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To Take To Heart By: Cynthia Sherrill
Everyone’s tax situation is different, and there are many things that can influence an individual- or business-tax situation. Planning for 2016 was made difficult by our political environment and certain economic uncertainty. The following are just a few items to keep in mind as you file your 2016 return and as you start planning for your 2017 year:
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Documents
Charitable Contributions
RMD and IRAs
Capital Gains Rates
Make sure you have the final version of your broker statement prior to filing your return. Many are not final until February or early March.
2 Sales Tax North Carolina sales tax rules have undergone major changes that affect small businesses and self-employed individuals. Check out your responsibility for charging sales tax on any services you provide or items that you sell.
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If over $250, you must have an acknowledgement prior to filing your tax return. Courts have disallowed charitable contributions in which the taxpayer had not obtained the acknowledgement timely or the acknowledgement did not contain the proper statement as to benefits derived. The deductions were disallowed even when the taxpayer obtained the correct statement during audit.
Congress made the ability to make charitable contributions from an IRA permanent. If you are over 70 1/2 and must take a required minimum distribution (RMD), consider making your charitable contributions directly from your account. This can satisfy your RMD requirement and keep what would have been income from the RMD off your return, thereby reducing your adjusted gross income (AGI), which affects many items on your return.
7 Appreciated Stock
There is a 0 percent capital gains rate for individuals with taxable income in the 10 and 15 percent tax bracket. This could include your parents or your children that are not subject to the kiddie tax. Gifting stock with high appreciation to be sold by them instead of you can save as much as 23.8 percent on your return (There is still some North Carolina state income tax that could be due related to these sales.).
6 Business The IRS reduced the mileage rate for 2017 to 53.5 cents per mile from 54 cents in 2016. A recent law passed that will now allow smallbusiness employers (as defined) to reimburse their employees for their health insurance premiums under certain circumstances and within certain dollar limits. There are many other business tax-planning ideas, which we can help you use all of the provisions that could apply to you.
If you are going to make large contributions, consider giving highly appreciated stock that you have held more than one year, as this will allow you a deduction for the fair market value of the stock, and you will not have to include any income for the increase in the value on your return.
Cynthia Sherrill is a CPA and the managing partner at Sherrill, Blake, & Harrison CPA, PA, where their philosophy is to assist clients in all stages of their lives to give them the most success possible. Her concentration is in difficult tax situations of small businesses, estates, and trusts. Cindy also has her Series 7 and 66 securities licenses. For more information, visit www.sbh-cpa.com, or call 704.966.1849.