Providing tax benefits to investors who invest eligible capital into distressed communities throughout the U.S. and its possessions, Qualified Opportunity Zones (QOZs) were created under the Tax Cuts and Jobs Act of 2017 to spur economic development and job creation. If you’re considering investing in a QOZ, here are five facts you should know:

1. Defer Tax on Capital Gains. Taxpayers may defer tax on eligible capital gains by making an appropriate investment in a Qualified Opportunity Fund (QOF) and meeting other requirements.

2. Partnerships. In the case of an eligible capital gain realized by a partnership, the rules allow either a partnership or its partners to elect deferral. Similar rules apply to other pass-through entities, such as S corporations and its shareholders, as well as estates and trusts and its beneficiaries.

3. Qualifying for the Deferral. To qualify for the deferral, investors must meet the following criteria:

• Capital gains must be invested in a QOF within 180 days.
• Taxpayer elects deferral on Form 8949 and files with its tax return.
• Investment in the QOF must be an equity interest, not a debt interest.

4. Investment held 5 to 7 years. If a taxpayer holds its QOF investment at least five years, the taxpayer may exclude 10 percent of the original deferred gain. If a taxpayer holds its QOF investment for at least seven years, the taxpayer may exclude an additional five percent of the original deferred gain for a total exclusion of 15 percent of the original deferred gain. The original deferred gain – less the amount excluded due to the five and seven year holding periods – is recognized on the earlier of sale or exchange of the investment, or December 31, 2026.

5. Investment held 10 years. If the taxpayer holds the investment in the QOF for at least 10 years, the taxpayer may elect to increase its basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged. This may eliminate all or a substantial amount of gain due to appreciation on the QOF investment.

To view the current list of designated Qualified Opportunity Zones navigate to the Opportunity Zones Resources page at the Department of Treasury’s www.cdfifund.gov.

Questions about the Opportunity Zone Tax Incentive? Don’t hesitate to call. You can also listen to a podcast where Matt Wheeler and Michael Bryant Qualified Opportunity Zones by clicking here.

January 28, 2019, marked the start of this year’s tax filing season, and it’s the first time taxpayers will be filing under the new tax reform laws, most of which became effective in 2018. Complicating matters is a newly revised Form 1040, U.S. Individual Income Tax Return, as well as the partial shutdown of the federal government. With more than 150 million individual tax returns expected to be filed for the 2018 tax year, here’s what individual taxpayers can expect:Continue reading

The complexity of the tax code generates a lot of folklore and misinformation that could lead to costly mistakes such as penalties for failing to file on time or, on the flip side, not taking advantage of deductions you are legally entitled to take and giving the IRS more money than you need to. With this in mind, let’s take a look at seven common small business tax myths.Continue reading

The partners and staff of Wheeler Accountants, LLP, are pleased to announce the successful completion of an independent peer review of it accounting and auditing practice. Wheeler Accountants, LLP is a member of the Private Companies Practice Section (PCPS) and Government Audit Quality Center (GAQC)of the American Institute of Certified Public Accountants (AICPA). In conjunction with these memberships, our firm has an outside peer review of our quality control procedures every three years. These reviews include a broad spectrum of engagements. We have consistently received the highest ratings in our peer reviews.

To see a copy of our latest peer review report, please click here.

Every year, it’s a sure bet that there will be changes to current tax law and this year is no different, now that the tax provisions under the Tax Cuts and Jobs Act of 2017 (TCJA) are in full effect. From standard deductions to health savings accounts and tax rate schedules, here’s a checklist of tax changes to help you plan the year ahead.

Individuals

In 2019, a number of tax provisions are affected by inflation adjustments, including Health Savings Accounts, retirement contribution limits, and the foreign earned income exclusion.

The tax rate structure, which ranges from 10 to 37 percent, remains similar to 2018; however, the tax-bracket thresholds increase for each filing status. Standard deductions also rise. As a reminder, personal exemptions have been eliminated through tax year 2025.

Standard Deduction
In 2019, the standard deduction increases to $12,200 for individuals (up from $12,000 in 2018) and to $24,400 for married couples (up from $24,000 in 2018).

Alternative Minimum Tax (AMT)
In 2019, AMT exemption amounts increase to $71,700 for individuals (up from $70,300 in 2018) and $111,700 for married couples filing jointly (up from $109,400 in 2018). Also, the phaseout threshold increases to $510,300 ($1,020,600 for married filing jointly). Both the exemption and threshold amounts are indexed annually for inflation.Continue reading

Everyone wants to save money on their taxes, and older Americans are no exception. If you’re age 50 or older, here are six tax tips that could help you do just that.

1. Standard Deduction for Seniors. If you and/or your spouse are 65 years old or older and you do not itemize your deductions, you can take advantage of a higher standard deduction amount. There is an additional increase in the standard deduction if either you or your spouse is blind.

2. Credit for the Elderly or Disabled. If you and/or your spouse are either 65 years or older–or under age 65 years old and are permanently and totally disabled–you may be able to take the Credit for Elderly or Disabled. The credit is based on your age, filing status, and income.

You may only take the credit if you meet the following requirements:

Your income on Form 1040 line 38 must be less than $17,500 ($20,000 if married filing jointly and only one spouse qualifies), $25,000 (married filing jointly and both qualify), or $12,500 (married filing separately and lived apart from your spouse for the entire year).

and

The non-taxable part of your Social Security or other nontaxable pensions, annuities or disability income is less than $5,000 (single, head of household, or qualifying widow/er with dependent child); $5,000 (married filing jointly and only one spouse qualifies); $7,500 (married filing jointly and both qualify); or $3,750 (married filing separately and lived apart from your spouse the entire year).Continue reading

If you’ve lost your job you may have questions surrounding unemployment compensation, severance, and other issues that could affect your tax situation. Here are some answers:

Q: What if I receive unemployment compensation?

A:Unemployment compensation you receive under the unemployment compensation laws of the United States or of a state is considered taxable income and must be reported on your federal tax return. If you received unemployment compensation, you will receive Form 1099-G, Certain Government Payments (Info Copy Only), showing the amount you were paid and any federal income tax you elected to have withheld.

Types of unemployment benefits include:

• Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
• Railroad unemployment compensation benefits
• Disability payments from a government program paid as a substitute for unemployment compensation
• Trade readjustment allowances under the Trade Act of 1974
• Unemployment assistance under the Disaster Relief and Emergency Assistance Act

You must also include benefits from regular union dues paid to you as an unemployed member of a union in your income. However, other rules apply if you contribute to a special union fund and your contributions are not deductible. If this applies to you, only include in income the amount you received from the fund that is more than your contributions.

Continue reading

Starting January 1, 2019, the standard mileage rates for the use of a car, van, pickup or panel truck are as follows:

• 58 cents per mile driven for business use, up 3.5 cents from the rate for 2018
• 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018.
• 14 cents per mile driven in service of charitable organizations.

The business mileage rate increased 3.5 cents for business travel miles driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate remains unchanged.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas, and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

Prior to tax reform, these optional standard mileage rates were used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. However, it is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for mileage related to moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. Please call if you need additional information about these and other special rules.

If you have any questions about standard mileage rates or which driving activities you should keep track of as the new tax year begins, do not hesitate to contact the office.

The Tax Cuts and Jobs Act, passed in December 2017, made tax law changes that will affect virtually every business and individual in 2018 and the years ahead. One tax provision that taxpayers should be aware of is that like-kind exchanges are now generally limited to exchanges of real property. Here’s what you need to know:

Effective January 1, 2018, exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property generally do not qualify for nonrecognition of gain or loss as like-kind exchanges. However, certain exchanges of mutual ditch, reservoir or irrigation stock are still eligible.

Like-kind exchange treatment now applies only to exchanges of real property that is held for use in a trade or business or investment. Real property, also called real estate, includes land and generally anything built on or attached to it. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange.

A transition rule in the new law allows like-kind treatment for some exchanges of personal or intangible property. If the taxpayer disposed of the personal or intangible property on or before December 31, 2017, or received replacement property on or before that date, the exchange may qualify for like-kind exchange treatment.

Properties are of like-kind if they’re of the same nature or character, even if they differ in grade or quality. Improved real property is generally of like-kind to unimproved real property. For example, an apartment building would generally be of like-kind to unimproved land. However, real property in the United States is not of like-kind to real property outside the U.S.

A like-kind exchange is reported on Form 8824, Like-Kind Exchanges, which taxpayers must file with their tax return for the year the taxpayer transfers property as part of a like-kind exchange. This form helps a taxpayer figure the amount of gain deferred as a result of the like-kind exchange, as well as the basis of the like-kind property received if cash or property that isn’t of like kind is involved in the exchange. Form 8824 helps taxpayers compute the amount of gain you must report.

For more information about this and other tax reform changes, please call.