Mark Korte Featured as a 2019 Top Accountant

Mark Korte, CPA, CCIFP was recently featured in the August issue of St. Louis Small Business Monthly as a “Top Accountant”. Mark was one of only three local CPAs honored. In the feature, Mark was asked was motivated him to help business owners. He responded saying, “Successful business owners have a vision of what their business can be and where they want their business to go. It is exciting to help them realize their vision and be by their side helping them through the hurdles along the way. Being a part of their team and working toward their goals is very fulfilling. Assisting them with building successful businesses also helps strengthen our communities, which helps us all.”

Congratulations to Mark on this recognition!

To read Mark’s full interview, click here to check out this month’s edition of Small Business Monthly.

Proudly Announcing our 2019 Promotions

We are excited to share that a total of 25 professionals were recently promoted throughout the firm. Congratulations  and we wish you all the best in your new roles!

Manager

Crystal Bock, CPA (Jerseyville)

Supervisor

Jason Grunlund, CPA (Edwardsville)

Christopher Sobrino, CPA (Alton)

Senior Accountant

Patrick Meyer, CPA (Highland)

Taylor Jarvis, CPA (Highland)

Andrew Patterson (Edwardsville)

Nick Hoff, CPA (Alton)

Kayla Ervin (Edwardsville)

Katelin Feldman (Alton)

Travis Wellen, CPA (Belleville)

Noah Feldmeier, CPA (Belleville/Columbia)

Chad Frerichs, CPA (Alton)

Michael Kanallakan, CPA (Jerseyville)

Semi-Senior Accountant

Kyle Moist (Columbia)

Matt Caraway (Belleville)

Alyssa Kelsey (Belleville)

Kara Evans (Jerseyville)

Aaron Schumacher (Belleville)

Chloe Brock (Belleville)

Lauren Nettles (Carrollton)

Alex Stoff, CPA (Highland)

Julia Billhartz (Belleville)

Jordan Vonder Haar (Edwardsville)

Accounting Supervisor

Kayla Mitchell (Belleville)

Josh Andres Promoted to Principal

We are excited to announce the recent promotion of Josh Andres, CPA to Principal!

Josh joined our firm in 2006 and serves clients out of the Alton office. He is a senior leader on the Construction Accounting Team and also specializes in working with governmental agencies and privately held businesses.

Josh graduated with both his B.S. and M.B.A. from Southern Illinois University Edwardsville and earned his CPA designation in 2010. He is active in the Riverbend Growth Association, the North Alton Godfrey Business Council, the Young Professionals Group of Alton, and serves on the Board of Directors for the Boys and Girls Club of Alton.

On behalf of his team at Scheffel Boyle, we’d like to wish Josh congratulations on this great accomplishment!

What Every Teacher Should Know About Their Usual Tax Break

When teachers are setting up their classrooms for the new school year, it’s common for them to pay for a portion of their classroom supplies out of pocket. A special tax break allows these educators to deduct some of their expenses. This educator expense deduction is especially important now due to some changes under the Tax Cuts and Jobs Act (TCJA).


Old School

Before 2018, employee business expenses were potentially deductible if they were unreimbursed by the employer and ordinary and necessary to the “business” of being an employee. A teacher’s out-of-pocket classroom expenses could qualify.

But these expenses had to be claimed as a miscellaneous itemized deduction and were subject to a 2% of adjusted gross income (AGI) floor. This meant employees, including teachers, could enjoy a tax benefit only if they itemized deductions (rather than taking the standard deduction) and only to the extent that all their deductions subject to the floor, combined, exceeded 2% of their AGI.

Now, for 2018 through 2025, the TCJA has suspended miscellaneous itemized deductions subject to the 2% of AGI floor. Fortunately, qualifying educators can still deduct some of their unreimbursed out-of-pocket classroom costs under the educator expense deduction.

New School

Back in 2002, Congress created the above-the-line educator expense deduction because, for many teachers, the 2% of AGI threshold for the miscellaneous itemized deduction was difficult to meet. An above-the-line deduction is one that’s subtracted from your gross income to determine your AGI.

You don’t have to itemize to claim an above-the-line deduction. This is especially significant with the TCJA’s near doubling of the standard deduction, which means fewer taxpayers will benefit from itemizing.

Qualifying elementary and secondary school teachers and other eligible educators (such as counselors and principals) can deduct above the line up to $250 of qualified expenses. If you’re married filing jointly and both you and your spouse are educators, you can deduct up to $500 of unreimbursed expenses — but not more than $250 each.

Qualified expenses include amounts paid or incurred during the tax year for books, supplies, computer equipment (including related software and services), other equipment and supplementary materials that you use in the classroom. For courses in health and physical education, the costs of supplies are qualified expenses only if related to athletics.

More Details

Some additional rules apply to the educator expense deduction. If you’re an educator or know one who might be interested in this tax break, please contact us for more details.

No Surprises: Why You Should Check Your Tax Bracket

Many taxpayers learned some tough lessons upon completing their 2018 tax returns regarding the changes brought forth by the Tax Cuts and Jobs Act (TCJA). If you were one of them, or even if you weren’t, now’s a good time to check your bracket to avoid any unpleasant surprises next April.

Under the TCJA, the top income tax rate is now 37% (down from 39.6%) for taxpayers with taxable income over $500,000 for 2018 (single and head-of-household filers) or $600,000 for 2018 (married couples filing jointly). These thresholds are higher than they were for the top rate in 2017 ($418,400, $444,550 and $470,700, respectively), so the top rate probably wasn’t too much of a concern for many upper-income filers.

But some singles and heads of households in the middle and upper brackets were likely pushed into a higher tax bracket much more quickly for the 2018 tax year. For example, for 2017 the threshold for the 33% tax bracket was $191,650 for singles and $212,500 for heads of households. For 2018, the rate for this bracket was reduced slightly to 32% — but the threshold for the bracket is now only $157,500 for both singles and heads of households.

So, a lot more of these filers found themselves in this bracket and many more could so again in 2019. Fortunately for joint filers, their threshold for this bracket has increased from $233,350 for 2017 to $315,000 for 2018. The thresholds for these brackets have increased slightly for 2019, due to inflation adjustments. If you expect this year’s income to be near the threshold for a higher bracket, consider strategies for reducing your taxable income and staying out of the next bracket. For example, you could take steps to accelerate deductible expenses.

But carefully consider the changes the TCJA has made to deductions. For example, you might no longer benefit from itemizing because of the nearly doubled standard deduction and the reduction or elimination of certain itemized deductions. For 2019, the standard deduction is $12,200 for singles and married individuals filing separately, $18,350 for heads of households and $24,400 for joint filers.

Mark Your Calendar for Upcoming Tax Deadlines!

July 15 — If the monthly deposit rule applies, employers must deposit the tax for payments in June for Social Security, Medicare, withheld income tax and nonpayroll withholding.

July 31 — If you have employees, a federal unemployment tax (FUTA) deposit is due if the FUTA liability through June exceeds $500.

  • The second quarter Form 941 (“Employer’s Quarterly Federal Tax Return”) is also due today. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until August 12 to file the return.

August 15 — If the monthly deposit rule applies, employers must deposit the tax for payments in July for Social Security, Medicare, withheld income tax and nonpayroll withholding.

September 16 — Third quarter estimated tax payments are due for individuals, trusts and calendar-year corporations.

  • If a six-month extension was obtained, partnerships should file their 2018 Form 1065 by this date.
  • If a six-month extension was obtained, calendar-year S corporations should file their 2018 Form 1120S by this date.
  • If the monthly deposit rule applies, employers must deposit the tax for payments in August for Social Security, Medicare, withheld income tax and nonpayroll withholding.

September 30 — Calendar year trusts and estates on extension must file their 2018 Form 1041.

Scheffel Boyle Climbs Higher on the Biz Journal Annual List

We are excited to share that we have climbed in the rankings on the St. Louis Business Journal’s annual Largest Accounting Firms lists. The Journal publishes two lists for ranking CPA firms each year: one based on number of CPAs and the other on number of professionals. Coming in at 14th on both lists last year, we are now ranked as the 13th largest by number of CPAs and the 12th largest by number of professionals in the entire St. Louis region.

Thank you to our clients, employees, and community partners for all they’ve done to help us grow and continue serving the St. Louis and Metro regions.

Click here to view St. Louis’ largest accounting firms ranked by CPAs.

Click here to view St. Louis’ largest accounting firms ranked by professionals.

Estate Planning Portability Lives on Under the TCJA

When the TCJA was passed, the big estate planning news was that the federal gift and estate tax exclusion doubled from $5 million to an inflation-indexed $10 million. It was further indexed for inflation to $11.18 million for 2018 and now $11.4 million for 2019.

Somewhat lost in the clamor, however, was (and is) the fact that the new law preserves the “portability” provision for married couples. Portability allows your estate to elect to permit your surviving spouse to use any of your available estate tax exclusion that is unused at your death.

A Brief History

At the turn of this century, the exclusion was a mere $675,000 before being hiked to $1 million in 2002. By 2009, the exclusion increased to $3.5 million, while the top estate tax rate was reduced from 55% in 2000 to 35% in 2010, among other changes.

After a one-year estate tax moratorium in 2010, the Tax Relief Act (TRA) of 2010 reinstated the estate tax with a generous $5 million exclusion, indexed for inflation, and a top 35% tax rate. The American Taxpayer Relief Act (ATRA) of 2012 made these changes permanent, aside from increasing the top rate to 40%.

Most important, the TRA authorized portability of the estate tax exclusion, which was then permanently preserved by the ATRA. Under the portability provision, the executor of the estate of the first spouse to die can elect to have the “deceased spousal unused exclusion” (DSUE) transferred to the estate of the surviving spouse.

How the DSUE Works

Let’s say Kevin and Debbie, who have two children, each own $5 million individually and $10 million jointly with rights of survivorship, for a total of $20 million. Under their wills, all assets pass first to the surviving spouse and then to the children.

If Debbie had died in early 2019, the $10 million ($5 million owned individually and $5 million held jointly) in assets would be exempt from estate tax because of the unlimited marital deduction. Thus, her entire $11.4 million exclusion would remain unused. However, if the election is made upon her death, Kevin’s estate can later use the $11.4 million of the DSUE from Debbie, plus the exclusion for the year in which Kevin dies, to shelter the remaining $8.6 million from tax, with plenty to spare for some appreciation in value.

What would have happened without the portability provision? For simplicity, let’s say that Kevin dies later in 2019. Without being able to benefit from the unused portion of Debbie’s exclusion, the $11.4 million exclusion for Kevin in 2019 leaves the $8.6 million subject to estate tax. At the 40% rate, the federal estate tax bill would amount to a whopping $3.44 million.

Although techniques such as a traditional bypass trust may be used to avoid or reduce estate tax liability, this example demonstrates the potential impact of the portability election. It also emphasizes the need for planning.

Other Points of Interest

Be aware that this discussion factors in only federal estate taxes. State estate taxes may also have a significant impact, particularly in some states where the estate tax exemption isn’t tied to the federal exclusion.

Also, keep in mind that, absent further legislation, the exclusion amount is slated to revert to pre-2018 levels after 2025. Portability continues, although, for those whose estates will no longer be fully sheltered, additional planning must be considered.

Furthermore, portability isn’t always the best option. Consider all relevant factors, including nontax reasons that might affect the distribution of assets under a will or living trust. For instance, a person may want to divide assets in other ways if matters are complicated by a divorce, a second marriage, or unusual circumstances.

Details, Details

Every estate plan includes details that need to be checked and rechecked. We can help you do so, including deciding whether portability is right for you.

Scheffel Boyle Employees Raise Over $5,000 for Big Brothers Big Sisters

We had a great season this year for our annual Bowl for Kids’ Sake fundraiser, benefiting Big Brothers Big Sisters of Southwestern Illinois. Between our two teams, our employees raised an outstanding $5,100 to support the programs and overall mission of this wonderful, local organization.

Our bowlers go above and beyond for this event and we are so proud of all they accomplish. Thank you to everyone who supported them along the way and helped them reach their $5,000 goal.

The Tax-Manian Devils and the Ten-Key Strikers

Sarah Smith, Chad Frerichs, Elizabeth Heil, Josh Andres, Tyler Jackson, Lisa Bohnenstiehl, Marissa Dycus, and Jenna Andres

(Not pictured: Crystal Bock and Carrie Evans)

Ensuring Your Long-Term Care Policy is Tax-Qualified

A long-term care insurance policy supplements your traditional health insurance by covering services that assist you or a loved one with one or more activities of daily living. Such activities include eating, bathing, dressing, toileting and transferring (in and out of bed, for example).

Long-term care coverage is relatively expensive, but it may be possible to reduce the cost by purchasing a tax-qualified policy. Generally, benefits paid in accordance with a policy are tax-free. In addition, if a policy is tax-qualified, your premiums are deductible (as medical expenses) up to a specified limit if you qualify.

To qualify, a policy must:

  • Be guaranteed renewable and noncancelable regardless of health,
  • Not delay coverage of pre-existing conditions more than six months,
  • Not condition eligibility on prior hospitalization,
  • Not exclude coverage based on a diagnosis of Alzheimer’s disease, dementia, or similar conditions or illnesses, and
  • Require a physician’s certification that you’re either unable to perform at least two of six ADLs or you have a severe cognitive impairment and that this condition has lasted or is expected to last at least 90 days.

It’s important to weigh the pros and cons of tax-qualified policies. The primary advantage is the premium deduction. But keep in mind that medical expenses are deductible only if you itemize and only to the extent they exceed 10% of your adjusted gross income for 2019, so some people don’t have enough medical expenses to benefit from this advantage. It’s also important to weigh any potential tax benefits against the advantages of nonqualified policies, which may have less stringent eligibility requirements.