The Internal Revenue Service (IRS) made some changes to the US tax code in late 2016 to reflect the adjustments brought about by factors such as inflation, medical expenses, and retirement planning. An important aspect to note is that these changes affect the 2017 tax preparation which is done in 2018. It’s, therefore, important to understand and take into account these amendments in tax laws so that you can have less of a hassle when preparing your 2017 taxes. Even if you are planning to hire a tax professional, you still need to be aware of what’s in and what’s out.

Inflation-Adjusted Tax Brackets
This is the significant change to the tax code. Inflation typically increases the nominal income for households. The IRS pushed the minimum taxable wage for married couples filing separately from $9,275 to $9,325. On the other hand, married couples filing jointly saw the minimum taxable wage move from $18,550 to $18,650 while that of the heads of households stands at $13,350 up from $13,250. 

As a whole, the tax differences resulting from the inflation adjustment are very minute. This is mainly because the rate of inflation has been relatively low and as such, the upward shift in the tax schedule hasn’t been as significant. Unless you expect significant bonuses or substantial changes in your salary, you may not need to make any year over year tax adjustments. 

An Increase in Standard Deductions
People filing their taxes individually as well as heads of households will get a deduction of $6,350 and $9,350 in 2017 respectively. Compared to deductions in 2016, this is a $50 increase. For couples filing jointly, their standard deduction will rise by $100 to $12,700. Even though the change isn’t very significant, anything to reduce your tax liability is welcome. 

Upward Adjustments for Both Traditional and Roth IRA Phase-outs 
The traditional IRA is considered the most popular retirement tool. This is mainly because IRA accounts are tax-deferred meaning the tax liability will become due when making your retirement withdrawals. Also, these accounts can lower your current tax liability. In 2017, single taxpayers will enjoy an additional $1,000 to their 2016 contribution limit for an income range of $62,000 to $72,000. For married couples within the salary range of $99,000 to $119,000, and filing jointly, they will also be able to contribute $2,000 above their 2016 limit. 

For Roth IRA, the individual phase out for single filers rose by $1,000 for those at the adjusted gross income range of $118,000 to $133,000. Couples filing jointly and whose adjusted gross income is in the range of $186,000 to $196,000 will enjoy an additional $2,000 to their contribution limit. 
This change simply means that more people will be able to make contributions to both Roth IRA and traditional IRA in 2017. 

Changes to Medical Expense Deductions
In 2016, a large number of Americans had to surpass the 10% threshold of their adjusted gross income before taking a deduction. On the other hand, taxpayers aged 65 and above were allowed a limit of 7.5% of their adjusted gross income to qualify for a tax deduction. Starting 2017, this has changed and now all people including the 65 year plus citizens have to meet the medical expenses threshold of 10% of their adjusted gross income for them to qualify for tax deductions. 

An Increase in Estate Tax Exemption
There is a modest increase in estate tax exemptions in 2017. This is particularly for those long-term investors and property barons. Estates of individuals who pass on in 2017 will be tax exempt up to $5.49 million. This is an increase of $40,000 from 2016 levels. Generally, estate taxes affect a small population which means this change will not be widely felt. Ironically, this small group of people has attracted the attention of many legislators and policy makers who are of the opinion that the tax exemptions should be scrapped off altogether. 

With all these changes in mind, it is important you take the time to compile tax information for your business and personal records. Be sure to understand your current situation and the potential changes it may undergo. Waiting for the last minute is not an option, and if you consider the tax assessment process to be overwhelming, you can enlist the help of a tax professional. 

Any food service business that has beverage and food sales is required to file a return. Businesses included in this are coffee shops, restaurants, tearooms, cafeterias, grills, luncheonettes, mobile canteens, soda fountains, ice cream shops, and many others. Where the business makes sales between $200,000 and $499,999, the sales tax rate applicable is 0.5%. On the other hand, for sales over $500,000, the applicable rate of tax increases to 0.75% for the portion above $500,000. 
​
The taxable foods and beverages are those manufactured or prepared and served or sold by qualified food service businesses in Orleans Parish. 

Any business establishment in Jefferson or Orleans Parish that is engaged in the provision of lodging facilities or accommodation for transient guests is required to pay sales tax. In both Jefferson and Orleans parishes, the hotels will be required to pay 4% tax. In Orleans Parish, the businesses will be expected to pay an additional $1 per night if their hotels have between 300 to 999 rooms. In the case of hotels with a thousand rooms and above, they will be charged $2 per night. Included in this is hotel rooms that are booked via rental sites such as AirBNB. 

If as a business you rent automobiles in Louisiana for a duration of up to 29 days, you are supposed to collect sales tax in addition to the other applicable taxes. By definition, an automobile includes any vehicle designed to transport passengers as well as their baggage. However, the tax doesn’t apply to pickup trucks rentals.

​The rate of sales tax is 3% which comprises 2.5% state tax and an additional 0.5% local tax. The only exemptions to this apply where the automobile is rented by a vehicle repair dealer or an insurance company to serve as a replacement vehicle for a customer while theirs is being repaired. Also, vehicles which are rented and the lessor furnishes the driver, are exempted from this tax. 

​Exemptions on the purchase of manufacturing equipment and business utilities were lessened and this means businesses will be expected to pay more when buying manufacturing equipment or paying utilities. 

The days when shoppers from online retailers such as Amazon used to enjoy tax-free purchases are over. Under the new Louisiana sales tax, all purchases shipped to destinations within Louisiana will be subject to sales tax starting January 1, 2017. This is also applicable to Louisiana retailers who sell their merchandise online.

Before this came into effect, online buyers only kept track of their purchases over the year and then did a self-reporting during the tax filing period. The implications of this change in tax application means New Orleans shoppers will be paying anything up to 10% more when they complete their online orders.

A typical Amazon purchase will include 5% state sales tax in addition to city sales taxes which can range up to 5%. The general sales tax in Orleans Parish is 5%, but when making food and drug purchases; this drops to 4.5%.
In Jefferson Parish, the general sales tax is 4.75%, but food and drug purchases attract a much lower sales tax of 3.5%.
The reason why Amazon is collecting the sales tax is that the law requires that it does so or face the alternative ordeal of reminding customers the items they bought from them and the much they owe in sales taxes each year. With the addition of Louisiana and Colorado, Amazon now charges sales taxes in 29 states within the U.S. also to include the District of Columbia.

​

1. Unreported Income
​One of the easiest ways to catch the IRS’ eye is not to report all of your income. If someone had you fill out a 1099, they reported it to the IRS. However, if you forgot to mention it as well, things won’t add up, and they’ll definitely think that you’re intentions are less than honorable.

2. Business Deductions are Too High 
Many think that working from home is enough to warrant receiving the home business deductions so they can save on meals out, travel expenses, vehicles, and even entertainment. Deductions that are higher than earnings may look suspicious if it occurs for more than three years.

3. Operating a Cash Business
If you run a cash only business, you absolutely need to have some form of paper trail. Because the IRS knows that much of these transactions can go without any sort of trace, they can easily wind up in the IRS’ crosshairs. As long as you can prove you aren’t hiding it all, you can reduce the amount of flags you raise.

4. Improper Deductions
Some think that being a local business owner means writing everything off. Unless the right deduction codes are used and items like claiming vehicles that double as personal use are deducted, the IRS will know you’re claiming too many deductions. Tax returns of 20% or higher than average will quite possibly get flagged. ​

​10. Using a Bad Tax Preparation Service or Accountant
If a New Orleans Accountant or Bookkeeping service is a little too good at their job, they may get flagged by the IRS. So by association, you will be flagged for using them. There’s a fine line between getting the return that you deserve, and getting a fat paycheck from Uncle Sam that shouldn’t be happening.

​At Accounting Services Unlimited, LLC, we can ensure that the IRS will leave you alone and give you the audit protection you deserve. To make sure you're getting the best return or need an expert New Orleans accounting firm or bookeepper, call today to schedule your consultation and get through the upcoming tax season the safe & convenient way.

Everyone knows that they should regularly keep up with their taxes, but, if you're like many, you probably wait to do it a week before they need to be submitted. As 2016 comes to a close, there are a few things to consider for the 2017 tax season.

1. Make Sure the Year is Balanced
   If you’ve been the diligent type, then it’s time to make sure that all of your receipts and records even out before January 1st gets here. If applicable, you can begin distributing 1099 and W-2 forms. It’s also a good idea to reconcile your notes payable to keep up with debts owed, as well as any remaining payroll items for the year. 
   ​
2. Utilize a Checklist
   While many rely on a series of sticky notes plastered all over their computer screen, a dedicated tax checklist will speed the process along and help keep you focused and organized. How many times have you thought that you were finally finished, only to realize you left something out? A checklist is easy enough to make, and you can find a template online for one of these with a quick search.
   
   
3. Take Advantage of Gifts
   Each individual can give up to $14,000 annually as tax-free gifts. If you have someone who 's hard to buy for on your Christmas list, cash is always appreciated. Just ensure that you’re giving it to them correctly and not accidentally breaking the rules. Speaking of giving, make sure you have records of all charity contributions for the year. By having them recorded now, it will save a ton of time later, and will give you a better idea of what you're you’re going to owe. 
   
   
4. Utilize Your Retirement
   Each year, if you have a Roth IRA retirement account, you can place $5,500 tax-free into your account. Because Roth IRAs are not taxed until after the money comes out, you can potentially rack up a ton in savings before the IRS gets to touch it. As with any investment account, there are many stipulations, so it’s best to meet with a financial advisor before going nuts trying to max out your account. The good news is that if you have a traditional IRA, converting to a Roth IRA account is easy enough to do.  
   
   The end of the year a terrific time to sock additional funds into a 401(K) or other retirement funds if you have one. If you don't have a retirement account, now is a good opportunity to begin one. Many retirement accounts can reduce your taxes owed, or at least incur a deduction. As always, it’s best to meet with an expert to find out the exact rules for your state.
   
   
5. Don’t Wind Up a Scrooge
   Some people think that tax-free gifts can be used to pay for expenses such as tuition and medical costs. While there may be some exceptions, the general rule is that these types of payments, especially to health insurance providers, must be paid directly. On the other hand, make sure that the individual(s) you intend on gifting money to is eligible to receive them. The worst gift of all is thinking you’re getting some extra spending money, only to have to pay it back to Uncle Sam later. 
   
   
6.  Know Your Tax Bracket
   It’s always good to know your tax bracket, particularly if you are an employer. Employers belonging to higher tax brackets not only incur certain surtaxes but are also subject to Medicaid and other withholdings to consider as they reconcile their year-end taxes. 
   
   Having an idea of what your tax bracket requires will help you determine what you can contribute to retirement funds, as well as what you can give away as charity and gift contributions. Knowing what you will owe now will make it easier to submit later on. And, considering it may be a different bracket from the last filling, it never hurts to discover it as you’re thinking about taxes.
   
   
7. Know the Ins and Outs of the AMT
   The AMT, or the Alternative Minimum Tax, is as expensive as it is confusing. While the AMT was started to make sure wealthier fillers didn’t get out of paying their fair share via loopholes (like Donald Trump so famously bragged about), it could, almost 50 years later, wind up costing you a ton without you even realizing it.

With the myriad of tax laws and tax rulings on business owners, it's always best to speak with a tax expert regarding what's best for your specific business type and industry. Remember... a free consultation today, may save you a bundle tomorrow. Schedule a meeting with one of our tax experts today!