Important2016Year-EndTaxInformation
DearClientsandFriends:
Weknowyouareverybusy,butpleasetakeafewmomentstoreadthisemailtodeterminewhichportions
applytoyouoryourbusiness.Eachtaxseasonthesameitemschange,getmissedorareoverlookeduntilit
is very late in the preparation process. Hopefully, this letter will help you develop your own year-end
checklist.
2017TaxSeasonStartDate
TheIRScurrentlyexpectstobeginaccepting2016taxreturnsasofJanuary23,2017.
NEW2017TaxReturnFilingDueDates
2016Forms1099-MISCandW-2willneedtobefiledJanuary31,2017–thisisthesamedatethatthe
formsmustbeprovidedtopayeesandemployees.
Under prior law, Form 1065 (for partnerships) was due 3 ½ months after the year-end (April 15th, for
calendar year-end partnerships), and could be extended for 5 months (through September 15 for
calendaryearpartnerships).The2016Form1065duedateisnowdue2½monthsaftertheyear-end
(March 15th, for calendar year-end partnerships), and can now be extended for 6 months (through
September15forcalendaryearpartnerships).
Underpriorlaw,Form1120(forCcorporations)wasdue2½monthsaftertheyear-end(March15th,for
calendar year-end corporations), and could be extended for 6 months (through September 15 for
calendaryearcorporations).The2016Form1120duedateisnowdue3½monthsaftertheyear-end
(April 15th, for calendar year-end partnerships), and can now be extended for 5 months (through
September15forcalendaryearpartnerships).
The due dates for 2016 Form 1120S (for S corporations) remain due 2 ½ months after the year-end
(March 15th, for calendar year-end corporations), and may be extended for 6 months (through
September15forcalendaryearcorporations).
FinCEN Form 114 better known as the foreign bank account report (FBAR) must be filed to report
certainfinancialinterestsinorsignatureauthorityoverforeignfinancialaccounts.FinCENForm114isa
calendaryearreport.ItcanonlybefiledelectronicallyandmustbefiledthroughtheBankSecrecyAct
(BSA) E-Filing System. Under prior law, the Form 114 had to be filed by June 30 with no extensions
allowed. Beginning with the 2016, the FinCEN Form 114 will be due April 15 and may be extended 6
monthstoOctober15.YoumustnotifyusinwritingpriortoMarch1,2017,ifyouwantustoprepare
yourFinCENForm114toprovideuswithenoughtimetoprepareorextendthisreturn.
The extended due dates for 2016 Forms 1041 (for trusts and estate income) is now 5 ½ months to
September30ratherthanSeptember15aspreviouslyallowed.
Theextendedduedatesfor2016Forms990(fororganizationsexemptfromtax)isnow6monthsto
November15.Inthepasttwo3monthextensionswereallowed.
NewStrategisWebsiteandClientPortals
All clients have a secure portal for accessing their tax returns, filing instructions and individual return
sourcedocuments.AsyouknowwerolledoutacompletelyupdatedwebsitethispastNovember.Your
portalisstillaccessedfromtheClientCenterwhichisnowlocatedbetweenOurTeamandContactin
greentextontherightsideofthebanneratthetopofthehomepage.
After clicking on the Client Center button select the Client Portal Login button on the left side of the
SelectaTooldropdownmenu.LoggingintoyourportalisdonebyenteringyourUsernamewhichis
youremailaddressandyourPasswordwhichisself-selectedandthenclickingtheLoginbutton.
Ifyouhavenotdonesopleasemakesureyoucanaccessyourportalandupdateyourpassword.Ifyou
donotrememberyourpasswordusetheForgotPassword?buttonintheClientPortalLoginscreento
resetyourpassword.Ifyouexperienceanyproblemswithyourportal,pleasecontactKarenSanfordat
[email protected].
Credit/DebitsCardPayments
Alsonewonourwebsitethisyearisanonlinepaymentfeaturethatwillallowyoutopayinvoiceswith
yourDebitorCreditcardatyourconvenience24/7.ThePaybuttonislocatedontherightsideofthe
banneratthetopofthehomepage.
ZoomVideoMeetings
AlsolocatedintheSelectaToolsectionoftheClientCenterofourwebsiteisabuttonforZoomVideo
Meetings.Thisisasimpletooltouseandwefindmanyofourclientsenjoyusingvideomeetingsrather
thanphonecallsorstoppingbytheoffice.Itisnicetospeakwithyoufacetofacefromtheconvenience
ofyourofficeorhome.Itsavestraveltimeandalsoenablesustoshareourcomputerscreensoyoucan
review documents or software together with us as we speak. This is a tremendous increase in
productivityandmostclientsswitchentirelytoZoomoncetheyuseitacoupleoftimes.Pleasecallusif
youareinterestedingivingthisatestdrivetoseehowitworks.
ClientOrganizers
In 2017 our Client Organizers and the client copy of your tax return will again be delivered to you on
yoursecureclientportal.Ifyoupreferthatwemailapapercopyofyourreturntoyou,pleasecallor
emailKarenatkarens@strategiscpa.comandshewillmarkitinyourfiletomakesureweprovideyou
with a paper copy as well. We currently expect to print your organizer to your portal the week of
January2th.Beonthelookoutforanemailexplainingthisatthattime.
IndividualRetirementAccounts
If you have a Simple IRA Plan, the annual deferral limit remains at $12,500 in both 2016 and 2017. The
catch-upcontributionlimitforages50andoveralsoremainsat$3,000inboth2016and2017.Besurethat
employee’sthatintendtomatchthelimithavedonesobeforeyear-end.Also,besuretodoublecheckthe
calculationoftheemployer2%or3%match.
ThecontributionlimitforIRAsremainsat$5,500inboth2016and2017,withanadditional$1,000allowed
for those 50 and over in 2016 and 2017. In the year an individual attains age 70½, contributions to
traditionalIRAsarenolongerpermitted.
RequiredMinimumDistributionsfromRetirementAccountswhenyou
ReachAge70½
You cannot keep funds in your retirement accounts indefinitely. You generally must begin taking
withdrawals from your IRA or retirement plan account when you reach age 70½. Roth IRAs (click to
followlink)donotrequirewithdrawalsuntilafterthedeathoftheowner.
The minimum amount you must withdraw from your account each year is called your required
minimum distribution (“RMD”). You can withdraw more than the minimum required amount. Your
withdrawals will be included in your taxable income except for any part that was taxed before (your
basis)orthatcanbereceivedtax-free(suchasqualifieddistributionsfromdesignatedRothaccounts).
Werecommendthatratherthanattempttomanuallycomputetheamountofrequireddistribution,you
insteadnotifythecustodianforeachofyourretirementaccountsandrequestthattheyautomatically
distributetheRMDonarecurringbasissothatthedistributionisnotinadvertentlyoverlooked.There
aresignificantpenaltiesiftheRMDisnotmade.
SocialSecurity
The social security wage base will increase from $118,500 in 2016 to $127,200 in 2017. This is an
increaseof7.3%inthewagebasewhilethebenefitsincreaseamere.3%.TheemployeeFICAtaxrate
willremainthesameat7.65%in2016and2017andtheself-employedtaxratewillremainthesameat
15.3%inboth2016and2017.Theearningsceilingforsocialsecurityin2017areasfollows:Underfull
retirementage-willincreasefrom$1,310in2016to$1,410in2017;theyearanindividualreachesfull
retirementage-willincreasefrom$3,490in2016to$3,740in2017;and,nolimitonearningsbeginning
the month an individual reaches full retirement (66 if born between 1943 and 1954). The earnings
neededtoearnonesocialsecuritycredit(quarterofcoverage)willbe$1,260in2016andincreaseto
$1,300in2017.Therefore,2016earningsof$5,200willearnfourcredits.Fortycreditsarerequiredto
maximize social security benefits. This is important for spouses that work part-time in closely-held
businesses.
HealthInsurance
Theself-employedhealthinsurancededuction(whichappliesto2%ormoreScorporationowners)is100%
deductiblefor2016forregulartaxpurposes.However,specialreportingismandatoryonyourFormW-2in
ordertoqualifyforthededuction.
IfStrategispreparesyourW-2’s,youmustprovideuswiththeamountofhealthinsurancepremiumspaid
on your behalf by your S corporation by Friday, December 23, 2016, to insure the proper amount is
reported on your 2016 Form W-2. If we do not prepare your W-2’s and you use an outside vendor to
prepareyourpayroll,youmustprovidethisinformationtothePayrollvendorusuallybeforethedatethe
lastpayrolloftheyearisprocessed.
Werecommendthatyoucontactyourpayrollvendordirectlyandinwritingtoavoidadditionalpayroll
feestocorrectthisafteryourW-2’sareprepared.
SCorporationShareholderReasonableCompensation
One area that continues to receive heightened IRS scrutiny is reasonable compensation for S
corporation shareholders. S corporations must pay reasonable compensation to a shareholderemployee in return for services that the employee provides to the corporation before non-wage
distributionsmaybemadetotheshareholder-employee.Theamountofreasonablecompensationwill
neverexceedtheamountreceivedbytheshareholdereitherdirectlyorindirectly.
TheinstructionstotheForm1120S,U.S.IncomeTaxReturnforanSCorporation,state"Distributions
andotherpaymentsbyanScorporationtoacorporateofficermustbetreatedaswagestotheextent
theamountsarereasonablecompensationforservicesrenderedtothecorporation."
Several court cases support the authority of the IRS to reclassify other forms of payments to a
shareholder-employeeasawageexpenseandsubjecttoemploymenttaxes.
Filing 1099 Forms is Mandatory and Must Be Disclosed on your
Business Return (IRS is now aggressively assessing penalties for late
filingandfailuretofile1099Forms)
Anynon-employeeperson(orbusinessthatisnotacorporation)receivingapaymentof$600ormore
fromyourbusinessshouldreceiveaForm1099fromyourbusiness.Asageneralrule,werecommend
that you obtain a completed and signed Form W-9 Request for Taxpayer Identification Number and
Certificationbeforeapaymentforservicesismade.AlinktothisformandtheFormW-4Employee’s
WithholdingAllowanceCertificateisavailablefromtheClientResources/ClientFormstabofourwebsite
athttps://www.strategiscpa.com/resources/client-forms.
This is especially important, because all business tax returns now require management to indicate
whetherpaymentsweremadeduringtheyearthatrequireForm1099’stobefiled.Ifthisquestionis
answered“Yes”,thebusinessmustindicatewhethertheyhavefiledorwillfiletherequired1099Forms
by the due date. Answering the first question “Yes” and the second question “No” we believe, will
significantly increase the risk of an IRS audit. We strongly encourage you to file any required Form
1099’sbytheJanuary31,2017,deadline.Pleasecontactusbeforeyear-endifyouneedourassistance
preparingtheForms1096and1099.
Ifyoudonothavecompleteandaccuratenames,addressesandFederalIdentificationNumbersforall
subcontractorsbeforeyear-enditislikelyyouwillnotbeabletofileyourForms1099bytheJanuary
31,2017duedate.Contrarytothepast,theIRSisaggressivelyassessinglargepenaltiesforfailureto
fileandlatefilingofForms1099.
The1099filingrequirementsaremoreexpansivethanmostpeoplethink.Forexample,paymentsof
$600 or more to attorneys require a Form 1099 even if paid to a corporation. Additionally, rental
paymentsof$600ormoreforofficespacealsorequirefilingaForm1099.
EmployeeGifts,BonusesandMiscellaneousPayments
All gifts, bonus payments, trips, awards or other miscellaneous payments to employees in excess of
$25mustbetreatedaspayrollandgothroughthepayrollprocess.Normally,thesetypesofpayments
aresubjecttoFederal,State(ifapplicable)andSocialSecurityandMedicareTaxwithholding.Sinceitis
normallynotpossibletowithholdtaxfromnon-cashpayments,wemust“gross-up”payrollbymaking
thenetcheckequaltotheamountofthenon-cashpayment.Ifyouanticipatemakingbonuspayments
ornon-cashpaymentspleasecontactusbeforethepaymentismadesowecanassistyou.Otherwise,it
mayresultinapenaltyfordepositingtherequiredwithholdingtaxlate.
StandardMileageRates
Ifyouuseavehicleforbusiness,pleaserecordyourodometerreadingonDecember31,2016,andcallus
for an automobile worksheet, which you will need to complete in order to report your business miles
driven.The2017standardmileagerateforbusinessmilesdrivenis53.5centspermile,downfrom54cents
permilein2016.The2017standardmileagerateformedicalandmovingis17centspermiledownfrom19
cents per mile in 2016. The 2017 standard mileage rate for miles driven in service to charitable
organizationsis14centspermilewhichisthesameas2016.
Ifyouplantouseyourvehicleforbusiness,westronglyrecommendusingoneofthemileagetrackingapps
that are available on your smart phone. One app I looked at tracked your daily driving and then let you
swipethetripsonedirectionforpersonalandtheotherforbusiness.Notescanbeaddedtothebusiness
tripstomeettheIRSrequirements.
IRSRequiresWrittenPolicytoExpenseTangiblePropertyCostingless
than$2,500
The IRS made substantial changes to the way repairs, maintenance and improvements must be
accounted for beginning January 1, 2014. The net result was more stuff that many clients incorrectly
expensedinthepastasrepairsisnowrequiredtobecapitalized,especiallyonrealproperty.However,
beginningJanuary1,2016,theIRSincreasedthecapitalizationlimitto$2,500,whichmeansthateach
individual item with a purchase price of less than $2,500 can be expensed. In order to do this, we
recommend that each business prepare a written policy indicating the new limit is being adopted. A
samplewrittenCapitalizationPolicywhichmaybeusedtoincreaseyourcapitalizationlimitto$2,500is
availableonourwebsiteathttps://www.strategiscpa.com/resources/client-forms.SelectCapitalization
PolicyfromClientForms.
Ifyouplantomakesubstantialrepairsandmaintenanceduring2017,pleasecontactusbeforehandto
makesureyouareabletogetthetaxtreatmentthatyouareexpecting.
Section179ExpenseandBonusDepreciation
IRC Section 179 allows a special depreciation deduction for equipment that normally must be capitalized
anddepreciated.CertaintangiblepersonalpropertyuptotheSection179limitcannormallybeexpensedin
theyearpurchasedratherthanrecoveringthecostusingdepreciationoveraperiodofyears.The2016and
2017Section179deductionlimitis$500,000.However,thereisaspendingcapof$2,010,000in2016and
$2,020,000for2017.ThisisthemaximumamountthatcanbespentonequipmentbeforetheSection179
deductionavailabletoyourbusinessbeginstobereduceddollarfordollar.TheSection179deductionis
limitedtothetaxpayer’saggregatetaxableincomederivedfromactiveconductofalltradesorbusinesses.
Generally,rentalactivitiesdonotqualifytotakeadvantageofSection179.
After Section 179, 50% Bonus Depreciationis available on new assets placed in service before 2020.
Businessesofallsizeswillbeabletodepreciate50percentofthecostofequipmentacquiredandputin
service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40 percent in 2018
and30percentin2019.
Inventory
If you sell merchandise in your business, or file your business tax return using the accrual method of
accounting (rather than the cash method of accounting), you must prepare a schedule of inventory,
accountsreceivableandaccountspayableonhandasofDecember31,2015.Wewouldbehappytoanswer
any questions you have regarding what information is required and how to handle any or all of these
matters.
Obama’sNewOvertimePayRegulationisOnHold
Just days before the December 1 implementation date, a federal judge in Texas blocked the new
DepartmentofLabor(DOL)federalovertimerule,whichwouldhavedoubledtheFairLaborStandards
Act’s (FLSA’s) salary threshold for exemption from overtime pay. This extension of overtime eligibility
wouldhaverequiredemployerstopaytime-and-a-halftotheiremployeeswhoworkedmorethan40
hoursinagivenweekandearnlessthan$47,476ayear.
Lawsuits objecting to the overtime rule were filed by 21 states, the U.S. Chamber of Commerce, and
otherbusinessgroupsconcernedaboutthenegativeimpactsofthelegislationonbusinesses—including
higher payroll costs and reduced staffing flexibility. The DOL plans to challenge the decision. The DOL
alsostatedthatthesalarylevelwassetpurposefullylowtoscreenoutobviouslynonexemptemployees
suchasexecutivesandhigher-levelprofessionals.
AlthoughtheovertimeextensionrulewillnottakeeffectDecember1,itcouldstillbeimplementedin
thefuture.Employersshouldcontinuetofollowtheexistingovertimeregulationsuntilafinaldecisionis
reached. For those employers who have already raised exempt employees’ salaries to meet the new
thresholdorwhohavereclassifiedemployeeswhoarestillearninglesstononexemptstatus,theSociety
for Human Resources Management (SHRM) recommends leaving such decisions in place because they
would be difficult to reverse. However, employers may want to postpone making any further moves
untilafinalrulingismade.
Workers’CompensationInsurance
Businesses with employees are required by law to carry workers’ compensation insurance. The only
exception is for non-construction businesses with less than four employees. All construction businesses
musthaveworkers’compensationcoverage,evenwithonlyoneemployee.
UnemploymentandWithholdingTaxNotices
Ifyouhaveemployees,youshouldreceiveyournewFloridaunemploymenttaxratefor2017,aswellas
yourFederalwithholdingtaxdepositrequirementsduringthefirstweekofDecember2016.Pleasefaxusa
copyassoonasyoureceivethem.Callusimmediately,ifyoudonotreceivethisinthemail.Ifyourpayroll
tax deposits exceeded $50,000 during the period 07/01/2015–06/30/2016, you will be required to make
your2017taxdepositswithinthreebusinessdaysofpayrollratherthanbythe15thofthenextmonth.
Latedepositsresultinhugepenalties.
EFTPS
Beginning January 1, 2011, the Treasury Department eliminated the option of depositing employment
tax deposits with your local bank. All Federal tax deposits including unemployment (Form 940) must
nowbemadeusingtheElectronicFederalTaxPaymentSystem(EFTPS)http://www.irs.gov/uac/EFTPS:The-Electronic-Federal-Tax-Payment-System. Employers with quarterly payroll tax amounts below
$2,500 per quarter may remit employment taxes with their Form 941 or Form 944. However, we
recommend that all clients regardless of amount utilize the EFTPS system. It takes several weeks to
enroll, and it is important to be currently enrolled before the need to use it arises. Payment of your
individualestimatedtaxpaymentscanalsobescheduledandpaidelectronicallyaswell.Pleasecallour
officeifyouwouldlikeassistancesettingthisup.
FloridaNewHireForm
Ifyouhireorre-hireemployees,youarerequiredtoreportcertaininformationabouttheemployeetothe
StateDirectoryofNewHireswithin20daysofhiringthatemployee.Youcannowfilethisreportonlineor
downloadacopyoftheformtofaxormailbacktothestate.Togetmoreinformation,visitthewebsiteat
https://newhire.state.fl.us/fl-newhire/.
RecordMaintenance
Rememberthatitisyourresponsibilitytokeepbankstatements,cancelledchecksandallbusinessandtax
receiptsforuptosevenyearsinordertosubstantiatebusinessincomeanddeductions.Also,youmusthave
acopyonfileofIRSFormsW-4andI-9foreachemployee.Ifyouhaveun-reimbursedbusinessexpenses,
you must submit these for reimbursement before the end of the year in order to deduct them on your
businesstaxreturn.Ifyouprepareyourbusinesstaxreturnusingthecashbasisofaccounting,youmust
actuallypaybillswithacheckduring2015forthedeductiontobeallowedin2015.However,youshould
notreduceyourcashbalancebelowzeroifyoudonothaveadequatecashtocoveryourbills.
FloridaSalesandUseTax
Many businesses that don’t collect and remit Florida sales tax are surprised when they receive an audit
noticefromtheFloridaDepartmentofRevenue.ThisisbecausetheStateauditsbusinessestomakesure
theyhaveproofthatsalestaxwaspaidonalloftheirofficefurnitureandequipment,aswellasotherfixed
assets that were purchased for use within Florida. We recommend that you maintain a file containing a
copyofallpurchaseinvoicesforeverybusinessassetyouownthatcostsmorethan$500.Pleasecontactus
ifyouwouldlikeassistancesubmittingusetaxonanyout-of-statepurchasesthatdidnotcollectFlorida
salestax.
DataSecurityandPasswordManagementSoftware
Ifyouuseacomputerinyourbusinessandyouwanttostayinbusiness,youneedtomaintainfrequent
backupsofyourcomputerdata.Agoodruleofthumbabouthowoftentobackup,is,onlybackupwhatyou
don’twanttorecreatefromscratch.Overthepastfewyearsseveralofourclientshavehadcomputers
stolen or unexpectedly fail, with catastrophic data losses. By hosting your accounting software in the
cloud,manyoftheseriskscanbemitigated.
If you are not currently using Password Management Software we would definitely recommend
investigatingit.ClickheretolinktoanarticledatedNovember4,2016,fromPCMagazineofTheBest
Password Managers of 2016. We have tested Dashlane and have clients using LastPass. The cost for
Dashlane was approximately $89 for a three year single license. Based on the time savings opening
passwordprotectedwebpageswewillsaveseveraltimesthepriceintimesavings.Thissoftwareworks
onbrowserbasedapplicationsbutmostdonotworkwithinsoftwarethatisonyourcomputer.
QuickBooksOnline(QBO)andHostedQuickBooks
Astechnologyhascontinuedtoimproveoverthepastfewyears,wehavemovedmanyofourbusiness
clientsaccountingtoahostedenvironment.Duringthistime,QuickBookshascontinuedtofocusmost
oftheirresourcesonimprovingQBOratherthantheirdesktopsoftwareversion.Formanyofournew
and existing service based clients, QBO is our recommended accounting solution. As we continue to
moveforward,ourgoalistoprovideourclientswithincreaseddatasecurityandflexibilityingathering
andaccessingyourinformationanytimefromanywhere.
BOSS(BackOfficeSupportSystem)
Withtheincreasedadministrativeburdenofrunningabusiness,manybusinessownersarelookingfor
opportunities to outsource services that don’t fall within their core competency. BOSS™ is an allinclusive solution that offers businesses relief from the day-to-day accounting hassles while providing
24/7accesstofinancialdata.Asyourtrustedadvisor,wepayyourbills,recorddeposits,preparepayroll
andpayrolltaxreturns,furnishfinancialstatements,produceW-2’s,produce1099’s,preparetaxreturns
andsupplyvaluablefinancialandtaxadvicethroughouttheyear.Allactivityiscompletedonlineviaa
technologically advanced SaaS-based platform—so communication and document exchange is in realtime.
IfyouhaveaninterestinmoreinformationregardingQBOorBOSS™checkoutthesolutionssectionof
our website at https://strategiscpa.com/solutions/ or call our office to discuss your specific
circumstances.
EndofYearReview
Thisisalsoagoodtimetoevaluateyourfamily’sfinancialandestateplans.Pleasetakesometimebefore
the end of the year to determine if your disability and life insurance coverage, retirement accounts and
wills/trustsareadequatetoprovideforyourfamily’scurrentandfutureneeds.Wewillbehappytodiscuss
anyoftheseissueswithyou.
Hopefully,thiswillhelpyouwithyourendofyearplanning.Asinthepast,wewillmakeeveryeffortto
beginbusinesstaxreturnsduringthemonthofJanuary.Pleasedeliveryourinformationtousasearlyin
Januaryaspossible.Pleasecallusifyouhaveanyquestionsorwouldliketoscheduleameetingorphone
conferencebeforetheendoftheyear.Haveagreatholidayseason!
Sincerely,
TheStrategisCPAs&ConsultantsTeam