Individual Income Tax
Planning, calculating, and paying income tax can be complicated. The professional tax services provided by the Sarasota CPA firm of Koontz & Parkin, CPAs can ease the stress of income tax payment with comprehensive individual income tax preparation and planning services.
New Laws Make Certified Public Accountants a Necessity for Smart Tax Planning
Each year, the federal government passes new laws regarding income taxes, and recently, the government has made more sweeping changes than ever before.
Koontz & Parkin CPAs can help you take advantage of the positive aspects of the new tax laws, minimize negative impact, and make a smart, well-informed tax plan for the future. In particular, the Koontz & Parkin team can help you with specific areas affected by the new laws, including:
- Tax Rates: The most noticeable change in the Tax Cuts and Jobs Act (TCJA) was a reduction in income tax rates. Capital Gains Tax Rates will continue to be taxed in a similar manner prior to the TCJA.
- Increased Standard Deduction: The TCJA has nearly doubled the standard deduction for all taxpayers. As a result of the increase, more taxpayers will take advantage of the standard deduction rather than itemizing deductions. Prior to 2018, taxpayers were also able to claim a personal exemption for themselves and each of their dependents. As part of tax reform, the personal exemption has been eliminated.
- Qualified Business Income Deduction: Business owners are now able to deduct up to 20% of their qualified business income (QBI) from sole proprietorships, partnerships, trusts and S corporations. The deduction is phased out for income from a Specified Service Trade or Business (SSTB) which is generally a professional service business. The 2019 deduction for SSTB’s begins to phase out at $321,400 for a married couple filing a joint tax return or $160,700 for individual and head of household filers.
- 100% Bonus Depreciation: Taxpayers are now able to deduct the full cost of qualified property in the first year that the property is placed in service. Qualified property generally includes items that have a recovery period of 20 years or less and include tangible, personal property such as vehicles, office equipment, heavy equipment and machinery. Bonus depreciation can now be deducted for property that was previously used as long as it meets certain requirements.
- Divorce: As of January 1, 2019, alimony and separate maintenance payments for divorces and separation agreements entered into after December 31, 2018 will no longer be deductible by the payor, nor includable in income of the payee.
Some of the tax-related provisions in the 2019 year-end package include, among other items:
- Retroactive and current renewal of over two dozen temporary tax breaks known as tax extenders, which have expired or would soon be expired, spanning from 2017 to 2019. Generally, the renewed tax breaks are extended through 2020.
- The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) (HR 1994), which makes sweeping changes to retirement savings and employer retirement contributions provisions;
- Certain fixes to the Tax Cuts and Jobs Act (TCJA); and
- Full repeal of three tax-related provisions of the Affordable Care Act (ACA), two of which include the 2.3 percent excise tax on medical devices and the 40 percent excise "Cadillac"tax on high-dollar employer-sponsored health insurance plans.
- Moving the start date for requirement required minimum distributions (RMDs) to the year the owner turns 72;
- Ending the 70 1/2 age limit for contribute contributions to an IRA; and
- Shortening the distribution period for nonspouse inherited IRAs to a 10-year maximum.
The 10-year window for distributions to a nonspouse beneficiary applies regardless of when the IRA owner dies. Thus, the change will severely limit the use of "stretch IRAs" as an effective planning tool. Limited exceptions are available.
- Requiring plans to offer participation to long-term, part-time employees;
- Encouraging auto-enrollment by increasing the cap; and
- Streamlining the safe harbor for non-elective contributions.
Employers with 401(k) plans must offer employees who work between 500 and 1000 hours year an additional means to participate in the plan. The rule change would only affect 401(k) cash or deferral arrangements, and no other qualified plans.
Retirement Plans for Small Employers
Several changes are made to encourage more small employers to offer retirement benefits to their employees, such as:
- Adding a new tax credit for small employers using auto-enrollment plans;
- Increasing the credit for small employer pension plan start-up costs; and
- Allow small employers of two or more to band together to participate in a new class of pooled multiple employer plans (MEPs).