the best it’s ever been[P1] . With technology and smartphones making sales ripe, how can businesses make the most of localized and location-based marketing to reach consumers and business clients?

Maximize a Localized Consumer Experience

With a mobile website, there’s no one-size-fits-all design. However, there are some common elements that provide better functionality when viewed on a mobile device. These include the ability to press a phone number for assisted dialing or an email address right on the screen to email the business instantly. Other elements include fewer but larger buttons to search the website, navigate between pages, and for easy access to the address, operating hours and social networking sites connected to the business.

Creating a mobile optimized website is the first step to help locals and travelers find nearby businesses. While location-based marketing certainly includes targeting nearby customers as a first priority, it needn’t be limited to potential customers within a defined area. When anyone is looking on the internet for a business in a particular city or town, it is found by a search query for a product or service. For example, a targeted keyword phrase might be “Tampa coffee shop” or “art galleries near L’Enfant Plaza.”

Another way to localize a marketing campaign is to work with one’s location, along with calendar or seasonal events in conjunction with keywords. This can either take the form of marketing campaigns that take advantage of well-known events, such as Mardi Gras in New Orleans. You can target mobile users seeking Mardi Gras information with keyword optimization for, say, festive clothing or regional foods. It can also work with weather events, such as unusually warm spells during Midwest winters. This type of weather event could be leveraged to target customers for fans in the case of heat spells.

Put the Consumer in Control

One way for retailers to take advantage of location-based marketing, especially in a store or a defined area near a retail or business establishment, is to let the consumer control his options. Whether using an app, a push notification or text messages, it’s a good idea to ask the user for permission to receive notifications in order to gain his trust. This puts the customer in control of how many messages he’ll receive and when, making them more effective.

Another way to better connect with customers through location-based marketing is to create a fast and convenient experience. Using an app, a brick-and-mortar retailer can ask if the customer would like to place an order and pay for it before he visits the store. All that’s left is to pick up the item in the store or through curbside delivery, if it’s available with the merchant.

Remember, localized and location-based marketing technology can be used effectively to target and increase sales with both local and out-of-town consumers.

[P1] Sources for statistics: 

https://www.statista.com/statistics/428420/us-beacon-triggered-retail-sales/ 
http://www.pewresearch.org/fact-tank/2017/01/12/evolution-of-technology/

Avoid IRS Trouble by Reporting Bitcoin Cash

Avoid IRS Trouble by Reporting Bitcoin Cash

IRS guidance on the tax treatment of cryptocurrencies already exists. Right now, the IRS considers cryptocurrencies to be “intangible assets.” As a result, they are subject to capital asset treatment. However, recent developments complicate matters.

On Aug. 1, Bitcoin split into two separate cryptocurrencies – Bitcoin and Bitcoin Cash. The currently issued guidance does not address cryptocurrency splits, also known as fork transactions.

How to Report Your Bitcoin Cash

At the split, Bitcoin Cash’s initial price was set at 9.5 percent of Bitcoin’s unit price of $2,801 – or $266. Holders of Bitcoin received one Bitcoin Cash unit for every Bitcoin they held at the time of the split, making Bitcoin Cash a separate financial instrument. As a result, this makes it taxable – so recipients of Bitcoin Cash should include the transaction on their 2017 income tax returns.

Since a cryptocurrency is not technically a security or a debt-like interest, the transaction is considered neither a dividend nor interest income. So how should you report the transaction? While there is no clear-cut guidance as of yet, the best place to report the transaction is as “Other Income” on Form 1040, since this is where you can report transactions that do not neatly fit anywhere else.

Another reporting alternative is to use Form 8949, where you report the sale of capital assets. If you use this form you would report $266 per unit and offset it with a corresponding 9.5 percent of your Bitcoin cost basis. By transferring a proportional amount of your basis from the original investment you will reduce your taxable income. This reporting method also has the advantage of allowing you to offset the capital gains with capital losses and carryovers. Beware however, that this method is less likely to be accepted by the IRS.

What to Do if You Sold Your Bitcoin Cash

Selling some or all of your Bitcoin Cash means you’ll need to treat it as a capital gain and report it via Form 8949. If you sell any Bitcoin Cash, make sure you report your receipt as “Other Income” per above, since this will then serve as your basis for offsetting your sale. Your selling price would be whatever value you sold it for, less any commissions or fees on the sale. Also, remember that for your 2017 tax return filing, your holding period would start from the split date of Aug. 1, and therefore be short-term.

Why Cryptocurrency Splits Are Not Tax-Free Exchanges

Some will argue that cryptocurrency splits such as Bitcoin Cash qualify as tax-free exchanges; however, this view is unlikely to hold up to IRS scrutiny since none of the corporate reorganization non-recognition events under Section 368 apply. Bitcoin Cash is economically different from Bitcoin, and therefore should be viewed as a new category of financial instrument.

Beware the IRS

Over the past several years, many investors sold cryptocurrencies, including Bitcoin, but did not report any taxable income from the transactions, while others used Section 1031 like-kind exchange laws to postpone taxation. The IRS is none too pleased by all of this and is taking action.

The IRS estimates that hundreds of thousands of U.S. taxpayers failed to report cryptocurrency income sales over the past few years. Combined with the recent meteoric rise in prices, the IRS is hungry for the potential to collect billions in interest, penalties and back taxes.

Recently for example, the IRS summoned a large cryptocurrency exchange (Coinbase) to hand over its customer lists. Subsequently, they reached an agreement to disclose only transactions in excess of $20,000; however, it is clear from this case that the IRS is going to get aggressive on the matter.

Cryptocurrency investors need to be aware of the evolving nature of taxation in this space in order to avoid IRS problems. This is an emerging issue and one on which you can bet the IRS is not going to stand down. As always, consult a tax professional for details about your particular situation.