As we approach the upcoming tax season, getting organized is key to a stress-free experience. To ensure a smooth process, we encourage our clients to start early and compile the necessary documents well in advance. Here's a handy guide to help you prepare for the tax season:
1. Sources of Income:
1. Financial Statements:
At Cornbelt Financial, we are committed to staying at the forefront of technology to enhance our services and provide an unparalleled experience for our clients. We are excited to announce our adoption of Canopy, a cutting-edge platform that will revolutionize how we manage operations and interact with our clients.
Streamlining Operations for Efficiency
One of the key reasons we chose Canopy is its ability to streamline our internal operations. The platform offers a centralized hub for document management, task tracking, and communication. This means faster response times, improved organization, and a more efficient workflow for our team.
Enhancing Client Experience through the Client Portal
The heart of this transformation lies in the client portal. This secure, user-friendly interface allows our clients to access their financial documents and stay informed all in one place. This centralized approach ensures that our clients have instant access to the information they need, fostering a more transparent and collaborative relationship.
Benefits of the Canopy Client Portal
The Power of Mobility with Canopy's Mobile App
Recognizing the importance of mobility in today's fast-paced world, Canopy offers a robust mobile app. Our clients can now manage their financial matters from the palm of their hand. The app provides the similar functionality as the desktop version, ensuring a consistent and convenient user experience.
Conclusion: A New Era of Financial Management
The implementation of Canopy marks a significant step forward for Cornbelt Financial and our commitment to provide a top-tier service. This innovative platform allows us to offer a more personalized and efficient experience for our clients, helping them achieve their financial goals with greater ease.
As we embark on this journey with Canopy, we are excited about the positive impact it will have on our operations and the enhanced experience it will deliver to our clients.
At Cornbelt Financial, we believe that having a comprehensive financial plan is essential for building a strong foundation and achieving your financial goals. Whether you're just starting out on your journey to adulthood or preparing for retirement, a financial plan provides guidance and peace of mind.
Let's explore the four phases of life where a financial plan can make all the difference:
At Cornbelt Financial, our financial planning services encompass a range of essential elements to ensure a comprehensive approach:
By partnering with Cornbelt Financial, you gain access to our expertise and personalized guidance throughout your financial journey. We understand that each phase of life presents unique challenges and opportunities, and we are here to help you navigate them all.
Don't underestimate the power of a comprehensive financial plan. Contact us today to learn more about how Cornbelt Financial can create a tailored financial roadmap that aligns with your goals, priorities, and dreams.
Identifying tax phishing threats is crucial to protect yourself from falling victim to scams and potential financial loss. Here are several key indicators to help you recognize and steer clear of tax phishing attempts.
Are you a small business owner operating as an S-Corporation? If so, reasonable compensation is a crucial concept in the realm of business and taxation. But what exactly does reasonable compensation mean, and why is it so important?
Reasonable compensation refers to the amount of salary or wages that an S-Corporation pays to its owner-employee(s) who are actively involved in the day-to-day operations of the business for the services they provide to the company. S-Corps, as pass-through entities, allow the income generated by the business to pass through to the shareholders, who then report and pay taxes on their respective shares of the profits. However, the Internal Revenue Service (IRS) requires S-Corp owners to receive reasonable compensation for their work to prevent the evasion of payroll taxes.
But why is reasonable compensation important? There are a few key reasons:
How do you report Reasonable Compensation?
At Cornbelt Financial, we leverage Gusto, a comprehensive payroll platform, to help process payroll for S-Corporations. Gusto streamlines the payroll process, making it easy to accurately calculate and document reasonable compensation, ensuring that your payroll is in compliance with IRS guidelines.
However, determining reasonable compensation can be complex and involves consideration for multiple factors such as the nature of the business, qualifications and responsibilities of the owner, your role and time spent in the business, industry standards, geographic location, job market, and the financial performance of your company. In summary, reasonable compensation should be the fair and justifiable amount that an individual would be paid for similar services in a similar industry and geographic location.
It's important for S-Corp owners to strike the right balance when setting their salary. On one hand, paying a reasonable salary ensures compliance with IRS regulations and helps avoid penalties. On the other hand, setting an unreasonably low salary and taking the majority of income as distributions could raise red flags during an IRS audit. Therefore, seeking our guidance can be beneficial in determining an appropriate salary.
Our team of experts at Cornbelt Financial specializes in providing guidance and support for S-Corporations. We can help you navigate the complexities of reasonable compensation, ensuring that you strike the right balance between a fair salary and optimizing tax advantages.
Contact us today to discuss your S-Corporation's compensation strategy and learn how Cornbelt Financial and Gusto can simplify the payroll process while ensuring compliance with reasonable compensation guidelines.
Classifying workers as independent contractors — rather than employees — can save businesses money and provide other benefits. But the IRS is on the lookout for businesses that do this improperly to avoid taxes and employee benefit obligations.
To find out how the IRS will classify a particular worker, businesses can file optional IRS Form SS-8, “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.” However, the IRS has a history of reflexively classifying workers as employees, and filing this form may alert the IRS that your business has classification issues — and even inadvertently trigger an employment tax audit.
Contractor vs. employee status
A business enjoys several advantages when it classifies a worker as an independent contractor rather than as an employee. For example, it isn’t required to pay payroll taxes, withhold taxes, pay benefits or comply with most wage and hour laws.
On the downside, if the IRS determines that you’ve improperly classified employees as independent contractors, you can be subject to significant back taxes, interest and penalties. That’s why filing IRS Form SS-8 for an up-front determination may sound appealing.
But because of the risks involved, instead of filing the form, it can be better to simply properly treat independent contractors so they meet the tax code rules. Among other things, this generally includes not controlling how the worker performs his or her duties, ensuring you’re not the worker’s only client, providing Form 1099 and, overall, not treating the worker like an employee.
Be prepared for workers filing the form
Workers seeking determination of their status can also file Form SS-8. Disgruntled independent contractors may do so because they feel entitled to health, retirement and other employee benefits and want to eliminate self-employment tax liabilities.
After a worker files Form SS-8, the IRS sends a letter to the business. It identifies the worker and includes a blank Form SS-8. The business is asked to complete and return it to the IRS, which will render a classification decision. But the Form SS-8 determination process doesn’t constitute an official IRS audit.
Passing IRS muster
If your business properly classifies workers as independent contractors, don’t panic if a worker files a Form SS-8. Contact us before replying to the IRS. With a proper response, you may be able to continue to classify the worker as a contractor. We also can assist you in setting up independent contractor relationships that can pass muster with the IRS.
Whether you’re claiming charitable deductions on your 2017 return or planning your donations for 2018, be sure you know how much you’re allowed to deduct. Your deduction depends on more than just the actual amount you donate.
Type of gift
One of the biggest factors affecting your deduction is what you give:
Cash. You may deduct 100% gifts made by check, credit card or payroll deduction.
Ordinary-income property. For stocks and bonds held one year or less, inventory, and property subject to depreciation recapture, you generally may deduct only the lesser of fair market value or your tax basis.
Long-term capital gains property. You may deduct the current fair market value of appreciated stocks and bonds held for more than one year.
Tangible personal property. Your deduction depends on the situation:
Vehicle. Unless the vehicle is being used by the charity, you generally may deduct only the amount the charity receives when it sells the vehicle.
Use of property. Examples include use of a vacation home and a loan of artwork. Generally, you receive no deduction because it isn’t considered a completed gift.
Services. You may deduct only your out-of-pocket expenses, not the fair market value of your services. You can deduct 14 cents per charitable mile driven.
First, you’ll benefit from the charitable deduction only if you itemize deductions rather than claim the standard deduction. Also, your annual charitable donation deductions may be reduced if they exceed certain income-based limits.
In addition, your deduction generally must be reduced by the value of any benefit received from the charity. Finally, various substantiation requirements apply, and the charity must be eligible to receive tax-deductible contributions.
While December’s Tax Cuts and Jobs Act (TCJA) preserves the charitable deduction, it temporarily makes itemizing less attractive for many taxpayers, reducing the tax benefits of charitable giving for them.
Itemizing saves tax only if itemized deductions exceed the standard deduction. For 2018 through 2025, the TCJA nearly doubles the standard deduction — plus, it limits or eliminates some common itemized deductions. As a result, you may no longer have enough itemized deductions to exceed the standard deduction, in which case your charitable donations won’t save you tax.
You might be able to preserve your charitable deduction by “bunching” donations into alternating years, so that you’ll exceed the standard deduction and can claim a charitable deduction (and other itemized deductions) every other year.
Let us know if you have questions about how much you can deduct on your 2017 return or what your charitable giving strategy should be going forward, in light of the TCJA.
When it comes to income tax returns, April 15 (actually April 17 this year, because of a weekend and a Washington, D.C., holiday) isn’t the only deadline taxpayers need to think about. The federal income tax filing deadline for calendar-year partnerships, S corporations and limited liability companies (LLCs) treated as partnerships or S corporations for tax purposes is March 15. While this has been the S corporation deadline for a long time, it’s only the second year the partnership deadline has been in March rather than in April.
Why the deadline change?
One of the primary reasons for moving up the partnership filing deadline was to make it easier for owners to file their personal returns by the April filing deadline. After all, partnership (and S corporation) income passes through to the owners. The earlier date allows owners to use the information contained in the pass-through entity forms to file their personal returns.
What about fiscal-year entities?
For partnerships with fiscal year ends, tax returns are now due the 15th day of the third month after the close of the tax year. The same deadline applies to fiscal-year S corporations. Under prior law, returns for fiscal-year partnerships were due the 15th day of the fourth month after the close of the fiscal tax year.
What about extensions?
If you haven’t filed your calendar-year partnership or S corporation return yet, you may be thinking about an extension. Under the current law, the maximum extension for calendar-year partnerships is six months (until September 17, 2018, for 2017 returns). This is up from five months under prior law. So the extension deadline is the same — only the length of the extension has changed. The extension deadline for calendar-year S corporations also is September 17, 2018, for 2017 returns.
Whether you’ll be filing a partnership or an S corporation return, you must file for the extension by March 15 if it’s a calendar-year entity.
When does an extension make sense?
Filing for an extension can be tax-smart if you’re missing critical documents or you face unexpected life events that prevent you from devoting sufficient time to your return right now.
But keep in mind that, to avoid potential interest and penalties, you still must (with a few exceptions) pay any tax due by the unextended deadline. There may not be any tax liability from the partnership or S corporation return. If, however, filing for an extension for the entity return causes you to also have to file an extension for your personal return, you need to keep this in mind related to the individual tax return April 17 deadline.
Have more questions about the filing deadlines that apply to you or avoiding interest and penalties? Contact us.
Individuals can deduct some vehicle-related expenses in certain circumstances. Rather than keeping track of the actual costs, you can use a standard mileage rate to compute your deductions. For 2017, you might be able to deduct miles driven for business, medical, moving and charitable purposes. For 2018, there are significant changes to some of these deductions under the Tax Cuts and Jobs Act (TCJA).
Mileage rates vary
The rates vary depending on the purpose and the year:
In addition to deductions based on the standard mileage rate, you may deduct related parking fees and tolls.
2017 and 2018 limits
The rules surrounding the various mileage deductions are complex. Some are subject to floors and some require you to meet specific tests in order to qualify.
For example, if you’re an employee, only business mileage not reimbursed by your employer is deductible. It’s a miscellaneous itemized deduction subject to a 2% of adjusted gross income (AGI) floor. For 2017, this means mileage is deductible only to the extent that your total miscellaneous itemized deductions for the year exceed 2% of your AGI. For 2018, it means that you can’t deduct the mileage, because the TCJA suspends miscellaneous itemized deductions subject to the 2% floor for 2018 through 2025.
If you’re self-employed, business mileage can be deducted against self-employment income. Therefore, it’s not subject to the 2% floor and is still deductible for 2018 through 2025, as long as it otherwise qualifies.
Miles driven for health-care-related purposes are deductible as part of the medical expense deduction. And an AGI floor applies. Under the TCJA, for 2017 and 2018, medical expenses are deductible to the extent they exceed 7.5% of your adjusted gross income. For 2019, the floor will return to 10%, unless Congress extends the 7.5% floor.
And while miles driven related to moving can be deductible on your 2017 return, the move must be work-related and meet other tests. For 2018 through 2025, under the TCJA, moving expenses are deductible only for certain military families.
Substantiation and more
There are also substantiation requirements, which include tracking miles driven. And, in some cases, you might be better off deducting actual expenses rather than using the mileage rates.
We can help ensure you deduct all the mileage you’re entitled to on your 2017 tax return but don’t risk back taxes and penalties later for deducting more than allowed. Contact us for assistance and to learn how your mileage deduction for 2018 might be affected by the TCJA.
Sec. 179 expensing provides small businesses tax savings on 2017 returns — and more savings in the future
If you purchased qualifying property by December 31, 2017, you may be able to take advantage of Section 179 expensing on your 2017 tax return. You’ll also want to keep this tax break in mind in your property purchase planning, because the Tax Cuts and Jobs Act (TCJA), signed into law this past December, significantly enhances it beginning in 2018.
2017 Sec. 179 benefits
Sec. 179 expensing allows eligible taxpayers to deduct the entire cost of qualifying new or used depreciable property and most software in Year 1, subject to various limitations. For tax years that began in 2017, the maximum Sec. 179 deduction is $510,000. The maximum deduction is phased out dollar for dollar to the extent the cost of eligible property placed in service during the tax year exceeds the phaseout threshold of $2.03 million.
Qualified real property improvement costs are also eligible for Sec. 179 expensing. This real estate break applies to:
The TCJA permanently enhances Sec. 179 expensing. Under the new law, for qualifying property placed in service in tax years beginning in 2018, the maximum Sec. 179 deduction is increased to $1 million, and the phaseout threshold is increased to $2.5 million. For later tax years, these amounts will be indexed for inflation. For purposes of determining eligibility for these higher limits, property is treated as acquired on the date on which a written binding contract for the acquisition is signed.
The new law also expands the definition of eligible property to include certain depreciable tangible personal property used predominantly to furnish lodging. The definition of qualified real property eligible for Sec. 179 expensing is also expanded to include the following improvements to nonresidential real property: roofs, HVAC equipment, fire protection and alarm systems, and security systems.
Save now and save later
Many rules apply, so please contact us to learn if you qualify for this break on your 2017 return. We’d also be happy to discuss your future purchasing plans so you can reap the maximum benefits from enhanced Sec. 179 expensing and other tax law changes under the TCJA.
Adam Carr, MBA, EA