529 Plans: What you NEED to know about qualified tuition programs

Raich Ende Malter is pleased to announce the REM Cycle's inaugural video blog. We plan to make video posts a recurring feature for the coming year.

In this video, tax manager Joseph DeMartinis takes a look at qualified tuition programs, better known as 529 plans. These programs are subject to many limitations, but they contain many benefits, as well. Let's break them down.

 
 

We hope you find this video both informative and interesting. Please feel free to share it with clients and colleagues, as well as on social media.

REM Cycle Review: Unexpected DNA kits and spousal support

At last, the moment you’ve been waiting for all week—the latest installment of the REM Cycle Review, the only weekly tax roundup compiled by a penguin who consumes nothing but Red Bull and burritos. (You’ve got to lay off the Red Bull, Crystal. It’s starting to get weird.) We’ve got lots of tax tidbits to get you through these cold winter nights, plus this week’s staff video picks. Join us, won’t you?

Spousal support after a divorce? There’s a new tax rule for that. A more in-depth, less pun-laden look at the new divorce rules under the Tax Cuts and Jobs Act (TCJA) than last week’s article on the Jeff and MacKenzie Bezos split. [Business Insider]

Withholding and estimated tax payments fall short? The IRS may waive your penalty. In a move sure to relieve many, the IRS announce this week that it will waive the estimated tax penalty for many taxpayers whose withholding and estimated tax payments fell short of their total tax liability for the year. [IRS.gov]

Surprising absolutely no one, student loan debt keeps young people from buying homes. The Federal Reserve commissioned a long-term study to figure out why millennials weren’t buying houses. As it turns out, $1.5 trillion ($1,500,000,000,000—that’s eleven zeroes, for those playing along at home) in education-related loans is an “important factor.” [CNBC]

Unexpected DNA test kits + hackers + $10 Amazon gift cards = FRAUD. It’s weird enough to receive a DNA test kit in the mail you didn’t order. Weirder still if you discover the kit was ordered by someone you don’t know, who used a stolen credit card number in order to do it. The weirdness reaches M.C. Escher levels when it’s revealed all this nefarious naughtiness was committed in the name of… getting a ten-dollar gift card for Amazon? Uhhh… seriously? [USA Today]

Today, January 18, is National Thesaurus Day. National Thesaurus Day is observed annually on January 18 in honor of Peter Mark Roget (1779-1869), creator of Roget’s Thesaurus. Today, the thesaurus is also celebrated, appreciated, valued, treasured, esteemed, and held in high regard. [National Day Calendar]

This week we’re watching…

The REM Cycle editorial staff recommends one professional development video and one funny or thought-provoking video each week.

Former FBI hostage negotiator Christopher Voss created his company Black Swan based on the skills learned as a negotiator in hostage situations.

DNA tests you can take with do-it-yourself kits sent right to your home are more popular than ever, but how well do they really work?

Thanks to astute reader Greg Lavin for pointing out the correct number of zeroes in a trillion. We send him a trillion thanks and good wishes.

The REM Cycle Review is a weekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general.

Got a hot tip? Email us at REMCycle@rem-co.com.

Not your ordinary losses!

iStock and Amy Frushour Kelly

iStock and Amy Frushour Kelly

Posted by Konstantinos A. Kokkosis, Senior Tax Accountant

New year, new blog… and time to dive into some of the new changes that have made ordinary tax concepts, well, not so ordinary. What better way to start than with net operating losses (NOLs).

Net operating losses have always featured two elements. One element was how an entity or individual used the NOL, which was to offset dollar for dollar any losses carried forward or back against taxable income. The second element was how the entity or individual was able to apply an NOL. Historically, we would carry the NOL back two years or forward 20 years to offset any taxable income that the entity or individual incurred in the preceding or subsequent years. Thanks to the Tax Cuts and Jobs Act, as of December 31, 2017 and going forward, we have big changes. Changes that make us look at net operating losses entirely differently. Firstly, we will not be allowed to take a dollar for dollar deduction anymore. We will only be allowed to offset 80% of our taxable income with the NOL. Secondly, we will no longer be able to carry back the NOLs two years and instead of carrying them forward for only 20 years, we will be allowed to carry forward the NOLs indefinitely. How lucky are we! Due to the different treatment of the NOLs, the pre-2018 NOLs and the post 2018 NOLs need to be tracked separately.

Now, this is where we venture off into the great unknown. Things get a little tricky in the year where we need to use the pre-2018 NOLs and the post-2018 NOLs. As I stated earlier, for any NOLs incurred prior to December 31, 2017, we can take a full dollar for dollar deduction. But as of January 1, 2018, under the new tax law, we are only allowed to offset 80% of our taxable income by using up NOLs. The following example illustrates why there is uncertainty:

  • Corporation A has $90 million in NOLs generated in 2017 and $20 million generated in 2018.

  • In 2019, if corporation A had $90 million of income, Corporation A would be able to use up the entire 2017 NOL against the $90 million of income.

  • If on the other hand, Corporation A had $100 million of income, the correct answer is not as clear as before.

    • Could Corporation A argue that they should be able to offset the additional $10 million of income with the $8 million of NOL? …or…

    • Are they not allowed to utilize the 2018 NOL at all, since 80% of $100 million is $80 million, which is less than the $90 million of NOL applied to the current tax year?

The answer? Nobody knows… yet.

With so many changes that are being made to the tax law via the Tax Cuts and Jobs Act, tax planning has become more complicated than ever. The changes that have been made to NOLs will change how many entities and individuals plan for not only this year but for many years into the future! It is never too late to consult your tax advisor and see how these new changes affect you.

REM Cycle Review: Amazon divorce and a GILTI proposal

Ahhhh, Friday. The work week is almost over, the weekend is almost upon us, and it’s time to lean back in your chair and relax with another edition of the REM Cycle Review, the only weekly tax roundup written on an Apple MacIntosh. (The last part of this statement is not true.) We’ve got tax news that might have slipped under your radar this week, as well as this week’s staff video picks. Let’s dive in!

When Amazon founder Jeff Bezos couldn’t re-Kindle Fire into his marriage, the entire world took note—including tax professionals. One thing Jeff and MacKenzie Bezos may not have Primed themselves for is the new divorce rules under the Tax Cuts and Jobs Act (TCJA)... [Fox Business]

There is no average taxpayer anymore—not that there was an average taxpayer to begin with. But now that the TCJA has turned filing requirements upside down, New Yorkers will find their requirements even more complex, as NYS has decoupled its tax policies from the new federal laws. [Rochester Democrat & Chronicle]

A GILTI proposal. The American Institute of CPAs has requested that the IRS and Department of the Treasury change proposed regulations to the Global Intangible Low Tax Income provision in the TCJA. [Tax Pro Today]

Cryptocurrency markets plunge 11% in a single day. As of this writing, the biggest losers are Bitcoin Cash, EOS, Tron, and Cardano. So…not a super-great day to be a crypto investor. [Ethereum World News]

This week we’re watching…

The REM Cycle editorial staff recommends one professional development video and one funny or thought-provoking video each week.

Craig Wortmann shares five elements to running a high-impact business meeting.

Did Pepsi really run a commercial promising drinkers a military aircraft? Uhhh…

The REM Cycle Review is a weekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.

Happy holidays from the REM Cycle editors and contributors

Happy Holidays 2018.png

Posted by Evan Piccirillo, Managing Editor

Without question, 2018 has been the biggest year yet for the little blog we decided to produce once a month in the summer of 2016 here at Raich Ende Malter. The Tax Cuts and Jobs Act gave us more material to write about than we could ever hope to cover in a bimonthly column, so we went weekly. Now we’re posting twice a week—one serious original tax piece, usually on Tuesday, and a Friday tax news roundup featuring REM Randy, pictured above (hi, Randy!). It’s a significant change in format and frequency, and a far cry from the occasional thought piece in our original vision.

This year, we’ve seen more new contributors, with content covering areas we haven’t touched on before. It’s all been incredibly exciting, and we’re currently hard at work on a new REM Cycle project. It should be arriving in your inboxes sometime next month. We think you’re going to like it.

But enough talk. Happy holidays, happy new year, and thank you for reading. See you in 2019.

New York, land of itemized deductions

New York Itemized Deductions 2.png

Posted by Evan Piccirillo, CPA

As we discussed previously, under the Tax Cuts and Jobs Act (TCJA), most itemized deductions have been suspended or limited for the next eight years. That fact, coupled with the nearly doubled standard deduction, means that most taxpayers will no longer itemize deductions on their federal tax return. Many might be led to infer that we no longer need to gather receipts and other tax deduction documents like we had in the past. You might even be thinking “Finally, something in the TCJA that resembles the simplification that the term ‘tax reform’ would suggest.”

Not so fast… New York State threw us a curve ball.

Prior to 2018, in most cases if taxpayers took the standard deduction on their federal return, then they would have to use the standard deduction on their New York return. Now New York will allow all taxpayers to itemize, even if they take the standard on their federal. In addition, virtually all the categories of itemized deductions that were suspended under the TCJA for federal returns are still allowable for New York returns. This means you will have to provide your tax preparer with:

  • amounts paid for charity

  • personal casualty losses

  • real estate and foreign taxes paid (you still can’t deduct New York taxes on your New York return)

  • interest paid, including mortgage interest

  • medical expenses, if they exceed 10% of federal AGI

  • certain job expenses and other miscellaneous itemized deduction, subject to limits

Many of these deductions are subject to limits for New York that differ from federal limits.  Also, keep in mind that the New York standard deduction is only $16,050 for a married couple while the federal standard deduction is $24,000.  It very well may be the case that taxpayers with itemized deductions that fall between those amounts (and in excess of those amounts) will want to tax advantage of this change in New York.

Although this is actually a benefit for taxpayers (more deductions) it adds yet another layer of complexity to an already tangled web of information and misinformation in the public conversation.  If you were under the impression that your facts lined up in such a way that you were done with tracking personal deductions, it is very likely that you were wrong.

I hope you didn’t throw away those receipts…

REM Cycle Review: Cell phone tax, test your altruism, and marijuana CPAs

REM Cycle Review Header Image RED & WHITE with photo V2-01.png

It’s Friday, and that means it’s time for another edition of the REM Cycle Review, your weekly roundup of all the tax news that’s fit to print. We’ve got a few tax tidbits that might have slipped under your radar this week. If you’re reading this on your mobile device, our first story will be of special interest to you…

Cell phone users are paying more in sales and use tax than ever before. According to a new study by the Tax Foundation, wireless tax rates have been on a steady increase since 2006—to an average current rate of 19.1%. [www.taxfoundation.org]

This December, you can test your altruism! Because that charitable contribution might not be tax-deductible after all. [Forbes]

Could raising taxes on alcohol save lives and prevent crime? The answer is complicated (it usually is), but sobering. A worthwhile read, especially during the festive season. [Vox]

Accountants are increasingly finding that pot is a proverbial pot of gold. A brand-new, multi-billion-dollar global industry is in desperate need of number-crunchers: marijuana. The pros for accountants: higher fees due to highly specialized knowledge of accounting practices. The cons, well… [Business Insider]

This week we’re watching…

The REM Cycle editorial staff recommends one professional development video and one funny or thought-provoking video each week.

What makes a great leader? Management theorist Simon Sinek suggests it's someone who makes their employees feel secure and draws staffers into a circle of trust. But creating trust and safety means taking on responsibility.

A misplaced cell phone leads to unexpected consequences. Featuring Vine and YouTube star Darius Benson.

The REM Cycle Review is a weekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.

Perspective on a tariff-ying trade war

REM Cycle

REM Cycle

Posted by Amy Frushour Kelly. Associate Editor

The U.S.-China trade war is having a significant effect on commerce, seeing Chinese imports and exports at a record 28-month low and causing major tech manufacturers like GoPro to pull their factory work from China (“production will continue in China for non-U.S.-bound cameras,” according to NBC News). All this despite the 90-day truce called by President Trump and Chinese President Xi Jinping at the G-20 Summit in Argentina earlier this month.

No, not this Grover.   Source

No, not this Grover. Source

In an exclusive interview on CNBC’s “Squawk Box” Friday, American political advocate Grover Norquist asserted that “Tariffs are taxes. … It's a weapon, tariffs, that raise[s] the costs of goods and services on Americans. Tariffs on Chinese goods are paid by American consumers.” Full disclosure: Mr. Norquist is founder and president of Americans for Tax Reform, a powerful conservative anti-tax organization, so he has an iron or two in this fire.

A tax, as we’re all well aware here at the REM Cycle, is any charge imposed by a government upon a taxpayer. Sales tax, use tax, estate tax, property tax, income tax, gift tax, yadda, yadda, yadda.

A tariff, however, is a special class of tax imposed only on imported (and, rarely, exported) goods and services between sovereign states. Tariffs are used to restrict trade of these imported goods and services by increasing their price, making them more expensive to consumers and theoretically encouraging domestic trade. Tariffs are therefore useful to governments as a means of shaping trade policy.

But there’s a big difference between the U.S. government and the average U.S. consumer. Let’s rephrase the previous paragraph: a tariff is a sales tax on goods and services from a certain foreign country. The tax is imposed at the port of entry and paid by the importer, then presumably passed on to the consumer: for instance, the person buying a GoPro or an iPhone.

So is our pal Grover right? Will tariffs on Chinese-made products effectively raise taxes on Americans?

Probably—at least in the short term. Savvy Chinese manufacturers will do all they can to avoid incurring the tariff. Some are already doing this by finishing assembly in nearby nations or shipping via Vietnam. And there is still the possibility that Mr. Trump and Mr. Jinping will make good on their 90-day deadline to end the trade war. However, all these solutions take time to implement, and the trade war already has been raging for several months. Here’s hoping for a holiday ceasefire.

In the spirit of giving, New Jersey "regifts"

iStock and Raich Ende Malter

iStock and Raich Ende Malter

Posted by Sam Federman, CPA

The state of New Jersey has now provided taxpayers with a limited time amnesty offer. The state refers to this as a gift. The last time this opportunity was offered was 2014. Specifics to the amnesty program can be found on the state’s web site – taxamnesty.nj.gov – but a few pertinent details are listed below.

  • Deadline to apply: January 15, 2019

  • Applications must be completed online

  • Relief of penalties and half of total interest due on tax liability

Caveats

All taxes must be paid and all returns must be filed by the deadline. There is no option for a “partial” amnesty.

Once payment is made, none of the taxes can be appealed. The payments made are not eligible for refund or credit.

Taxpayers who do not take advantage of amnesty may be subject to an additional 5% penalty for taxes that were not satisfied during the amnesty period.

Eligibilty

The program applies to outstanding tax filings or payments that are reportable on a tax return due after January 31, 2009 and before September 1, 2017.

Amnesty participation is available for virtually all taxes (income, sales tax, etc.) administered by the state. Taxes that are not eligible include local property taxes and certain portions of payroll taxes.

Special note

The state has acknowledged that, due to the mass mailing nature of the tax amnesty program, many erroneous notices have been sent. If you believe you received a notice in error, don’t panic. You are not alone.

This opportunity will not last much longer and may help you sleep better at night. Contact your REM tax adviser to determine whether this program is right for you.

REM Cycle Review: amnesty, virtual currency, and a rude awakening

REM Cycle Review Header Image RED & WHITE with photo V2-01.png

It’s Friday afternoon, and you know what that means… yes, it’s time for the REM Cycle Review, your weekly tax news roundup. So pull up a chair, grab some coffee, and prepare to be dazzled.

New Jersey launches extensive tax amnesty program. We’ll be diving deep into this topic in next Tuesday’s blog post, but here’s a quick primer to whet your appetite. [www.nj.com]

IRS Advisory Council says taxpayers should be permitted to pay taxes using virtual currency. Considering the rising number of taxpayers who use or invest in virtual currencies, this isn’t unreasonable. [Forbes]

U.S.-based tech companies may be in for a rude tax awakening. French Minister Bruno Le Maire urged the European Union member nations to raise taxes on tech giants like Apple, Microsoft, and Amazon: “I cannot accept to have Google, Amazon, or Facebook paying less taxes ... than my butcher or my bookshop.” [FastCompany]

Check your wallet. No, not that one. If you use cryptocurrency, you probably use a virtual currency wallet app to manage your money, send and receive payments, etc. It’s a simple, real-time way to keep track of your funds. Except when the wallet’s a fake and you’ve been scammed. [Ethereum World News]

PROFESSIONAL DEVELOPMENT VIDEO: “How to become more productive at work | Harvard Business School.”

INTERESTING VIDEO: “Former CIA Chief Explains How Spies Use Disguises.” Former Chief of Disguise for the CIA, Jonna Mendez, explains how disguises are used in the CIA, and what aspects to the deception make for an effective disguise.

The REM Cycle Review is a weekly compilation of newsworthy articles pertaining to taxation, accounting, and life in general. Got a hot tip? Email us at REMCycle@rem-co.com.