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QCD Basics

QCD Basics

Qualified Charitable Distributions (QCDs) rules are now permanent, so taking advantage of this tax-beneficial charitable giving strategy has become easier and is available to taxpayers who are 701/2 on the date of the contribution.

A QCD is a cash payment of an otherwise taxable distribution, by your IRA trustee, directly to a qualified public charity. QCDs cannot be made to private foundations and donor advised funds. Also, the funds must be transferred directly to the charity. You cannot receive the funds yourself and then make the contribution to the charity. However, the IRA trustee can give you a check made out to the charity that you then deliver to the charity.

Income Tax Benefits

QCDs are not included in your Adjusted Gross Income (AGI). This lowers the odds that you’ll be affected by various unfavorable AGI-based phase-out rules. In addition, you don’t have to worry about the 50%-of-AGI limitation that can delay itemized deductions for garden-variety cash donations to public charities.

QCDs count as a payout for purposes of the Required Minimum Distribution (RMD) rules. Therefore, you can donate all or part of your 2017 RMD amount (up to the $100,000 limit on QCDs) and thereby convert taxable RMDs into tax-free QCDs.

You cannot arrange for more than $100,000 of QCDs in any one year. If your spouse has IRAs, he or she has a separate $100,000 limitation. If you are the beneficiary of an IRA (as opposed to an account owner), you too are eligible for the QCD deal if you are at least age 70 1/2.

You must get and keep substantiation of the contribution from the charity. Also, you must not have received any benefit in return for making the contribution.

Does the QCD Deal Work for You?

The QCD privilege is beneficial for seniors in the following circumstances:

  • You don’t itemize deductions. Under the “normal” rules, only itemizers get any income tax benefit from charitable donations. Making QCDs will save taxes whether you itemize or not.
  • Your itemized charitable donations would be delayed by the 50%-of-AGI limitation. Making QCDs will avoid this unfavorable limitation.
  • You want to avoid being taxed on RMDs that you are forced to take from your IRAs. The QCD strategy does the trick while also allowing you to satisfy your charitable inclinations.


If you’re interested in taking advantage of the tax-saving QCD strategy for 2017, you will need to arrange with your IRA trustee for money to be paid out to one or more qualifying charities by year end. If you have questions about QCDs or want more information, please contact us.

The 2017 standard mileage rate has decreased to 53.5 cents per mile for business uses and 17 cents per mile for medical and moving uses. It remains at 14 cents per mile for charitable uses.

Red Flag Reporting

Red Flag Reporting

Early Fraud Detection

Early Fraud Detection

According to the Federal Trade Commission (FTC), as many as 10 million Americans have identities stolen each year. In fact, almost 50% of complaints received by the FTC in 2015 were tax-related ID theft, making it their number one complaint for the sixth consecutive year. Judging from recent news reports, this doesn’t seem to be getting any better. Hopefully it never happens to you. But, if it does, early detection could mean the difference between a painful experience and a disastrous one. A good way to proactively recognize that you have a potential identity theft situation is to request and review copies of your tax account transcripts from the IRS and credit reports from the three major credit reporting agencies.

Periodically Review IRS Transcripts

IRS transcripts can show early signs of identity theft and should be reviewed periodically. They are available for free on the “Get Transcript” web page at www.irs.gov, by calling (800) 908-9946 to receive the transcript by mail, or submitting Form 4506-T (Request for Transcript of Tax Return).

For identity theft purposes, a couple potentially important codes are TC 150, which indicates that a tax return was filed and posted to the taxpayer’s account, and TC 976, which indicates that a duplicate return was filed and posted to the taxpayer’s account. For example, if more than one return was filed, which indicates a possible identity theft situation, and the fraudulent return posts first, the fraudulent return will be identified on the account with TC 150 and the taxpayer’s (subsequent) return will be identified by TC 976.

Taxpayer accounts are marked throughout the identity theft resolution process to indicate actions taken. Identity theft indicators are placed on taxpayers’ accounts using TC 971 AC 522 when identity theft is initially suspected either by the IRS or by the taxpayer.

Review Your Credit Reports

Your credit report may show the first signs that someone has misused your information, so it’s important to check your report at least once a year if not more often. You have the right to obtain a free copy of your credit report every 12 months from each of the three primary credit reporting companies—Experian, Equifax, and TransUnion—at www.annualcreditreport.com or by calling (877) 322-8228. Some issues to watch out for as possible indications of identity theft include the following:

  • Do any of the inactive accounts show new activity? Unfamiliar activity on an inactive account could be a red flag, although it is possible that recent activity could still be posted on the credit report if the creditor reports activity, such as changing the report date.
  • Is there a line of credit that you did not open or that looks unfamiliar? If so, your identity may have been stolen and used to open new lines of credit.
  • Is an account unfamiliar, or an account you recognize but did not think was overdue, delinquent or in collections? The latter could be an issue if an identity thief hijacked the account and had the bills forwarded to a different address.
  • Are there inquiries from creditors (“hard inquiries”) that you do not recognize? The inquiry information on your credit report generally covers the past two years. An inquiry for which you did not apply could be another indicator of identity theft.


Obviously, there is much more to identity theft than outlined in this letter. Should you want to discuss this further, please call to schedule an appointment. If you think you may have been a victim of identity theft, please give us a call immediately.

Client Portal

A New Way to Work with us – NetClient CS

In a world where business is done anytime and anywhere, we are pleased to announce a new way to work with us from any highspeed internet connection, 24 hours a day, seven days a week. Using NetClient CS is as easy as online banking and it’s completely secure.

Once you’re up and running on NetClient CS, you’ll have your own secure, password protected online portal that you can access from our website. Just log-in from your web browser for instant access.

A Client Portal allows you to:

  • View and print tax documents – including finished tax returns, electronic filing authorizations and more. Final tax documents and other items can be saved for up to 7 years on the portal; you can also copy the files to your own location for safe keeping.
  • Eliminate the bulky paper copies of your tax return, store and access them securely anytime/anyplace
  • Exchange files with us – any file, any time

State-of-the-Art Security:

  • Our NetClient CS portals are hosted at some of the largest most secure data centers in the world. It uses the industry’s most advanced security and reliability measures to keep your data safe, including:
  • Built-in redundancy: Multiple data locations. Internet connections and power sources keep your portal up and running all the time.
  • Secure Password Protection – This protects your data as it travels between the data center and your computer.

Get set up today!

Simply send us an email ShannonTax@Shannon-CPAs.com or contact our office at 253-852-8500 to indicate your interest in getting set up.

Importance of a Buy-sell Agreement

Importance of a Buy-sell Agreement

It is important that businesses with more than one owner (such as your business) have a written buy-sell agreement specifying what happens when an owner withdraws from the business. A buy-sell agreement is a contract between the owners (or the owners and the business entity itself) that establishes rules and restrictions applicable to changes in ownership.

The typical buy-sell agreement provides that an owner’s interest in the business will be sold (or at least offered for sale) at a specified price to the other owners and/or to the business entity itself upon the occurrence of specified events (such as death). This prevents unwanted persons from becoming members of the ownership group and ensures a ready market for closely-held  ownership interests. It also provides liquidity to a deceased owner’s family and assures the remaining owners that they will be able to continue the business without interference from the family of the deceased owner.

In addition, buy-sell agreements that meet certain requirements can set the value of closely-held business interests for estate tax purposes. This can avoid expensive and distracting disagreements with the IRS over value and provide greater certainty about the federal estate tax outcome after the death of a co-owner. It is important that the agreement establish a valuation method that unrelated co-owners of the business would find reasonable and useful under the circumstances. The use of an independent professional appraiser should be considered when setting up this method.

The best time to establish a buysell agreement is now, before a problem develops. If you currently do not have a buy-sell agreement for your business, we would be happy to discuss their merits with you, particularly in terms of estate tax planning, and help you and your attorney in formulating the terms of the agreement. If you already have a buy-sell agreement in place, we suggest we review it together to ensure that it is current and includes appropriate provisions to protect you in the event of an ownership change.

Tax Calendar

JUNE, 2017 | JUNE 15:

  • INDIVIDUALS. If you are not paying your 2017 income tax through withholding (or will not pay enough tax during the year that way), pay the second installment of your 2017 estimated tax. If you are a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, file Form 1040 and pay any tax, interest, and penalties due for 2016. If you want additional time to file your return, file Form 4868 to obtain four additional months to file, then file Form 1040 by October 16.
  • CORPORATIONS. Deposit the second installment of estimated tax for 2017.
  • EMPLOYERS. For Social Security, Medicare, withheld income tax, and non-payroll withholding, deposit the tax for payments in May if the monthly rule applies.

JULY, 2017 | JULY 17:

  • EMPLOYERS. For Social Security, Medicare, withheld income tax, and nonpayroll withholding, deposit the tax for payments in June if the monthly rule applies.

JULY 31:

  • EMPLOYERS. For Social Security, Medicare, and withheld income tax, file Form 941 for the second quarter of 2017. Deposit any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until August 10 to file the return.
  • For federal unemployment tax, deposit tax owed through June if more than $500.
  • If you maintain an employee benefit plan with a calendar year-end, file Form 5500 or 5500-EZ for calendar year 2016.

These issues can be complex. Please call our office for assistance in calculations or if you have any questions.