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Tax Reform Summary

Dec 7, 2017 02:14 PM

If you are feeling confused by the recent tax reform proposals, you are not alone. With the Senate narrowly passing their version of tax reform early Saturday morning, both the House of Representatives and the Senate have now each passed their own versions of a tax legislation bill, but the two versions include many technical differences.

We have been closely monitoring the progress of these bills. Although the final details of the bill are yet to be determined, it is clear that it will have a dramatic impact on your 2018 tax return (filed in 2019).

House and Senate Republicans are set to reconcile differences between the two tax bills.  Here are a few highlights of things that may affect you.

 Individual tax rates

  • The House bill collapses the current seven brackets into four and keeps the top tax rate of 39.6%, although it raises the income level at which that applies. The changes would take effect in 2018.
  • The Senate bill has seven brackets, but reduces the top rate to 38.5% (currently 39.6%) for income over $500,000 for single filers and $1 million for couples filing jointly. The Senate bill also reduces income levels on other brackets compared with the current levels.

 Obamacare individual mandate

  • While the House bill makes no changes to the Affordable Care Act, the Senate bill would repeal the individual mandate that requires Americans to purchase health insurance or face a tax penalty.

 Mortgage interest deduction

  • The House bill would reduce the mortgage interest deduction for future home purchases.  Homeowners would be limited to deducting interest on up to $500,000 in mortgage debt. Deductions for second homes would no longer be allowed. Existing mortgages would not be affected.
  • The Senate bill does not change any of those provisions.

 Estate tax

  • The House and Senate bills would double the exemption next year for assets subject to the estate tax, a levy of as much as 40% that hits heirs of large estates.
  • The current exemption levels are $5.49 million for an individual and about $11 million for a couple.

 Alternative minimum tax

  • The House bill eliminates the alternative minimum taxes for individuals and corporations.
  • The Senate bill also repeals the tax, but AMT would return in 2026 as part of the expiration of the changes to that part of the tax code.

 Corporate rate reduction

  • The House and Senate bills permanently cut the corporate tax rate to 20% from 35%. The House cut would take effect next year, but the Senate bill delays it until 2019.

 Tax rate on pass-through businesses

  • The House and Senate bills also reduce taxes on pass-through businesses — sole proprietorships, partnerships, limited liability companies, and S corporations.
  • The changes are complicated and the bills take different approaches to those taxes.
  • The House bill would cap the top tax rate for pass-throughs at 25%, down from 39.6% individual rate.
  • The Senate plan would continue taxing pass-through businesses at the individual rate that would apply to the owner, with a top proposed rate of 38.5%. But the Senate bill would allow most pass-throughs to deduct about 23% of their business income from their taxes. 
  • This would likely exclude many service-based companies.

 State income tax

  • If you itemize your deductions, you can deduct state and local income taxes or sales taxes. Both proposals would eliminate the state and local income tax or sales tax deduction for individual taxpayers.
 
 
Dan Packard, CPA, Cooper Norman
You can read more about the author Dan Packard, MAcc, CPA, CFE, CVA here. 
 
Tax
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2017 AgKnowledge Seminar

Brooke Eppa
Dec 16, 2016 05:05 PM
AGKnowledge Seminar Logo
 
 
AgKnowledge agriculture seminar image
 
You can register through Eventbrite or call Malinda in our Idaho Falls office at 208.523.0862 for questions or to register over the phone.
$25 per person or $50 per farm (lunch is included)
 
All locations listed below will be in the state of Idaho:
 
 
Pocatello - Tuesday, January 31, 2017
 
Twin Falls - Wednesday, February 2, 2017
 
Idaho Falls - Thursday, February 3, 2017
AgKnowledge future planning
 
 
 
AgKnowledge Agriculture seminar header image
 
 
 
Itinerary posted here soon
 
 
 
 
 
AgKnowledge agriculture business seminar
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American Opportunity Tax Credit

Ryan Stone
Dec 14, 2016 11:21 AM

As a recent university graduate, the American Opportunity Tax Credit is something that has directly benefitted me and something that I have been very grateful for. If you or one of your dependents is a university student, this might be something that could help you lower the amount of federal income tax that you pay. The credit can be taken on 100% of the first $2,000 spent on qualified tuition and related expenses, and then 25% on the next $2,000 spent on qualified tuition and expenses. The total maximum credit is $2,500 per student, per year, and can be used for the student’s first four years of post-secondary education. Not only can this reduce your tax liability, but up to 40% of the credit amount is refundable which could generate a refund if your tax liability is reduced to zero before using up the entire credit.

In order for this credit to be applicable, you or your dependent needs to be a qualifying student. A qualifying student is a student who is pursuing a degree or other recognized credential from a college or university and is enrolled at least half-time. Additionally the student must not have been convicted of a controlled substance felony.

As previously mentioned, qualified tuition and expenses are used to calculate the amount of the credit. Tuition and fees along with course materials (required books, supplies, etc.) are all qualified expenses and can be used to calculate the credit. However, things like insurance, room and board, and transportation are not considered qualified expenses. Another factor in calculating the credit is the amount of financial aid received. The college or university that you or your dependent is attending will send you a tuition statement (1098-T) which will report qualified expenses as well as financial aid received. The amount of qualified expenses reported on the tuition statement might just be the amount of tuition and fees paid/billed and therefore you might be able to tack on things like books and supplies that you were required to purchase for your courses. The total qualified educational expenses will be reduced by financial aid you receive like scholarships, fellowships, or grants, but will not be reduced by borrowed funds like student loans.

Form 8863 is used to calculate the credit and must be attached to your Form 1040 when you file your individual tax return. The form instructs you to start on Part III where you will calculate the amount of the credit. Then it will take you to Part I and then to finish up on Part II. Part I will calculate any phase-out of the credit that might take place based on your AGI (Adjusted Gross Income). Taxpayers that are married and filing jointly will begin to lose some of the credit if their AGI is above $160,000 and will completely miss out on the credit if their AGI reaches $180,000 or above. For taxpayers using the other filing statuses the credit will be limited if AGI reaches $80,000 and completely eliminated with an AGI of $90,000 or above.  After the phase-out calculation, the refundable portion of the credit is calculated in Part I and then the nonrefundable portion is calculated in Part II.

In conclusion, it can be very advantageous to use education credits and deductions when preparing your tax return. Most of the time the American Opportunity Tax Credit will be the optimal credit to use, but if you don’t qualify, you can check to see if you qualify for the Lifetime Learning Credit or the Tuition and Fees Deduction. Education expenses are already high enough, you might as well use them to get some relief on your taxes and hopefully this post shed some light on how to do so.

-Ryan Stone

Email Ryan 

Tax
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December 1st Federal Overtime Rule Delayed

Dec 14, 2016 11:00 AM

A preliminary injunction was filed in a November 22 ruling that has put a hold on the implementation of the new federal overtime rule. 

The case was filed in the District court in Texas by 21 states, the U.S. Chamber of Commerce, and other business groups. 

“A preliminary injunction preserves the status quo while the court determines the Department of Labor’s authority to make the final rule as well as the final rule’s validity,” said Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas. 

The Department of Labor will appeal the decision, but until the courts make a final ruling, employers may continue to follow the existing overtime rule.

Cooper Norman News, Tax
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Thinking about giving this #GivingTuesday?

Nov 29, 2016 11:17 AM

If you’re thinking in participating in #GivingTuesday, keep in mind that certain charitable contributions are deductible if you itemize on your 2016 tax return. IRS Select Check on IRS.gov is a searchable online tool that lists most eligible charitable organizations. Donations to  religious organizations and government agencies are eligible to be deductible donations even if they are not listed in this database. In some states, Idaho for example, there is also a special deduction for contributions made to state educational entities or youth rehabilitation services. Property donations (items like clothing, household items, and other like items) are normally limited to the item’s fair market value or the value at which the thrift store can sell it. If any benefit is received in result of the donation (merchandise, meals, tickets or services), donors may have to reduce the value of their charitable contribution. Bank records (canceled checks, bank statements, etc.) or a written statement from the organization is needed to prove the amount of any donation made so be sure to keep track of these items. For more details on Charitable Contributions and possible tax deductions, visit the IRS website

 

IRS giving tuesday graphic

 

 IRS press release on Gifts to Charities

Tax
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New Nevada Business Tax Quick Overview

Aug 29, 2016 06:25 PM

Nevada has adopted a tax on businesses that generate more than $4,000,000 in revenues from within the state. Some of the notable features of the tax include:

 

1-      This is set up to be more of a franchise tax rather than an income tax. The standard nexus rules of P.L. 86-272 don’t apply here.

2-      You will need to look to the state’s definition of “Nevada Income” to calculate the correct amount to report on the form.

3-      The form is based on a fiscal year- 7/1-6/30.

4-      The tax rate used is based on the business NAICS code of the business.

5-      The filing requirement applies to all businesses including sole proprietors (Sch C, E, and F).

 

Any business registered in Nevada or with operations there will need to file a return annually. Some additional references on the Nevada Business Tax can be found at the Tax Adviser and the Nevada Department of Taxation.

 

If you believe this applies to you and your business and would like assistance in preparation of this return, please contact us at any of our three locations in Idaho Falls (208.523.0862), Pocatello (208.232.6006), and Twin Falls (208.733.6581). Our tax experts can help you navigate the many nuances and requirements of filing.

 

Disclaimer: Any material appearing in communication or shared third party content from Cooper Norman is for informational purposes only and is not intended as legal, accounting, or tax advice provided by Cooper Norman. Opinions expressed in communications from Cooper Norman professionals or shared third party content do not necessarily reflect the opinion of Cooper Norman or its associates. These communications are not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Often these materials have been prepared by professionals, but the user should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Cooper Norman assumes no obligation to provide notification of changes in tax laws or other factors that could affect the information provided.

 

You can read more about the author, Tim Anderson, CPA, MAcc on his bio here.

Tim Anderson, CPA, MAcc, Idaho Falls, Cooper Norman, Business Advisor

Tax
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2016 AgKnowledge Ag Seminar

Brooke Eppa
Dec 1, 2015 06:10 PM
AGKnowledge Seminar Logo
 
 
AgKnowledge agriculture seminar image
 
You can register through Eventbrite or call Malinda in our Idaho Falls office at 208.523.0862 for questions or to register over the phone.
$25 per person or $50 per farm (lunch is included)
 
All locations listed below will be in the state of Idaho:
 
 
Pocatello - Tuesday, January 19, 2016
 
Twin Falls - Friday, January 22, 2016
 
Idaho Falls - Friday, January 29, 2016
AgKnowledge future planning
 
 
 
AgKnowledge Agriculture seminar header image
 
Itinerary
 
Sign in and registration
9:45am - 10:00am
 
Topic 1 - Tax Update
10:10am to 10:55am
 
Topic 2 - Strategic Planning and Retreats for Business
11:05am to 11:50am
 
Lunch
11:50am to 12:20pm
 
Topic 3 - Industry Panel Part 1: Commodity Leaders will give presentations, discuss, and answer questions regarding current opportunities and issues
12:20pm to 1:00pm
 
Break 1:00pm to 1:10pm
 
Topic 4 - Industry Panel Part 2: Commodity Leaders will give presentations, discuss, and answer questions regarding current opportunities and issues
1:10pm to 2:10pm
 
Question and Answer and Wrap Up 
2:10pm to 2:25pm
 
 
 
 
AgKnowledge agriculture business seminar
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2015 ISU Cooper Norman Tax Competition

Brooke Eppa
Jan 29, 2015 10:10 AM
Cooper Norman’s first annual collegiate tax competition took place yesterday, Wednesday, January 28th at Idaho state University.  We invite undergraduate students to participate in the two hour competition.  The participants are presented with 2 tax research topics and are asked to draft tax file memos addressing the issues.  Cash prizes were awarded to the three top teams.  We had over 40 participants.  
 
2015 ISU Tax Competition Sponsored by Cooper Norman
2015 ISU Tax Competition Sponsored by Cooper Norman 2

2015 ISU Tax Competition Sponsored by Cooper Norman 3
 
2015 ISU Tax Competition Sponsored by Cooper Norman 4  
2015 ISU Tax Competition Sponsored by Cooper Norman 5  
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IRS Phone Scam Hitting Idaho

Brooke Eppa
Jan 26, 2015 05:43 PM
The scammers make unsolicited calls to taxpayers fraudulently claiming to be IRS officials.  They demand money be sent to them for unpaid taxes.  They want the taxes paid via prepaid debit cards or wire transfers.  There are also versions promising big refunds. 
 
If you receive one of these calls please just hang up.  Do not divulge information or make payments over the phone. If you have a question about the status of your relationship with the IRS, please contact your accountant for clarification.
 
Please be aware that the IRS will never call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.   The IRS will never demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.  The IRS will not require you to use a specific payment method for your taxes, such as a prepaid debit card, nor will they ask for credit or debit card numbers over the phone.   The IRS will not threaten to bring in local police or other law-enforcement groups to have you arrested for not paying. 
 
For anyone who is not represented by an accountant, or those wishing to speak directly with the IRS, you may call this number to find out if there really is an issue you need to resolve: 1.800.829.1040 (Be prepared to patiently wait for assistance.)
 
Big RED flags! Characteristics of the scam listed on the IRS website:
 
• Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
• Scammers may be able to recite the last four digits of a victim’s Social Security number.
• Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
• Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
• Victims hear background noise of other calls being conducted to mimic a call site.
• After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.
 
 
 
 
 
In addition to the Phone Scam, there are also scammers sending email requesting that you “update your IRS e-file” information.   The IRS has a list of scam on their website.    If something doesn’t sound right, it probably isn’t.  Please be cautious with your personal data.
 
 
Content and wording pulled from the IRS website and from our Tax Committee Chair Todd Wadsworth, CPA.
 
Any material appearing in communication or shared third party content from Cooper Norman is for informational purposes only and is not intended as legal, accounting, or tax advice provided by Cooper Norman. Opinions expressed in communications from Cooper Norman professionals or shared third party content do not necessarily reflect the opinion of Cooper Norman or its associates. These communications are not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Often these materials have been prepared by professionals, but the user should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Cooper Norman assumes no obligation to provide notification of changes in tax laws or other factors that could affect the information provided.
Cooper Norman News, Tax
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AGKnowledge Cultivating Agribusiness

Brooke Eppa
Oct 30, 2014 04:58 PM
AGKnowledge Seminar Logo
 
 
AgKnowledge agriculture seminar image
 
Click on your desired location to register through Eventbrite or call Malinda in our Idaho Falls office at 208.523.0862 for questions or to register over the phone.
$25 per person or $50 per farm (lunch is included)
 
 
 
 
AgKnowledge Agriculture seminar header image
 
Itinerary
 
Sign in and registration
9:45am - 10:00am
 
Session 1 - Tax Update: ACA, Farm Bill, etc.
10:10am to 10:55am
 
Session 2 - Protecting Your Business from Fraud
11:05am to 11:50am
 
Lunch
11:50am to 12:20pm
 
Session 3 - Estate Planning and Transition Planning
12:20pm to 1:05pm
 
Session 4 - Industry Panel: Commodity Leaders will give brief presentations regarding current opportunities and issues
1:15pm to 2:15pm
 
Question and Answer and Wrap Up
2:15 to 2:30pm
 
 
AgKnowledge agriculture business seminar
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