Tax Brackets The number of brackets remains at seven. And the percentage charged at each of these brackets has been reduced, with the notable exception of the lowest bracket of 10% which remains unchanged. The majority of our clients who were previously in the 15% or 25% tax bracket will now find themselves in the 12% or 22% bracket respectively. You may have already noticed the impact of these new brackets when your employer adjusted your withholdings earlier in the year, increasing your take home pay. TO BE AWARE OF UNDER THE 2018 TAX REFORM At the end of last year President Trump signed the Tax Cuts and Jobs Act into law, signaling the largest tax reform in over three decades. We have received a lot of questions recently on how this law will affect our clients. With the tax season now behind us it is time to address how these changes will impact you in 2018. There are many aspects to this law and there is no "one size fits all" explanation for how it will impact our clients. Some of our clients will win and some of them will lose under the new law. With that in mind we have outlined the five changes that we believe are most relevant to you. Personal exemptions historically represented a $4,000 reduction in taxable income for each dependent listed on the tax return. Under the new law these exemptions have been eliminated. However, to help mitigate the loss of these exemptions, the law also made changes to the child tax credit and has added a new credit for non-child dependents. Starting in 2018 the Child Tax Credit has been doubled to $2,000 per child, $1,400 of which is refundable. The phaseout threshold for the Child Tax Credit has also been drastically increased to $200,000 for single filers and $400,000 for joint filers. This means that most taxpayers who were previously prevented from claiming the full Child Tax Credit will now be able to claim the entire credit. Additionally, the law has introduced a new $500 credit for any dependents who are over the age of 17, allowing parents to continue to receive a tax benefit for children in college or other adults residing in their home. SUMMARY There are many moving parts in the new tax law, with a lot of them working to balance one another out. Some of our clients will see a decrease in their tax bill while others will see it increase. Overall, we do not expect any of our clients to see drastic changes, good or bad, with the new code. We expect the majority of our clients to see an increase or decrease in their tax bill of less than $1,000. If you would like to know how the tax reform will directly impact you, please call our office. UNREIMBURSED EMPLOYEE EXPENSES The change that could have the greatest impact on our public servant clients is the elimination of the deduction for unreimbursed employee expenses. As the law currently stands, employees will no longer be able to deduct their union dues, work uniforms, tools, or any other expenses related to their employment. The only exception to this is the special $250 allowance for teacher's expenses which remains unaffected. There is currently a bill in congress which seeks to reinstate the deduction for unreimbursed expenses. The "Tax Fairness for Workers Act" would not only bring back the itemized deduction for employee expenses but would go a step further and allow for specific deductions to be taken above-the-line, meaning they would not be subject to many of the limitations that currently restrict their use. It remains to be seen how far this bill will go but we strongly recommend that you keep track of your job expenses until a decision is reached. If the bill passes, this will cause job related expenses to have a greater impact on your tax return. ITEMIZED DEDUCTIONS AND THE STANDARD DEDUCTION One of the most promoted aspects of the new tax law is the nearly doubling of the standard deduction to $12,000 for single, $18,000 for head of household, and $24,000 for joint filers. While the standard deduction amounts are receiving significant increases, many of the allowed itemized deductions are either being handicapped or removed entirely: The deductions for state and local income taxes as well as property taxes are capped at a combined total of $10,000. This means that homeowners in high income-tax states are likely to lose a portion of this former deduction. The deduction for home mortgage interest remains but is limited to mortgages that do not exceed $750,00, down from the previous threshold of $1,000,000. All miscellaneous itemized deductions (including tax preparation fees, casualty losses and all unreimbursed employee expenses) have been eliminated entirely. The increased standard deduction amounts combined with the additional restrictions on itemized deductions increases the chances of the standard deduction being more beneficial than itemizing deductions in 2018. 1 ABOVE THE LINE DEDUCTIONS Above-the-line deductions are more beneficial than itemized deductions as they have far fewer restrictions. The new tax law retains many of these deductions including educator expenses, student loan interest, and contributions to Health Savings Accounts. Two deductions that have been changed are expenses for a job-related move, and alimony payments. Starting in 2018 expenses for a job-related move will only be deductible by active members of the military. Starting in 2019 alimony payments will no longer be deductible. However, this will only apply to divorce agreements settled after the start of 2019. This means that alimony payments from divorce agreements that were already in place prior to 2019 will continue to be deductible. FIVE CHANGES 3 PERSONAL EXEMPTIONS AND THE CHILD TAX CREDIT 2 4 5 At Monotelo, we exist to make a difference with meaningful and actionable financial solutions that positively impact our client's lives. If you have questions about what steps you can be taking to prepare for your retirement years, call us at 800-961-0298

SMALL BUSINESS TIPS DEDUCT YOUR MEDICAL EXPENSES BY HIRING YOUR SPOUSE What Business Types Qualify? This option is available to you if you operate your business as one of the following: A sole proprietorship A partnership (provided your spouse is not a partner in the business) An LLC taxed as a sole proprietorship or partnership A real estate rental business A farm business If your business is organized as an S-Corporation than this option will not be available to you. While insurance premiums and out-of-pocket medical expenses can be deducted as itemized deductions , the limitations placed on those deductions make it difficult to realize any actual benefit. However, if you operate your own business, you may be able to get around these limitations by hiring your spouse and paying them through tax-free fringe benefits, including reimbursing them for medical expenses and insurance premiums. How Does This Work? Hire Your Spouse: Your spouse needs to be operating as a real employee for the business, performing services at your direction that benefit the business. Your spouse should not be a co-owner of the business and should not have any title in the business assets or control over the business bank account. To substantiate their role as an employee your spouse should keep a timesheet to document the hours that they worked and the tasks that they completed. Don’t Pay Cash Wages: If you pay your spouse cash wages for working in your business you are simply moving money around without creating any tax savings. In fact, you are likely increasing your tax burden by converting qualified business income to non-qualified wage income. Instead of paying them cash wages you can compensate them through tax-free employee benefits which can provide you with a sizeable tax break and avoid the need to file payroll tax returns. Establish a Medical Reimbursement Arrangement: A medical reimbursement arrangement allows you to compensate your spouse for their work by reimbursing out-of-pocket medical expenses and health insurance premiums. This provides the business with tax-deductible compensation expenses and tax-free income to your spouse. If your spouse is your only employee, you can easily establish a 105-HRA plan to reimburse them for their medical expenses by signing an agreement between yourself and your spouse. If you have additional employees you will need to establish an ICHRA plan, which has additional requirements. If you have multiple employees and want to establish a medical reimbursement arrangement, please reach out to us for more guidance. To qualify the insurance premiums for reimbursement your spouse should purchase a health insurance plan in their name that covers the entire family (including you). Then you, as the employer, reimburse your spouse for the premiums. The reimbursement arrangement can also be used to reimburse your spouse for any out-of-pocket expenses that the insurance doesn’t cover, including deductibles, copays, and prescriptions for your entire family. Pay a Reasonable Amount: To make sure the employee benefits you pay your spouse can withstand IRS scrutiny, make sure that the amount they are compensated is reasonable for the work that they are performing. A good rule of thumb is not to compensate your spouse more than you would compensate someone else for those same services. Consider Other Fringe Benefits: While health insurance and medical expenses are typically the largest items you can provide to your spouse as employee benefits, there are other benefits that you may also be able to provide: Education. You can reimburse your spouse for job-related education expenses Life Insurance. You can provide your employees with up to $50,000 in group term life insurance coverage Working Condition Fringe Benefits. You can reimburse your spouse employee for expenses that help them do their job. For example, you can reimburse the cost of a cell phone they use for work and they are not required to track how much of their phone use is for business. Summary Hiring your spouse to work for your business can provide some meaningful tax benefits by allowing you to deduct personal expenses that otherwise would not be deductible. To qualify for these deductions, you need to follow some simple guidelines: make sure your spouse is operating as your bona fide employee establish a formal medical reimbursement arrangement compensate fairly for the services provided If you would like assistance establishing a medical reimbursement plan for your spouse or other employees, please give us a call.

What requirements do you need to meet to avoid capital gains taxes on the sale of your home? TAX IMPLICATIONS of Selling Your Home Save as PDF Read more articles Share Ownership Test: You need to have owned the home for at least 24 months out of the last 5 years leading up to the date of the sale. If you are married, only one spouse needs to own the property. Residence Test: You must have used the property as your primary residence for at least 24 months out of the last 5 years. These 24 months are not required to be consecutive. If you are married each spouse must meet this test to qualify for the full exclusion. Lookback Test: You cannot have taken the exclusion for the sale of another property in the last 2 years. If you meet these three requirements, then you can exclude up to $250,000 ($500,000 if married and filing a joint return) in capital gains from the sale of your home. If you have capital gains in excess of the exclusion amount you will be required to pay taxes on the excess amount. Partial Exclusion If you do not meet the above requirements you may still be eligible for a partial exclusion if you sold the house for one of the following reasons: Work-Related Move: If you or your spouse get a job that is at least 50 miles further from your house than your previous job you can qualify for the partial exemption. Health-Related Move: If you move to obtain medical treatment for yourself or a family member, or to provide medical or personal care for a family member suffering from a disease or injury. Unforeseeable Events: You or your spouse: Dies Gets divorced or legally separated Gives birth to two or more children from the same pregnancy Becomes eligible for unemployment compensation Becomes unable to pay basic living expenses for the household due to a change in employment status. If one of these special circumstances applies to you then you can receive a partial exemption based on the percentage of the 2-year residence requirement that you meet. Example: One year after purchasing your home, you or your spouse gives birth to twins and you decide to sell your home to find a larger home. Even though you do not meet the 2-year ownership and residence requirements, you can receive a partial exclusion of the capital gains since the move was due to the birth of twins. In this case your exclusion would be one half of $500,000 since you resided in the house for 1 of the 2 required years. Exclusion of Gains on Home Sale Before any large financial decision, you should ask yourself “What are the tax implications of this?” Failing to consider the tax impact on some decisions can lead to an unpleasant surprise come tax season. Fortunately, the sale of your personal home is a financial event where you can generally expect favorable tax treatment. That is because the tax code allows you to exclude up to $500,000 in capital gains when selling your primary residence, provided you meet certain requirements. So what are capital gains? Capital gains are any profits from selling personal property above the original purchase price. If you purchase a painting for $10,000 and later sell it for $15,000 you have capital gains of $5,000, which can be taxed at rates up to 20%. However, when you sell your primary residence you can avoid the capital gains tax on the sale if you meet the following three requirements: Summary Our homes are one of the few assets that we own that have the potential to appreciate. If you own your home and live in it for more than 2 years before you sell it, you can exclude up to $500,000 of the gains from your taxable income. If you do not meet the 2-year requirement you may still be eligible for a partial exclusion if one of the provided special circumstances applies to you. Read more articles Share Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

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By failing to plan ahead, you will find that most of your medical expenses are worthless on your tax return. With a little planning, you can prevent this. If you fail to plan ahead, you will struggle to claim your medical expenses as an itemized deduction when April 15th arrives. You will lose the ability to deduct the bulk of these expenses because they need to surpass 10% of your Adjusted Gross Income (AGI) to be usable as an itemized deduction . This means that taxpayers who make $100,000 during the year will not be able to deduct the first $10,000 in medical expenses. That handicap essentially means you will not be able to deduct any medical expenses, unless you incur heavy medical bills in a single year. And if you are paying AMT (the Alternative Minimum Tax) - don't even think about it. When it comes time to pay your income tax bill, most Americans want to pay the lowest amount possible. One of the ways taxpayers seek to do this is by increasing the number of deductions they take on their tax return each year. So it's not surprising that one of the common questions we receive from our clients is whether or not they can deduct their medical expenses. While the simple answer is "yes," the reality for most taxpayers is "no." However, with a little planning, that answer can be "yes." If you fail to plan ahead, you will struggle to claim your medical expenses as an itemized deduction when April 15th arrives. You will lose the ability to deduct the bulk of these expenses because they need to surpass 10% of your Adjusted Gross Income (AGI) to be usable as an itemized deduction . This means that taxpayers who make $100,000 during the year will not be able to deduct the first $10,000 in medical expenses. That handicap essentially means you will not be able to deduct any medical expenses, unless you incur heavy medical bills in a single year. And if you are paying AMT (the Alternative Minimum Tax) - don't even think about it. The best way to counteract this nasty little piece of the tax code is to set up an HSA (Health Savings Account) and contribute to it each year. When you contribute to an HSA you get the privilege of deducting the amount of your contributions from your income and you bypass the 10% threshold. You can do this even if you don't choose to itemize your deductions! And as an added bonus (do we sound like an infomercial?) - the money you put into your HSA, as well as the earnings of the account, can be taken out tax free as long as they are used for qualified medical expenses. While you cannot pay your health insurance premiums with funds from an HSA, you can pay most other medical expenses. Additionally, once you turn 65 you can use the HSA to pay your Medicare or other healthcare premiums. Requirements for an HSA In order to qualify for an HSA you must have a high-deductible health plan - defined as a healthcare plan with: 1 An annual deductible of at least $1,350 for individual coverage or at least $2,700 for family coverage. 2 Maximum annual out-of-pocket expenses of $6,750 for individual coverage and $13,500 for family coverage. Once you have your HSA set up you can contribute up to $3,500 per year for individual coverage and $7,000 for family coverage. If you are over the age of 55 you can contribute an additional $1,000 annually. Save as PDF Read More Articles Share Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us. Avoiding the 10% Threshold for Medical Expenses How do you setup an HSA? If your employer offers a high-deductible health plan, they should also give you the ability to contribute to an HSA. You can also open an account on your own through a qualified HSA provider, such as a bank or insurance company (go to www.hsasearch.com for a list of qualified HSA providers). What happens if you don't plan ahead? So what is the solution? Key Takeaways If you don't plan ahead and contribute to a Health Savings Account then you will find that most, if not all, of your medical expenses will be ineligible for a deduction due to the 10% threshold that must be met before deducting medical expenses. By setting up and contributing to a Health Savings Account you can deduct your full contribution to the account and have the flexibility to pay your medical bills with tax-free withdrawals from the account.

September 2019 SMALL BUSINESS TIPS Quarterly: Oct 17 How Will Your Real-Estate Sale Be Taxed? When you sell real estate property other than your primary residence, the tax implications of that sale depend on whether it qualifies as dealer or investor property. Each of these classifications is taxed differently and carries its own benefits and drawbacks. Dealer Property: Property you hold for sale to customers in the ordinary course of a trade or business is considered Dealer Property. House flipping is a common example of dealer property because you purchase the property with the intention of fixing it up and selling it for a profit. Profits on dealer sales are taxed at your ordinary income rate which can be as high as 37 percent and are also subject to the self-employment tax of 15.3 percent. Dealer sales cannot be used in 1031 exchanges to defer taxes by reinvesting in another property. One advantage of dealer sales is that any losses on a property are considered ordinary business losses which can be fully deducted in the year of the sale as opposed to capital losses on investment property which are limited to $3,000 per year. Investor Property: Property that is held to produce income or long-term appreciation is considered Investor Property. Rental properties are the most common type of investor properties. Profits on investor sales are taxed at capital gains rates which are capped at 20 percent if you own the property for more than one year. Investor property sales are also not subject to the 15.3 percent self-employment tax. The cost of investor properties can also be depreciated over the useful life of the property, although the depreciated cost will need to be recaptured at the time of the sale. Investor properties qualify for 1031 exchanges which allow you to reinvest the profits from the property into a similar property and defer the taxes on the sale until you sell the new property. One disadvantage of investor property sales is that the deduction for capital losses is capped at $3,000 per year unless you have capital gains from another sale to offset the losses. Generally speaking, if you sell a property at a gain you will receive favorable tax treatment if the property is classified as investor property and if you sell a property at a loss you will receive favorable tax treatment if it is classified as dealer property. Classifying Your Property Sale Identifying the correct property classification is not as simple as determining which will give you better tax treatment. In classifying your property sale the IRS will look at multiple attributes of the individual sale and your overall situation: Intent: One key area the IRS will look at when classifying your property sale is your original intent in purchasing the property. If you purchase a property with the intent of fixing it up and reselling for a profit, then that property is considered dealer property. If you buy a property with the intention of fixing it up to operate as a rental property it will be considered investment property. Even if you sell the property before collecting any rent you can classify it as an investment property if you can demonstrate that your original intent was for it to be a rental property. Documenting your intent at the point of purchase is critical to defend your position before the IRS. Holding period: Generally speaking, the less time you own a property before selling it the greater the chance the IRS will classify the property as a dealer property. Frequency of property sales: If you are regularly buying and selling properties you are likely to be classified as a dealer. “Making a Living:” If a significant portion of your income is made through buying and selling properties you are more likely to be classified as a dealer. These attributes are examples of what the IRS looks at to classify your property sale but not a definitive list. There is no standard formula to follow and you need to evaluate the characteristics of each property sale on its own. Understanding the distinction between a dealer and investor property can help you avoid surprises in tax season. Proper planning and record-keeping can also ensure that you receive the best tax treatment available to you when you sell your property. For help determining how your property sale should be classified, please reach out to us. Previous Article

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At Monotelo, we use our unique knowledge of the job-related expenses of our public-servant clients to reduce what they are paying in taxes. Learn More Getting started with Monotelo Advisors As a firefighter, we know that there are unique deductions available to you that most accountants and tax software fail to capture. That is why we start all of our firefighter clients with a no-cost, no-obligation review of their last three tax returns. We have found that we can typically recover $800-$1,500 per year. To get started with your tax review you can upload your 2015, 2016, and 2017 tax returns using the link below. Upload Your 2015-2017 Tax Returns

We are living in interesting times. While it is important to review the retirement and tax planning aspects of your situation on a regular basis, it is equally imperative to review the risk side of your balance sheet as well. In times like today, unaddressed risks can result in a negative impact on an otherwise healthy financial plan. That is why we created our Crisis Checklis t, designed to help families navigate a rapidly changing world. We realize some of the topics are somewhat personal, but our role as advisors is to make sure you have the proper plans in place, both in good times and in times of crisis. More than just identifying potential risks, this checklist will help you create a roadmap of areas exposed to risks that may need to be addressed. We do not want you, your family, or your financial future to be exposed to unexpected risk due to the uncertainty caused by the COVID pandemic. If you would like us to help you assess and mitigate your financial risks please complete the checklist and then schedule a complimentary 20-minute strategy call with us. We look forward to speaking with you soon, Read more articles FINANCIAL PLANNING CHECKLIST Failing to order your affairs to minimize your tax burden could cost you significant money - so don't wait to take action. If you have additional questions or need some planning help, please reach out to us.

Monotelo Advisors Inc FinCEN Beneficial Ownership Engagement Letter Heading 1 Thank you for choosing Monotelo to assist you with the preparation and filing of your FINCEN Beneficial Ownership Information (BOI) report. This engagement letter outlines the scope of our services, your responsibilities, and our commitment to providing you with accurate and timely compliance solutions. By agreeing to this letter, you authorize Monotelo to gather, prepare, and submit the required information on your behalf to ensure compliance with FINCEN regulations. As part of this process, please ensure that you upload a valid driver's license for each shareholder and manager. This step is essential for verifying their identities and completing the report. Additionally, all fields marked with a red asterisk (*) are required and must be completed to proceed. Once all necessary documents are uploaded and required fields are filled out, a blue "FINISH" button will appear, indicating that you are ready to submit the report. We look forward to working with you and ensuring that your reporting obligations are met with precision and professionalism.

Monotelo Advisors Inc Tax Planning Engagement Letter Heading 1 Thank you for choosing Monotelo to assist you with your tax planning needs. Tax planning is a strategic approach to managing finances that aims to minimize tax liability and maximize savings. By organizing income, expenses, investments, and expenditures efficiently, individuals and businesses can take full advantage of tax benefits, deductions, and credits. Effective tax planning not only reduces the amount of taxes owed but also contributes to better financial health by freeing up resources for savings, investments, and future growth. This engagement letter outlines the scope of our services, your responsibilities, and our commitment to providing you with accurate and timely solutions. By agreeing to this letter, you authorize Monotelo to prepare a tax plan that will help to reduce your short-term and lifetime tax liability. We look forward to working with you to ensure that you retain more of your hard-earned money.

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