By Kathy Fettke | Real Wealth Network
The new year began with new tax rules for residential and commercial real estate investors. It’s still too early to know the full impact of the legislation, but many tax professionals say that real estate investors and other property owners have hit the jackpot.
by Kenneth Ziskin, The Apartment Owners’ Estate Planning Attorney SM
Tax reform finally became law late in December, 2017, even though passage required it to give up its common name, the Tax Cut and Jobs Act (“TCJA”).
For most of you, the TCJA will give with one hand, and take away with the other. For some, the act will be a lump of coal, and taxes will, unfortunately, go up. For others, the act will be a real Christmas present that brings real tax savings. You probably cannot just intuitively figure out whether you got a real present or a lump of coal until you model your situation, and possible planning opportunities.
Many of the law’s provisions were not finalized, or even discussed, in committee, and we will not understand the full impact for months, or maybe even years. But, while all tax professionals (including me) are trying to get a handle around the impacts of the TCJA, I want to try to give you an idea of some of the major impacts and a few planning implications.
By Jon Coupal
What’s the difference between a tax and fee? There is no easy answer and the political class likes it that way. In fact, they would prefer that the public remain confused to the point of apathy.
The political class, of course, consists of elected officials, bureaucrats and their special interest allies who are to the Capitol what insider traders are to Wall Street. Working in lockstep, their approach to increasing the take from taxpayers was best outlined by Jean Baptiste Colbert, Minister of Finance under Louis XIV of France: The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.
But taxpayers are not defenseless because they have approved three constitutional amendments defining – and limiting – taxes and fees. These include Propositions 13 (1978), Proposition 218 (1996) also known as the Right to Vote on Taxes Act, and Proposition 26 (2010) which provides comprehensive definitions of taxes and fees. All three provide effective weapons against an insatiable government ever in search of more revenue.
However, to protect themselves, taxpayers must be knowledgeable, alert and ready to fearlessly protect and exercise their rights.
Therefore, while most taxpayers don’t have a law degree, here are some basics about the difference between a “tax” and a “fee.” There are very few legal limitations on “taxes.” About the only way a tax could be unconstitutional is if it impaired a fundamental right (a “poll” tax on the right to vote) or if it singled out some group for discriminatory purposes. But fees are different. A fee is a charge for something that confers a benefit to the fee-payer that is not available to those who do not pay the fee. A classic example is a charge for entering a state campground.
Until the passage of Proposition 26 in 2010, the legislature could approve fees with a simple majority vote. But in 2011, the Legislature approved, with a simple majority, charging 850,000 rural homeowners an annual “fire fee” of $150. The “fee” was not accompanied by any additional benefit or service, clearly making it a tax requiring a two-thirds vote of the Legislature. This issue is currently being litigated by taxpayers, but it is a classic example of the dishonest ends to which tax raisers are willing to go to wring ever more money from taxpayers.
Moreover, the political class has a habit of pursuing taxes that are not apparent to the general public. Almost any tax on business fits into this category. As Howard Jarvis liked to say, businesses do not pay taxes, “we do.”
As part of Obamacare, the federal government imposed a tax scheme designed to stop employers from offering top quality health plans. Backers of the Affordable Care Act included a 40 percent tax on providers of what were derisively described as “Cadillac” plans. As these plans disappear, the uninformed will assume that it is their employer who is responsible, when, in fact, it is government.
Here, in California, a major hidden tax is cap-and-trade legislation, not approved with a two-thirds vote, that compels companies to buy carbon credits. Of course, these costs are passed on and drivers feel the impact every time they fill up with gasoline that costs, by the most conservative estimates, an additional 12 cents per gallon with more increases on the horizon. Unaware of the impact of cap-and-trade, many motorists may mistakenly assume that the high cost of gas is entirely due to the petroleum companies.
This is why taxpayers are closely watching a case just argued before the Sacramento appeals court, where opponents argue that cap-and-trade charges amount to an unconstitutional tax. The court is expected to render a decision within 90 days but, regardless of the outcome, the loser is likely to appeal to the California Supreme Court.
Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.
By Becky Bower | ApplyConnect.com
As the year comes to a close, take the time to prepare for tax season early. With just a little extra prep work, you’ll avoid a huge headache next year. Here are 4 tax resources to get you started on organizing your office, getting all the deductibles you can get, and achieving a stress free tax season.
When it comes to taxes, before you can do anything, you need to be organized. In this article, we break down the organizational process into 4 easy steps. Your office never looked so clean. Read More!
You want to get as many deductibles as you can get, but compiling the mileage, paperwork, and receipts behind those hefty tax deductibles can be stressful. By utilizing apps, you can cut down on the physical paperwork and access everything from your phone or laptop. Easy. Read More!
When you have a rental property, utilizing every tax deduction you can is very important. Take advantage of our common deductible checklist and organizational list now. This can help you make sure no stone goes unturned. Read More!
There’s no denying that tax season can be pretty stressful. While utilizing handy apps and utilizing deductibles are certainly important, it’s also important to maintain good communication with your tenants during this time, and setting goals for 2017. Read More!
While tax season might be far from your mind as Thanksgiving comes close, by taking some time to start going through your documents and receipts, and utilizing our tax resources above, your workload next year won’t be as hefty. Once it’s all said and done, and you have that big tax refund check in hand, you’ll be happy you started your taxes early.
1) Be Prepared
Ah yes, the Boy Scout Motto, “Be Prepared”. It is very applicable to surviving tax season. How can you get prepared? Start with completing your tax organizer. We send these out to our clients in early January. This will contain all of the prior year information. Some clients don’t like filling out the tax organizer. That’s fine. Just organize your records as best as possible. Try to get all of your material together. Finally, schedule an appointment with your CPA early during tax season.
2) Be Patient
Expect delays from the Internal Revenue Service (“IRS”). This is nothing new. We can’t really blame them. It really comes down to Congressional action. Or inaction as the case may be.
Also, expect amended Form 1099′s. This seems to be happening more frequently, particularly later in tax season. If you have had amended 1099′s in the past, let your CPA know. They may want to complete your returns but request that you don’t file them until later in the filing season. This may avoid having to file an amended return. It’s like what any veteran carpenter will tell you, “measure twice, cut once.” Well said.
You may be asking yourself “Where’s my K-1?” People who have invested in Partnerships or Subchapter S corporations need their K-1 to report their portion of the profit or loss on their individual income tax return. Unfortunately the K-1 forms are not due until April 15, the same day the individual income tax return is due. Don’t wait for your K-1′s. Give all of the tax material you have to your CPA and let them get started on your return. You can just forward the K-1 to them when you receive them. This will increase the odds of your return being filed on time.
3) Be Proactive
While you need to be patient, you also need to be very proactive. While 2013 may be in the books, it’s time to start addressing your tax planning for 2014. This could be something as simple as maximizing your contribution to your 401(k) plan at work. Taxpayers are allowed to contribute up to $17,500 into their 401(k) plan in 2014. Taxpayers age 50 or older can contribute an additional $5,500 in a so-called ‘catch up’ contribution for a total of $23,000. Or perhaps your employer has added a Roth 401(k) plan feature to the existing 401(k) plan. This might be something you should consider allocating a portion of your 401(k) contributions to.
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