As we head towards the April 18 income tax deadline, the common issues we hear from small and middle market clients mostly come in four areas: Security, Health Care, Tax Rates and ROTHs.
Security
So much time is spent on security now. So many e-mails require accessing databases, portals or secure sites that even the simple exchange of information takes longer than it used to. Businesses can no longer take the process of securing data lightly.
Health Care
What now? The most disappointing part about the failed repeal of the Affordable Care Act is that the Net Investment Income Tax is here a while longer. This is a 3.8% surtax mostly on investment income for those with Adjusted Gross Income over $200,000 ($250,000 for Married taxpayers). It seems that we could be looking at a no change environment for health care, so it is time for businesses to review their plans and maximize the features to get the best coverage at an affordable cost.
Tax Rates
The stock market jump has greatly been attributed to an expected 15% drop in the top Corporate Tax Rate. With the health care defeat, can we expect this proposed tax reduction to happen? Discussion has been that this would be paid for by a border tax or a repatriation tax, but there does not seem to be total agreement on that.
Many small and middle market businesses were also hoping to see a drop in the top individual tax rates. From rates into the middle 40 percent range, with the Net Investment Income Tax, campaign talk was this top rate could come down about 10 percent for high earners. All sounds are we will know that by around August, but politics are hardly predictable, so it is anyone’s guess as to when we will know what the future is for tax rates.
ROTHs
ROTH savings, where retirement funds grow tax-free, have gotten quite confusing. High wage earners cannot invest directly into a ROTH. They can invest in a non-deductible Traditional IRA and then roll that contribution over to a ROTH in some circumstances.
Last year’s insufferable campaigns told us the Internal Revenue Code would get simpler. It sure seems like simple is far from what we are facing ahead.
If you need help on any of the above matters, please feel free to contact our office at team@h2rcpa.com and visit our website at www.h2rcpa.com.
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