Feature Articles

• Small Employer Health Reimbursement Arrangements
• October 1 Deadline for Establishing SIMPLE IRA Plans
• 2018 Inflation Adjustments Updated under Tax Reform
• Succession Planning: Strategies for Leaving a Business
• Five Ways to Minimize your Tax Liability

Tax Tips

• Extension Deadline Looming for 2017 Tax Returns
• 529 Education Savings Plan Updates under Tax Reform
• Taxpayer Data Secure with new IRS Get Transcript
• Ten Tax Tips for Individuals Selling a Home this Year
• Tips for Taxpayers: Be Prepared for Natural Disasters

QuickBooks Tips

• How to Use Memorized Transactions in QuickBooks

Small Employer Health Reimbursement Arrangements

Small employer HRAs or QSEHRAs (Qualified Small Employer Health Reimbursement Arrangements) allow small businesses without group health plans to set aside money, tax-free, for employees to use toward medical expenses–including the cost of buying health insurance. Here’s what you need to know about QSEHRAs.

Background

Included in the 21st Century Cures Act enacted by Congress on December 13, 2016, was a provision for QSEHRAs, which permit an eligible employer to provide a qualified small employer health reimbursement arrangement (QSEHRA), which is not a group health plan and thus is not subject to the requirements that apply to group health plans. QSEHRAs must meet several criteria such as:

• the arrangement is funded solely by an eligible employer, and no salary reduction contributions may be made under the arrangement;
• the arrangement generally is provided on the same terms to all eligible employees of the employer;
• the arrangement provides, after the employee provides proof of coverage, for the payment or reimbursement of medical expenses incurred by the employee or the employee’s family members; and
• the amount of the payments and reimbursements for any year do not exceed $4,950 for employee-only arrangements or $10,000 for arrangements that provide for payments and reimbursements of expenses of family members. These amounts are adjusted for inflation annually for tax years after 2016. For 2018, the maximum dollar amount for employee-only arrangements is $5,050 ($4,950 in 2017). The maximum dollar amount for arrangements that provide for payments and reimbursements for expenses of family members is $10,250 ($10,050 in 2017).

Which Employers Qualify?

Any small employer from a startup to a nonprofit that doesn’t offer a group health plan is able to set up a QSEHRA as long as they meet certain rules (see below). Small employers are defined as an employer that is not an applicable large employer (ALE). An applicable large employer is defined as one that employs more than 50 full-time workers, including full-time equivalent employees, on average.

Tip: If a small employer currently offers a group health plan but wants to set up a QSEHRA, the group health plan must be canceled before the QSEHRA will start.

Are there any other Rules?

Yes. One of the most important rules is that in order for employees to participate in a QSEHRA, they must have health insurance that meets minimum essential coverage. That is, indemnity, short-term health insurance, and faith-based insurance plans (e.g., Liberty HealthShare) do not qualify. Health insurance plans purchased through the Marketplace meet this qualification. Employers may choose whether to reimburse employees for both medical expenses and health insurance premiums or just premiums.

Furthermore, while there are no minimum monthly contribution limits, there is an annual maximum contribution limit. For 2018, the limit is $420 per month for individuals and $854 per month for families.

Note: QSEHRAs are funded entirely by the employer. As such, employees are prohibited from making contributions.

Written Notice to Employees

Eligible employers are required to provide written notice to eligible employees at least 90 days before the beginning of a year for which the QSEHRA is provided. In the case of an employee who is not eligible to participate in the arrangement as of the beginning of the year, the written notice must be furnished on the date on which the employee is first eligible. The written notice must include:

1. a statement of the amount that would be the eligible employee’s permitted benefit under the arrangement for the year;
2. a statement that the eligible employee should provide that permitted benefit amount to any health insurance exchange to which the employee applies for advance payments of the premium tax credit; and
3. a statement that if the eligible employee is not covered under minimum essential coverage for any month, the employee may be liable for an individual shared responsibility payment (eliminated for tax years starting in 2019) for that month and reimbursements under the arrangement may be includible in gross income.

Questions about QSEHRAs?

If you have any questions about QSEHRAs or are wondering whether your small business would benefit from a QSEHRA, don’t hesitate to call.

October 1 Deadline for Establishing SIMPLE IRA Plans

Of all the retirement plans available to small business owners, the SIMPLE IRA plan (Savings Incentive Match PLan for Employees) is the easiest to set up and the least expensive to manage. The catch is that you’ll need to set it up by October 1st. Here’s what you need to know.

What is a SIMPLE IRA Plan?

SIMPLE IRA Plans are intended to encourage small business employers to offer retirement coverage to their employees. Self-employed business owners are able to contribute both as employee and employer, with both contributions made from self-employment earnings. In addition, if living expenses are covered by your day job (or your spouse’s job), you would be free to put all of your sideline earnings, up to the ceiling, into SIMPLE IRA plan retirement investments.

How does a SIMPLE IRA Plan Work?

A SIMPLE IRA plan is easier to set up and operate than most other plans in that contributions go into an IRA you set up. Requirements for reporting to the IRS and other agencies are minimal as well. Your plan’s custodian, typically an investment institution, has the reporting duties and the process for figuring the deductible contribution is a bit easier than with other plans.

SIMPLE IRA plans calculate contributions in two steps:

1. Employee out-of-salary contribution
The limit on this “elective deferral” is $12,500 in 2018, after which it can rise further with the cost of living.

Catch-up. Owner-employees age 50 or older can make an additional $3,000 deductible “catch-up” contribution (for a total of $15,500) as an employee in 2018.

2. Employer “matching” contribution
The employer match equals a maximum of three percent of employee’s earnings.

Example: An owner-employee age 50 or over in 2018 with self-employment earnings of $40,000 could contribute and deduct $12,500 as employee plus an additional $3,000 employee catch up contribution, plus a $1,200 (3 percent of $40,000) employer match, for a total of $16,700.

Are there any Downsides to SIMPLE IRA Plans?

Because investments are through an IRA you must work through a financial institution acting, which acts as the trustee or custodian. As such, you are not in direct control and will generally have fewer investment options than if you were your own trustee, as is the case with a 401(k).

You also cannot set up the SIMPLE IRA plan after the calendar year ends and still be able to take advantage of the tax benefits on that year’s tax return, as is allowed with Simplified Employee Pension Plans, or SEPs. Generally, to make a SIMPLE IRA plan effective for a year, it must be set up by October 1 of that year. A later date is allowed only when the business is started after October 1, and the SIMPLE IRA plan must be set up as soon as it is administratively feasible.

Furthermore, once self-employment earnings become significant other retirement plans may be more advantageous than a SIMPLE IRA retirement plan.

Example: If you are under 50 with $50,000 of self-employment earnings in 2018, you could contribute $12,500 as employee to your SIMPLE IRA plan plus an additional 3 percent of $50,000 as an employer contribution, for a total of $14,000. In contrast, a 401(k) plan would allow a $31,000 contribution.With $100,000 of earnings, the total for a SIMPLE IRA Plan would be $15,500 and $43,500 for a 401(k).

If the SIMPLE IRA plan is set up for a sideline business and you’re already vested in a 401(k) in another business or as an employee the total amount you can put into the SIMPLE IRA plan and the 401(k) combined (in 2018) can’t be more than $18,500 or $24,000 if catch-up contributions are made to the 401(k) by someone age 50 or over. So, someone under age 50 who puts $9,000 in her 401(k) can’t put more than $9,500 in her SIMPLE IRA plan for 2018. The same limit applies if you have a SIMPLE IRA plan while also contributing as an employee to a 403(b) annuity (typically for government employees and teachers in public and private schools).

How to Get Started Setting up a SIMPLE IRA Plan

You can set up a SIMPLE IRA plan account on your own; however, most people turn to financial institutions. SIMPLE IRA Plans are offered by the same financial institutions that offer any other IRAs and 401(k) plans.

You can expect the institution to give you a plan document and an adoption agreement. In the adoption agreement, you will choose an “effective date,” which is the start date for payments out of salary or business earnings. Again, that date can’t be later than October 1 of the year you adopt the plan, except for a business formed after October 1.

Another key document is the Salary Reduction Agreement, which briefly describes how money goes into your SIMPLE IRA plan. You need such an agreement even if you pay yourself business profits rather than salary. Printed guidance on operating the SIMPLE IRA plan may also be provided. You will also be establishing a SIMPLE IRA plan account for yourself as participant.

Ready to Explore Retirement Plan Options for your Small Business?

SIMPLE IRA Plans are an excellent choice for home-based businesses and ideal for full-time employees or homemakers who make a modest income from a sideline business and work well for small business owners who don’t want to spend a lot of time and pay high administration fees associated with more complex retirement plans.

If you are a business owner interested in discussing retirement plan options for your small business, don’t hesitate to contact the office today.

2018 Inflation Adjustments Updated under Tax Reform

Tax year 2018 annual inflation adjustments have been updated to reflect changes from the Tax Cuts and Jobs Act (TCJA). These tax year 2018 adjustments are generally used on tax returns filed in 2019. The tax items affected by TCJA for tax year 2018 of greatest interest to most taxpayers include the following:

The standard deduction for married filing jointly rises to $24,000. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,000; for heads of households, $18,000.

The TCJA reduced the personal exemption. The personal exemption for tax year 2018 is $0.

TCJA reduced tax rates for many taxpayers. The new tax rates are: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and a top rate of 37 percent. For tax year 2018, the highest tax rate will apply to married individuals filing jointly and surviving spouses with taxable incomes over $600,000, to single taxpayers and heads of households with incomes over $500,000, and to married taxpayers filing separately with incomes over $300,000.

The Alternative Minimum Tax (AMT). The AMT exemption amount for tax year 2018 is greatly increased under TCJA. For tax year 2018, the exemption amount for single taxpayers is $70,300 and begins to phase out at $500,000, and the exemption amount for married couples filing jointly is $109,400 and begins to phase out at $1 million.

Estates. For estates of any decedent passing away in calendar year 2018, the basic exclusion amount is $11,180,000.

Certain items had minor adjustments. TCJA requires a different method for adjusting for inflation.

Foreign earned income exclusion. For 2018, the foreign earned income exclusion will be $103,900.

Earned Income Credit. The maximum earned income credit amount will be $6,431 for taxpayers with 3 or more qualifying children, for 2018. Other earned income credit amounts are detailed in Revenue Procedure 2018-18.

Medical Savings Accounts. For tax year 2018, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,300, but not more than $3,450. For self-only coverage, the maximum out-of-pocket expense amount is $4,550. For tax year 2018, participants with family coverage, the floor for the annual deductible is $4,550; however, the deductible cannot be more than $6,850. For family coverage, the out-of-pocket expense limit is $8,400 for tax year 2018.

Items not affected by the TCJA

The dollar amounts for the following items remain unchanged under the new method for adjusting for inflation required by the TCJA:

• For tax year 2018, the annual exclusion for gifts is $15,000.
• For tax year 2018, the monthly limitation for the qualified transportation fringe benefit is $260, as is the monthly limitation for qualified parking.
• For tax year 2018, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $114,000.
• For calendar year 2018, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is $695.

Questions about tax reform? Help is just a phone call away.

Succession Planning: Strategies for Leaving a Business

Selecting your business successor is a fundamental objective of planning an exit strategy, but it requires a careful assessment of what you want from the sale of your business and who can best give it to you.

There are four ways to leave your business: transfer ownership to family members, Employee Stock Option Plan (ESOP), sale to a third party, and liquidation. The more you understand about each one, the better the chance is that you will leave your business on your terms and under the conditions you want. With that in mind, here’s what you need to know about each one.

1. Transfer Ownership to your Children

Transferring a business within the family fulfills many people’s personal goals of keeping their business and family together, but while most business owners want to transfer their business to their children, few end up doing so for various reasons. As such, it’s necessary to develop a contingency plan to convey your business to another type of buyer.

Transferring your business to your children can provide financial well-being for younger family members unable to earn comparable income from outside employment, as well as allow you to stay actively involved in the business with your children until you choose your departure date.

It also affords you the luxury of selling the business for whatever amount of money you need to live on, even if the value of the business does not justify that sum of money.

On the other hand, this option also holds the potential to increase family friction, discord, and feelings of unequal treatment among siblings. Parents often feel the need to treat all of their children equally. In reality, this is difficult to achieve. In most cases, one child will probably run or own the business at the perceived expense of the others.

At the same time, financial security also may be diminished, rather than enhanced, and the very existence of the business is at risk if it’s transferred to a family member who can’t or won’t run it properly. In addition, family dynamics, in general, may also significantly diminish your control over the business and its operations.

2. Employee Stock Option Plans (ESOP)

If your children have no interest or are unable to take over your business, there is another option to ensure the continued success of your business: the Employee Stock Ownership Plan (ESOP).

ESOPs are qualified retirement plans subject to the regulatory requirements of the Employee Retirement Income Security Act of 1974 (ERISA). There’s one important difference, however; the majority (more than half) of their investment must be derived from their own company stock.

Whether it’s due to lack of interest from your children, an economic downturn or a high asking price that no one is willing to pay, what an ESOP does is create a third-party buyer (your employees) where none previously existed. After all, who more than your employees has a vested interest in your company?

ESOPs are set up as a trust (complete with trustees) into which either cash to buy company stock or newly issued stock is placed. Contributions the company makes to the trust are generally tax deductible, subject to certain limitations and because transactions are considered stock sales, the owner who is selling (you) can avoid paying capital gains. Shares are then distributed to employees (typically based on compensation levels) and grow tax-free until distribution.

If your company is a stable, well-established one with steady, consistent earnings, then an ESOP might be just the ticket to creating a winning exit plan from your business.

If you have any questions about setting up an ESOP for your business, give the office a call today.

3. Sale to a Third Party

In a retirement situation, a sale to a third party too often becomes a bargain sale–and the only alternative to liquidation. But if the business is well prepared for sale, this option just might be your best way to cash out. In fact, you may find that this so-called “last resort” strategy just happens to land you at the resort of your choice.

Although many owners don’t realize it, most or all of your money should come from the business at closing. Therefore, the fundamental advantage of a third party sale is immediate cash or at least a substantial upfront portion of the selling price. This ensures that you obtain your fundamental objectives of financial security and, perhaps, avoid risk as well.

If you do not receive the bulk of the purchase price in cash, at closing, however, your risk will suddenly become immense. You will place a substantial amount of the money you counted on receiving in the unpredictable hands of fate. The best way to avoid this risk is to get all of the money you are going to need at closing. This way any outstanding balance payable to you is “icing on the cake.”

4. Liquidation

If there is no one to buy your business, you shut it down. In liquidation, the owners sell off their assets, collect outstanding accounts receivable, pay off their bills, and keep what’s left, if anything, for themselves.

The primary reason liquidation is considered as an exit plan is that a business lacks sufficient income-producing capacity apart from the owner’s direct efforts and apart from the value of the assets themselves. For example, if the business can produce only $75,000 per year and the assets themselves are worth $1 million, no one would pay more for the business than the value of the assets.

Service businesses, in particular, are thought to have little value when the owner leaves the business. Since most service businesses have little “hard value” other than accounts receivable, liquidation produces the smallest return for the owner’s lifelong commitment to the business. Smart owners guard against this. They plan ahead to ensure that they do not have to rely on this last ditch method to fund their retirement.

If you need assistance figuring out which exit strategy is best for you and your business, please don’t hesitate to call. The sooner you start planning, the easier it will be.

Five Ways to Minimize your Tax Liability

If you want to save money on your tax bill next year, consider using one or more of these tax-saving strategies that reduce your income, lower your tax bracket, and minimize your tax bill.

1. Max out your 401(k) or Contribute to an IRA

You’ve heard it before, but it’s worth repeating because it’s one of the easiest and most cost-effective ways of saving money for your retirement. Many employers offer plans where you can elect to defer a portion of your salary and contribute it to a tax-deferred retirement account. For most companies, these are referred to as 401(k) plans. For many other employers, such as universities, a similar plan called a 403(b) is available. Check with your employer about the availability of such a plan and contribute as much as possible to defer income and accumulate retirement assets.

If you have income from wages or self-employment income, you can build tax-sheltered investments by contributing to a traditional (pre-tax contributions) or a Roth IRA (after-tax contributions). You may also be able to contribute to a spousal IRA even when your spouse has little or no earned income.

2. Take Advantage of Employer Benefit Plans

Medical and dental expenses are generally only deductibles to the extent they exceed 7.5 percent of your adjusted gross income (AGI) in 2018 (rising to 10% in 2019). For many individuals, particularly those with high income, this could eliminate the possibility for a deduction.

However, you can effectively get a deduction for these items if your employer offers a Flexible Spending Account or FSA (sometimes called a cafeteria plan). These plans permit you to redirect a portion of your salary to pay these types of expenses with pre-tax dollars. Another such arrangement is a Health Savings Account (HSA). Ask your employer if they provide either of these plans.

3. Bunch your Itemized Deductions

Certain itemized deductions, such as medical or employment-related expenses, are only deductible if they exceed a certain amount. It may be advantageous to delay payments in one year and prepay them in the next year to bunch the expenses in one year. This way you stand a better chance of getting a deduction.

4. Use the Gift-Tax Exclusion to Shift Income

In 2018, you can give away $15,000 ($30,000 if joined by a spouse) per donee, per year without paying federal gift tax. And, you can give $15,000 to as many donees as you like. The income on these transfers will then be taxed at the donee’s tax rate, which is in many cases lower.

Note: Special rules apply to children under age 18. Also, if you directly pay the medical or educational expenses of the donee, such gifts will not be subject to gift tax.

For gift tax purposes, contributions to Qualified Tuition Programs (Section 529) are treated as completed gifts even though the account owner has the right to withdraw them. As such, they qualify for the up-to-$15,000 annual gift tax exclusion in 2018. One contributing more than $15,000 may elect to treat the gift as made in equal installments over the year of the gift and the following four years so that up to $60,000 can be given tax-free in the first year.

5. Consider Tax-Exempt Municipal Bonds

Interest on state or local municipal bonds is generally exempt from federal income tax and from tax by the issuing state or locality. For that reason, interest paid on such bonds is somewhat less than that paid on commercial bonds of comparable quality. However, for individuals in higher brackets, the interest from municipal bonds will often be greater than from higher paying commercial bonds after reduction for taxes. Gain on sale of municipal bonds is taxable, and loss is deductible. Tax-exempt interest is sometimes an element in the computation of other tax items. Interest on loans to buy or carry tax-exempts is non-deductible.

Documentation – Keep Good Records

Unfortunately, many taxpayers forgo worthwhile tax credits and deductions because they have neglected to keep proper receipts or records. Keeping adequate records is required by the IRS for employee business expenses, deductible travel and entertainment expenses, and charitable gifts and travel, and more.

But don’t do it just because the IRS says so. Neglecting to track these deductions can lead to overlooking them as well. You also need to maintain records regarding your income. If you receive a large tax-free amount, such as a gift or inheritance, make certain to document the item so that the IRS does not later claim that you had unreported income.

If you’re ready to save money on your taxes this year but aren’t sure which tax-saving strategies apply to your financial situation, don’t hesitate to call.

Extension Deadline Looming for 2017 Tax Returns

Time is running short for taxpayers who requested an extra six months to file their 2017 tax return. As a reminder, Monday, October 15, 2018, is the extension deadline for most taxpayers. For taxpayers who have not yet filed, here are a few tips to keep in mind about the extension deadline and taxes:

1. Taxpayers can still e-file returns. Filing electronically is the easiest, safest and most accurate way to file taxes.

2. For taxpayers owed a refund, the fastest way to get it is to combine direct deposit and e-file.

3. Taxpayers who owe taxes should consider using IRS Direct Pay, a simple, quick and free way to pay from a checking or savings account using a computer or mobile device. There are also other online payment options. Please call the office if you need details about other payment options.

4. Members of the military and those serving in a combat zone generally get more time to file. Military members typically have until at least 180 days after leaving a combat zone to both file returns and pay any tax due.

5. Taxpayers should always keep a copy of tax returns for their records. Keeping copies of tax returns can help taxpayers prepare future tax returns or assist with amending a prior year’s return.

529 Education Savings Plan Updates under Tax Reform

Taxpayers with school-age children should be aware of three recent tax law changes affecting 529 education savings plans.

Tuition refunds

The PATH Act change added a special rule for a beneficiary of a 529 plan, usually a student, who receives a refund of tuition or other qualified education expenses. This can occur when a student drops a class mid-semester. If the beneficiary re-contributes the refund to any of his or her 529 plans within 60 days, the refund is tax-free.

The Treasury Department and the IRS intend to issue future regulations simplifying the tax treatment of these transactions. Re-contributions would not count against the plan’s contribution limit.

K-12 education

One of the TCJA changes allows distributions from 529 plans to be used to pay up to a total of $10,000 of tuition per beneficiary (regardless of the number of contributing plans) each year at an elementary or secondary (k-12) public, private or religious school of the beneficiary’s choosing.

Rollovers to an ABLE account

The second TCJA change allows funds to be rolled over from a designated beneficiary’s 529 plan to an ABLE account for the same beneficiary or a family member. ABLE accounts are tax-favored accounts for certain people who become disabled before age 26, designed to enable these people and their families to save and pay for disability-related expenses.

The regulations would provide that rollovers from 529 plans, together with any contributions made to the designated beneficiary’s ABLE account (other than certain permitted contributions of the designated beneficiary’s compensation) cannot exceed the annual ABLE contribution limit — $15,000 for 2018.

For more information about 529 education savings plans please contact the office.

Taxpayer Data Secure with new IRS Get Transcript

Taxpayers that need prior years’ tax returns and other tax documents should know that there is a new format for individual tax transcripts that redacts personally identifiable information from Form 1040 tax documents.

This new transcript replaces the previous format and will be the default format available via Get Transcript Online, Get Transcript by Mail or the Transcript Delivery System for tax professionals as of September 23. Financial entries will remain visible, which will give taxpayers and third-parties the data they need for tax preparation or income verification.

There is also a new IRS Customer File Number that lenders, colleges and other third parties that order transcripts for non-tax purposes can use as an identifying number instead of the taxpayer’s SSN.

The new tax transcript was created in response to criminal activity that made it a sought-after document whereby criminals attempt to pose as taxpayers accessing their own account or as tax preparers or third parties requesting client information.

The following information will be provided on the new transcript:

• Last 4 digits of any SSN listed on the transcript: XXX-XX-1234
• Last 4 digits of any EIN listed on the transcript: XX-XXX-1234
• Last 4 digits of any account or telephone number
• First 4 characters of the last name for any individual
• First 4 characters of a business name
• First 6 characters of the street address, including spaces
• All money amounts, including balance due, interest and penalties

An updated Form 4506-T and Form 4506T-EZ, Request for Transcript of Tax Return, will be available on September 23, that will have a new Line 5b for a 10-digit Customer File Number. Legitimate third parties with a need for income verification or tax data often request taxpayers complete a Form 4506-T.

As of September 23, third parties or taxpayers can create any 10-digit number, except for the taxpayer’s SSN, for use as an identifier. The Customer File Number listed on the 4506-T automatically will be posted and visible on the requested tax transcript, allowing the third party to match the document to the taxpayer. A Customer File Number can be, for example, a loan account number.

Line 5b is an optional line, intended for those third parties that request high volumes of transcripts.

There is no change in the process for students seeking income verification through Free Application for Federal Student Aid (FAFSA) or disaster victims seeking FEMA assistance. Nor will business tax transcripts change.

Ten Tax Tips for Individuals Selling a Home this Year

In most cases, gains from sales are taxable. But did you know that if you sell your home, you may not have to pay taxes? Here are ten facts to keep in mind if you sell your home this year.

1. Exclusion of Gain. You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale.

2. Exceptions May Apply. There are exceptions to the ownership, use, and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more information about these exceptions, please call the office.

3. Exclusion Limit. The most gain you can exclude from tax is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.

4. May Not Need to Report Sale. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.

5. When You Must Report the Sale. You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds from Real Estate Transactions. If you report the sale, you may need to pay the Net Investment Income Tax. Please call the office for assistance on this topic.

6. Exclusion Frequency Limit. Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule.

7. Only a Main Home Qualifies. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.

8. First-time Homebuyer Credit. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules, please call.

9. Home Sold at a Loss. If you sell your main home at a loss, you can’t deduct the loss on your tax return.

10. Report Your Address Change. After you sell your home and move, update your address with the IRS. To do this, file Form 8822, Change of Address. You can find the address to send it to in the form’s instructions on page two. If you purchase health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan.

Questions? Help is just a phone call away.

Tips for Taxpayers: Be Prepared for Natural Disasters

While September and October are prime time for Atlantic hurricanes, natural disasters of any kind can strike at any time. As such, it’s a good idea for taxpayers to think about – and plan ahead for – what they can do to be prepared. Here’s what taxpayers should keep in mind:

1. Update emergency plans. Because a disaster can strike any time, taxpayers should review emergency plans annually. Personal and business situations change over time, as do preparedness needs. When employers hire new employees or when a company or organization changes functions, they should update plans accordingly. They should also tell employees about the changes. Individuals and businesses should make plans ahead of time and be sure to practice them.

2. Create electronic copies of key documents. Taxpayers should keep a duplicate set of key documents in a safe place, such as in a waterproof container and away from the original set. Key documents include bank statements, tax returns, identification documents, and insurance policies.

Doing so is easier now that many financial institutions provide statements and documents electronically, and financial information is available on the Internet. Even if the original documents are provided only on paper, these can be scanned into a computer. This way, the taxpayer can download them to a storage device like an external hard drive or USB flash drive.

3. Document valuables. It’s a good idea for a taxpayer to photograph or videotape the contents of their home, especially items of higher value. Documenting these items ahead of time will make it easier to claim any available insurance and tax benefits after the disaster strikes.

How to Obtain a Copy of a Tax Return

Taxpayers who need a copy of their prior-year tax return have several options. If they:

• Went to a paid preparer, they might be able to get a copy of last year’s tax return from that preparer.
• Used the same tax preparation software this year that they used last year, that software will likely have their prior-year tax return.
• Didn’t use the same tax preparation software this year, they may be able to return to their prior-year software and view an electronic copy of that return.

How to Get a Transcript

Taxpayers who are unable to access prior-year tax return using the above methods can get a copy of their transcript by calling the office directly or going to IRS.gov and using the Get Transcript application. By selecting “Get Transcript Online,” the taxpayer can immediately view, print or download their transcript. If they prefer to have a copy sent to the address that the IRS has on file, they can select “Get Transcript by Mail.” They should receive their transcript in the mail in five to 10 days from the time the IRS receives their request online.

How to Use Memorized Transactions in QuickBooks

Last month’s QuickBooks article explored the benefits of having QuickBooks on your desktop. Among those listed were three that impact every business. To recap, QuickBooks helps you:

• Save time.
• Save money.
• Minimize errors.

There are numerous examples that could be used to illustrate how this software accomplishes this but for this month the topic is using memorized transactions. These are templates you set up that contain most if not all the information that could be repeated at specified intervals, eliminating the need for you to enter the same repetitive data regularly and reducing the chances that you’ll make a mistake.

You can create these transaction “models” for both sale and purchase transactions. For example, you might have wireless service bills that remain the same every month or vary by just a bit, or you have customers who have monthly standing orders for the same products, services, or subscription fees.

QuickBooks makes it very easy to set up transactions for repetitive use, and you’ll see how it works in more detail below. We recommend you use one of QuickBooks’ sample files for this tutorial.

Creating a Template

Let’s start by creating a repeating bill. Click Enter Bills on the home page and complete all the fields that will remain the same every time the bill is created. In our example, we’re paying a utility bill whose Amount Due will change every month, so we’re leaving that blank. When you’re done, click Memorize in the toolbar to open this window:

Figure 1: Once you’ve created a transaction template, you’ll have to complete the fields in this window to memorize it correctly.

The vendor name appears automatically in a field in the upper left. Below that is a list of four options. These have to do with how/if you want to be notified when it’s time to process a memorized transaction. Your choices are:

• Add to my Reminders List. QuickBooks will display an entry in your Reminders Listfor each memorized transaction. Not using Reminders? Please call.
• Do Not Remind Me. Nothing will be done.
• Automate Transaction Entry. You would only select this option if nothing but the date of the transaction changes when it recurs. QuickBooks would automatically process and dispatch the transaction.
• Add to Group. If you have multiple recurring transactions that come due at the same time, you can create Groups and assign transactions to them (more on this later).

On the right side of the window, open the drop-down list in the field next to How Often and select from the options provided. Click the calendar icon to choose the transaction’s Next (Due) Date. If you only want QuickBooks to automate the entry a specific number of times, add that in the field next to Number Remaining. Then enter the Days In Advance To Enter.

Further Explanation Needed

Let’s expand on two of the concepts discussed here. First, advance notice for transactions. If you’ve selected Add to my Reminders List for any memorized transactions, you need to tell QuickBooks how far in advance your reminders should start to appear. Open the Edit menu and select Preferences, then Reminders.

Figure 2: If you want Reminders for memorized transactions, you’ll need to tell QuickBooks what your Preferences are.

Memorized Transactions Due appears toward the bottom of the Company Preferenceslist. Click on the appropriate button to indicate whether you want to see a summary or a list in your Reminders (or nothing at all) and how many days in advance the alert should appear.

Next, Groups. As mentioned earlier, you can combine memorized transactions due at the same time within a group. To create one, go to Lists | Memorized Transaction List. Click the arrow next to Memorized Transaction in the lower left, then click New Group and give it a name. Choose from the options available for notification and click OK.

Now you can add memorized transactions to this Group by right-clicking on it, selecting Edit Memorized Transaction, and clicking in the button next to Add to Group. Click the down area to the right of the field assigned to Group Name and select the one you just created.

Figure 3: You can add memorized transactions to a Group and process them at the same time.

Caution Advised

This particular QuickBooks feature has been shared with you because software like this can save time and minimize errors. There are many other features that can help you as well, so don’t hesitate to call if you would like to learn more about them.

The mechanics of creating memorized transactions are fairly simple. But mistakes can be costly in terms of bills that don’t get paid on time (or at all) and items or services that don’t get invoiced. If you’re new to QuickBooks, call for assistance as working on your own could be tricky. Even if you’re a seasoned user, you may want help setting up memorized transactions for the first time. Please contact the office if you need assistance with this or any other element of QuickBooks accounting. Help is just a phone call away.

Tax Due Dates for September 2018

September 10

Employees Who Work for Tips – If you received $20 or more in tips during August, report them to your employer. You can use Form 4070.

September 17

Individuals – Make a payment of your 2018 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment date for estimated tax in 2018.

Partnerships – File a 2017 calendar year income tax return (Form 1065). This due date applies only if you were given an additional 6-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1065) or a substitute Schedule K-1.

S corporations – File a 2017 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you made a timely request for an automatic 6-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1.

Electing Large Partnerships – File a 2017 calendar year income tax return (Form 1065-B) and pay any tax due. This due date applies only if you timely requested an automatic 6-month extension. Otherwise, see March 15. Provide each partner with a copy of Schedule K-1 (Form 1065-B) or a substitute Schedule K-1.

Corporations – Deposit the third installment of estimated income tax for 2018. A worksheet, Form 1120-W, is available to help you make an estimate of your tax for the year.

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in August.

Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in August.

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