Dear Client :
Take the president’s tax plan for what it is: A starting point for negotiations in his push to move tax reform to the top of his legislative agenda.
On individual taxes, he calls for three rates of 10%, 25% and 35%, doubling standard deductions, eliminating unspecified write-offs and tax breaks, and axing the estate tax and alternative minimum tax.
On business taxes, he still wants a 15% rate for corporations, which he’d also apply to owners of pass-through businesses. For U.S. multinationals, he wants a territorial tax system so only income earned within U.S. borders is taxed, and a low one-time tax on the $2.6 trillion of previously untaxed income held abroad.
What’s most interesting is what Trump has left out of his tax plan: It lacks specificity on which deductions he’d get rid of. The write-offs for home mortgage interest and charitable gifts are safe, but that’s all we really know. Every deduction facing the ax has backers in the private sector and on Capitol Hill.
Trump doesn’t say how he’d pay for his desired massive tax cuts, which would balloon the already large federal debt. Without the border adjustment tax, and absent revenues generated from other pay-fors and a repeal of Obamacare, revenue-neutral tax reform with the tax cuts advocated by Trump is impossible. And any future economic growth resulting from the tax changes won’t be enough.
Major tax overhaul just isn’t in the cards…at least not this year. Democrats won’t back a GOP tax plan. Republicans may try a parliamentary move to pass tax reform in the Senate with a simple majority, but budget reconciliation rules require that bills not subject to Senate filibuster can’t hike the deficit beyond 10 years. The White House will pull out all the stops and push hard for tax reform.
But in the end, Trump will probably have to settle for temporary tax cuts for businesses and individuals, without all the trappings of a broad overhaul bill. Making the cuts temporary, as President George W. Bush did in 2001 and 2003, won’t affect the long-term deficit, setting the stage for a majority vote in the Senate. Businesses won’t be happy with temporary cuts…they want permanent relief. And any cuts will be far smaller than what Trump’s latest proposal calls for.
Don’t fret if you missed the April 18 deadline for reporting foreign accounts. You have an automatic six-month extension (until Oct. 16) to file the FBAR for 2016. U.S. taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time in 2016 are required to electronically file FinCen Form 114 to report them. And for taxpayers with undisclosed overseas accounts from prior years… Keep in mind IRS’s voluntary disclosure program, which lets account owners come in, fess up and pay any back taxes and a penalty to avoid criminal charges.
Want to convert a traditional IRA to a Roth? Be sure you take tax reform into account. President Trump and the GOP-controlled Congress want to lower tax rates and scrap many deductions as part of their desire to overhaul the tax system. If they’re not able to pass comprehensive reform, then odds are they’ll settle for temporary tax cuts without all the trappings of a broad overhaul bill.
Most would be wise to delay Roth conversions until tax changes are enacted, which may very well not happen until sometime next year. You don’t want to convert at this year’s 39.6% maximum rate only to see the top rate fall in 2018 to around 35%.
IRS is becoming more aggressive in targeting business tax identity theft. Increasingly, fraudsters are filing bogus corporate, payroll and excise tax returns, among others, using stolen tax identification numbers and claiming false refunds. For this filing season, IRS has added more filters to proactively identify these scams and to make better use of a database of suspicious employer tax ID numbers.
With hurricane season approaching, think about disaster preparedness. IRS has some suggestions. Safeguard tax records in a protected place. Scan important papers into electronic format and make sure to have backup copies. Take pictures or videos of the contents of your home or business premises, and store images off-site. Look into computer software packages for recordkeeping.
Audits focusing on shareholder basis in S corporations are starting. Owners of S firms can deduct losses only up to their stock basis and loans that they make to the company. Because IRS knows compliance in this area is lacking, its Large Business and International Division has decided to ramp up enforcement. The exams occur at the shareholder level. Experienced revenue agents with knowledge of the issue will check to see whether S corporation shareholders are properly tracking their basis. Most audits won’t involve person-to-person meetings.
Be wary of phone calls that purport to be from IRS. The Revenue Service and Treasury inspectors have issued warnings about a nationwide phone scam targeting taxpayers. Callers claim to be IRS employees and alter the caller ID readout to make it look as if IRS really is calling. Victims are being told that they owe taxes and must pay up fast or they will lose their driver's license, be arrested or deported.
IRS never makes unsolicited calls to people to tell them they owe more taxes or are due refunds. It contacts taxpayers first by mail. If you get one of these calls, notify Treasury inspectors at 800-366-4484. Also tell the Federal Trade Commission by filing a consumer complaint at www.ftc.gov and noting "IRS Telephone Scam."
Real Estate Investing:
Recently we have launched a website, TheAuctionary.com. This website is a database of foreclosed and tax deed properties listed in the Tampa Bay area. It is a first of its kind and shows every property that is going to be auctioned off by the counties.
You will not find such properties on any MLS. We have compiled this data on our own from numerous sources. It took us thousands of hours to compile and setup this data so our customers can save their valuable time.
Currently serving Hillsborough, Hernando, Pasco, Pinellas, and Polk Counties.
These are the official County foreclosures and tax deed auctions. If a bank wins an auction, they add 25% or more to the price. It then lists it on the MLS which makes it an "REO" property. Don't buy properties that have already been marked up; buy them from the source and use The Auctionary to help you pick the right one.
We also have the largest collection of new homes. Get a 50% real estate commission rebate when you buy your next new home. We will give you half of what the seller pays to the buyer agent. Typically, a seller will pay 3% to the buyer agent and you will get 1.5% of that. So on a $300,000 property you buy, you will get $4,500 in buyers’ rebate.
Try our website at: http://theauctionary.com/
Check out SK Financial site here.
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Yours very truly,
Shams Khan CPA, CFP
