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Austin, Texas Business Lawyer - Attorney And CPA | LLCs, Corporations, Contracts, And Litigation
 

Austin Tax Attorney And CPA
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"Last-Minute” Year-End 2020 Tax-Saving Moves For Individuals

 

There are only a few days left to go before the year ends, but here are some actions you may take before the end of the year to improve the your tax situation for 2020 and beyond.

 

Consider Biden's proposals. As the year comes to an end, it is hard to predict what, if anything, that Mr. Biden has proposed will become law and take effect in 2021. Many believe that taxes will have to be raised after the economic effects of the pandemic are tamed, to pay for the increased federal spending caused by the pandemic. But enacting tax legislation of any sort is likely to be a slow process and could very conceivably not affect 2021 taxes.

 

In any case, here are some of Mr. Biden's most noteworthy tax proposals:

 

Tax increase proposals

  • Raise the highest individual income tax rate to 39.6% from 37%.
  • Cap itemized deductions for the wealthiest Americans at 28%.
  • End favorable capital gains rates, including those rates on dividends, for anyone with income of more than $1 million.
  • Eliminate basis step-up at death, accompanied by taxing all appreciated investments at death.
  • Dropping the estate and gift tax exemption to its pre-Tax Cuts and Jobs Act level.

Tax decrease proposals.

  • $8,000 tax credit to help offset the costs of child care.
  • Exclusion for student loans that have been forgiven.
  • A refundable tax credit for low- and middle-income workers who contribute to IRAs and employer-provided retirement savings plans.
  • Catch-up contributions to retirement plans for caregivers of any age who leave the workforce for at least a year.
  • A $5,000 tax credit for family caregivers.

Solve underpayment of estimated tax/withheld tax issues.

Have an extra amount of withholding in order to solve an underpayment of estimated tax problem. Employees may discover that their prepayments of tax for 2020 have been too small because, for example, their estimate of income or deductions was off and they are underwithheld, or they failed to make estimated tax payments for unanticipated income, such as gains from sales of stock. Or they may have an underpayment of estimated tax because of the additional 0.9% Medicare tax and/or the 3.8% surtax on unearned income. To ward off or reduce an estimated tax underpayment penalty, employees can ask their employers to increase withholding for their last paycheck or paychecks to make up or reduce the deficiency. Employees can file a new Form W-4 or simply request that the employer withhold a flat amount of additional income tax. Increasing the final estimated tax payment for 2020 (due on Jan. 15, 2021) can cut or eliminate the penalty for a final-quarter underpayment only. It doesn't help with underpayments for preceding quarters. By contrast, tax withheld on wages can wipe out or reduce underpayments for previous quarters because, as a general rule, an equal part of the total withholding during the year is treated as having been paid on each quarterly estimated payment date.

 

Reference: See FTC 2d/FIN ¶ S-5248.

 

Take a retirement plan distribution in order to solve an underpayment of estimated tax problem. An individual can take an eligible rollover distribution from a qualified retirement plan before the end of 2020 if he or she is facing a penalty for underpayment of estimated tax and the extra withholding option described above is unavailable or won't sufficiently address the problem. Unless the taxpayer chooses no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. The taxpayer can also ask the payer to withhold an additional amount using Form W-4P. The taxpayer can then timely roll over the gross amount of the distribution, as increased by the amount of withheld tax, to a traditional IRA. No part of the distribution will be includible in income for 2020, but the withheld tax will be applied pro rata over the full 2020 tax year to reduce previous underpayments of estimated tax.

Reference: See FTC 2d/FIN ¶ S-5248.

 

Charitable donations.

Use IRAs to make charitable donations. Taxpayers who have reached age 70½ by the end of 2020, own IRAs, and are thinking of making a charitable gift should consider arranging for the gift to be made by way of a qualified charitable contribution, or QCD—a direct transfer from the IRA trustee to the charitable organization. Such a transfer (not to exceed $100,000 for all such transfers for 2020) will neither be included in gross income nor allowed as a deduction on the taxpayer's return. But, since such a distribution is not includible in gross income, it will not increase AGI for purposes of the phaseout of any deduction, exclusion, or tax credit that is limited or lost completely when AGI reaches certain specified level.

Taxpayers who have reached age 72 by Dec. 31 normally must take required minimum distributions (RMDs) from their IRAs or 401(k) plans (or other employer-sponsored retired plans) by Dec. 31. However, there is no such requirement for 2020.

Nonetheless, a QCD before Dec. 31, 2020 is still a good idea for retired taxpayers who don’t need all of their as-yet undistributed RMD for living expenses. That’s because a 2020 QCD will reduce the taxpayer's retirement account balance and thus reduce the amount of the RMD that must be withdrawn in future tax years.

 

Reference: See FTC 2d/FIN ¶ H-12253.2 et seq.

 

Charitable donation by non-itemzers. Non-itemizers can deduct up to $300 of cash charitable donations that they make in 2020. While the Consoidated Appropriations Act, 2021 (CAA, 2021), if signed into law, provides for an additional charitable deduction in 2021 for non-itemizers, to get the $300 deduction for 2020, the donation must be made before year-end 2020.

And, because CAA, 2021 does provide for a charitable deduction for non-itemizers for 2021, taxpayers should consider holding off in making contributions over $300 for 2020 and making those "excess contributions" in 2021.

 

Reference: See FTC 2d/FIN ¶ A-2630.

 

Higher limit on charitable contributions. In response to the Coronavirus (COVID-19) pandemic, the limit on charitable contributions of cash by an individual in 2020 was increased to 100% of the individual's contribution base. For previous years, the limit was 60% of the contribution base. The contribution base is a modification of adjusted gross income.

While this increased limit was extended to 2021 by the CAA, 2021, taxpayers should consider increasing 2020 contributions to take advantage of the increased limit.

 

Reference: See FTC 2d/FIN ¶ K-3672.4.

 

Retirement plans.

Establish a Keogh plan. A self-employed person who wants to contribute to a Keogh plan for 2020 must establish that plan before the end of 2020. If that is done, deductible contributions for 2020 can be made as late as the taxpayer's extended tax return due date for 2020.

 

Reference: See FTC 2d/FIN ¶ H-10017.

 

Relief with respect to withdrawal from retirement plans. A distribution from a qualified retirement plan is generally subject to a 10% additional tax unless the distribution meets an exception under Code Sec. 72(t).

2020 legislation provides that the Code Sec. 72(t) 10% additional tax does not apply to any coronavirus-related distribution, up to $100,000. A coronavirus-related distribution is any distribution made on or after January 1, 2020, and before December 31, 2020, from an eligible retirement plan, made to a qualified individual.

A qualified individual is an individual

 

  1. Who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention (CDC),
  2. Whose spouse or dependent (as defined in Code Sec. 152) is diagnosed with such virus or disease by such a test, or
  3. Who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury.

Other relief also applies to coronavirus-related distributions, including the ability to recognize income over a 3-tax-year period.

 

Reference: See FTC 2d/FIN ¶ H-11119.

 

Other.

Make year-end gifts. A person can give any other person up to $15,000 for 2020 without incurring any gift tax. The annual exclusion amount increases to $30,000 per donee if the donor's spouse consents to gift-splitting. Anyone who expects eventually to have estate tax liability and who can afford to make gifts to family members should do so. Besides avoiding transfer tax, annual exclusion gifts take future appreciation in the value of the gift property out of the donor's estate, and they shift the income tax obligation on the property's earnings to the donee who may be in a lower tax bracket (if not subject to the kiddie tax).

A gift by check to a noncharitable donee is considered to be a completed gift for gift and estate tax purposes on the earlier of:

  1. The date on which the donor has so parted with dominion and control under local law so as to leave the donor with no power to change its disposition, or
  2. The date on which the donee deposits the check (or cashes it against available funds of the donee) or presents the check for payment, if it is established that:
    • The check was paid by the drawee bank when first presented to the drawee bank for payment;
    • The donor intended to make a gift;
    • The donor was alive when the check was paid by the drawee bank;
    • Delivery of the check by the donor was unconditional; and
    • The check was deposited, cashed, or presented in the calendar year for which completed gift treatment is sought and within a reasonable time of issuance.

Thus, for example, a $15,000 gift check given to and deposited by a grandson on Dec. 31, 2020 is treated as a completed gift for 2020 even though the check doesn't clear until 2021 (assuming the donor is still alive when the check is paid by the drawee bank).

 

Reference: See FTC 2d/FIN ¶ Q-1916.

 

Watch out for the use-it-or-lose-it rule. Unused cafeteria plan amounts left over at the end of a plan year must generally be forfeited (use-it-or-lose-it rule). A cafeteria plan can provide an optional grace period immediately following the end of each plan year, extending the period for incurring expenses for qualified benefits to the 15th day of the third month after the end of the plan year. Benefits or contributions not used as of the end of the grace period are forfeited. Under an exception to the use-it-or-lose-it rule, at the plan sponsor's option and in lieu of any grace period, employees may be allowed to carry over up to $500 of unused amounts remaining at year-end in a health flexible spending account.

Taxpayers thus should make sure they understand their employer's plan and should make last-minute purchases before year end to the extent that not doing so will result in losing benefits. In most cases, a trip to the drug store, dentist or optometrist, for goods or services that the taxpayer would otherwise have purchased in 2021, can avoid "losing it."

 

Reference: See FTC 2d/FIN ¶ H-2417.

 

Paying by credit card creates deduction on date of credit card transaction. Taxpayers should consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase their 2020 deductions even if they don't pay their credit card bill until after the end of the year.

 

Reference: See FTC 2d/FIN ¶ G-2436.

 

Renew ITINs that expire on Dec. 31. Any individual filing a U.S. tax return is required to state his or her taxpayer identification number on that return. Generally, a taxpayer identification number is the individual's Social Security number (SSN). However, IRS issues Individual Taxpayer Identification Numbers (ITINs) to individuals who are not eligible to be issued an SSN but who still have a U.S. tax filing obligation.

Unlike SSNs, ITINs expire if not used on a return for three consecutive years or after a certain period. For example, ITINs issued in 2012 and 2013 (i.e., those with middle digits 90, 91, 92, 94, 95, 96, 97, 98 or 99) expire on December 31, 2020.

Anyone whose ITIN is expiring at the end of 2020 needs to file a complete renewal application, Form W-7, Application for IRS Individual Taxpayer Identification Number.

 

Reference: For the ITIN program, see FTC 2d/FIN ¶S-1582.1 et seq.

 

Increase 2020 itemized deductions via a "bunching strategy." Many taxpayers who claimed itemized deductions in prior years will no longer be able to do so. That’s because the standard deduction has been increased and many itemized deductions have been cut back or abolished. Paying some otherwise-deductible-in-2021 itemized deductions in 2020 can decrease taxable income in 2020 and will not increase 2021 taxable income if 2021 itemized deductions would otherwise have still been less than the 2021 standard deduction. For example, a taxpayer who expects to itemize deductions in 2020 but not 2021, and usually contributes a total of $1,500 to charities each year, should consider making a total of $3,000 of charitable contributions before the end of 2020 (and skipping charitable contributions in 2021).

 

Reference: See FTC 2d/FIN ¶ G-243

 

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

 

Tuesday, May 28, 2019

IRS Issues 2020 Inflation-Adjusted Amounts For Health Savings Accounts

 
In a new Revenue Procedure (Rev Proc 2019-25, 2019-22 IRB), the IRS has provided the 2020 inflation-adjusted contribution, deductible, and out-of-pocket expense limits for health savings accounts (HSAs). 
 
 
HSA basics. 
Eligible individuals may, subject to statutory limits, make deductible contributions to an HSA. Employers and other persons (e.g., family members) also may contribute to an HSA on behalf of an eligible individual. Generally, employer contributions are treated as employer-provided coverage for medical expenses under an accident or health plan and are excludable from income.
 
In general, a person is an "eligible individual" if he or she is covered under a high deductible health plan (HDHP) and is not covered under any other health plan, unless the other coverage is permitted insurance (e.g., for worker's compensation, a specified disease or illness, or providing a fixed payment for hospitalization). General purpose health accounts, such as flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs), constitute "other coverage" that will usually preclude HSA eligibility. However, exceptions apply for, among other things, FSAs and HRAs that provide only certain benefits, such as dental and vision, and those imposing high annual deductibles.
 
HSA distributions not used to pay for qualifying medical expenses generally are included in income and are subject to a 10% penalty tax.
 
Annual contribution limitations for 2020. 
For calendar year 2020, the limitation on deductions under Code Sec. 223(b)(2)(A) for an individual with self-only coverage under an HDHP is $3,550 (up from $3,500 for 2019). For calendar year 2020, the limitation on deductions under Code Sec. 223(b)(2)(B) for an individual with family coverage under an HDHP is $7,100 (up from $7,000 for 2019).
 
HDHP for 2020. For calendar year 2020, an HDHP is defined under Code Sec. 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 (up from $1,350 for 2019) for self-only coverage or $2,800 (up from $2,700 for 2019) for family coverage, and with respect to which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, not including premiums) do not exceed $6,900 (up from $6,750 for 2019) for self-only coverage or $13,800 (up from $13,500 for 2019) for family coverage. 
 
 
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Monday, May 13, 2019

2019 IRS Income Tax Deductions For Automobile Costs

 


Businesses that use a car or other vehicle may be able to deduct the expense of operating that vehicle on their taxes.

Businesses generally can use one of the two methods to figure their deductible vehicle expenses:
  • Standard mileage rate
  • Actual car expenses
For 2019, here are the standard mileage rates for calculating the deductible costs of operating an automobile for business, charitable, medical or moving purposes:
  • 58 cents per mile driven for business use
  • 20 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations
Of course, business taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Here are some facts to help business owners understand the differences between the two methods of figuring their deductible vehicle expenses:
  • Businesses that want to use the standard mileage rate for a car they own must choose to use the standard mileage rate in the first year they use the vehicle. Then, in later years, they can choose to use either the standard mileage rate or actual expenses.
     
  • If a business wants to use the standard mileage rate for a car they lease, they must use this rate for the entire lease period.
     
  • The business must make the choice to use the standard mileage rate by the due date of their return, including extensions. They can’t revoke the choice.
     
  • A business that qualifies to use both methods may want to figure their deduction both ways to see which gives them a larger deduction.
     
  • Here are some examples of actual car expenses that a business can deduct:
o Licenses
o Gas
o Oil
o Tolls
o Insurance
o Repairs
o Depreciation – limitations and adjustments may apply  

Businesses can see Publication 463, Travel, Gift and Car Expenses, for a full list of actual expenses and how to calculate them.

More Information:

IRS issues standard mileage rates for 2019
IRS Notice 2019-02
National Small Business Week


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Tuesday, April 23, 2019

Six Things Taxpayers Should Know About The Sharing Economy And Their IRS Taxes

 

 

From renting spare rooms and vacation homes to car rides or using a bike…name a service and it’s probably available through the sharing economy. 
 


Taxpayers who participate in the sharing economy can find helpful resources in the IRS Sharing Economy Tax Center on IRS.gov. 

Here are six things taxpayers should know about how the sharing economy might affect their taxes:

1. The activity is taxable.
Sharing economy activity is generally taxable. It is taxable even when:

  • The activity is only part time
  • The activity is something the taxpayer does on the side
  • Payments are in cash
  • The taxpayer receives an information return – like a Form 1099 or Form W2

2. Some expenses are deductible.
Taxpayers who participate in the sharing economy may be able to deduct certain expenses. For example, a taxpayer who uses their car for business may qualify to claim the standard mileage rate, which is 58 cents per mile for 2019.

3. There are special rules for rentals.
If a taxpayer rents out their home or apartment, but also lives in it during the year,
special rules generally apply to their taxes. Taxpayers can use the Interactive Tax Assistant tool, Is My Residential Rental Income Taxable and/or Are My Expenses Deductible? to determine if their residential rental income is taxable.

4. Participants may need to make estimated tax payments.
The U.S. tax system is
pay-as-you-go. This means that taxpayers involved in the sharing economy often need to make estimated tax payments during the year. These payments are due on April 15, June 15, Sept. 15 and Jan. 15. Taxpayers use Form 1040-ES to figure these payments.

5. There are different ways to pay.
The fastest and easiest way to make estimated tax payments is through
IRS Direct Pay. Alternatively, taxpayers can use the Electronic Federal Tax Payment System.

6. Taxpayers should check their withholding.
Taxpayers involved in the sharing economy who are employees at another job can often avoid making estimated tax payments by having more tax withheld from their paychecks. These taxpayers can use the
Withholding Calculator on IRS.gov to determine how much tax their employer should withhold. After determining the amount of their withholding, the taxpayer will file Form W-4 with their employer to request the additional withholding.

IRS YouTube Videos:
Your Taxes in the Sharing Economy –
English | ASL

 

 

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How IRS Tax Reform Affects Taxpayers Who Claim The Child Tax Credit

 

Many people claim the child tax credit to help offset the cost of raising children. Tax reform legislation made changes to that credit for 2018 and later. 

Here are some important things for taxpayers to know.

Credit amount. The new law increases the child tax credit from $1,000 to $2,000. Eligibility factors for the credit have not changed. As in past years, a taxpayer can claim the credit if all of these apply:

  • the child was younger than 17 at the end of the tax year
  • the taxpayer claims the child as a dependent
  • the child lives with the taxpayer for at least six months of the year

Credit refunds. The credit is refundable, now up to $1,400. If a taxpayer doesn’t owe any tax before claiming the credit, they will receive up to $1,400 as part of their tax refund.

Earned income threshold. The income threshold to claim the credit has been lowered to $2,500 per family. This means a family must earn a minimum of $2,500 to claim the credit.

Phaseout. The income threshold at which the child tax credit begins to phase out is increased to $200,000, or $400,000 if married filing jointly. This means that more families with children younger than 17 qualify for the larger credit.


New credit for other dependents. Dependents who can’t be claimed for the child tax credit may still qualify for the new credit for other dependents.  This is a non-refundable credit of up to $500 per qualifying person. These dependents may also be dependent children who are age 17 or older at the end of the tax year. It also includes parents or other qualifying relatives supported by the taxpayer.

More information:

Tax Reform Basics for Individuals and Families
Tax Reform Small Business Initiative


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Five IRS Tax Facts About The New Form 1040

 
There are several changes to the 2018 Form 1040. However, taxpayers who file electronically may not notice the changes as the tax return preparation software guides people through the filing process.

The IRS worked closely with its partners in the tax return preparation and tax software industries to prepare for tax reform and tax form changes affecting tax year 2018, including the
Form 1040. This ongoing collaboration ensures that taxpayers can continue to rely on the IRS, tax professionals and tax software programs when it’s time to file their tax returns.

Here are five things taxpayers need to know about the 2018 Form 1040.
  • The 2018 Form 1040 replaces Forms 1040,1040A and 1040EZ with one 2018 Form 1040 that all taxpayers will file.
     
  • Forms 1040A and 1040EZ are no longer available. Taxpayers who used one of these forms in the past will now file Form 1040.
     
  • The 2018 Form 1040 uses a “building block” approach and allows taxpayers to add only the schedules they need to their 2018 tax return.
     
  • The most commonly used lines on the prior year form are still on the form. Other lines are moved to new schedules and are organized by category. These categories include income, adjustments to income, nonrefundable credits, taxes, payments, and refundable credits.
     
  • Many taxpayers will only need to file Form 1040 and no schedules. Those with more complicated tax returns will need to complete one or more of the 2018 Form 1040 Schedules along with their Form 1040. These taxpayers include people claiming certain deductions or credits, or owing additional taxes.
Electronic filers may not notice any changes because the tax return preparation software will automatically use their answers to the tax questions to complete the Form 1040 and any needed schedules.

For taxpayers who filed paper returns in the past and are concerned about these changes, this year may be the year to consider the benefits of
filing electronically. Using tax software is convenient, safe and a secure way to prepare and e-file an accurate tax return.

More information:

About the Form 1040, U.S. Individual Income Tax Return
Questions and Answers About the 2018 Form 1040
Get Ready for Tax Filing Season
Publication 5307, Tax Reform: Basics for Individuals and Families
Publication 17, Your Federal Income Tax for Individuals
IRS Tax Map


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IRS Provides A Safe Harbor Method Of Accounting For Passenger Automobiles That Qualify For The 100-Percent Additional First Year Depreciation

 

WASHINGTON –The Treasury Department and the Internal Revenue Service issued guidance that provides a safe harbor method for determining depreciation deductions for passenger automobiles that qualify for the 100-percent additional first year depreciation deduction and that are subject to the depreciation limitations for passenger automobiles.

Under the Tax Cuts and Jobs Act (TCJA), the additional first year depreciation deduction applies to qualified property, including passenger automobiles, acquired and placed in service after September 27, 2017, and before January 1, 2027.

In general, the section 179 and depreciation deductions for passenger automobiles are subject to dollar limitations for the year the taxpayer places the passenger automobile in service and for each succeeding year.  For a passenger automobile that qualifies for the 100-percent additional first year depreciation deduction, TCJA increased the
first-year limitation amount by $8,000.  If the depreciable basis of a passenger automobile for which the 100-percent additional first year depreciation deduction is allowable exceeds the first-year limitation, the excess amount is deductible in the first taxable year after the end of the recovery period.

The guidance provides a safe harbor method of accounting for passenger automobiles. The safe harbor allows depreciation deductions for the excess amount during the recovery period subject to the depreciation limitations applicable to passenger automobiles.  To apply the safe-harbor method, the taxpayer must use the applicable depreciation table in Appendix A of IRS Publication 946.  The safe harbor method does not apply to a passenger automobile placed in service by the taxpayer after 2022, or to a passenger automobile for which the taxpayer elected out of the 100-percent additional first year depreciation deduction or elected under section 179 to expense all or a portion of the cost of the passenger automobile.

Taxpayers adopt the safe harbor method of accounting by applying it to deduct depreciation of a passenger automobile on their return for the first taxable year following the placed-in-service year.
For more information on the additional first year depreciation deduction, see
TCJA, Depreciation. For information about other TCJA provisions, visit IRS.gov/taxreform.


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How To Pay Your IRS Federal Income Taxes

 
The IRS offers several payment options where taxpayers can pay immediately or arrange to pay in installments. 

Taxpayers can pay online, by phone, or with their mobile device and the IRS2Go app.

Taxpayers should pay in full whenever possible to avoid interest and penalty charges.   


Here are some electronic payment options for taxpayers:
  • Electronic Funds Withdrawal. Taxpayers can pay using their bank account when they e-file their tax return. EFW is free and only available through e-File.
     
  • Direct Pay. Taxpayers can pay directly from a checking or savings account for free with IRS Direct Pay. Taxpayers receive instant confirmation after they submit a payment. With Direct Pay, taxpayers can schedule payments up to 30 days in advance. They can change or cancel their payment two business days before the scheduled payment date. Taxpayers can choose to receive email notifications each time they make a payment.
     
  • Credit or debit cards. Taxpayers can also pay their taxes by debit or credit card online, by phone, or with a mobile device. Card payment processing fees vary by service provider and no part of the service fee goes to the IRS. Telephone numbers for service providers are at IRS.gov/payments.
     
  • Pay with cash. Taxpayers can make a cash payment at a participating retail partner. Taxpayers can do this at more than 7,000 locations nationwide. Taxpayers can visit IRS.gov/paywithcash for instructions on how to pay with cash.
     
  • Installment agreement. Taxpayers who are unable to pay their tax debt immediately may be able to make monthly payments. Before applying for any payment agreement, taxpayers must file all required tax returns. They can apply for an installment agreement with the Online Payment Agreement tool, which also has more information about who’s eligible to apply for a monthly installment agreement.
Anyone wishing to use a mobile device should remember they can access the IRS2Go app to pay with either Direct Pay or by debit or credit card. IRS2Go is the official mobile app of the IRS and is available for download from Google Play, the Apple App Store or the Amazon App Store.
Taxpayers can also visit
IRS.gov/account and log in to their account. From here, they can view their taxes owed, payment history, federal tax records, and key information from their most recent tax return as originally filed.

More information:

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Taxpayers should choose their tax return preparer wisely.  

 

This is because taxpayers are responsible for all the information on their income tax return. That’s true no matter who prepares the return.


Here are ten tips for taxpayers to remember when selecting a preparer:

  • Check the Preparer’s Qualifications. People can use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool helps taxpayers find a tax return preparer with specific qualifications. The directory is a searchable and sortable listing of preparers.
  • Check the Preparer’s History. Taxpayers can ask the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, people can check with the State Board of Accountancy. For attorneys, they can check with the State Bar Association. For Enrolled Agents, taxpayers can go to the verify enrolled agent status page on IRS.gov or check the directory.
  • Ask about Service Fees. People should avoid preparers who base fees on a percentage of the refund or who boast bigger refunds than their competition. When asking about a preparer’s services and fees, don’t give them tax documents, Social Security numbers or other information.
  • Ask to E-File. Taxpayers should make sure their preparer offers IRS e-file. The quickest way for taxpayers to get their refund is to electronically file their federal tax return and use direct deposit.
  • Make Sure the Preparer is Available. Taxpayers may want to contact their preparer after this year’s April 15 due date. People should avoid fly-by-night preparers.
  • Provide Records and Receipts. Good preparers will ask to see a taxpayer’s records and receipts. They’ll ask questions to figure things like the total income, tax deductions and credits.
  • Never Sign a Blank Return. Taxpayers should not use a tax preparer who asks them to sign a blank tax form.
  • Review Before Signing. Before signing a tax return, the taxpayer should review it. They should ask questions if something is not clear. Taxpayers should feel comfortable with the accuracy of their return before they sign it. They should also make sure that their refund goes directly to them – not to the preparer’s bank account. The taxpayer should review the routing and bank account number on the completed return. The preparer should give you a copy of the completed tax return.
  • Ensure the Preparer Signs and Includes Their PTIN. All paid tax preparers must have a Preparer Tax Identification Number. By law, paid preparers must sign returns and include their PTIN.
  • Report Abusive Tax Preparers to the IRS. Most tax return preparers are honest and provide great service to their clients. However, some preparers are dishonest. People can report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their return without the taxpayer’s consent, they should file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit.

More information:

Understanding Tax Return Preparer Credentials and Qualifications

Tax Topic 254 - How to Choose a Tax Return Preparer

Choosing a Tax Professional

How to Make a Complaint About a Tax Return Preparer

How to Report Suspected Tax Fraud Activity

IRS Tax Pro Association Partners

 

 

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The December 2017 Tax reform legislation affects almost every taxpayer.

 

Taxpayers can continue to rely on the IRS, tax professionals and tax software programs when it’s time to file their returns.

 

As people prepare to file their 2018 tax returns this year, they can visit IRS.gov for answers to their questions about tax reform. Here are several of the resources that will help taxpayers find out how this law affects them:

 

Tax reform provisions that affect individuals

This is the main tax reform page with information for individual taxpayers. It includes dozens of links to more information on topics from withholding and tax credits to deductions and savings plans.

 

Tax reform basics for individuals and families

This publication provides information to help individual taxpayers understand the Tax Cuts and Jobs Act and how to comply with federal tax return filing requirements.

 

Tax reform resources

On this page, taxpayers can find helpful products including news releases, tax reform tax tips, revenue procedures, fact sheets, FAQs and drop-in articles.

 

Steps to take now to get a jump on next year’s taxes

This page has dozens of resources and tools that people can visit now or any time before they file their 2018 tax returns.

 

Paycheck Checkup

This page has information for people doing a Paycheck Checkup to see if they’re withholding the right amount of tax from their paychecks. Taxpayers can perform a Paycheck Checkup at the beginning of 2019 to make sure their withholding is correct for the rest of the year.

 

IRS Withholding Calculator

One way taxpayers can do a Paycheck Checkup is to use the Withholding Calculator. Checking withholding can help taxpayers protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time.

 

Taxpayer Advocate

The Taxpayer Advocate Service’s Tax Reform Changes website, available in English and Spanish, explains what is changing and what is not this year for individuals. Its interactive information can be reviewed by tax topic or line by line using a Form 1040 example and is updated to show the new 2018 Form 1040 references.

 

Tax reform

The main tax reform webpage on IRS.gov features information for individuals, but also takes users directly to info for people who are self-employed. It is also a great resource for anyone who does taxes or accounting for a business or charity.

 

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.


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List Of 2018 Expired IRS Federal Tax Provisions

As we enter tax season, here is a listing of those federal IRS tax provisions, that, as noted in a recent report by the Joint Committee on Taxation (JCT), have not been extended to 2018.


Background. The Code contains dozens of temporary tax provisions—i.e., provisions with a fixed termination date. Often, these expiring provisions are temporarily extended for a short period of time (e.g., one or two years).

 

Many of these extender provisions would have been extended through the end of 2018 by a the Retirement, Savings, and Other Tax Relief Act of 2018 and the Taxpayer First Act of 2018 (H.R. 88). However, on Dec. 10, 2018, that bill was revised so as to not include those extensions.

 

On January 15, Charles Grassley (R-IA), Chairman of the Senate Finance Committee stated that his goal is to guide extenders legislation to final enactment. However, he acknowledged that he does not have a specific plan and that no hearings on the subject have been scheduled.

 

List of extenders that haven't been extended to 2018. On January 19, the JCT released its annual report on the temporary individual, business, and energy tax extender provisions. This report contains a section that serves as a reminder of the extender provisions that expired at the end of 2017.

 

The provisions can be fit into three categories—those primarily affecting individuals, those primarily affecting businesses, and being energy-related provisions.

 

The expired individual provisions are:

 

  • The above-the-line deduction for certain higher-education expenses, including qualified tuition and related expenses, under Code Sec. 222;
  • The treatment of mortgage insurance premiums as qualified residence interest under Code Sec. 163(h)(3)(E); and
  • The exclusion from income of qualified canceled mortgage debt income associated with a primary residence under Code Sec. 108(a)(1)(E).

The expired business provisions are:

 

  • The Indian employment tax credit under Code Sec. 45A(f);
  • Accelerated depreciation for business property on Indian reservations under Code Sec. 168(j)(9);
  • The American Samoa economic development credit (P.L. 109-432, Sec. 119);
  • The railroad track maintenance credit under Code Sec. 45G(f);
  • 7-year recovery for motorsport racing facilities under Code Sec. 168(i)(15);
  • The mine rescue team training credit under Code Sec. 45N(e);
  • The election to expense advanced mine safety equipment under Code Sec. 179E(g);
  • Special expensing rules for film, television, and live theatrical production under Code Sec. 181;
  • Empowerment zone tax incentives under Code Sec. 1391(d)(1)(A);
  • 3-year depreciation for race horses two years or younger under Code Sec. 168(e)(3)(A)(i); and

The expired energy provisions are:

 

  • The beginning-of-construction date for nonwind facilities to claim the production tax credit (PTC) or the investment tax credit (ITC) in lieu of the PTC under Code Sec. 45(d) and Code Sec. 48(a)(5);
  • The special rule to implement electric transmission restructuring under Code Sec. 451(k);
  • The credit for construction of energy efficient new homes under Code Sec. 45L;
  • The energy efficient commercial building deduction under Code Sec. 179D;
  • The nonbusiness energy property credit under Code Sec. 25C;
  • The alternative fuel vehicle refueling property credit under Code Sec. 30C(g);
  • Incentives for alternative fuel and alternative fuel mixtures under Code Sec. 6426(d)(5) and Code Sec. 6427(e)(6)(C);
  • Incentives for biodiesel and renewable diesel under Code Sec. 40A(a), Code Sec. 6426(c)(6), Code Sec. 6426(e)(3) and Code Sec. 6427(e)(6)(B);
  • Second generation (cellulosic) biofuel producer credit under Code Sec. 40(b)(6)(J);
  • Credit for production of Indian coal under Code Sec. 45(e)(10)(A);
  • Special depreciation allowance for second generation (cellulosic) biofuel plant property under Code Sec. 168(l);
  • The credit for qualified fuel cell vehicles under Code Sec. 30B; and
  • The credit for 2-wheeled plug-in electric vehicles under Code Sec. 30D(g)(3)(E)(ii).

Tax forms and instructions. A sampling of the relevant 2018 tax forms/instructions, as they existed at the time we went to press, indicates that those forms/instructions reflect the fact that the above extenders do not apply for 2018 tax years.

 

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.


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IRS Issues Final Regulations And Other Guidance On Section 199A Qualified Business Income Deduction

 
Treasury, IRS issue final regulations, other guidance on new qualified business income deduction; Safe harbor enables many rental real estate owners to claim deduction

 

The Treasury Department and the Internal Revenue Service issued final regulations and three related pieces of guidance, implementing the new qualified business income (QBI) deduction (section 199A deduction).

The new QBI deduction, created by the 2017 Tax Cuts and Jobs Act (TCJA) allows many owners of sole proprietorships, partnerships, S corporations, trusts, or estates to deduct up to 20 percent of their qualified business income.  Eligible taxpayers can also deduct up to 20 percent of their qualified real estate investment trust (REIT) dividends and publicly traded partnership income. 

The QBI deduction is available in tax years beginning after Dec. 31, 2017, meaning eligible taxpayers will be able to claim it for the first time on their 2018 Form 1040.
The guidance, released today includes:

  • A set of regulations, finalizing proposed regulations issued last summer, A new set of proposed regulations providing guidance on several aspects of the QBI deduction, including qualified REIT dividends received by regulated investment companies
     
  • A revenue procedure providing guidance on determining W-2 wages for QBI deduction purposes,
     
  • A notice on a proposed revenue procedure providing a safe harbor for certain real estate enterprises that may be treated as a trade or business for purposes of the QBI deduction

The proposed revenue procedure, included in Notice 2019-07, allows individuals and entities who own rental real estate directly or through a disregarded entity to treat a rental real estate enterprise as a trade or business for purposes of the QBI deduction if certain requirements are met.  Taxpayers can rely on this safe harbor until a final revenue procedure is issued.

The QBI deduction is generally available to eligible taxpayers with 2018 taxable income at or below $315,000 for joint returns and $157,500 for other filers. Those with incomes above these levels, are still eligible for the deduction but are subject to limitations, such as the type of trade or business, the amount of W-2 wages paid in the trade or business and the unadjusted basis immediately after acquisition of qualified property. These limitations are fully described in the final regulations.

The QBI deduction is not available for wage income or for business income earned by a C corporation.

For details on this deduction, including answers to frequently-asked questions, as well as information on other TCJA provisions, visit
IRS.gov/taxreform.

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