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Zinner & Co. LLP Partner Susan Krantz, CPA, CGMA, was honored with a prestigious Rainmaker award as the Nonprofit Certified Public Accountant (CPA) member of the year.

Presented during the Rainmaker Companies’ annual SuperConference, held in Indianapolis from May 31 through June 2, the award is given annually to a member best described as someone who is a constant source of value to other members. Other criteria include an individual who engages in group activities and contributes to the success of the alliance through leadership, collaboration and the sharing of resources and best practices.

The Tax Cuts and Jobs Act of 2017 generally lowered federal income tax rates, with some exceptions. Among the ways in which lower rates impact tax planning, they make unmatched contributions to traditional employer retirement plans less attractive.

Example 1: Chet Taylor has around $100,000 in taxable income a year. Chet contributed $12,000 to his company’s traditional 401(k) in 2017, reducing his taxable income. He was in the 28 percent tax bracket last year, so his federal tax savings were $3,360 (28 percent of $12,000). An identical contribution this year will save Chet only $2,880, because the same income would put him in a lower 24 percent bracket.

Not everyone will be in this situation.

A proposed bill has the potential to put taxpayers in a charitable mode.

U.S. Rep. Chris Smith (R-NJ) and U.S. Rep. Henry Cuellar (D-TX) recently introduced the “Charitable Giving Tax Deduction Act,’ a bipartisan bill that would make charitable tax deductions “above-the-line,” allowing taxpayers to write off charitable donations without limitation, whether or not they choose to itemize.

The proposed bill would address concerns that changes made by the Tax Cuts and Jobs Act will result in fewer taxpayers itemizing their deductions, reducing the tax incentive to make charitable contributions. 

Taxpayers who have healthcare coverage under a High Deductible Health Plan (HDHP) may qualify for tax relief from the Internal Revenue Service.

HDHPs, health insurance plans with lower premiums and higher deductibles than a traditional health plan, are a requirement for having a health savings account.

When couples divorce, financial negotiations often involve alimony. The tax rules regarding alimony were dramatically changed by the Tax Cuts and Jobs Act (TCJA) of 2017, but existing agreements have been grandfathered. In addition, the old rules remain in effect for divorce and separation agreements executed during 2018. Next year, the rules will change, and the roles will be reversed.

Under divorce or separation agreements executed in 2018, and for many years in the past, alimony payments have been tax deductible. Moreover, these deductions reduce adjusted gross income, so they may have benefits elsewhere on a tax return. While the spouse or former spouse paying the alimony gets a tax deduction, the recipient reports alimony as taxable income.

Shifting into reverse

Beginning with agreements executed in 2019, there will be no tax deduction for alimony. As an offset, alimony recipients will not include the payments in income.

Many higher income taxpayers have long made it a practice to open investment accounts for their children, hoping to take advantage of their lower tax rates.  Many years ago, Congress imposed, what is colloquially known as the “kiddie tax” to place strict limits on the amount of investment income that can be taxed at those lower rates. 

One of the changes made by the recently enacted Tax Cuts and Jobs Act of 2017 made some significant changes to how the “kiddie tax” is administered, impacting the way adults pass investment income on to their minor children. 

The "kiddie tax" is a provision that taxes the unearned income of children under the age of 19 and of full-time students younger than 24 at a special rate. Under both the new law and the old, the first $1,050 of a child's income is tax-free and the next $1,050 is taxed at a rate of 10 percent.

The good news is that the Tax Cuts and Jobs Act of 2017 lowered corporate tax rates from a graduated schedule that reached 35 percent to a 21 percent flat rate. The bad news? Many business expenses are no longer tax deductible. That list includes all outlays that might be considered entertainment or recreation.

As of 2018, tickets to sports events cannot be deducted, even if you walk away from the game with a new client or a lucrative contract. The same is true if you treat a prospect to seats at a Broadway play or take a valued vendor out for a round of golf. Those outlays will be true costs for business owners without any tax relief.

Drilling down

Does that mean that you should drop all your season tickets supporting local teams? Cancel club memberships? Pack away your putter and your tennis racquet? Before taking any actions in this area, take a breath and crunch some numbers.

The IRS announced today that it was going to end the Offshore Voluntary Disclosure Program (OVDP) by September 28, 2018.  The Service is giving taxpayers just over six months’ notice of the program closure to allow any taxpayers who wish to do so the opportunity to take advantage of the program before then.

The current program has been in place since 2014 and is, actually, a modified version of the one that was originally launched in 2012.  The programs have afforded taxpayers to voluntarily resolve past non-compliance issues related to unreported foreign financial assets, as well as failures to file foreign information returns. 

Many folks faced the new year with a fresh-start mindset, new goals, and a handful of resolutions. For some, 2017 is still at the top-of-mind with credit card balance carry-overs and a loan or two. For others, the new year brings ideas of travel, home renovations, or major purchases. 

Regardless of the intent, oftentimes folks think they can simply borrow or withdraw from their 401(k) to pay for these things when their bank account is not liquid.  After all, the money is theirs and just “sitting” untouched.  So why not tap into the account – life is short, right?