Tax

Many of the tax changes affecting individuals and businesses for 2017 were related to the Protecting Americans from Tax Hikes Act of 2015 (PATH) that modified or made permanent numerous tax breaks (the so-called “tax extenders”). To further complicate matters, some provisions were only extended through 2016 and are set to expire at the end of this year while others were extended through 2019. With that in mind, here’s what individuals and families need to know about tax provisions for 2017.

Personal Exemptions
The personal and dependent exemption for tax year 2017 is $4,050.

Standard Deductions
The standard deduction for married couples filing a joint return in 2017 is $12,700. For singles and married individuals filing separately, it is $6,350, and for heads of household the deduction is $9,350.

The additional standard deduction for blind people and senior citizens in 2017 is $1,250 for married individuals and $1,550 for singles and heads of household.

Income Tax Rates
In 2017 the top tax rate of 39.6 percent affects individuals whose income exceeds $418,400 ($470,700 for married taxpayers filing a joint return). Marginal tax rates for 2017–10, 15, 25, 28, 33 and 35 percent–remain the same as in prior years.

Due to inflation, tax-bracket thresholds increased for every filing status. For example, the taxable-income threshold separating the 15 percent bracket from the 25 percent bracket is $75,900 for a married couple filing a joint return.

Estate and Gift Taxes
In 2017 there is an exemption of $5.49 million per individual for estate, gift and generation-skipping taxes, with a top tax rate of 40 percent. The annual exclusion for gifts is $14,000.

Alternative Minimum Tax (AMT)
AMT exemption amounts were made permanent and indexed for inflation retroactive to 2012. In addition, non-refundable personal credits can now be used against the AMT.

For 2017, exemption amounts are $54,300 for single and head of household filers, $84,500 for married people filing jointly and for qualifying widows or widowers, and $42,250 for married people filing separately.

Marriage Penalty Relief
The basic standard deduction for a married couple filing jointly in 2017 is $12,700.

Pease and PEP (Personal Exemption Phaseout)
Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) limitations were made permanent by ATRA (indexed for inflation) and affect taxpayers with income at or above $261,500 for single filers and $313,800 for married filing jointly in tax year 2017.

Flexible Spending Accounts (FSA)
Flexible Spending Accounts (FSAs) are limited to $2,600 per year in 2017 (up from $2,550 in 2016) and apply only to salary reduction contributions under a health FSA. The term “taxable year” as it applies to FSAs refers to the plan year of the cafeteria plan, which is typically the period during which salary reduction elections are made.

Specifically, in the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,600 limit for the subsequent plan year.

Further, employers may allow people to carry over into the next calendar year up to $500 in their accounts, but aren’t required to do so.

Long Term Capital Gains
In 2017 taxpayers in the lower tax brackets (10 and 15 percent) pay zero percent on long-term capital gains. For taxpayers in the middle four tax brackets the rate is 15 percent and for taxpayers whose income is at or above $418,400 ($470,700 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent.

Individuals – Tax Credits

Adoption Credit
In 2017 a nonrefundable (i.e. only those with a lax liability will benefit) credit of up to $13,570 is available for qualified adoption expenses for each eligible child.

Child and Dependent Care Credit
The child and dependent care tax credit was permanently extended for taxable years starting in 2013. If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses.

For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.

Child Tax Credit
For tax year 2017, the child tax credit is $1,000. A portion of the credit may be refundable, which means that you can claim the amount you are owed, even if you have no tax liability for the year. The credit is phased out for those with higher incomes.

Earned Income Tax Credit (EITC)
For tax year 2017, the maximum earned income tax credit (EITC) for low and moderate income workers and working families increased to $6,318 (up from $6,269 in 2016). The maximum income limit for the EITC increased to $53,930 (up from $53,505 in 2016) for married filing jointly. The credit varies by family size, filing status, and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Individuals – Education Expenses

Coverdell Education Savings Account
You can contribute up to $2,000 a year to Coverdell savings accounts in 2017. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.

American Opportunity Tax Credit
For 2017, the maximum American Opportunity Tax Credit that can be used to offset certain higher education expenses is $2,500 per student, although it is phased out beginning at $160,000 adjusted gross income for joint filers and $80,000 for other filers.

Employer-Provided Educational Assistance
In 2017, as an employee, you can exclude up to $5,250 of qualifying post-secondary and graduate education expenses that are reimbursed by your employer.

Lifetime Learning Credit
A credit of up to $2,000 is available for an unlimited number of years for certain costs of post-secondary or graduate courses or courses to acquire or improve your job skills. For 2017, the modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $112,000 for joint filers and $56,000 for singles and heads of household.

Student Loan Interest
In 2017 you can deduct up to $2,500 in student-loan interest as long as your modified adjusted gross income is less than $65,000 (single) or $135,000 (married filing jointly). The deduction is phased out at higher income levels. In addition, the deduction is claimed as an adjustment to income, so you do not need to itemize your deductions.

Individuals – Retirement

Contribution Limits
For 2017, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $18,000 (same as 2016). For persons age 50 or older in 2017, the limit is $24,000 ($6,000 catch-up contribution). Contribution limits for SIMPLE plans remain at $12,500 (same as 2016) for persons under age 50 and $15,500 for anyone age 50 or older in 2017. The maximum compensation used to determine contributions increased to $265,000.

Saver’s Credit
In 2017, the adjusted gross income limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and-moderate-income workers is $62,000 for married couples filing jointly, $46,500 for heads of household, and $31,000 for married individuals filing separately and for singles.

Please call if you need help understanding which deductions and tax credits you are entitled to.

• By Leon Clinton
• December 3, 2017

December 11

Employees who work for tips – If you received $20 or more in tips during November, report them to your employer. You can use Form 4070.

December 15

Corporations – Deposit the fourth installment of estimated income tax for 2017. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.

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

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

• By Leon Clinton
• December 1, 2017

Let’s say you have a regular customer who used to pay on time, but he’s been hit-and-miss lately. How do you get him caught up? Or, one of your customers thinks she’s paid you more than she owes. How do you straighten out this account?

Both of these situations have a similar solution: QuickBooks’ Statements.

QuickBooks’ statements provide an overview of every transaction that has occurred between you and individual customers during a specified period of time. They’re easy to create, easy to understand, and can be effective at resolving payment disputes.

A Simple Process

Here’s how they work. Click Statements on the home page, or open the Customers menu and select Create Statements. A window like this will open:

Figure 1: QuickBooks provides multiple options on this screen so you create the statement(s) you need.

First, make sure the Statement Date is correct, so that your statement captures the precise set of transactions that you want. Next, you will need to tell QuickBooks what that set is. Should the statement(s) include transactions only within a specific date range? If so, then click the button in front of Statement Period From, and enter that period’s beginning and ending dates by clicking on the calendar graphic. If you would rather, you can include all open transactions by clicking on the button in front of that option. As you can see in the screenshot above, you can choose to Include only transactions over a specified number of days past due date.

Choosing Customers

Now, you need to tell QuickBooks which customers you want to include in this statement run. Your options here are:

• • All Customers.

• • Multiple Customers. When you click on this choice, QuickBooks displays a Choose button. Click on it, and your customer list opens in a new window. Click on your selections there to create a check mark. Click OK to return to the previous window.

• • One Customer. QuickBooks displays a drop-down menu. Click the arrow on the right side of the box, and choose the correct one from the list that opens.

• • Customers of Type. Again, a drop-down list appears, but this one contains a list of the Customer Types you created to filter your customer list, like Commercial and Residential. You would have assigned one of these to customers when you were entering data in their QuickBooks records (click the Additional Info tab in a record to view).

• Preferred Send Method. E-mail or Mail?

Miscellaneous Options

At the top of the right column, you can select a different Template if you would like, or Customize an existing one. Not familiar with the options you have to change the layout and content of forms in QuickBooks? Let one of our QuickBooks experts introduce you to the possibilities.

Below that, you can opt to Create One Statement either Per Customer or Per Job. The rest of the choices here are pretty self-explanatory–except for Assess Finance Charges. If you have never done this, then it may be helpful to call the office and arrange for a QuickBooks pro to work with you on this complex process.

When you are satisfied with the options that you have selected in this window, click the Preview button in the lower left corner of the window (not pictured here). QuickBooks will then prepare all the statements in the background, and display the first one. Click Next to view them one by one. At the bottom of each, you will see a summary of how much is due in each aging period, like this:

Figure 2: It is easy to see how much each customer is past due within each aging period. This summary appears at the bottom of statements.

After you have checked all the statements, click the Print or E-mailbutton at the bottom of the window.

Other Avenues

Your company’s cash flow depends on the timely payment of invoices. Sending statements is only one way to encourage your customers to catch up on their past due accounts. There are many others, like opening a merchant account so customers can pay you online with a bank card or electronic check. If poor cash flow is threatening the health of your business, a QuickBooks professional can help.

• By Leon Clinton
• November 30, 2017