With the passing of the new tax law, business owners should carefully prepare for the upcoming tax season.
This article discusses steps business owners can take to ensure proper tax filings, and the importance of a financial advisor.
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Cryptocurrency is hot right now. As it emerges as an asset class of its own, many people are still confused about how to treat it for federal income tax purposes. In response, the IRS issued guidance back in 2014 that treats virtual currencies that are convertible to cash as a capital asset—but it’s not as simple as it appears. 
Taxable Events and Imputed Income
A major concern for the IRS is that coin-to-coin trades and buying items and services with coins are often mishandled for tax reporting purposes. The IRS considers these all to be taxable events, but this might not be evident to most people. Coin holders are supposed to “impute” an exchange transaction and report gains/losses in all these cases.
While it might seem absurd to have to report a taxable event each time you buy or sell something, remember that the IRS considers cryptocurrencies intangible property and not actual money, which is a crucial difference.
Coin to Cash Transactions
Capital gains and losses are the difference in the price you sell the asset at (minus transaction costs such as commissions) and your basis in the asset. Your basis is what you paid for the asset (plus transaction costs such as commissions). These types of transactions are straightforward and common sense—just think of buying and selling a stock. 
Coin to Coin Transactions
Cryptocurrency traders often exchange one type of coin for another, such as trades like Bitcoin to Ethereum. Purchases of alt coins usually require using another coin such as Ethereum—you simply cannot purchase some cryptocurrencies with U.S. dollars directly.
Some taxpayers delay capital gains recognition in situations such as these by treating coin-for-coin trades as Section 1031 exchanges; however, the new tax law has eliminated this treatment for sure, and it was questionable at best before.
Let’s look at a simplified example of a coin-to-coin trade and the tax consequences. Say you bought 1 Bitcoin for $3,000. Now it is worth $12,000 and you exchange it for 10 Ethereum. Technically, you have a taxable gain of $9,000 ($12,000 minus $3,000 basis) and your new basis in the 10 Ethereum is $12,000. 
Coins for Goods Transactions
Similar to coin-to-coin transactions, using a cryptocurrency to purchase goods or services is a taxable event. Let’s look at an example of how this works.
You were brilliant and bought some Ethereum in early 2017 for $12 per coin and now it is worth $1,100 per coin. Feeling rich, you wander over and buy yourself a new Aston Martin DB11 for 196 Ethereum coins, or the equivalent of $215,600 cash. Aside from being the proud new owner of a fine sports car, you also owe the IRS taxes on $213,248 in gains (196 coins x $1,100 value at purchase, minus your $12 cost). Hopefully you have some cash or coins left over to cover the tax bill.
Investing in Cryptocurrency Outside the United States
You do not need to report your cryptocurrency on your FBAR, according to an IRS statement issued in 2014. The IRS confirmed this position again for 2017.
Conclusion
Big gains in cryptocurrency prices over 2017 mean there is A LOT of tax money at stake, and the IRS is cracking down in an effort to get what they consider their fair share. They are using legal efforts to force major exchanges such as Coinbase to turn over customer records and institute reporting measures to stop fraud. Stay ahead of the IRS and make sure you report your cryptocurrency trading properly.
Be sure to take advantage of the many hidden write-offs you may be able to claim on your 2017 tax returns.
This article discusses the seven different deductions you may be able to claim on your 2017 returns, before the 2018 tax laws take place.
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The certified public accounting firm of Reynolds Bone & Griesbeck, PLC (RBG)  is pleased to announce the addition of Christian Lewis, Elizabeth McCarty, Madeline Howard, and Brandon McLarty as interns to the firm.
“We are very excited to have these young professionals join the firm for the upcoming busy season,” said John Griesbeck, CPA, managing partner of RBG. “Their skills and fresh perspective will help them serve our clients with accuracy and enthusiasm.”
Lewis is a current student at University of Memphis, where he is part of Helen Hardin Honors College. He is also a member of the IFC Executive Board and the former SAE President. Lewis will split his duties at RBG in the audit and tax departments. The son of Harris and Lori Lewis, he graduated from Evangelical Christian School before attending college. Lewis currently resides in Germantown and in his freetime enjoys football, basketball, and film.
A student of Mississippi State University, McCarty will graduate in May 2018 with a Bachelor of Accountancy. She is a member of the professional fraternity Beta Alpha Psi and a regular name on the President’s List. During her time at RBG, she will work in the audit department. McCarty currently resides in Starkville, Mississippi, and enjoys spending time with family and friends, as well as running, in her free time.
Howard attends the University of Mississippi and will receive a Bachelor of Accountancy in May 2018. She will serve as an intern in the tax department. She is a member of the sorority Chi Omega, as well as the honors fraternity Phi Kappa Phi, and professional fraternity Beta Alpha Psi. Howard currently resides in Memphis and in her free time enjoys spending time at Pickwick Lake with her dogs, exercising, and cooking.
Also a student of the University of Mississippi, McLarty finishes his schooling in May 2018. He will serve as a tax intern with the firm. In his free time, McLarty enjoys the outdoors, especially playing golf, in his town of Olive Branch.
Some experts are predicting that the recent tax legislation will create a ton of new business creation and activity—just not the kind that lawmakers originally intended. These people are predicting a surge in efforts for reclassification and the organization of cover companies by employees so they can have their salaries recognized as business income, significantly lowering their tax burden as a result.
A central tenet of the Republican bill is that it reduces both corporate and pass-through business tax rates. Corporate profits are now taxed at only 21 percent, and owners of pass-through companies will get to take a 20 percent deduction. While these same experts predict it will take some time to adapt, they believe that as lawyers and accountants delve into the new rules, they will find ways to minimize taxes for their clients using the new tax structure.
A group of tax law professors and lawyers wrote a paper on various ways imaginative and wealthy individuals can use the preferential business tax treatment to reduce their taxes. This academic paper is entitled “The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation” (available for download via SSRN), and it chronicles how they believe individuals in various fields and scenarios will create or turn themselves into small businesses to take advantage of the new tax structure.
Below is a brief synopsis of the different strategies. As always, remember that each situation is unique and you should consult your tax professional before implementing any of these strategies—this is definitely not a DIY type of situation.
Partnership Game Changers
Some of the paper’s authors believe that people will transform themselves into self-employed contractors or partnerships, thus turning their wages into pass-through profits and entitling them to the 20 percent deduction.
The IRS lays out pretty strict guidelines on who can be classified as an independent contractor, with a bias toward workers being treated as W-2 employees—so this isn’t a simple path. The most likely candidates are individuals in certain professions, such as law firms. One example given is that associates (partners would already receive the pass-through treatment) could create an LLC and then be hired by the firm. There are provisions that prevent guaranteed payments from qualifying for the deduction; however, many feel these regulations are weakly written and might only apply to S corporations.
Split the Difference
Another strategy professional service pass-throughs can use is to split their companies into parts. One part would perform the services portion of the business, while the other would own the real estate and/or any productized revenue streams. Separating the service portion of the business would allow the other segments to qualify for profit deductions where they would not otherwise if they were comingled.
Self-Incorporation
Initially, many believed the easiest way to arbitrage the new tax rate structure would be to organize a corporation. 
Currently, however, most entrepreneurs avoid forming corporations due to double taxation (profits are taxed at both the corporate level and then again as dividend distributions). The reduced corporate rate of 21 percent combined with the top dividend rate of 20 percent means that even taxpayers in the top brackets will do better not incorporating; however, opportunities for interest earning investments are still available.
Conclusion
Change often means opportunity when it comes to tax law. The new tax law substantially shakes up business taxation, and as professionals sort through the finer details, new strategies will emerge for some taxpayers.
Reynolds, Bone & Griesbeck PLC recently promoted Joseph D. Callicutt, Jr., to Audit Partner from the position of Senior Audit Manager. 
Callicutt became a partner effective January 1, 2018, after ten years at RBG. During his tenure here, Callicutt has managed audit and tax engagements for financial institutions, and provided advisory services related to interest rate risk management, bank profitability and efficiency, strategic planning facilitation, and outsourced internal audits.
In addition to his technical abilities, Callicutt has shown himself to be a passionate professional, committed to building lasting relationships with his clients and peers. According to Managing Partner John Griesbeck, “I’ve never seen anyone more passionate about the banking industry than Joseph. His passion is exceeded only by his desire to serve clients and provide solutions for the issues they face.” 
 This ability to grow and maintain well-established and supportive relationships has been a strong resource for Callicutt’s clients. Through an intricate knowledge of clients’ challenges, and a deep understanding of tax and regulatory policy, Callicutt has been able to support small and mid-sized banks in navigating their challenges effectively and ethically, while assisting clients in looking toward the future.
Prior to his work at RBG, Callicutt was employed at a regional financial institution, where he worked in the areas of commercial real estate lending and investments in affordable housing and historical tax credit developments. 
Callicutt is a member of both the American institute of CPAs (AICPA) and the Tennessee Society of CPAs (TSCPA). A Mississippi native, Callicutt was educated at the University of Mississippi, where he earned a dual bachelors in Accountancy and Business Administration in Banking and Finance. He is also a graduate of the Barret School of Banking.
Reynolds, Bone & Griesbeck PLC has served the greater Mid-South for the past 100 years. The accounting firm specializes in accounting and auditing, tax, and advisory services for a diverse client base, including financial institutions, manufacturers and distributors, not-for-profit entities, retail dealerships, and employee benefit plans. For more information, visit rbgcpa.com.
 
According to the pundits, the Dec. 14 move by the U.S. Federal Communications Commission to repeal existing net neutrality rules is either a major blow to free communication or a storm in a teacup. Perhaps the truth lies somewhere between these polarizing viewpoints.
It appears that those who supported dismantling the rules put in place to ensure equal access to the Internet (a concept usually known as “net neutrality”) and those who wished them to remain want the same things. Both sides say they are opposed to Internet Service Providers putting discriminatory practices in place to slow down or block certain content, and neither wants ISPs to charge users more to see certain websites. The disagreement appears to center on how fair play on the Internet should be enforced and who exactly does the enforcing. Not surprisingly, President Trump’s appointee to the FCC, Chairman Ajit Pai, believes less government regulation will be more beneficial, and that broadband should not be regulated as if it were a utility. 
Most software companies disliked the FCC’s recent repeal of the Obama era regulations. Many small business owners and entrepreneurs also voiced their opposition to the repeal, fearing that the big ISPs will take advantage of their “gatekeeper” role. On the other hand, telecommunications companies were glad to see them repealed. The naysayers believe there are clear dangers in allowing market players to also be guardians of net neutrality. They argue that big telecom companies are already dabbling in preferential Internet usage practices to steer consumers to their sister companies and that Pai’s repeal opens the door for more ploys of this nature.
Here is some of the history behind the headlines and some of the key issues to ponder:
Lawmakers have the power to overturn this recent decision, and to propose their own laws to provide some stability to the regulatory environment. Small business owners who want to see a fair and level playing field will want to continue to monitor this situation. 
Congress’ recent tax reform bill, the Tax Cut and Jobs Act, aims to lower taxes on corporations and companies. The GOP believes that lower taxes will help American companies to be more competitive and, in turn, will generate more jobs and more dividends for shareholders. Not all economists are sold on this argument. They note that many corporations are already cash-rich, and there are no guarantees that lessening their tax burden will result in employment gains or more generous dividends for their shareholders.
Senate Republicans agree with their Congressional colleagues on corporate tax reform, but they have additional proposals. These have been reviewed by the nonpartisan Congressional Budget Office, which has reported that the Senate’s reform package will leave lower-income and middle-class families worse off, and that proposed health insurance changes will further burden America’s poorest families. The bill overall would add some $1.4 trillion to the deficit over the next decade. Here’s an overview of the how the currently proposed reforms might affect business owners and households.
Big Business Scores Big
The top corporate tax rate would be cut from 35 percent to 20 percent (Senate version does not go into effect until 2019) – the largest one-time decrease in corporate taxes ever. Also, corporations would see additional tax breaks, including a lower rate of  percent on money expatriated from low-tax countries, and a new system that, for the most part, would tax the profits created in the United States rather than worldwide income. The amended House version taxes cash repatriation at 14 percent and non-cash assets at 7 percent, while the Senate version taxes cash at 10 percent and non-cash assets at 5 percent.
Some Joy for Small Businesses via “Pass-Through” Taxation Reform
More than 90 percent of small businesses are organized for tax purposes as “pass-through” companies – either sole proprietorships, partnerships or Limited Liability Corporations. This means that income is only taxed once. If the business receives income, the money boosts the owner’s coffers, and the owner makes the appropriate tax payments based on his/her individual tax rate. The new House proposals call for cutting the top pass-through rate from 39.6 percent to 25 percent, but excludes service companies like consultants and lawyers. It also proposes a complicated formula so that the lowered rate may apply to only about 30 percent of total income. Business owners who make $150,000 or less would be allowed to pay a reduced rate of 9 percent on the first $75,000 of their earnings. This tax break would be phased in – the lowest rate would not be available until 2022. The Senate takes a different approach to lowering business owner income by proposing allowing pass-through entity members to deduct up to 17.4 percent of their ordinary business income. It also denies this deduction to anyone operating a service business with a taxable income of more than $500,000 or $250,000, married filing jointly versus single.
A Simpler Tax Code
Filing taxes will be simpler. The House bill reduces the current seven tax brackets to just four – 12 percent, 25 percent, 35 percent and 39.6 percent. The top rate applies to income of $1 million or more per year for couples and $500,000 or more for individuals. The Senate bill keeps seven brackets but alters the rates and bracket ranges instead. The bill also eliminates many credits and deductions; but it does provide a larger standard deduction ($12,000 for single taxpayers and $24,000 for couples), a larger deduction for a child – $1,600 per child as opposed to the current $1,000 per child – and a new Family Flexibility Credit of $300 per year for individuals and $600 for couples. Both versions of the bill call for the elimination of personal exemptions as well.
Fewer Deductions for Most of Us
It may be great to have fewer tax brackets to consider, but along with this streamlining comes a big reduction in itemized deductions. What remains under the House version are deductions for charitable donations, property taxes (up to $10,000 per year), and mortgage interest deductions. The Senate version of the bill completely eliminates the SALT (State and Local Tax) deduction.
The Rich Get Richer
Changes to estate taxation will help wealthy families keep more of their inheritances, until 2024 when estate taxation is eliminated entirely. Current estimates suggest that about half the benefits included in the reform proposals will accrue to the wealthiest top 2 percent. These individuals will no longer have to pay the alternative minimum tax (AMT), a measure first introduced in 1969 to inhibit tax-dodging strategies. The extremely wealthy segment of society will also be able to file charitable deductions to lower their tax bills.
What eventually becomes law remains up for debate. However, almost everyone can agree that the final passage of the Republican’s tax reform proposals faces a rough road ahead.
IRS guidance on the tax treatment of cryptocurrencies already exists. Right now, the IRS considers cryptocurrencies to be “intangible assets.” As a result, they are subject to capital asset treatment. However, recent developments complicate matters.
On Aug. 1, Bitcoin split into two separate cryptocurrencies – Bitcoin and Bitcoin Cash. Current guidelines do not address cryptocurrency splits, also known as fork transactions.
How to Report Your Bitcoin Cash
At the split, Bitcoin Cash’s initial price was set at 9.5 percent of Bitcoin’s unit price of $2,801—or $266. Holders of Bitcoin received one Bitcoin Cash unit for every Bitcoin they held at the time of the split, making Bitcoin Cash a separate financial instrument. As a result, this makes it taxable—so recipients of Bitcoin Cash should include the transaction on their 2017 income tax returns.
Since a cryptocurrency is not technically a security or a debt-like interest, the transaction is considered neither a dividend nor interest income. So how should you report the transaction? While there is no clear-cut guidance as of yet, the best place to report the transaction is as “Other Income” on Form 1040, since this is where you can report transactions that do not neatly fit anywhere else.
Another reporting alternative is to use Form 8949, where you report the sale of capital assets. If you use this form you would report $266 per unit and offset it with a corresponding 9.5 percent of your Bitcoin cost basis. By transferring a proportional amount of your basis from the original investment you will reduce your taxable income. This reporting method also has the advantage of allowing you to offset the capital gains with capital losses and carryovers. Beware however, that this method is less likely to be accepted by the IRS.
What to Do if You Sold Your Bitcoin Cash
Selling some or all of your Bitcoin Cash means you’ll need to treat it as a capital gain and report it via Form 8949. If you sell any Bitcoin Cash, make sure you report your receipt as “Other Income” per above, since this will then serve as your basis for offsetting your sale. Your selling price would be whatever value you sold it for, less any commissions or fees on the sale. Also, remember that for your 2017 tax return filing, your holding period would start from the split date of Aug. 1, and therefore be short-term.
Why Cryptocurrency Splits Are Not Tax-Free Exchanges
Some will argue that cryptocurrency splits such as Bitcoin Cash qualify as tax-free exchanges; however, this view is unlikely to hold up to IRS scrutiny since none of the corporate reorganization non-recognition events under Section 368 apply. Bitcoin Cash is economically different from Bitcoin, and therefore should be viewed as a new category of financial instrument.
Beware the IRS
Over the past several years, many investors sold cryptocurrencies, including Bitcoin, but did not report any taxable income from the transactions, while others used Section 1031 like-kind exchange laws to postpone taxation. The IRS is none too pleased by all of this and is taking action.
The IRS estimates that hundreds of thousands of U.S. taxpayers failed to report cryptocurrency income sales over the past few years. Combined with the recent meteoric rise in prices, the IRS is hungry for the potential to collect billions in interest, penalties and back taxes.
Recently for example, the IRS summoned a large cryptocurrency exchange (Coinbase) to hand over its customer lists. Subsequently, they reached an agreement to disclose only transactions in excess of $20,000; however, it is clear from this case that the IRS is going to get aggressive on the matter.
Cryptocurrency investors need to be aware of the evolving nature of taxation in this space in order to avoid IRS problems. This is an emerging issue and one on which you can bet the IRS is not going to stand down. As always, consult a tax professional for details about your particular situation.
Traditionally, retirement was short and peaceful. People worked jobs that were hard on the body—such as farming, manufacturing, trades work or railroad work. If you made it to retirement, you were relieved to have the chance to wind down your days in restful repose.
That all changed in the latter part of the 20th century. Retirees began to take advantage of affordable travel opportunities enabled by cars that could drive great distances and highways that could accommodate them, as well as regional intracontinental airlines. In the 1980s, exercise became a popular pastime and retirees could be found at fitness clubs, aerobics classes and racquetball courts. There was a sweet spot in time when retirement was short enough not to outlive savings and retirees were healthy enough to enjoy an active leisure life.
But a lot of things have changed over the past 30 years. More jobs are automated and life expectancy rates, especially for people who reach age 65, are longer than ever. By middle age, it is common to have developed one or more chronic conditions, making a long retirement a less-than-healthy one. Furthermore, we experienced a pretty severe recession and slow economic recovery, when many pre-retirees had to dig into their savings just to stay above water.
Another area that has changed is the transition from employer-sponsored pensions to 401(k) plans. This has fostered a different way of looking at retirement. Back when many workers had pensions, all they had to do was accumulate enough credits and they could retire with a guaranteed stream of income for life. That gave people something to look forward to. Now, with self-directed retirement plans, workers know that the longer they work the more they can save and the longer their investments have time to grow—which actually creates an incentive to work longer. Another reason people tend to work until at least age 65 is so they don’t have to pay for their own healthcare insurance, for which premiums have grown exponentially over the past 15 years.
In addition, the longer we earn an income the longer we can delay drawing Social Security benefits. Once you start taking a benefit, that payout level remains permanent throughout your life. However, the longer you wait, the higher the payout. In fact, people who delay to age 70 can take advantage of Delayed Retirement Credits, which increase their level of payout 5.5 percent to 8 percent a year past full retirement age.
Now that people are living longer, many are healthy enough to continue working longer as well. Plenty of employees want to continue working not only for the money, but for social interaction and intellectual engagement. When retirement was 10 years or less, that seemed like enough time to wind down and relax. But with today’s workers facing 30 years or more in retirement, the prospect of not having a regular place to go, people to see, and work to do for a few decades isn’t quite as appealing.
However, what if you hate your job and can’t imagine staying on past traditional retirement age? A recent study found that people who changed jobs in their 50s were more likely to work longer. In some scenarios, using well-earned experience can translate into a more rewarding job opportunity. Consider that even if you don’t earn more money, a lateral move could still yield higher financial rewards if you enjoy the new job and want to continue working there indefinitely.
Some retirees decide to go back to work because they’ve had a bit of fun but find they miss the day-to-day routine of work and having a broader network of interpersonal relationships. In fact, they often find their experience and expertise was sorely missed, and in some situations, are more valued by their colleagues. This might not happen in all cases, but the lure of renewed friendships, professional appreciation and additional income offer compelling reasons to come out of retirement.z
