Tax Cuts and Jobs Act Update

Tax Cuts and Jobs Act

With the passing of the Tax Cuts and Jobs Act on December 22, 2017, there are several significant changes to the way individuals will compute their individual income tax beginning in 2018. Although the actual impact the Act will have on each individual income tax return may be different, the following provides a general summary of the most significant changes made by the Act.

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2017 Tax Act Update: Overview of 199A Deductions

Tax Cuts and Jobs Act

One of the most favorable and substantial changes in the 2017 Tax Act (the “Act”) for closely held business owners is what is commonly referred to as the “pass-thru deduction.” Contrary to its common name, this deduction is not limited to pass-thru entities. This new deduction is available to sole proprietorships as well as partnerships, limited-liability companies, and S corporations. It provides a deduction of up to 20% of qualified business income.

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What the “Tax Cuts and Jobs Act” Means for Our Clients

Tax Cuts and Jobs Act

On December 22, (H.R. 1), commonly referred to as the “Tax Cuts and Jobs Act”, was signed into law providing a sweeping tax reform law that substantially changes the tax landscape. The new law reflects the largest major tax reform in over three decades. We have been busy working our way through the hundreds of pages of statutory text. This comprehensive tax overhaul dramatically changes the rules governing the taxation of individual and business entity taxpayers.

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Some CRP Payments Not Subject to Self-Employment Tax: Eighth Circuit Reverses the Tax Court

CRP Payments

The Eighth Circuit Court of Appeals recently addressed whether Federal Conservation Reserve Program (“CRP”) payments made to non-farmers are subject to self-employment taxes. The 8th Circuit in a 2 to 1 decision held that the payments were not subject to self-employment tax and in so doing reversed the United States Tax Court’s earlier decision in the case.

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Noncustodial Parents Claiming Dependency Exemptions: The Importance of Form 8332

Family Law, Shuttleworth & Ingersoll, P.L.C.

On March 13, 2014, the Eighth Circuit Court of Appeals in a consolidated appeal affirmed two decisions from the United States Tax Court, Armstrong v. Commissioner, 139 T.C. 468 (2012) and Hanson v. Commissioner, T.C. Memo. 2012-352. Armstrong v. Commissioner, No. 13-1235 (8th Cir. 2014), Hanson v. Commissioner, No. 13-2064 (8th Cir. 2014). In both of those cases the Tax Court concluded, and the Eighth Circuit affirmed, that noncustodial parents were not entitled to dependency exemption deductions claimed under IRC section 152, for their noncustodial children because the noncustodial parents did not attach to their tax returns a Form 8332 or another document conforming in substance to Form 8332 declaring that the custodial parent “will not claim” the child as a dependent for the taxable year. The Tax Court and the Eight Circuit reached this conclusion even though the taxpayers had enforceable agreements arising out of divorce proceedings indicating that the noncustodial parents were entitled to the exemption deductions for the tax years in issue.

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Final Employer Mandate Regulations Delay Some Penalties and Provide Additional Guidance

United States Department of the Treasury

The Treasury Department has released the long-awaited final regulations under Internal Revenue Code section 4980H, which implements the employer shared responsibility (the “pay-or-play” employer mandate) provisions of the Affordable Care Act (“ACA”). Generally, this mandate requires employers with 50 or more full-time and full-time equivalent employees (“FTE”) to either (1) offer full-time employees and their dependents “minimum essential coverage”, that is health coverage that meets affordability and “minimum value” requirements, or (2) pay a penalty. Employers with fewer than 50 workers are exempt from the employer responsibility provisions. A few highlights in the final regulations include:

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Tax Court Provides Lesson on What Not To Do With an ESOP

Tax Court Provides Lesson on What Not To Do With an ESOP

Employee stock ownership plans (“ESOP”) are unique creatures in the world of retirement plans and business succession planning. The rules governing ESOP are complex and often not well understood, but if done properly, ESOPs can have several benefits, which include tax savings for both employees and business owners, additional cash-flow for a business, and have the potential to pass-on the financial strength of local businesses to its employees, often resulting in increased local or regional wealth.

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Recent Developments: HRAs, FSAs, and Employer Payment Plans

Recent Developments: HRAs, FSAs, and Employer payment plans

The Departments of the Treasury, Health and Human Service, and Labor have in a coordinated effort issued new guidance on the application of certain provisions of the Affordable Care Act (ACA) to health reimbursement arrangements (HRAs), “employer payment plans”, and health flexible spending accounts (FSAs). Each of these arrangements are “group health plans” and, as a result, unless certain exceptions apply, they will be subject to many new requirements for “group health plans” under the ACA.

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The IRS loosens the “use-or-lose” rule for health FSAs

The Internal Revenue Service (IRS) recently issued new guidance in Notice 2013-71 modifying the “use-or-lose” rules for health flexible spending arrangements (FSAs). Under the new rules, plans can permit employees to carry over up to $500 of unused amounts in a health FSA in to the following year, provided the plan does not also incorporate the grace period rule. The following highlights some important details about health FSAs and the new rules:

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DOMA & Employee Benefits: What’s next?

Labor and Employment Law, Shuttleworth & Ingersoll, P.L.C.

The IRS recently issued Revenue Ruling 2013-17 and a corresponding Frequently Asked Questions publication providing important guidance to both employers and individuals on the application, for Federal tax purposes, of the Supreme Court’s decision in United States v. Windsor. The Supreme Court in Windsor held that Section 3 of the Defense of Marriage Act’s (DOMA’s) unequal treatment of same-sex marriage for Federal law purposes is unconstitutional. This bulletin quickly walks through the highlights of the IRS’s recent publications and provides some items for employers to consider going forward.

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Historic Tax Credits – What are they and how do I get them?

State and federal historic tax credits are available to help finance rehabilitation of historic buildings. Generally the credits are available only for buildings that are at least 50 years old. There is an application process for the state and one for the federal government for approval of these credits. In Iowa it is a relatively streamlined process. At the federal level it is more complex.

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Misclassification of workers: What it means for health care providers

By: Donald Johnson

Taxpayers often classify, or misclassify, their workers as “independent contractors” for various reasons, including simplifying the payroll process, minimizing the employer’s portion of payroll taxes, and misinterpreting the law. According to the Federal Government Accountability Office, the underpayment of social security, unemployment, and income taxes in 2006 due to worker misclassification totaled an estimated 2.72 billion dollars nationally. Although worker classification may also have an impact on a taxpayer’s employee benefits, worker’s compensation, and wage and hour matters, this article focuses on the classification of workers for payroll tax liability.

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