Author: Alexis Long
What’s best for you, taking the standard deduction or claiming itemized deductions?
The standard deduction changes yearly and is based on age and filing status. The Tax Cuts and Jobs Act raised the standard deduction so that more people could benefit from its simplicity. Itemizing deductions requires more work, but taxpayers can save taxes if the total exceeds the standard deduction.
Eligible taxpayers may prefer to itemize if they: pay state and local income tax, mortgage interest, mortgage insurance, real estate or personal property tax; suffered a large eligible casualty loss; make significant charitable donations; and/or have high medical deductions. We can help choose your best path. Talk with your ATA business partner to know which is best for you.
A significant law was recently passed that adds tax breaks and makes changes to employer-provided retirement plans. If your small business has a current plan for employees or if you’re thinking about adding one, you should familiarize yourself with the new rules.
The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) was signed into law on December 20, 2019, as part of a larger spending bill. Here are three provisions of interest to small businesses.
Employers that are unrelated will be able to join together to create one retirement plan. Beginning in 2021, new rules will make it easier to create and maintain a multiple employer plan (MEP). A MEP is a single plan operated by two or more unrelated employers. But there were barriers that made it difficult to setting up and running these plans.
Soon, there will be increased opportunities for small employers to join together to receive better investment results, while allowing for less expensive and more efficient management services. There’s an increased tax credit for small employer retirement plan startup costs. If you want to set up a retirement plan, but haven’t gotten around to it yet, new rules increase the tax credit for retirement plan start-up costs to make it more affordable for small businesses to set them up.
Starting in 2020, the credit is increased by changing the calculation of the flat dollar amount limit to:
The greater of $500, or the lesser of: a) $250 multiplied by the number of non-highly compensated employees of the eligible employer who are eligible to participate in the plan, or b) $5,000.
There’s a new small employer automatic plan enrollment tax credit. Not surprisingly, when employers automatically enroll employees in retirement plans, there is more participation and higher retirement savings. Beginning in 2020, there’s a new tax credit of up to $500 per year to employers to defray start-up costs for new 401(k) plans and SIMPLE IRA plans that include automatic enrollment. This credit is on top of an existing plan start-up credit described above and is available for three years. It is also available to employers who convert an existing plan to a plan with automatic enrollment.
These are only some of the retirement plan provisions in the SECURE Act. There have also been changes to the auto-enrollment safe harbor cap, nondiscrimination rules, new rules that allow certain part-timers to participate in 401(k) plans, increased penalties for failing to file retirement plan returns and more. Contact us to learn more about your situation at info@atacpa.net. © 2019
This year, the optional standard mileage rate used to calculate the deductible costs of operating an automobile for business decreased by one-half cent, to 57.5 cents per mile. As a result, you might claim a lower deduction for vehicle-related expense for 2020 than you can for 2019.
Calculating your deduction
Businesses can generally deduct the actual expenses attributable to the business use of vehicles. This includes gas, oil, tires, insurance, repairs, licenses and vehicle registration fees. In addition, you can claim a depreciation allowance for the vehicle. However, in many cases depreciation write-offs on vehicles are subject to certain limits that don’t apply to other types of business assets. The cents-per-mile rate comes into play if you don’t want to keep track of actual vehicle-related expenses. With this approach, you don’t have to account for all your actual expenses, although you still must record certain information, such as the mileage for each business trip, the date and the destination. Using the mileage rate is also popular with businesses that reimburse employees for business use of their personal vehicles. Such reimbursements can help attract and retain employees who drive their personal vehicles extensively for business purposes.
Why? Under the Tax Cuts and Jobs Act, employees can no longer deduct unreimbursed employee business expenses, such as business mileage, on their own income tax returns. If you do use the cents-per-mile rate, be aware that you must comply with various rules. If you don’t, the reimbursements could be considered taxable wages to the employees.
The rate for 2020
Beginning on January 1, 2020, the standard mileage rate for the business use of a car (van, pickup or panel truck) is 57.5 cents per mile. It was 58 cents for 2019 and 54.5 cents for 2018. The business cents-per-mile rate is adjusted annually. It’s based on an annual study commissioned by the IRS about the fixed and variable costs of operating a vehicle, such as gas, maintenance, repair and depreciation. Occasionally, if there’s a substantial change in average gas prices, the IRS will change the mileage rate midyear.
Factors to consider
There are some situations when you can’t use the cents-per-mile rate. In some cases, it partly depends on how you’ve claimed deductions for the same vehicle in the past. In other cases, it depends on if the vehicle is new to your business this year or whether you want to take advantage of certain first-year depreciation tax breaks on it. As you can see, there are many factors to consider in deciding whether to use the mileage rate to deduct vehicle expenses. Click here to speak to your long-term business advisor about tracking and claiming expenses. © 2019
Media Release
FOR IMMEDIATE RELEASE
Adelsberger Marketing LLC
541 Wiley Parker Road
Jackson, TN 38305
731-506-5339
kevin@adelsbergermarketing.com
Contact: Kevin Adelsberger, Owner
Adelsberger Marketing Announces Partnership With Alexander Thompson Arnold CPAs
Adelsberger Marketing LLC and Alexander Thompson Arnold PLLC (ATA), both headquartered in Jackson, TN, have announced a new partnership.
“We are so excited to join the ATA Family of Companies,” said Adelsberger Marketing LLC owner and founder, Kevin Adelsberger. “As our digital marketing firm has grown over the past 5 years, we were ready to take the next step. Joining forces with ATA and their client base throughout West Tennessee and the Southeast was a perfect match.”
“Bringing Adelsberger Marketing into our expanding family of companies enables ATA to offer our clients a larger array of marketing services. We are excited to have them on board,” stated Stephen Eldridge, partner at ATA.
Founded in 2014, Adelsberger Marketing LLC is a digital agency that helps businesses communicate with their customers. They believe that digital marketing is the present and the future. Adelsberger Marketing helps clients conquer digital marketing with videography, content marketing, digital advertising, social media, websites, and branding which sets them apart in a crowded business environment. They are located in theCO. You can learn more about Adelsberger Marketing LLC by visiting www.adelsbergermarketing.com or connecting with them on social media (Facebook: @adelsbergermarketing and Instagram: @adelsbergermktg).
ATA has 14 office locations in Tennessee, Kentucky and Mississippi. Recognized as an IPA Top 200 regional accounting firm, it provides a wide array of accounting, auditing, tax and consulting services for clients ranging from small family-owned businesses to publicly traded companies and international corporations. The firm was recognized by Forbes in 2020 as a top recommended tax firm in the country. ATA is also an alliance member of BDO USA LLP, a top five global accounting firm. This alliance provides the highest level of resources and expertise for ATA’s clients.
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Alexander Thompson Arnold PLLC (ATA) is humbled to be recognized as a top tax firm in America. Research company, Stratista, worked with Forbes to compile the list of leading organizations, which only included 227 firms. This award displays ATA’s passion to work diligently with clients on their taxes to amplify their business. For more information visit Forbes’ website.
“We strive to provide our clients sound tax advice and expertise through heavy research and training,” said managing partner, John Whybrew. “It’s an honor to have our firm recognized by Forbes and be commended for our hard work.”
ATA is a long-term business advisor to its clients and provides other services that are not traditionally associated with accounting. For example, Revolution Partners, ATA’s wealth management entity provides financial planning expertise; ATA Technologies provides trustworthy IT solutions; Sodium Halogen focuses on growth through the design and development of marketing and digital products; Adelsberger Marketing offers video, social media, and digital content for small businesses; and Center Point Business Solutions is a comprehensive human resource management agency.
ATA has 14 office locations in Tennessee, Kentucky and Mississippi. Recognized as an IPA Top 200 regional accounting firm, it provides a wide array of accounting, auditing, tax and consulting services for clients ranging from small family-owned businesses to publicly traded companies and international corporations. ATA is also an alliance member of BDO USA LLP, a top five global accounting firm, which provides additional resources and expertise for clients.
The IRS issued its 2019 annual report, which gives an overview of the tax agency’s progress in taxpayer service, compliance and support. For example, the report focuses on results from its Criminal Investigation department and efforts involving civil enforcement. Ongoing compliance areas, including micro-captives, syndicated conservation easements and virtual currency, are also detailed in the publication.
In addition, it covers IRS implementation of new tax laws, ranging from steps put in place to carry out provisions of the Tax Cuts and Jobs Act to work underway on the new Taxpayer First Act of 2019. Read it here.
Watch the Family and Education Tax Planning video here.
Family & Education
While the Tax Cuts and Jobs Act of 2017 has reduced or eliminated many tax breaks for the next several years, most child and education-related breaks remain intact or even enhanced.
Child Credit
For each child under age 17, you may be able to claim a $2,000 credit. This credit phases out for higher-income taxpayers, but the income ranges are much higher than before the Tax Cuts and Jobs Act. If your dependent child is age 17 or older or if you have a dependent elderly parent, a $500 family credit is available, also subject to income-based phase out.
Tax credits reduce your tax bill dollar for dollar, so for many taxpayers, these expanded credits will make up for losing the dependency exemptions.
Education Credits
If you have children in college now or are currently in school yourself, you may be eligible for the American Opportunity Credit. The maximum credit, per student, is $2,500 per year for the first four years of postsecondary education. Again, this credit is subject to income-based phaseouts, but if your income is too high for you to qualify, your child might be eligible.
Be sure you and your family take advantage of available credits and other tax-saving opportunities to make saving taxes a family tradition.
In addition to a year-end funding bill, lawmakers finalized the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The retirement bill includes expansion of the automatic contribution to savings plans to 15% of employee pay, allows some part-time employees to participate in 401(k) plans and raises the age limit for IRA contributions from age 70½ to 72.
Also included in the retirement package are provisions aimed at Gold Star families, eliminating an unintended tax on children and spouses of deceased military family members. As with the funding bill, the Senate is expected to pass and the president to sign the bill by the end of the week.
Watch the Individual Deductions and Updates video here.
What’s happening with deductions in 2019?
The standard deduction for separate filers is $12,200 and for joint filers, it’s $24,400. Itemized deductions are more beneficial if taxpayers ‘bunch’ deductions into one year. The itemized deductions that may be able to be shifted from year-to-year are real estate taxes, state income tax estimates. This bunching strategy needs to be discussed with your tax advisor to most benefit.
Some expenses are limited or no longer tax-deductible
Let’s discuss what expenses are limited or no longer tax-deductible. State and local tax deduction, including sales tax, property tax, and state income tax, is limited to $10,000. Home office expenses and unreimbursed business expenses are no longer deductible if you are a W-2 employee. Personal casualty and theft losses are only allowed if it arises due to an event officially declared a federal disaster area. Finally, work-related moving expenses are not deductible, except for members of the Armed Forces.
Medical Savings and Spending Accounts – Health Savings Account and Flexible Spending Accounts
Health Savings Accounts also known as HSA’s are available to participants in qualified high-deductible health plans. You can contribute pre-tax income up to $3,500 for self-only coverage or $7,000 for family coverage into an employer-sponsored HSA account. HSAs can bear interest or be invested, growing tax-deferred similar to an IRA. Withdrawals for qualified medical expenses are tax-free, and you can carry over a balance from year to year, allowing the account to grow.
Flexible Spending Accounts, also known as FSA’s, can be funded with $2,700 pretax income in an employer-sponsored account but have limitations on what can be rolled over to the following year based on the employer plan. The plan pays or reimburses you for qualified medical expenses. What you don’t use by calendar year’s end, you generally lose.