Willeford Client Bulletin December 2017 We hope you are enjoying time with your family while accomplishing the last set of goals you have for this year! As you are doing this, remember that December is also a good time to wrap up final business tasks such as: implementing revised paychecks provided during year-end meetings, if applicable. maximizing your 401(k) deferral from your paycheck by December 31. paying all final expenses and having all final equipment delivered by year end. properly reporting health insurance on your W-2s (for 2% owners of S-corps). gathering paperwork that’s necessary for 1099 preparations in early January. Christmas & New Year’s Office Closings While some team members may be working limited hours during the rest of December, our office will be officially closed from Friday, December 22 through Monday, January 1 so that our team may spend time enjoying the holidays with family and friends. Revised 2017 Paychecks: Remember to Run Revisions If you received a revised paycheck from us during your year-end meeting, remember tocontact your payroll company to request that the revised paycheck be run before the end of the year, as discussed. 401(k) Deferrals: Maximize by December 31 Be sure to maximize your 401(k) deferral from your paycheck by December 31. For 2017, the maximum deferral is $18,000 per person and $24,000 for anyone age 50 and over. Final Year-End Expenses & Equipment Deliveries: Complete by 12/31 While we are still waiting for final tax legislation to rely upon for next year, one of the key aspects that we now expect, given what has passed Congress thus far, is that tax reform will NOT be retroactive and is now expected to take effect January 1, 2018. What does this mean for your business this December? It means you may want to consider using some of the follow tax strategies during the month of December: Prepay expenses that you will need to pay the first week or two of January. Consider bulk ordering clinical supplies and office supplies. Delay recording additional income until January. December may not be the best time to push hard to collect and deposit a significant amount of Accounts Receivable. Use your business credit card in December for expenses. You get the tax deduction when you use the credit card in the store or online, not when you pay the bill. Install equipment and new computers by December 31. You get the deduction when you can “plug it in,” not when you pay the invoice. Unfortunately, we don’t yet know what the highest tax brackets or income ranges for those brackets will be for 2018 and therefore cannot predict exactly how much of an impact these strategies will have on your wallet. As always, my team and I continue to research tax reform so we can give you up-to-date information when it becomes important enough to change your financial habits. 2% Owners of S-Corporations: W2s & Health Insurance Premiums If you are a 2% owner of an S-Corporation, the following information regarding your W-2s and health insurance premiums for you and your family is extremely important! Per Rev. Rul. 91-26, an S-Corporation must file a Form W-2 for each employee (1) who is a more-than 2% S-Corporation shareholder and (2) on whose behalf health and accident insurance premiums have been paid (or health savings account contributions have been made). Because health and accident insurance premiums paid on behalf of a 2% shareholder are reportable as wages for income tax withholding purposes, but not for FICA tax purposes, the cost of the premiums is included in Box 1 of Form W-2 but not in Box 3 (Social Security Wages) or Box 5 (Medicare Wages and Tips).You may further identify the premiums in Box 14 (Other). By December 31, 2017, call your payroll provider, and give them (1) the amount of SE health insurance premiums paid for 2017 and (2) the amount of HSA contributions paid for 2017 by the S-Corporation on your behalf so that your W-2s can be properly prepared. December 31 will be your last chance to double check that you and/or the payroll company have been entering premiums into the correct field, and thus correctly for taxes, during the year. We are providing this information as a courtesy to help you navigate the complex world of health insurance. Please keep in mind that we are not health insurance premium experts, nor do we create your W-2s. In addition, we are not attorneys and cannot provide legal advice as it relates to Medical Reimbursement Plans, Cafeteria Plans, etc. As the owner of your business, it is your responsibility to make sure you have talked to your insurance carrier to run non-discrimination testing, know the regulations, and call the payroll company to make sure your W-2s are correct. 1099 Preparations: Gear Up for the January Deadline 1099s must be completed and issued no later than Wednesday, January 31, 2018, after which time the IRS will assess penalties for late filing. You will soon receive an email from your staff accountant requesting the information that’s necessary to prepare your 2017 1099s. Keep in mind that we must receive your information no later than Friday, January 19 to give us enough time to (1) process your 1099s and (2) receive final approval from you so that (a) you can submit them to the recipients and (b) we can e-file them by January 31, 2018. In general, we will need the following from you in January: Signed 1099 Engagement Letter Vendor W-9 Forms (blank form available here) Vendor 1099 Review Report (after you’ve confirmed the accuracy of the report) Vendor 1099 Summary Report (after you’ve confirmed the accuracy of the report) If you plan to prepare and file your own 1099s for 2017, please let your staff accountant know as soon as possible. Even if you file your own 1099s, you should still make plans to forward copies of your finalized 1099s and Form 1096 to us once everything has been filed. Without this documentation, we cannot mark “Yes” on your tax return for the question related to the filing of 1099s. Marking “No” for this question on your tax return can result in penalties from the IRS for not filing your 1099s, which are required by law to be issued each year. Section 199 Deduction: Can You Take Advantage? One of the tax deductions you can potentially use for your on-site CAD/CAM technology is the Manufacturing Deduction, also known as Section 199. Typically, the deduction is between $3,000 and $9,000, and because it takes extra time for us to calculate this deduction, there is an investment in our time and expertise to run the calculations. Typically, in order to determine how sizable this deduction could be for you, we need the following information: How much of your collections was based on production done inside your office and not referred out to another lab? What is the on-site production of crowns? What is the on-site production of in-lays, on-lays, and other restorations using CAD/CAM technology? What is the production of whitening trays? What is the revenue derived from retainers, study models, appliances, etc. that are produced using your in-house laboratories? If you are interested in having us determine if Section 199 will be valuable for you, please fill out the form we will send you in January with your tax organizer. Have a wonderful Christmas and happy New Year!