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December 2019 Newsletter

December 2019 Newsletter

3.12.2019

Are you up-to-date on your 2019 taxes? The IRS won’t be as generous as it was for 2018. Individuals are required to prepay their income taxes (through wage withholding or estimated payments) as the income is earned, otherwise, they will get hit with an underpayment penalty. To avoid a penalty, an individual must prepay the […]

Are you up-to-date on your 2019 taxes? The IRS won’t be as generous as it was for 2018. Individuals are required to prepay their income taxes (through wage withholding or estimated payments) as the income is earned, otherwise, they will get hit with an underpayment penalty. To avoid a penalty, an individual must prepay the lesser of 90% of their current year tax or 110% of their prior year tax (100% if prior year AGI was less than $150,000). For tax year 2018, due to the confusion created by the 2017 Tax Reform, the IRS lowered the threshold to the lesser of 80% of their current year tax or 110% of their prior year tax. However, for tax year 2019, the 90% threshold is back, so make sure you’re current with your taxes.

Considering investing in a Qualified Opportunity Zone? The window for a 15% exclusion will soon be over, but there will still be enormous tax incentives thereafter. As part of the 2017 Tax Reform, three new tax incentives are available to a taxpayer who invests in a business located within a qualified opportunity zone (a designated, economically distressed community): (1) the temporary deferral of tax on capital gains, to the extent the gains are reinvested into one of these zones (2) the 15% permanent exclusion from tax of the previously deferred gains if the investment is held for at least 7 years, or 10% if the investment is held for only 5 years, and (3) the permanent exclusion from tax of post-acquisition gains from the sale of the investment if held for at least 10 years. However, to qualify for the 15% exclusion, the 7 year holding period must begin no later than December 31, 2019. Nevertheless, an investment made after this date, in addition to the other tax incentives, would still qualify for the lesser 10% exclusion. So, while the upcoming deadline is significant, most of the benefits will still be available thereafter.

Planning a company holiday party? They’re still fully deductible. Prior to 2018, Meals & Entertainment expenses were 50% deductible. However, as part of the 2017 Tax Reform, some changes have been made to this category of expenses, specifically, entertainment expenses, are in most cases no longer deductible. However, company social events, regardless if they are considered “meals” or “entertainment” are 100% deductible. Yet, to qualify for this deduction, these events must be open to all employees, or alternatively, be open to the general public. So, make sure those holiday party expenses are properly classified as such, and not lumped together with “meals” or “entertainment”.

Stay tuned for next month’s exciting updates.

Ari Reifer
areifer@fhllp.com