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Tax Law Changes and Year End Memo to clients


TO: All Clients

DATE: January 2018



FICA Tax changes for 2018:

FICA Tax includes both Social Security coverage and Medicare coverage, and are both a deduction
from employee wages and matched by the employer.

Maximum Wages Subject to
Social Security Tax $ 128,400.00
Maximum Social Security Tax – Employers $7,960.80
Maximum Social Security Tax – Employees $7,960.80

Maximum Wages Subject to  Medicare Tax                        Unlimited

Social Security Tax Rate:
Employees                                                    6.20%
Employers                                                    6.20%

Medicare Tax Rate:
Employees  1.45% (Employees earning over $200,000 are subject to additional 0.09 Medicare Tax)
Employers 1.45%

NYS Unemployment wage base $11,100.00

The  Federal  &  State agencies have been aggressively looking for ways to assess taxes  & penalties.

Forms 1099; are still an area for target. All payments of  $600. per year to non-corporate entities for services will need a  signed and completed  Form  W-9  on file so we can complete a  Form  1099  at yearend. For all sales that are exempt from sales tax,  you must have a  signed resale certificate or xemption certificate on file from the customer.

If you need any forms or& haveany questions,  please do not hesitate to contact our office.

Please be advised that it is a  misdemeanor offense to be collecting  Sales  Tax without having, your  Certificate of  Authority on display  at your place of business and,  if you have employees,  you must also have your  Workers’ Compensation and  Disability  Insurance  Certificates displayed.

We are an authorized  Quickbooks-Pro  Advisor and,  as such,  can get you discounts on  Quick-books,  Quickbooks upgrades,  and  Quickbooks supplies directly from  Quickbooks.   Our contact is Keith  Van  Order and his direct number is  214-387-2840.   We were told our clients would receive a  30%  discount when they mention our name.

We now have a  Facebook page under  ” Michael J. Berger and Co. CPA’s, LLP ”

As the end of the year approaches ….

Start thinking of planning moves that will help lower your tax bill for this year and possibly the next.

Higher-income earners have unique concerns when mapping out year-end plans. They must be wary of the 3.8% surtax on certain unearned income and the additional 0.9% Medicare (hospital insurance, or HI) tax.

We have compiled a checklist of additional actions based on current tax rules that may help you save tax dollars if you act before year-end. Not all actions could apply in your particular situation, but it is possible that you (or a family member) will likely benefit from many of them. We can narrow down the specific actions that you can take once we meet with you. In the meantime, please review the following list and contact us at your earliest convenience so that we can advise you on which tax-saving moves to make.

Year-End Tax Planning Moves for Individuals

  • Realize losses on stock while substantially preserving your investment position. There are several ways this can be done. For example, you can sell the original holding, then buy back the same securities at least 31 days later.  It may be advisable for us to meet to discuss year-end trades you should consider making.
  • Postpone income until 2018 and accelerate deductions into 2017 to lower your 2017 tax bill. This strategy may enable you to claim larger deductions, credits, and other tax breaks for 2017 that are phased out over varying levels of adjusted gross income (AGI). These include child tax credits, higher education tax credits, and deductions for student loan interest. Postponing income is also desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income into 2017. For example, this may be the case where a person’s marginal tax rate is much lower this year than it will be next year or where lower income in 2018 will result in a higher 2018 tax credit for an individual who plans to purchase health insurance on a health exchange and is eligible for a premium assistance credit.
  • If you believe a Roth IRA is better than a traditional IRA and you are eligible to convert a traditional IRA to a Roth IRA, consider converting traditional-IRA money invested in beaten-down stocks (or mutual funds) into a Roth IRA. Keep in mind, however, that such a conversion will increase your AGI for 2017.
  • If you converted assets in a traditional IRA to a Roth IRA earlier in the year and the assets in the Roth IRA account declined in value, you could wind up paying a higher tax than is necessary if you leave things as is. You can back out of the transaction by recharacterizing the conversion—that is, by transferring the converted amount (plus earnings, or minus losses) from the Roth IRA back to a traditional IRA via a trustee-to-trustee transfer. You can later reconvert to a Roth IRA.
  • It may be advantageous to try to arrange with your employer to defer, until early 2018, a bonus that may be coming your way.
  • Consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase your 2017 deductions even if you don’t pay your credit card bill until after the end of the year.
  • If you expect to owe state and local income taxes when you file your return next year, consider asking your employer to increase withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2017 if you won’t be subject to alternative minimum tax (AMT) in 2017.
  • Estimate the effect of any year-end planning moves on the AMT for 2017, keeping in mind that many tax breaks allowed for purposes of calculating regular taxes are disallowed for AMT purposes. These include the deduction for state and local property taxes on your residence, state income taxes, miscellaneous itemized deductions, and personal exemption deductions. Other deductions, such as medical expenses of a taxpayer who is at least age 65 or whose spouse is at least 65 as of the close of the tax year, are calculated in a more restrictive way for AMT purposes than for regular tax purposes. If you are subject to the AMT for 2017, or suspect you might be, these types of deductions should not be accelerated.
  • You may be able to save taxes this year and next by applying a bunching strategy to “miscellaneous” itemized deductions, medical expenses and other itemized deductions.
  • For 2017, the “floor” beneath medical expense deductions for those age 65 or older is 7.5% of adjusted gross income (AGI). Unless Congress changes the rules, this floor will rise to 10% of AGI next year. Taxpayers age 65 or older who can claim itemized deductions this year, but won’t be able to next year because of the higher floor, should consider accelerating discretionary or elective medical procedures or expenses (e.g., dental implants or expensive eyewear).
  • You may want to pay contested taxes before the end of the year, so as to be able to deduct them this year while continuing to contest them next year.
  • You may want to settle an insurance or damage claim in order to maximize your casualty loss deduction this year.
  • Take required minimum distributions (RMDs) from your IRA or 401(k) plan (or other employer-sponsored retirement plan). RMDs from IRAs must begin by April 1 of the year following the year you reach age 70-½. That start date also applies to company plans, but non-5% company owners who continue working may defer RMDs until April 1 following the year they retire. Failure to take a required withdrawal can result in a penalty of 50% of the amount of the RMD not withdrawn. Although RMDs must begin no later than April 1 following the year in which the IRA owner attains age 70-½, the first distribution calendar year is the year in which the IRA owner attains age 70-½. Thus, if you turn age 70-½ in 2018, you can delay the first required distribution to 2018, but if you do, you will have to take a double distribution in 2018—the amount required for 2017 plus the amount required for 2018. Think twice before delaying 2017 distributions to 2018, as bunching income into 2018 might push you into a higher tax bracket or have a detrimental impact on various income tax deductions that are reduced at higher income levels. However, it could be beneficial to take both distributions in 2018 if you will be in a substantially lower bracket that year.
  • Increase the amount you set aside for next year in your employer’s health flexible spending account (FSA) if you set aside too little for this year.
  • If you become eligible on or before December of 2017 to make health savings account (HSA) contributions, you can make a full year’s worth of deductible HSA contributions for 2017.
  • If you are thinking of installing energy saving improvements to your home, such as certain high-efficiency insulation materials, do so before the close of 2017. You may qualify for a “nonbusiness energy property credit” that won’t be available after this year, unless Congress reinstates it. You can still install solar energy on your residence for a tax credit of up to 30% of the total cost including installation. The State also has a credit of up to $5,000.
  • Make gifts sheltered by the annual gift tax exclusion before the end of the year and thereby save gift and/or estate taxes. The exclusion applies to gifts of up to $14,000. made in 2017 and

$15,000. made in 2018

to each of an unlimited number of individuals. You can’t carry over unused exclusions from one year to the next. The transfers also may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax.

Tax Figures to Note 2016 2017
Maximum Income Tax 39.60% 39.60%
Maximum Capital Gains Rate 20% 20%
Maximum Qualified Dividends Rate 20% 20%
Net Investment Income Tax 3.80% 3.80%
Medicare Payroll Tax Rate on Employees 2.35% 2.35%
Estate Tax Exemption $5.45 Million $5.49 Million
Maximum Estate Tax Rate 40% 40%
Gift Tax Exemption $5.45 Million $5.49 Million
Maximum Gift Tax Rate 40% 40%
Generation-Skipping Transfer (GST) Tax Exemption $5.45 Million $5.49 Million
Maximum GST Rate 40% 40%
Annual Gift Tax Exclusion $14,000. per donee $14,000. per donee
Annual Exclusion Gift to Non-Citizen Spouse $148,000.00 $149,000.00

Year-End Tax-Planning Moves for Businesses & Business Owners

  • Businesses should consider making expenditures that qualify for the business property expensing option. For tax years beginning in 2016, the expensing limit is $500,000. and the investment ceiling limit is $2,010,000. Expensing is generally available for most depreciable property (other than buildings), off-the-shelf computer software, and qualified real property—qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property. The generous dollar ceilings that apply this year mean that many small and medium sized businesses that make purchases before the end of 2016 will be able to currently deduct most, if not all, of their outlays for machinery and equipment. The expensing deduction is not prorated for the time that the asset is in service during the year. This opens up significant year-end planning opportunities.
  • Businesses also should consider making expenditures that qualify for 50% bonus first year depreciation if bought and placed in service this year. The bonus depreciation deduction is permitted without any proration based on the length of time that an asset is in service during the tax year. As a result, the full 50% first-year bonus write-off is available even if qualifying assets are in service for only a few days in 2016.
  • A corporation should consider accelerating income from 2017 to 2016 if it will be in a higher bracket next year. Conversely, it should consider deferring income until 2017 if it will be in a higher bracket this year.
  • A corporation (other than a “large” corporation) that anticipates a small net operating loss (NOL) for 2017 (and substantial net income in 2018) may find it worthwhile to accelerate just enough of its 2018 income (or to defer just enough of its 2017 deductions) to create a small amount of net income for 2017. This will permit the corporation to base its 2019 estimated tax installments on the relatively small amount of income shown on its 2018 return, rather than having to pay estimated taxes based on 100% of its much larger 2018 taxable income.
  • To reduce 2017 taxable income, consider deferring a debt-cancellation event until 2018.
  • To reduce 2017 taxable income, consider disposing of a passive activity in 2017 if doing so will allow you to deduct suspended passive activity losses.
  • • If you own an interest in a partnership or S corporation, consider whether you need to increase your basis in the entity so you can deduct a loss from it for this year.

Minimum Wage Increases

  Workers Employed in NYC by Businesses with 11 or More Employees Workers Employed in NYC by Businesses with 10 or Fewer Employees Workers Employed in Nassau, Suffolk and Westchester Counties Workers in the Remainder of NYS (“Upstate”)
Effective Date
31-Dec-16 $11.00/hour $10.50 $10.00 $9.70
31-Dec-17 $13.00/hour $12.00 $11.00 $10.40
31-Dec-18 $15.00/hour $13.50 $12.00 $11.10

Fast Food Workers

Effective Date New York City New York State outside of New York City
31-Dec-15 $10.50 $9.75
31-Dec-16 $12.00 $10.75
31-Dec-17 $13.50 $11.75