A Qualified Charitable Contribution (QCD) can provide you with substantial benefits

If you own an IRA and are 70 1/2 or older, a Qualified Charitable Contribution (QCD) can provide you with substantial benefits. At 70 ½, IRA owners are required to make an annual minimum withdrawal (RMD). A qualified charitable distribution can satisfy all or part the amount of your required minimum distribution from your IRA and, at the same time, reduce your taxable income. Using this strategy can benefit both you and your designated charity.

Here’s how it works. A direct transfer is made from your IRA account by your plan to a qualifying charity. This helps the charity. Qualifying charities must be a 501(c)(3) organization that is eligible to receive tax-deductible contributions. Please note that fund distributions made directly to you do not qualify.

The contribution amount, while satisfying all or part of your annual RMD, can in most cases be deducted from your taxable income, potentially lowering your income tax liability.

QCD requirements:

  • You must be 70½ or older to be eligible to make a QCD.
  • QCDs are limited to only the amount that would otherwise be taxed as ordinary income. Non-deductible contributions are excluded.
  • The QCD maximum annual amount is $100,000. It is the total sum QCD contributions made to any and all charities in a calendar year. Your spouse can also make a QCD from his or her own IRA within the same tax year for up to $100,000.
  • For a QCD to count towards your current year’s RMD, the funds must come out of your IRA by your RMD deadline, generally December 31.
  • You are not permitted to count any amount donated above your RMD toward satisfying a future year’s RMD.

Tax Reporting:

While a QCD is not subject to Federal withholding, State tax rules may vary.

A QCD contribution requires you to receive the same type of acknowledgement from the charity of the donation you would need to claim any other deduction for a charitable contribution.

Your Mitz & Rozansky tax adviser can help you determine if both your IRA and charity qualify for QCDs. Please contact us at (414)352-3200 to discuss how a QCD can work for you.

Highlights of the New Tax Reform Law for 2018 and Beyond

The new tax reform law, commonly called the “Tax Cuts and Jobs Act” (TCJA), is the biggest federal tax law overhaul in 31 years, and it has both good and bad news for taxpayers. For information on how the new law affects your taxes, please contact Mitz & Rozansky at (414)352-3200 to learn more.

Below are highlights of some of the most significant changes affecting individual and business taxpayers. Except where noted, these changes are effective for tax years beginning after December 31, 2017.

Individuals

  • Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37% — through 2025
  • Near doubling of the standard deduction to $24,000 (married couples filing jointly), $18,000 (heads of households), and $12,000 (singles and married couples filing separately) — through 2025
  • Elimination of personal exemptions — through 2025
  • Doubling of the child tax credit to $2,000 and other modifications intended to help more taxpayers benefit from the credit — through 2025
  • Elimination of the individual mandate under the Affordable Care Act requiring taxpayers not covered by a qualifying health plan to pay a penalty — effective for months beginning after December 31, 2018
  • Reduction of the adjusted gross income (AGI) threshold for the medical expense deduction to 7.5% for regular and AMT purposes — for 2017 and 2018
  • New $10,000 limit on the deduction for state and local taxes (on a combined basis for property and income taxes; $5,000 for separate filers) — through 2025
  • Reduction of the mortgage debt limit for the home mortgage interest deduction to $750,000 ($375,000 for separate filers), with certain exceptions — through 2025
  • Elimination of the deduction for interest on home equity debt — through 2025
  • Elimination of the personal casualty and theft loss deduction (with an exception for federally declared disasters) — through 2025
  • Elimination of miscellaneous itemized deductions subject to the 2% floor (such as certain investment expenses, professional fees and unreimbursed employee business expenses) — through 2025
  • Elimination of the AGI-based reduction of certain itemized deductions — through 2025
  • Elimination of the moving expense deduction (with an exception for members of the military in certain circumstances) — through 2025
  • Expansion of tax-free Section 529 plan distributions to include those used to pay qualifying elementary and secondary school expenses, up to $10,000 per student per tax year
  • AMT exemption increase, to $109,400 for joint filers, $70,300 for singles and heads of households, and $54,700 for separate filers — through 2025
  • Doubling of the gift and estate tax exemptions, to $10 million (expected to be $11.2 million for 2018 with inflation indexing) — through 2025

Businesses

  • Replacement of graduated corporate tax rates ranging from 15% to 35% with a flat corporate rate of 21%
  • Repeal of the 20% corporate AMT
  • New 20% qualified business income deduction for owners of flow-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships — through 2025
  • Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets — effective for assets acquired and placed in service after September 27, 2017, and before January 1, 2023
  • Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phaseout threshold to $2.5 million
  • Other enhancements to depreciation-related deductions
  • New disallowance of deductions for net interest expense in excess of 30% of the business’s adjusted taxable income (exceptions apply)
  • New limits on net operating loss (NOL) deductions
  • Elimination of the Section 199 deduction, also commonly referred to as the domestic production activities deduction or manufacturers’ deduction — effective for tax years beginning after December 31, 2017, for noncorporate taxpayers and for tax years beginning after December 31, 2018, for C corporation taxpayers
  • New rule limiting like-kind exchanges to real property that is not held primarily for sale
  • New tax credit for employer-paid family and medical leave — through 2019
  • New limitations on excessive employee compensation
  • New limitations on deductions for employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation

More to consider

This is just a brief overview of some of the most significant TCJA provisions. There are additional rules and limits that apply, and the law includes many additional provisions. Contact Mitz & Rozansky at (414)352-3200 to learn more about how these and other tax law changes will affect you in 2018 and beyond.

© 2017

 

Why Your Tax Returns Need to be Prepared by a Qualified Professional

Now more than ever, it is extremely important that as tax payers you utilize qualified tax professionals who will prepare your tax returns and will represent you should you be audited. Too often, tax payers hire someone who does not have the proper licenses and credentials required to be qualified to represent them, particularly given the complexity of the ever changing tax code.

The Tax Code Has Changed
As of January 1, 2016 the IRS tax code requires that anyone representing a taxpayer be qualified according to IRS specifications.  To be sure that you will not have to seek additional services to represent you to the IRS, your tax preparation needs to be done by a CPA, Enrolled Agent (EA) or an attorney who is IRS qualified. Tax preparers, who do not otherwise qualify, can also complete the IRS’s voluntary Annual Filling Season Program. Only those who successfully complete the program, receive a Record of Completion allowing them to represent you to the IRS.

Employing qualified professionals not only assures that your tax returns are properly prepared, but it also provides you with a representative who can stand in for you at appearances before the IRS for such issues as audits, appeals and collections. They can speak to directly to an IRS representative on your behalf as well as make appearances for you at IRS hearings involving your tax returns.

At Mitz & Rozansky, LLC our CPA’s and tax preparation specialists prepare your tax return with the utmost care. They work diligently to ensure that you pay only the taxes required and they stand ready to represent you up should any tax related issues arise with the IRS. For additional information about this or any other accounting related matters, please contact us by phone at (414)352-3200 or via email at info@mrsc.com.

New Wisconsin Tax Deduction for Tuition Expenses

Did you know that a little known tuition tax deduction started in Wisconsin in 2014? Now parents are allowed to deduct private and religious school tuition up to $4000 for each child in grades K-8 and up to $10,000 for each child in grades 9-12.

This tax deduction does not require the schools to comply with voucher program regulations and is available to all families for tuition assistance. Please see the information below containing specific information about this program or give us a call at (414)352-3200 to discuss how this program can be applied to your specific family situation.

Any taxpayer who pays tuition expenses at a private school (grades K-12) is eligible. Taxpayers who have incomes that have at least some tax liability and who are within the allowable deduction per child will receive the benefit. The portion of tuition covered by scholarship or tuition assistance is not eligible as the deduction is applicable only to expenses that families have actually paid. Please note that this is a deduction and not a tax credit. The amount that any one family or individual will save is dependent on their income, how they file, and the resulting tax liability.

Please give a call at (414)352-3200 to discuss specifics regarding your personal circumstances.

Congress Passes Tax Increase Prevention Act of 2014

The “Tax Increase Prevention Act of 2014,” recently enacted by Congress, once again extends a variety of expired or expiring individual, business and energy provisions popularly known as “extenders.” The extenders include more than fifty tax deductions, credits and other tax savings laws that have been in place for several years, but have remained technically temporary because all have a specific end date. Congress has repeatedly extended these tax breaks for a year or two at a time, which is why we call them “extenders.”
The newest law generally extends these tax breaks retroactively, most of which expired in 2013, for one year through 2014. Here is an overview of the key tax breaks extended. Please call us for specific guidance on how these changes may affect you or your business.
Individual extenders – these provisions were extended through 2014:
• $250 deduction for educators’ expenses
• Exclusion (up to $2 million for married/$1 million if married filing separately) of discharged principal residence indebtedness
• Increase in employer-provided mass transit benefits to match parking exclusion of $250
• Mortgage insurance premiums are deductible as qualified residence interest
• Option to deduct state and local sales tax instead of state and local income taxes
• Increased contribution limits and carry-forward period for contributions of appreciated real property for conservation purposes
• Deduction for qualified tuition and related expenses
• Ability to transfer up to $100,000 from an IRA directly to charity as a tax-free distribution for taxpayers age 70 ½ or older
Business extenders – generally extended through 2014:
• Research credit
• Temporary minimum low-income housing tax credit rate for non-federally subsidized new buildings
• New markets tax credit
• Employer wage credit for activated military reservists
• Work opportunity tax credit
• 15-year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
• 50% bonus depreciation (extended before Jan. 1, 2016 for certain longer-lived and transportation assets)
• Section 179 rules: increase in expensing (up to $500,000 write-off of capital expenditures subject to a gradual reduction once capital expenditures exceed $2,000,000) and an expanded definition of property eligible for expensing
• Special treatment of certain dividends of regulated investment companies (RICs)
• Definition of RICs as qualified investment entities under the Foreign Investment in Real Property Tax Act
• Exclusion of 100% of gain on certain small business stock
• Basis adjustment to stock of S corporations making charitable contributions of property
• Reduction in S corporation recognition period for built-in gains tax
Again for more information on how these changes or other aspects of the new law affect you, please call us at (414)352-3200.

Clients and Friends-Beware! IRS Warning – Scam Artists Posing as the IRS

IRS Warning – Scam Artists Posing as the IRS. Clients and Friends-Beware!

(Taken Directly from the IRS Website – See Link Below)
Please be aware of scam artists posing as IRS personnel on the phone. The IRS has issued an alert that details the types of calls you could receive and what to do about them.

“Callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:
• Call to demand immediate payment, nor will we call about taxes owed without first having mailed you a bill.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone.
• Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
• If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.

To read the complete IRS alert go to http://www.irs.gov/ and type “scam” in the search box.”

Please note: It is extremely important that you protect your identity from people attempting to fraudulently file a tax return in your name. If you feel that some has tried to do so contact us immediately at 414-352-3200 for assistance. You should also fill out the IRS Identity Theft Affidavit which can be downloaded by clicking here.

The staff at Mitz & Rozansky is available to discuss any tax related concerns you may have. Give us a call at (414)352-3200.

New 2014 Tax Planning Guide

'14-'15TaxPlannerWith significant tax-related provisions of the Affordable Care Act (ACA) now affecting many taxpayers — not to mention continued uncertainty about tax reform — tax planning is more complicated yet more important than ever. To save the most, you need to understand how recent tax legislation affects you and how we can assist you in taking advantage of every tax break you’re entitled to.

As we move into tax preparation season, we hope you find our complimentary Tax Planning Guide helpful in understanding recent tax-related legislation and identifying steps you can take to reduce your personal and business tax liability.
To download a copy of the Tax Planning Guide click here.

As you look through the guide, please note the strategies and tax law provisions that apply to your situation or that you would like to know more about. Then call us at (414)352-3200 with any questions you may have about these or other tax matters.

As our client, you know that our professionals are thoroughly familiar with the latest tax laws and tax-reduction strategies, and are eager to help you take full advantage of them. So please contact us today at (414)352-3200 or at info@mrsc.com to schedule a time to talk about ways to lighten your tax burden and better achieve your financial objectives.

Enhancements in Wisconsin’s Tomorrow’s Scholar 529 Plans

For 2014, there are been some very beneficial tax code enhancements to Wisconsin’s  Tomorrow’s Scholar 529 College Savings Plan which is sponsored by the State of Wisconsin.

Specifically those changes provide for:
• A reduction from Wisconsin taxable income of up to $3,050 of annual contributions for each beneficiary account (adjusted annually for inflation). This income reduction is available to anyone who makes contributions during the tax year, regardless of whether they are the account owner or their relationship to the beneficiary

• Contributions may be made for the tax year up to April 15th of the following year and contributions that exceed the maximum reduction amount for a tax year may be carried forward to reduce future taxable income

• The account balance is excluded from calculation of state funded financial aid awards and is protected from claims by creditors

• In addition, the $25 Annual Maintenance Fee is waived.

If you have a student enrolled in the Tomorrow’s Scholar Plan or have interest in enrolling a student, please contact us at 414-352-3200 to discuss the program in detail to ensure you take full advantage of its benefits.

Time for an Income Tax Check-up

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The 2013 tax year is complete and we are now off and running into 2014 which means it’s time to get moving on your 2013 tax returns AND to have a 2014 “tax check-up”. Many tax payers wait until year-end to deal with tax planning. That can be a costly mistake. We highly recommend meeting now to discuss how recent tax law changes will affect your personal financial matters in 2014.

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Combining submission of your 2013 documentation with a 2014 planning session is an economical and timely approach to ensuring you take advantage of all deductions you are entitled to and that you only pay the taxes that you are required to pay in both 2013 and 2014.

Here are some of the significant 2014 changes you may be affected by:

1.       Higher income taxpayers are going to pay more. The Bush-era tax cuts have expired. The top tax rate for taxpayers is now 39.6% for $400,000 for individual taxpayers and $450,000 for married couples filing jointly.

2.       All wages are subject to Medicare tax which is already the case but now taxpayers who make over $200,000 ($250,000 for married taxpayers) will be subject to the Medicare surtax. For those taxpayers, a Medicare surtax will be added onto your wages, compensation, or self-employment income over that amount at a rate of .9%.

3.       If you have both net investment income and modified adjusted gross income (MAGI) of at least $200,000 for an individual taxpayer and $250,000 for taxpayers filing as married you may be subject to the Net Investment Income Tax (NIIT). Net investment income includes items like interest, dividends, capital gains, rental and royalty income, and certain income from businesses. It doesn’t include wages, unemployment compensation, operating income from a non-passive business, Social Security Benefits, alimony, tax-exempt interest, self-employment income, and distributions from certain Qualified Plans.

4.       The limitation for itemized deductions – the Pease limitations, named after former Rep. Don Pease (D-OH) – claimed on individual returns for tax year 2014 will begin with incomes of $254,200 or more ($305,050 for married couples filing jointly). The limitations were brought back in 2013 at the original thresholds, indexed for inflation. The limitation reduces itemized deductions by 3% of the amount by which your adjusted gross income (AGI) exceeds those thresholds, up to a maximum reduction of 80%. That’s a complicated way of saying that your deductions are limited as your income increases.

5.       Kind of a “tag along” provision is the personal exemption phase-out (PEP). Phase-outs for PEP in 2014 begin with AGI of $254,200 for individuals and $305,050 for married couples filing jointly; the personal exemptions phase out completely at $376,700 for individual taxpayers ($427,550 for married couples filing jointly).

6.       Taxpayers who are affected by the Affordable Care Act could also have a tax impact in 2014. If you do not have health insurance in 2014 – and you don’t otherwise meet certain exemptions – you’re going to be subject to a “shared responsibility payment.” Whether you call it a tax, a fee or a penalty, if you don’t have health insurance coverage and don’t otherwise meet certain provisions, you’ll be responsible for either 1% of your taxable income or a flat fee of $95 per uninsured adult and $47.50 per child (up to $285 for a family), whichever amount is higher. The penalty is due when you file your 2014 tax return in April 2015. The flat fee increases to $325 in 2015 and $695 in 2016.

7.       In 2014, business owners will feel the loss of the Section 179 expense deduction. The deduction allowed small and mid-size business owners to immediately deduct an amount used to obtain qualifying equipment rather than spread the deduction over time according to a depreciation schedule. Up until this year, business owners could deduct up to a $500,000 of qualifying assets. In 2014, the limit drops to all the way to $25,000.

The best time to start your planning for 2014 is right now even before we’ve finalized your 2013 return. Our staff is ready to do an in-depth 2014 tax plan customized specifically for you. Don’t hesitate, please contact us at (414)352-3200 to set up a time to discuss your plan.