16 Jun 2018
0

(#334) What to Know about the Tax Treatment of Bitcoin and Other Virtual Currencies

Roger Rossmeisl, CPA
Taxes

Over the last several years, virtual currency has become increasingly popular. Bitcoin is the most widely recognized form of virtual currency, also commonly referred to as digital, electronic or crypto currency. While most smaller businesses aren’t yet accepting bitcoin or other virtual currency payments from their customers, more and more larger businesses are. And the trend may trickle down to smaller businesses. Businesses also can pay employees or independent contractors with virtual currency. But what are the tax consequences of these transactions? Bitcoin 101 Bitcoin has an equivalent value in real currency and can be digitally traded between users. It also can be purchased with real currencies or exchanged for real currencies. Bitcoin is most commonly obtained through virtual currency ATMs or online exchanges. Goods or services can be...

14 Jun 2018
0

(#332) Putting Your Child on Your Business’s Payroll for the Summer May Make More Tax Sense Than Ever

Roger Rossmeisl, CPA
Taxes

If you own a business and have a child in high school or college, hiring him or her for the summer can provide a multitude of benefits, including tax savings. And hiring your child may make more sense than ever due to changes under the Tax Cuts and Jobs Act (TCJA). How it works By shifting some of your business earnings to a child as wages for services performed, you can turn some of your high-taxed income into tax-free or low-taxed income. For your business to deduct the wages as a business expense, the work done must be legitimate and the child’s wages must be reasonable. Here’s an example: A sole proprietor is in the 37% tax bracket. He hires his 20-year-old daughter, who’s majoring in marketing,...

14 Jun 2018
0

(#331) Saving Tax on Restricted Stock Awards with the §83(b) Election

Roger Rossmeisl, CPA
Taxes

Today many employees receive stock-based compensation from their employer as part of their compensation and benefits package. The tax consequences of such compensation can be complex — subject to ordinary-income, capital gains, employment and other taxes. But if you receive restricted stock awards, you might have a tax-saving opportunity in the form of the §83(b) election. Convert ordinary income to long-term capital gains Restricted stock is stock your employer grants you subject to a substantial risk of forfeiture. Income recognition is normally deferred until the stock is no longer subject to that risk (that is, it’s vested) or you sell it. At that time, you pay taxes on the stock’s fair market value (FMV) at your ordinary-income rate. The FMV will be considered FICA income, so it also...

12 Jun 2018
0

(#330) Sending Your Kids to Day Camp May Provide a Tax Break

Roger Rossmeisl, CPA
Taxes

When school lets out, kids participate in a wide variety of summer activities. If one of the activities your child is involved with is day camp, you might be eligible for a tax credit! Dollar-for-dollar savings Day camp (but not overnight camp) is a qualified expense under the child and dependent care credit, which is worth 20% of qualifying expenses (more if your adjusted gross income is less than $43,000), subject to a cap. For 2018, the maximum expenses allowed for the credit are $3,000 for one qualifying child and $6,000 for two or more. Remember that tax credits are particularly valuable because they reduce your tax liability dollar-for-dollar — $1 of tax credit saves you $1 of taxes. This differs from deductions, which simply reduce the amount...

05 Jun 2018
0

(#327) TCJA Changes Some Rules for Deducting Pass-Through Business Losses

Roger Rossmeisl, CPA
Taxes

It’s not uncommon for businesses to sometimes generate tax losses. But the losses that can be deducted are limited by tax law in some situations. The Tax Cuts and Jobs Act of 2017 (TCJA) further restricts the amount of losses that sole proprietors, partners, S corporation shareholders and, typically, limited liability company (LLC) members can currently deduct — beginning in 2018. This could negatively impact owners of start-ups and businesses facing adverse conditions. Before the TCJA Under pre-TCJA law, an individual taxpayer’s business losses could usually be fully deducted in the tax year when they arose unless: The passive activity loss (PAL) rules or some other provision of tax law limited that favorable outcome, or The business loss was so large that it exceeded taxable income from...

05 Jun 2018
0

(#326) Be Aware of the Tax Consequences Before Selling Your Home

Roger Rossmeisl, CPA
Taxes

In many parts of the country, summer is peak season for selling a home. If you’re planning to put your home on the market soon, you’re probably thinking about things like how quickly it will sell and how much you’ll get for it. But don’t neglect to consider the tax consequences. Home sale gain exclusion The U.S. House of Representatives’ original version of the Tax Cuts and Jobs Act of 2017 (TCJA) included a provision tightening the rules for the home sale gain exclusion. Fortunately, that provision didn’t make it into the final version that was signed into law. As a result, if you’re selling your principal residence, there’s still a good chance you’ll be able to exclude up to $250,000 ($500,000 for joint filers) of gain. Gain...

04 Jun 2018
0

(#324) Impact of TCJA on Home Mortgage Interest Deductions

Roger Rossmeisl, CPA
Taxes

The Tax Cuts and Jobs Act of 2017 (TCJA) has caused some changes in the area of home mortgage interest deductions.  While a good amount of existing homeowners will not be impacted due to grandfather provisions that keep certain prior-law rules in place, other homeowners will be negatively impacted by a new provision that generally disallows interest deductions for home equity loans for tax years 2018-2025. This Tax Planning Letter outlines what you need to be aware of regarding TCJA’s impact on home mortgage interest deductions. TABLE OF CONTENTS HOME MORTGAGE INTEREST: Pre-TCJA HOME MORTGAGE INTEREST: TCJA "Home acquisition indebtedness" under TCJA "Home equity indebtedness" under TCJA $1 million of "home acquisition indebtedness" grandfather rules under TCJA Taxpayers who can disregard TCJA changes HOME MORTGAGE INTEREST: Pre-TCJA Prior to TCJA, a taxpayer was allowed...

21 May 2018
0

(#322) Can Your Deduct Business Travel When It’s Combined With a Vacation?

Roger Rossmeisl, CPA
Taxes

At this time of year, a summer vacation is on many people’s minds. If you travel for business, combining a business trip with a vacation to offset some of the cost with a tax deduction can sound appealing. But tread carefully, or you might not be eligible for the deduction you’re expecting. General rules Business travel expenses are potentially deductible if the travel is within the United States and the expenses are “ordinary and necessary” and directly related to the business. (Foreign travel expenses may also be deductible, but stricter rules apply than are discussed here.) Currently, business owners and the self-employed are potentially eligible to deduct business travel expenses. Under the Tax Cuts and Jobs Act, employees can no longer deduct such expenses. The potential deductions...

21 May 2018
0

(#321) Do You Need to Adjust Your Withholding?

Roger Rossmeisl, CPA
Taxes

If you received a large refund after filing your 2017 income tax return, you’re probably enjoying the influx of cash. But a large refund isn’t all positive. It also means you were essentially giving the government an interest-free loan. That’s why a large refund for the previous tax year would usually indicate that you should consider reducing the amounts you’re having withheld (and/or what estimated tax payments you’re making) for the current year. But 2018 is a little different. The TCJA and withholding To reflect changes under the Tax Cuts and Jobs Act (TCJA) — such as the increase in the standard deduction, suspension of personal exemptions and changes in tax rates and brackets — the IRS updated the withholding tables that indicate how much employers should hold...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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