Protecting Your Financial and Tax Records
- Disaster Plans – Both businesses and individuals should have a disaster plan. It is helpful to review this disaster plan each year. Your plan may reflect the type of risk in your location. With a hurricane or flood, you may have a day or more of notice. If you are victimized by a tornado, there is often no notice and no time to take protective actions.
- Electronic Documents – You should have a secure version of all bank statements, tax returns and insurance policies in a safe location. You may want to scan your documents and save them as PDFs. You can then upload these PDFs and other electronic documents to an external hard drive, a USB drive or burn them to a CD or DVD.
- Records of Valuables – If you have art, a collection, jewelry or other valuable personal items, it is helpful to have photos or videos of these valuable items. These records will be useful if you later must file an insurance claim or report a loss for tax purposes.
- IRS Assistance – The IRS has a disaster office, which you can contact by calling 866-562-5227. It may be able to assist you with copies of tax returns or forms W-2. You also may request a tax return with IRS Form 4506. Another option is the Get Transcript link on www.IRS.gov.
Senate Reviews Health Care Taxes
Following the House of Representatives passage of the American Health Care Act (AHCA), the Senate Finance Committee now is focused on healthcare. One important issue is repeal of the Affordable Care Act (ACA) taxes. The AHCA generally repeals healthcare taxes.
Senate Finance Committee Chairman Orrin Hatch (R-UT) suggested a preference for repeal of ACA taxes. On the other hand, he noted that any new healthcare bill will still require funding to pay for credits for lower-income persons. Hatch stated, “I am not so sure where they would get the money” to cover these low income credits.
Sen. Susan Collins (R-ME) echoed that concern. She stated, “I do not see how you can repeal all the pay-fors that were used to finance the ACA and still meet the goal of providing health insurance coverage for people who truly need assistance.”
Sen. John Thune (R-SD) expressed the hope that the Senate will be able to find funding for low-income healthcare credits. He noted, “What we are looking at doing is trying to shorten the tail of the tax credit.” He suggested that the credit will focus primarily on low-income persons rather than individuals with higher incomes.
Senate Finance Committee Ranking Member Ron Wyden (D-OR) opposed repeal of the ACA taxes. Wyden stated, “There is not a shred of actual hard evidence that the Senate Republican Caucus is objecting to nearly $1 trillion in tax breaks for the wealthy and special interests by cutting more than $800 billion out of Medicaid. I understand why they are doing it, because what they want to do is, in effect, get these tax breaks for the wealthy in a health bill so they can have it teed up to get more tax breaks for the wealthy in a tax bill.”
Sen. Wyden and Sen. Patty Murray (D-WA) sent a letter with similar thoughts to Sen. Hatch and Health, Education, Labor and Pension Committee Chairman Lamar Alexander (R-TN). The letter stated, “Furthermore, we urge you to abandon the disastrous Trumpcare Bill. Stop trying to repeal ACA and sabotaging the health system, and work with Democrats on bipartisan legislation to make healthcare more affordable, expand coverage, and strengthen quality of care for patients and families.”
Editor’s Note: These comments by Senators suggest that a Senate bill will have larger low-income healthcare credits than the AHCA. If this is the case, the Senate is likely to seek methods for funding those higher levels of credits.
White House Support for BAT?
On May 4, President Trump spoke with an international media publication. When he was asked about tax reform and the 20% border adjustable tax (BAT) favored by House Ways and Means Committee Chairman Kevin Brady (R-TX), he responded, “It is not really what I am considering.”
President Trump then compared the BAT with a value added tax (VAT). He stated that several of the properties owned by the Trump organization were in nations with a VAT. He suggested, “The concept of VAT I really like.” However, he noted the VAT is not politically acceptable and therefore not likely to be included in White House plans.
Trump was also asked about the business interest deduction. He expressed an openness to retaining the deduction. He emphasized that this was a topic that was still under discussion.
President Trump also accepted the concept of a 10% tax on repatriated funds. U.S. companies currently have approximately $3 trillion overseas, so repatriation with a 10% tax has the potential to produce $300 billion in revenue.
On May 11, a White House aide spoke with national media and indicated the BAT is still on the negotiating table. While the White House does not support the current House version of BAT, a modified bill may be an option.
Editor’s Note: The House plan still envisions a revenue-neutral bill. The BAT is projected to raise $1 trillion over a decade. Similarly, repeal of business interest deductions also raises approximately $1 trillion. These would seem to be essential if the bill is going to be revenue-neutral. If the White House rejects both options, it will be difficult to pass tax reform.
Applicable Federal Rate of 2.4% for May — Rev. Rul. 2017-11; 2017-19 IRB 1 (17 Apr 2017)
The IRS has announced the Applicable Federal Rate (AFR) for May of 2017. The AFR under Section 7520 for the month of May will be 2.4%. The rates for April of 2.6% or March of 2.4% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2017, pooled income funds in existence less than three tax years must use a 1.2% deemed rate of return. Federal rates are available by clicking here.