SSA ’fesses up. First, the Social Security Administration (SSA) announced that the wage and self-employment income ceiling for the Social Security tax (6.2% for wages and 12.4% for self-employed individuals) was going up from $127,200 to $128,700 (SBTS, December 2017). But now the SSA says it miscalculated. The actual figure for 2018 is slightly lower at $128,400. (www.ssa.gov/news/press/factsheets/colafacts2018.pdf)
As before, the Medicare tax (1.45% for wages rising to 2.35% at higher wage levels, and 2.9% rising to 3.8% at higher levels of self-employment income), applies to all wages and self-employment income.
SALT shaker. Due to new limits on state and local tax (SALT) deductions, many taxpayers in high-tax states rushed to prepay their 2018 tax bills in 2017. Just before year-end, the IRS issued guidelines on deducting those prepayments on 2017 returns. (IRS Internal News Release IR-2017-210, 12/27/17) The IRS said a prepayment of anticipated real property taxes that haven’t been assessed prior to 2018 aren’t deductible in 2017. Stay tuned for more on this issue.
In the driver’s seat. Just prior to the enactment of the Tax Cuts and Jobs Act (TCJA), the IRS announced the standard mileage rates to be used in lieu of certain actual expenses for 2018. (IRS Internal News Release IR-2017-204, 12/14/17) Following is a list of the key rates established by the IRS.
- The deduction for business-relating driving was increased to 54.5 cents per business plus related parking fees and tolls. That’s up a penny from 53.5 cents per business mile in 2017.
- The IRS also increased the flat rate for deduction for medical and moving expense travel from 17 cents per mile to 18 cents per mile. (However, the TCJA generally eliminates the moving expense deduction for 2018, except for active duty military personnel).
- Finally, the tax rate for charitable driving, which is set statutorily, remains at just 14 cents per mile in 2018.
Note: Generally, taxpayers will be able to claim bigger deductions by keeping track of actual expenses, but these optional flat rates save time and money.
Revamp the IRS? Proposals to overhaul the IRS fell by the wayside last year as GOP leaders burned the midnight oil cranking out the new Tax Cuts and Jobs Act. But that doesn’t mean a restructuring of the IRS is on the back burner—far from it. In fact, you can expect that restructuring efforts will heat up again once the dust from the TCJA has settled. What’s in store for the nation’s tax collection agency? One recent proposal would divide the IRS up into three sections with one devoted to individual taxes, a second to business tax matters and a third to small claims for routine tax disputes. We will continue to keep you posted on any significant developments.
- Small Business Tax Deduction Strategies No matches