Just a reminder that the last day you may make a tax-deductible purchase, pay a tax-deductible expense, take advantage of tax credits, or make tax-deductible charitable contributions for 2018 is Dec. 31. Every taxpayer’s situation is unique, and the suggestions offered here may not apply to you. The best way to ensure that you are putting yourself into the most tax-advantaged position is to seek tax-planning advice, usually earlier in the year. However, the following are some tax strategies that can be utilized at the last minute.Continue reading →
This has been a tumultuous year for taxes, with the tax reform that passed in late 2017 generally becoming effective in 2018, often with significant changes for both individuals and businesses. This is the first major tax reform legislation in more than 30 years, and to implement it, the IRS will have to create or revise approximately 450 forms, publications and instructions and modify around 140 information technology systems to ensure it can accommodate the newly revised or created tax forms, not to mention writing tax regulations for all of these changes – a daunting task for sure. The following are issues that could affect you and that you may need to plan for.Continue reading →
With so much confusion regarding tax reform, we put together a side by side comparison of the old and new law.Continue reading →
If you are a business owner who is accustomed to treating clients to sporting events, golf getaways, concerts and the like, you were no doubt saddened by the part of the tax reform that passed last December that did away with the business-related deductions for entertainment, amusement or recreation expenses, beginning in 2018. You can still entertain your clients; you just can’t deduct the costs of doing so as a business expense.
While the ban on deducting business entertainment was quite clear in the revised law, a lingering question among tax experts has been whether the tax reform’s definition of entertainment also applied to business meals, such as when you take a customer or business contact to lunch. Some were saying yes, and others no. Either way, both sides recommended keeping the required receipts and documentation until the issue was clarified.
The IRS recently issued some very business-friendly guidance, pending the release of more detailed regulations. In a notice, the IRS has announced that taxpayers generally may continue to deduct 50 percent of the food and beverage expenses associated with operating their trade or business, including business mealsContinue reading →
It is quite common for teachers to spend their own money on classroom supplies – so common, in fact, that a few years back, Congress created a special deduction that allowed teachers to deduct up to $250 above-the-line for classroom supplies. “Above-the-line” means the deduction can be claimed whether or not the taxpayer itemizes their deductions. Although the $250 amount is subject to an inflation adjustment, there has been no increase to the limit, at least through 2018.
Eligible educators are those who work in a school as teachers of kindergarten through grade 12, instructors, counselors, principals, or aides for at least 900 hours during a school year. Because of the 900-hour requirement, many substitute teachers do not qualify for this above-the-line deduction.
But $250 is not much, and even if the teacher is in a tax bracket as high as 24% (most are in lower brackets), the deduction will only net them a tax savings of $60. A $60 tax savings is nothing to write home about, and the $250 special deduction was nothing more than a token gesture by Congress. Many conscientious teachers spend far more than $250 for classroom supplies every year.Continue reading →
As a result of tax reform, most taxpayers will be paying less tax for 2018 than they did in 2017. But that may not translate into a larger refund. Your refund is the amount that your pre-payments (withheld income tax, estimated tax payments, and certain credits) exceed your tax liability, and if the pre-payment also got reduced, you could be in for an unpleasant surprise at tax time.
So, why would the pre-payments, particularly withholding, be less? Simply because the current W-4 form on which employers base the amount of tax to withhold, and the withholding tables provided by the government that employers use to determine the amount to withhold, are not sophisticated enough to deal with the revised tax laws. Congress passed the changes at the 11th hour of 2017, without giving the IRS sufficient time to adjust the W-4 form and withholding tables to account for the changed laws. The IRS did come out with a revised W-4 late in February, but there are serious concerns that the revised W-4 and withholding tables are not coming up with the correct amounts based upon the new tax law and that the form itself is much more complicated for employees to complete than prior versions were. In fact, the government is so concerned about this that the IRS issues almost daily notices cautioning taxpayers to double check their withholding.Continue reading →
Remember the IRS’s promise about being able to file your income tax return using a postcard?
The reality of the new 1040 form is a far cry from a postcard. Although the administration insists that it has simplified the process of preparing your tax return, a few minutes of comparing the old 1040 to the new draft version shows that the redesign did little more than change it from the previous two-page form to two half-size pages – with six schedules provided separately. All but four of the 79 lines from the old version remain on the new one; they’re just divided up differently. Unless all of your income comes from wages, interest, dividends, pensions and Social Security, you will now have more schedules to fill out than you did before, and you still have a lot of work ahead of you.Continue reading →
In the past, the business use of a vehicle was determined either by using the standard mileage rate for business or using actual expenses plus vehicle depreciation limited by the luxury auto caps. That continues to be the case, except the luxury auto depreciation limit has been substantially increased. In addition, there are other changes as detailed below.
Standard Mileage Rates – The standard mileage rates for the business use of a car (or a van, pickup, or panel truck) are:
STANDARD MILEAGE RATES FOR BUSINESS
53.5 Cents Per Mile
54.5 Cents Per Mile
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It is almost summertime. Have you figured out what to do with the kids while they are out of school and you are at work? There are possibilities that may qualify you for a break in the form of a tax credit that can help offset the cost of care for children. But not all summertime care solutions may qualify for the tax credit, so here is some information that will help you understand how the credit is determined, what kinds of care qualify and possible limitations.
The credit is the percentage of actual care expenses. It can be as high as 35% for lower income taxpayers but is never less than 20% of for higher income taxpayers.Continue reading →
Years ago, to prevent parents from transferring their investment accounts into their children’s name to avoid taxes, Congress created what is referred to as the kiddie tax. This counteracted the strategy of taking income from the parents’ higher tax bracket and shifting it to their children’s lower tax bracket.
The kiddie tax plugged that tax loophole by taxing the child’s unearned income (income not from working) at the parent’s top marginal rate.
That has all changed under the new tax reform. Beginning in 2018, children’s tax rates are no longer based upon their parents’ top marginal rates.Continue reading →