LKM Accounting Specializes in providing services to small
businesses and individuals with their accounting and
income tax needs. We provide our clients with the
necessary expertise and services most small businesses
or start-ups can’t always afford from larger firms or
internal personnel. We want you to achieve your
business and personal goals. Our philosophy is simple,
we approach each task for our clients as if we were doing
it for our own business. We are invested in helping you
grow your business, increase profitability and minimize taxes.
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Important changes coming in 2017 to deadlines for business tax filings including:
- W-2 and 1099 filings are due on January 31, 2017 – This is 30 to 60 days EARLIER than past years. These forms are still due to your employees and contractors by January 31, so it is still a good idea to prepare and file these early.
- Partnerships, LLPs and Multi-Member LLCs (filing Partnership Form 1065) – Shorting filing period – Need to be filed by March 15 or the 15th day of the third month following the end of the organization’s fiscal year end. The previous deadline for this return was April 15. Extensions are available for up to six months, filed no later than September 15, 2017.
- S-Corporations Form 1120S – No change to filing deadline or extensions. Returns for these entities are still due in March 15th or the 15th of the Third month following the organizations Fiscal year end.
- C-Corps filing Form 1120 Previously filed on March 15th now get an extra 30 days with the new Due Date of April 15th or the 15th day of the fourth month following the end of the organization’s fiscal year. Extensions can be filed no later than September 15. After 2026, C-Corporation extensions will be available for up to six months after the initial due date.
- Trust and Estate filing Form 1041 the extension due date has changed from September 15 to September 30.
- Exempt Organizations filing Form 990 now have only one extension until November 15.
If you have any questions about the above changes please do not hesitate to contact our office.
If your employer hasn’t already, they should have given you a new W-4 form to update your Withholding exemptions. These should really be updated each year and adjusted according to what your tax liability was for the prior year. Now, being it’s only January, you most likely won’t have your W-2 or Tax Returns completed yet for last year but if your filing status has changed … ie you got married, had a child or other dependent, or possibly bought a house… you should go through the step by step calculation to see if you have your exemptions correct.
What is an exemption? A Withholding Exemption is a deduction from your gross income that reduces your period income by a given dollar amount when calculating your Federal and State income tax on that payroll amount. Example: If you are paid weekly, 1 exemption is equal to $43.30 (rate for 2016) so if you claimed 3 exemptions and were paid $500 per week, your TAXABLE income for Income tax purposes would be $370.10 ($500 less 3x$43.30 or $129.90). The exemption amount changes depending the frequency you are paid. The annual value of each exemption is $2,250 so if you are paid monthly, your exemption amount would be equal to $187.50 PER EXEMPTION (or $2,250 divided by 12).
How many exemptions should I claim? Don’t get carried away on claiming exemptions! The more exemptions you claim, the less is withheld in Federal and State income taxes on each paycheck. Although this may sound like a great idea, it could end up leaving you with a very large tax bill at the end of the year when you finally do your tax returns. Try to match your exemptions to what your liability actually is so that you come out with a Zero net tax, in other words No Tax Due but No Tax Refund either. This may be something you want to consult with your tax accountant on. I know a lot of people think that if they have more withheld that means a nice large check at the end of the year but I don’t agree with this savings plan. Set up a Savings account and put those funds in an account that you have access to in the event you have an emergency and need access to your money! Remember if you give it to the Government, you’ll need to wait to get it back. Wouldn’t you rather collect interest on that money and have it available if you need it?
The basic rule on exemptions is you get 1 exemption for each person who appears or will appear on your Income Tax Return. However, this basic amount is a TOTAL number of exemptions you can claim. So is you are married with a child, the total basic exemption you can claim on your W-4 is 3. You can split these in any way you’d like between you and your spouse. If your spouse works too, you and your spouse need to split up the exemptions – if you take all 3, your spouse would need to claim 0. So long as you add up to 3 between the 2 of you, you and your spouse can claim any combination. In addition to the exemption for each person on the return, there are also exemptions you can claim for Child Care, Head of Household, and other Dependent Care expenses.
Should I be claiming Exempt from Withholding Taxes? Unless you are a FULL TIME STUDENT AND/OR your income is LESS than your Standard Deduction and Personal Exemption(s) on your Tax return, you can not claim exempt from withholding – period! This status is meant for tax payers who will have NO Tax Liability in the given tax year. If you claim this and your employer suspects that you do not fall into the category that allows you to claim exempt, they can consider your Form W-4 as invalid and request you complete a new form. However, if you refuse, they can send in your W-4 to the IRS for review. If the IRS reviews your W-4 and determines that you have falsely completed your form, the IRS will send you and your Employer an “INITIAL LOCK IN LETTER”. This letter will indicate that you have 10 days to correct your W-4. However, the IRS can also send you and you Employer a “LOCK IN LETTER” that permanently sets the amount of withholding exemptions you are allowed to claim. And normally, they will set your new withholding Exemptions at Single with 0 Exemptions – insuring the maximum amount of withholding. Under these letters, you can appeal but your employer can not change your withholding without a release from the IRS. Basically, the IRS is punishing you for not withholding federal income taxes based on information they have from your prior years Tax Return and your filed W-2. If you are not sure if you can claim exempt, ask your tax accountant or your Payroll Administrator at you place of work.
Congress has reached a Budget deal which incorporates and reauthorizes some tax breaks and incentives for individuals and small business. Below is a list of items that are PERMANENTLY extended!!
The credits being permanently extended include:
- An expanded Earned Income Tax Credit for low-income earners;
- The Child Tax Credit for low and moderate income workers;
- The American Opportunity Tax Credit to help students under age 40 pay college tuition and expenses;
- Low income housing credits;
- An expanded research and experimentation credit;
- Section 179 business expensing, which allows businesses to fully deduct the price of equipment and software investments;
- State and local sales tax deduction;
- Tax deductions for food inventory donated to food banks;
- A deduction for land donated for conservation; and
- A tax break for individuals to donate to charity from qualified retirement accounts.
Section 179 is the huge one for Businesses!! Very happy with congress today for seeing the light on this one. (For further information on Section 179, please see our Blog on 09/09/2015)
Additional items included in this legislation:
- A compromise over cybersecurity legislation that would encourage businesses to share information with the government about potential cyber threats
- Permanently reauthorize federal health benefits for emergency personnel who responded to the Sept. 11 terrorist attacks;
- Put in place new security requirements for a visa waiver program, which the House passed as a standalone bill earlier this month. that has come under scrutiny following the Paris terror attacks. The legislation does not include new restrictions that would prevent Syrian and Iraqi refugees from entering the country, a provision House Republicans had pushed to get in the bill;
- Freeze funding for the Internal Revenue Service and the Environmental Protection Agency; and
- Repeal country-of-origin food labeling requirements.
The IRS has strengthened its penalty phase of the reporting requirements. These penalties are effective beginning January 1st for the 2015 tax year filing period. The penalties are as follows:
1-30 days late: $30.00 each penalty per return not filed with a maximum of $500,000.00 per year ($175,000.00 for small business maximum)
30 days – 8/1/2016: $100.00 each penalty per return not filed timely with a maximum of $1,500,000.00 per year ($500,000.00 for small business maximum)
After 8/1/2016: $250.00 each penalty per return not filed timely with a maximum of $3,000,000.00 per year ($1,000,000.00 for small business maximum)
Intentionally Disregarded: $500.00 each penalty per return not filed timely with no maximum limit per year (No maximum limit for small business)
As you can see from the information above, the penalties can be severe. However, should your supplier not provide you with necessary paperwork, you will not be penalized – SO LONG AS, your attempts to collect the information can be provided and are sufficient to prove that you made attempts to obtain the information.
More than ever, it is important that you are complying with these regulations.