Business

Three Financial Housekeeping Tips for the Post Tax Season

tax-468440_1280

You did it! Whether you’re patiently awaiting a refund or unenthusiastically writing a check, you can officially put tax season behind you. While tax time can be stress inducing for even the most seasoned accountants, not to mention taxpayers, it’s never too early to start preparing for next year. We always advise our clients to use this downtime as an opportunity to reflect on the past financial year and perform a little financial housekeeping.

1. Perform a year-end financial analysis

Having just reviewed your major financial documents for the year, you have a pretty good idea of your financial wins and losses. Taking a closer look with an open eye and willingness to learn can go a long way – in other words, use this last year’s financial experience to improve the future.

Analyzing your expenses can help identify ways to save more money. For example, consider raising your 401k contributions if you notice that your income rose last year and you are not maxing out currently. Or, if you aren’t there yet, committing to packing your lunch, or making your own coffee can add up throughout the year.

2. Consult with your accountant or financial advisor

Finances are complicated. After you’ve done your base analysis, consult with a professional for a deeper understanding. They can bring a fresh set of eyes to your financial situation and offer helpful solutions.

Maybe your goal is to buy a house this year. An accountant can help you prepare financially, compare different loan options, and explain how this will affect your taxes next year.

3. Implement new tools and strategies to track your finances

The best way to avoid a headache next April is to find ways to track and organize your finances throughout the year. Whether you file under a business or individually, there are simple things you can do.

For example, keep and organize your receipts. If you donate old clothes to Goodwill, be sure to take pictures of all items donated, and file your receipt now so you aren’t scrambling at tax time. Also, don’t be afraid to use technology to help you. Create an Excel spreadsheet to track your monthly expenses, or take advantage of mobile banking.

Final Note: With the recent changes to the tax law, it’s more important than ever to start planning now. If you have any questions about organizing your finances, we’re always happy to help – Just send us an email and we’ll talk.

WCBS Small Business Spotlight features Paul Herman!

Paul Herman of Herman & Company, CPA’s is featured on the WCBS Small Business Spotlight. Learn how the tax code changes will effect you!!

 

US Senate Presents A Different Take On Tax Reform

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

by Mike Godfrey, Tax-News.com, Washington

The Senate Finance Committee released its tax reform plan on November 9, presenting a draft bill with marked differences to that agreed by the House Ways and Means Committee on the same day.

The proposal was drafted by Finance Committee Republicans under the leadership of Senate Finance Committee Chairman Orrin Hatch (R-UT), based on the Unified Tax Framework agreed by the Trump Administration, the House Committee on Ways and Means, and the Senate Committee on Finance in September 2017.

While said to adopt a similar “pro-growth approach” to the House Ways and Means proposal, the Senate plan differs in a number of areas.

The Senate bill would preserve the current seven income tax brackets, compared to the reduced four brackets proposed under the House bill. Under the Senate proposal, the zero tax bracket would be expanded, and a slightly lower 38.5 percent tax rate would be introduced for high-income earners (compared with 39.6 percent in the House Bill, in line with current law).

Both the Senate and House bills include a proposal to double the standard deduction, to USD12,000 for individuals and USD24,000 for married couples; to repeal the Alternative Minimum Tax; and eliminate the state and local tax deductions. Where the House bill would repeal the medical expense deduction, the Senate bill would retain it.

The treatment of the Child Tax Credit is also largely similar in both bills, with the Senate proposing to increase the credit from USD1,000 to USD1,650 (compared to USD1,600 in the House Bill). However, the Senate Bill would preserve the existing mortgage interest deduction, which the House Bill proposes to curb from USD1m to USD500,000.

The Senate bill also proposes to preserve the estate tax, which the House Bill would repeal for persons dying after 2024. The Senate bill also proposes to double both the estate and gift tax exemption for individuals, from USD5m to USD10m.

For businesses, the Senate Bill would also cut the corporate tax cut from 35 percent to 20 percent, but would delay implementation until January 2019. The bill proposes a new 17.4 percent deduction for certain pass-through businesses, which are taxed under the personal income tax regime, and enhanced Section 179 expensing. There is an exclusion from the deduction for specified service businesses, except in the case of a taxpayer whose taxable income does not exceed USD150,000, for married individuals filing jointly, or USD75,000 for other individuals.

The Senate Bill would tax multinationals’ offshore holdings under a repatriation tax proposal at lower rates than under the House bill. Cash holdings would be subject to a repatriation tax of five percent, rather than seven percent under the House proposal, and at 10 percent on non-cash holdings, rather than 14 percent as under the House proposal.

Both bills would cap the deduction for net interest expenses at 30 percent of adjusted taxable income, with exclusions for small businesses.

“This is just the start of the legislative process in the Senate. We expect robust committee debate on the policies in this bill, will have an open amendment process, and hope to report legislation by the end of next week,” said Hatch.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.