Strate­gies

Accounting Today - - Coverstories - From page 1

Here are their sug­ges­tions:

Re­vise W-4s be­fore year-end to more closely match re­main­ing with­hold­ing for the year to ex­pected tax obli­ga­tions. The sav­ings that tax­pay­ers might an­tic­i­pate might have al­ready been given to them through with­hold­ing. If they’ve been re­ceiv­ing a big­ger pay­check, it won’t be there — or worse, they may owe money.

If a small-busi­ness client is el­i­gi­ble for the 20 per­cent de­duc­tion for pass-through en­ti­ties, de­ter­mine whether there are any changes in the com­pen­sa­tion struc­ture they can make that will max­i­mize the de­duc­tion.

With the new higher in­come lim­its for in­di­vid­u­als ex­posed to the Al­ter­na­tive Min­i­mum Tax, more tax­pay­ers will have the op­por­tu­nity to re­cap­ture the AMT paid in prior years. Tax pro­fes­sion­als can 9/17/2018 10:17:53 cal­cu­late AM prior years’ AMT credit now and the tax­pay­ers af­fected can re­duce their with­hold­ing and en­joy the ben­e­fit early.

Max­i­mize re­tire­ment plan con­tri­bu­tions be­fore year end. This is a peren­nial sug­ges­tion, as far too many tax­pay­ers fail to make the most of their 401(k)s and other sav­ings ac­counts.

Sell stocks that may pro­duce a loss. Tax­pay­ers can deduct up to $3,000 ($1,500 for mar­ried fil­ing sep­a­rately) of their ex­cess losses, which re­duces over­all in­come. If the tax­payer sold stocks that re­sulted in a gain, sell­ing stocks that pro­duce a loss will off­set the gain.

Review flex­i­ble spend­ing ac­counts to de­ter­mine if the ac­count bal­ance can be used be­fore the plan’s dead­line. Funds not used by the ac­count dead­line will be lost, so tax­pay­ers need to sched­ule med­i­cal ap­point­ments, buy new glasses, or buy health care items cov­ered by FSA.

Ad­vise clients who buy, sell or mine cryp­tocur­rency to get ac­cu­rate records in or­der. Tax­pay­ers with­out ac­cu­rate records could be sub­ject to higher-than-nor­mal gains.

Make sure an S cor­po­ra­tion owner’s salary meets the “rea­son­able com­pen­sa­tion” stan­dard — what they would need to pay some­one else to do the job they do. If they have not taken a salary, they should do so by the end of the year.

‘It is all about the tax­payer, and there will be tax­pay­ers pleas­antly sur­prised by the tax changes of the TCJA and those that will be woe­fully disappointed and need to make ac­com­mo­da­tions for what may amount to a bal­ance due rather than a re­fund next April.’

Com­pare re­duced item­ized de­duc­tions to which the tax­payer might be en­ti­tled this year to the new stan­dard de­duc­tion. If they won’t ben­e­fit from in­creas­ing item­ized de­duc­tions such as char­i­ta­ble con­tri­bu­tions (be­cause the stan­dard de­duc­tion will be greater), they can con­sider bunch­ing char­i­ta­ble con­tri­bu­tions into ev­ery other year, set­ting up a donor-ad­vised fund, or, if over 70-1/2, mak­ing char­i­ta­ble con­tri­bu­tions through IRA dis­tri­bu­tions.

If they are tak­ing the de­duc­tion this year, they can add to it by clean­ing out clos­ets, dressers and stor­age ar­eas and do­nat­ing un­used items to char­i­ta­ble or­ga­ni­za­tions such as Amvets, Good­will and the Sal­va­tion Army.

For those sub­ject to the $10,000 de­duc­tion cap on state and lo­cal taxes, they should pre­serve real es­tate tax de­duc­tions by al­lo­cat­ing to a busi­ness re­turn when­ever pos­si­ble.

En­hance in­sur­ance cov­er­age due to the loss of per­sonal ca­su­alty and theft­loss de­duc­tions that are not part of fed­er­ally de­clared dis­as­ters.

Buy an SUV or truck that is heav­ier than 6,000 pounds for a busi­ness to take bonus de­pre­ci­a­tion of up to 100 per­cent of the cost of the ve­hi­cle.

If the client has pur­chased or is pur­chas­ing real es­tate by year’s end to rent out or use in busi­ness, do a cost seg­re­ga­tion study so they can cap­ture the bonus de­pre­ci­a­tion on land im­prove­ments and con­tents of the build­ing.

If a client is in the mid­dle of a di­vorce, fi­nal­ize the di­vorce be­fore the end of 2018 so they will be able to deduct al­imony paid to their spouse. If the client will be the re­cip­i­ent of the al­imony, they might want to put off fi­nal­iz­ing the di­vorce or cut a deal to in­crease pay­ment — af­ter 2018 they won’t pay tax on the al­imony.

AT

Our thanks to Sheila Clark, di­rec­tor of The In­come Tax School; Tynisa Gaines, as­sis­tant di­rec­tor of The In­come Tax School; Roger Har­ris, pres­i­dent of Pad­gett Busi­ness Ser­vices; Mark Luscombe, prin­ci­pal fed­eral tax an­a­lyst for Wolters Kluwer; Mike Mccarthy, prin­ci­pal at Rehmann; Cathy Mueller, di­rec­tor of op­er­a­tions for Peo­ples In­come Tax; Tom Wheel­wright, chief ex­ec­u­tive of Wealtha­bil­ity; and Beanna Whit­lock, a San An­to­nio-based prac­ti­tioner and ed­u­ca­tor and for­mer IRS di­rec­tor of Na­tional Pub­lic Li­ai­son.

MY K

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