40/29 " On The Record"

2025 Best of NWA

Fri, 24 Apr 2026 15:00:24 GMT

We’re excited to share some wonderful news with our clients, partners, and community—our firm has once again been recognized in the Best of NWA 2025 awards !

This year, we are honored to receive:

Gold for Best Accounting Firm
Gold for Bookkeeping
Silver for Business Consulting

Awards like these are especially meaningful to us because they reflect the trust and confidence our clients place in our team every day. Your support, referrals, and continued partnership are what make achievements like this possible.

As we reflect on this recognition, we’re reminded of why we do what we do. At Byrd & Massey, our focus has always been on providing dependable accounting services, thoughtful tax solutions, and strategic business guidance tailored to the needs of small businesses. This acknowledgment encourages us to continue improving, growing, and finding new ways to better serve you.

We don’t take your trust lightly. Every return prepared, every set of books balanced, and every consultation we provide is done with a commitment to professionalism, integrity, and attention to detail. Your financial success will always remain at the heart of our work.

We are truly grateful for the relationships we’ve built over the years and proud to be part of such a supportive community. Thank you for allowing us to be a part of your journey—we look forward to continuing to grow alongside you for many years to come.

— The Team at Byrd and Massey

The “Big Beautiful Bill”: What It Means for You (10-Part Series)

Mon, 08 Dec 2025 16:00:18 GMT

A new tax law — often referred to as the Big Beautiful Bill — has officially passed, bringing several important updates for individuals, families, homeowners, and small business owners. To make everything easy to understand, we’re launching a 10-part series highlighting the most important changes and how they may affect your taxes in 2025 and beyond.

Here’s a quick overview of what the series will cover:

1. Standard Deduction Is Staying Higher

The increased standard deduction will not drop in 2026.

2. Lower Tax Brackets Are Staying in Place
Current tax brackets and lower rates are now permanent.

3. Child Tax Credit Increase
Families may see a higher credit per child.

4. New Overtime Pay Deduction (2025–2028)
A new deduction for qualified overtime income, even with the standard deduction.

5. New Tip-Income Deduction
Tip earners can deduct taxable tip income (2025–2028).

6. Car-Loan Interest Deduction (U.S.-Assembled Cars Only)
Interest on qualifying auto loans becomes deductible for 2025–2028.

7. SALT Deduction Cap Increase
The cap rises dramatically from $10,000 to $40,000, with phaseouts (2025–2029).

8. New Deduction for Seniors 65+
Older taxpayers receive an additional deduction through 2028.

9. Continued Small Business & Self-Employed Benefits
QBI stays, bonus depreciation continues, and write-off opportunities remain.

10. Smart 2025 (and beyond) Tax-Planning Tips
Practical steps to make the most of the new changes.

We’ll be publishing each of these posts individually on Instagram and Facebook so you can maximize every deduction and credit available. Stay tuned — there’s a lot of good news to share!

With so many tax changes on the horizon, knowledge truly is power. Stay tuned as we unpack each update in our upcoming series — small insights now can lead to smarter decisions all year long.

We're Moving!

Wed, 02 Jul 2025 17:06:49 GMT

We have some exciting news to share with you!

We're moving!

Our New Location will be 2618 SE J St. #4, Bentonville, AR 72712. We are expecting to move in Mid-July, but please call first if you have any questions! Our phone number and email address will remain the same.

Education Credits and Why They're Important

Fri, 24 Jan 2025 16:00:06 GMT

There are two types of educational credits to help students in their continuous pursuit of knowledge: The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). Understanding both is important if you attend college or have kids who do because it can greatly help with your tax bill.

American Opportunity Tax Credit (AOTC)

This undergraduate tax credit is a partially refundable credit that is good for the first four years in college and assists with students’ expenses such as qualified tuition expenses, school fees, and course materials. You can claim up to $2500 PER student each year; however, your modified adjusted gross income is a factor when claiming this credit. See the numbers below:

Based on Modified Adjusted Gross Income

(To claim FULL credit)

Individual - $80,000 or less

Married Filing Jointly - $160,000

Based on Modified Adjusted Gross Income

(To claim REDUCED credit)

Individual - Less than $90,000

Married Filing Jointly - Less than $180,000

To claim the AOTC credit, you will need the following:

A TIN or Social Security Number
A 1098-T (or tuition statement) from an eligible educational institution*
Be pursuing a degree or other recognized education credential
Be enrolled at least half time for at least one academic period beginning in the tax year
Not have claimed the AOTC or the former Hope credit for more than four tax years
Not have a felony drug conviction at the end of the tax year

*Note: If you were not issued a 1098-T, you may still be able to claim the credit by showing proof of payment to the eligible educational institution attended.

Lifetime Learning Credit (LLC)

This tax credit is for undergraduate, graduate, and professional studies which includes any courses you take to improve job skills. The LLC is exactly that, for a lifetime. The credit never runs out if you are enrolled and taking courses from an eligible educational institution. You, your spouse, or dependent can receive a $2,000 tax credit every tax year.

Based on Modified Adjusted Gross Income

(To claim $2000 tax credit)

Individual - Less than $90,000

Married Filing Jointly - Less than $180,000

To claim the LLC, you need:

A 1098-T (or tuition statement) from an eligible educational institution

Cannot also claim the AOTC

If you do not receive a 1098-T, provide receipts of tuition and other approved expenses, such as course materials.

Student Loans

If you are one of millions of taxpayers with student loans, then you are already familiar with form 1098-E. Be sure to keep an eye out for yours. Student loan servicers will be sending notifications out this month. Hoping for help with the burden of student loans? There’s an interest deduction for that! According to the IRS, you may deduct the “lesser of $2500 that you paid throughout the previous year OR the amount of interest you actually paid during the year.” The amount phases out when you reach the annual limit for your filing status.

For more information on educational and student loan credits click here and if you would like to see the format of the tax form for each credit, visit this link here .

As always, we are here to help navigate the ins and outs of tax season. Send your questions to us via your client portal by clicking here to log in. We are happy to help and remember, we’re easy to talk to!

ATOM: New Client Portal

Fri, 10 Jan 2025 16:00:01 GMT

We are thrilled to introduce you to your new client portal:

ATOM

This innovative platform represents a significant step forward in how we interact with our clients, offering several features designed to enhance communication and overall user experience. With ATOM, you will have access to the following:

Schedule an appointment
Get updates on the status on your tax return
Upload and download documents to and from our office
Secure messaging functionality

In the main menu, clients will see a range of features which include:

Viewing upcoming appointments
Documents requiring e-signatures, and
Messages sent from our CPAs and staff

Once you have thoroughly reviewed your information and are confident you have no changes this tax season, simply upload your tax documents and any tax questions you have, and we will begin processing your tax return. Our commitment to excellence means that we will diligently review, verify, and process your information in a timely manner.

If you would like to sign up for the client portal, please call 479-876-5599

If you have a portal, but are logging into ATOM for the first time, please follow these instructions:

Click here

Under Login Selection, please select E-mail from the drop-down menu

Enter the E-mail address associated with your account ( primary taxpayer )

Password ( this will be given to you via portal instructions through email or phone )

Click the “Log In” button

Should you have any questions, send us a message or give us a call. Remember, we're easy to talk to and we are happy to help!

Oh, BOI! The Beneficial Ownership Information Report and Financial Crimes Enforcement Network: A Quick Guide

Fri, 06 Dec 2024 17:00:00 GMT

The Corporate Transparency Act (CTA) went into effect on January 1, 2024. As a result, non-exempt companies (almost all closely held businesses, including LLCs, corporations, and limited partnerships) that are registered to do business within any state in the US (reporting companies) are required to file initial and updated reports (BOI Report) to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) about their beneficial owners and company applicant.

A “beneficial owner” is an individual who either controls 25% of the ownership interests, or directly or indirectly exercises substantial control over the reporting company. Non-owners (such as managers, officers, directors, etc.) can also be beneficial owners for purposes of the CTA.

A “company applicant” is a person responsible for the reporting company’s initial formation or registration. There are 23 types of entities that are exempt from filing BOI reports; however, most entities will not be exempt.

For reporting companies formed prior to January 1, 2024, the initial BOI reports are due by January 1, 2025. For reporting companies formed on or after January 1, 2024, and before January 1, 2025, the initial BOI reports are due within 90 days of formation. For reporting companies formed on or after January 1, 2025, the initial BOI reports are due within 30 days of formation. An updated BOI report MUST be filed within 30 days for any changes in the information given about the reporting company or its beneficial owners.

For additional information, here is a link to the website for filing. In general, the following information is required to be included to be in the BOI report:

Reporting Company

Full legal name

Any trade or doing business as (dba) name

Address for principal place of business in the US

Jurisdiction of formation/registration

Taxpayer identification number (TIN)

Beneficial Owners & Company Applicants

Full legal name

Date of birth

Unique identifying number (i.e. driver's license or passport)

Current address

Image of the identifying document

Failure to comply with the CTA can result in a civil penalty of $500 per violation per day, and a criminal fine and/or imprisonment of up to 2 years.

Because the consequences of failing to report are significant, we are alerting you so that you may take whatever action is necessary to comply based on your unique circumstances.

PLEASE NOTE: For purposes of clarification, Byrd and Massey will NOT be filing any BOI reports with FinCEN at this time.

RMDs: An Overview

Mon, 25 Nov 2024 17:00:05 GMT

Birth Year Acknowledgement

If you were born in 1950 or earlier, you should have already started taking your Required Minimum Distributions (RMDs). For those born between 1951 and 1959, you have a bit more time. You can wait until April 1st of the year after you turn 73 to begin taking your RMDs. Those born in 1960 or later will have until April 1 ^st of the year after turning 75. It's crucial to stay informed and compliant with these regulations to avoid any unnecessary penalties. If you have any questions or need assistance, consult with your financial advisor to ensure you're on the right track.

Subsequent RMDs

After taking your first RMD, all future RMDs must be taken by December 31 ^st of each year. If you delay your first RMD until April 1 ^st of the following year, you will need to take TWO distributions in that year, one by April 1 ^st and the other by December 31 ^st . This can have significant tax implications. To ensure you make the best financial decisions, we strongly recommend discussing your RMD strategy with a financial advisor . Stay informed and plan ahead!

First RMD Deadline for IRAs

If you turned 73 in 2024, a first RMD must be taken by April 1, 2025. This applies to ALL types of IRAs, including SEP and SIMPLE IRAs; however, Roth IRAs are an exception. Roth IRA owners are not required to take RMDs during their lifetime .

First RMD Deadline for 401(k) and Other Defined Contribution Plans

If you are still working and do not own more than 5% of the company sponsoring your retirement plan, you may be able to delay your first RMD until after retirement. This exception applies exclusively to workplace retirement plans and does not extend to IRAs, SEP IRAs, or SIMPLE IRAs.

To discuss tax planning strategies, you can book an advisory appointment online or by giving us a call at 479-876-5599. We are happy to help!

Major Life Changes + Taxes

Fri, 01 Nov 2024 16:00:05 GMT

If you have recently married, purchased a home, or had a baby, you are likely aware of the significant life adjustments such milestones present! But you may not realize that major life changes usually have tax implications associated with them.

Here are a few things to consider when major life events happen:

Getting Married -- What is the best filing status for our financial situation? Should we update our withholding?
Buying a House – Do I get a tax break when I buy a house?
Having a Baby – Will I be eligible for the child tax credit?
Changing Jobs – I’m making more money. Should I bump up my withholding?
Sending Kids to College – Can I claim tax credits and deductions for the education-related expenses I paid for my child? Does it make more sense for my child to take the credits?
Going Through a Divorce – What filing status do I qualify for after a divorce?
Getting Ready to Retire – Should I be concerned about the tax implications of required minimum distributions? Will I pay taxes on my Social Security benefits?

If you are a Returning Tax Client , the above questions can be addressed via a note enclosed with your tax organizer and documents, and your CPA will review and acknowledge it accordingly. If you are new to the firm, a sit-down meeting is required so a CPA can understand your previous year and current tax situation moving forward. There is no fee for this meeting; however, should you need to discuss tax planning in a more detailed manner, you can schedule an advisory appointment online or give us a call at 479-876-5599.

As always, we are here to help and we're easy to talk to!

We're Going Green!

Fri, 01 Nov 2024 15:30:01 GMT

Thinking about going green with a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV)? You might qualify for a clean vehicle tax credit of up to $7,500!

If you place your new EV or FCV in service in 2023 or later, ensure the seller provides information about the vehicle's qualifications AND reports it to the IRS. Without this, your vehicle will not be eligible for the credit.

Eligibility requirements include:

- Buying the vehicle for personal use, not resale

- Using it primarily in the U.S.

- Meeting specific income thresholds

-$300,000 for married couples filing jointly (or a surviving spouse)

-$225,000 for heads of households

-$150,000 for all other filers

For vehicles placed in service from April 18, 2023, additional critical mineral and battery component requirements apply and can be found here .

To claim the credit, you will need to file Form 8936 with your tax return. Please be sure to get a time-of-sale report from the dealer.

**Please note that as of January 1, 2024, Clean Vehicle Tax Credits MUST be initiated & approved AT THE TIME OF SALE.

For more information on purchasing clean vehicles and the clean vehicle tax credit, visit the following IRS websites:

Credits for NEW Clean Vehicles Purchased in or After 2023

Transferring Clean Vehicle Tax Credits

How to Claim a Clean Vehicle Tax Credit

Drive green and save green!

6 Key Retirement Planning Considerations for Employees

Wed, 16 Oct 2024 16:00:01 GMT

With the end of the year approaching fast, we wanted to share a few important considerations when it comes to employees and retirement.

Max Out Your Contributions
The limit for 2024 is $23,000 for those under 50 and $30,500 for those 50 and up. If you haven’t reached this limit yet, consider increasing your contributions through the end of the year.
Adjust Payroll Deductions
If you find that you need to contribute more, adjust your payroll deductions. Check with your HR department to ensure the changes are made ON TIME.
Assess Investment Allocations
Review your current investment allocations to ensure they align with your retirement goals. Rebalance if necessary.
Maximize Employer Match
Make sure you are contributing enough to get the full employer match.
Review and Update Beneficiaries
Be sure your beneficiary designations are current and reflect any life changes, such as marriage, divorce, or the birth of a child.
Plan for Required Minimum Distributions (RMDs)
If you are 73 or order, you NEED to be taking RMDs from your 401(k). Missing an RMD can result in hefty penalties. Be sure you know how much you need to withdraw to meet the minimum RMD requirement.

Tax season is right around the corner, so be sure to make any changes you feel are necessary, now. If you have questions about tax planning, we offer advisory services which can be booked online HERE or by calling us at 479-876-5599.

The Child & Dependent Care Credit: What you need to know for the upcoming tax season

Wed, 18 Sep 2024 18:07:39 GMT

The Child and Dependent Care Credit is a tax benefit for parents or guardians who acquire expenses while caring for a child or dependent.

Did You Know?

The Child & Dependent Care Credit is not just for children? It can also be applied to other dependents; for example, a parent, or disabled spouse who lives with you and requires care.

There are a few key elements to qualify for the credit. Eligibility requirements are below:

If you are caring for qualifying individual(s): The credit applies to children under the age of 13 or dependents – of any age – who are physically or mentally incapable of self-care and have lived with you for more than half of the year.
You – and your spouse, if filing jointly – must be employed or actively seeking employment. The credit is aimed at those who need childcare to work or find work. You may also be eligible if your spouse is disabled or a student.
There is no income limit for the credit; however, the credit you receive and the maximum amount of expenses eligible for the credit decreases as your income increases.
Most filing statuses qualify, but if you are filing Married Filing Separate , you will not be eligible to claim this credit.
You must provide the TIN (usually the Social Security Number) of each qualifying individual.

-Qualifying Expenses & Claiming the Credit-

Expenses that qualify are daycare, preschool, and day camp, and may be provided in the household or outside of the household. It does not cover expenses such as private school tuition, overnight camps, or care provided by a spouse, the parent of your qualifying individual, your child under the age of 19, or a dependent whom you or your spouse may claim on your tax return.

There is a limit to the total amount you can use to calculate the Child and Dependent Care Credit. You can claim up to $3,000 for one qualifying individual or up to $6,000 for two or more qualifying individuals; however, if you received any dependent care benefits that you exclude or deduct from your income, you must subtract the amount of those benefits from the dollar amount that applies to you. For more information click here .

To claim this credit, you will need to complete Form 2441 and attach it to your tax return (which we can do for you). :)

Please note that we will need information about the care provider, including their name, address, and taxpayer identification number (TIN), as well as the total amount paid to the provider during the year. Most facilities will provide families with a document at the beginning of the new year. Reach out to your care facility to request this document if you have not received one in an appropriate amount of time.

If you have questions about the credit, please let us know or include a note when you drop off or upload your tax documents this upcoming tax season. We’re here to help anyway we can!

Non-Cash Contributions: What You Need to Know for the Upcoming Tax Year

Fri, 21 Jun 2024 19:53:51 GMT

Starting in 2024, if you are making non-cash contributions over $500, you'll need signed receipts for each donation (for federal tax deductions) . You must have a signed acknowledgement from whichever charitable organization you choose to donate to (i.e., The DEB Project, Beautiful Lives, Helping Hands, Goodwill, Salvation Army, etc.). It must show the amount of the donation and a description of the items donated.

If you're a frequent donor, make sure to get a signed receipt every time you donate; especially if your contributions will total more than $500 in a calendar year. This applies to donations like clothing, household items, etc. given to qualified charitable organizations.

Remember, your receipt must include the following:

The approximate amount of the donation
A description of the items donated

We're already halfway through the year, so let's stay ahead of the game. Happy donating and keep those receipts handy. It will make things a whole lot easier when tax season rolls around!

QBD to QBO: Making the Switch

Fri, 07 Jun 2024 14:10:40 GMT

Adios QuickBooks Desktop; say Hello to Fully Integrated QuickBooks Online!

If you’re a diehard QuickBooks Desktop (QBD) user, the way you use QuickBooks is changing and it’s happening very fast! As of May 31, 2024, QuickBooks Desktop 2021 ended users’ capability to access online banking, payroll services, payments, and even support. Critical security updates protecting your data have also stopped as of June 1, 2024, and Intuit announced their plans to discontinue selling new subscriptions to many of their Desktop products as of July 31, 2024.

As we move into June, we want to make sure our clients, both current and prospective, can migrate to QuickBooks Online (QBO) seamlessly, so planning for these changes now will go a long way toward preparing for and advancing your QBO skills when the time arrives.

If you have recently imported your QBD company file into QBO and feel like you could use some personalized guidance, we offer one-hour training sessions to help you master the functionality of QBO.

You can easily book a session with Nita online here or by giving us a call. At Byrd and Massey, we are committed to your success and always here to assist you any way we can.

Should I Hire an Accountant: A Small Business QuickStart Q & A Guide

Mon, 03 Jun 2024 17:20:56 GMT

Bookkeeping 101: A Q& A Guide

If you have a small business and you’re managing your own books, here is a guide to help you decide if you should hire an accountant to assist with all your accounting tasks.

Question 1: With how much time it takes, is the bookkeeping becoming too much or too tedious to handle?

Question 2: Do you know how to address the following:

Payments
Invoices
Chart of Accounts
Accounts Receivable and Payable
Bank Reconciliation

Question 3: Can I make the time to keep up with new tax laws and manage my bookkeeping?

If any of the previous three questions have made you think, it may be time to explore what an accounting firm can do for you and your small business.

Pros and Cons of Hiring an Accountant

-Pros-

An accountant or bookkeeper can help keep track of company expenses to ensure every cost is recorded correctly.
They keep up with financial documents such as the profit and loss statement and balance sheet, and can assist with sales tax, franchise tax, and annual tax preparation.
Monthly reconciliations take place to know how your business is doing.
Reviews of your general ledger to identify problems or fix any discrepancies.
Provides client consultation services throughout the year.
Bookkeeping services generally cost MUCH less than hiring an in-house bookkeeper.

-Cons-

Sometimes finding the right fit can be difficult; kind of like trying to find the rightful owner of a glass slipper!
Fees. Depending on your price point and what you are willing to spend, this can be a challenge for some small businesses; however, a full-service accounting firm will work to customize a package of services tailored to your specific needs.

We’re Easy to Talk to !

It can sometimes be a little overwhelming and feel like a challenge deciding where to begin, and that’s okay! If you are interested in talking with one of our friendly and knowledgeable accountants, they would be more than happy to spend some time discussing your current business needs and where you would like to see your business grow. Schedule an appointment online here or give us a call. We are here to help!

Best of NWA

Thu, 25 Apr 2024 16:32:35 GMT

We are thrilled and humbled to announce that we have been recognized as the best in our field! Thanks to the unwavering trust and support of our incredible clients, we have been awarded the prestigious Gold for Best Accounting Firm and Silver for Best Tax Services .

This achievement would not have been possible without your continued faith in our expertise and dedication. We are truly honored and grateful for your partnership.

Here at Byrd and Massey, we are committed to providing exceptional accounting services and top-notch tax solutions. This recognition motivates us to push even harder and strive for excellence in everything we do.

Rest assured, we will continue to serve you with the utmost professionalism, integrity, and attention to detail. Your financial success remains our top priority.

We extend our heartfelt gratitude to each and every one of our clients for their invaluable support. Together, we have built a strong foundation of trust and collaboration, and we look forward to many more years of working together.

Once again, thank you for making us the best. We are truly honored to be your trusted accounting partner.

Arkansas Small Businesses & Franchise Tax

Mon, 22 Apr 2024 18:14:06 GMT

Franchise Tax in Arkansas

The deadline for Arkansas Franchise Tax is May 1 ^st , 2024. If you haven’t already prepared, filed, and paid your tax, we can help! This service is part of our contract for bookkeeping clients; however, if you're not a bookkeeping client and would still like assistance, we can take care of it for you. Here is a breakdown of fees:

Tax: $150 + $5 credit card processing fee
Our Fee: $75

Don’t wait!

If you would like for us to prepare and send in your Franchise Tax, we MUST have your information no later than Friday, April 26 ^th to allow for setup and processing.

Please Note

Your Franchise Tax will continue to accrue until your business has been dissolved. If you need guidance, you can set up an advisory appointment with a CPA by going here , or calling our office.

Final Thoughts

Remember to file a BOI (Beneficial Ownership Information) report with FinCen by going here . It is now required for both new and existing businesses under the Corporate Transparency Act.

Who Ya Gonna Call?

Thu, 01 Feb 2024 16:00:00 GMT

The Battle of "Us" vs. "Them"

When it comes to figuring out who best to call when tax issues arise, it can sometimes seem tricky, but we’ve got you covered! We have compiled a list of situations and scenarios to help guide you through tax season and navigate the stress of dealing with the IRS all year long.

Tax Return Preparation and Filing - US

We will always handle ALL your tax prep and filing. We can file for all 50 states and will work with you to minimize your taxes throughout the year, not just at the end of the year.

Notice or Letter from the IRS - US

When you receive a letter from the IRS about your tax return, please reach out to us so we can review the notice for possible errors or even incomplete information and assist in resolving the issue as quickly as possible.

Tax Disputes or Audits - US

We know it can be nerve wracking to receive any notice from the IRS let alone a notice specifying you’re being audited, so that’s where we come in. We handle it all for you. Simply bring in or forward the notification to us and we’ll take care of everything from A to Z.

Identity Verification – THEM

If the IRS is asking to verify your identity for any reason, contact them directly using their official website or by calling their toll-free number at 1-800-829-1040. Remember, the IRS will never ask to verify personal identifiable information via call, text, message, or email.

General Tax Inquiries – US

For general tax questions throughout the year, we are here for you, and you can reach out to us at any time. We offer advisory services from $125 per hour where our CPAs can answer all your questions. We will guide you through any adjustments that may need to be made to your finances and contributions, simplify complicated tax laws and rules, and boost your deductions. We make it a priority to proactively stay up to date on current tax law, tax code, and new regulations so we can serve you better.

To schedule an advisory, you can book online by clicking here or you can give us a call at 479-867-5599 .

QBO & The Beast

Thu, 25 Jan 2024 16:00:00 GMT

QuickBooks Online is cloud-based and can be accessed through any web browser or mobile app. It functions similarly to its counterpart (QuickBooks Desktop), however, offers much more flexibility making it ideal for small to medium-sized businesses.

We’ve compiled a list of tips to help even the most seasoned user.

Tip 1: “More” is More!

You may or may not have noticed it at the bottom of your transaction screen, but next to the Print button, there’s More! It can come in handy if you need to make edits, delete, void, or even copy a transaction.

Tip 2: Did You Document It?

QBO is an amazing tool, so you may think it’s okay to toss or shred your documents once you enter them; however, it is always a great idea to scan and attach a copy of the original document (i.e., receipt, check, etc.) to the transaction, especially if you plan on claiming it on your tax return.

There is a handy box in the transaction specifically for attachments, and you can simply upload or drag documents from the location you choose into the attachment box. Once it has finished uploading, save the transaction and voila! *Hint* You can view all your attachments by clicking the gear icon in the upper right corner and look under “Lists.”

Tip 3: Use Your Tabs

Sometimes it’s necessary to move back and forth between two screens simultaneously. You can do so by hovering over one of the navigation links, like Sales, and clicking your mouse wheel; doing this will automatically open a new tab. You can also right-click and select “open link in new tab.” This can be a huge help and time saver.

Tip 4: Take Ctrl

Ctrl is a modifier key that only works in conjunction with another key on your keyboard. In QBO there are many shortcuts you can take using the ctrl key (i.e. ctrl + another key). The two that we will share are the favorite functions Nita, our staff accountant, finds most useful:

1. [Ctrl + A] opens the Chart of Accounts

2. [Ctrl + F] helps find an entry.

Bonus Tip: QuickBooks ProAdvisor Program

This program connects customers with Intuit Certified local bookkeepers, accountants, and CPAs - like us - who help establish QBO accounts. This allows our clients the ability to easily track income and expenses, reconcile statements, eliminates the need to manually enter data, create short-cuts, and even better, have convenient remote access from anywhere in the world!

Interested in one-on-one QBO training? You’re in luck! Call our office or click here to book a session with a certified trainer.

*Please note that we will need to be able to look at your QB file before training can begin.

The Truth About End-of-Year Tax Forms

Tue, 23 Jan 2024 19:58:21 GMT

What's It All Mean?

Confusion tends to spring up when it comes to tax time; especially while dealing with three specific tax forms: W-2’s, 1099-MISC, and 1099-NEC. Businesses are required to report payments made to employees throughout the calendar year; and these forms are how they get reported to the IRS. Let’s look at each form below:

The Good Ole W-2

The Wage and Tax Statement might not be as old as sliced bread, but it has been around for a long time; since 1944 in fact. Employers must complete and send, either by mail or electronically, their employees W-2’s by January 31 to avoid being penalized. The W-2 shows the breakdown of all wages, taxes withheld, FICA, and more for that calendar year.

Who Gets One?

W-2’s are issued to employees who are officially employed by a company. This means that they have filled out a W-4, I-9, etc. for formal employment.

The Gist About 1099-Misc

The 1099-Misc Form began as a way to report earnings for independent contractors, consultants, or freelancers at the end of the calendar year. Box 7 was intended for that, specifically, but in 2020 the IRS switched things up a little. While you still use a 1099-MISC for earnings, it’s more focused on prizes and royalties rather than income. Click here for more information about what ways to use form 1099-MISC.

Non-Employee Compensation (1099-NEC)

Beginning in 2020, the IRS introduced a new form for businesses and organizations to report compensation. On the 1099-NEC, taxes are generally never withheld due to the nature of the work in question (i.e., contract, non-employees, consultants, etc.). You may also only receive this form if you’ve earned $600 or more during the calendar year. *Please Note: If you made less than $600 and did not receive a 1099-NEC, you are still required to report your earnings on your tax return.

What If I Don’t Get All My Tax Documents?

If you’re unsure if you should be receiving one, whether it’s a W-2, 1099-MISC, or 1099-NEC, reach out to the business, person, or organization who paid you; that is often the best way to resolve the issue. Be sure to verify your address and Social Security Number since those two things are reported directly to the IRS.

Errors and Inaccuracies

If you receive a form with errors on it, immediately tell the company and ask them to correct it. With the new program, IRIS (Information Returns Intake System) implemented by the IRS, corrections are much easier to do and can be done electronically.

With tax season upon us, it’s crucial to get your documents in as soon as possible! Schedule an appointment today by clicking here or call us at 479-876-5599 . We are here to help and we’re easy to talk to!

Waivers and Penalty Relief for 2020-21 Federal Tax Returns

Wed, 10 Jan 2024 18:08:43 GMT

Here’s the Scoop:

If you had a balance due during 2020 or 2021, the IRS announced in December 2023 that they would be automatically waiving any “failure to pay” penalties on assessed taxes that were less than $100,000. Those who filed the following ways are automatically eligible:

Filed a Form 1040, 1041, 1120 series or Form 990-T tax return for years 2020 and/or 2021.
Were assessed taxes of less than $100,000, and
Received an initial balance due notice, typically the CP14 or CP161, between Feb 5, 2022, and Dec. 7, 2023.

If you made payments on your account or your balance is paid in full, you are automatically eligible for this “failure to pay” penalty relief on assessed taxes of less than $100,000 per year.

How Do I Get the Credit?

According to the IRS, a credit will automatically be applied to any other tax year with a balance due. If no balance is due, a refund (by mail) will be issued.

Please note - if your address has changed, you will need to update your account to make sure you receive your refund and/or any notices from the IRS. You may do so by clicking here . The IRS asks that you allow 4-6 weeks for processing. In the meantime, the IRS suggests notifying the post office that services your old address.

I’m Not Eligible, What Can I Do?

If you have assessed taxes of more than $100,000, you can apply for penalty relief under the reasonable cause criteria or the First-Time Abate program. Go here to view the various types of relief you may qualify for. Remember, all hope is not lost!

40/29 "On The Record" End-of-Year Tax Strategy

Tue, 26 Dec 2023 19:54:13 GMT

Melissa goes "On the Record" with 40/29 Yuna Lee at 40/29 News --Fort Smith & Fayetteville, Arkansas to talk about how to prepare for end-of-year taxes, and what to plan for going into 2024

Arkansas Franchise Tax & Small Businesses

Tue, 05 Dec 2023 22:15:01 GMT

Here's the Scoop

As 2023 draws to a close, our team would like to share vital information that could greatly impact your business. The following updates will help you prepare for important deadlines and keep your business in good standing as we get ready to step into 2024.

Franchise Tax Payments

Deadline – December 31, 2023

If you haven’t already done so, please remember to file and pay your franchise tax for the 2023 tax year no later than December 31st. Failure to pay by the deadline will enter your business into revoked status . To check your current status, visit the Arkansas Secretary of State (SOS) website here .

At Byrd and Massey, we automatically file franchise taxes for all our contract clients and extend our services to non-contract clients should you need our assistance. Please feel free to reach out to us. Due to the deadline falling on a Sunday, we ask that you contact us no later than December 21st if you need help filing.

Dissolution and Franchise Tax

Deadline – December 31, 2023

If you currently own a business but wish to dissolve it and avoid accruing additional franchise taxes, you must do so by December 31st. We can file Articles of Dissolution on your behalf for a nominal fee. Call us at 479-876-5599 or send an inquiry by clicking here .

Accrual Reminder

It's crucial to remember that even if a company is no longer in operation, the corporation will continue to accrue franchise taxes until it is formally dissolved with the Arkansas Secretary of State.

Finally…

Stay informed and act now to ensure compliance with Arkansas business regulations. Your timely attention to these matters will help protect your business and avoid any unnecessary penalties. As always, if you have questions let us know. After all, we are here to help and we’re easy to talk to!

Charitable Giving & Taxes

Mon, 04 Dec 2023 19:48:17 GMT

Making Change...

When you give to charities and non-profit organizations, it not only impacts those organizations in a positive way by helping them accomplish their goals, but it can also provide a sense of personal satisfaction whether you are donating as an individual or a business.

Since it can sometimes be unclear as to what qualifies and how to keep track of your giving for tax purposes, we have made a checklist of 3 important things to keep in mind when you give.

· Be sure the recipient is an organization qualified under section 170(c) of the Internal Revenue Code. This includes 501(c)(3) and religious organizations.

· Maintain records of your contribution(s) (receipts, bank records, letter from organization(s)) with the name of org, amount donated, and date of the contribution.

· Donations to individuals or groups through crowdfunding services, such as GoFundMe, are generally considered to be "personal gifts," and monetary gifts are likely not tax deductible.

If you have general questions please reach out to us at 479-876-5599. To schedule an advisory for a more in-depth look at your giving and how it might affect your taxes, click here . We are always here to help!

The IRS and the Identity Protection PIN

Tue, 28 Nov 2023 17:02:30 GMT

The IRS and the Identity Protection PIN

ID Theft is Not a Victimless Crime

If you’ve been a victim of identity theft, or the IRS has identified you as a possible victim of tax-related identity theft, chances are you will receive a 6-digit PIN to authenticate your identity when you file your tax return. Here are 6 tips you need to know about your IP PIN for the upcoming tax season:

Your IP PIN is ONLY valid for your federal tax return. You will receive a CP01A notice from the IRS from mid-December through early January. Please DO NOT throw it away! Keep it with all other tax-related documents you receive and bring it in to your tax preparer when you are ready to file your taxes.

If you are married and you file a joint return, EACH person who has a PIN must be sure to enter it on the return. If only one of you has a PIN (i.e., only one spouse has been a victim of ID theft and has been issued an IP PIN), then only one PIN will be entered on the tax return.

If you are filing for the current year AND a previous or previous years in the current year, you will use the same PIN for all tax returns during the calendar year.

Dependents with their own IP PIN must share that PIN with their parent(s) or guardian(s) if they are still being claimed on a tax return. *Note: Your e-file return will be rejected If you do not enter a dependent’s IP PIN.

According to the IRS, the IP PIN is only used on tax Forms 1040, 1040-NR, 1040-PR, 1040-SR, and 1040-SS. *Note: If you file an Amended return, you will need to include your IP PIN!

Where Do I Sign Up?

If you’ve been a victim of identity theft, the IRS has provided ways to get an IP PIN. Remember – having this PIN will prevent someone from filing a tax return using your Social Security number or Individual Taxpayer Identification Number (ITIN).

Get one online. The fastest way to get an IP PIN is to use the IRS.gov websites . Get an IP PIN tool; however, if you don’t have an IRS.gov account, you will have to register and validate your identity, which can be a tedious process.

Fill out and mail or fax an application for an IP PIN, which can be printed by going here .

Get your IP PIN in-person by going to your local IRS Taxpayer Assistance Center. You will have to call to make an appointment, of course, and you can find an office here .

Lost and Found

If you lost or misplaced your PIN, not to worry, there are a couple of ways to recover your original PIN or even get a replacement!

Call the IRS. They have a team that specializes in IP PIN retrieval. Once they verify your identity, they will mail your IP PIN to your address on file within 21 days. The number is 800-908-4490 and they are available to help Monday – Friday, 7:00am – 7:00pm local time.
The retrieval tool online is the fastest way to receive your IP PIN. This is also the same tool that allows you to register for a PIN initially. Click here to log into the tool.

Last But Not Least

The IRS has created an Identity Theft Affidavit for victims of identity theft that can be found here . You can fill it out and submit online or print it and either mail or fax the form. All information for each option is at the link above.

A Quick Recap

Open IRS letters and keep your PIN with your other tax docs
Your PIN is REQUIRED to file your tax return
If you have a dependent(s), you will need their PIN to file
The IP PIN is for Federal ONLY
Your tax return will be REJECTED if you do not use your PIN
You CAN recover your IP PIN by using one of the methods in the above post

If you have any questions regarding the Identity Protection PIN, please do not hesitate to reach out to us via e-mail info@byrdandmassey.com , phone, or our website . We’re here to help any way we can!

Don’t forget we are also now accepting appointments for the 2024 Tax Season. You can view our calendar online and schedule an appointment by clicking here , or by calling our office at 479-876-5599 and Jen, our friendly Receptionist, will help you find a date and time that works best for you!

Year End Checklist

Wed, 15 Nov 2023 17:41:52 GMT

With 2024 fast approaching, it’s time to look back at 2023 if you want to properly prepare for the future! To bring positive closure to the year and close strong, we suggest following these three R’s...

Record
Reconcile
Review

Record

Take the time to download transactions, record and update your QBO, databases, etc. with ALL your receipts (paper and electronic) - we can teach you how to do this easily with the app. Be sure to make note of every single expense you’ve had but may have forgotten. This is important, so make the time to do it.

Reconcile

You will likely be doing this throughout the year, but it’s a good idea to clean up your books by reviewing what has been paid and what is still owed. This is true of both accounts payable and accounts receivable. (Hint: Use your bank statements!)

Review

Once you have everything entered and accounted for, it’s time to review your accounts receivable, financial statements, Profit & Loss, etc. Reviewing this information not only helps you learn about the money you earned or lost, but it also shows where adjustments can be made for the next year (i.e., areas you need to reduce costs or items that aren’t as profitable).

Doing these three steps now will lower the cost and simplify your tax return process. After all, time is money, friends!

Clean Vehicle Credits and You

Fri, 03 Nov 2023 20:28:09 GMT

For the upcoming tax year, you may be wondering if your plug-in electric vehicle (EV) or fuel cell vehicle (FCV) qualifies for any tax credits. The answer is probably. Here is everything you need to know; from new clean vehicles to used and even commercial! Find out who qualifies and how to claim the credit.

New Vehicles

If you purchased and began using a new all-electric, plug-in hybrid, or fuel cell electric vehicle in 2023, you may qualify for up to $7,500 under IRS Section 30D. First, and foremost, the seller MUST have registered and reported the information to the IRS for your vehicle to be eligible. On a positive note, the credit is available to both individuals and their businesses.

Here’s how to know if you qualify:

You must buy it for your own use and not for resale

You must use it primarily in the U.S.

Your modified AGI (adjusted gross income) cannot exceed $300,000 for married couples who file jointly; $225,000 for heads of household; $150,000 for all others

What You Can Expect to Get $:

New requirements went into effect on April 18, 2023, changing the way credits are assessed, splitting them into two categories:

Vehicles placed in service January 1 to April 17, 2023, are credited as follows:

$2,500 base amount

+ $417 for a vehicle with at least 7 kilowatt hours of battery capacity

+ $417 for EACH kilowatt hour of battery capacity beyond 5 kilowatt hours

Up to $7,500 TOTAL

Vehicles placed in service April 18, 2023, and after are credited as follows:

$3,750 if the vehicle meets the criteria minerals requirement ONLY

$3,750 if the vehicle meets the battery components requirement ONLY

$7,500 if the vehicle meets BOTH

How Do I Know If My Vehicle Qualifies?

To qualify, your EV or FCV vehicle must meet the standards set forth by the Department of Energy and the EPA and are as follows:

You must have a battery capacity of at least 7 kilowatt hours

You must have a gross vehicle weight rating of less than 14,000 pounds

Your vehicle must be made by a qualified manufacturer

The vehicle’s MSRP (manufacturer suggested retail price) CANNOT exceed $80,000 for vans, SUVS, and pickup trucks; and $55,000 for other vehicles

Click here to see if your vehicle is eligible for the new clean vehicle credit!

When you are ready to file your tax return, be sure to include the following information so we can help you claim your clean vehicle credit:

Year, make, and model of vehicle

VIN (vehicle identification number)

Date vehicle was placed in service

(Hint: We’re scheduling appointments for 2024 NOW!)

You can read more about the revisions, amendments, and purposes and procedures of the Internal Revenue Code regarding the “new clean vehicle” here .

Oops, I Missed Out!

If you are wondering about a possible credit you missed out on prior to 2022, do not worry! We can usually amend a tax return to reflect the missing information; however, be sure you meet the same guidelines listed above with a couple of differences – you must have a vehicle with a battery capacity of at least 5 kilowatt hours and have an external charging source. You can read, in detail, about qualifications and credits for new electric vehicles purchased in 2022 or before here .

Mine’s Used, What Do I Do?

Guess what? You may qualify! If you purchased your used EV or FCV from a LICENSED dealer for $25,000 or less, you may be eligible for a credit of UP TO $4,000; however, purchases of used clean cars made BEFORE 2023 do not qualify. For more information on previously owned clean cars, click here .

Commercial Clean Vehicles and the Credit

Business and tax-exempt organizations, you have not been left behind! If you purchased a commercial clean vehicle, you too, may qualify for a clean vehicle tax credit of UP TO $40,000 under IRC 45W. Keep in mind a couple of things. According to the IRS, the credit equals the lesser of 15% of your basis in the vehicle (30% if your vehicle is NOT powered by gas or diesel), and the incremental cost of the vehicle. So, the maximum credit is $7,500 for qualified cars with a gross weight rating of under 14,000 pounds and $40,000 for all other vehicles. Click here to see if you meet the specific qualifications in order to receive this credit.

– Byrd and Massey is here for YOU

As always, we are here to guide you through the tax process and give you the best advice and service. If you have any questions about Clean Vehicle Credits, let us know and we will do our best to answer your questions. Our appointment book is now available for the 2024 tax year, so you can book online or give us a call and reserve your spot today! We also have advisory appointments available for those in need of general tax or business advisory services. At Byrd & Massey, we are easy to talk to!

IRS Letters 2021

Tue, 25 Jan 2022 16:50:17 GMT

What Preparers Need to File 2021 Tax Returns

Avoid delayed refunds or owing more in taxes with the information in this important one minute video explaining what preparers will need to file accurate 2021 tax returns.

Byrd & Massey COVID-19 Update

Wed, 20 Jan 2021 00:37:26 GMT

A Message to Our Customers

Watch a video from our own Amber, Business Services Manager, as she discusses options for tax return services during the on going pandemic. We offer the following options for our customers to help them file taxes:

Digitally (for the more tech savvy)
Mail-in
In person drop off and pickup (our doors are locked, so call when you arrive)

Please call our office at 479-802-4490 to find out more and get started!

2020 Tax Strategies

Mon, 28 Sep 2020 19:59:18 GMT

Our own Melissa Massey CPA discussing tax planning strategies with her friends at Mach 1 Financial Group.

Melissa Massey, CPA, was invited to join Mach 1 Financial Group's podcast last week to discuss current tax strategies, gifts, the effects of COVID and the impact of the upcoming election on current and future tax laws.

The outcome is 26 minutes of valuable, money saving information we wanted to share with you! Enjoy!

IRS Stimulus Check – What You Should Know

Mon, 30 Mar 2020 19:50:33 GMT

The $2 trillion stimulus package was enacted Friday, March 27, 2020. The plan will give taxpayers a one-time benefit based on their AGI ( adjusted gross income) .

These comments only address the Federal Returns. Many states are following the Feds, with an extended tax filing and paying deadline from the traditional April 15th to July 15th, but not all. Arkansas has followed the Feds, but check your own state for an update, if you are not an Arkansas tax-payer.

To see a general outline of what the plan uses, follow this link .

2019 Tax Checklist

Thu, 19 Dec 2019 22:38:21 GMT

Would you like to get your 2019 Tax checklist and questionnaire online, via our secure portal? Its simple!

What is a Tax checklist and questionnaire?? Watch this helpful, 1 minute video, where Paul explains what it is, and why it is useful.

Surprise! You owe taxes.

Mon, 16 Sep 2019 19:15:16 GMT

Common reasons you may owe taxes and what you can do to avoid a nasty surprise. Save money on your tax bill!

Follow the link to read the complete article!

Tax Checkup - Video

Wed, 28 Aug 2019 16:23:10 GMT

When was the last time you visited with your CPA? Get a tax Checkup now before it’s too late to strategize. Make informed and intelligent financial decisions and avoid costly surprises.

Stop the LLC Madness

Thu, 22 Aug 2019 21:53:18 GMT

Forming a legal business entity is serious business. STOP and read this article to see if forming an entity is even necessary in your specific circumstances. The article discusses the reasons to, and not to, form a Limited Liability Company (LLC).

It is time to Stop the LLC Madness!!

Follow the link to read the complete article!

Death and Taxes - Video

Fri, 16 Aug 2019 13:00:57 GMT

Death and Taxes, the only 2 things we MUST DO in life. Understand the complexities. Is a final return needed? Are you a surviving spouse? Was there a will or trust? We can help.

Annual Franchise Tax

Fri, 09 Aug 2019 20:52:20 GMT

Keep your business legal! Information on who, why, and when you need to file your Annual Franchise Tax Report in the State of Arkansas.

Follow the link to read more!

Tracking Expenses

Tue, 30 Jul 2019 17:41:07 GMT

Do you use a shoe box to track your personal or business expenses? Don’t spend hours sorting and summarizing receipts for your tax return. There is a safer, faster and easier way!

2020 HSA Deductions

Fri, 31 May 2019 18:44:14 GMT

Limits on Contributions are issued

The IRS announced the annual inflation-adjusted limits on deductions for contributions to a health savings account (HSA) allowed for taxpayers with family coverage under a high deductible health plan for 2020. For more information click here. https://www.journalofaccountancy.com/news/2019/may/2020-hsa-contribution-limits-201921341.html

Best of the Best NWA!!

Fri, 22 Mar 2019 13:26:55 GMT

Best Tax Preparer and Best Accounting Service. Thank you NWA!

2018 Best of the Best Tax Preparation Service and Accounting Service. Thank you Northwest Arkansas!!!

Check out our new sign!

amber@byrdandmassey.com (Amber Dicken ) — Tue, 29 Jan 2019 17:34:34 GMT

It looks amazing!

Since the addition of new Partner, Melissa Massey CPA, our name changed, and now our look has been updated to match!

Standard Deduction Doubles!

Thu, 27 Dec 2018 17:47:45 GMT

To Itemize or not to Itemize....that is the question.

A Gift from the IRS

Tue, 18 Dec 2018 18:27:30 GMT

by Melissa Massey

YEAR-END TAX PLANNING FOR INDIVIDUALS

Tue, 20 Nov 2018 15:53:22 GMT

Once again, tax planning for the year ahead presents a number of challenges, this year, primarily due to tax laws changes brought about the passage of the Tax Cuts and Jobs Act of 2018. These changes include the nearly doubling of the standard deduction, elimination of personal exemptions, and numerous itemized deductions reduced or eliminated. Let's take a closer look.

General Tax Planning

General tax planning strategies for individuals this year include postponing income and accelerating deductions, as well as careful consideration of timing related investments, charitable gifts, and retirement planning. For example, taxpayers might consider using one or more of the following:

Selling any investments on which you have a gain or loss this year. For more on this, see Investment Gains and Losses , below.
If you anticipate an increase in taxable income this year, in 2018, and are expecting a bonus at year-end, try to get it before December 31. Keep in mind, however, that contractual bonuses are different, in that they are typically not paid out until the first quarter of the following year. Therefore, any taxes owed on a contractual bonus would not be due until you file your 2019 tax return in 2020. Don't hesitate to call the office if you have any questions about this.
Prepaying deductible expenses this year using a credit card. Examples of deductible expenses include charitable contributions and medical expenses. This strategy works because deductions may be taken based on when the expense was charged on the credit card, not when the bill was paid. Likewise with checks. For example, if you charge a medical expense in December but pay the bill in January, assuming it's an eligible medical expense, it can be taken as a deduction on your 2018 tax return.
If your company grants stock options, then you may want to exercise the option or sell stock acquired by exercise of an option this year. Use this strategy if you think your tax bracket will be higher in 2019. Generally, exercising this option is a taxable event; sale of the stock is almost always a taxable event.
If you're self-employed, send invoices or bills to clients or customers this year to be paid in full by the end of December.

Caution: Keep an eye on the estimated tax requirements.

Accelerating Income and Deductions

Accelerating income and deductions are two strategies that are commonly used to help taxpayers minimize their tax liability. Most taxpayers anticipate increased earnings from year to year, whether it’s from a job or investments, so this strategy works well. On the flip side, however, if you anticipate a lower income next year or know you will have significant medical bills, you might want to consider deferring income and expenses to the following year.

Accelerating Income

If you anticipate being in a higher tax bracket next year, accelerating income into 2018 is a good idea, especially for taxpayers whose earnings are close to threshold amounts ($200,000 for single filers and $250,000 for married filing jointly) that make them liable for additional Medicare Tax or Net Investment Income Tax (see below).

Caution: Taxpayers close to threshold amounts for the Net Investment Income Tax (3.8 percent of net investment income) should pay close attention to "one-time" income spikes such as those associated with Roth conversions, sale of a home or other large assets that may be subject to tax.

Tip: If you know you have a set amount of income coming in this year that is not covered by withholding taxes, there is still time to increase your withholding before year-end and avoid or reduce any estimated tax penalty that might otherwise be due. On the other hand, the penalty could be avoided by covering the extra tax in your final estimated tax payment and computing the penalty using the annualized income method.

In cases where tax benefits are phased out over a certain adjusted gross income (AGI) amount, a strategy of accelerating income and deductions might allow you to claim larger deductions, credits, and other tax breaks for 2018, depending on your situation. Roth IRA contributions, conversions of regular IRAs to Roth IRAs, child tax credits, higher education tax credits, and deductions for student loan interest are examples of these types of tax benefits.

Examples of other strategies a taxpayer might take include:

Pay a state estimated tax installment in December instead of at the January due date. However, make sure the payment is based on a reasonable estimate of your state tax.
Pay your entire property tax bill, including installments due in year 2019, by year-end. This does not apply to mortgage escrow accounts.
Pay 2019 tuition in 2018 to take full advantage of the American Opportunity Tax Credit, an above-the-line credit worth up to $2,500 per student to cover the cost of tuition, fees and course materials paid during the taxable year. Forty percent of the credit (up to $1,000) is refundable, which means you can get it even if you owe no tax.
Try to bunch medical expenses. For example, you might pay medical bills in whichever year they would do you the most tax good. Medical expenses are deductible only to the extent they exceed a certain percentage of adjusted gross income (AGI). For example, to deduct medical and dental expenses these amounts must exceed 7.5 percent of AGI. By bunching these expenses into one year, rather than spreading them out over two years, you have a better chance of exceeding the thresholds, thereby maximizing your deduction.

Note: The 7.5 percent threshold is only in effect for tax years 2017 and 2018. In 2019, it reverts to 10 percent AGI.

Additional Medicare Tax

Taxpayers whose income exceeds certain threshold amounts ($200,000 single filers and $250,000 married filing jointly) are liable for an additional Medicare tax of 0.9 percent on their tax returns, but may request that their employers withhold additional income tax from their pay to be applied against their tax liability when filing their 2018 tax return next April.

High net worth individuals should consider contributing to Roth IRAs and 401(k) because distributions are not subject to the Medicare Tax.

If you're a taxpayer close to the threshold for the Medicare Tax, it might make sense to switch Roth retirement contributions to a traditional IRA plan, thereby avoiding the 3.8 percent Net Investment Income Tax (NIIT) as well (more about the NIIT below).

Alternate Minimum Tax

The alternative minimum tax (AMT) applies to high-income taxpayers that take advantage of deductions and credits to reduce their taxable income. The AMT ensures that those taxpayers pay at least a minimum amount of tax and was made permanent under the American Taxpayer Relief Act (ATRA) of 2012.

Although the AMT remained under the TCJA exemption amounts increased significantly. As such, the AMT is not expected to affect as many taxpayers. Furthermore, the phaseout threshold increases to $500,000 ($1 million for married filing jointly). Both the exemption and threshold amounts are indexed for inflation.

Note: AMT exemption amounts for 2018 are as follows:

$70,300 for single and head of household filers,

$109,400 for married people filing jointly and for qualifying widows or widowers,

$54,700 for married people filing separately.

Charitable Contributions

Property, as well as money, can be donated to a charity. You can generally take a deduction for the fair market value of the property; however, for certain property, the deduction is limited to your cost basis. While you can also donate your services to charity, you may not deduct the value of these services. You may also be able to deduct charity-related travel expenses and some out-of-pocket expenses, however.

Keep in mind that a written record of your charitable contributions--including travel expenses such as mileage--is required in order to qualify for a deduction. A donor may not claim a deduction for any contribution of cash, a check or other monetary gift unless the donor maintains a record of the contribution in the form of either a bank record (such as a canceled check) or written communication from the charity (such as a receipt or a letter) showing the name of the charity, the date of the contribution, and the amount of the contribution.

Tip: Contributions of appreciated property (i.e. stock) provide an additional benefit because you avoid paying capital gains on any profit.

Taxpayers age 70 ½ or older can reduce income tax owed on required minimum distributions (RMDs) from IRA accounts by donating them to a charitable organization(s) instead.

Investment Gains and Losses

This year, and in the coming years, investment decisions are often more about managing capital gains than about minimizing taxes per se. For example, taxpayers below threshold amounts in 2018 might want to take gains; whereas taxpayers above threshold amounts might want to take losses.

Caution: Fluctuations in the stock market are commonplace; don't assume that a down market means investment losses as your cost basis may be low if you've held the stock for a long time.

Minimize taxes on investments by judicious matching of gains and losses. Where appropriate, try to avoid short-term capital gains, which are taxed as ordinary income (i.e., the rate is the same as your tax bracket).

In 2018 tax rates on capital gains and dividends remain the same as 2017 rates (0%, 15%, and a top rate of 20%); however, due to tax reform, threshold amounts do not correspond to the new tax bracket structure as in prior years:

0% - Maximum capital gains tax rate for taxpayers with income up to $38,600 for single filers, $77,200 for married filing jointly.
15% - Maximum capital gains tax rate for taxpayers with income above $38,600 for single filers, $77,200 for married filing jointly.
20% - Maximum capital gains tax rate for taxpayers with income above $425,800 for single filers, $479,000 for married filing jointly.

Where feasible, reduce all capital gains and generate short-term capital losses up to $3,000. As a general rule, if you have a large capital gain this year, consider selling an investment on which you have an accumulated loss. Capital losses up to the amount of your capital gains plus $3,000 per year ($1,500 if married filing separately) can be claimed as a deduction against income.

Wash Sale Rule. After selling a securities investment to generate a capital loss, you can repurchase it after 30 days. This is known as the "Wash Rule Sale." If you buy it back within 30 days, the loss will be disallowed. Or you can immediately repurchase a similar (but not the same) investment, e.g., and ETF or another mutual fund with the same objectives as the one you sold.

Tip: If you have losses, you might consider selling securities at a gain and then immediately repurchasing them, since the 30-day rule does not apply to gains. That way, your gain will be tax-free; your original investment is restored, and you have a higher cost basis for your new investment (i.e., any future gain will be lower).

Net Investment Income Tax (NIIT)

The Net Investment Income Tax, which went into effect in 2013, is a 3.8 percent tax that is applied to investment income such as long-term capital gains for earners above certain threshold amounts ($200,000 for single filers and $250,000 for married taxpayers filing jointly). Short-term capital gains are subject to ordinary income tax rates as well as the 3.8 percent NIIT. This information is something to think about as you plan your long-term investments. Business income is not considered subject to the NIIT provided the individual business owner materially participates in the business.

Please call if you need assistance with any of your long-term tax planning goals.

Mutual Fund Investments

Before investing in a mutual fund, ask whether a dividend is paid at the end of the year or whether a dividend will be paid early in the next year but be deemed paid this year. The year-end dividend could make a substantial difference in the tax you pay.

Example: You invest $20,000 in a mutual fund in 2018. You opt for automatic reinvestment of dividends, and in late December of 2018, the fund pays a $1,000 dividend on the shares you bought. The $1,000 is automatically reinvested.

Result: You must pay tax on the $1,000 dividend. You will have to take funds from another source to pay that tax because of the automatic reinvestment feature. The mutual fund's long-term capital gains pass through to you as capital gains dividends taxed at long-term rates, however long or short your holding period.

The mutual fund's distributions to you of dividends it receives generally qualify for the same tax relief as long-term capital gains. If the mutual fund passes through its short-term capital gains, these will be reported to you as "ordinary dividends" that don't qualify for relief.

Depending on your financial circumstances, it may or may not be a good idea to buy shares right before the fund goes ex-dividend. For instance, the distribution could be relatively small, with only minor tax consequences. Or the market could be moving up, with share prices expected to be higher after the ex-dividend date. To find out a fund's ex-dividend date, call the fund directly.

Please call if you'd like more information on how dividends paid out by mutual funds affect your taxes this year and next.

Year-End Giving To Reduce Your Potential Estate Tax

The federal gift and estate tax exemption is currently set at $11.18 million but is projected to increase to $11.4 million in 2019. ATRA set the maximum estate tax rate set at 40 percent.

Gift Tax. Sound estate planning often begins with lifetime gifts to family members. In other words, gifts that reduce the donor's assets subject to future estate tax. Such gifts are often made at year-end, during the holiday season, in ways that qualify for exemption from federal gift tax.

Gifts to a donee are exempt from the gift tax for amounts up to $15,000 a year per donee in 2018 and are expected to remain the same in 2019.

Caution: An unused annual exemption doesn't carry over to later years. To make use of the exemption for 2018, you must make your gift by December 31.

Husband-wife joint gifts to any third person are exempt from gift tax for amounts up to $30,000 ($15,000 each). Though what's given may come from either you or your spouse or both of you, both of you must consent to such "split gifts."

Gifts of "future interests," assets that the donee can only enjoy at some future time such as certain gifts in trust, generally don't qualify for exemption; however, gifts for the benefit of a minor child can be made to qualify.

Tip: If you're considering adopting a plan of lifetime giving to reduce future estate tax, don't hesitate to call the office for assistance.

Cash or publicly traded securities raise the fewest problems. You may choose to give property you expect to increase substantially in value later. Shifting future appreciation to your heirs keeps that value out of your estate. But this can trigger IRS questions about the gift's true value when given.

You may choose to give property that has already appreciated. The idea here is that the donee, not you, will realize and pay income tax on future earnings and built-in gain on sale.

Gift tax returns for 2018 are due the same date as your income tax return (April 15, 2019). Returns are required for gifts over $15,000 (including husband-wife split gifts totaling more than $15,000) and gifts of future interests. Though you are not required to file if your gifts do not exceed $15,000, you might consider filing anyway as a tactical move to block a future IRS challenge about gifts not "adequately disclosed." Please call the office if you're considering making a gift of property whose value isn't unquestionably less than $15,000.

New Tax Rate Structure for the Kiddie Tax

Under the TCJA, the kiddie tax rules have changed. For tax years 2018 through 2025, unearned income exceeding $2,100 is taxed at the rates paid by trusts and estates. For ordinary income (amounts over $12,501), the maximum rate is 37 percent. For long-term capital gains and qualified dividends, the maximum rate is 20 percent.

Other Year-End Moves

Maximize Retirement Plan Contributions. If you own an incorporated or unincorporated business, consider setting up a retirement plan if you don't already have one. It doesn't actually need to be funded until you pay your taxes, but allowable contributions will be deductible on this year's return.

If you are an employee and your employer has a 401(k), contribute the maximum amount ($18,500 for 2018), plus an additional catch-up contribution of $6,000 if age 50 or over, assuming the plan allows this and income restrictions don't apply.

If you are employed or self-employed with no retirement plan, you can make a deductible contribution of up to $5,500 a year to a traditional IRA (deduction is sometimes allowed even if you have a plan). Further, there is also an additional catch-up contribution of $1,000 if age 50 or over.

Health Savings Accounts. Consider setting up a health savings account (HSA). You can deduct contributions to the account, investment earnings are tax-deferred until withdrawn, and amounts you withdraw are tax-free when used to pay medical bills.

In effect, medical expenses paid from the account are deductible from the first dollar (unlike the usual rule limiting such deductions to the amount of excess over 7.5 percent of AGI). For amounts withdrawn at age 65 or later that are not used for medical bills, the HSA functions much like an IRA.

To be eligible, you must have a high-deductible health plan (HDHP), and only such insurance, subject to numerous exceptions, and must not be enrolled in Medicare. For 2018, to qualify for the HSA, your minimum deductible in your HDHP must be at least $1,350 for single coverage or $2,700 for a family.

529 Education Plans. Maximize contributions to 529 plans, which starting in 2018, can be used for elementary and secondary school tuition as well as college or vocational school.

Summary

These are just a few of the steps you might take. Please contact the office for assistance with implementing these and other year-end planning strategies that might be suitable for your particular situation.

YEAR-END TAX PLANNING FOR BUSINESSES

Mon, 19 Nov 2018 00:00:00 GMT

There are a number of end of year tax planning strategies that businesses can use to reduce their tax burden for 2018. Here are a few of them:

Deferring Income

Businesses using the cash method of accounting can defer income into 2019 by delaying end-of-year invoices, so payment is not received until 2019. Businesses using the accrual method can defer income by postponing delivery of goods or services until January 2019.

Purchase New Business Equipment

Section 179 Expensing. Business should take advantage of Section 179 expensing this year for a couple of reasons. First, is that in 2018 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to a maximum of $1 million for the first $2.5 million of property placed in service by December 31, 2018. Keep in mind that the Section 179 deduction cannot exceed net taxable business income. The deduction is phased out dollar for dollar on amounts exceeding the $2.5 million threshold and eliminated above amounts exceeding $3.5 million.

Caution: The new law removes computer or peripheral equipment from the definition of listed property. This change applies to property placed in service after December 31, 2017.

Tax reform legislation also expanded the definition of Section 179 property to allow the taxpayer to elect to include certain improvements made to nonresidential real property after the date when the property was first placed in service (see below). These changes apply to property placed in service in taxable years beginning after December 31, 2017.

1. Qualified improvement property, which means any improvement to a building's interior. However, improvements do not qualify if they are attributable to:

the enlargement of the building,
any elevator or escalator or
the internal structural framework of the building.

2. Roofs, HVAC, fire protection systems, alarm systems and security systems.

Bonus Depreciation. Businesses are allowed to immediately deduct 100% of the cost of eligible property placed in service after September 27, 2017, and before January 1, 2023, after which it will be phased downward over a four-year period: 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026.

Qualified Property

Qualified property is defined as property that you placed in service during the tax year and used predominantly (more than 50 percent) in your trade or business. Property that is placed in service and then disposed of in that same tax year does not qualify, nor does property converted to personal use in the same tax year it is acquired.

Note: Many states have not matched these amounts and, therefore, state tax may not allow for the maximum federal deduction. In this case, two sets of depreciation records will be needed to track the federal and state tax impact.

Please contact the office if you have any questions regarding qualified property.

If you plan to purchase business equipment this year, consider the timing. You might be able to increase your tax benefit if you buy equipment at the right time. Here's a simplified explanation:

Conventions. The tax rules for depreciation include "conventions" or rules for figuring out how many months of depreciation you can claim. There are three types of conventions. To select the correct convention, you must know the type of property and when you placed the property in service.

The half-year convention: This convention applies to all property except residential rental property, nonresidential real property, and railroad gradings and tunnel bores (see mid-month convention below) unless the mid-quarter convention applies. All property that you begin using during the year is treated as "placed in service" (or "disposed of") at the midpoint of the year. This means that no matter when you begin using (or dispose of) the property, you treat it as if you began using it in the middle of the year.

Example: You buy a $70,000 piece of machinery on December 15. If the half-year convention applies, you get one-half year of depreciation on that machine.

The mid-quarter convention: The mid-quarter convention must be used if the cost of equipment placed in service during the last three months of the tax year is more than 40 percent of the total cost of all property placed in service for the entire year. If the mid-quarter convention applies, the half-year rule does not apply, and you treat all equipment placed in service during the year as if it were placed in service at the midpoint of the quarter in which you began using it.
The mid-month convention: This convention applies only to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month.

If you're planning on buying equipment for your business, call the office and speak with a tax professional who can help you figure out the best time to buy that equipment and take full advantage of these tax rules.

Other Year-End Moves to Take Advantage Of

Small Business Health Care Tax Credit. Small business employers with 25 or fewer full-time-equivalent employees with average annual wages of $50,000 indexed for inflation (e.g., $52,400 in 2017) may qualify for a tax credit to help pay for employees' health insurance. The credit is 50 percent (35 percent for non-profits).

Business Energy Investment Tax Credits. Business energy investment tax credits are still available for eligible systems placed in service on or before December 31, 2022, and businesses that want to take advantage of these tax credits can still do so. Business energy credits include geothermal electric, large wind (expires 2020), and solar energy systems used to generate electricity, to heat or cool (or to provide hot water for use in) a structure, or to provide solar process heat. Hybrid solar lighting systems, which use solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight, are eligible; however, passive solar and solar pool-heating systems excluded are excluded. Utilities are allowed to use the credits as well.

Repair Regulations. Where possible, end of year repairs and expenses should be deducted immediately, rather than capitalized and depreciated. Small businesses lacking applicable financial statements (AFS) are able to take advantage of de minimis safe harbor by electing to deduct smaller purchases ($2,500 or less per purchase or per invoice). Businesses with applicable financial statements are able to deduct $5,000. Small business with gross receipts of $10 million or less can also take advantage of safe harbor for repairs, maintenance, and improvements to eligible buildings. Please call if you would like more information on this topic.

Qualified Business Income Deduction. Under the Tax Cuts and Jobs Act non-corporations) may be entitled to a deduction of up to 20 percent of their qualified business income (QBI) from a qualified trade or business for tax years 2018 through 2025. To take advantage of the deduction, taxable income must be under $157,500 ($315,000 for joint returns).

The QBI is complex, and tax planning strategies can directly affect the amount of deduction, i.e., increase or reduce the dollar amount. As such it is especially important to speak with a tax professional before year's end to determine the best way to maximize the deduction.

Depreciation Limitations on Luxury, Passenger Automobiles and Heavy Vehicles

The new law changed depreciation limits for luxury passenger vehicles placed in service after December 31, 2017. If the taxpayer doesn't claim bonus depreciation, the maximum allowable depreciation deduction is $10,000 for the first year.

For passenger autos eligible for the additional bonus first-year depreciation, the maximum first-year depreciation allowance remains at $8,000. It applies to new and used ("new to you") vehicles acquired and placed in service after September 27, 2017, and remains in effect for tax years through December 31, 2022. When combined with the increased depreciation allowance above, the deduction amounts to as much as $18,000.

Under tax reform, heavy vehicles including pickup trucks, vans, and SUVs whose gross vehicle weight rating (GVWR) is more than 6,000 pounds are treated as transportation equipment instead of passenger vehicles. As such, heavy vehicles (new or used) placed into service after September 27, 2017, and before January 1, 2023, qualify for a 100 percent first-year bonus depreciation deduction as well.

Note: Deductions are based on a percentage of business use; i.e., a business owner whose business use of the vehicle is 100 percent can take a larger deduction than one whose business use of a car is only 50 percent.

Retirement Plans. Self-employed individuals who have not yet done so should set up self-employed retirement plans before the end of 2018. Call today if you need help setting up a retirement plan.

Dividend Planning. Reduce accumulated corporate profits and earnings by issuing corporate dividends to shareholders.

Call a Tax Professional First

These are just a few of the year-end planning tax moves that could make a substantial difference in your tax bill for 2018. If you'd like more information, please call to schedule a consultation to discuss your specific tax and financial needs, and develop a plan that works for your business.

TAX BENEFITS OF HEALTH SAVINGS ACCOUNTS

Sun, 18 Nov 2018 00:00:00 GMT

While similar to FSAs (Flexible Savings Plans) in that both allow pre-tax contributions, Health Savings Accounts or HSAs offer taxpayers several additional tax benefits such as contributions that roll over from year to year (i.e., no "use it or lose it"), tax-free interest on earnings, and when used for qualified medical expenses, tax-free distributions.

What is a Health Savings Account?

A Health Savings Account is a type of savings account that allows you to set aside money pre-tax to pay for qualified medical expenses. Contributions that you make to a Health Savings Account (HSA) are used to pay current or future medical expenses (including after you've retired) of the account owner, his or her spouse, and any qualified dependent.

Caution: Medical expenses that are reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return are not eligible.

Caution: Insurance premiums for taxpayers younger than age 65 are generally not considered qualified medical expenses unless the premiums are for health care continuation coverage (such as coverage under COBRA), health care coverage while receiving unemployment compensation under federal or state law.

You cannot be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care and you cannot be claimed as a dependent on someone else's tax return. Spouses cannot open joint HSAs. Each spouse who is an eligible individual who wants an HSA must open a separate HSA.

An HSA can be opened through your bank or another financial institution. Contributions to an HSA must be made in cash. Contributions of stock or property are not allowed. As an employee may be able to elect to have money set aside and deposited directly into an HSA account; however, if this option is not offered by your employer, then you must wait until filing a tax return to claim the HSA contributions as a deduction.

High Deductible Health Plans.

A Health Savings Account can only be used if you have a High Deductible Health Plan (HDHP). Typically, high-deductible health plans have lower monthly premiums than plans with lower deductibles, but you pay more health care costs yourself before the insurance company starts to pay its share (your deductible).

A high-deductible plan can be combined with a health savings account, allowing you to pay for certain medical expenses with tax-free money that you have set aside. By using the pre-tax funds in your HSA to pay for qualified medical expenses before you reach your deductible and other out-of-pocket costs such as copayments, you reduce your overall health care costs.

Calendar year 2018. For calendar year 2018, a qualifying HDHP must have a deductible of at least $1,350 for self-only coverage or $2,700 for family coverage. Annual out-of-pocket expenses (e.g., deductibles, copayments, and coinsurance) of the beneficiary are limited to $6,650 for self-only coverage and $13,300 for family coverage. This limit doesn't apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies.

Last month rule. Under the last-month rule, you are considered to be an eligible individual for the entire year if you are an eligible individual on the first day of the last month of your tax year (December 1 for most taxpayers).

You can make contributions to your HSA for 2018 until April 15, 2019. Your employer can make contributions to your HSA between January 1, 2019, and April 15, 2019, that are allocated to 2018. The contribution will be reported on your 2019 Form W-2.

Summary of HSA Tax Advantages

Tax deductible. You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you don't itemize your deductions on Schedule A (Form 1040).
Pre-tax dollars. Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
Tax-free interest on earnings. Contributions remain in your account until you use them and are rolled over year after year. Any interest or other earnings on the assets in the account are tax-free. Furthermore, an HSA is "portable" and stays with you if you change employers or leave the workforce.
Tax-free distributions. Distributions may be tax-free if you pay qualified medical expenses.
Additional contributions for older workers. Employees, aged 55 years and older are able to save an additional $1,000 per year.
Tax-free after retirement. Distributions are tax-free at age 65 when used for qualified medical expenses including amounts used to pay Medicare Part B and Part D premiums, and long-term care insurance policy premiums. However, you cannot use money in an HSA to pay for supplemental insurance (e.g., Medigap) premiums.

If you have any questions about HSAs, help is just a phone call away.

MAKING TAX SMART LOANS TO FAMILY AND FRIENDS

Sat, 17 Nov 2018 00:00:00 GMT

Lending money to a cash-strapped friend or family member is a noble and generous offer that just might make a difference. But before you hand over the cash, you need to plan ahead to avoid tax complications for yourself down the road.

Take a look at this example: Let's say you decide to loan $5,000 to your daughter who's been out of work for over a year and is having difficulty keeping up with the mortgage payments on her condo. While you may be tempted to charge an interest rate of zero percent, you should resist the temptation.

Here's why:

When you make an interest-free loan to someone, you will be subject to "below-market interest rules." IRS rules state that you need to calculate imaginary interest payments from the borrower. These imaginary interest payments are then payable to you, and you will need to pay taxes on these interest payments when you file a tax return. To complicate matters further, if the imaginary interest payments exceed $15,000 for the year, there may be adverse gift and estate tax consequences.

Exception: The IRS lets you ignore the rules for small loans ($10,000 or less), as long as the aggregate loan amounts to a single borrower are less than $10,000, and the borrower doesn't use the loan proceeds to buy or carry income-producing assets.

As was mentioned above, if you don't charge any interest, or charge interest that is below market rate (more on this below), then the IRS might consider your loan a gift, especially if there is no formal documentation (i.e., written agreement with payment schedule), and you go to make a nonbusiness bad debt deduction if the borrower defaults on the loan--or the IRS decides to audit you and decides your loan is really a gift.

Formal documentation generally refers to a written promissory note that includes the interest rate, a repayment schedule showing dates and amounts for all principal and interest, and security or collateral for the loan, such as a residence (see below). Make sure that all parties sign the note so that it's legally binding.

As long as you charge an interest rate that is at least equal to the applicable federal rate (AFR) approved by the Internal Revenue Service, you can avoid tax complications and unfavorable tax consequences.

AFRs for term loans, that is, loans with a defined repayment schedule, are updated monthly by the IRS and published in the IRS Bulletin. AFRs are based on the bond market, which changes frequently. For term loans, use the AFR published in the same month that you make the loan. The AFR is a fixed rate for the duration of the loan.

Any interest income that you make from the term loan is included on your Form 1040. In general, the borrower, who in this example is your daughter, cannot deduct interest paid, but there is one exception: if the loan is secured by her home, then the interest can be deducted as qualified residence interest--as long as the promissory note for the loan was secured by the residence.

If you have any questions about the tax implications of loaning a friend or family member money, please contact the office.

SECTION 199A: QUALIFIED BUSINESS INCOME DEDUCTION

Fri, 16 Nov 2018 00:00:00 GMT

Thanks to tax reform legislation passed in December 2017, eligible taxpayers may now deduct up to 20 percent of certain business income from qualified domestic businesses, as well as certain dividends. Eligible taxpayers can claim the deduction for the first time on the 2018 federal income tax return they file in 2019.

Note: Although the final regulations have not yet been published in the Federal Register, taxpayers who wish to become familiar with the rules may review the proposed regulations issued by visiting the IRS website or calling the office.

The Qualified Business Income Deduction (QBID) often referred to as the 20 percent deduction for pass-through entities, is also known as the Section 199A deduction as it is named after Section 199A of the Internal Revenue Code.

Here are six key facts about the qualified business income deduction:

1. The deduction applies to qualified business income from a qualified business (i.e. pass-through entities) such as:

a sole proprietorship
S-corporation
Partnership
LLC treated as a sole proprietorship or partnership for tax purposes
Non-corporate taxpayers such as trusts and estates
REITs
Publicly traded partnerships

2. Qualified business income is the net amount of qualified items of income, gain, deduction, and loss connected to a qualified U.S. trade or business. Only items included in taxable income are counted. Qualified business income does not include income from performing services as an employee. Capital gains and losses, shareholders wages, certain dividends, and interest income are excluded as well.

3. The deduction is available to eligible taxpayers, whether they itemize their deductions on Schedule A or take the standard deduction.

The deduction can be taken in addition to the standard or itemized deductions and is subject to limitations based on the type of trade or business, the taxpayer's taxable income, the amount of W-2 wages paid with respect to the qualified trade or business, and the unadjusted basis of qualified property held by the trade or business.

4. The deduction is generally equal to the lesser of these two amounts:

Twenty percent of qualified business income plus 20 percent of qualified real estate investment trust dividends and qualified publicly traded partnership income.
Twenty percent of taxable income computed before the qualified business income deduction minus net capital gains.

5. For taxpayers with taxable income computed before the qualified business income deduction that exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers, the deduction may be subject to additional limitations or exceptions. These are based on the type of trade or business (see below), the taxpayer's taxable income, the amount of W-2 wages paid by the qualified trade or business, and the unadjusted basis immediately after acquisition of qualified property held by the trade or business.

6. Income earned through a C corporation is not eligible for the deduction.

7. Qualified Trade or Business. A qualified trade or business is any trade or business except one involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets or any trade or business where the principal asset is the reputation or skill of one or more of its employees. This exclusion only applies, however, if a taxpayer's taxable income exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers.

While relatively straightforward for most businesses, those with more complicated tax structures or multiple businesses or trades, consulting a tax professional is advised. As always, don't hesitate to call if you have any questions.