What’s new: Tax cuts and jobs act (Part 4)

• YOU may need to pay quarterly estimated taxes unless tax owed is less than $1,000 upon filing of the tax return or you do not owe any taxes in prior year if you have income from business as sole proprietor, or receiving K-1 as a partner or shareholder of S-corporation. Refer to IRS Publication 505 for more information.

• Starting January 1, 2018, the 20% of qualified business income deduction or section 199A business income deduction is available to business owners.

• Qualifying property in service on or after September 27, 2017, must file election to choose 100% depreciation deduction with the IRS by October 15, 2018. The election allows to write-off depreciable assets in the year placed in service and generally applies to depreciable assets used in the business with life not more than 20 years. These assets generally qualify: computers, furniture and equipment, machinery, etc. For timely filed 2017 return and did not elect out but wanted to elect out will need to file an amended return.

• Luxury automobile depreciation. Starting January 1, 2018, depreciation deduction is subject to dollar limitation in the year automobile is placed in service and each succeeding year. The limitation applies to both if the taxpayer elects not to claim bonus depreciation or the taxpayer elects to claim bonus depreciation.

• Achievement Award to Employee. Achievement award to employee can be excluded from wages if the award is tangible personal property. Tangible personal property does not include gift certificates, gift cards, meals and lodging, movie theater tickets, etc.

• Amusement, recreation, and entertainment are now non-deductible under the new act. Businesses may still claim 50% deduction on meals if 1) provided to potential customer or client 2) not extravagant 3) the employer or employee is present 4) purchased separately from entertainment events. You may rely on Notice 2018-76 until the Department of Treasury publish regulations on when business meals expenses are deductible.

• Unless you are member of Armed Forces on duty, moving expenses is no longer deductible. Payment by an employer to employee for qualified moving expenses is subject to federal income tax.

• Exclusion from employee’s wages of qualified bicycle commuting reimbursements has been suspended. These reimbursements must now be included in employee’s wages starting 2018 through 2025.

• Starting January 1, 2018 through January 1, 2026, the miscellaneous itemized deduction subject to 2% adjusted gross income floor has been suspended. Any unreimbursed employee travel expenses for business standard mileage rate under Notice 2018-03 cannot be utilized to claim for itemized deduction.

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Disclaimer: Any accounting, business or tax advice contained in this communication is neither intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.

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Al-os & Associates  Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies.    

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