WHAT ARE THE IRS 2018 PERSONAL INCOME TAX RATES?

2018 IRS Income Tax Rate Table and IRS Filing Status

Tax Rate Unmarried Individuals Heads of Households Married Filing Jointly and Surviving Spouses Married Filing Separately
10% $0 – $9,525 $0 – $13,600 $0 – $19,050 $0 – $9,525
12% $9,525 – $38,700 $13,600 – $51,800 $19,050 – $77,400 $9,525 – $38,700
22% $38,700 – $82,500 $51,800 – $82,500 $77,400 – $165,000 $38,700 – $82,500
24% $82,500 – $157,500 $82,500 – $157,500 $165,000 – $315,000 $82,500 – $157,500
32% $157,500 – $200,000 $157,500 – $200,000 $315,000 – $400,000 $157,500 – $200,000
35% $200,000 – $500,000 $200,000 – $500,000 $400,000 – $600,000 $200,000 – $300,000
37% over $500,000 over $500,000 over $600,000 over $300,000

2018 IRS Standard Deduction by IRS Filing Status

Unmarried Individuals Heads of Households Married Filing Jointly and Surviving Spouses Married Filing Separately
$12,000 $18,000 $24,400 $12,000

California’s Sales Tax will Decrease January 1, 2017

 

On January 1, 2017, the statewide sales and use tax rate will decrease one quarter of one percent (0.25%).  The decrease in the statewide rate is effective for all cities and counties in California.  Sales tax is comprised of the statewide sales and use tax rate of 7.25 percent plus any district tax.  For most of Orange County California the the new sales tax is 7.75 percent down from 8.00 percent.

Most of Orange County is a full 1.00 percent or more less than Los Angeles County.

Why is the sales and use tax rate decreasing?  Proposition 30, The Schools and Local Public Safety Protection Act of 2012 that was approved by California voters in November 2012 to temporarily increase the sales and use tax by 0.25 percent expires December 31, 2016.

A retailer who continues to charge and collect the higher statewide sales and use tax rate after January 1, 2017, must either refund the excess tax collected to their customer or pay the excess tax to the Board of Equalization (BOE).  You may not keep it.

List of Orange County Sales Tax Rates as of January 1, 2017.

Counties Rate Location
  Orange   7.750 %   Aliso Viejo*
  Orange   7.750 %   Anaheim*
  Orange   7.750 %   Atwood
  Orange   7.750 %   Balboa (Newport Beach*)
  Orange   7.750 %   Balboa Island (Newport Beach*)
  Orange   7.750 %   Ballroad
  Orange   7.750 %   Bolsa
  Orange   7.750 %   Brea*
  Orange   7.750 %   Brookhurst Center
  Orange   7.750 %   Buena Park*
  Orange   7.750 %   Capistrano Beach (Dana Point*)
  Orange   7.750 %   Corona Del Mar (Newport Beach*)
  Orange   7.750 %   Costa Mesa*
  Orange   7.750 %   Coto De Caza
  Orange   7.750 %   Cowan Heights
  Orange   7.750 %   Dana Point*
  Orange   7.750 %   East Irvine (Irvine*)
  Orange   7.750 %   El Modena
  Orange   7.750 %   El Toro (Lake Forest*)
  Orange   7.750 %   El Toro M.C.A.S.
  Orange   7.750 %   Foothill Ranch
  Orange   7.750 %   Fountain Valley*
  Orange   7.750 %   Fullerton*
  Orange   7.750 %   Garden Grove*
  Orange   7.750 %   Huntington
  Orange   7.750 %   Huntington Beach*
  Orange   7.750 %   Irvine*
  Orange   8.250 %   La Habra*
  Orange   7.750 %   La Palma*
  Orange   7.750 %   Ladera Ranch
  Orange   7.750 %   Laguna Beach*
  Orange   7.750 %   Laguna Hills*
  Orange   7.750 %   Laguna Niguel*
  Orange   7.750 %   Laguna Woods*
  Orange   7.750 %   Lake Forest*
  Orange   7.750 %   Leisure World
  Orange   7.750 %   Leisure World (Seal Beach*)
  Orange   7.750 %   Los Alamitos*
  Orange   7.750 %   Mariner
  Orange   7.750 %   Midway City
  Orange   7.750 %   Mission Viejo*
  Orange   7.750 %   Monarch Beach (Dana Point*)
  Orange   7.750 %   Newport Beach*
  Orange   7.750 %   Orange*
  Orange   7.750 %   Placentia*
  Orange   7.750 %   Rancho Santa Margarita*
  Orange   7.750 %   Rossmoor
  Orange   7.750 %   San Clemente*
  Orange   7.750 %   San Juan Capistrano*
  Orange   7.750 %   San Juan Plaza (San Juan Capistrano*)
  Orange   7.750 %   Santa Ana*
  Orange   7.750 %   Seal Beach*
  Orange   7.750 %   Silverado Canyon
  Orange   7.750 %   South Laguna (Laguna Beach*)
  Orange   8.750 %   Stanton*
  Orange   7.750 %   Sunset Beach
  Orange   7.750 %   Surfside (Seal Beach*)
  Orange   7.750 %   Trabuco Canyon
  Orange   7.750 %   Tustin*
  Orange   7.750 %   University Park (Irvine*)
  Orange   7.750 %   Villa Park*
  Orange   7.750 %   Westminster*
  Orange   7.750 %   Yorba Linda*
  Orange   7.750 %   Cypress*

(Note:*” next to city indicates incorporated city)
Obtained from California State Board of Equalization website January 4, 2017.

To go to California State Board of Equalization website and check tax rates for different cities or counties click here.

Minimum CA LLC Franchise Tax

LLCs classified as disregarded entities or as partnerships are subject to an $800 annual tax.  The tax applies if the LLC does business in California or if the SOS accepts their Articles of Organization (LLC-1) or Application for Registration as a Foreign Limited Liability Company (LLC-5). LLCs organized or registered in California are subject to the annual tax even if they conduct no business in California.

Total Income Min Tax + Add’l Fee
$0 – 249,999 $800 $0
$250,000 – 499,999 $800 $900
$500,000 – 999,999 $800 $2,500
$1,000,000 – 4,999,999 $800 $6,000
$5,000,000+ $800 $11,790

The above chart is applicable for tax years 2001 to the present

LLCs are subject to an annual fee based on their total income “from all sources derived from or attributable to California”.  LLCs must estimate and pay the annual fee by the 15th day of the 6th month, of the current tax year. If the LLCs tax year ends prior to the 15th day of the 6th month, the LLC must pay the fee by the due date for filing its Form 568, Limited Liability See Company Return of income

Physical Presence Test to Qualify for Foreign Earned Income Exclusion

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. To Qualify for the Foreign Earned Income Exclusion you must meet either the Bona Fide Residence Test or the Physical Presence Test.

PHYSICAL PRESENCE TEST

To meet the Physical Presence Test you must be physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. The 330 days do not have to be consecutive. Any U.S. citizen or resident alien can use the physical presence test to qualify for the exclusions and the deduction.

The physical presence test is based only on how long you stay in a foreign country or countries. This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad.

330 full days. Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period. You can count days you spent abroad for any reason. You do not have to be in a foreign country only for employment purposes. You can be on vacation.

You do not meet the physical presence test if illness, family problems, a vacation, or your employer’s orders cause you to be present for less than the required amount of time.

Exception. You can be physically present in a foreign country or countries for less than 330 full days and still meet the physical presence test if you are required to leave a country because of war or civil unrest.

Full day. A full day is a period of 24 consecutive hours, beginning at midnight.

Travel. When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters does not count toward the 330-day total.

Example. You leave the United States for France by air on June 10. You arrive in France at 9:00 a.m. on June 11. Your first full day of physical presence in France is June 12.

Passing over foreign country. If, in traveling from the United States to a foreign country, you pass over a foreign country before midnight of the day you leave, the first day you can count toward the 330-day total is the day following the day you leave the United States.

Example. You leave the United States by air at 9:30 a.m. on June 10 to travel to Kenya. You pass over western Africa at 11:00 p.m. on June 10 and arrive in Kenya at 12:30 a.m. on June 11. Your first full day in a foreign country is June 11.

Change of location. You can move about from one place to another in a foreign country or to another foreign country without losing full days. If any part of your travel is not within any foreign country and takes less than 24 hours, you are considered to be in a foreign country during that part of travel.

Example 1. You leave Ireland by air at 11:00 p.m. on July 6 and arrive in Sweden at 5:00 a.m. on July 7. Your trip takes less than 24 hours and you lose no full days.

Example 2. You leave Norway by ship at 10:00 p.m. on July 6 and arrive in Portugal at 6:00 a.m. on July 8. Since your travel is not within a foreign country or countries and the trip takes more than 24 hours, you lose as full days July 6, 7, and 8. If you remain in Portugal, your next full day in a foreign country is July 9.

In United States while in transit. If you are in transit between two points outside the United States and are physically present in the United States for less than 24 hours, you are not treated as present in the United States during the transit. You are treated as traveling over areas not within any foreign country.

Travel Log.  You must track all of your travel to and from the US and all foreign countries.  This will be needed to file your tax return.

Required Travel Log
Required Travel Log

Source:  IRS Publication 54

Am I Required to File IRS Form 1099 or Other Information Return?

Am I Required to File Form 1099 or Other Information Returns?
Here’s the short answer:
You are not required to file information return(s) including 1099’s if any of the following situations apply:

  • You are not engaged in a trade or business
  • You are engaged in a trade or business and the payment was made to another business that is incorporated, or the sum of all payments made to the person or unincorporated business is less than $600 in one tax year (unless the recipient is an attorney or law firm, see specific instructions for 1099-MISC for further details)

If You MUST File Form 1099’s, Here’s What You Need To Do:

  • Call Steve Mangione CPA your Orange County Accounting and Tax specialist.
  • We’ll answer your questions
  • We’ll print out the forms for you to mail to your vendors, (or we can mail)
  • We’ll e-file the Form 1096 Annual Summary and Transmittal of U.S. Information Returns to the IRS

What Is the Due Date for Mailing 1099’s to Vendors?

  • Form 1099-MISC is due to recipient on last day of January when you are reporting nonemployee compensation payments in box 7
  • Last day of February
  • File Form 1098 on paper by February 28, 2017, or March 31, 2017, if filing
    electronically through the FIRE system

NOTE: If the regular due date falls on a Saturday, Sunday, or legal holiday, file by the next business day.  A business day is any day that is not a Saturday, Sunday, or legal holiday.

If You Want To Create and Send Form 1099’s To Your Vendors and the Information Return Form 1096 To the IRS Yourself, Here’s What You Need To Do:

  1. Order the forms directly from the IRS for free. IRS Order Form
  2. Buy the forms from your local office supply store.  You’ll be able to print form on your inkjet or laser printer.  Some forms comes with free templates
    (TIP – Buy early they sell out early January)
  3. Request each vendor fill out IRS Form W-9
  4. Make sure you only include vendors that you paid over $600
  5. Certain vendors require you put the dollar amount in a different box and there are multiple 1099’s i.e. 1099-MISC | 1099-INT or the most common for trades and businesses
  6. You do not have to send a 1099 to corporations
  7. Fill out Form 1096 and mail to the IRS

 

 

What Records Should I Keep to Support My Tax Return?

Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out.

How Long Should I Keep My Tax Records?

It is important to keep these documents because they support the entries in your books and on your tax return.

Gross receipts – Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts. Documents that show gross receipts include the following.

  • Cash register tapes.
  • Bank deposit slips.
  • Receipt books.
  • Invoices.
  • Credit card charge slips.
  • Forms 1099-MISC.

Inventory – Inventory is any item you buy and resell to customers. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Your supporting documents should show the amount paid and that the amount was for inventory. Documents reporting the cost of inventory include the following.

  • Canceled checks.
  • Cash register tape receipts.
  • Credit card sales slips.
  • Invoices.

Expenses – Expenses are the costs you incur (other than the cost of inventory) to carry on your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include the following.

  • Canceled checks.
  • Cash register tapes.
  • Account statements.
  • Credit card sales slips.

What States Have No State Income Tax?

States with no individual income tax as of 2014 are:

  • Alaska
  • Florida
  • Nevada
  • New Hampshire
  • South Dakota
  • Texas
  • Wyoming

States with no corporate income tax as of 2014 are:

  • Nevada
  • South Dakota
  • Wyoming

Can I Claim the Foreign Earned Income Exclusion?

What is the Foreign Earned INcome Exclusion?

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income some or all of your foreign earnings.  The amount allowed to be excluded is adjusted annually for inflation.

How do I qualify for the Exclusion?

Requirements to claim the foreign earned income exclusion are; 1) Your tax home must be in a foreign country.  2) You must have foreign earned income.  3)  a)You must be a US citizen who is a Bona Fide Residence for an uninterrupted period that includes an entire tax year, b) or a US resident alien who is a citizen or national of a country which the United States has an income tax treaty and who is a Bona Fide Resident uninterrupted for an entire year, c) or US citizen or US resident alient who is physically present for at least 330 full days during any period of 12 consecutive months and pass the Physical Presence Test.

Your tax home is your regular or principal place of business, employment, or post of duty, regardless of where you maintain your family residence. If you do not have a regular or principal place of business because of the nature of your trade or business, your tax home is your regular place of abode (the place where you regularly live). You are not considered to have a tax home in a foreign country for any period during which your abode is in the United States. However, if you are temporarily present in the United States, or you maintain a dwelling in the United States (whether or not that dwelling is used by your spouse and dependents), it does not necessarily mean that your abode is in the United States during that time. There are special rules, so be sure to speak to your tax professional or CPA.

HOW MUCH IS THE EXCLUSION?

The amount is adjusted annually for inflation. The most recent tax years are listed below:

For the Tax Year Max Exclusion
2016 $101,300
2015 $100,800
2014 $99,200
2013 $97,600
2012 $95,100
2011 $92,900
2010 $91,500

Does it Exclude Self Employment

No, you must still figure and pay self employment taxes on earned income from 1099’s, K-1’s, partnership’s, self employment, etc. .

Do the Exclusions apply for state taxes

Obviously for states where there is no state income tax no state tax is due. Each state has there own set of rules and some have harder standards to meet the exclusion. Be sure to speak to your tax professional or CPA.

Source:  IRS Publication 54

2014 Traditional & Roth IRA Contribution Limits

2014 Traditional & Roth IRA Contribution Limits

  Standard Limit Catch-up Limit (Age 50 and older)
Traditional $5,500 $6,500
Roth $5,500 $6,500

2014 SEP Contribution Limits

Simplified Employee Pension (SEP) Contribution Limits

Max Dollar Allocation Max Considered Compensation
$52,000 $260,000

The maximum amount that can be contributed to a simplified pension plan (SEP) plan is 25% of an employee’s compensation, which is capped at a maximum as indicated above.

2014 SIMPLE IRA Contribution Limits

Savings Incentive Match Plan for Employees (SIMPLE) IRA Contributions and Catch Up Provisions

Standard Limit Catch-up Limit (Age 50 and older)
$12,000 $14,500

Employers are generally required to match each employee’s salary reduction contributions, on a dollar-for-dollar basis, up to 3% of the employee’s compensation.

2014 401(k) and Contribution Limits

401(k) Plans: Employee Salary Deferral Limits

Standard Limit Catch-up Limit (Age 50 and older)
$17,500 $23,000

Employers can contribute up to $33,500.

What is the IRS Estimated Tax | Quarterly Tax?

Who must pay Estimated Taxes?

If you have Taxable Income and you have not paid any taxes or you did not have enough taxes taken out of your pay check from your employer, you are required to estimate and pay your taxes to the IRS quarterly. You may be subject to a penalty if you do not pay quarterly tax payments. Generally, most taxpayers will avoid a penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if you have paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules, so be sure to speak to your tax professional or CPA.

Estimated Taxes

Estimated taxes are a method to pay income tax and self-employment tax, as well as other taxes during the year in addition to any withholding you have taken out of your paycheck from your employer. If you do not have an employer, you must pay tax four times a year called Quarterly Estimated Tax Payments

Estimated quarterly tax payments may be due if you have taxable income from:

  • Self-employment
  • Investments
  • Interest
  • Dividends
  • Alimony
  • Rent
  • Lottery winnings
  • Gambling winnings
  • Gains from the sale of assets
  • Other income

When should I pay my Quarterly estimated taxes?

The tax year is divided into four payment periods:

For the Period Due Date:
January 1 to March 31 April 15
April 1 to May 31 June 15
June 1 to August 31 September 15
September 1 to December 31 January 15 of next year

Saturday, Sunday, Holiday Rule

If the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that is not a Saturday, Sunday, or a holiday.

What if my company has a fiscal tax year?

If your tax year does not start on January 1, your payment due dates are:

  • The 15th day of the 4th month of your fiscal year
  • The 15th day of the 6th month of your fiscal year
  • The 15th day of the 9th month of your fiscal year
  • The 15th day of the 1st month after the end of your fiscal year

You do not have to make the last payment listed above if you file your income tax return by the last day of the first month after the end of your fiscal year and pay all the tax you owe with your return.

How do I Pay my Estimated Taxes?

  1. If you have a credit from last years tax return, that counts as a payment.
  2. Send in your payment with a payment voucher Form 1040-ES
  3. Make an online electronic payment. To pay your taxes online or for more information, click HERE.