CPA Blog

New law provides a variety of tax breaks to businesses and employers

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Published: Monday, 06 January 2020 07:57

Written by Phillip Strickler, CPA.CITP

While you were celebrating the holidays, you may not have noticed that Congress passed a law with a grab bag of provisions that provide tax relief to businesses and employers. The “Further Consolidated Appropriations Act, 2020” was signed into law on December 20, 2019. It makes many changes to the tax code, including an extension (generally through 2020) of more than 30 provisions that were set to expire or already expired.

Two other laws were passed as part of the law (The Taxpayer Certainty and Disaster Tax Relief Act of 2019 and the Setting Every Community Up for Retirement Enhancement Act).

Here are five highlights.

Long-term part-timers can participate in 401(k)s.

Under current law, employers generally can exclude part-time employees (those who work less than 1,000 hours per year) when providing a 401(k) plan to their employees. A qualified retirement plan can generally delay participation in the plan based on an employee attaining a certain age or completing a certain number of years of service but not beyond the later of completion of one year of service (that is, a 12-month period with at least 1,000 hours of service) or reaching age 21.

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5 ways to strengthen your business for the new year

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Published: Monday, 06 January 2020 07:53

Written by Phillip Strickler, CPA.CITP

The end of one year and the beginning of the next is a great opportunity for reflection and planning. You have 12 months to look back on and another 12 ahead to look forward to. Here are five ways to strengthen your business for the new year by doing a little of both:

1. Compare 2019 financial performance to budget. Did you meet the financial goals you set at the beginning of the year? If not, why? Analyze variances between budget and actual results. Then, evaluate what changes you could make to get closer to achieving your objectives in 2020. And if you did meet your goals, identify precisely what you did right and build on those strategies.

2. Create a multiyear capital budget. Look around your offices or facilities at your equipment, software and people. What investments will you need to make to grow your business? Such investments can be both tangible (new equipment and technology) and intangible (employees’ technical and soft skills).

Equipment, software, furniture, vehicles and other types of assets inevitably wear out or become obsolete. You’ll need to regularly maintain, update and replace them. Lay out a long-term plan for doing so; this way, you won’t be caught off guard by a big expense.

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Congress gives a holiday gift in the form of favorable tax provisions

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Published: Monday, 06 January 2020 07:46

Written by Phillip Strickler, CPA.CITP

As part of a year-end budget bill, Congress just passed a package of tax provisions that will provide savings for some taxpayers. The White House has announced that President Trump will sign the Further Consolidated Appropriations Act of 2020 into law. It also includes a retirement-related law titled the Setting Every Community Up for Retirement Enhancement (SECURE) Act.

Here’s a rundown of some provisions in the two laws.

The age limit for making IRA contributions and taking withdrawals is going up. Currently, an individual can’t make regular contributions to a traditional IRA in the year he or she reaches age 70½ and older. (However, contributions to a Roth IRA and rollover contributions to a Roth or traditional IRA can be made regardless of age.)

Under the new rules, the age limit for IRA contributions is raised from age 70½ to 72.

The IRA contribution limit for 2020 is $6,000, or $7,000 if you’re age 50 or older (the same as 2019 limit).

In addition to the contribution age going up, the age to take required minimum distributions (RMDs) is going up from 70½ to 72.

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2019 Tax Law Change Update

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Published: Monday, 23 December 2019 09:32

Written by Phillip Strickler, CPA.CITP

Highlights of spending package’s tax law changes

The federal government spending package titled the Further Consolidated Appropriations Act, 2020, does more than just fund the government. It extends certain income tax provisions that had already expired or that were due to expire at the end of 2019. The agreement on the spending package also includes the Setting Every Community Up for Retirement Enhancement (SECURE) Act.

Let’s look at some of the highlights.

Extenders

Here are some of the most widely relevant breaks that have been extended through 2020:

• The exclusion from gross income of discharge of qualified principal residence indebtedness,
• The treatment of mortgage insurance premiums as qualified residence interest for itemized deduction purposes,
• The reduction in the medical expense itemized deduction floor to 7.5% of adjusted gross income,
• The above-the-line deduction for qualified tuition and related expenses,
• Empowerment zone tax incentives,
• The New Markets credit,
• The employer tax credit for paid family and medical leave, and
• The Work Opportunity credit.

Some of these extensions might open up year-end tax planning opportunities if you can act before December 31. And the extension of some breaks that had expired at the end of 2017 but that now have been retroactively revived means that some taxpayers should consider filing amended returns for 2018.

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