Dorinda Kisner CPA PLLC
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If you don't necessarily love doing your taxes (or have an accounting degree), you've come to the right place. Our staff can provide for your needs: taxes, small businesses, larger enterprises, and individuals – we've done them all.
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A heartfelt thank you to our clients who support us and make us successful. Thank you for your continued patronage and support. We appreciate you choosing to do business with us and strive to give you a great product at an affordable price.
Dorinda Kisner and staff.
All Matters of Accounting and Taxation
Tax Tips and Updates
We cordially invite you to attend a reception open house for the retirement of a long time employee, friend and co-worker Deborah Fike. Debbie is moving on to “greener” pastures to take a more active role in her family owned farming enterprise.
We already miss her and know many of our clients will too. She has been a large part of our success and wish her continued success in this next season of life.
Please join us for an open house in our new location at 1003 East State Avenue, Terra Alta, WV (formally the BB&T Bank) from 3pm to 6pm onThursday, June 7 and wish her well.
RSVP is not necessary but if you know you plan to attend, a quick email response would be helpful to niki@kisnercpa.com.
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As we progressively complete our move from 406 E State to 1003 E State (i.e. "the bank") we now have the night drop box open for use and drive thru too! If we are not open when you need to drop off paperwork, please use the first lane drive thru where you will find the secure night depository. If you want to drop something off during office hours, feel free to drive thru the first lane and we will be alerted by our security system that you are present. A great big shout out to Jason, Monk, and Kathy for their assistance on moving day. What a pleasant surprise and help they were!
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Members of the military and their families are often eligible for certain tax breaks. For example, members of the armed forces don’t have to pay taxes on some types of income. Special rules could also lower the tax they owe or give them more time to file and pay taxes.
No matter what time of the year, it’s good for members of the military and their spouses to familiarize themselves with these benefits. Here are some things for these taxpayers to know about their taxes:
Combat pay exclusion. If someone serves in a combat zone, part or even all of their combat pay is tax-free. This also applies to people working in an area outside a combat zone when the Department of Defense certifies that area is in direct support of military operations in a combat zone. There are limits to this exclusion for commissioned officers.
Deadline extensions. Some members of the military, such as those who serve in a combat zone, can postpone most tax deadlines. Those who qualify can get automatic extensions of time to file and pay their taxes.
Earned income tax credit. If those serving get nontaxable combat pay, they may choose to include it in their taxable income to increase the amount of EITC. That means they could owe less tax or get a larger refund.
Signing joint returns. Normally, both spouses must sign a joint income tax return. If military service prevents that, one spouse may be able to sign for the other or get a power of attorney.
ROTC allowances. Some amounts paid to ROTC students in advanced training are not taxable. This applies to allowances for education and subsistence. Active duty ROTC pay is taxable. For instance, pay for summer advanced camp is taxable.
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The Internal Revenue Service today provided information to taxpayers and employers about changes from the Tax Cuts and Jobs Act that affect:
Move related vehicle expenses
Un-reimbursed employee expenses
Vehicle expensing
Changes to the deduction for move-related vehicle expenses
The Tax Cuts and Jobs Act suspends the deduction for moving expenses for tax years beginning after Dec. 31, 2017, and goes through Jan. 1, 2026. Thus, during the suspension no deduction is allowed for use of an automobile as part of a move using the mileage rate listed in Notice 2018-03. This suspension does not apply to members of the Armed Forces of the United States on active duty who move pursuant to a military order related to a permanent change of station.
Changes to the deduction for un-reimbursed employee expenses
The Tax Cuts and Jobs Act also suspends all miscellaneous itemized deductions that are subject to the 2 percent of adjusted gross income floor. This change affects un-reimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel.
Thus, the business standard mileage rate listed in Notice 2018-03, which was issued before the Tax Cuts and Jobs Act passed, cannot be used to claim an itemized deduction for un-reimbursed employee travel expenses in taxable years beginning after Dec. 31, 2017, and before Jan. 1, 2026. The IRS issued revised guidance today in Notice 2018-42.
Standard mileage rates for 2018
As mentioned in Notice 2018-03, the standard mileage rates for the use of a car, van, pickup or panel truck for 2018 remain:
54.5 cents for every mile of business travel driven, a 1 cent increase from 2017.
18 cents per mile driven for medical purposes, a 1 cent increase from 2017.
14 cents per mile driven in service of charitable organizations, which is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
Increased depreciation limits
The Tax Cuts and Jobs Act increases the depreciation limitations for passenger automobiles placed in service after Dec. 31, 2017, for purposes of computing the allowance under a fixed and variable rate plan. The maximum standard automobile cost may not exceed $50,000 for passenger automobiles, trucks and vans placed in service after Dec. 31, 2017. Previously, the maximum standard automobile cost was $27,300 for passenger automobiles and $31,000 for trucks and vans.
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During the summer, taxpayers often rent out their property. They usually think about things such as cleanup and maintenance, but owners also need to be aware of the tax implications of residential and vacation home rentals.
If taxpayers receive money for the use of a house that’s also used as a taxpayer’s personal residence, it generally requires reporting the rental income on a tax return.
Vacation Home. This may be a house, an apartment, condominium, mobile home, boat, vacation home or similar property. It's possible to use more than one unit as a residence during the year.
Used as a Home. When the property is used as a home, the rental expense deduction is limited. This means the rental expenses cannot be more than the rent received.
Personal Use. Personal use means use by the owner, owner’s family, friends, other property owners and their families. Personal use includes anyone paying less than a fair rental price.
Divide Expenses. Generally, special rules apply to the rental expenses of a property used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, and any expenses need to be divided between personal and business purposes.
How to Report. Taxpayers use Schedule E to report rental income and rental expenses. Rental income may also be subject to Net Investment Income Tax.
Special Rules. If the home unit is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible.
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Taxpayers who sell a home may qualify to exclude from their income all or part of any gain from the sale. Below are some things taxpayers should keep in mind when selling a home:
Ownership and use. To claim the exclusion, the homeowner must meet the ownership and use tests. During a five-year period ending on the date of the sale, the homeowner must have:
Owned the home for at least two years.
Lived in the home as their main home for at least two years.
Gain. Taxpayers who sell their main home and have a gain from the sale may usually be able to exclude up to $250,000 from their income or $500,000 on a joint return. Homeowners who can exclude all of the gain do not need to report the sale on their tax return.
Loss. Taxpayers experience a loss when their main home sells for less than what they paid for it. This loss is not deductible.
Reported sale. Taxpayers who cannot exclude the gain from their income must report the sale of their home on a tax return. Taxpayers who choose not to claim the exclusion must report the gain on a tax return. Taxpayers who receive a Form 1099-S, Proceeds from Real Estate Transactions, as part of the real estate transaction must also report the sale on their tax return.
Mortgage debt. Some taxpayers must report forgiven or canceled debt as income on their tax return. This generally includes people who went through a mortgage workout, foreclosure, or other process in which a lender forgave or canceled mortgage debt on their home. Taxpayers who had a written agreement for the forgiveness of the debt in place before January 1, 2017, might be able to exclude the forgiven amount from income.
Possible exceptions. There are exceptions to these rules for persons with a disability, certain members of the military, intelligence community and Peace Corps workers, among others.
Multiple homes. Taxpayers who own more than one home can only exclude the gain on the sale of their main home. They must pay taxes on the gain from selling any other home.
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Home Office Deduction; often overlooked!
Regular method
The first option for calculating the home office deduction is the regular method. This method requires computing the business use of the home by dividing the expenses of operating the home between personal and business use. Direct business expenses are fully deductible and the percentage of the home floor space used for business is assignable to indirect total expenses. Self-employed taxpayers file Schedule C, Profit or Loss From Business (Sole Proprietorship), and compute this deduction on Form 8829, Expenses for Business Use of Your Home.
Simplified method
The second option, the simplified method, reduces the paperwork and recordkeeping burden. The simplified method has a prescribed rate of $5 a square foot for business use of the home. There is a maximum allowable deduction available based on up to 300 square feet. Choosing this option requires taxpayers to complete a short worksheet in the tax instructions and enter the result on the tax return. There is a special calculation for daycare providers. Self-employed individuals claim the home office deduction on Schedule C, Line 30, and farmers claim it on Schedule F, Profits or Loss from Farming, Line 32. And it does NOT require any depreciation recapture if you sell your home at a gain! (not true of regular method)
Regardless of the method used to compute the deduction, business expenses in excess of the gross income limitation are not deductible. Deductible expenses for business use of a home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance and repairs. In general, expenses for the parts of the home not used for business are not deductible.
Deductions for business storage are allowed when the home is the only fixed location of the business, or for regular use of a residence for daycare services; exclusive use isn't required in these cases.
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I have had many questions about the "legality" of passing on credit card fees. This is a tough issue with no definitive answer. After researching this issue and even speaking with the Attorney General's office in WV; it remains unclear. If you research a little there was a class action suit that appeared to be a "win" for the business that passed on the fee. However, that win was appealed and was not upheld. And some states have since tried to pass state laws to prohibit this but most of those haven't stood either. WV has NOT passed any prohibition against the business doing this but there remains a potential WV issue because WV prohibits "debt collection to pass on the fees of collections to the debtor." That could be interpreted to include credit card fees because you are collecting debt. This remains to be unsettled but probably somewhere, sometime, someone will sue a business that does pass on the fee and then there will be a WV court decision. In the meanwhile if you choose to pass on the fee; that is the risk you are taking. However, if you POST in a conspicuous and clear manner you are doing it, then your risk is reduced but that your risk regardless. Then you can only charge the customer the exact amount of fee the processor charges you; i.e. you cannot profit from the fee. The recommended option is charge a fee then offer a cash discount. Further complicating the matter and of foremost concern is that your AGREEMENT with your merchant who processes your credit card must NOT prohibit this; if they do you are violating a legally enforceable agreement at this point.
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Generally, income received in the form of tips is taxable. Here’s some information to help all taxpayers correctly report the income they receive as a tip: (i.e. even if you own your own business you must report TIPS on your tax return; you are NOT exempt from this!)
Show All Tips on a Tax Return. Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to report the amount of any unreported tip income to include as additional wages. This includes the value of non-cash things someone receives as a tip, such as tickets or passes to an event.
Report All Types of Tips. Taxpayers must pay tax on all tips received during the year, including those:
Directly from customers.
Added to credit cards.
From a tip-splitting agreement with other employees.
Report Tips to an Employer. Employees who receive $20 or more in tips in any month must report their tips for that month to their employer by the 10th day of the next month, including cash, check and credit card tips received. The employer must withhold federal income, Social Security and Medicare taxes on the reported tips.
Keep a Daily Log of Tips. Use Publication 1244, Employee's Daily Record of Tips and Report to Employer, to record tips. This will help report the correct amount of tips on a tax return.
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In the latest version of the phone scam, criminals claim to be calling from a local IRS TAC office. Scam artists have programmed their computers to display the TAC telephone number, which appears on the taxpayer’s Caller ID when the call is made.
If the taxpayer questions their demand for tax payment, they direct the taxpayer to IRS.gov to look up the local TAC office telephone number to verify the phone number. The crooks hang up, wait a short time and then call back a second time, and they are able to fake or “spoof” the Caller ID to appear to be the IRS office calling. After the taxpayer has “verified” the call number, the fraudsters resume their demands for money, generally demanding payment on a debit card.
Fraudsters also have been similarly spoofing local sheriff’s offices, state Department of Motor Vehicles, federal agencies and others to convince taxpayers the call is legitimate.
IRS employees at TAC offices do not make calls to taxpayers to demand payment of overdue tax bills. The IRS reminds taxpayers it typically initiates most contacts through regular mail delivered by the United States Postal Service.
There are special, limited circumstances in which the IRS will call or come to a home or business, such as when a taxpayer has an overdue tax bill, to secure a delinquent tax return or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations.
Even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail.
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The busiest part of tax season begins this week, with millions of people planning to file. Through April 6, the IRS has processed more than 101 million tax returns and issued more than 79.1 million tax refunds totaling $226.6 billion. The average refund to date is $2,864.
Additional filing season numbers:
The IRS expects to receive about 14.9 million individual income tax returns for the week ending April 13, with about 13.1 million filed electronically.
On top of those 14.9 million tax returns, the IRS expects to receive another 17 million tax returns the following week.
Requests for extension are anticipated to exceed 11.6 million by next week, with the vast majority of those Forms 4868,Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, being filed electronically. Overall, this year, the IRS expects to receive more than 14 million extension requests from taxpayers.
Thanks for making our season a success and supporting us.
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As the first quarter of 2018 means it is estimate time; this is a reminder of some of the big changes in 2018.
New deduction provided for portion of passthrough business income.— An individual taxpayer may deduct up to 20 percent of certain domestic qualified business income from a partnership, S corporation, or sole proprietorship for a tax year The deduction is generally limited to the greater of (1) 50 percent of W-2 wages paid by the business, or (2) the sum of 25 percent of the W-2 wages paid plus 2.5 percent of the unadjusted basis of
certain property the business uses to produce qualified business income. This limit may be phased-in or eliminated if the taxpayer’s taxable income meets certain threshold requirements The deduction is generally not allowed for certain service trades or businesses, but this disallowance is phased-in for taxpayers whose taxable income meets certain threshold requirements. It is anticipated that the IRS will provide a new worksheet or form for calculating the deduction but no draft has been made public yet.
I was recently asked why I don't recommend installment agreements for clients who owe but didn't save for their taxes. The way the IRS compounds their interest; it is around the 24% interest rate; and I don't find that professionally responsible to suggest anyone use. Clear Mountain Bank, BB&T, First United, Huntington Bank, & credit unions are in the business of lending money; the IRS is not and does not want to be your bank. That's why we don't recommend them. We recommend you pay estimated taxes quarterly or increase your withholding at work or come in when you receive unusual income (gambling wins, IRA inheritances, timber sales etc) and we will calculate how much you need for the income taxes and when you should pay those! Why pay penalties and interest when you will eventually have to pay the tax anyway?
REMINDER; an extension is an extension to FILE; not an extension to pay! If you owe the IRS money or expected to; you must pay with the extension or the extension is not effective!
Warning - Annual Report SCAM!
Businesses / LLC's are receiving letters from a company called Workplace Compliance Services notifying them of a bill for $100 to perform their "Annual Report". Your annual report invoice is issued by the Secretary of State office and is still ONLY $25. If you receive one of these letters throw it away or report to attorney general and or WVSOS. This is misleading and unnecessary.
To see a sample letter go to Dorinda Kisner CPA PLLC facebook page.
Tis the "season" when businesses get "warnings" about the federal and state labor law poster requirements. Frequently we have clients who pay hundreds of dollars for these things. You can download the posters you need for free; don't be scammed by these mailings.
https://labor.wv.gov/Pages/Required-Posters.aspx
https://www.dol.gov/general/topics/posters
http://workforcewv.org/workplace-posters.html.
Yes you do have to poster labor laws; no you don't have to pay for them
Recent changes to federal tax law allow funds to be used to pay tuition and expenses for children enrolled in K-12 private and religious schools. There are different options for West Virginia residents and Maryland:
Families with children enrolled in grades K – 12 at private and religious schools are eligible.
Parents/grandparents etc can pay for up to $10,000 annually of private and religious school expenses.
Qualified K – 12 distributions are tax exempt at the federal level.
Contributions to an account provide state tax advantages.
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It's never ending; and always evolving; TAX LAWS! ...... the IRS clarifies that despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled. The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.
Under the new law, for example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not. As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements.
American Opportunity Tax Credit (AOTC) for college students: Assume your dependent child attended college half time in 2017 for a semester and will attend full time starting 2018 and expects to graduate from college in 2021. You can skip taking the credit for 2017 because her expenses are low and claim the credit for 2018, 2019, 2020 and 2021. And by skipping a year when your expenses are low; there are other smaller credits you can use. You are not required to claim the credit for a particular year. If your child’s college does not consider your child to have completed the first four years of college at the beginning of 2020, you may take the AOTC credit in 2020.
So here we go again. As a part of the Feb 9 budget; there are tax rules that have been RETROACTIVELY changed. (I don't do this; congress does!) Here is a major one that could affect any tax return already filed (or may force delay filing one immediately) that claimed or will claim education expenses. The provision extends through 2017 the above-the-line deduction for qualified tuition and related expenses for higher education. The deduction is capped at $4,000 for an individual whose adjusted gross income (AGI) does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers).
Another retroactive change made Feb 9 in the budget is a 2017 credit for purchases of nonbusiness energy property. The provision allows a credit of 10 percent of the amount paid or incurred by the taxpayer for qualified energy improvements, up to $500.
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Tax Reform; A LOT has changed. Note some of these highlights!
If you want to know how to "plan" for the reform (and yes, there are things you should plan to do) it is best to make an appointment when you are ready to bring in your 2017 income tax documents.
Corporate rates change under the "reform." Lots of debate in the media about corporate tax rate cuts. However, let's set aside political views and stick with the FACTS. Did you know the US has the HIGHEST corporate income tax rates among (OEDC) the Organization of Economically Developed Countries? Why does this matter? A short lesson in US global income taxes; for the most part, corporations are taxed on worldwide income. The best way to avoid the high US rates is to source your income outside of the US. So, if a CPA is helping manage and minimize income taxes; the planning must focus on moving overseas to reduce the tax paid here in the US. Thus; your jobs go overseas with the headquarters and sourcing. With the new reform; corporations will be able to repatriate global income back into the US without being taxed (also lose a foreign tax credit that is currently allowed) but the hope is those corporations will bring money home. To incentive that process; corporations with a threshold of ownership overseas will have to pay a tax for untaxed earnings overseas. Thus the reason to move overseas will be minimized and hopefully eliminated. Most of the media doesn't understand this "cause and effect."
1. Exemptions (for yourself/spouse and dependents) will be eliminated after the 2017 income tax return.
2. Standard deduction, however, will almost DOUBLE after 2017; will make itemizing more of a challenge especially with the cap on state taxes
3. Child Credit doubles from $1,000 to $2,000 in 2018
4. Added a credit for other non-child family members for 2018 $500
5. Remaining as an S –Corp may be more appealing than the media is portraying. However, it is a very complicated, challenging decision and the risk of C Corp rates raising back to higher levels has to be seriously considered. (when the parties in power change; anything can change)
6. Student loan forgiveness due to death or disability will not be taxable income
7. Charitable donations previously limited to 50% increases to 60%
8. Extended the 7.5% of AGI medical expenses for another 2 years; then goes to 10%
9. Alimony deduction (and taxability) will be repealed for any agreement entered into after 12/31/18
10. For tax years 2018-2025, the deduction for moving expenses and the income exclusion for qualified moving expense reimbursements is eliminated, except for members of the Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station.
11. Casualty losses repealed in 2018 (personal)
12. State and local tax deductions limited to $10,000 annually in 2018 and thereafter
13. 100% bonus depreciation is back effective 09/27/17 until 2022 and includes USED property; (used was not previously allowed for bonus depreciation.)
14. Section 179 property doubles from $500,000 annually to $1,000,0000
15. Expanded 179 property to include: roofs, heating and AC, alarm systems and security
16. Like kind exchanges now limited to real property; not personal property as previously allowed
17. The rumor about business interest deduction limit does NOT affect businesses that do NOT exceed $25 MILLION in gross receipts
18. NOL’s will not be carried back, but can be carried forward indefinitely (previously limited to 20 years)
19. Active business losses will be limited to $500K
20. Previously partnerships were technically terminated when 50% or more of the partnership ownership changed within 12 months; this has been repealed
21. Home equity interest is gone and home mortgage is limited to $750,000 of debt
22. Estates now have options on selecting year end dates
23. Charitable Contribution Deduction for College Athletic Seating Rights Eliminated. For tax years after 2017, no charitable deduction will be allowed for any payment to an institution of higher education in exchange for the right to purchase tickets or seating at an athletic event.
24. For tax years 2018-2025, the limitation on wagering) is modified to provide that all deductions for expenses incurred in carrying out wagering transactions, and not just gambling losses, are limited to the extent of gambling winnings
25. Affordable Care Act Individual Mandate Repealed.
26. Shortened Recovery Period for New Farming Equipment. The recovery period of new machinery or equipment placed in service after 12/31/17 and used in a farming business from seven to five years. In addition, use of the 150% declining balance depreciation method for these assets will no longer be required.
27. Domestic Production deduction is eliminated in 2018
28. Disallows deductions for entertainment expenses after 2017
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The Tax Bill suspends all miscellaneous itemized deductions that are subject to the 2% floor under present law. This includes the following deductions that an employee had been permitted to deduct under current law: DON"T be confused; these relate to non reimbursed employee expenses NOT to business deductions!
Casualty and theft losses from property used in performing services as an employee;
Business bad debt of an employee;
Business liability insurance premiums;
Damages paid to a former employer for breach of an employment contract;
Depreciation on a computer a employee’s employer requires him or her to use in his or her work;
Dues to a chamber of commerce if membership helps the employee perform his or her job;
Dues to professional societies;
Educator expenses;
Home office or part of a employee’s home used regularly and exclusively in his or her work;
Job search expenses in the employee’s present occupation;
Legal fees related to the employee’s job;
Licenses and regulatory fees;
Malpractice insurance premiums;
Medical examinations required by an employer;
Occupational taxes;
Passport fees for a business trip;
Research expenses of a college professor;
Subscriptions to professional journals and trade magazines related to the employee’s work;
Tools and supplies used in the employee’s work;
Costs for travel, transportation, meals, entertainment, gifts, and local lodging related to the employee’s work;
Union dues and expenses;
Work clothes and uniforms if required and not suitable for everyday use; and
Work-related education.
Thus, under the provision, employees may not claim the above-listed items as itemized deductions for taxable years 2018 through 2025.
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Denial of deduction for settlements subject to nondisclosure agreements paid in connection with sexual harassment or sexual abuse: Under current law (Internal Revenue Code (“Code”) Section 162(a)), a taxpayer is generally allowed a deduction for ordinary and necessary expenses paid or incurred in carrying on any trade or business. Under the Tax Bill, no deduction is allowed for any settlement, payout, or attorney fees related to sexual harassment or sexual abuse if such payments are subject to a nondisclosure agreement.
Tax Cuts and Jobs Act amends I.R.C. § 170(l) to provide that, starting in 2018, contributions to a college or university that entitle the donor to purchase tickets or seating at an athletic event are not deductible. Under current law, 80% of such donations are deductible
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