Fill The Pantry for The Community of Hope 11-15-2018

As our 100-year anniversary celebration begins to wind down, we are hosting a food drive for The Community of Hope.  The food drive will last through the end of November & items can be dropped off at our Montgomery or Wetumpka office locations.

The Community of Hope assists many families throughout the River Region.  During this holiday season, The Community of Hope’s pantry is running low.  Please consider donating any of the following non-perishable items:

Corn, beans, peas, squash, yams, butterbeans, collards, turnip greens, tomatoes rice, black eye peas, pinto beans, pasta, crackers, ham, salmon, tuna, chicken, roast beef, ravioli, chili, soups, pop tarts, oatmeal,  grits, breakfast bars, powdered milk, juice, toilet paper, soap, toothpaste and deodorant.  Monetary donations will also be accepted.  

For more information about The Community of Hope check out their website at communityofhopemontgomery.org.

We are grateful for all that choose to participate in helping families during this holiday season.


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Does Your Paycheck Need A Checkup? 11-01-2018

By:  Shana M. MacDonald

The IRS estimates that 21% of taxpayers will be under-withheld due to the new withholding tables that went into effect this year. This may lead to a higher than expected balance due on your 2018 federal income tax return and possibly an underpayment penalty as well.

To address this, the IRS is encouraging taxpayers to do a “paycheck checkup” to reassess their 2018 withholding. In doing so, taxpayers will need to take into account the sweeping changes imposed by the Tax Cuts and Jobs Act (TCJA). Some of the key changes that you will need to consider in evaluating your withholding include: 1 reduced income tax rates along with expanded tax brackets; 2 near doubling of the standard deduction; 3 elimination of personal and dependent exemptions; 4 increased child tax credit; and 5 numerous limitations and repeals enacted on itemized deductions.

The new withholding tables released by the IRS in January of this year are intended to reflect the changes from TCJA and produce approximate withholding amounts for those with simple tax situations, generally reducing the amount withheld from employees’ paychecks. However, this lower withholding combined with the loss of many itemized deductions could leave some taxpayers significantly under-withheld on their federal income taxes – particularly those with high income or more complex tax situations. For this reason, we recommend that you review your personal situation (and your pay stub) to avoid a surprise tax bill and the dreaded penalties and interest that could come with it.

To aid in this process, there is a free withholding calculator available on the IRS website which can help you determine whether changes to your federal withholding are necessary. Individuals with more complicated tax situations would be wise to also consult with their tax professional to discuss the specific implications of TCJA on their personal tax return.

Whether you decide to do it yourself or seek the advice of a professional, it is imperative that you perform this check-up sooner rather than later because the longer you wait, the fewer pay periods there will be to apply the change and the more impact it will have on your paycheck. Taxpayers who find that their withholding does, in fact, require an adjustment will need to submit a new Form W-4 to their employer as soon as possible.

If you have any questions regarding tax reform, tax withholding, or tax planning, please contact our office as we will gladly assist you in understanding the effects of TCJA and how to navigate our ever-changing tax landscape.

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Is Social Media Activity Putting You at Risk? 12-18-2017

Are you planning to go on a vacation this winter? Whether you're trying to escape the cold or visiting loved ones, travel brings photo opportunities that you'll want to share on social media. But think twice before you post a selfie from the beach or check-in at the airport. Thieves have been known to troll social media activity and some insurance companies may review your social media posts before approving theft-related claims. Continue reading

You may need to add RMDs to your year-end to-do list 11-27-2017

You may need to add RMDs to your year-end to-do list

As the end of the year approaches, most of us have a lot of things on our to-do lists, from gift shopping to donating to our favorite charities to making New Year’s Eve plans. For taxpayers “of a certain age” with a tax-advantaged retirement account, as well as younger taxpayers who’ve inherited such an account, there may be one more thing that’s critical to check off the to-do list before year end: Take required minimum distributions (RMDs).

A huge penalty

After you reach age 70½, you generally must take annual RMDs from your:

IRAs (except Roth IRAs), and
Defined contribution plans, such as 401(k) plans (unless you’re still an employee and not a 5%-or-greater shareholder of the employer sponsoring the plan).
An RMD deferral is available in the initial year, but then you’ll have to take two RMDs the next year. The RMD rule can be avoided for Roth 401(k) accounts by rolling the balance into a Roth IRA.

For taxpayers who inherit a retirement plan, the RMD rules generally apply to defined-contribution plans and both traditional and Roth IRAs. (Special rules apply when the account is inherited from a spouse.)

RMDs usually must be taken by December 31. If you don’t comply, you can owe a penalty equal to 50% of the amount you should have withdrawn but didn’t.

Should you withdraw more than the RMD?

Taking only RMDs generally is advantageous because of tax-deferred compounding. But a larger distribution in a year your tax bracket is low may save tax.

Be sure, however, to consider the lost future tax-deferred growth and, if applicable, whether the distribution could: 1) cause Social Security payments to become taxable, 2) increase income-based Medicare premiums and prescription drug charges, or 3) affect other tax breaks with income-based limits.

Also keep in mind that, while retirement plan distributions aren’t subject to the additional 0.9% Medicare tax or 3.8% net investment income tax (NIIT), they are included in your modified adjusted gross income (MAGI). That means they could trigger or increase the NIIT because the thresholds for that tax are based on MAGI.

For more information on RMDs or tax-savings strategies for your retirement plan distributions, please contact us.

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Open Enrollment: Sign Up for Tax-Smart Benefits Before the Deadline 11-13-2017

Have you signed up for employer-provided benefits for 2018? November is open enrollment season at most offices.

Benefits enrollment is a little trickier this year, because it’s uncertain how tax reform legislation that could be enacted soon will change the tax rules starting in 2018. Some employer-provided benefits might be repealed. But there are two open enrollment options that apparently won’t be on the chopping block.

1. Health Care FSAs

Under a health care flexible spending account (FSA) plan, you make an election near the end of this year to contribute a designated amount of next year’s salary to your health care FSA. The maximum amount you can contribute for next year is $2,650.

Contributions will be withheld in installments from your 2018 paychecks. You can use the FSA to reimburse yourself for uninsured medical expenses, such as:

Insurance deductibles and copayments,

Prescriptions, and

Dental and vision care costs.
The total amount withheld from your paychecks during the year is treated as a salary reduction for purposes of your federal income tax, Social Security tax, Medicare tax and state income tax (if applicable). Reimbursements from the FSA to cover qualified health care expenses are tax-free.

A healthcare FSA allows you to pay for all or a portion of next year’s out-of-pocket medical costs with pretax dollars. That’s the same as getting an income tax deduction — plus a reduction in your payroll tax withholding.

Those savings add up. For example, if you’re in the 25% federal income tax bracket next year, you could save up to $865 in federal income and payroll taxes by contributing the maximum $2,650 in 2018. People in higher brackets could save even more. And these savings are permanent — not just a timing difference.

Important note: Healthcare FSA plans will become particularly attractive for families with high medical costs if Congress passes tax reform legislation that would eliminate itemized deductions for medical expenses starting in 2018. Under current tax law, if you itemize deductions, you can deduct out-of-pocket medical expenses for you, your spouse and your dependents to the extent the expenses exceed 10% of adjusted gross income (AGI).

There is one downside to health care FSAs: If you don’t incur enough qualified expenses to drain your FSA each year, any leftover balance generally reverts to your employer. Thankfully, there are two helpful exceptions to the “use-it-or-lose-it” rule:

A 2 1/2-month grace period for unused FSA balances. If your company’s plan offers a grace period, you’ll have until March 15, 2019, to use up your 2018 contribution.

A carryover of unused health care FSA balances of up to $500. If your company’s plan includes a carryover provision, you can carry over up to $500 of any remaining balance on the books at the end of 2018. Then you can apply that amount to expenses incurred in 2019.
An employer can offer either the 2 1/2-month grace period or the $500 carryover, but not both deals. Management (not individual employees) decides whether to include an exception to the use-it-or-lose-it rule.

2. Retirement Plan Contributions

Does your company have a salary-reduction retirement savings plan? If so, open enrollment is a good time to review your contribution amount for 2018. The maximum salary reduction contribution to 401(k), 403(b) or 457 plans for next year is currently scheduled to be $18,500 — or $24,500 if you will be age 50 or older by the end of 2018.

Important note: These limits aren’t expected to change under the recently proposed tax reform legislation.

Although 401(k) contributions will reduce your monthly cash flow, your retirement nest egg will be increased. In addition, salary-reduction contributions will reduce your taxable salary for federal income tax purposes and possibly state income tax purposes (if applicable). However, withholding from your paychecks for Social Security and Medicare taxes will be unaffected.

Enroll Now

Be smart. All too often, employees procrastinate and fail to participate in employer-sponsored tax-saving arrangements. If you have questions or want more information contact your tax advisor.

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Guidance released on Medicare Surtax 12-03-2012

A recent Journal of Accountancy article explains the recently proposed Internal Revenue Service regulations on the additional Medicare tax. The proposed regulations provide guidance for employers and individuals on implementation of the tax. The tax is effective for wages received in any tax year starting after December 31, 2012. The employer is responsible for withholding the additional tax on any employee’s wages exceeding $200,000 in a calendar year. An employee is liable for additional Medicare tax on wages to the extent that the tax isn’t withheld. The proposed regulations illustrate threshold amounts for self-employed individuals as well as discuss underpayments and the claiming of refunds in limited instances.

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