2018 tax reform changes: At a glance
Some of the most significant tax changes since the 1980's recently took effect with the passing of the Tax Cuts & Jobs Act. In brief, below are the revisions:
- Reduces income tax brackets. The bill retains seven brackets, but at reduced rates, with the highest tax bracket dropping to 37 percent from 39.6 percent.
- Doubles standard deductions. The standard deduction nearly doubles to $12,000 for single filers and $24,000 for married filing jointly. To help cover the cost, personal exemptions and most additional standard deductions are suspended.
Your tax-time financial review
Now is the perfect time to review your financial affairs. You have to gather information to prepare your tax return at this time. Why not take one more step and do something positive for the well-being of your wallet?
The following suggestions will help you with your financial review:
• Talk to your family. You should factor in the financial decisions and goals of your spouse and children.
• Put your financial goals in writing. Figure out how much money you'll need to meet each goal, when you'll need it and how you'll get it.
Dugan & Lopatka welcomes two associates
Michelle is a 2016 graduate of Olivet Nazarene University where she received her Bachelor of Science in Accounting. During her college career she served as a supplemental instructor, assisting professors in both financial and managerial accounting courses and guiding students in their coursework. She was also a four year member of the women’s varsity soccer team.
Jennifer is a 2016 graduate of the University of Illinois, where she received her masters in accounting science degree. She also received her bachelor of science in accountancy from U of I. While a student at U of I, she served as an account reconciler with the University’s Department of Kinesiology and Community Health. She also worked in Finance Operations at Zurich American Insurance Company in Schaumburg.
Both will focus their practice on assisting a variety of companies and not-for-profit organizations including religious, educational, and professional associations.
Trump signs sweeping tax overhaul
The Tax Cuts and Jobs Act was signed into law by President Trump on December 22. It is considered the most significant overhaul of the U.S. tax code in 30 years.
This historic Act calls for lowering the individual and corporate tax rates, repealing countless tax credits and deductions, enhancing the child tax credit, boosting business expensing, and more. The bill also impacts the Affordable Care Act, or Obamacare, effectively repealing the individual shared responsibility requirement.
Click Here to learn more about how these tax changes will impact you as an individual or business owner.
Dugan & Lopatka welcomes Eric Thompson
Eric is a graduate of the University of Illinois at Urbana-Champaign, holding both a Bachelor and Master in Accounting Science degree.
As an associate, Eric’s responsibilities include assisting clients with their monthly, quarterly, and annual accounting work such as conducting reviews and compilations of financial statements and closing the books at the end of a client's accounting cycle. Eric also prepares tax returns for businesses and their individual owners.
Eric served as an accounting intern at Dugan & Lopatka and also Luse Holdings, Inc. (The Construction Financial Management Association) prior to joining the firm.
4 smart ways to cut business costs
Keeping costs under control is crucial in today's challenging business environment. Without a doubt, one of the quickest ways for a business to cut costs is through staff reduction. But cutting jobs is not always the best cost-cutting strategy. Drastic job cuts can lead to a vicious cycle of reduced productivity, followed by even slower growth and decreased profitability. Replacing skilled workers when times improve may be difficult, leaving your company to struggle longer still.
Take a look at some alternative cost-control strategies:
IRS lowers business mileage rate for 2016
The standard mileage rates you can use to calculate your deductible vehicle expenses during 2016 for business, medical, and moving mileage have decreased from last year. Here's a recap.
A business expensing primer
Knowing whether you can or can't expense a purchase for business purposes can be complicated. That's why there are a few hard and fast rules to help you make the best decisions.
According to the IRS, business expenses must be ordinary and necessary to be deductible. That means they are common and accepted in your business, as well as helpful and appropriate. You'll need to maintain records (such as journals and ledgers) and supporting documents (e.g., receipts, invoices) to substantiate your deductions. Certain expenses are subject to extra requirements, as described below.
Travel expenses pertain to business trips and can include transportation to and from: your destination, airports, your hotel and business meeting places. They also generally include lodging, meals, tips and other related incidentals.
- Maintain trip logs describing your business expenses and the purpose of each. If your trip is mostly for business but includes personal components, separate them in your log. These nondeductible personal items could include extending your stay for a vacation or taking personal side trips.
- Deduct travel-related meal costs, but only up to the 50 percent are allowed by the IRS.
- Rely on estimates to determine the business vs. personal components of your expenses.
- Deduct any of your travel expenses if your trip is primarily for personal purposes.
- Deduct any of your meal costs if they could be considered unreasonably "lavish or extravagant."
Entertainment expenses need to be either directly related to or associated with the conduct of your business. That means that business is the main purpose of the activities and it's highly likely you'll get income or future business benefits. Expenses from entertainment that isn't considered directly related might still be deductible if they are associated with your business and happen right before or after an important business discussion.
- Keep records of entertainment expenses, including clear descriptions of the nature, dates and times of the pertinent business activities or discussions.
- Deduct only up to 50 percent of entertainment expenses, as allowed by the IRS.
- Claim the costs of pleasure boat outings or entertainment facilities (e.g., hunting lodges).
Business use of your personal car is calculated according to your actual business-related expenses, or by multiplying your business mileage by the prescribed IRS rate (53.5 cents per mile in 2017). This is called the standard mileage rate.
- Log odometer readings for each business trip and record your business purpose.
- Claim actual basis deductions by applying the ratio of your business-to-total mileage.
- Claim mileage or expenses pertaining to commuting to and from work.
Illinois shows improvement in State Business Tax Climate Index
The Tax Foundation recently released its 2016 State Business Tax Climate Index and Illinois improves from 31st to 23rd due to the sunset of higher corporate and individual income taxes enacted in 2011. Each year the Tax Foundation compiles the Index to rank the 50 U.S. states across more than 100 variables in the areas of corporate income tax, individual income tax, sales tax, property tax, and unemployment insurance tax.
Is your business waving a red flag at the IRS?
The chance the IRS will target your business for a federal tax audit is usually low. However, if your tax return for your business includes certain red flags, you boost your odds of being audited. Here are a few of the most common audit triggers that are likely to grab the attention of the IRS.
Continuous losses. If you report a net loss on a Schedule C in more than two out of the last five years, the IRS may consider your business a hobby. If deemed a hobby, you can deduct expenses only up to the amount of your hobby's total income. Enjoy rebuilding cars? Great. But if you never turn a profit, don't expect the IRS to consider it more than a hobby.
Good communication keeps your customers happy
As a business owner, you know how much effort goes into attracting new customers. So once you've found a new customer, you want to keep that customer as long as possible. Good communication can help. Make your customer feel known, understood, and appreciated at every stage of the relationship – before the sale, while you're reaching a deal, and after you've concluded the sale.