​S Corp Savings If you own a business as a garden variety single-member LLC (one owner or shareholder), your business income will be reported on your personal tax return under Schedule C and is subject to self-employment tax (currently 15.3%) and ordinary income tax.

The same is true for a business that has not formed a corporation such as a sole proprietor and partnerships. So, you could easily pay an average of 40% (15.3% in SE taxes + 25% in income taxes) on all your net business. These saving are available if you follow some basic rules when running your business. Owner reasonable salary is required to fulling enjoy the S-Corp benefits. McVay has payroll services for S-Corp owners as low as 99.00 per month - Full Payroll Service and Features. 

Your S-Corp income is only taxed at your personal Federal rate. Wow! However, when your partnership, LLC or corporation is taxed as an S-Corp you are both an employee and a shareholder (think investor). As an employee, your income is subjected to all the usual taxes that you would see on a paystub- federal taxes, state taxes, Social Security taxes, Medicare taxes, unemployment and disability. However, as a shareholder or investor, you are simply getting a return on your investment much like a dividend which is not subjected to self-employment taxes. Net savings is about 8-10% of your net business income after expenses

Mike McVay - Tax Accountant * S-Corp & LLC Expert - 850-725-5696
Mike@MikeMcVay.com 

What Are Quarterly Taxes?Quarterly taxes are estimated tax payments to the IRS made throughout the year (instead of all at once on Tax Day in April). These payments are based on an estimation of your income for the current year. Most people use their previous year’s taxes as a guide.

Everyone is required to pay taxes. If you’re self-employed or work for the man, your taxes are paid in one of two ways:

1. Withholding taxes from your paycheck (W-2 workers)
2. Paying quarterly taxes (1099 workers)

Traditional (W-2) employees usually don't owe quarterly taxes because taxes are withheld from their pay. However, if you are self-employed (ie: real estate agents, Uber drivers, or any freelancers or contractors), taxes are not withheld from your pay. That's right--you are responsible for paying taxes on your own!

How Do I Know If I Owe Quarterly Taxes?If you are self-employed and turning a profit, you probably owe quarterly taxes.

However, it’s possible that you’re already paying enough in taxes during the year. For example, if you have a W-2 full-time or part-time job where your taxes are already being withheld for you and you typically get a tax refund, you may not need to pay quarterly taxes.
Alternatively, you do not need to pay quarterly if you have already paid at least:

1. 90% of your estimated tax owed for the current year
   OR
2. 100% of the tax amount owed shown on your return for the prior year

In this case, your tax liability is already almost completely covered. Keep in mind, this is most common for people who have received a refund for the previous year’s tax and use that to pay their upcoming year’s taxes. For example, if you received a refund on your 2017 taxes in April and elected to pay it toward your 2018 taxes, you may be covered for estimated taxes, but only if that refund equals 90% of your expected 2018 taxes or was equal to 100% of your 2017 taxes owed.

What If I Didn't Earn That Much?Even if you only earned a little, you may still need to pay quarterly taxes. If you expect to owe $1,000 or more in taxes for the year (after deduction and credits), the IRS expects you to make quarterly tax payments on your business profit for that tax year. As a reminder, you are making a profit if your self-employment income is higher than your business deductions.

Put simply: if you have income that didn't have taxes withheld and you expect to owe $1,000 or more in taxes on all of that combined income in April, then you should consider paying quarterly taxes. Mike McVay, Tax Services in Pensacola Fl 850-725-5696

​It is not a major disaster if you owed some money when you filed your return-after all, you would rather have the use of the funds for as long as possible. What you want to avoid is having to pay the IRS a penalty for underpaying your taxes during the year. If you owe the estimated tax underpayment penalty, which is nondeductible, you are, in effect, paying the IRS interest for part of the money you should have prepaid during the year for taxes but did not.

On the other hand, if you received a large refund on last year's return, you made an interest-free loan to the government which is something you may want to avoid this year. If that happened, you should consider reducing the amount of withholding taken from your salary and/or the amount of estimated tax payments you make.

Here are some pointers to keep you on even keel when it comes to estimated taxes.
Basic rules. There is no estimated tax underpayment penalty for the 2018 tax year if the total tax on your return reduced by withholding (but not by estimated tax payments) is less than $1,000. If the amount owed on an individual income tax return comes to $1,000 or more after subtracting withheld tax, the estimated tax underpayment penalty generally will not apply if your "required annual payment" (i.e., the amount that must be prepaid during the year in the form of withheld tax and estimated tax payments) equals at least the smaller of two amounts:

• 90% of your tax bill for 2018, or

• 100% of your tax bill for 2017.

For example, suppose your tax bill for 2017 was $12,000, and your tax bill for 2018 will come to $15,000 (90% of which is $13,500). In this case, you must prepay at least $12,000 of your tax bill during 2017 to avoid the underpayment penalty. On the other hand, if the tax you will owe for 2018 will only be $10,000, you will have to make timely estimated tax payment of only $9,000 for 2018 to avoid the penalty.

A tougher rule applies if your adjusted gross income for 2017 exceeded $150,000 ($75,000 for married persons filing a separate return). During 2018, to avoid the underpayment penalty, you must prepay the smaller of 90% of the tax for 2018, or110% of the tax for 2017.

The IRS can waive an underpayment penalty if you did not make the payment because of a casualty, disaster, or other unusual circumstance, and it would be inequitable to impose the penalty. The penalty also can be waived for reasonable cause during the first two years after you retire (after reaching age 62) or become disabled.

It is a pay-as-you-go system. In general, one-quarter of your required annual payment must be paid by April 15, 2019, June 15, 2019, September 15, 2019, and January 15, 2020. Tax withheld from your salary is treated as an estimated tax payment, and an equal part of withheld tax generally is treated as paid on each installment date.

You may be able to make smaller payments under the annualized income method, which is useful to people whose income flow is not uniform over the year, perhaps because of a seasonal business. You may also want to use the annualized income method if a significant portion of your income comes from capital gains on the sale of securities which you sell at various times during the year.

Time for a checkup. Although you now know what your 2018 tax bill came to, you probably do not quite know what your 2019 tax will be. While it cannot be predicted with absolute certainty, your accountant can project what your 2019 tax will be based on your financial picture thus far, as well as on events you anticipate will occur and transactions you anticipate finalizing in the balance of this year. It would be a good idea for you and your accountant to get together well in advance of the next estimated tax installment to see how your payments are tracking and make any necessary adjustments to your wage withholding and/or estimated tax payments. It is possible a review of your situation could determine you are withholding too much rather than too little.

You and your accountant should also review whether changes in your personal or financial situation require a change in estimated tax payments or withholding. Mike McVay, Tax Accountant offers quarterly check-up so you don't have year end surprises. 
​
Mike McVay, Accountant - 850-725-5696 Mike@MikeMcVay.com

1. You don’t have all your tax and financial information yet.If you have a small business, for example, you may still be working on the books. Or you could be waiting for a letter confirming a charitable contribution. You may even still need the basis of stock you sold or a specific document from a financial institution. If you’re waiting on information that’s critical to helping you file your return accurately, it’s likely best for you to wait until you have that information.

2. A partnership or other organization hasn’t sent out forms.If you are a partner in a business and are waiting to receive your Schedule K-1, it’s perfectly fine to file an extension and wait to receive that document.

3. You have an emergency that prevents you from completing your return.Unexpected hospitalization or long-term illness, a family emergency, or just crunch time at work can make it difficult to finish your return. No worries. Give yourself a little more time for this important financial task.

4. You need more time to make contributions or change a retirement plan.If you are considering funding a retirement plan or starting a new one for the 2017 tax year, you may want to file an extension so you have more time to complete that task. Contributions to an IRA are tax-deductible, which you can claim on your 2017 return to reduce your taxable income. Just remember, you must make that decision by the April 17 filing deadline.

5. You want to make elections on your return, but you won’t know which election is best until later.If you have losses that you can carry back to prior years, you may not know until later in the current year if that’s a good idea or if you should use the losses on a future tax return.

Mike McVay, Tax Accountant will file all client tax extensions at no charge. Call Mike McVay today to get the process started. 
5336 N Blue Angel Pkwy Pensacola, FL 32526 * 850-725-5696
Mike@MikeMcVay.com * www.PensacolaFLTax.com 

3 Ways for Nonprofits to Level up Their Finances. Nonprofit organizations all face a familiar crunch: how to do more with less. Their missions are noble. But there’s always a limited number of employees to get the job done.
Now, with the advancement of cloud-based technology, accounting automation, and mobile payments, nonprofits have the ideal opportunity to level up their finances and maximize their resources.
​
McVay Business Services is a Bill.com Specialist. Bill.com & QuickBooks Online subscription is included in all non-profit weekly or month CFO services - Mike McVay, Certified QuickBooks ProAdvisor. QuickBooks Accountant & Bookkeeper * 850-725-5696

Nonprofit Champion #1: Accounting Automation
Accounting automation digitizes grunt work and runs those processes for you.
Let’s start with bill payment. If three people need to see an invoice to approve it for payment, there’s typically an owner of the process who is tracking people down, sending reminders, and continually checking where it is in the review process.
While this process is important (you have to pay the bills!), shouldn’t there be a way to make it easier?

With accounting automation for bill payment:

• An invoice enters the system.
• The system begins the review process based on the non-profit’s guidelines and the information in the invoice
• It alerts the first reviewer and will remind them if they haven’t responded in a certain amount of time.
• It continues this process through to the release of payment.

Time Savings: With automation like this, the time your nonprofit spends on bill payment can be cut by at least 50 percent. Plus, if you integrate with solutions like QuickBooks Online or Xero, all data will automatically sync between systems. You have real-time, accurate data always at your fingertips.

Nonprofit Champion #2: Mobile Payments and Mobility
Nonprofits—and their donors—are often spread across a country, continent, or beyond. Oftentimes, sitting at a desk every day isn’t an option for executives and employees. They visit donors, hold fundraisers, visit with volunteers, and more. If they can’t work on the go, they’re limiting their contributions to the organization.
Imagine if you had a dangerously close-to-overdue bill. All non-profits face tight budgets, and a late fee means an unnecessary and costly expense. The only person who can sign the paper check is traveling and won’t be in the office until next week.
What do you do?
Along with automating accounting, you must mobilize it. That includes the ability to pay from mobile devices. Adopt systems that are mobile-compatible, so that activities normally confined to paper or certain workstations don’t impair progress. In the example above, that executive could view the bill and any related documents or notes on a mobile app and simply swipe to authorize an ACH payment.

Time savings: Incalculable. Can we use that when talking about accounting?

Nonprofit Champion #3: Audit-ready tracking
Audits are a way of life for nonprofits. In order to retain their status, they often undergo them on an annual basis.
This process can be inefficient, devours valuable time, and typically looks like this:

• Digging through files
• Gathering paper bills and invoices
• Finding canceled checks
• Rounding up contracts and other related documents
• Putting the pile on a conference room table
• Opening the doors to the auditor
• Spending a week working with the auditor to find additional documents
• Cleaning up and refiling everything once you’re done

Mike McVay is an experienced public accountant with affordable solutions for non-profit bill pay, non-profit payroll services and QuickBooks Accounting 850-725-5696

​What if everything you needed for an audit could be handed over in just a few clicks?
With automation, every activity and workflow is tracked and archived—from the bill’s entry to the system, through each reviewer, all notes, approval, payment, and even check images. The nonprofit gives the auditor an audit-level access to the system. From there, the auditor can locate the information they need to complete their work—they don’t even have to be onsite. They can conduct the audit from any location in a fraction of the time it normally takes.

Why the IRS audits peopleThe IRS conducts audits to minimize the “tax gap,” or the difference between what the IRS is owed and what the IRS actually receives. Sometimes audits are random, but the IRS often selects taxpayers based on suspicious activity.
We’re against subterfuge. But we’re also against paying more than you owe. As you walk the line this tax season, here are seven of the biggest red flags likely to land you in the audit hot seat.
1. Making math errorsWhen the IRS starts investigating, “oops” isn’t going to cut it. Don’t make mistakes. This applies to everyone who must file taxes. Don’t accidentally write a 3 instead of an 8. Don’t get distracted and forget to include that final zero. Mistakes happen, but make sure you double- and triple-check your numbers if you’re doing your own taxes. You’ll be hit with fines regardless of whether your mistake was intentional. If your math is a little shaky, using good tax preparation software or a tax preparer near you can help you avoid unfortunate errors.
2. Failing to report some incomeEasy way to score an audit? Don’t report part of your income.
Let’s say you’re employed herding sheep for Farmer Joe and you pick up a little extra cash writing articles for a sheep-shearing publication on a freelance basis. You may be tempted to submit only the W-2 form from your herding job and keep the freelance writing income on your Form 1099 under wraps. (A 1099 reports nonwage income from things like freelancing, stock dividends and interest.)
Well, guess what? The IRS already knows about income listed on your 1099 because the publication sent it a copy, so it’s only a matter of time before it discovers your omission.
3. Claiming too many charitable donationsIf you made significant contributions to charity, you’re eligible for some well-deserved deductions. This bit of advice is common sense: Don’t report false donations. If you don’t have the proper documentation to prove the validity of your contribution, don’t claim it. Pretty simple. Claiming $10,000 in charitable deductions on your $40,000 salary is likely to raise some eyebrows.
4. Reporting too many losses on a Schedule CThis one is for the self-employed. If you are your own boss, you might be tempted to hide income by filing personal expenses as business expenses. But before you write off your new ski boots, consider the suspicion that too many reported losses can arouse. The IRS may begin to wonder how your business is staying afloat. IRS Publication 535 has details.
We’re against subterfuge. But we’re also against paying more than you owe.
5. Deducting too many work expensesAlong the same lines as reporting too many losses is reporting too many expenses. To be eligible for a deduction, purchases must be 1) ordinary and 2) necessary to your line of work. A professional artist could claim paint and paintbrushes because such items meet both requirements. A lawyer who paints for fun and doesn’t turn a profit on the works couldn’t claim art supplies as a deduction. The question to ask is: Was the purchase absolutely necessary to performing my work duties?
6. Claiming a home office deductionHome office deductions are rife with fraud. It may be tempting to give yourself undeserved deductions for expenses that don’t technically qualify. The IRS narrowly defines the home office deduction as reserved for people who use part of their home “exclusively and regularly for your trade or business.” That means a home office can qualify if you use it for work and work only. Occasionally answering emails on your laptop in front of your 72-inch flat screen TV doesn’t qualify your living room as a deductible office space. Claim a home office deduction only if you have set off a section of your home strictly for business purposes. Be honest when you report expenses and measurements.
7. Using nice, neat, round numbersIn all likelihood, the numbers on your 1040 form and supporting documents will not be in simple, clean intervals of $100. When making your calculations, be precise and avoid making estimations. Round to the nearest dollar, not the nearest hundred. Say you’re a photographer claiming a $495.25 lens as a business expense; round that to $495, not to $500. An even $500 is somewhat unlikely, and the IRS may ask for proof.

When are 2018 Business Taxes Due?Using your entity type, you can identify what your deadline is for filing business taxes and what it would be if you elect to take advantage of the extension, but you’ll also need to take weekends and federal holidays into account.
The following table covers when each type of business entity needs to file 2018 taxes in 2019 (using the calendar year):
Partnership Tax Deadlines:Due Date:
Original tax deadline for partnerships (Form 1065)March 15, 2019
Extension tax deadline for partnerships (Form 7004)September 16, 2019
S Corporation Tax Deadlines:Due Date:
Original tax deadline for S Corporations (Form 1120S)March 15, 2019
Extension tax deadline for S Corporations (Form 7004)September 16, 2019
C Corporation Tax Deadlines:Due Date:
Original tax deadline for C Corporations (Form 1120)April 15, 2019
Extension tax deadline for C Corporations (Form 7004)October 15, 2019
Sole Proprietor Tax Deadlines:Due Date:
Original tax deadline for sole proprietors and individuals (Sch C, Form 1040)April 15, 2019
Extension tax deadline for sole proprietors and individuals (Form 4868)October 15, 2019
Nonprofit Tax Deadlines:Due Date:
Original tax deadline for exempt organizations (Form 990)May 15, 2019
Extension tax deadline for exempt organizations (Form 8868)August 15, 2019What Flow-Through Entities (S Corps or Partnerships) Need to Do By Their Tax Dead line If your business is a flow-through entity—S Corporation or partnership (LLC)—your taxes are due on the fifteenth day of the third month of your fiscal year or the fifteenth day of the ninth month if you file an extension. However, those entities get the name “flow-through” or “pass-through” because they do not pay income tax.
As a flow-through, your business’s income and losses get passed on to the partners, owners, and shareholders. So when your flow-through entity files a Form 1065 to the IRS, you must also issue Schedule K-1s to each partner or shareholder for them to report on their individual returns. For this reason, if you plan on electing to extend your tax deadline, be sure and let all partners and shareholders know so they can do the same!
​
What Individuals and C Corps Need to Do By Their Tax Dead line As an individual (including sole proprietors) or corporation, your taxes are due on the fifteenth day of the fourth month of your fiscal year or the fifteenth day of the tenth month if you file an extension. This means you will file your taxes or an extension on April 15, 2019, and pay any tax liability you owe. If you ask for an extension, you will file taxes by October 15, 2019, but you will still need to pay taxes by April 15.

What Exempt Organizations (Nonprofits and Charities) Need to Do By Their Tax Deadline As an exempt organization, such as a nonprofit or charity, you will file taxes on the fifteenth day of the fifth month of your fiscal year or the fifteenth day of the eighth month if you file an extension. For your 2018 return, you will need to file your taxes or an extension by May 15, 2019. If you ask for an extension, you will have until August 15, 2019 to file your return.

Mike McVay's V.I.P APPOINTMENT LINE - 850-933-3972


Mike McVay 
Owner
McVay Business Services
5336 N Blue Angel Parkway
Pensacola, FL 32526

3 Mistakes You Don't Want To Make This Tax Season
Last week was the beginning of every American’s favorite time of the year … to hate: tax season. Starting last Monday, January 28th, the IRS started accepting tax returns for the 2018 tax year. Here are three of the most common ...
Forbes
These red flags on your 2018 tax return could spark interest from the IRS
Even though the IRS may be just getting back on its feet after the partial government shutdown — with another one potentially in ...
CNBC

What you're getting when you buy pet insurance
While it's smart for pet owners to have pet insurance, not all companies and policies are the same, said veterinarian Jennifer Quammen ...
USA Today
What are S Corporations and LLCs?
Let's break out the magnifying glass and take a closer look at both S corporations and LLCs, and examine which one makes sense for your company. New tax law changes may benefit you to change business entities. Free S Corp/LLC review all month. 
Mike McVay, Tax Accountant * 850-933-3972
Workers Comp Insurance & Employee Leasing
Know the in and outs of florida's workers compensation laws. Need workers comp, employee leasing or a florida contractors exempt certificate? Call Mike McVay - Over 20+ years experience with business and contractors payroll. 
McVay's Employee Leasing and Workers Comp
How Much Rent Do You Need to Charge to Make a “Good” Investment?
Rental real estate can be one of the most rewarding and potentially lucrative income sources out there. But how much rent do you need to ...
Investor Junkie

Worried about a recession? Consider a move to these 7 slump-proof US cities
Worried that the relatively rosy economic times may soon be over? You're not alone. A recent survey from Duke University found that half ...
CNBC
How To Lower Your Taxes And Spark Joy By Tidying Up With Marie Kondo
Kondo-mania has swept the nation. It seems viewers can't get enough of the Netflix show "Tidying Up with Marie Kondo" and watching ...
Forbes

Take These Simple Steps to Open an IRA
If you're putting off doing your taxes because you're afraid you might be getting back less than you expect or, worse yet, owe more than ...
Investopedia
It's not too late to set money resolutions for 2019
New Year's Day has come and gone and perhaps your resolve to stick to your resolutions has disappeared by now as well. If so, don't despair ...
ABC News

Emergency Funds Can Reduce Stress
According to a 2018 report from the Federal Reserve, 40% of adults in the U.S. would not be able to cover an unexpected expense of $400 ...
Kiplinger
Taxpayers could be shocked by refund size this year: Report
Taxpayers are accustomed to receiving big refunds after filing, but experts warn that with new laws more people could end up owing the ...
USA Today

Here’s what many Americans are doing to get out from under debt
It's a Catch-22: You want to make progress on paying off your debt but, in order to do so, you take out yet another loan. A new study ...
CNBC
"Our books are balanced. 50% of our numbers are real and 50% are made up."
Copyright © Randy Glasbergen
Trivia
What is the average life span of an American $1 bill? 
See the answer below.
6 Expert-Approved Ways to Travel on a Budget
Planning a vacation is much easier than it used to be, thanks in large part to the internet. After all, finding a hotel, flight or dinner ...
Time
What Year Was It?
Elizabeth Becomes Queen
After a long illness, King George VI of Great Britain and Northern Ireland dies in his sleep at the royal estate at Sandringham. Princess Elizabeth, the oldest of the king's two daughters is the next in line to succeed him.
The day was Feb 6. What year was it?
Quote of the Week
"A nickel ain't worth a dime anymore." 
Yogi Berra
Trivia Answer
What is the average life span of an American $1 bill? 
Answer: 5 years
 
SUBSCRIBE TO OUR NEWSLETTER
 
NEWSLETTER ARCHIVES
McVay Business Services
5336 N Blue Angel Parkway
Pensacola, FL 32526
The articles in our publications come from many sources. We do not endorse information or opinions appearing in linked articles. The articles selected are not sponsored, and we assume no responsibility for the accuracy of the information. Copyright for linked articles belongs to the linked source.
A Newsletter Station Publication
© All Rights Reserved.

Entrepreneurs have a couple choices when deciding what to file their new business as. And it’s important to do the necessary research to make the best decision for you and your business. One of those options is the S Corporation.
First of all, what is an S Corporation? An S Corporation, or an S Corp, received its name from subsection S of the tax code. To start an S Corp, a small business owner simply forms a C Corporation then files for S corporation status with the IRS. While an S Corporation and a C corporation have some similarities, the two have differences when it comes to regulating pay and self-employment tax regulations.
Mike McVay, LLC & S-Corporation Specialist - 850-725-5696

Here are the top three benefits of forming an S Corporation:
They have Pass Through Taxation like an LLCLike an LLC, an S Corporation doesn’t pay corporate taxes. Anything made or lost is reported based off of the personal income taxes of the business owner’s. As a result, this avoids the double taxation that C Corporations have to put up with. Since net losses are also passed through, the shareholder can reduce his tax liability by counteracting other income with any losses from the S Corporation. There is an important caveat however: any shareholder who works for the company must pay him or herself reasonable compensation. Basically, this means that the shareholder must be paid fair market value, or the IRS might reclassify any additional corporate earnings as “wages.” Additionally, the owners of an S Corporation are considered employees of the company, not owners. So the “owners” of an S Corp get to skip out on the self-employment taxes that members of an LLC would have to pay.
Plan Ahead with Reduced Taxable GainsIf you open your business with the intention to sell it at some point, then the S Corp might suit you perfectly. When you finally want to sell your business, your taxable gains from the sale may very well be less than if you were selling a C Corporation instead of your S Corporation. Not everyone wants to close their business, but when they do want to, or have to, it’s always nice to walk away with some money.
They have an Unlimited LifespanIf you do indeed plan on making sure your business sticks around for a while, the S Corporation works in your favor as well. Unlike an LLC, S Corporations have an unlimited life span. Your business will continue to exist even if you leave as the owner. The business can continue operating without too much trouble or upkeep. However, say you have the best intentions to run your own business and stick with it through the years, through thick and thin, but something comes up and you have no choice but to transfer ownership. In some forms of incorporating, this can mean a lot of hassle. Though with an S Corporation, ownership can be easily handed over by selling the company stock.
Additionally, if after a while you think an S Corporation isn’t for you after all, that maybe you’d like to stick with a C Corporation, you can easily drop the S Corporation status with the IRS at any time.

McVay Business Services - 850-725-5696 - Pensacola LLC & S-Corporation Specialist

Are you wondering where to get your taxes done? The best price?
This is a great question. You want to be sure you're spending your money wisely and getting the best help possible because of all the new tax changes. What is best for your situation. 

The point is that filing online is not the best way to go if you don't have an extremely complex knowledge of the new tax changes.  We suggest taking your information to a local full year licensed tax professional like Mike McVay, Tax Accountant in Pensacola, FL.

The bottom line is that the more complex your financial situation is (i.e. rental properties, heavy stock trades, small business, income from multiple states), the more likely it is that you should use a professional, like McVay Business Services, to help you with tax planning and filing your taxes. For the rest of us, filing online is the way to go. Survey's show the I.R.S. targets taxpayers that use retail Tax software 5 to 1 for tax audits. Most of the audit protection that comes with some tax software is a joke. If your audited these companies will not send an accountant to the audit like McVay Business Services does.  
850-725-5696 - www.PensacolaFLTax.com - www.QuickBooksPensacola.com

Prices to file taxes can be all over the map because everyone's situation is so different. I've put together some averages based on reliable sources that should give you an idea of what to expect when you go to file.

• Full-Time Tax Pros (aka your local Accountant): According to the National Society of Accountants, it will run you an average of $293 per return to work with an Accountant. That nearly $300 price tag is for an itemized 1040 filing with state tax return. An unitemized 1040 with a state tax return will only set you back $200. When I prepare taxes, I didn't charge this much (more like $99-$155). However, more complex or business returns are a little more. Most the Free or low cost retail software will lure you into an accountant on demand service or added extras they don't disclose until your ready to submit your return. A local tax accountant such as myself Mike McVay, Accountant is the best option. We are look at tax planning, seninaro's and real life options to get your refund the highest it can possibly be. McVay is tipacally 1/2 the price of large national tax prep firms. Some of these national franchises staff only have a 30-hour course and they are set to prepare your taxes. Mike McVay has been doing personal & business taxes for over 20+ years. Mr. McVay attends a 30-hour continued education class every summer just to keep up with the new tax changes. Big box tax prep firms only require a 6 hour refresher class each year to be eligible to prepare next season taxes. Don't be fooled by the bombardment of ads.  

Why Pay a Licensed Accountant?
Going to a LOCAL flesh-and-blood tax professional may be the best option for many taxpayers. That's because a professional Accountant can help you navigate the difficult tax questions like business structure, tax planning moves, etc. that pop up throughout the year.

Software has a harder time with this. You can't have lunch with and discuss your small business with software.
​
Accountant  are usually the best option, your getting someone to help you with a difficult tax situation or simply to give you that extra assurance.

​What Are S Corporations and LLCs?
According to the Internal Revenue Service, which takes a special interest in how a business is classified, an S corporation is a business that opts to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.
Basically, S corporation shareholders report the flow-through of income and losses on their personal tax returns and the IRS subsequently assesses a tax at their individual income tax rates. Under this scenario, S corporations can bypass double taxation on any corporate income earned by the business.
To get Uncle Sam's stamp of approval and achieve S corporation status, a company must meet the following requirements, as laid out by the IRS:

• Be a domestic corporation
• Have only allowable shareholders
  • May be individuals, certain trusts, and estates and
  • May not be partnerships, corporations or non-resident alien shareholders
• Have no more than 100 shareholders
• Have only one class of stock
• Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).

What Is an LLC?
A limited liability corporation is a relative common, uncomplicated business structure, with a strong dose of flexibility for business owners.
The flexibility in an LLC can mainly be found in numbers, as LLCs can be owned by more than one individual (the IRS refers to LLC participants as "members"), or it can be operated by a single owner (known as a "single member LLC" by the IRS.)
Structuring a business as an LLC offers ample benefits to business owners. For starters, it offers a firewall against lawsuits in protecting personal financial assets. It also curbs paperwork, stops a company from being taxed twice by the IRS, and provides some much-needed stability for new companies.
Creating an LLC is fairly basic, even by Internal Revenue Service standards. Business owners usually launching an LLC in their home states, although many business owners form an LLC in tax-friendly states like Delaware or Nevada.
Process-wise, new applications for an LLC are handled by the specific state's secretary of state office (the office's website is a great place to start your research on LLCs.) The filing form is simple and short, requiring the names of each LLC partner and their contact information. Each state has its own way of doing business, but LLC owners can count on paying a filing fee of up to $200.
Hiring a good business and/or tax lawyer isn't necessary, but for a nominal fee, it's a good idea to have an experienced hand on the till when structuring your LLC.
Tax Benefits of an LLC Filed as S Corp.
There is a way to hit the "sweet spot" and benefit from both an LLC and an S corporation designation.
Business owners can do so by becoming an LLC and elect to have your business treated like an S corporation for tax purposes. Business owners need to make that call via an IRS Form 2553, but the reality is the process of balancing your company between an LLC and an S corporation is easy to do and offers some intriguing tax and operational benefits:

• Fewer headaches. Legally, the company will operate more like an LLC than a corporation when you go the Form 2553 route. That's an advantage for companies, as requirements for things like record keeping, paperwork, and regulatory mandates are eased.
• Tax benefits. In addition to fewer administrative obligations, business owners gain the beneficial tax treatments of being an S corporation. The company still gains the advantage of pass-through income and it avoids double taxation.
• Company structure. Basically, even though your company is not structured as a corporation, tax-wise, the IRS treats you as a corporation, with all of the tax benefits that designation entails.

For instance, the company is effectively split from the owner. That allows the business entity to pay ownership a salary and benefits, subject to FICA tax. Simultaneously, the business entity can steer additional net income from the business to ownership as passive income, and thus avoiding the Self-Employment Contributions Act (SECA that requires business owners at S corporations, partnerships, and sole proprietorships to pay the 15.3% net income tax from self-employment to pay for their own Social Security and Medicare.
By structuring your company as an LLC and then electing to be designated as an S corporation, business owners earn two primary benefits:

• A lower administration burden by operating as an LLC.
• Better tax benefits from electing to be an S corporation for tax purposes.

How to File as an S Corporation Tax Return. McVay Business Services are both expert at S-Corporation and LLC I.R.S tax filings. 

While the tax form process of applying is easy (using Form 2553), The IRS has strict rules that companies need to abide by to file as an S corporation. These S-Corporation rules for reasonable compensation is required in order to received the great tax benefits of an s-corporation. 

By and large, an S corporation will only be approved under these conditions:

• The business entity has no more than 100 shareholders.
• No business entity shareholder is a nonresident alien, i.e., a noncitizen who doesn't live in the U.S.
• The business entity has only one class of stock.
• None of the business entity's shareholders are other corporations or partnerships.

If you're applying for S corporation status for the current calendar, you must file IRS Form 2553 by March 15. Companies seeking S corporation status can elect to file IRS Form 2553 the year before an S corporation ruling takes effect.
Pros and Cons of Filing as an S Corporation
Although there are plenty of benefits of filing an LLC as an S Corporations, it isn't the best option for everyone. 
Pros of Filing as an S Corp
There are some decided benefits from electing to become an S corporation. Most benefits focus on operational and tax issues - here's a quick look:

• Limited liability. Anyone affiliated with an S corporation, including business owners, partners, and staffers, all gain limited liability protection.
• Pass-through taxation. Company owners get to record any personal profit and loss on their individual tax returns.
• Elimination of double taxation of income. With an S corporation, business income can't be taxed twice - first as a tax on corporate income and secondly as a tax on dividend income.
• Investments and asset accrual. S companies can easily attract investors via the sale of shares of stock, thus adding valuable assets to the bottom line.
• Open-ended existence. An S corporation continues to exist even if the owner decides to retire or passes away.
• Once-a-year tax filing requirement. S corporations only file taxes once annually, as opposed to a limited liability company, which has to file its taxes quarterly.

Cons of Filing as an S Corp
These are some decided disadvantages of being an S corporation:

• Must be a U.S. citizen. S corporation owners and partners must be citizens of the U.S. and live here legally.
• Shareholder limits. An S corporation cannot have more than 100 shareholders.
• Higher fees. Firms that wish to elect as an S corporation often face heavier state regulation fees (depending on the state they reside) and often have to pay extra for getting help from a registered agent.
• Tax qualifications. The IRS is very strict about following the "rules of the road" on S corporation compliance. Companies have been known to have their S corporation designation taken away for not following IRS guidelines.
• Burden of business debts. Unlike a business owner operating as an LLC, S corporation ownership doesn't give you limited liability for business debts and financial obligations.

What's Better for You?Ultimately, the choice between electing to be an S corporation or LLC comes down to your personal preference as a business owner (i.e., how you feel about tax status, compliance, and paperwork obligations.)
That said, financial issues are likely the determining factor in choosing between an S corporation and an LLC. For instance, if you want to earn a salary instead of declaring self-employment income, you want pass-through taxation, and you want to make it easier for your company to obtain investment capital, an S corporation can be a good idea.
But if you want more flexibility in operating your company and don't want the red tape associated with running a corporation, an LLC may be the way to go.
Either way, it's advisable to consult with a tax specialist (Mike McVay, Tax Accountant @ 850-725-5696) and talk to business owners who have experience in both S corporation and LLC scenarios before committing to one business structure over the other.

McVay Business Services 
5336 N Blue Angel Pkwy 
Pensacola, FL 32526
850-725-5696
Mike@MikeMcVay.com
www.PensacolaFLTax.com

Attention drivers, the 2019 standard mileage rates have been released. The IRS announced the rates today, which are used for determining the deduction for the costs of operating a vehicle for various business, charitable, moving, or medical reasons.
What are the changes for 2019?

Starting January 1st 2019, the standard mileage rates (for use of a car, van, pickup or panel truck) are:

• 58 cents for business miles driven (up from 54.5 cents per mile in 2018)
• 20 cents per mile driven for medical or moving purposes (up from 18 cents per mile in 2017)
• 14 cents per mile driven in service of charitable organizations (no change from 2018)

Important Change under the TCJA
Make note that under the Tax Cuts and Jobs Act (TCJA), taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Also, taxpayers are unable to claim a deduction for moving expenses (unless the taxpayer is a member of the armed forces on active duty moving under orders to a permanent change of station).
How are the rates calculated?

There are various factors that influence the standard mileage rates, including:

• Gas and oil prices
• Insurance costs
• The state of the economy
• The expected cost of typical wear and tear on a vehicle

Hence the rates are purposed to go over and above the amounts a consumer pays solely for gas.
How can I reduce my fuel consumption?

Looking for ways to save money and reduce fuel consumption? There are a few things you can do to make the most out of a tank of gas:

• Make a concerted effort to maintain a constant speed, as speeding up and slowing down frequently can severely lower your gas mileage. Cruise control can help!
• Stop speeding. For every 5 miles you drive over 60 miles per hour, you are reducing your fuel economy by potentially 7%.
• Though tempting, letting your car warm up for 10 minutes during the heart of winter can cost you $0.04 per minute ($2.80 per week of wasted gas).
• Consider a tune up—it can increase your mileage by 4%.
• Consider cleaning your car and removing extra cargo from both the vehicle and the roof rack. Extra weight can reduce your fuel economy as well.

Is the standard mileage rate the only way to gauge deductions?

No, taxpayers always have the option to claim deductions based on the actual costs of using a vehicle, as an alternative to using the standard mileage rates.

Questions on the standard mileage rates for 2019? Contact Mike McVay, Tax Accountant 850-725-5696 - www.PensacolaFLTax.com - Mike@MikeMcVay.com 
5336 N Blue Angel Pkwy Pensacola, FL 32526 - Pensacola Tax Service

You may have herd that I.R.S refunds will be delayed if the Gov. is shut down. NOT TRUE !

Tax refunds will go out even if the government shutdown extends into filing season, the Internal Revenue Service said late Monday, and the agency will start accepting tax returns on Jan. 28.

Mike McVay, Tax Accountant - Pensacola, FL - 850-725-5696

IRS Could Be More Taxpayer-Friendly in the New Year

Let’s face it…the IRS isn’t the most popular government agency out there. It’s not just that they take your money. They also have a (undeserved?) reputation for tough stances on deductions and credits, aggressive tax collectors, poor customer service and generally being difficult if you happen to disagree with them.
Wouldn’t it be nice to have a kinder, gentler IRS? You’d still have to pay your taxes, but at least you wouldn’t have to deal with some of the IRS’s rougher edges anymore. Well, guess what… Congress is kicking around a few ideas that would make the IRS a little more taxpayer-friendly.There’s bipartisan support for improving the IRS, so we may actually see some of them enacted.

​Tax Season 2019 – Your 2018 Tax Changes - Pensacola
You might wonder what the Tax Cuts and Jobs Act (TCJA) has in store for you next year. The answer is a lot. Many of the common deductions you know will either be limited or removed until 2025, when the TCJA expires.
1.   No more personal and dependent exemptions.
The $4,050 personal exemption that taxpayers claim for themselves, spouses and dependents are no longer available in 2019. Currently, you can still deduct personal exemptions for the 2017 tax year. Click here to deduct your personal exemptions now.
2.   The Standard Deduction doubles.
For 2019, the standard deduction increases to $12,000 for single and married filing separate filers, $18,000 for heads of households, and $24,000 for joint filers. It’s twice the amount of the previous standard deductions which are $6,350 for single and married filing separately, $9,350 for the head of household and $12,700 for joint filers. This may make it harder for taxpayers to itemize their deductions.
3.   The Child Tax Credit (CTC) increases until 2025.
For qualifying children under 17, the CTC doubles from $1,000 to $2,000. Your dependent must also have a social security number for this credit. Moreover, the TCJA combines the Additional Child Tax Credit (ACTC) with the CTC. You can then receive a refundable credit of up to $1,400 after removing your tax.
4.   A new dependent credit is here.
If you want to claim a non-dependent, (meaning someone who is not a qualifying child under age 17) you can do so and receive $500 for this credit. The non-dependent must be either a full-time student or disabled.
5.   State and Local Taxes (SALT) deduction have a cap of $10,000.
Beforehand, there was not a limit in place for your SALT deduction but now, there will be a noticeable difference for taxpayers with greater amounts of state and local taxes.
6.   Miscellaneous itemized deductions are eliminated.
In prior years, you can deduct your itemized deductions such as unreimbursed job expenses, tax preparation fees, and other expenses as long as they exceed 2% of your adjusted gross income. In 2019, you cannot deduct expenses such as:
·         Moving expenses (excluding members of the armed forces)
·         Travel expenses
·         Meal expenses
·         Professional and union dues
·         Business liability insurance premiums
·         Depreciation in mandatory items such as computer or phone usage
·         Employee education expenses
·         Home office expenses
·         Job-seeking expenses
·         Supplies and uniforms
·         Investment fees
·         Tax preparation fees
·         Hobby expenses
It’s also recommended that you complete a new W-4 in place of this new tax law. Click here to find out more about your W-4.
7.   Natural disaster expense deductions are allowed only if the location is a disaster zone.
Now, you can only deduct expenses from natural disasters if it falls under a presidentially designated disaster zone. Click here to see qualified disaster zones.
8.    No more alimony deductions.
The TCJA declares that you cannot deduct your alimony payments on your tax return. This means that divorcees who make alimony payments can no longer deduct that amount on their federal taxes. This applies to divorces after December 31, 2018.
9.   Mortgage interest deduction receives a cap of $750,000.
Prior to this, taxpayers could deduct up to $1 million in mortgage interest whereas now, it’s cut by 25%. On top of that, the new cap of $750,000 applies to residences purchased after December 15, 2017.
10.                The Home Equity Interest Deduction disappears.
For 2018-2025, the interest you pay on home equity loans and lines of credit are no longer available. However, the IRS states that they are still deductible as long as they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.
For example, you cannot deduct the use of the loan for credit card debt and living expenses. The loan must also be a qualified residence such as a homeowners’ main or second home and not exceed the cost of the home.
Here’s a reminder of the income tax brackets for 2018:
·         10% (Up to $9,525 for individuals; up to $19,050 for married filing jointly; and $13,600 for head of household)
·         12% (< $9,525 to $38,700; < $19,050 to $77,400 for couples; and < $13,600 to $51,800)
·         22% (< $38,700 to $82,500; < $77,400 to $165,000 for couples; and < $51,800 to $82,500)
·         24% (< $82,500 to $157,500; < $165,000 to $315,000 for couples; and < $82,500 to $157,500)
·         32% (< $157,500 to $200,000; < $315,000 to $400,000 for couples; and < $157,500 to $200,000)
·         35% (< $200,000 to $500,000; < $400,000 to $600,000 for couples; and < $200,000 to $500,000)
·         37% (< $500,000; < $600,000 for couples; and < $500,000)
Keep these 2019 changes in mind.
These changes will take place in the 2019 tax season. If you haven’t already filed your 2017 tax return, file now to get the tax deductions you’ll miss out next year!

Difference in Marginal Tax Rates and Brackets
One of the most widely discussed changes in the 2018 tax reform bill involves income tax brackets and marginal tax rates. Tax brackets refer to specific ranges of income and their corresponding tax rates. Marginal tax rates apply to different levels of income—the higher the income, the higher the tax rate. What this means to you is that your income is not taxed at one rate but at several different rates, depending on your income.
For example, if your income is $120,000, your tax rate isn’t a flat 50%. You’re actually taxed 10% on the first $20,000, 20% on the next $20,000 and so on, according to the chart. So instead of paying $60,000 in taxes ($120,000 x 50%), a person making $120,000 would pay $38,000 in income taxes.

For 2018, the tax brackets have shifted, and almost all of the marginal tax rates have been cut. That means nearly everyone will have lower income tax rates (on the same income) in 2018.
2017 Marginal Income Tax Rates and Brackets2017 Marginal Tax RatesSingle 2017 Tax BracketMarried Filing Jointly 2017 Tax BracketHead of Household 2017 Tax BracketMarried Filing Separately 2017 Tax Bracket10%$0 - $9,325$0 - $18,650$0 - $13,350$0 - $9,325
15%$9,326 - $37,950$18,651 - $75,900$13,351 - $50,800$9,326 - $37,950
25%$37,951 - $91,900$75,901 - $153,100$50,801 - $131,200$37,951 - $76,550
28%$91,901 - $191,650$153,101 - $233,350$131,201 - $212,500$76,551 - $116,675
33%$191,651 - $416,700$233,351 - $416,700$212,501 - $416,700$116,676 - $208,350
35%$416,701 - $418,400$416,701 - $470,700$416,701 - $444,550$208,351 - $235,350
39.6%Over $418,400Over $470,700Over $444,550Over $235,350Chart: 2017 Marginal Income Tax Rates and Brackets(2)
A single individual with a taxable income of $100,000 in 2017 paid $20,981.35 in taxes: (8,100 x 0.28) + (53,949 x 0.25) + (28,624 x 0.15) + (9,325 x 0.10).
2018 Marginal Income Tax Rates and Brackets2018 Marginal Tax RatesSingle 2018 Tax BracketMarried Filing Jointly 2018 Tax BracketHead of Household 2018 Tax BracketMarried Filing Separately 2018 Tax Bracket10%$0 - $9,525$0 - $19,050$0 - $13,600$0 - $9,525
12%$9,525 - $38,700$19,050 - $77,400$13,600 - $51,800$9,525 - $38,700
22%$38,700 - $82,500$77,400 - $165,000$51,800 - $82,500$38,700 - $82,500
24%$82,500 - $157,500$165,000 - $315,000$82,500 - $157,500$82,500 - $157,500
32%$157,500 - $200,000$315,000 - $400,000$157,500 - $200,000$157,500 - $200,000
35%$200,000 - $500,000$400,000 - $600,000$200,000 - $500,000$200,000 - $300,000
37%Over $500,000Over $600,000Over $500,000Over $300,000Chart: 2018 Marginal Income Tax Rates and Brackets(3)

Now compare that to the 2018 marginal tax rates. A single individual with a taxable income of $100,000 in 2018 will pay $18,289.50 in taxes: (17,500 x 0.24) + (43,800 x 0.22) + (29,175 x 0.12) + (9,525 x 0.10).

Not only will taxpayers see lower rates, but the shift in tax brackets will also remove what used to be an unintended tax penalty for married filers. Under the 2017 tax thresholds, some married filers were pushed into a higher income bracket when they combined their income with their spouse’s. The new brackets double for joint filers, so any marriage penalty is effectively removed for 2018.

Difference in the Standard Deduction
Another important difference in the 2018 tax reform bill is that the standard deduction has almost doubled.

The standard deduction is an automatic reduction in a taxpayer’s tax obligation. U.S. taxpayers have long had the option of taking the federal standard deduction or itemizing their deductions—identifying which expenses they qualify for and calculating their deductions one by one. Itemizing is more of a hassle, but it’s worth it if your itemized deductions exceed the amount of the standard deduction.
Changes to the Standard DeductionFiling Status2017 Standard Deduction2018
tandard DeductionSingle$6,350$12,000
Married Filing Jointly$12,700$24,000
Married Filing Separately$6,350$12,000
Head of Household$9,350$18,000

Chart: Changes to the Standard Deduction(4)
At first glance, the increase in the standard deduction makes itemizing look even less worthwhile. But, the 2018 tax reform bill also eliminates the personal exemption—the amount a taxpayer gets to deduct from their taxable income for themselves and any dependents claimed on their tax return. Here’s how those two changes play out:
In 2017, the personal exemption was $4,050 per person and dependent.(5) So, in 2017, a married couple filing jointly with no dependents who made $100,000 received a $13,000 standard deduction and $8,100 in personal exemptions, leaving them with a taxable income of $78,900. In 2018, that same couple will receive a $24,000 standard deduction and no personal exemptions, leaving them with a taxable income of $76,000.
Essentially, the tax reform bill simplified this portion of the income tax process. In many cases, the increase in the standard deduction will make up for the elimination of personal exemptions, leaving most Americans with quite a bit more money in their pockets.
Changes to the Personal Exemption
Filing Status 2017
Personal Exemption 2018
Personal Exemption Single With Income Less Than $261,500
$4,050Removed
Married Filing Jointly
With Income Less Than $313,800$4,050Removed
Head of Household
With Income Less Than $287,650$4,050Removed
Married Filing Separately
With Income Less Than $156,900
$4,050 Removed
Chart: Changes to the Personal Exemption(6)

Difference in Child Tax Credit In our current tax code, if parents make less than $110,000 jointly and $75,000 individually, they receive a $1,000 Child Tax Credit for qualified children under the age of 17.(7) The 2018 tax reform bill increases that credit to $2,000 per qualified child and raises the income limits for the credit to $400,000 jointly and $200,000 individually.(8) This means a lot more people will be able to receive tax credits for their children. Woo-hoo! The kids are finally paying off!

Changes in Child Tax Credit Thresholds
Filing Status
2017 Child Tax Credit Threshold 2018 Child Tax Credit Threshold Single$75,000$200,000
Married Filing Jointly $110,000 $400,000Chart: Changes in Child Tax Credit Thresholds
More Changes for Taxpayers With Kids If you have children, you may have a 529 college savings plan in place. This savings plan acts similarly to a Roth IRA for your kids’ college education. Funds within the account are invested and grow tax-free, but they can only be used for qualifying college expenses. The new tax reform bill changes this significantly.
Starting in 2018, if you have a 529 savings plan for your child, you can use it for levels of education other than college. For example, if you have children in private school, or if you pay for tutoring for your child in kindergarten through twelfth grade, you can use money from your 529 for these expenses tax-free.
While it may seem like a benefit to use a 529 plan prior to college, you should work with a qualified investing professional to make sure—especially if you want to use the 529 plan sooner than you had originally intended. Taking too much out of a 529 plan early can completely negate the compounding growth effect the account could experience if the money is left alone.
As you consider college funding, don’t forget the Baby Steps! Paying off consumer debts, saving three to six months of expenses in an emergency fund, and contributing 15% of your income into retirement all come before college savings. There are a lot of ways to plan for college without going into debt!
Differences for HomeownersMortgage deductions in the new tax reform bill were a hotly debated topic. You may have heard whispers of disappointment in the final outcome. Here’s what everyone’s talking about:
Currently, if you itemize your deductions, the IRS allows homeowners to deduct the interest they pay on their primary residence and/or second home, up to a maximum of $1 million in original mortgage principal. This can include more than one loan—as long as the total is below the $1 million limit—and can include loans to refinance your home as well as mortgages to purchase the home. The new maximum in the tax reform bill is $750,000 in original mortgage principal. Not to worry, taxpayers with existing mortgages in between $1 million and $750,000 will be grandfathered into the old deduction.(9)
Taxpayers are also currently allowed to deduct interest paid on home equity debt, up to $100,000. The Tax Cuts and Jobs Act has removed that deduction for 2018.(10)
If you’re thinking of buying or selling a home and wondering how the tax reform bill could affect you, get expert advice from a top agent in your area.
Mike McVay, Pensacola Tax Accountant - 850-725-5696

Difference in the Alternative Minimum Tax The Alternative Minimum Tax (AMT) was put into place to ensure that top-income earners paid appropriate taxes. Basically, upper income taxpayers have to calculate their taxes two ways—once under the traditional tax system and once under the AMT—and pay whichever amount is more. Much of the AMT is fairly complicated, however, the AMT tax brackets are not. While the standard tax system has seven brackets, the AMT system has only two—26% and 28%. Below a certain income amount, the 26% rate is applied, and over that amount, the 28% rate is applied to the rest.
Once taxpayers have calculated what they owe in the AMT process, they can deduct an exemption from that amount. The problem is that these exemptions weren’t properly set up to account for inflation. So as time passed, more and more Americans were affected by the AMT—even those who it was never intended for, like the middle class. To address this issue, the Tax Cuts and Jobs Act makes the minimums for the AMT system much higher to avoid the average Joe from having to run their numbers twice. Here’s how the AMT exemptions are changing for 2018.
Changes to the Alternative Minimum Tax Exemption Filing Status
2017 AMT Exemption 2018 AMT Exemption Single or Head of Household$54,300$70,300
Married Filing Jointly$84,500$109,400Chart: Changes to the Alternative Minimum Tax Exemption
2017 AMT Exemption(10), 2018 AMT Exemption(11)
In addition, the income thresholds at which the exemption amounts begin to phase out are dramatically increased. Currently, these are set at $160,900 for joint filers and $120,700 for individuals, but the new law raises them to $1 million and $500,000, respectively.
So, what does this mean in plain English? The new tax reform bill significantly increases the exemptions for AMT. Therefore, if you’re one of the many Americans who has to use the AMT for your yearly taxes, you will be seeing increased standard exemptions and higher tax thresholds for the 26% and 28% tax rates. Win-win!
Take Our Quiz: Do You Really Need a Tax Advisor?
Difference in the SALT DeductionThe SALT deduction is another deduction that was heavily deliberated before the tax reform bill was voted in. SALT stands for "state and local taxes" and refers to taxpayers’ ability to deduct their state income taxes and/or sales taxes, if itemizing deductions. In previous years, there was no limitation on the deduction of state and local taxes, which was an advantage to those living in high tax states like California and New York. The new tax reform bill keeps the SALT deduction but limits the total deductible amount to $10,000, including income, sales and property taxes.(12)
The Estate Tax Exemption The estate tax is a tax on inherited money and property. Currently, heirs pay a tax rate of 40% on any inherited property valued at over $5.49 million.(13)
In the new tax reform bill, individuals have a $11.2 million lifetime inheritance tax exemption and married couples can exclude inheritances of $22.4 million.(14) As you can probably imagine, this won’t leave too many families paying the estate tax.
What About Charitable Donations?Under current tax law, you can deduct up to half of your income in qualified charitable donations if you itemize your deductions. That makes it a popular deduction for people at all income levels
 The new tax reform bill has increased that limit to 60% of your income.(15) What a great incentive to get taxpayers to donate to charities!
However, donations made to a college in exchange for the right to purchase athletic tickets will no longer be deductible.

What About Medical Expenses?Another frequently used deduction is the medical expense deduction. Prior to the new tax reform bill, you could deduct unreimbursed medical expenses above 10% of your adjusted gross income (AGI), which is your total income minus other deductions you have already taken.(16) 

The new tax reform bill has reduced that hurdle to 7.5% of your AGI.(17) So, if your AGI was $100,000 in 2017, you could deduct medical expenses over $10,000. In 2018, if your AGI is $100,000, you will be able to deduct unreimbursed medical expenses over $7,500.
What About Health Care (Obamacare)?The Affordable Care Act, otherwise known as Obamacare, remains in effect for 2017. However, the new tax reform bill removes the individual mandate penalty, meaning that people who don’t buy health insurance will no longer have to pay a tax penalty.
It’s worth noting that this change doesn’t go into effect until 2019, so for 2018, the "Obamacare penalty" can still be assessed.
Other Deductions That Are Disappearing Other deductions that didn’t make it past the chopping block in the new tax reform bill:

• Casualty and theft losses (except those attributable to a federally declared disaster)
• Unreimbursed employee expenses
• Tax preparation expenses
• Alimony payments
• Moving expenses
• Employer-subsidized parking and transportation reimbursement

Don’t worry, teachers can still deduct classroom supplies!
Have a small business? 
Check with a tax pro for help with the specifics on what’s best for your business.
But What Does It All Mean?

The one thing that’s clear through all of this is that taxes are complicated. Even the IRS is scrambling to keep up with all the changes in the new tax reform bill.
Add to that the fact that millions of Americans overpay their taxes each year, and it’s easy to see why you need a tax professional now more than ever.(18) A pro handles the heavy lifting of tax preparation and makes sure your taxes are done right. No more overpaying! 

Just one missed deduction could cost you far more than the fee of a professional.
But what about tax software or online tax prep? Prior to the new tax reform bill, it might have been safe to rely on those options to file your yearly taxes. But with all the changes coming, there’s no guarantee these programs have caught up. If any year is the year to work with a tax advisor, it would be 2018.
Mike McVay, Tax Accountant in Pensacola - 850-725-5696 - www.PensacolaFLTax.com