Welcoming Some New Members of the CPA Club!

We are excited to share that two of our employees passed the CPA exam! Michael Kanallakan of Jerseyville and Alex Stoff of Highland are our newest CPAs.

Congratulations on this amazing milestone in your careers!

 

Social Security Administration Scam Calls

Our offices have received a few client calls this holiday season concerned about phone calls they recently received from someone claiming to be from the Social Security Administration (SSA). The “SSA” said they were calling to verify our client’s social security number and other personal information. Obtaining your social security number is a surefire way for scammers to create a world of problems for you. Your social security number is a key piece of information used to steal your identity. If you get a phone call from someone claiming to be from the SSA needing to verify your information, don’t give it out!

The SSA published this blog post about this malicious activity earlier this year, and it has some great advice on what to do if you receive one of these scam calls.

Is a PTO Contribution Arrangement Right for Your Business?

Many businesses find themselves short-staffed from Thanksgiving through December 31 as workers scramble to use, rather than lose, their remaining time off. Indeed, your workplace may resemble a ghost town if you limit how many vacation days employees can roll over to the new year. A paid time off (PTO) contribution arrangement may be the solution.

A PTO contribution program allows employees with unused vacation hours to elect to convert them to retirement plan contributions. If the plan has a 401(k) feature, it can treat these amounts as a pretax benefit, similar to normal employee deferrals. Alternatively, the plan can treat the amounts as employer profit sharing, converting excess PTO amounts to employer contributions.

A PTO contribution arrangement may be a better option than increasing the number of days employees can roll over. Larger rollover limits can result in employees building up large balances that create a significant liability on your books.

To offer a PTO contribution arrangement, simply amend your 401(k) plan. However, you must still follow the plan document’s eligibility, vesting, rollover, distribution and loan terms. Additional rules may apply. To learn more about PTO contribution arrangements, including their tax implications, please contact us.

Accelerating Your Property Tax Deduction

Smart timing of deductible expenses can reduce your tax liability, and poor timing can increase it unnecessarily. One deductible expense you may be able to control to your advantage is your property tax payment.

You can prepay (by December 31) property taxes that relate to 2018 (the taxes must be assessed in 2018) but that are due in 2019, and deduct the payment on your return for this year. But you generally can’t prepay property taxes that relate to 2019 (they must be assessed in 2019) and deduct the payment on this year’s return. Also beware of the dollar-amount limitation discussed below.

It’s important that we mention that Illinois is one of the few states that this would be allowed. Depending on how your state collects property taxes, this may not apply to you. Please contact us for specific questions.

A Big Decision

Accelerating deductible expenses such as property tax payments is typically beneficial. Prepaying your property tax may be especially advantageous if your tax rate under the Tax Cuts and Jobs Act (TCJA) is expected to decrease in the next year. Deductions save more tax when tax rates are higher.

But not every tax rate has dropped for the 2018 tax year under the TCJA — the very lowest rate, 10%, has been retained, as well as the 35% rate (though the income brackets for these rates have changed). So, some taxpayers may not save any more by prepaying. Also, taxpayers who expect to substantially increase their income next year, pushing them into a higher tax bracket, may benefit by not prepaying their property tax bill.

Another important point is that, under the TCJA, for tax years 2018 through 2025 the itemized deduction for all state and local taxes is limited to $10,000 ($5,000 for married filing separately).

More Considerations

Property tax isn’t deductible for purposes of the alternative minimum tax (AMT). So, if you’re subject to the AMT this year, a prepayment may hurt you because you’ll lose the benefit of the deduction. Before prepaying your property tax, make sure you aren’t at AMT risk for 2018.

Also, don’t forget that, for 2018 to 2025, the TCJA suspends personal itemized exemptions but roughly doubles the standard deduction amounts (for 2018) to $12,000 for singles and separate filers, $18,000 for heads of households, and $24,000 for joint filers. This may affect your decision on whether to prepay.

Specific Strategies

Not sure whether you should prepay your property tax bill or what other deductions you might be able to accelerate into 2018 (or should consider deferring to 2019)? Contact us. We can help you determine your optimal year-end tax planning strategies.