2018 HSA limits announced

The IRS recently announced the 2018 inflation-adjusted limits for health savings accounts. For 2018, taxpayers can contribute up to $3,450 (up from $3,400 in 2017) for single coverage, or up to $6,900 (up from $6,750 in 2017) for family coverage.

The maximum out-of-pocket figures are: $6,650 for single coverage (up from $6,550 in 2017) and $13,300 for family coverage (up from $13,100 in 2017).

Summer business tip

Summer is a good time to do business entertaining. Normally, deductions for business entertainment and meals are limited to 50 percent of the expenses. However, you can write off 100 percent of the cost of a company picnic or other get-together. Note that you can’t restrict the outing to only a select few employees. Keep records of the cost, the date, the attendees, and the business purpose

Single people have financial considerations that differ from those who are married. But this doesn’t mean they should overlook financial planning

Whether you are a lifelong single person or you found yourself single through divorce or the death of your spouse, you have your own financial considerations and complications. Unfortunately, many single people overlook financial planning. Don’t make this costly mistake.

Financial and estate planning help you protect your earnings and your property. For single people who do not have someone to fall back on, planning for unexpected financial setback is especially important.

Protecting your earnings (your ability to provide basic needs for yourself and your dependents) should start with creating an emergency fund that could pay for your basic living expenses for six to twelve months. The fund should be separate from your other investments, readily accessible, and reserved solely for emergency use.

Insurance is an important factor when it comes to protecting your income. Disability insurance provides a steady income stream when you’re sidelined by illness or injury. Employers frequently offer disability policies, but they are also available through private insurers. Life insurance may not be a priority for you if you do not have dependents, but if anyone relies on you financially, a term life insurance policy would offer an income stream to your loved ones in the event of your death.

Asset protection is more complex. Through powers of attorney, you can appoint trustworthy people to make financial or medical decisions for you in the event you become incapacitated. By creating a will (and perhaps a trust) and naming beneficiaries for your IRA or 401(k) plans, you can ensure that your assets will go to the individuals or charities of your choice.

Your financial planning needs are unique. If you’d like to learn more about protecting your finances and property, let’s talk.

 Service charges vs. tips

 

Remember, service charges do not receive the same tax treatment as tips. Service charges are non-tip wages, and employers must treat them as such for tax withholding and filing requirements. Tips are payments made to employees by customers at the customer’s discretion. Service charges are extra fees a customer must pay to a business. Examples of service charges are fees imposed by restaurants for parties of six or more, cruise ship package fees, and hotel room service charges.

Two facts about your chances of being audited

Your chances of being audited are probably lower than you think. A look at the latest IRS statistics for 2016 reveals two interesting and reassuring facts about the risk of an IRS audit.

One of these facts is that audits are becoming less common. The number of individual tax returns the IRS audited fell to a 12-year low last year, to just above 1 million. Audits have been declining steeply over the last five years, which the IRS commissioner said was due in part to declining budgets and a smaller workforce.

Another fact is that IRS audits happen most often to the super-rich. The statistical chance of being audited increases dramatically for people of higher income levels.

For example, filers that made near the average U.S. income only had a 0.4 percent chance of being audited. That frequency doubled once annual incomes reached $200,000, and doubled again at incomes greater than $500,000. By the time a person reports $10 million in income, they have a one-in-five chance of being audited, according to IRS statistics.

Don’t Make an expensive mistake with your IRA

Simple mistakes on your IRA can cost you dearly. Perhaps you accidentally doubled up on your IRA contribution for 2016. Did you forget to take your required minimum distribution and then notice the oversight when you were gathering the information to file your federal tax return? These mistakes can lead to penalties – up to 50% in the case of a missed required minimum distribution. Fortunately, you may be able to get the penalties waived by correcting the errors promptly. Contact us for details.

FLUGGE CPA’S VIEW ON PAYING TAXES

 

 

 

 

Judge Learned Hand Wrote:

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury.  There is not even a patriotic duty to increase one’s taxes.  Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible.  Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”

                                                    * Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934)

 

We have this quote (written in 1934) on our website and in our office. It is what we practice.

During the last Presidential Election, the media tried to discredit one of the candidates since there was a year that no income tax was paid by the candidate.

In reality, due to the structure of the tax laws, many taxpayers pay no income tax. People with children can use earned income tax credits, additional child tax credits, educational credits, credits for child care expenses, and other credits to offset or eliminate their income tax liability.

Congress uses the tax law not just to raise revenue, but also to influence social, economic, health, education and other areas of our life. Therefore, there are tax credits and other tax incentives to invest, spend (or not spend), and otherwise influence our lives.

There is nothing wrong with using these aspects of tax law to reduce our tax liability, even to zero.

We believe that every taxpayer should pay the tax he or she owes, but not a dollar more.

 

Be aware of these four IRA rules

If you have an individual retirement account, you’re aware of how complicated the rules can get. Here are four to remember as you prepare your 2015 federal income tax return.

1. Are you searching for one more tax deduction? It’s not too late to contribute to your IRA and claim a deduction for 2015. Under current tax rules, you can establish and contribute to your IRA up until April 18, 2016 (April 19 if you live in Maine or Massachusetts). If the IRA is the traditional, tax-deductible kind, you can deduct that contribution on your 2015 federal income tax return. If you’re under age 50, the maximum contribution is $5,500. If you were 50 or older by December 31, 2015, you can contribute up to $6,500.

2. You can make a contribution to a traditional IRA and convert it to a Roth later. Although a conversion now will generate taxable income that’s reportable on next year’s federal tax return, qualifying withdrawals from the Roth will be tax-free when you retire. If your circumstances change, you can choose to “recharacterize” your new Roth as a traditional IRA by moving the funds back within a specified period. You also have the opportunity to “reconvert” the funds to a Roth again after a recharacterization.

3. If you turned 70½ in 2015, you’re now required to take an annual minimum distribution from your IRA (and, unless you’re still working, from other retirement plans also). If you chose to delay taking your first distribution last year, April 1, 2016, is an important deadline. That’s the last day you have to take your initial distribution or you’ll be subject to a 50% penalty on the amount you should have taken.

4. The age of 70½ also lets you benefit from the now-permanent tax break for making charitable contributions from your IRAs. While it’s too late to make a contribution for 2015, you can exclude direct transfers of up to $100,000 from your gross income this year. The donation counts as part of your required minimum distribution.

For more tax breaks related to IRAs and other retirement plans, contact our office.