Under the Small Business and Job Protection Act in 1996, the 529 was originally established as a pre-paid tuition program. Two years later, the IRS created guidelines for tuition plans under Code Section 529.
For over a decade, parents have been using the 529 to help their children pay for higher education through pre-paid tuition programs and investment savings plans. Any money in the savings account, including investment growth, used to pay for tuition, fees, room and board, books, and any other required school supplies, is distributed tax-free.
Now, under the Tax Cuts and Jobs Act of 2017, the 529 has been expanded to cover qualifying expenses for private, public, and religious K-12 schools. Unlike the 529 for college though, the 529 for K-12 students cannot be spent on supplies, fees, or activities — it can only be spent on school tuition.
The yearly withdrawal limit per child is $10,000, and any parent that overdraws that limit will face a 10% penalty on top of the taxes they must pay on the amount of investment growth. Overdrawing may also mean having to pay back any state tax deductions received when originally depositing money into the 529.
Though less than half of U.S. states have agreed to adopt this new rule, Maryland is one of the states in which parents can start funding a 529 savings plan for their children in K-12 schools.
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For more information about the changes that the Tax Cut and Jobs Act of 2017 is bringing about, tune into last week’s Facebook Live below to learn about what was discussed during the NASBA Eastern Regional Conference in Orlando, FL.
Seems like every couple years MD attempts to implement a sales tax on services. Prior to the last attempt several years ago the tax on services idea was nixed as they discovered many government contractors would simply move their business to N. Va or another “business friendly” state. The powers that be determined MD would lose not only business and the taxes that go along but many employees.
The legislators have no clue what it takes to run a small business. Evidence the HSA debacle. Now insurance companies are requesting premium increases of close to 20% (the two that will sell on the exchange that is). The thought is most receive subsidies, which many of us do not qualify for, meaning those paying the unsubsidized cost are the “beasts of burden”. I wrote to several legislators last year after my premium went from ~1800 to ~2600. The responses I received were enlightening – those who represent us are clueless. The only elected official whose response indicated an understanding the dilemma we and many of our small business clients face was Gail Bates.
I too am unable to keep up with the increases which means I’m losing money. Politics aside depending on who becomes the next governor, I am seriously considering a move – working remotely gives one more options.
On last week’s edition, we welcomed Rich Gottfried, Second Vice President of the Society and Chair of the Young Professionals Committee, to discuss the all-important topic of Financial Literacy. We then discussed how the Maryland legislature is attempting to offer college financial savings options for Maryland taxpayers. Read on for a closer look at the segments on this week’s recap!
FINANCIAL LITERACY
April is Financial Literacy Month—a very important topic that the MSATP community is actively trying to promote at levels of the education system. We have been collaborating with other agencies, including the Maryland Coalition for Financial Literacy and the Maryland Council on Economic Education, to lay a solid financial foundation for the next generation of competent, confident and financially literate adults. For more information on what financial literacy entails, check out this great resource published by the Maryland Council on Economic Education! (http://www.econed.org/2018/02/1487/)
While financial literacy is a required course offering in some Maryland public schools, it is only a mandatory graduation requirement in Baltimore City Schools and seven other county school systems.
MSATP is working with the Maryland Financial Literacy Coalition to offer our member volunteers as guest speakers that meet with teachers from elementary to high school grade levels and deliver presentations to their classes that focus on financial literacy topics the teacher and member volunteer have selected. Ann Elliot, a long-time member of the Society and a current volunteer with the MSATP Financial Literacy Team, submitted some of her thoughts after a recent visit to Eleanor Roosevelt High School: “In December, I presented at Northwestern High School in Hyattsville…I started with how I’d begun working the accounting field, how I’d begun working for myself, and how long I’d been doing it. I discussed various career opportunities, the pros and cons of accounting and tax work, including hours, sitting at a desk for long hours, multi-tasking, and working within various organizations versus working for yourself.” Ann also offered some suggestions on how the financial literacy initiative might be improved in the future: “One take away would be that I think it might be helpful to have someone available for one on one meetings, questions and discussions with students that are sincerely interested. If during the career day programs, they allowed for some of us to be available to meet, the interested students may have an opportunity to drill down to their interests. In the classroom environment, it didn’t allow for more directed discussions without most of the class being excluded.”
MARYLAND’S NEW COLLEGE SAVING PROGRAMS
Maryland offers two great Sec 529 plans—the Maryland Prepaid College Trust and the Maryland College Investment Plan—that allow parents to save early for their children’s education while enjoying tax savings on their Maryland income tax return.
The State of Maryland and Maryland 529 are now teaming up to start a new initiative called The Save4College State Contribution Program. The plan, managed by T. Rowe Price, gives eligible taxpayers the opportunity to receive a one-time matching amount of $250. These funds can be applied to tuition at any U.S. college, technical or trade school and even international schools. To be eligible for the program, your tax client must meet the following criteria:
Must be a Maryland resident
The previous tax year’s taxable income must not exceed $112,500 as an individual or $175,000 jointly
Must open a Maryland College Investment Plan or have opened an account after December 31, 2016
Submit an application for the Save4College State Contribution Program prior to June 1, 2018 and make a minimum contribution to the investment plan between July 1 and November 1.
Additionally, the MSA Scholarship Foundation offers scholarship opportunities for Maryland accounting students who are Maryland Residents. In 2017, the Foundation awarded 17 scholarships totaling $30,500. The Foundation will begin reviewing applications for the 2018-2019 Academic Year on June 15, 2018. If you know a current accounting student who might benefit, make sure you have them complete the on-line application by June 15, 2018! (www.msascholarships.org)
It’s time for you to check out MSATP’s latest Facebook Live Stream installment! Sandy kicks off the episode with an insightful analysis of a few impactful financial consumer bills the legislature passed during its latest session. We then had the pleasure to hear from MSATP President, William Feehley, CPA, as he reflected on an eventful tax season and provided tax professionals with some useful resources to take their practice to the next level. Donny Lala capped off our presentation by introducing the USB Payment Processing Refer a Client Program, an innovative tool to help your clients increase their profit margin. Here’s a quick recap of this week’s video—make sure to check out the video as well!
This bill removed the requirement that you must be at least 25 years-old to apply for Earned Income Tax Credit for Individuals Without Qualifying Children. The bill will come in effect on July 1, 2018.
HB 710 / SB 202:
Many consumers have put a freeze on their financial information due to the recent rise in security breaches. Previously, these individuals would be charged up to $5.00 to freeze their accounts and an additional $5.00 to re-open them. This bill prohibits creditors from charging these fees and permits consumers to request a freeze at any time without cause. This bill will come in effect on October 1, 2018. To place or lift a credit freeze, please contact the three major credit bureaus: www.experian.com, www.equifax.com, www.transunion.com
HB 17 / SB 69:
In 2016, Maryland required higher education institutions to send an annual letter to individuals who are receiving financial aid detailing their accrued debt. HB 17 / SB 69 expands the requirement to for-profit institutions.
REVIEWING ANOTHER EVENTFUL TAX SEASON
WITH MSATP PRESIDENT, WILLIAM FEEHLEY
Bill started off his reflections of the past tax season by pointing out the impact of the Tax Cuts and Jobs Act that was passed on December 22, 2017 and how 85-90% of his clients will benefit from the new legislation. While in Bill’s opinion, Maryland did relatively little else to assist taxpayers this session by only granting a small increase in the standard deduction and not allowing taxpayers to itemize on the Maryland returns if they opted for the standard deduction on federal, he was quick to express his gratitude that the IRS stepped in to resolve the HSA issue we covered in last week’s episode.
Bill then turned to the future—offering some useful insight and resources on how those in the tax industry can get ahead before the next tax season rolls around. For tax professionals specializing in multistate returns, Bill anticipates the Supreme Court will hear more cases concerning this issue in the near future that could impact income and sales tax matters. To make sure you’re ready to handle any changes, Bill advises developing additional checklists or implement additional staff training now, rather than waiting until November or December when it will likely be too late for these efforts to be useful to your business.
Bill reminded those that missed out on the new tax law class in January that they can attend the class in Ocean City at the upcoming annual convention. Thompson Reuters published a handy guide of the tax act and developed sample letters tax professionals can use to inform clients and potentially general additional billable hours over the summer. There will also be an all-inclusive Solo & Small Firm event in Bethany Beach this November that includes hotel, meals and entertainment—in addition to outstanding educational opportunities, a chance to get to know fellow practitioners and gain some valuable insights into how others run their practices.
ADD VALUE TO CLIENTELE WITH USB PAYMENT PROCESSING
We were excited to welcome Donny Lala of USP Payment Processing to introduce their quick and easy client referral program. USB Payment Processing has been helping accountants and tax professional grow their businesses since 1996. They can help you assist clients in identifying revenue savings that they can then invest back into their business—adding value to your tax practice and drive revenue to your clients. USB’s Refer a Client Program allows accounting and tax professionals to request a free payment processing quote in 3 easy steps:
STEP 1:
Email a minimum of 2 months of your client’s current payment processing statements to: statements@usbne.com, with the subject line: “MSATP Client Proposal Request.” Be sure to remove the name and address of the client to safeguard their privacy.
STEP 2:
Include in your email the industry type (retail, restaurant, car dealership, etc.) and tell USB how the client is currently processing (i.e., online terminal, swiped via mobile device).
STEP 3:
Allow 2-3 hours for the USB specialists to complete your client’s no-cost analysis.
Are you tech savvy? Good news—you can also apply online at: www.usbne.com/MSATP
Be sure to stay tuned for this week’s MSATP Facebook Live Episode on Thursday, April 26th at 9 AM —we’ll be taking a look at how we’re working with young professionals and promoting financial literacy. Not a member of our private MSATP Members Facebook Group yet? Click HERE to join!
It’s our favorite time of the week once again—the MSATP team just dropped our third Facebook Livestream episode featuring an in-depth analysis of the latest happenings in the tax and financial world!
MSATP’s latest video features a dynamic duo of industry experts. First, Phyllis Burlage returns to break down a busy 2018 legislative schedule that could have a major impact for tax professionals. Then, Jerry Lotz, from Cost Segregation Services Incorporated (CSSI), introduces the concept of cost segregation—a method of re-classifying components and improvements of commercial buildings from real property to personal property to reduce taxable income and ramp up cash flow. Here’s a closer look at what MSATP’s third episode covered—make sure to watch the video to get the full experience!
LEGISLATIVE UPDATE
It’s been a busy start to 2018—there were 3,127 bills introduced during the Maryland legislative session spanning from January 10th to April 9th. Here are some key takeaways from all the recent activity:
TAX RELIEF:
It looks like the majority of MSATP’s clients will be paying higher Maryland taxes in the coming year. The Maryland legislature still needs to gauge exactly how much more revenue will be generated by the tax changes before they make further changes. Based on the available information, here’s what to expect for the tax year:
Anyone can elect to use the Standard Deduction
You must itemize on the Federal return to itemize on the Maryland return
The Standard deduction has been increased on the Individual $250 to a maximum of $2,250 AND Head of Household and Joint $500 to a max of $4,500. That’s an estimated $40 tax break for 58% of taxpayers!
WINNING TAXPAYERS:
Several classifications of Maryland taxpayers are getting substantial tax breaks thanks to the new legislation coming down the pipeline—including small businesses and investors. Here’s a quick break-down of who stands to benefit:
The subtraction for Military Retirement Income is $5,000 for retirees under 55 and $10,000 for retirees over 55
Corrections officers may subtract up to $15,000 of their retirement income
The Earned Income Credit has been expanded by eliminating the 25-year-old minimum age
Teachers will receive a $250 subtraction for unreimbursed school expenses
Small Business Credit for businesses with less than 15 employees who give paid sick and safe family leave to low paid employees receive a $500 credit
Investors in cyber security companies now qualify for a tax credit that previously was only available to the company
Individuals whose statewide original cost is less than $2,500 are exempt from personal property taxes
For estate taxes, the Maryland Unified Credit was increased to $5,000,000
Exemption to register as a tax preparer will not apply to employees of exempt tax preparation practitioners if the employee signs the return as the preparer
General contractors may now be held responsible for wage violations of a subcontractor
HEALTH INSURANCE:
On last week’s episode, we covered the HSA conundrum when it came to male reproductive coverage and the attempted legislative “fix” for the issue. The HSA “fix” for coverage of vasectomies passed and was approved by the Governor. Another “fix”—this time for Obamacare to prevent skyrocketing premiums also saw some movement. Maryland will take the $380 million federal tax break away from insurance companies and use the money to subsidize the catastrophic claims by those with insurance thru the Maryland Marketplace.
COST SEGREGATION—STAY COMPLIANT, SAVE MONEY
The rules have changed—there’s now a way to keep your clients compliant and get more loyal customers. Sound too good to be true? With cost segregation, you can do both! Cost segregation is a method of re-classifying components and improvements of your commercial building from real property to personal property. This process allows the assets to be depreciated on five, seven, or fifteen-year schedule instead of the traditional 27.5 or 39-year depreciation schedule of real property. This means your clients’ current taxable income will be substantially reduced while their cash flow increases.
The experienced professionals at Cost Segregations Services Incorporated will conduct a complimentary property analysis and review the potential savings with you and your client. The study will be fully completed in a short 4-6 weeks and will keep your clients happy and compliant! Who exactly qualifies and benefits from this game-changing tax approach? A wide variety of businesses and individuals are eligible for major tax savings, including owners and leaseholders of residential rental, multi-family and commercial properties. Contact Cost Segregation Services Incorporated today to learn how you can save your clients a substantial amount of their hard-earned money!
Be sure to stay tuned for this week’s MSATP Facebook Live stream on Thursday, April 19th at 9 AM to hear our Board President, William M. Feehley, wrap-up the 2017 tax season! Not a member of our private MSATP Members Facebook Group yet? Click HERE to join!
MSATP just rolled out another Facebook Live episode that’s an absolute can’t-miss discussion covering the latest issues in tax and finance! We welcomed back Phyllis Burlage to review a new IRS tax platform, break down an important Health Savings Accounts update, and preview some upcoming legislation. Here’s a quick recap of 3 takeaways we covered in last week’s Live video.
1. IRS LAUNCHES NEW TAX PLATFORM
MSATP has an established, long-time partnership with the Internal Revenue Service (IRS). We’re always excited to see the IRS make improvements to streamline the process for taxpayers—and their new platform does just that! In late March 2018, the IRS implemented a new initiative called “Paycheck Checkup,” encouraging taxpayers to verify their paycheck withholding in light of the recent tax law developments. Tax professionals need to work with clients to insure they don’t incur an underpayment penalty or an increased tax bill on 2018 earnings next year. To help with this process, the IRS has a few handy tools accessible on its website, like the Withholding Calculator.
2. IRS INTERVENES TO CORRECT CONTRACEPTIVE EQUITY ACT OVERSIGHTS
In 2016, the Maryland General Assembly passed The Contraceptive Equity Act intending to revolutionize birth control access by expanding coverages and lowering costs for all forms of contraception by state-regulated insurance plans. Unfortunately, the new law jeopardized Health Savings Accounts in several unintended ways:
The Contraceptive Equity Act requires that vasectomies have no co-pay or deductible
The Affordable Care Act states that only “preventative care” can be fully paid by HSA Qualified High Deductible Insurance Plans
The IRS classifies vasectomies as “elective surgery” NOT “preventative care”
The Maryland legislature attempted to resolve the issue by amending the law to exempt HSA High Deductible Plans from the vasectomy requirement; however, the 2018 insurance contracts were already approved. Luckily, the IRS stepped in. On March 5, 2018, the IRS issued Notice 2018-12, providing transition relief for male sterilization and HSA accounts. Page 6 of the Notice clarifies that: (1) Male sterilization is NOT preventative care; (2) Male sterilization must include cost sharing payments such as deductibles/co-pays; and (3) HDHP Policies that mandate payments for male sterilization without cost sharing are NOT qualified for HSA contributions –BUT—for 2018 and 2019, the IRS will allow HSA contributions even if the HDHP policy is not qualified due to the male sterilization requirement.
The Maryland legislature must still correct the male sterilization mandate for HDHP policies, but as long as the bill is passed and signed before 2020, Maryland citizens will be able to make fully deductible, qualified HSA contributions for 2018 and 2019. You can access Notice 2018-12 on the IRS website.
3. UPCOMING LEGISLATION PREVIEW
This week’s episode will cover legislation that passed in the 2018 session. While it’s still unclear as to how Maryland is handling the issue of standard and/or itemized deductions in 2018, there has been significant movement and discussion on this issue. Session concluded on April 9th at midnight.
Be sure to stay tuned for this week’s MSATP Facebook Live stream on Thursday, April 12th at 9 AM as we discuss how the state of Maryland is addressing the 2018 Tax Jobs and Tax Act for Maryland Taxpayers! Not a member of our private MSATP Members Facebook Group yet? Click HERE to join!
The Maryland Healthy Working Families Act, which took effect on February 11, 2018, requires employers with 15 or more employees provide their employees with 1 hour of paid sick and safe leave for every 30 hours worked. The Act also requires that employers with 14 or fewer employees provide their employees with unpaid sick and safe leave accruing at the same rate. Employees are entitled to carry over up to 40 hours (5 days) of accrued but unused leave in a given year, unless the employer awards the employee the full amount of earned sick and safe leave at the beginning of the year.
Sick and safe leave may be used by an employee:
To care for or treat the employee’s mental or physical illness, injury or condition;
To obtain preventive medical care for the employee or employee’s family member;
To care for a family member with a mental or physical illness, injury or condition;
For maternity or paternity leave; or
For absences due to domestic violence, sexual assault or stalking committed against the employee or the employee’s family member.
Employers must provide notice to their employees that they are entitled to sick and safe leave under the Act. One way to do this is to include the notice in an Employee Handbook. In addition, employers must provide notice to each employee of how much leave such employee has available when wages are paid.
Penalties for failure to comply with the Act include the full monetary value of unpaid earned sick and safe leave, any actual economic damages, up to 3 times the value of the employee’s hourly wage, and a civil penalty of up to $1,000.00 for each employee for whom the employer is not in compliance with the Act.
Employers may offer alternative paid leave policies which permit an employee to accrue and use leave under terms and conditions that are at least equivalent to the minimum requirements of the Act. Many employers choose to offer a flexible paid leave policy which combines sick and vacation leave (e.g. PTO). This type of flexible policy can be structured to satisfy the minimum requirements of the Act.
It is important to recognize that the Act does not preempt Montgomery County’s existing Earned Sick and Safe Leave Law. Montgomery County’s Law and the Maryland Healthy Working Families Act differ in several respects, including the treatment of employers with 5-14 employees. However, the Act does preempt Prince George’s County’s earned sick and safe leave law, Bill Number CB-87-2017.
We recommend that employers take immediate action to review their employment policies, and modify existing leave policies as necessary to comply with the Act, or develop new policies which satisfy the leave requirements under the Act, including requirements concerning notice to employees.
This article was written by Jordan G. Savitz, Attorney at Law at the law firm of Stein Sperling Bennett De Jong Driscoll PC. Mr. Savitz’s contact information is:
Great news! MSATP has launched our Facebook Live stream and the first installment is a must-see!
Our inaugural video featured consummate professional and former MSTAP President and CPR Committee Chair, Phyllis Burlage. Phyllis drew on her years of industry experience and thorough research to provide an insightful analysis of the newly-implemented Maryland Healthy Working Families Act. Here’s a quick and handy recap of 5 takeaways from Phyllis’ breakdown of the new legislation:
1. DOES THE ACT APPLY TO ME?
The Maryland Healthy Working Families Act applies to all employers regardless of number of employees, size or industry. This means employers must start maintaining Sick and Safe Leave accrual records as of the effective date of the bill and retain them for 3 years.
2. WHAT DOES THE ACT REQUIRE?
Every employer must have a policy that explains how the Sick and Safe Leave may be awarded and used. Employers have two options:
Award all 40 hours at the beginning of the year; OR
Employees may accrue 1 hour of leave for every 30 hours worked. Employees can only earn a maximum of 40 hours of leave per year, but any unused hours can be carried over to the next year. Employees may only accrue 64 leave hours at a given time.
The employer is required to provide each employee with a statement of used and available paid and unpaid leave with each pay period. The DLLR has provided Model Policies to help employers develop their own plan, check them out HERE.
3. WHICH EMPLOYEES DO I COUNT?
Employers whose main work location is in Maryland are required to cover employees whose primary work location is in Maryland, even if they are not state residents. If an employer has more than 14 employees, the leave must be paid. If an employer has less than 15 employees, the leave must be unpaid. The total number of employees is based on the previous year’s monthly average and encompasses all Full, Part-time, Temporary and Seasonal workers.
4. ARE THERE ANY EXEMPTIONS?
Although ALL employees count towards the monthly average, the following are exempt from coverage:
Employees who regularly work less than 12 hours per week;
Certain independent contractors;
Certain associate real estate brokers and salespersons;
Individuals younger than 18 before the beginning of the year;
Agricultural sector employees in certain agricultural operations as defined in §5-403 of the Courts and Judicial Proceedings Article of the Maryland Annotated Code;
Certain construction workers covered by a collective bargaining agreement;
Certain employees working on an as-needed basis in a health or human service industry; and,
Certain employees of a temporary services agency.
5. WHAT CAN EMPLOYEES USE THEIR LEAVE FOR?
Permissible uses for the leave include:
To care for or treat the employee’s mental or physical illness, injury or condition;
To obtain preventative medical care for the employee or the employee’s family member;
To care for a family member with a mental or physical illness, injury or condition;
For maternity or paternity leave; or
For an absence due to domestic violence, sexual assault, or stalking committed against the employee or the employee’s family member under certain circumstances.
Be sure to stay tuned for this week’s MSATP Facebook Live stream on Thursday, April 5th at 9 AM as we discuss HSA Legislation and the future of the program! Not a member of our private MSATP Members Facebook Group yet? Click HERE to join!
