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IRS REMINDER

Deadline Dec. 31 for most retirees who must make required retirement plan distributions

IR-2018-248, December 11, 2018

WASHINGTON — The Internal Revenue Service today reminded retirees born before July 1, 1948, that they usually must take distributions from their individual retirement arrangements (IRAs) and workplace retirement plans by Dec. 31.

The payments, called required minimum distributions (RMDs), are normally made by the end of the year. Those who reached age 70½ during 2018 are covered by a special rule that allows them to wait until April 1, 2019, to take their first RMDs.

This means that those born after June 30, 1947, and before July 1, 1948, are eligible for this special rule for 2018. If they wait until early 2019 to take that first RMD (up until April 1, 2019), it can be counted toward their 2018 RMD, but is still taxable in 2019.[read more=”Read more” less=”Read less”]

The special April 1 deadline only applies to the RMD for the first year. For all subsequent years, the RMD must be made by Dec. 31. So, for example, a taxpayer who turned 70½ in 2017 (born after June 30, 1946, and before July 1, 1947) and received the first RMD (for 2017) on April 1, 2018, must still receive a second RMD (for 2018) by Dec. 31, 2018.

Types of retirement plans requiring RMDs

The required distribution rules apply to owners of traditional, Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs. Roth IRAs don’t require distributions while the original owner is alive. RMDs also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2018 RMD, this amount is on the 2017 Form 5498 normally issued to the owner during January 2018.

An IRA owner must calculate the RMD separately for each IRA they own, but can withdraw the total amount from one or more of the IRAs. However, RMDs required from workplace retirement plans (like 401(k), 403(b), and 457(b) plans) have to be taken separately from each of those plan accounts.

IRS online forms and publications can help

The RMD for 2018 is based on the taxpayer’s life expectancy on Dec. 31, 2018, and their account balance on Dec. 31, 2017. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Use the online worksheets on IRS.gov or find worksheets and life expectancy tables to make this computation in the Appendices to Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

For most taxpayers, the RMD is based on Table III (Uniform Lifetime Table) in IRS Publication 590-B. So, for a taxpayer who turned 72 in 2018, the required distribution would be based on a life expectancy of 25.6 years. A separate table, Table II, applies to a taxpayer whose spouse is more than 10 years younger and is the taxpayer’s only beneficiary.

Though the RMD rules are mandatory for all owners of traditional, SEP and SIMPLE IRAs and participants in workplace retirement plans, some people in workplace plans can wait longer to receive their RMDs. Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulations in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

Find more information on RMDs, including answers to frequently asked questions, on IRS.gov.

Source: https://www.irs.gov/newsroom/irs-reminder-deadline-dec-31-for-most-retirees-who-must-make-required-retirement-plan-distributions

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What does CPA stand for? Certified Public Accountant

certified public accountant - cpa

Everyone knows about CPAs, right? Although you may often hear friends talk about meeting with their CPAs at tax time or when they need critical business advice, in fact many people are not really aware of what it means to be a certified public accountant.

When you are looking for financial advice, keep in mind that not all accountants are CPAs. Many states allow anyone to use the title “accountant,” but only CPAs have passed the CPA exam and meet their state board of accountancy’s licensing requirements. CPAs are also the only professionals who can perform audits of publicly traded companies. If you are seeking the services of a highly trained professional, make sure they have the “CPA” initials after their name. Certified Public Accountant – Read full story.

Davis, Nagy & Company, LLC brings over 53 combined years of public and private accounting and tax knowledge. Davis, Nagy & Company has distinguished the service they provide to their clients by going beyond what is considered to be the “typical” Certified Public Accountant (CPA) role.  Clients have learned to rely on the firm for their individual and business tax, payroll, and business consulting needs.

Don’t think you can afford tax and business planning assistance? Think again!

At Davis, Nagy & Company we specialize in small business success. We focus on minimizing tax liabilities and business planning so you can focus on growing your business.

We look forward to being your one-stop for taxes, payroll and business planning. And, we are more cost-effective than you might think. Give us a call at 330.665.9405 for details.

 

 

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What Kids And Their Parents Should Know About Summer Jobs And Taxes

Image from Shutterstock

Kelly Phillips Erb Forbes Staff
Taxes
Source: https://www.forbes.com/sites/kellyphillipserb/2018/07/05/what-kids-and-their-parents-should-know-about-summer-jobs-and-taxes/#5cee24221ce4

Now that the fireworks are over and summer is officially in full swing, many high school and college students are thinking about getting a seasonal job. Whether kids are serving up slices, mowing lawns or ringing up groceries, here’s what they and their parents should know about summer jobs and taxes:

You may not owe taxes, but you may still need to fill out tax forms. Mark Luscombe, Principal Analyst, Wolters Kluwer Tax & Accounting, says that a summer job may be the first time that kids encounter a form W-4. Figuring out what to claim as an adult can be tricky, but it’s typically a little easier for children with seasonal jobs. With the increased standard deduction, he says, it’s less likely that a teen filing on his or her own will owe taxes. If you’re sure that you won’t owe taxes, Luscombe says to consider claiming an exemption from withholding. If you don’t know, claim 0 or 1, since any over-withholding should be refunded to you at tax time.[read more=”Read more” less=”Read less”]

(You can read more about how to complete the new form W-4 here. Freelancers and independent contractors not subject to withholding can read about their revised forms here.)

The more allowances you claim, the less federal income tax your employer will withhold from your paycheck, which means the bigger your take-home pay. The fewer allowances you claim, the more federal income tax your employer will withhold from your paycheck and the smaller your take-home pay. If you don’t have enough withholding, you’ll owe Uncle Sam at tax time. If you have too much withholding, you’ll be due a refund. The key is to find the right balance.

(To see whether you’re withholding the right amount, consider checking out the new IRS withholding calculator. You can find more here.)

You may need to file and pay taxes even if you’re paid under the table. We’ve all heard the term “paid under the table”—that typically means that the employer is paying you off the books. If that’s the case, your employer may not be reporting wages paid to you to the tax authorities. That can be a big mistake on the employer’s part and can cost them money in penalties, fines, and unpaid taxes. But Luscombe says not to let their mistake become your mistake: If cash that is paid to you for work that you’ve done is considered taxable income, you’ll need to report it even if the employer doesn’t issue you any tax forms. No matter what your employer does, you’ll want to do the right thing.

Don’t forget about state and local taxes. The focus on federal income taxes tends to be so overwhelming that kids (and their parents) forget about state and local taxes. Unlike federal returns which exempt some low-income workers from filing returns, some state and local tax authorities impose taxes on the first dollar of income. Additionally, some states offer tax credits or other forgiveness for low-income taxpayers, but you have to file in order to qualify. Luscombe says to make sure that you don’t overlook filing and payment requirements for state and local taxes.

You may be able to claim job-related expenses. If you have a “regular” job—meaning one where the employer issues you a form W-2—you can no longer claim unreimbursed job expenses on your federal income tax return as the result of tax reform. But kids who work for themselves, whether from mowing lawns, selling lemonade or some other entrepreneurial venture, can still claim job-related expenses on a Schedule C. Those expenses need to be related to your trade or business and considered “ordinary and necessary.” Keep receipts: Luscombe says the best practice is to keep contemporaneous records to produce at tax time.

(You can read more about Schedule C expenses here.)

Consider using a tax professional. It’s likely not necessary to run out and hire a tax professional to cover your McDonald’s paycheck, but if you have a more complicated tax return, it might be beneficial to use your parents’ tax preparer in 2018. The rules for reporting earned income—meaning wages from your job—haven’t changed as a result of tax reform, but the kiddie tax rules got a makeover. It used to be the case that kids could report unearned income on their parents’ tax return since the kiddie tax rates were the equivalent of the parents’ tax rates. But, Luscombe notes, that changed with tax reform. Now, he says, for federal income tax purposes, the kiddie tax rates are the same as trust tax rates. And even though a draft “postcard-size” tax return has been released (you can see it here), Luscombe says that we’re still not sure how all of the details will work—including the options for children to report unearned income. There may also be specific situations, like teens or college students who are married, that complicate matters just a bit more. The solution might be to let the pros sort it out.

(You can see the 2018 tax rates here.)

Save for a rainy day. So what’s a kid to do with his or her hard-earned money? After you’ve spent a dollar or two on necessities (yes, I’m aware that both Ant-Man and Jurassic World are currently playing), consider saving the rest. And you don’t have to do the expected. Rather than stashing your cash in a typical savings account, Luscombe suggests that you consider a Roth IRA. With a Roth IRA, you pay taxes on your contribution but the income grows tax-free for federal income tax purposes, and qualified withdrawals are also tax-free for federal income tax purposes. A child can contribute up to the statutory limit ($5,500 in 2018), or his or her earned income, whichever is less. And one more thing: A Roth IRA for your child doesn’t have to be funded using only your kid’s income. As the parent, if you want to kick in a few dollars to maximize the contribution, that’s okay, too (see Ashlea Ebeling’s take on that here).[/read]

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Exciting developments happening this summer!

Dear Valued Client,

Exciting developments happening this summer!

We are pleased to announce that Davis CPA and Associates, LLC is merging with Sharon L. Nagy, CPA Inc. effective July 1, 2018. We can’t wait for our clients to meet the new team and see our new location. The new practice will be known as Davis, Nagy & Company LLC and the new location will be 1270 S. Cleveland-Massillon Rd. Bldg. A Ste. 110, Copley, OH 44321.

Davis CPA and Associates, LLC brings over 53 combined years of public and private accounting and tax knowledge. Davis CPA has distinguished the service they provide to their clients by going beyond what is considered to be the “typical” CPA role.  Clients have learned to rely on the firm for their individual and business tax, payroll, and business consulting needs. Davis CPA and Associates, LLC currently has two team members, Kathy Davis, CPA and Ken Gillette. Kathy’s area of expertise is tax and business planning, while Ken’s focus is financial business planning and payroll services.

Sharon L. Nagy, CPA, Inc. brings over 37 combined years of public and private accounting and tax experience. The practice concentrates on the accounting and tax needs of small businesses and their owners. Clients know the firm is invested in doing what is necessary to ensure they have the information needed to run a successful business. Sharon L. Nagy, CPA, Inc. currently has two team members, Sharon Nagy, CPA and Beth Krakora. Sharon’s area of expertise is business planning and tax services, while Beth’s focus is tax and accounting services.

Kathy and Sharon have known each other since 1998, having met and worked together at a regional accounting firm. The two have continued to share ideas over the years and have served as business sounding boards to one another. The combining of the practices ensures that our clients have access to a team of professionals working to support their business and individual needs. We are confident this merger allows us to more effectively serve you as trusted advisors.

There are several things we want to point out that will not change:

  • You will continue to work with the same great people from both practices.
  • Phone numbers from both practices will continue to work.
  • Email addresses from both practices will continue to work, and we will transition to new addresses over the next few months.
  • The services we have provided you in the past will continue to be offered from our quality team.
  • You will have access to additional team members to help assist with your needs.

If you have any questions about this exciting news and what it will mean to you, please contact any of us at any time.

 

We are grateful to you, not only for the trust which you have placed in us to handle your business and individual needs, but also for your friendship. Our relationships with each of you have enriched our lives, both personally and professionally. We are confident that this merger will serve you, our valued clients, well in the years to come.

 

We couldn’t do what we do without you!

 

Kathy         Sharon        Ken      Beth

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26 Ways the New Tax Law Will Affect Your Wallet

Getty Images
By Kevin McCormally, Chief Content Officer , and Sandra Block, Senior Editor and Joy Taylor, Editor | January 4, 2018
Source: https://www.kiplinger.com/slideshow/taxes/T054-S001-26-ways-the-gop-tax-reform-will-affect-your-wallet/index.html?rid=SOC-email#.WnXIZ3XU75M.email

The new year starts with a new tax law affecting every taxpayer in the land. Now that a jubilant President Trump has signed the massive tax overhaul into law, it’s time for the number crunching to move from Capitol Hill to your kitchen table. Do the pros and cons found in the 500-plus pages of legislative language add up to good news or bad news for your family’s bottom line?

Here’s a look at key provisions of the new law that could affect everything from your family to your investments to your retirement planning. Most of the changes go into effect right away in 2018, but will NOT affect your 2017 tax return due in April. In almost every case, that return is covered by the old rules. Also, note that many of the changes affecting individuals are scheduled to expire after 2025. Unless a future Congress acts to extend them, most of these rules would revert to those in effect in 2017.

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New tax withholding tables are issued

Source: https://www.journalofaccountancy.com/news/2018/jan/2018-tax-withholding-tables-201818191.html?utm_source=mnl:alerts&utm_medium=email&utm_campaign=11Jan2018&utm_content=headline

By Sally P. Schreiber, J.D.
January 11, 2018

The IRS on Thursday issued new income tax withholding tables that reflect new tax rates and other changes for individuals implemented by P.L. 115-97, known as the Tax Cuts and Jobs Act, enacted Dec. 22 (Notice 1036). Employers should use the updated withholding rules for 2018, putting them into effect as soon as possible but no later than Feb. 15, the IRS said. Until then, employers should continue to use the 2017 withholding tables.[read more=”Read more” less=”Read less”]

The IRS noted that many employees should begin to see their take-home pay increase in February depending on how quickly their employers implement the new tables and whether they are paid weekly, biweekly, or monthly. The new withholding tables are designed to work with Forms W-4, Employee’s Withholding Allowance Certificate, that employees already have on file, so employees do not have to fill out new ones at this time. The IRS plans on issuing a new Form W-4 in the near future. It is also working on revising the withholding tax calculator available on its website, which it expects will be finished by the end of February.

According to the IRS, the new tables in Notice 1036 reflect the increase in the standard deduction, the repeal of personal exemptions, and new tax rates and brackets. The new tables are designed to produce the correct amount of tax withholding and are also intended to avoid over- and under-withholding of tax.

The IRS also posted a “frequently asked questions” page on its website to explain the new withholding tables to taxpayers.

The IRS says it will make additional changes to its withholding tables in 2019 and work with employers and the payroll industry on designing these changes.[/read]

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Avoid these 8 entrepreneurial time-wasters

Source: http://ohiocpa.com/news-resources/news/2017/11/13/avoid-these-8-entrepreneurial-time-wasters

Written on Nov 13, 2017

Here are eight time-wasters to avoid for a more productive and efficient workday:

1. Being unorganized
If you come into work every day without a clear plan, the hours will fly by without anything to show for it. At the end of each day, assess the items that must be accomplished tomorrow.

Assemble a list of priorities with the understanding that other urgent issues may come up later.[read more=”Read more” less=”Read less”]

2. Procrastinating
Everyone has something they’d rather not do, but putting those tasks off for another time is the easy way out. Procrastination can easily become a persistent habit, resulting in overlooked items that should be addressed (until they grow into a full fledged crisis). Set aside a dedicated amount of time to accomplish tedious, but essential, tasks and then focus on other matters.

Ask any veteran entrepreneur for tips on starting a business and time management will likely be near the top of the list. Your energy and creativity may feel limitless, but your time isn’t. If you waste time on activities that are either tangential or irrelevant to your enterprise, you can never get it back.

3. Multitasking
We’re all guilty of switching our attention from one task to another within minutes (or even seconds), but studies show that pausing to check social media accounts requires more time to refocus on the task at hand. Train yourself to set aside blocks of time to attend to individual projects without distraction.

4. Micromanaging employees
Business owners who fail to hire wisely often end up sacrificing valuable time overseeing workers’ every move. If you find yourself in this situation, it’s preferable to let go of employees who need hand-holding and recruit candidates with the experience and skills to work productively on their own, or get these employees the training needed to work autonomously. Micromanaging can also be a symptom of managerial inexperience; if an employee is up to the task and you’re still micromanaging, recognize that your approach is stifling both the business’ growth and the employee’s growth. In this case, it may be time to take a management training course.

5. Calling unnecessary meetings
Any list of time management tips usually includes an admonition to cut down on needless meetings or impromptu conversations when essential tasks need to get completed. It’s hard to say no to hallway chats, but unless some tangible benefit comes of it, recognize that it’s wasted time.

6. Putting out fires
This time-waster is related to micromanaging, in that you’re forever at the mercy of employees coming to you with urgent requests to fix a problem. Delegate these daily “emergencies” to the right people and reserve your time for focusing on strategic activities.

7. Checking social media
Maintaining an active social media presence is critically important to your brand, but that doesn’t mean you have to be one responsible for making it happen. Assign a qualified employee to monitor and feed your social media accounts daily.

8. Overworking
Working around the clock is not an efficient use of your time. Long hours invariably result in sluggish, unfocused performance — and your health and your personal life will suffer as a result. Try not to bring work home with you, but when it’s unavoidable, set aside a few hours away from the phone and laptop to recharge your batteries for tomorrow.[/read]

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Five Facts about Charitable Contributions

Source: https://www.irs.gov/newsroom/five-facts-about-charitable-contributions

IRS Tax Tip 2017-77, November 15, 2017

With the holidays around the corner, many people will be making donations to benefit charitable organizations. However, come tax time, the person who made the donation might also benefit. That’s because taxpayers who donate to a charity may be able to claim a deduction for the donation on their federal tax return.

Here are five facts about charitable donations:

Qualified Charities. A taxpayer must donate to a qualified charity to deduct their contributions. Gifts to individuals, political organizations, or candidates are not deductible. To check the status of a charity, taxpayers can use Exempt Organizations Select Check on IRS.gov.[read more=”Read more” less=”Read less”]

Itemize Deductions. To deduct charitable contributions, taxpayers must file Form 1040 and
itemize their deductions. To do this, taxpayers complete Schedule A, Itemized Deductions. They file this form with their tax return.

Getting Something in Return. Taxpayers may receive something in return for their donation. This includes things such as merchandise, meals, and event tickets. Taxpayers can only deduct the amount of the donation that’s more than the fair market value of the item they received. To figure their deduction, a taxpayer would subtract the value of the item received from the amount of their donation.

Type of Donation. For donations of property instead of cash, a taxpayer can only deduct the fair market value of the donated item. Fair market value is generally the price they would get if they sold the item on the open market. If they donate used clothing and household items, those items generally must be in good condition. Special rules apply to certain types of property donations, such as cars and boats.

Donations of $250 or More. If a taxpayer donates $250 or more in cash or goods, they must have a written receipt from the charity. The statement must show:

  • The amount of the donation.
  • A description of any property given.
  • Whether the taxpayer received any goods or services in exchange for their gift, and, if so, must provide a description and good faith estimate of the value of those goods or services.

Taxpayers can contact Davis CPA & Associates, LLC at 330.665.9405 to determine if their charitable contributions are deductible.[/read]

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The tax strategy your company is missing

Written on Nov 02, 2017
By Jessica Salerno, OSCPA content manager
Source: https://ohiocpa.com/communities/news/2017/11/02/the-tax-strategy-your-company-is-missing

The secret to becoming a more dynamic, efficient organization could be in your tax strategy.

“True tax planning can sometimes be overlooked if one is just focused on tax compliance,” said Susan Allen, CPA/CITP, CGMA, senior manager with the AICPA Tax Practice & Ethics team.

An emerging area in the tax profession called “tax information and operations management” (TIOM) focuses on enabling tax operations to run as efficiently as possible to add business value. Tax is an evolving area, and this is about doing more than simply complying with tax regulations.

To start executing an effective TIOM strategy, Allen suggested assessing the systems you have in place and how those operations are managed. Talk with people at varying levels in different departments to hear how they think processes could be improved.

“Collaboration is so key,” Allen said. “To get the numbers right from a tax perspective, finance and tax need to be buddies at every stage.”
[read more=”Read more” less=”Read less”]
Getting out of your department’s silo and speaking with others could reveal gaps in the process and opportunities to improve. And TIOM isn’t only for big corporations or public firms – it’s an area virtually every business can leverage to their benefit.

But for this process to be successful Allen said people need to change the way they view taxation; instead of looking at tax as a nuisance, think about how effective management of tax information and operations can add strategic value to the company. To truly stick, this perspective should start at the top.

She mentioned there can be a “man-behind-the-curtain effect” when it comes to the tax function; everyone knows the job gets done, but they might not know just how difficult it is.

“It almost seems like it’s easy, but in reality, it’s sometimes someone behind the curtain working ‘magic,’” Allen said. “They’re pulling things from so many different sources, and often using an unbelievably complicated spreadsheet to make it all come together.”

The opportunities for using tax strategically could make a lasting difference in your business.

“Think of tax from a different perspective and its competitive advantage on a global scale,” Allen said. “Strategically, this could save you a lot of time and money.”

Register now to learn more about tax information and operations management this fall at the Mega Tax Conference!

Contact Davis CPA & Associates LLC for more information at 330.665.9405 or send us a email.
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Registration Opens for Municipal Net Profit Tax

Ohio Department of Taxation

Today the Ohio Department of Taxation opened registration for businesses to ‘opt-in’ for centralized filing and state administration of the municipal net profit tax for the 2018 tax year.

Taxpayers can register at the Department’s website (tax.ohio.gov) either electronically or by filling out and submitting a paper registration form (see Tax Forms – Form MNP-R).

Businesses that opt-in will have the advantage of filing one municipal net profit tax return that encompasses every municipality in which they are required by law to report. The Department of Taxation will process all the centrally filed returns and distribute tax payments to the appropriate municipalities. The Department will also be responsible for all administrative functions, including appeals and audits.

Businesses that operate as a sole proprietor or single-member LLC are not eligible to file with the Department, and should continue their current method of filing.

To register, or for additional information, please visit our website at www.tax.ohio.gov or contact the Department at 1-844-238-0403.

Ohio Department of Taxation
Business Tax Division
P.O. Box 16158
Columbus, Ohio 43216-6158
Telephone: (844) 238-0403