Minimum wage- ballot petition

Keep an eye out for rising Michigan minimum wage. What is interesting about this ballot petition is that it includes language that will make ALL jobs increased to a new minimum wage level by 2022 of $12 per hour, including tipped employees. If you own a restaurant or bar, you need to keep this on your radar. Current minimum wage for tipped employees in Michigan is only $3.38 per hour! Huge changes may be coming…. See more details at this link.

Ballot petition- minimum wage increase

Jobs Bill- State of Michigan

Yesterday Governor Snyder signed into law the Jobs Bill. A tax break for businesses that create a large number of jobs in Michigan.

The Jobs Bill will offer incentives in the following manner. Any business that creates at least:

  • 250 jobs would qualify for a 100% credit of the Michigan tax withheld from employees for up to 10 years.
  • 500 jobs would qualify for a 50% credit of the Michigan tax withheld from employees for up to 5 years.
  • 3,000 or more jobs would qualify for a 100% credit of the Michigan tax withheld from employees for up to 10 years.

In order to qualify for the Jobs Bill not only do the businesses have to create the jobs within a certain time frame, they may also have to create the jobs at or above the average regional wage (except those employers that create at least 3,000 jobs). They would also have to apply with the State of Michigan and have their application accepted prior to 12/31/2019 (when the program is set to end, unless it is extended). This credit is available for up to 19 businesses annually, so if you are thinking about applying, you will want to make sure you do so as soon as possible.

Bill makers have supported this bill due to the fact that unlike other job creation bills, if the employer does not create the jobs, they do not receive the credit. We hope the State continues to support these types of bills which not only support job creation, but also hold the applicants accountable to create the jobs in order to qualify.

For more information about the Jobs Bill check out this great article on MLive:

http://www.mlive.com/news/index.ssf/2017/07/gov_rick_snyder_signs_incentiv.html#incart_river_home

Happy Thanksgiving!

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From our family to yours. Happy Thanksgiving from your friends at Capstone CPA Group!

New overtime rules- blocked by federal judge

A federal judge on Tuesday blocked a Department of Labor administrative ruling. Commonly known as the new mandatory overtime pay law, the Department of Labor in conjunction with the Obama administration changed the rules relating to overtime pay for certain workers making less than $47,500. This rule was set to take effect on December 1, 2016. However, this injunction and case will determine whether the change to the overtime rules is enforceable by the Department of Labor.

The federal judge presiding over this case issued an injunction, of the new policy. This injunction stops the Department of Labor from being able to enforce this new law (temporarily), while they hash out whether the Department of Labor has the authority to classify workers by annual pay. As more information is available, we will try to provide you with updates.

For more information about the injunction and what it may mean for your business, reach out to us and check out this article .

Later this month we will cover the new overtime rules and help you determine whether you would be covered by these changes, and some measures to take to make sure you can comply with these changes (if they are to take effect).

Trump tax – Business

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We hope you enjoyed our initial installment last week, where we covered the likely changes associated with the Trump tax plan. Specifically, we covered how the Trump tax plan may impact individuals. In the second part of our examination of the Trump tax plan we reviewed proposed changes in tax policy for business taxes.

Some of the largest cuts in the Trump tax plan are reserved for business taxes.

The top corporate tax rate would fall from 35% to 15%.  This lowering of the corporate tax structure would make corporate taxes much more attractive under certain circumstances by reducing the effect of double-taxation of corporate profits.  This is especially true when you consider that the current capital gains and dividends rates are much lower than historical rates.

In a major shift of tax policy, the owners of pass-through entities, such as sole proprietorships, DBA’s, partnerships, and S-corporations, could elect to be taxed at a flat rate of 15% on their business income rather than “regular” individual income tax rates. This change could make a big difference. We will use one example. Let’s say you have the option to go to your employer and ask to be treated as a subcontractor going forward. If your normal “highest” tax rate is 33%, if you elected to pay the flat 15% rate, you might be able to save up to 18% in federal taxes by changing the structure of your income. While it is too soon to know if this change will go through, it will be important to keep an eye on this tax change alone!

The Trump tax plan also contains a strategy to decrease the incentive for a US company to “move” its tax residence overseas.  Currently a 35% tax rate is applied to companies that wish to repatriate cash held overseas. The Trump tax plan would impose a one-time tax of 10% on the repatriation of cash to the US. This shift in tax policy should increase cash available for reinvestment and dividends in the US.

Businesses engaged in manufacturing could also elect to expense investment in equipment rather than depreciating the cost over time.  If this election is made, the business would not be allowed to deduct interest expenses on their business return.

Available documents describing the Trump tax plan also imply many business credits would be repealed.  Specifically, the research and development credit would be retained and the credit for employer-provided child and dependent care may be expanded. Other credits may be on the table. But, the language is too vague at this point to help provide further guidance one way or the other.

Thank you for allowing us to nerd out on tax policy. Overall we see some benefits and detractions relating to the proposed changes. So, if you would like more information about how these changes may affect you and your business, feel free to reach out to us by email at [email protected] or 616-822-2981.

 

Trump Tax Plan – Individuals

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With the election in our rear view mirror, many people are wondering what financial agenda the Trump team will implement. We are also interested in the total financial package President-Elect Trump will propose, outlines of his tax agenda are already fairly well documented.

President-Elect Donald Trump has proposed the largest tax cuts since Ronald Reagan. The last time there was unified party control in Washington our gift was the Affordable Care Act.  Not only did Donald Trump win the presidency, but the Republicans retained control of the House and the Senate. In spite of Trump’s very public battles with ingrained Republicans, Trump’s tax plan is similar in many ways to the ideas of the rest of the Republican Party.  That means his tax plan could very well happen by the summer of 2017. We offer to you a summary of the most likely outcomes of a Trump tax reform.

Trump’s plan would reduce the number of tax brackets from seven (currently) to three with rates of 12%, 25%, and 33%.  The top tax rate would drop from 39.6 % to 33%.  Also, the Net Investment Income Tax (part of the ACA) of 3.8% on high-income taxpayers would be eliminated.  The alternative minimum tax would also be gone, and to use the president’s words, it’s gonna be huge. Preferential tax treatment of capital gains and dividends would be retained. While we cannot find specific support (since many are split on whether to call it a penalty or tax) we are only to assume that if the ACA is eliminated so to would the responsible party penalty (non-insured penalty).

The Trump tax 2017, would eliminate the current federal estate, gift, and generation-skipping transfer taxes.  Instead, the Trump tax plan would place a special capital gains tax, upon death, for tax payers who have more than $5 million for single filers and $10 million for married couples. We are hoping for more information about this tax to become available in the coming months.

The standard deduction would be increased from $6,300 to $15,000 for single filers and from $12,600 to $30,000 for joint filers. But, this plan would eliminate personal exemptions. Certain taxpayers may still be able to itemize, but specific details are unclear at this point. The head of household filing status (available to single taxpayers with a qualifying child) would be eliminated.  The loss of personal exemptions and the head of household filing status would cause many large families and single parents to face tax increases. President- Elect Trump has also stated that his plan would include some sort of preferential treatment for child care expenses. However, at this time it is unclear as to the exact amounts, caps and limitations of such a tax deduct or tax credit.

We have included a simple table to show how the Trump tax 2017 may affect an average American household.

This is the first part of a two-part examination of the 2017 Trump tax plan. Look for our next installment next week, that examines how changes may affect businesses. As always, feel free to reach out to us as the tax landscape changes. [email protected] or 616-822-2981.

Trump Individual Tax – Tax Table

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We have included a simple table to show how the Trump Individual tax plan may affect an average American household. Please see the Individual Trump tax table

 

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Also, check out our post- Trump Individual tax plan. This post highlights some of the proposed tax reforms that are likely to be adopted in 2017. While it is still to early to know what portions of the total plan will be adopted. We feel that given the current political environment, these reforms have a high likelihood of happening. Especially given the fact that both parties and the general public have been asking for real tax reform in the last few years.

This is the first part of a two-part examination of the Trump tax plan. Look for our next installment next week, that examines how changes may affect businesses. As always, feel free to reach out to us as the tax landscape changes. [email protected] or 616-822-2981.

Year end planning: Retirement plan

Small business owners usually have a long list of items on their to-do lists. If contributing to your retirement plan was on your agenda this year, there may still be time to add more to your nest egg and reap the rewards on your 2015 return. You’re allowed to make contributions to an established retirement plan up until your tax filing deadline, or potentially as late as April 15 of next year (or later if you file an extension). You get two benefits: More money in the bank waiting for you when you retire and a tax deduction for 2015. These tax benefits can be especially helpful when you have a strategic tax plan in place to lower your total tax bill.

 

There are a number of tax-advantaged retirement plan options open to those who run their own businesses, with different choices for those who have employees and those who don’t. If you are self-employed, for example, you may qualify for retirement plan options that include the SEP (Self-Employed Pension) IRA or the individual 401(k). If you’d like to learn more, or if you have any questions about your retirement plan options, please contact our office.

Yes, You Can Appeal an IRS Decision!

If you disagree with an IRS decision also known as an IRS determination letter about your taxes, rest assured that you’re not alone. The IRS has an Office of Appeals that works with more than 100,000 taxpayers every year to address their IRS appeal. If you’re facing a tax dispute over an IRS letter, the first step we recommend is that you call our office. We can help you evaluate your claim, review your options and work with you throughout any IRS appeal. Often we can obtain the same result, without having to go through the lengthy IRS appeals process!

 

There is no charge for filing an IRS appeal with the federal government, and the process is designed to arrive at an objective resolution to your dispute with the IRS. If you decide to file an appeal with the IRS, it would involve an in-person or phone conference or thorough correspondence with an employee of the independent appeals organization “with the IRS”. We can help you prepare your appeal and participate in an appeals conference with you. Usually, you do not have a second chance to file an appeal with the IRS, so it is very important to get your facts correct and organized before the appeal has been filed.We offer knowledgeable advice on all your tax concerns, so be sure to contact us with all your questions.

IRS notices: How to deal with the IRS

In this article we are going to address how to deal with the IRS. We are also going to go over some information you should have if you receive an IRS notice.

Let’s assume for a moment that you are a good taxpaying citizen and have filed your tax returns for the last few years. You have filed them timely, and paid your taxes with Uncle Sam.

Then it comes. That day; when you receive the letter from the IRS. For most taxpayers, the IRS letter you will receive will be a CP2000 notice. These are automated notices that the IRS sends out which tell you the information you filed does not match with the records the IRS has on file. There are a couple of very important facts about this notice:

  • The IRS does screw up! You may owe less than the notice states, or nothing at all, but…
  • You cannot ignore this notice even if you believe you do not owe any money (we will cover this at length in a minute)
  • Take a minute to make sure that you owe taxes with this notice, and that the notice includes only known income sources.
  • Take out your tax return and compare it to the notice you received. Obviously you will be looking for differences between the summary information in the IRS letter, and your filing.
  • It takes time for the IRS to process information. Often it can take more than 90 days for the IRS to process one form. For this reason, the IRS is often dealing with old information.

The next step is usually to call us! We offer complimentary reviews of these notices to our clients, and in many cases can resolve the issue with the IRS without charging you for the service. There are a few reasons why we help taxpayers to fight these IRS letters:

  • The information on the IRS notice is inaccurate
  • There are additional credits that are available due to the adjusted income
  • There are additional expenses that can be applied to income before assessing tax that the IRS either did not know about, or did not process correctly
  • The IRS is understaffed and often unavailable. Tax professionals have tools available to deal with the IRS directly, that are not available to the general public
  • We know how to deal with the IRS, and know how to work within their systems to get results

If you decide not to consult an professional on the matter, it is important that you know a few facts. An IRS CP2000 notice becomes final and accepted as an adjustment to your return, if you do nothing 30 days after the notice issuance date. So, you only have a limited amount of time to ask that the IRS change the information contained on this notice. Once the IRS has adjusted your return for a CP2000 notice, you will usually receive a bill from the IRS. Even after the IRS has billed you, there are still things you can do to eliminate or minimize this tax bill, especially if you believe you do not owe the taxes due.

If you have not filed your returns and paid taxes over the last few years, we should also talk, but that is not the focus of today’s article. IRS notices are very important and timely pieces of information. For this reason, it is important to understand what the notices mean. If you have received IRS notices and are concerned about what will happen to you or your business. Contact us