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tip
of the month
Partner with your Insurance Company
Find out how well your company delivers services
and responds to you before you have a claim.
Here are a few good ways to do this:
• Discuss questions about the insurance
application and the information requested
with your underwriter or agent. This will
help you avoid errors, which could result in a
higher premium. A phone call is an easy way to
correct errors before they occur.
• Understand what the appropriate policy limits
would be for your firm. Excessively high limits
can create a bigger bulls eye for claimants and
potentially lengthen the claims process. But
also you need enough in limits to protect your
firm in the event of a severe or frivolous claim.
A specialized underwriter, agent or account
executive will work with you to create a policy
that addresses your specific risk areas.
• Utilize your insurance company’s loss
prevention and risk management services,
which are crucial in avoiding or minimizing
problems. The better the services, the better
your firm will be at improving its practices
and clientele. A good partnership with your
company will go a long way toward the
continuing success of your firm.
For more information and guidance about CPA
firm insurance issues, visit camico.com.
Tax Reform Legislation: Highlights
On Nov. 2, the House Ways and Means Committee released
draft tax reform legislation, Tax Cuts and Jobs Act (H.R. 1),
which could potentially make the biggest changes to the tax
code since 1986, including new tax rates, a lower limit on the
deductibility of home mortgage interest, the repeal of most
deductions for individuals and full expensing of depreciable
assets by businesses. The following are some bill highlights:
• Reducing the number of individual income tax brackets
from seven to four: 12 percent, 25 percent, 35 percent and
39.6 percent. Taxpayers with income greater than $500,000
and married taxpayers filing jointly with income greater than
$1 million would enter the 39.6 percent rate. The standard
deductions would increase to $12,200 for single taxpayers
and $24,400 for married couples filing jointly.
• A repeal of many deductions, including alimony, medical
expenses and tax preparation fees, as well as eliminates the
deduction for state and local income or sales taxes, except in
the case of taxes paid in carrying out a trade or business or
producing income.
• Estate taxes would be eliminated by 2023 (the step-up in
basis for inherited property would remain), with the current
exclusion amount doubling until that time.
• A repeal of the Alternative Minimum Tax.
• A portion of net income (generally 30 percent) from
passthrough entities would be taxed at a maximum rate
of 25 percent, instead of at ordinary individual income tax
rates. More restrictive rules are proposed for professional
service firms—including taxpayers in the fields of law,
accounting, consulting, engineering, financial services or
performing arts.
• For businesses, a flat 20 percent rate would replace the
four current corporate rates, with a 25 percent rate for
personal service corporations and a repeal of the corporate
AMT. The cash accounting method would be expanded for
corporations, with a new limit of $25 million of average
gross receipts.
• A repeal of many credits, including those for adoption, plugin
electric vehicles and individuals over age 65 and who are
disabled. One notable exception is the child tax credit, which
increases to $1,600 and is expanded.
• An increase in the child tax credit to $1,600.
•
The mortgage interest deduction on existing mortgages
would remain the same; for residences purchased after
Nov. 2, 2017, the limit on deductibility would be reduced to
$500,000 from the current $1.1 million.
6 C ALIFORNIA CPA DECEMBER 2017
• Requiring U.S. companies with foreign subsidiaries to
include previously untaxed offshore earnings and profits
(E&P) in income. The portion of E&P attributable to cash
or cash equivalents would be taxed at a 12 percent rate;
the remainder would be taxed at a 5 percent rate. U.S.
shareholders can elect to pay the tax liability over eight
years in equal annual installments of 12.5 percent of the
total tax due.
For more information on the bill, visit calcpa.org/taxreform.
– Information courtesy of the AICPA.
www.calcpa.org
CAMICO Insurance
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