2019 MA / RI NATP Annual State Update Seminar - LAST DAY TO REGISTER ONLINE!!

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 3rd 2019

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 3rd, 2019 for our Annual State Update Seminar. This all day event will be held at the Southbridge Hotel & Conference Center, Southbridge MA. Registration details are below, and are handled online directly by National NATP. A link to the registration website is listed below. Please take a look at the details on our speakers and topics provided in this great update opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities PLUS even 2 CE Credit Hours. Registration is from 7:30am to 8:30am & Education is from 8:30am to 4:30pm.

• Register online with credit card.
• For more information or to register by phone, fax or mail, use this form.
• After December 28th, please register at the door with the form above.

If you are planning to stay at the hotel, we have secured a room rate of $95/night. The reservations can be made here.

Topics:

Massachusetts State Tax Update presented by Massachusetts Department of Revenue.

Rhode Island State Tax Update presented by Rhode Island Division of Taxation.

Connecticut State Tax update presented by Kristin A. Roberts, MBA, EA, ABD.

Roberts holds the position of Post University’s Assistant Program Manager of Accounting. Her previous position at Post University was as an Associate Faculty in Accounting. Her course specialties at the university level include Financial Accounting, Individual Taxation, and Corporate Taxation. Roberts is actively involved in her local community, volunteering on a variety of councils for the historic district of Torrington.  She is also the Treasurer of the NW CT Chamber Education Foundation, and also serves as the Education Committee Chairperson for the CT Chapter of the National Association of Tax Professionals.  She is also a current member of the CT Department of Revenue External Editorial Board. Roberts is married with grown children.  She enjoys horror movies and classic rock music. When not working, her favorite pastime is spending time with her sons or listening to her husband singing and playing his guitar.


New York State Tax Update presented by Kathryn Keane of New York NATP Chapter.

Federal Tax Update presented by Kathryn Keane of New York NATP Chapter. (2 Hours of CE Credits)

Featured Speaker - Kathryn M. Keane, EA.

Kathryn is a principal of Macanta, a small tax and related services practice located in Brooklyn, NY, serving over 850 individual clients and 50 businesses. In December 2006, Kathryn completed two three-year terms on the National Board of Directors of NATP and was twice awarded Chapter Person of the Year for 2002 and 2008 for her volunteer service to the community at large as well as to NATP. In addition to serving as an Education Committee member for NY NATP, she currently serves as Chair of the IRS Tri-Boro Practitioner Liaison Committee. Kathryn is a frequent speaker for NATP Chapters. She has also presented for VASEA, NCCPAC (Nassau-Suffolk County Chapter) and local chapters of NYSSCPA. Kathryn has a B.S. degree from Brooklyn College.

Happy Holidays from The Massachusetts/Rhode Island Chapter of NATP

Misc. Itemized Deductions are Mostly a Thing of the Past, But I Want to Deduct My Broker's Wrap Fee, What Can I Do?

William Delaney, EA
Westood, MA

This is tempting, and you want to be creative for your client. It’s a lot of money, after all. So, someone at a seminar told us a few years ago to add it to the cost of the mutual fund and/or securities. That way you can deduct it when the investments are sold. Sounds great, but is it too good to be true? Read on…

At that time, this pie in the sky advice really didn’t hit your radar screen. After all, those fees (subject to the 2% floor) could be deducted and the tax saved would be at your client’s highest marginal rate, as opposed to the much lower capital gain rate if capitalized.

But now, when there is no place to deduct these fees, why not capitalize. Well, it turns out that better minds than ours have already addressed this issue. See IRS Chief Counsel Memo. 200721015 (6/25/07).

Our creative petitioner inquired if these fees qualified as a “carrying charge” which would then allow the taxpayer an election to capitalize. See Reg. 1.266-1(b)(1)(iv). See also Reg. 1.266-1(b)(2) which provides that if an expense is not otherwise deductible, it may not be capitalized under Sec. 266. This second reference was not important to the petitioner in 2007 (since he could claim a deduction), but it would be now since the new tax law has eliminated the deduction.

The Office of the Chief Counsel first concluded (for reasons detailed In the memo) that “…’carrying charges’ are charges other than interest paid or incurred to carry personal property.” Mutual funds and securities are personal property for purposes of the Internal Revenue Code.

The memo also referred to a tax court case, Ralph E. Purvis v. Comm., 65 T.C. 1165, 3/30/1976. In Purvis, the Court looked to the regulations which authorized the IRS to consider “sound accounting principles” as a basis for determining if a carrying cost may be capitalized. The Court, as a result of its independent research, concluded that generally accepted accounting principles looked unfavorably upon the capitalization of such costs. As a result, the Office of the Chief Counsel opined that “Fees for consulting and advisory services are better viewed as currently deductible investment expense.”

That was fine, then, but not so fine now due to current tax law. Heads I win; tails you lose!

2019 MA / RI NATP Annual State Update Seminar - TWO WEEKS AWAY!!

Massachusetts / Rhode Island NATP Chapter Annual State Update Seminar - January 3rd 2019

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, January 3rd, 2019 for our Annual State Update Seminar. This all day event will be held at the Southbridge Hotel & Conference Center, Southbridge MA. Registration details are below, and are handled online directly by National NATP. A link to the registration website is listed below. Please take a look at the details on our speakers and topics provided in this great update opportunity including continental breakfast, snacks, lunch, vendors and great networking opportunities PLUS even 2 CE Credit Hours. Registration is from 7:30am to 8:30am & Education is from 8:30am to 4:30pm.

• Register online with credit card.
• For more information or to register by phone, fax or mail, use this form.
• After December 28th, please register at the door with the form above.

If you are planning to stay at the hotel, we have secured a room rate of $95/night. The reservations can be made here.

Topics:

Massachusetts State Tax Update presented by Massachusetts Department of Revenue.

Rhode Island State Tax Update presented by Rhode Island Division of Taxation.

Connecticut State Tax update presented by Kristin A. Roberts, MBA, EA, ABD.

Roberts holds the position of Post University’s Assistant Program Manager of Accounting. Her previous position at Post University was as an Associate Faculty in Accounting. Her course specialties at the university level include Financial Accounting, Individual Taxation, and Corporate Taxation. Roberts is actively involved in her local community, volunteering on a variety of councils for the historic district of Torrington.  She is also the Treasurer of the NW CT Chamber Education Foundation, and also serves as the Education Committee Chairperson for the CT Chapter of the National Association of Tax Professionals.  She is also a current member of the CT Department of Revenue External Editorial Board. Roberts is married with grown children.  She enjoys horror movies and classic rock music. When not working, her favorite pastime is spending time with her sons or listening to her husband singing and playing his guitar.


New York State Tax Update presented by Kathryn Keane of New York NATP Chapter.

Federal Tax Update presented by Kathryn Keane of New York NATP Chapter. (2 Hours of CE Credits)

Featured Speaker - Kathryn M. Keane, EA.

Kathryn is a principal of Macanta, a small tax and related services practice located in Brooklyn, NY, serving over 850 individual clients and 50 businesses. In December 2006, Kathryn completed two three-year terms on the National Board of Directors of NATP and was twice awarded Chapter Person of the Year for 2002 and 2008 for her volunteer service to the community at large as well as to NATP. In addition to serving as an Education Committee member for NY NATP, she currently serves as Chair of the IRS Tri-Boro Practitioner Liaison Committee. Kathryn is a frequent speaker for NATP Chapters. She has also presented for VASEA, NCCPAC (Nassau-Suffolk County Chapter) and local chapters of NYSSCPA. Kathryn has a B.S. degree from Brooklyn College.

Does Your State Have a Throwback or Throwout Rule?

Katherine Loghead, Policy Analyst
TaxFoundation.com

This week’s state tax map examines states that have a throwback or throwout rule in their corporate tax code. Throwback and throwout rules are not widely understood, but they have a notable impact on business location and investment decisions.

For purposes of corporate taxation, multistate businesses are required to apportion their income among the states in which they operate. Most apportionment formulas assign weighting among three factors–property, payroll, and sales–to determine the amount of income taxed by each state in which the business operates. The goal of apportionment is to prevent double taxation of corporate income, but there is wide variation among states in how apportionment formulas are designed. For example, some states weight the three factors equally, while others weight the sales factor more heavily or use it as the only factor.

Varying state corporate income tax practices sometimes result in businesses having what is known as “nowhere income,” or income that is not taxed by any state. States with throwback or throwout rules seek to counter this phenomenon by requiring 100 percent of profits be apportioned among states. As such, businesses with nowhere income are required to “throw” that income “back” into a state where it will be taxed, even though that income was not earned in that state.

Although throwback rules are more common, three states adopt what are known as throwout rules. The difference is in how the “nowhere income” is treated. In both cases, the state is looking at a fraction: the amount of sales associated with the state over total sales. With a throwback rule, “nowhere income” is placed in the numerator (the amount apportioned to the state). With a throwout rule, it is removed from the denominator (the amount of total sales). Both increase in-state tax liability, though throwback rules are more aggressive than throwout rules.

Because two or more states can potentially stake claim to “nowhere income,” rules are needed to determine where that income should go, injecting another layer of complexity into already complicated state corporate tax structures. Throwback and throwout rules discourage investment and are inconsistent with the purpose of apportionment, which is to tax the share of a company’s income reasonably associated with that state—not to tax revenue clearly associated with other states just because those states choose not to tax that income.

States with corporate income taxes are nearly evenly divided between those that have a throwback or throwout rule and those that do not. The map below shows throwback rules in 22 states and the District of Columbia, as well as throwout rules in three states.

IRS: Taxpayers Have Extra Day to File and Pay; Returns and Payments Due Dec. 5 Are Now Due Dec. 6

WASHINGTON — The Internal Revenue Service today granted taxpayers an extra day, until Thursday, Dec. 6, 2018 to file any return or pay any tax originally due on Wednesday, Dec. 5.

The IRS granted the extra time, following the Dec. 1 Executive Order closing all federal agencies on Dec. 5, as a mark of respect for George Herbert Walker Bush, the forty-first President of the United States

The one-day extension applies to any return, required to be filed with the IRS, on Wednesday, Dec. 5, 2018. It also applies to any required federal tax payment, originally due on that day. In addition, it also applies to any federal income, payroll or excise tax deposit due on Dec. 5, including those required to be made through the Treasury Department’s Electronic Federal Tax Payment System (EFTPS).

Small Business Taxpayers (as defined below) May Use an Automatic Approval Procedure to Change to the Cash Method of Accounting for Income Tax Purposes

William Delaney, EA
Westwood, MA

Yes, the Congress said that we can do it, now the IRS is telling us how to do it automatically – see Rev. Proc. 2018-40.

Who May Do It – A small business taxpayer (defined) which has an average annual gross receipts for the three prior taxable years of $25,000,000 or less (to be adjusted for inflation).

Effective for taxable years beginning after December 31, 2017.

Accounts Receivable in existence when the change becomes effective will be recorded as income “as the amounts are actually or constructively received…”

Reduced filing requirement - Section 3, 15.18(7) outlines six bits of information needed for successful completion of Form 3115.  Automatic change number for the form is 233.

See the Rev. Proc. for additional information which you may need. 

Inflation-Adjusted Amounts Set for Tax Year 2019 - RI Division Also Posts Changes For Certain Items Involving 2018 Tax Year

PROVIDENCE, R.I. – The Rhode Island Division of Taxation announced the standard deduction amounts, tax bracket ranges, and other key items for the Rhode Island personal income tax for tax years beginning on or after January 1, 2019.

The inflation-adjusted amounts apply for tax year 2019, and therefore will not appear on tax returns until early 2020 (covering the 2019 tax year). Nevertheless, they are important to know now for tax-planning purposes.

The inflation-adjusted numbers will also aid tax professionals and taxpayers throughout 2019 as they make any needed adjustments to withholding or estimated payments, or for other purposes. The inflation-adjusted amounts are presented in the following tables.

Most taxpayers are able to claim the full amount of their applicable standard deduction. The same
is true for personal exemptions and dependency exemptions. However, if a taxpayer’s federal adjusted gross income (as modified for Rhode Island tax purposes) falls within a certain income range, the standard deduction amount – and the personal and dependency exemption amounts – are limited.

If income exceeds the range, the taxpayer cannot claim a standard deduction or personal or dependency exemption amount. The income ranges are listed in the following table. 

Personal income tax: uniform rate schedule

The Division of Taxation has recalculated tax bracket ranges for tax year 2019, as required by statute. The changes were made to the Rhode Island personal income tax’s uniform tax rate schedule, which is used by all filers.

If the dollar figures in tax brackets remained constant, a taxpayer might be bumped into a higher bracket solely because of an annual wage increase that is intended to help the worker keep pace with inflation -- an outcome often referred to as “bracket creep.” To help offset the effects of bracket creep, the General Assembly adopted a provision that requires the tax brackets to be adjusted annually with inflation. (Standard deduction and exemption amounts are adjusted in similar fashion.) The effect can be seen in the following two tables: one for tax year 2018, the other for tax year 2019.

Trusts and estates: income tax rate schedule

The Division of Taxation has posted the income tax rate schedule for 2019 that will be used by

fiduciaries for many trusts and estates. As a convenience, tables for tax year 2018 and tax year 2019 appear below.

Withholding tables, W-4 withholding certificate

By December 31, 2018, the Division of Taxation plans to post on its website the booklet of income tax withholding tables for tax year 2019. Employers use the tables to calculate how much to withhold from an employee’s pay for Rhode Island personal income tax purposes.

The booklet will also include a copy of the 2019 version of Form RI W-4, “Employee’s Withholding Allowance Certificate.” Both documents will be available via the following website:

http://www.tax.ri.gov/taxforms/withholding.php

Social Security and pension modification amounts for TY 2018

The Division of Taxation has set key numbers associated with the Social Security and pension/annuity/401(k) modifications for the 2018 tax year. The Division has also established the maximum credit amount for the statewide property-tax relief credit (Form RI-1040H) for the 2018 tax year. These numbers apply retroactively to the tax year beginning on or after January 1, 2018, and will appear on forms and instructions during the filing season which begins in January 2019.

SOCIAL SECURITY

Rhode Island legislation enacted in 2015 established a new modification involving the personal income tax.

Effective for tax years beginning on or after January 1, 2016, the modification decreases federal adjusted gross income for Rhode Island purposes for qualifying taxpayers who receive Social Security benefits. In general, a taxpayer is eligible for the modification if all three of the following conditions are met:

• The taxpayer’s federal adjusted gross income (AGI) includes taxable income from Social Security;
• The taxpayer has reached “full retirement age” as defined by the Social Security Administration; and
• The taxpayer’s federal AGI is below a certain amount (see table below).

PENSIONS, 401(K) PLANS, MILITARY RETIREMENT PAY, ANNUITIES, ETC.

Rhode Island legislation enacted in 2016 established a new modification involving the personal income tax.

Effective for tax years beginning on or after January 1, 2017, the modification decreases federal adjusted gross income for Rhode Island purposes for qualifying taxpayers who receive income from private‐sector pensions, government pensions, 401(k) plans, 403(b) plans, military retirement pay, annuities, and/or certain other sources.

In general, a taxpayer is eligible for the modification if all three of the following conditions are

met:

• The taxpayer’s federal AGI includes taxable income from pensions, 401(k) plans, annuities, and/or other such sources;
• The taxpayer has reached “full retirement age” as defined by the Social Security Administration; and
• The taxpayer’s federal AGI is below a certain amount. (Please see table below.)

PROPERTY-TAX RELIEF CREDIT (FORM RI-1040H)

The Division of Taxation has set the maximum property-tax relief credit for the 2018 tax year. The credit is claimed on Form RI-1040H. The amount is listed in the table below.