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Year End Tax Planning

Year End Tax Planning

As we get closer to the end of yet another year, it’s time to tie up the loose ends and implement tax saving strategies. This has been an interesting year in Washington. When the year started, it seemed highly likely that the tax law would receive a dramatic makeover this year. With just over two months left in 2017, we’ve seen a lot of bickering in Washington D.C., but no sweeping tax law changes. Of course, there is still time, but there is also a lot of ground left to cover.

We’ve listed below a few moneysaving ideas that you may want to put in action before the end of 2017.

  • Between now and year-end, review your securities’ portfolio for any losers that can be sold before year-end to offset gains you have already recognized this year or to get you to the $3,000 ($1,500 married filing separate) net capital loss that’s deductible each year.
  • The time-honored strategy of deferring income from the current year to later years could be particularly effective this year if tax reform with lower tax rates is enacted, but doesn’t take effect until next year. For example, if you’re in business for yourself and a cash-method taxpayer, you can postpone taxable income by waiting until late in the year to send out some client invoices or prepaying a reasonable amount of deductible business expenses such as office supplies, repairs, and maintenance before year-end. If you’re a participant in a 401(k) plan and have not already maxed out your elective contributions to the plan this year, consider increasing contributions through the year-end.
  • If you currently take advantage of itemized deductions, you may want to accelerate next year’s deductions into this year. First, you’ll get the benefit of the additional tax deductions this year—which is always good. Furthermore, if tax reform is enacted and effective next year, not only may your tax rate be lower next year, thereby reducing your tax savings from the deductions, but some of these deductions could be limited, eliminated, or rendered useless by an increased standard deduction. For example, you might consider making charitable contributions you would normally make in early 2018 at the end of 2017 or paying property taxes and/or state income taxes early. But, watch out for the AMT, as these taxes are not deductible for AMT purposes.
  • If you own your own business and have plans to buy a business computer, office furniture, equipment, vehicle, or other tangible business property, or to make certain improvements to real property, you might consider doing so before year-end. Eligible businesses can claim a Section 179 deduction for up to $510,000 of such expenditures in 2017 (assuming property purchases for the year don’t exceed $2,030,000). This means that an eligible business can often claim a first year write-off of the entire cost of new and used equipment, software additions, and eligible real property costs.
  • If you own an interest in a partnership or S corporation that you expect to generate a loss this year, you may want to make a capital contribution (or in the case of an S corporation, loan it additional funds) before year end to ensure you have sufficient basis to claim a full deduction.
  • If it looks like you are going to owe income taxes for 2017, consider bumping up the federal income taxes withheld from your paychecks now through the end of the year.
  • Watch out for the Alternative Minimum Tax (AMT) in all of your planning because what may be a great move for regular tax purposes may create or increase an AMT problem.

Again, these are just a few suggestions to get you thinking. If you’d like to know more about them or want to discuss other ideas, please feel free to call us at 253-852-8500 or email info@Shannon-CPAS.com to setup a personalized planning meeting.

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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.

Tax Reform on the Horizon

Tax Reform on the Horizon

The Trump Administration and select members of Congress have recently released a “unified framework” for tax reform. The released document provides more detail than a number of other tax reform documents that have emerged from the Administration over the past few months, but it still leaves most specifics to be worked out by the tax-writing committees (i.e., the House Ways and Means Committee and the Senate Finance Committee).

Plan Provisions Affecting Individuals Would:

  • Increase the standard deduction to $24,000 for married taxpayers filing jointly, and $12,000 for single filers;
  • Eliminate the personal exemption and the additional standard deductions for older/blind taxpayers;
  • Reduce the number of tax brackets from seven to four: 12%, 25%, 35%, and 39.6%;
  • Increase the child tax credit;
  • Repeal the individual alternative minimum tax;
  • Largely eliminate itemized deductions, but retain the home mortgage interest and charitable contribution deductions; and
  • Repeal both the estate tax and the generation-skipping transfer tax.

Plan Provisions Affecting Businesses Would:

  • Provide a maximum 25% tax rate for “small” and family-owned businesses conducted as sole proprietorships, partnerships and S corporations;
  • Reduce the corporate tax rate to 20% (down from the current top rate of 35%);
  • Provide full expensing of depreciable assets (outside of buildings) for five years;
  • Cap the deduction for net interest expense incurred by C corporations;
  • Eliminate the Domestic Production Activities Deduction
  • Repeal most other deductions and credits, but retain the research and low-income housing credits;
  • Modernize special tax rules that apply to certain industries and sectors;
  • Provide a 100% exemption for dividends from foreign subsidiaries; and
  • To protect the U.S. tax base, tax the foreign profits of U.S. multinational corporations at a reduced rate and on a global basis. This proposal is merely an outline, with the details intentionally vague to provide Congress with flexibility to craft legislation which will meet budgetary requirements. Between the proposed slashed income tax rates on corporate and passthrough income, the allowance for unlimited equipment expensing, and the elimination of the estate tax, there is potentially a great upside for small business owners. However, as the Senate and House tax-writing committees work through the process in the next few weeks we should have more concrete information for tax planning purposes.

Should you have any questions regarding these proposed changes or emerging details, we recommend that you call your Shannon & Associates advisor at your earliest convenience.

— Sally McColloch, CPA Senior Manager Shannon & Associates

How to Handle an IRS Letter or Notice

The IRS mails millions of letters to taxpayers every year for a variety of reasons. Keep the following suggestions in mind on how to best handle a letter or notice from the IRS:

1. Do not panic. Simply responding will take care of most IRS letters and notices. And, as always, we are here to help if you need us.

2. Do not ignore the letter. Most IRS notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes specific instructions on what to do. Read the letter carefully; some notices or letters require a response by a specific date.

3. Respond timely. Notices are often about changes to your account, taxes owed, or a payment request. Sometimes a notice may ask for more information about a specific issue or item on a tax return. A timely response could minimize additional interest and penalty charges.

4. If a notice indicates a changed or corrected tax return, it’s important to review the information and compare it with your original return. Please give us a call if you need help with this.

  • If you agree with the changes, simply note the corrections on your copy of your tax return in How to Handle an IRS Letter or Notice your records. There is usually no need to reply to a notice unless specifically instructed to do so, or to make a payment.
  • If you don’t agree with the changes, you’ll need to respond by mailing a letter explaining why you disagree to the address on the contact stub at the bottom of the notice. Be sure to include information and documents for the IRS to consider and allow at least 30 days for a response.

5. There is no need to call the IRS or make an appointment at a taxpayer assistance center for most notices. If a call seems necessary, use the phone number in the upper right-hand corner of the notice. Be sure to have a copy of the related tax return and notice when calling.

6. Always keep copies of any notices received with tax records. Please be sure to send or bring us a copy of them.

7. The IRS and its authorized private collection agency will send letters and notices by mail. The IRS will not demand payment a certain way, such as prepaid debit or credit card. To make a payment, visit IRS.gov/payments or use the IRS2Go app to make a payment with Direct Pay for free, or by debit or credit card through an approved payment processor for a fee.

Finally, it’s important to understand that the IRS will never initiate contact using social media or text message. First contact generally comes in the mail. If you don’t know if you owe money to the IRS, you can find out by checking your tax account information at IRS.gov (search for “view your account”).

Year-end Reminders

Year-end Reminders

S Corporations’ Shareholders

Shareholders with 2% or more must report health insurance premiums paid on your behalf on your W2. Personal use of vehicles must be computed and reported prior to your final payroll for 2017.

Funding Your HSA

Many taxpayers now have Heath Savings Accounts (HSA’s) in conjunction with a high deductible health plan (HDHP). The IRS code allows taxpayers to fund their HSA by transferring funds from their traditional or Roth IRA account.

  • The funds must go directly from the IRA account to the HSA account.
  • The distribution is limited to the HSA contribution limits for the year.
  • The IRA distribution is not taxed nor reported as a distribution.
  • Taxpayers are allowed one qualified HSA funding distribution in their lifetime.

This is an opportunity to fund the HSA with pre-tax dollars and not pay any taxes on the transfer.


For IRA’s (Including SEP and SIMPLE) — You must take your RMD beginning April 1 of the year you will turn 70 ½.

For 401(k), profit sharing, 403(b) or other defined contribution plans you must take your RMD April 1 following the later of the calendar year in which you reached age 70 ½ or retire.

For more information on any of these items contact us at 253-852-8500.

Shannon & Associates

is proud to be an independent member of Nexia International, a worldwide network of independent auditors, business advisors and consultants. Nexia International is the 10th largest network of accounting firms in the world, with member firms in over 100 countries. This global representation with Nexia enables us to offer our expertise in international taxes and accounting around the world and provide top quality service to our clients with foreign and domestic financial needs.