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Thursday, December 7, 2017

Tax Reform

Tax Reform and How it May Affect You

As of today, the House and Senate have each passed their own versions of the tax bill.  They will have to hammer out differences between the plans before a final bill can be approved and signed by President Trump.

Here are a few pros and cons that we see in the current bills.  Although not yet final, these changes are expected in some degree in the final legislation, which would become effective for 2018 tax returns.

Pro:  The standard deduction will be increased depending on your filing status to $12,200 for single and $24,400(House) and $24,000(Senate) for married filing jointly. 

Con:  The personal and dependent exemptions will no longer be available.  They were worth $4,050 per person last year.  A family of four would lose $16,200 in personal exemptions. 
Pro:  Both plans call to increase the amount of the child tax credit and increase the income level at which that credit is phased out.

Con:  Homeowners beware:  Both proposed versions of the bill cap the real property tax deduction to $10,000.  

Con:  Deductions for state and local income taxes would be eliminated. 

Con:  The mortgage interest deduction limits the deduction on new mortgages ($500,000 principal).

Con:  No mortgage interest deduction on vacation homes.

Con:  Repeals the deduction on home equity interest. 

Con:  Miscellaneous deductions will be eliminated.  This includes tax preparation fees, union dues, unreimbursed employee expenses, investment expenses…

Pro:  Everyone’s favorite Alternative Minimum Tax would be gone under the House bill, whereas the Senate bill would keep the AMT (boo!) but raise the exemption and phase-out thresholds.

Con: Tax rates would change under both plans – The House version has just 4 tax brackets compared to the Senate’s 7 brackets.  Fewer tax brackets mean a bigger jump between brackets.

Pro: Partnerships and S-Corps taxed as pass-throughs would see a reduction in tax rate on that income under both plans, although the details differ.

What to do:  CONTACT YOUR CPA RIGHT AWAY!  Consider paying for expenses before year end that are a deduction in 2017 but will be limited or eliminated in 2018 such as real property taxes, state and local estimates, tax preparation fees, etc. 

Note:  This is only a brief listing of the potential changes to be made.  Stay tuned to learn more. 

Honorine M. Campisi, CPA

Wednesday, November 29, 2017

Year-End Tax Tips

Year-End Tax Tips

  1. Review your portfolio.  Consider taking a loss if you have substantial capital gains.
  2. Max out your retirement plan contributions.  2017 maximum IRA contribution is $5,500 (plus $1,000 if age 50 or over).  2017 maximum 401(k) contribution is $18,000 (plus $5,500 if age 50 or over).
  3. Consider contributing to a 529 Plan if you have children or grandchildren.  For example, New York allows a deduction up to $5,000 (or $10,000 for married filing joint filers) for contributions made by an account owner to an account belonging to New York’s 529 College Savings Plan.
  4. Consider increasing your withholding if you anticipate owing tax.  This can help you to avoid an underpayment penalty since the government considers withholding to have been paid evenly throughout the year.  
  5. Save receipts for medical supplies and equipment such as prescriptions, doctor co-pays, dental expenses, insulin testing supplies, canes, braces, orthotics, eyeglasses, contact lenses and hearing aids, etc.  Medical expenses that exceed 10% (or 7.5% for those 65 and over) of AGI are deductible. 
  6. If you’re self-employed, try bunching expenses before year end.  Stock up on supplies or pre-pay some expenses.
  7. Pay your 4th quarter 2017 estimated state and/or local taxes by December 31, rather than the January 15, 2018 due date. However, if you are subject to AMT speak to your CPA first.
  8. Make charitable donations and be sure to get a receipt.  Both cash and non-cash donations to a registered charity will get you a deduction.  Make sure you have documentation, receipts and acknowledgements as necessary.                                                                                                 
  9. Volunteer!  It’s good for your spirit and your taxes if you keep records.  If you use your vehicle for volunteering and keep good records, you can deduct $.14 per mile or the actual cost of gas.  Tolls and parking are deductible whether you take a per-mile or actual cost deduction, too.
  10. If you are 70 ½ years old or older this year, make sure you take your required minimum distribution from your traditional IRA.  You do have the option to defer your first RMD until April 1 of the following year, but if you do so, you will need to take 2 RMDs in one year for 2018.

By: Honorine M. Campisi, CPA

Wednesday, November 8, 2017

NYS Sales Tax - Caterers and Catering Services

Welcome to the latest installment of our monthly blog “What are the rules for NYS Sales tax for my profession?”  

Every month we are highlighting another industry with a few of the broad guidelines to follow!  Our hope is not only to provide helpful information for the business owners but the consumers as well!
This month’s industry is 

Caterers and Catering Services

To start it is important to know exactly who is a caterer.  A caterer provides prepared food, beverages, and various other services for events.  These events can take place at a banquet facility, hotel or restaurant or a customer’s home or other location.  Party planners and those who coordinate events also qualify as caterers if they make sales of food and beverages.

Generally all charges by a caterer related to the event are taxable.  This includes:
  1. All food and beverages that have been prepared or served. This includes food found in the deli department – for example, cold cuts, fruit salads, cheese platters, etc.  
  2. Hotel and banquet facilities charges for the rental of a room that is part of the charge for the event is taxable.   It is important to note that if a customer rents a room for the event and hires a separate caterer then the room rental is not taxable.
  3. Tips that a customer leaves voluntarily are not taxable. Mandatory gratuities that are automatically added to the bill are not taxable if all of the following apply: 
  • The charge is shown separately on the bill 
  • The charge is identified as a tip 
  • All the money collected is given to the employees 
  • Service charges are subject to sales tax.

This is just a brief overview of the sales tax laws regarding Catering and Catering Services.   

For more information, call 516-409-1120.  

By Christine A. Murphy