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  • New tax bill planning - Nov newsletter

    We just sent out our November newsletter, which includes:

    To receive this in your inbox every month, you can sign up here and unsubscribe just as easily. Hope you learn something new!
    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

  • #2
    what is this penalties to the irs thing?  why would i have penalties?

     

    Comment


    • #3
      Hey, q-school, bless your heart for commenting - reminded me I had forgotten the links! Corrected now and you can find the penalties post here.

      Happy Thanksgiving!
      Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

      Comment


      • #4
        Bumping - I don't think I've ever done this before, so please forgive me. However, there are a few tax planning thoughts in this one that I hope will get read (of course, it all depends on what the final tax bill says).
        Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

        Comment


        • #5
          Unfortunately it looks like the child tax credit income phaseout has been lowered to 500,000 AGI in Senate bill,which would knock out many docs with working spouses.

          Am I reading the senate bill text incorrectly. It amends IRS Code section 24 by stating on pg 42, line 13 “Limitation.- In lieu of the amount under subsection (b)(2), the threshold amount shall be 500,000” but doesn’t specify if this is the MFJ or individual theshold. In IRS 24 (b)(2), there are separate thresholds for MFJ, individual, and MFS. ???

          Comment


          • #6
            Pass-through business taxes

            • Currently, profits from pass-through entities are taxed at the business owners’ highest marginal tax rates rather than separately at the entity (LLC, partnership, corporate) level.

            • Pass-through businesses with the exception of certain personal services businesses are eligible for a top tax rate of 25%. This rate will be applied to “a capital percentage of 30%” of net business income. The remaining 70% will continue to be taxed at the shareholder’s ordinary income tax rate.





            • Passive investors in pass-through businesses will be taxed at a top rate of 25% on all of their income from pass-through businesses (real estate investors, for example).



             

            Can you clarify this section?  My understanding is physician s-corp pass through entities are excluded from any changes?

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            • #7



              Pass-through business taxes

              • Currently, profits from pass-through entities are taxed at the business owners’ highest marginal tax rates rather than separately at the entity (LLC, partnership, corporate) level.

              • Pass-through businesses with the exception of certain personal services businesses are eligible for a top tax rate of 25%. This rate will be applied to “a capital percentage of 30%” of net business income. The remaining 70% will continue to be taxed at the shareholder’s ordinary income tax rate.





              • Passive investors in pass-through businesses will be taxed at a top rate of 25% on all of their income from pass-through businesses (real estate investors, for example).



               

              Can you clarify this section?  My understanding is physician s-corp pass through entities are excluded from any changes?
              Click to expand...


              They are - that’s what I mean by “with the exception of certain personal services businesses”... That’s you and me  .
              Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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              • #8
                Don’t give up yet, docs, lawyers, accountants. Ron Johnson (who’s vote is almost certainly needed) is holding out for ALL pass-throughs to be included, and for the final bill to have near parity for treatment of Corps and pass-throughs.

                Based on public statements from him and Susan Collins, I predict the final Senate product will:

                1) Slightly bump up the corporate tax rate to 22%
                2) Include ALL pass throughs with a rate close to 25% (including service professionals). Might be some carve out excluding $ over a certain amount.
                3) Only double the estate tax exemption, not eliminate it.
                4) Do some other painful things to those making more than 1M to make the reconciliation math fit.

                Happy thanksgiving to all. So much to be thankful for.

                Comment


                • #9
                  I thought “personal service businesses”  could still qualify for the lower rate on their passive income. For example, the portion of my business income comes from our PAs, product sales, ancillary services, etc would be taxed at the corporate rate, while my income from direct patient care is at the higher rate. Is this incorrect?

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                  • #10




                    I thought “personal service businesses”  could still qualify for the lower rate on their passive income. For example, the portion of my business income comes from our PAs, product sales, ancillary services, etc would be taxed at the corporate rate, while my income from direct patient care is at the higher rate. Is this incorrect?
                    Click to expand...


                    As it stands now, that is somewhat correct. If you’ll note in the 3rd bullet point copied from @childay, I noted the passive pass-through option. However, if all of your passive, personal-service, and income from the use of capital equipment, etc. is in the same business, you will have to go through a separate calculation to determine the application (if any) of the lower tax rate. Since, as @TheGipper mentioned, we have no final bill yet, there’s no use in going into the complications of the calculation. This is one section of the bill that is very fluid, at least imho.
                    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                    Comment


                    • #11




                      Unfortunately it looks like the child tax credit income phaseout has been lowered to 500,000 AGI in Senate bill,which would knock out many docs with working spouses.

                      Am I reading the senate bill text incorrectly. It amends IRS Code section 24 by stating on pg 42, line 13 “Limitation.- In lieu of the amount under subsection (b)(2), the threshold amount shall be 500,000” but doesn’t specify if this is the MFJ or individual theshold. In IRS 24 (b)(2), there are separate thresholds for MFJ, individual, and MFS. ???
                      Click to expand...


                      @TheGipper, the Senate version significantly raises the applicable income for the CTC. See this article. There are some complaints about including higher income households, especially in regard to it being only partially refundable, leaving some low income taxpayers unable to receive the full credit.

                      The House version raises the ceiling, also, but not as much as the Senate’s version.
                      Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                      Comment


                      • #12
                        Thanks for the great insight. One more question- on the capital gains phase out for selling a primary residence. From your article:

                        Example: If your family’s AGI is $600k, you can exclude only $400k of gain (MFJ) and only if it has been your primary home for five of the last eight years if you sell it after 12/31/17.

                        Do you mean if you BUY it after 12/31/17 THEN sell it? In other words, am I grandfathered in if I bought my house before 12/31/17?

                        Comment


                        • #13




                          Thanks for the great insight. One more question- on the capital gains phase out for selling a primary residence. From your article:

                          Example: If your family’s AGI is $600k, you can exclude only $400k of gain (MFJ) and only if it has been your primary home for five of the last eight years if you sell it after 12/31/17.

                          Do you mean if you BUY it after 12/31/17 THEN sell it? In other words, am I grandfathered in if I bought my house before 12/31/17?
                          Click to expand...


                          No, the bill references only the date of sale, which has led me to conclude that the new holding period is for all "personal" real esate (primary home + 1 vacation home) sold post 12/31/17.
                          Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                          Comment


                          • #14







                            Unfortunately it looks like the child tax credit income phaseout has been lowered to 500,000 AGI in Senate bill,which would knock out many docs with working spouses.

                            Am I reading the senate bill text incorrectly. It amends IRS Code section 24 by stating on pg 42, line 13 “Limitation.- In lieu of the amount under subsection (b)(2), the threshold amount shall be 500,000” but doesn’t specify if this is the MFJ or individual theshold. In IRS 24 (b)(2), there are separate thresholds for MFJ, individual, and MFS. ???
                            Click to expand…


                            @thegipper, the Senate version significantly raises the applicable income for the CTC. See this article. There are some complaints about including higher income households, especially in regard to it being only partially refundable, leaving some low income taxpayers unable to receive the full credit.

                            The House version raises the ceiling, also, but not as much as the Senate’s version.
                            Click to expand...


                            Actually the most recent amended senate version significantly lowers the income limit, from what was originally 1 million for joint filers in the original senate bill.  The 1M was nice, because 99% of docs even with working spouses would qualify.  Hatch lowered it to $500,000 for joint filers in the amended senate bill during markup, although my question in the post is if the actual text of the amended senate bill supports that?  How do you read the text as amending sec 24 (b)(2)?  This will make the difference of many docs with kids in high SALT states paying either more or less tax.

                            Comment


                            • #15


                              How do you read the text as amending sec 24 (b)(2)?  This will make the difference of many docs with kids in high SALT states paying either more or less tax.
                              Click to expand...


                              If you are asking about the amended version, it begins phasing out at $500k for MFJ (see #3 on pg. 5). Or maybe I still don't understand your question, lmk.

                              I have zero hope that the original Senate version of $1M limit will happen. Talk about bad publicity. This is not an opinion on the proposal itself, just on the likelihood of it being in the final bill.
                              Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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