Under the Tax Cuts and Jobs Act, there is potentially a 20 percent deduction for qualified business income from a qualified trade or business operated directly or through a pass-through entity. It is important to talk with a trusted tax accountant in Fort Collins to understand what that means for your business.
According to the IRS, there are two components to the qualified business income deduction:
1. Eligible taxpayers may be entitled to a deduction of up to 20 percent of qualified business income (QBI) from a domestic business operated as a sole proprietorship or through a limited liability company, partnership, S corporation, trust or estate.
2. Eligible taxpayers may also be entitled to a deduction of up to 20 percent of their combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income.
However, there are certain factors that must be considered. For example, taxpayers that have a taxable income greater than $315,000 for a married couple filing jointly or $157,500 for all others must meet additional tests relative to wages paid and assets owned that could limit the deduction.
What those limitations are and how they affect an entity’s tax return will vary. However, you can claim as much of the deduction as you are entitled to and file confidently by working with a tax accountant in Fort Collins to analyze your specific tax position.
Get Sound Advice and Assistance From a Knowledgeable Tax Accountant in Fort Collins
When talking with a tax accountant in Fort Collins, you want insights from a tax professional who is well-versed in the tax code. At Shaw & Associates, our skilled and experienced CPAs understand all the nuances of existing regulations and also study the latest changes like the qualified business income deduction so that we can help our clients benefit from them.
Contact us today to learn more about our accounting and financial advising services.
Form 1040, which many taxpayers use to file their returns, has been modified. This Fort Collins tax accountant is happy to report that it is much shorter. Now fitting on the front and back of half a sheet of paper, it is roughly the size of a postcard.
Key Considerations with New Form 1040
As you work on your tax return, here are a few things to note about the new Form 1040:
If you previously used form 1040-EZ and 1040-A, you will now use the new Form 1040.
- While the new form is shorter, many of its lines have been moved to six new schedules that you may have to submit along with it. They cover information like other sources of income, other forms of taxes, etc.
- As a result of the Tax Cuts and Jobs Act, miscellaneous deductions and personal exemptions have been eliminated and are not on the new form.
- The alimony deduction is now on Schedule 1 for 2018 but will then be eliminated.
These are just some of the changes. If you have questions about new Form 1040, we’re happy to answer them.
Form 1040 Has Changed — Our Attentive Service Hasn’t
Even as the tax code and tax forms evolve, you can be sure that as your Fort Collins tax accountant, our commitment to your satisfaction never changes. Contact Shaw & Associates CPAs and Financial Advisors to learn more about our services.
The skill and integrity of your accountant are very important. The work that they perform and the guidance they provide has a direct impact on your financial wellbeing, and your financial wellbeing plays a major role in the quality of life that you enjoy. Consequently, it is critical that when looking for an accountant in Fort Collins or anywhere, you assess whether they possess certain key attributes.
Key Attributes to Look for in an Accountant
Before trusting an accountant with your finances, you should confirm that they have these characteristics:
- Experience. The person fresh out of college may have earned high marks in all their accounting classes, but without a firm foundation in real-world accounting, you can’t be sure they will know how to deal with the unique scenarios that your finances present.
- Attention to detail. Talk with people who use a particular accountant. They can tell you if that person goes the extra mile to ensure high-quality work. If instead, you learn that the accountant often lets mistakes slip through, keep looking. Errors can cause a great deal of financial trouble.
- Transparency. Your accountant should be happy to explain every action they take or decision they make on your behalf. If they tend to answer specific questions with vague answers, that should be a red flag.
- Positive reputation. When an accountant does exceptional work, word gets around. If your inquiries don’t quickly turn up some excellent reviews, it’s best to keep looking.
Who You Trust with Your Finances Matters
Selecting a financial services provider is an important decision and one you should make carefully. As a respected accountant in Fort Collins, Kevin Shaw welcomes your questions about Shaw & Associates CPAs and Financial Advisors. Contact us to learn more about our services.
You’ve received an email that appears to be from the IRS requesting that you provide them with confidential information. Should you send them what they’ve asked for? As a Fort Collins tax accountant that has seen many of these kinds of requests, we can tell you that you definitely should not. The IRS makes it clear on its website that these types of communications do not come from them, stating:
“The IRS doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. This includes requests for PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts.”
The email you received is an example of what’s called a “phishing” scam. Phishing is when criminals contact a person by email or other means and claim to be a representative of a legitimate company or organization. This is an attempt to obtain information such as passwords, credit card numbers, or other personal data they can profit from.
Tips for Spotting and Addressing Phishing
Before replying to or clicking a link in an email from any unknown sender, you should look for certain telltale signs that it is a phishing scam. Some of the more common include:
- Unrealistic threats. Warnings that you will be arrested, fined, lose your home, or face other negative consequences if you don’t comply with a request are almost always phishing scams.
- Poor spelling and grammar. Emails from legitimate businesses go through many levels of proofreading and review. They rarely have errors, and almost never multiple errors or awkward phrasings.
- Requests for confidential information. Email is not a safe way to send confidential information. Legitimate organizations know that and will not ask you to do so.
- Promises of financial gain. Messages that guarantee a monetary return if you simply follow the steps provided are never from a trustworthy source.
- Claims of contacting you on a loved one’s behalf. Notes that include statements like, “Your nephew has been arrested and asked me to contact you for bail money.” should not be trusted.
What should you do if you suspect phishing?
First, don’t reply and don’t click anything in the email. Even a photo can have a hidden link. You can just delete the email. However, if you want to take additional action, the Federal Trade Commission suggests that you:
- Forward phishing emails to firstname.lastname@example.org – and to the organization impersonated in the email. Your report is most effective when you include the full email header, but most email programs hide this information. To ensure the header is included, search the name of your email service with “full email header” into your favorite search engine.
- File a report with the Federal Trade Commission at FTC.gov/complaint.
- Visit Identitytheft.gov. Victims of phishing could become victims of identity theft; there are steps you can take to minimize your risk.
- You can also report phishing email to email@example.com. The Anti-Phishing Working Group – which includes ISPs, security vendors, financial institutions and law enforcement agencies – uses these reports to fight phishing.
If the scam is related to the IRS or your finances, you can also contact Shaw & Associates, your trusted Fort Collins tax accountant for guidance.
There are many reasons to file an income tax extension. Whether you are missing key information or are away from home during tax season, you have the right to request extra time to complete and submit your return.
However, there are several misconceptions about tax extensions that create hesitation for people looking to file. Below are six common misperceptions and an explanation that sets the record straight for each.
- “Filing an extension also gives me an extension to pay.” Not true. An extension will give you additional time to get your paperwork to the IRS, but it does NOT extend the time you have to pay the taxes you owe. You must estimate any amounts due and pay it with the extension or be subject to penalties and interest.
- “Filing an extension will make me more likely to be audited.” Not true. In fact, there is some evidence to suggest that those who file extensions are less likely to be audited. Some tax professionals speculate that auditors have quotas they must meet, and they tend to have done so before the October tax extension deadline.
- “The IRS doesn’t like granting extensions and will likely reject my request if I don’t have a good reason for missing the April deadline.” The IRS doesn’t ask why you need an extension, and automatically grants a grace period of six months to anyone who fills out the form correctly.
- “I’m embarrassed because nobody else has to ask for an extension.” Actually, more than 10 million people file for a tax extension every year. Some taxpayers do so as a regular practice to give themselves more time to produce a complete and accurate return.
- “Requesting a tax extension requires the assistance of an accountant.” Not true. Filing for a tax extension is easy and can be done online. What’s known as the FileLater system lets you e-file the request in just minutes.
- “If I’m granted an extension, I can’t submit my return until October.” While October is the deadline for filing, you can submit your return at any point prior to then.
The Key is Ensuring Your Return is Done Right
A tax extension is a useful tactic that you are fully entitled to take advantage of as needed. If for any reason you aren’t prepared to submit a complete and accurate return by your filing deadline, you should request an extension and then talk with a tax accountant in Fort Collins like Shaw & Associates to ensure that the return is completed correctly. Contact us at your convenience to learn more about our tax and business accounting services.
Ensuring that the individuals who are involved in a partnership pay the required amount of taxes can be a challenge. In fact, partnership tax law is the most complicated part of the tax code. As a leading Fort Collins business accountant, we encourage people to be fully informed about how participating in a partnership affects their tax position.
How Partnerships are Taxed
Typically, partnerships and LLCs with two or more members are not taxed themselves. Instead, the IRS considers them “pass-through” entities, meaning that the profits or losses of the business pass through to the partners individually. They are then taxed based on what is called their “distributive share” of the profits or losses as outlined in a written agreement. Pass-through entity owners are allowed to deduct a certain percentage of their business income.
Key Considerations for Partnerships
If you are involved in a partnership or LLC with two or more members, below are some important points about how you are taxed.
- You are taxed on your distributive share whether you receive it or not. Whether your distributive share in a partnership or LLC is defined by an agreement or by state law, the IRS taxes you based on that percentage even if you choose to leave some or all of your income in the business.
- You pay self-employment taxes. Unless you are a limited partner or a non-managing member of an LLC, you are required to pay taxes that support the Social Security and Medicare programs based on your share of the partnership’s profits. In fact, you pay twice as much as an employee than your company pays, because you must make your contribution and the matching contribution that an employer would pay. However, you can deduct half of the total amount from your taxable income.
- You can claim a number of deductions. As a participant in a partnership, you can deduct a number of legitimate business expenses from your taxable income. This includes things like the cost of operations, travel, advertising, and business-related meals and entertainment.
Helping Your Partnership Interpret the Tax Code
While you can certainly study the extensive information regarding partnerships and taxation available online, a more efficient and cost-effective approach is to leverage the insights of a Fort Collins business accountant like Shaw & Associates. We can very quickly explain what will be required of you when it’s time to file your return, so you go into the process well-informed and well-prepared. Contact us at your convenience.
People who have owned the same home for many years may not know that the rules regarding taxation of gains and the personal residence exclusion changed in the late 1990s. Prior to that time, there were strict regulations regarding proceeds from the sale of a home. This included having to reinvest the money in the purchase of another, more expensive home within two years.
With changes to the rules implemented in 1997, homeowners now have much greater freedom. What is called “Topic Number 701 – Sale of Your Home” from the IRS says:
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic No. 409 covers general capital gain and loss information.
Under the heading “Qualifying for the Exclusion,” it goes on to explain:
In general, to qualify for the Section 121 exclusion, you must meet both the ownership test and the use test. You’re eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you’re not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
Crystal Clarity on Taxation and Your Personal Residence
What does all of this mean to you specifically? As your trusted Fort Collins tax accountant, Shaw & Associates can help you be clear on how any gains you receive from the sale of a personal residence will affect your tax position. Contact us at your convenience.
The arrival of tax season can be stressful. This is especially true if you have put off thinking about taxes since you filed last year’s return. As a trusted tax accountant in Fort Collins, we frequently remind our clients that the best way to reduce your stress and ensure that no important details are overlooked in a last minute scramble to gather information is to plan ahead.
Great Ways to Stay on Top of Your Taxes
Here are four proven tips for saving yourself a great deal of time and effort next year by putting in the work this year:
- Stay organized. It’s easy to let paid invoices, receipts and other paperwork pile up with the idea that you’ll “deal with that later.” But, taking a few minutes to do filing and organizing today can save you headaches down the road.
- Track expenses daily. Not only does recording expenses as they occur keep your records current, it can help you spot cash flow issues that are best addressed promptly.
- Plan your deductions for the year. People often make a number of charitable contributions or tax-deductible purchases just ahead of tax season in an effort to maximize their deductions. A more effective approach is to take a “big picture” look at your finances at regular intervals and make donations or purchases as appropriate.
- Meet with your tax accountant periodically. By connecting with your tax accountant a few times during the year, you will have a better sense of what your tax situation will look like when it comes time to file. That way you can make “course corrections” along the way if needed.
As a leading tax accountant in Fort Collins, Shaw & Associates can provide helpful tax planning guidance all year long. Contact us today!
With the new Tax Cuts and Jobs Act in place, it is important to get the most up-to-date information on filing your tax returns. Taxes and personal finances can be overwhelming, but Shaw & Associates, your trusted Fort Collins tax accountant, wants to make it simple for you. There are a number of changes to the law that may impact your future tax returns.
- Marginal tax rates have decreased. Beginning in 2018, all marginal tax brackets have decreased. Taxpayers will now be required to pay less tax on a higher level of income. This is ultimately a positive adjustment across the board.
- Standard deduction has increased. The standard deduction that a taxpayer is allowed has nearly doubled. In 2018, single filers can deduct $12,000 and a married couple filing jointly can deduct $24,000.
- Personal exemption has been eliminated. Prior to the new tax law, taxpayers could automatically deduct $4,050 per each person on the tax return. From 2018 forward, no personal exemptions can be claimed. For families with a higher number of dependents, this will have a greater impact.
- Several important deductions have been changed or eliminated. In 2018, there are a variety of deductions that have been modified, including the child tax credit, state and local taxes, moving expenses, etc. Contact Shaw & Associates to discuss further how each of these deductions may impact you.
Put Your Mind at Ease
The Tax Cuts and Jobs Act has brought with it many changes, big and small. Avoid overlooking any of these items that may affect your tax situation; your Fort Collins tax accountant can discuss how these new laws will impact you and work through each one with you. Contact Shaw & Associates today to increase your understanding and put your mind at ease!
When it comes to things you look forward to doing, filing your taxes generally does not make the list. We understand! However, putting off filing until the last minute tends not to be a good strategy for most people. In fact, there are a number of reasons why you should work with Shaw & Associates, your Fort Collins tax accountant, to get your forms sent off as early as possible.
Get Ahead of the Game
As any experienced Fort Collins tax accountant will tell you, it’s wise to get your taxes taken care of as soon as you have all the information you need. Here are the top five advantages of being an early bird:
- Avoid identity theft and the filing of fraudulent tax returns on your behalf. If someone gets a hold of your Social Security number, they can file a tax return in your name and have your refund sent to them. For obvious reasons they file early in the season, but they can’t if you’ve already submitted your returns.
- You get your refund faster. If you will be getting money back from the government, the sooner you file, the sooner you’ll have that check in your hand.
- You know what you owe sooner. If you will have to make a payment to the government, knowing what that amount is in January or February gives you more time to gather the funds before the mid-April payment deadline.
- It takes the stress out of tax season. Nobody likes having a deadline hanging over their head. Filing early means you can relax and move on to other things.
- You get information you may need for other reasons. If you will soon be doing things like applying for a mortgage or taking out student loans, you may need verified financial information from your recent tax returns.
The phrase “Good things come to those who wait” applies in many areas of life, but not taxes! Contact Shaw & Associates, your trusted Fort Collins tax accountant, today and let’s get started on your returns!