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Hal Zemel, CPA, J.D., LL.M.

Hal Zemel, CPA, J.D., LL.M.
Hal Zemel, a Tax Principal at Berdon LLP, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.
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TAX TALK: Retirement Plan Contributions Remain Largely Unchanged

Posted by Hal Zemel, CPA, J.D., LL.M. on Jan 3, 2017 11:00:00 AM

Since the 2017 inflation rate remained low, most of the retirement plan contribution limits are unchanged. Only the limit for contributions to defined contribution plans has increased by $1,000.

Type of limit

2017 limit

Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans

$18,000

Contributions to defined contribution plans

$54,000

Contributions to SIMPLEs

$12,500

Contributions to IRAs

$5,500

Catch-up contributions to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans

$6,000

Catch-up contributions to SIMPLEs

$3,000

Catch-up contributions to IRAs

$1,000

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Topics: TAX TALK

TAX TALK: IRS Reduces the Optional Standard Mileage Rate for 2017

Posted by Hal Zemel, CPA, J.D., LL.M. on Dec 19, 2016 12:50:00 PM

Due to lower gas prices, the IRS has lowered the optional standard mileage rates for 2017. The IRS has issued the 2017 optional standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

Beginning January 1, 2017 standard mileage rates for the use of a car, van, pickup or panel truck will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016;
  • 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016;
  • 14 cents per mile driven in service of charitable organizations.

The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged.

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Topics: TAX TALK

TAX TALK: Deducting Year-end Bonuses

Posted by Hal Zemel, CPA, J.D., LL.M. on Dec 12, 2016 11:00:00 AM

Accrual-basis taxpayers may be allowed to deduct bonuses employees have earned during a tax year if the bonuses are paid within 2½ months after the end of that year (by March 15 for a calendar-year company). Cash-basis taxpayers must deduct bonuses in the year they’re paid, regardless of when they’re earned. Even for accrual-basis taxpayers, however, the 2½ month rule isn’t automatic. Employers can deduct bonuses in the year they’re earned only if the employer’s bonus liability is fixed by the end of the year.

The all-events test

For accrual-basis taxpayers, the IRS determines when a liability (such as a bonus) has been incurred — and, therefore, is deductible — by applying the “all-events test.” Under this test, a liability is deductible when:

  1. All events have occurred that establish the taxpayer’s liability,
  2. The amount of the liability can be determined with reasonable accuracy, and
  3. Economic performance has occurred.

Generally, the third requirement isn’t an issue; it’s satisfied when an employee performs the services required to earn a bonus. But the first two requirements can delay your tax deduction until the year of payment, depending on how you design your bonus plan.

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Topics: TAX TALK

TAX TALK: Buy Business Assets Now for 2016 Tax Benefits

Posted by Hal Zemel, CPA, J.D., LL.M. on Dec 5, 2016 12:50:00 PM

You still have time to benefit from two valuable tax breaks for purchasing equipment. It is important that you act quickly, however, because the benefits require that you place the assets in service by the end of the year.

Section 179 deduction

Normally, the IRS requires you to depreciate capital expenditures for equipment over a five- to seven- year period (for some equipment, a longer life may be required). For qualified assets, the Sec. 179 deduction allows businesses to deduct as depreciation up to 100% of the cost of the assets in the year purchased. Sec. 179 can be used for fixed assets, such as equipment, software and leasehold improvements. Beginning in 2016, air conditioning and heating units were added to the list.

The maximum Sec. 179 deduction for 2016 is $500,000. The deduction begins to phase-out dollar-for-dollar for 2016 when total asset acquisitions for the tax year exceed $2,010,000.

Starting in 2010, qualified real property improvements were included as eligible Sec. 179 property, and in 2016, that provision was made permanent. You can claim a Sec. 179 deduction of up to $500,000 for certain qualified real property improvement costs.

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Topics: TAX TALK

TAX TALK: Basic Rules of Deferred Compensation under Nonqualified Plans

Posted by Hal Zemel, CPA, J.D., LL.M. on Nov 28, 2016 7:00:00 AM

Nonqualified deferred compensation (NQDC) plans are unsecured promises by the employer to pay executives at a specific time or upon a specific event in the future for services currently performed. Unlike qualified plans, such as 401(k) s, NQDC plans:

  • Can discriminate in favor of highly compensated employees;
  • Have no limit on the amount of compensation that the executive can defer;
  • Defer the employer’s compensation deduction to the year the employee is taxed on the income; and
  • Allow the employer’s general creditors to reach any amounts set-aside to fund the future payments.

Failure to understand the complex rules applicable to NQDC plans can cause substantial tax consequences.

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Topics: TAX TALK

TAX TALK: Highlights of Trump’s Tax Proposals for Individuals

Posted by Hal Zemel, CPA, J.D., LL.M. on Nov 21, 2016 12:50:00 PM

With the election of Donald Trump as President of the United States and the Republicans retaining control of both chambers of Congress, an overhaul of the U.S. tax code next year is likely. President-elect Trump’s comprehensive tax reform plan, released earlier this year, would greatly affect many individuals. The plan proposes to:

  • Reduce the number of income tax brackets from seven to three, with rates on ordinary income of 12%, 25%, and 33%. (These new brackets reduce rates for many taxpayers but result in a tax hike for certain single filers.)
  • Align the 0%, 15%, and 20% long-term capital gains and qualified dividends rates with the new brackets.
  • Eliminate the head of household filing status (which could cause rates to go up for some of these filers, who would have to file as singles).
  • Repeal the net investment income tax.
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Topics: TAX TALK

TAX TALK: Beware of Income-Based Limits on Itemized Deductions and Personal Exemptions

Posted by Hal Zemel, CPA, J.D., LL.M. on Nov 14, 2016 7:00:00 AM

Many tax breaks are reduced or eliminated for higher-income taxpayers. Two of particular note are the itemized deduction reduction and the personal exemption phaseout.

Income thresholds
If your adjusted gross income (AGI) exceeds the applicable threshold, most of your itemized deductions will be reduced by 3% of the AGI amount that exceeds the threshold (not to exceed 80% of otherwise allowable deductions). For 2016, the thresholds are $259,400 (single), $285,350 (head of household), $311,300 (married filing jointly) and $155,650 (married filing separately). The limitation doesn’t apply to deductions for medical expenses, investment interest, or casualty, theft or wagering losses.

Exceeding the applicable AGI threshold also could cause your personal exemptions to be reduced or even eliminated. The personal exemption phaseout reduces exemptions by 2% for each $2,500 (or portion thereof) by which a taxpayer’s AGI exceeds the applicable threshold (2% for each $1,250 for married taxpayers filing separately).

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Topics: TAX TALK

TAX TALK: More Tax Considerations for the Self-Employed (Part II)

Posted by Hal Zemel, CPA, J.D., LL.M. on Nov 7, 2016 7:00:00 AM

In addition to the previously discussed deductions available to the self-employed, there are at least two other considerations regarding timing and quarterly payments that the self-employed individual should consider.

If your wages or self-employment income varies significantly from year to year or you are close to the threshold for triggering the additional Medicare tax, income timing strategies may help you avoid or minimize it.

For example, as a self-employed taxpayer, you may have flexibility on when you pay expenses or invoice customers (see previous blog: Timing Your Business Income and Expenses). If your self-employment income is from a part-time activity and you are also an employee elsewhere, perhaps you can time with your employer when you receive a bonus.

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Topics: TAX TALK

TAX TALK: Tax Considerations for the Self-Employed (Part I)

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 31, 2016 7:00:00 AM

Self-employed individuals must pay close attention to IRS regulations concerning income tax requirements and filing.

All earned income is subject to income tax as well as Social Security and Medicare taxes (“employment taxes”).  The 12.4% Social Security tax applies only up to the Social Security wage base of $118,500 for 2016. All earned income is subject to the 2.9% Medicare tax (there is no cap). The employment taxes are split equally between the employee and the employer. However, if you are self-employed, you pay both the employee and employer portions of the employment taxes on your net self-employment income, which is the self-employment tax.

Higher-income taxpayers are also subject to an additional 0.9% Medicare tax. It applies to FICA wages and net self-employment income exceeding $200,000 per year ($250,000 for married filing jointly and $125,000 for married filing separately).

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Topics: TAX TALK

TAX TALK: Timing Your Business Income and Expenses

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 24, 2016 7:00:00 AM

By deferring net taxable income to a later year, you may be able to reduce your current tax liability. You can reduce your taxable income in one of two ways: You can either defer income to next year or you can accelerate deductions into the current year. Here are two timing strategies that can help your business defer net taxable income:

  1. Defer income to next year. If your business uses the cash method of accounting, you can defer billing for your products or services. Or, if you use the accrual method, you can delay shipping products or delivering services.
  2. Accelerate deductible expenses into the current year. If you’re a cash-basis taxpayer, you may pay vendor invoices before Dec. 31, so you can deduct it this year rather than next. Both cash- and accrual-basis taxpayers can charge expenses on a credit card and deduct them in the year charged, regardless of when the credit card bill is paid.

These strategies work best for transactions occurring near year-end, since the deferral of income will also result in your delaying the receipt of cash receipts until the next calendar year and the prepayment of expenses accelerating cash payments into the current calendar year.

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Topics: TAX TALK

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