Back to top

News

Click here to go back

Employee Payroll Tax Deferral & PPP Update

Posted by Admin Posted on Sept 09 2020
https://www.htsgcpa.com/siteAssets/site13320/files/HTSG_Logo_Main.png
Employee Payroll Tax Deferral & PPP Update
 
Hagan, Tucker, Schmitt & Gintz Business Partners:
 
Employee Payroll Tax Deferral
 
We wanted to take a moment and address the Presidential Memorandum issued August 8, 2020 that allows employers to defer withholding and payment of the employee's portion of the Social Security tax if the employee's wages are below a certain amount.
 
 
Employers can choose to offer this deferral or not.
 
Employer is responsible for payment of the deferred amounts.
  • If payments are not made by April 30, 2021, the employer will be subject to interest and penalties.
 
Deferral of employee portion of Social Security taxes (6.2%)
  • Available for employees making less than $4,000 bi-weekly for payments of wages from September 1 through December 31, 2020
  • To be repaid from January 1 through April 30, 2021 through employee withholding (in addition to regular Social Security tax withholding)
  • Employer would basically double withhold the 6.2% of employees portion of Social Security taxes during this time frame.
 
There are many questions we are awaiting answers to, the major one being: will this eventually move to being a forgiven amount? Until we see additional guidance released we would advise our clients not to offer this deferral at this time. We will continue to send updates as they are released.
PPP Update
 
Things are still unclear regarding PPP Loan Forgiveness. Though we have some guidance, there are still many questions without answers. Here is a brief update according to what we know now.
 
  • WAIT - We understand everyone's anxiety regarding forgiveness, but being patient about applying could be more beneficial than moving forward immediately.
  • Does your business want to be a guinea pig for the 1st round of forgiveness applications? Just like in the early days of the loan, there could be more changes coming down the pike. How many times do you want to have to recalculate or submit?
  • In addition to the forgiveness process, documentation requirements may also change.
  • We are still waiting on additional guidance regarding FTE reductions and Related Party Rent.
  • Timing of forgiveness - can we defer recognition to next year by waiting to apply? If possible, is it advisable? This will depend on the business.
  • If the loan is $150,000 or lower, there may still be legislative action to make it a simple signed affidavit.
  • Forgiveness should be available for up to 10 months after the end of the covered period for your PPP loan.
 
We are uniquely positioned to assist our clients with the application of forgiveness, as well as business modeling, cash flow/break even analysis and assessment for other loan assistance for those who continue to struggle. "PPP2" could be coming, although with a much narrower focus for those experiencing severe declines in revenue. We are happy to help our clients in any way we can.
 
Please contact us with additional questions and concerns.
Thank you for your continued trust and relationship with our firm.
Follow us on social media to keep in touch.
 
Hagan, Tucker, Schmitt & Gintz LLC
417-881-6919

PPP Loan Forgiveness Update

Posted by Admin Posted on Aug 04 2020
 
https://www.htsgcpa.com/siteAssets/site13320/files/HTSG_Logo_Main.png
 
Hagan, Tucker, Schmitt & Gintz Business Partners:
 
We look forward to the SBA launching the PPP Loan Forgiveness Process on or after August 10, 2020. Our contacts at local financial institutions plan to be ready when this happens. However, the situation continues to be very dynamic as the SBA and Treasury are not set to release any additionally needed FAQs before anticipated new relief legislation prior to the Congressional recess Aug 8th.
 
It appears that lenders will each have their own process to make the application for forgiveness as easy as possible. Lenders will be reaching out to you via phone and email with instructions for applying for forgiveness. When you receive this information, we ask that you forward it to us immediately. So far, many of the requirements for documentation to be retained by the borrower remain, although some may not currently need to be submitted to the lender.
 
We will continue to monitor developments in legislation and we advise our business partners to be patient. There will likely still be unanswered questions after the application process is open.
 
If you have not engaged us to help you prepare this information already, and you wish to do so, please give us a call. 
 
Thank you for your continued trust and relationship with our firm.
 
Follow us on social media to keep in touch.
 
 
Hagan, Tucker, Schmitt & Gintz LLC
417-881-6919

Updates on COVID-19 Leave, Payroll & Deadlines

Posted by Admin Posted on Mar 26 2020
  SHARE:  
 
What you need to know about the Families First Coronavirus Response Act
 
 
 
President Trump has signed into law the Families First Coronavirus Response Act. Among other things, the new law temporarily requires certain employers to provide expanded paid sick and family leave for employees affected by the coronavirus (COVID-19) pandemic. Employers’ increased costs will be offset by new tax credits, which also may be available to self-employed individuals.
 
Expanded family and medical leave
 
The new law amends the federal Family and Medical Leave Act (FMLA) for employers with fewer than 500 employees. Those employers generally must provide employees who’ve been on the job for at least 30 calendar days (including those who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan) with up to 12 weeks of job-protected leave, part of it paid.
 
The new law generally allows the leave in circumstances where an employee is unable to work (or “telework”) due to a need to care for a minor child whose school or paid place of childcare has been closed or is unavailable due to COVID-19.
 
The FMLA generally requires only job-protected leave, not paid leave. For leave under the new law, only the first 10 days of leave may be unpaid. (Those 10 days might, however, qualify for paid sick leave; see below.)
 
After 10 days, covered employers must provide paid leave at two-thirds of an employee’s usual rate. The pay requirement is limited, however, to $200 per day and $10,000 total per employee.
Be aware that certain exemptions and special rules may apply regarding expanded family and medical leave.
 
Paid sick leave
 
Under the new law starting April 1, 2020, employers with fewer than 500 employees must provide 80 hours of paid sick leave for full-time employees in certain situations. Part-time employees are entitled to this paid sick leave for the average number of hours worked over a two-week period.
 
Employees are eligible regardless of how long they’ve worked with the employer, and employers can’t require an employee to use other paid leave before the paid sick time.
 
An employee qualifies for the leave when he or she is unable to work (or telework) because the employee:
 
  1. Is subject to a COVID-19-related quarantine or isolation order,
  2. Has been advised by a health care provider to self-quarantine,
  3. Is experiencing COVID-19 symptoms and seeking a medical diagnosis,
  4. Is caring for an individual subject to a COVID-19-related quarantine or isolation order,
  5. Is caring for a son or daughter whose school or place of care has been closed, or whose childcare provider is unavailable, due to COVID-19 precautions, or
  6. Is experiencing substantially similar conditions specified by the U.S. Secretary of Health and Human Services Alex Azar.
 
When leave is taken for an employee’s own illness or quarantine (reasons 1 through 3 above), the leave is required to be paid at the employee’s regular rate, but no higher than $511 per day ($5,110 total). For leave taken for reasons 4 through 6 above, the leave is required to be paid at two-thirds of the regular rate, capped at $200 per day ($2,000 total).
 
Note that certain exemptions and special rules may apply regarding paid sick leave.
 
Tax credits for employers and the self-employed
 
Covered employers generally can take a federal payroll tax credit for 100% of the qualified family and sick leave wages they pay each quarter, beginning with amounts paid April 1, 2020 and following. The credits generally are available only to employers required to provide benefits by the new law.
 
The amount of wages taken into account for the paid family leave for each employee is capped at $200 per day and $10,000 for all calendar quarters. The amount of wages taken into account for paid sick leave is limited to $511 per day for leave taken for the employee’s own illness or quarantine and $200 for leaves taken to care for others.
 
Employers are required to post notice of these new provisions to their employees. Here is our posting for your use;
 
Effective for wages paid on and after April 1, 2020:
 
All full time employees unable to work qualify for 80 hours of Federal paid sick leave at your full pay rate of up to $511 daily if you are ill, quarantined, been advised by a medical professional to self-quarantine or have symptoms for which you are seeking medical diagnosis, all from Covid-19. You also qualify for FMLA sick leave at up to 2/3 of your normal pay up to $200 daily for 12 weeks (of which 10 are paid) for caring for any individual under quarantine, isolation, etc., or because your child under 18’s school or daycare has been closed.
 
These rules apply to wages earned through December 31, 2020.
 
 
Wages taken into account when computing the credit amount won’t be taken into account when computing the existing Section 45S business tax credit for paid family and medical leave.
Note that tax credits may also be available to certain self-employed individuals.
 
For 941 Tax Deposits:
 
Wages paid for COVID-19 sick or family leave are not subject to employee or employer FICA.
 
When submitting a 941 deposit the line items you will add to calculate your credit are as follows:
 
COVID-19 Related Sick and/or Leave Wages Only:
Employee Net Pay +
Federal Withholding +
Employee Medicare +
Employer Medicare +
Employer Paid Health Insurance =
Total Amount For Credit
 
This is applied first to total Employer 941 deposit for the period. If this amount is over the total deposit required, you will file for the rest of the credit on a to-be-determined tax form from the IRS.
 
This information is our current understanding and may change. If it does, we will update you as soon as we have clarity.
 
We encourage you to document all aspects of an employee's leave. Save the Stay At Home order, school closing notices, doctor notes from staff, etc. Create pay items for "COVID-19 Sick", "COVID-19 Leave" and "COVID-19 Extended Leave" to track this time and monies in a way that can be easily reported on.
 
Effective dates
 
The new law provides that the paid leave provisions must take effect no later than April 1, 2020. They expire on December 31, 2020. More relief affecting employees and businesses is sure to follow this legislation. Turn to us to for the latest developments.
 
Phase 3 of the stimulus bill is in the House currently awaiting a vote. We will let you know when more information is available on this bill.
 
 
© 2020
 
Please follow us on our social media below for updates as they happen.
 

What you need to know about the Families First Coronavirus Response Act

Posted by Admin Posted on Mar 23 2020



President Trump has signed into law the Families First Coronavirus Response Act. Among other things, the new law temporarily requires certain employers to provide expanded paid sick and family leave for employees affected by the coronavirus (COVID-19) pandemic. Employers’ increased costs will be offset by new tax credits, which also may be available to self-employed individuals.

Expanded family and medical leave

T
he new law amends the federal Family and Medical Leave Act (FMLA) for employers with fewer than 500 employees. Those employers generally must provide employees who’ve been on the job for at least 30 calendar days (including those who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan) with up to 12 weeks of job-protected leave, part of it paid. 

The new law generally allows the leave in circumstances where an employee is unable to work (or “telework”) due to a need to care for a minor child whose school or paid place of childcare has been closed or is unavailable due to COVID-19. 

The FMLA generally requires only job-protected leave, not paid leave. For leave under the new law, only the first 10 days of leave may be unpaid. (Those 10 days might, however, qualify for paid sick leave; see below.) 

After 10 days, covered employers must provide paid leave at two-thirds of an employee’s usual rate. The pay requirement is limited, however, to $200 per day and $10,000 total per employee.

Be aware that certain exemptions and special rules may apply regarding expanded family and medical leave.

Paid sick leave

Under the new law, employers with fewer than 500 employees must provide 80 hours of paid sick leave for full-time employees in certain situations. Part-time employees are entitled to this paid sick leave for the average number of hours worked over a two-week period. 

Employees are eligible regardless of how long they’ve worked with the employer, and employers can’t require an employee to use other paid leave before the paid sick time. 

An employee qualifies for the leave when he or she is unable to work (or telework) because the employee:

  1. Is subject to a COVID-19-related quarantine or isolation order,
  2. Has been advised by a health care provider to self-quarantine,
  3. Is experiencing COVID-19 symptoms and seeking a medical diagnosis,
  4. Is caring for an individual subject to a COVID-19-related quarantine or isolation order,
  5. Is caring for a son or daughter whose school or place of care has been closed, or whose childcare provider is unavailable, due to COVID-19 precautions, or
  6. Is experiencing substantially similar conditions specified by the U.S. Secretary of Health and Human Services Alex Azar.

When leave is taken for an employee’s own illness or quarantine (reasons 1 through 3 above), the leave is required to be paid at the employee’s regular rate, but no higher than $511 per day ($5,110 total). For leave taken for reasons 4 through 6 above, the leave is required to be paid at two-thirds of the regular rate, capped at $200 per day ($2,000 total).

Note that certain exemptions and special rules may apply regarding paid sick leave.

Tax credits for employers and the self-employed

Covered employers generally can take a federal payroll tax credit for 100% of the qualified family and sick leave wages they pay each quarter. The credits generally are available only to employers required to provide benefits by the new law.

The amount of wages taken into account for the paid family leave for each employee is capped at $200 per day and $10,000 for all calendar quarters. The amount of wages taken into account for paid sick leave is limited to $511 per day for leave taken for the employee’s own illness or quarantine and $200 for leaves taken to care for others. 

Wages taken into account when computing the credit amount won’t be taken into account when computing the existing Section 45S business tax credit for paid family and medical leave. 
Note that tax credits may also be available to certain self-employed individuals.

Effective dates

The new law provides that the paid leave provisions must take effect no later than 15 days after enacted. They expire on December 31, 2020. More relief affecting employees and businesses is sure to follow this legislation. Turn to us to for the latest developments.

© 2020

Business Owner Questions in Light of COVID-19

Posted by Admin Posted on Mar 20 2020

BULLETS AND 35 QUESTIONS FOR THE BUSINESS OWNER

Additional resources for our business clients via the AICPA and FM

  • Don’t panic but do plan.

 

  • Show concern for your employees: Give them an opportunity to share their concerns and ask questions.

 

  • Consider having an education session regarding your plans and proper hygiene.

 

  • Show concern for your customers. For any customer or client meetings, offer the opportunity to meet virtually.

 

  • Communicate and educate frequently.

 

  • Brainstorm with every department: How might you be affected?

 

  • Brainstorm possible options to mitigate the impact.

 

  • Document what you will do, when you will do it, and who will be responsible.

 

Questions about your employees

 

1.How can you best protect your employees?

 

2.Will you train your employees on how to identify coronavirus symptoms?

 

3.If an employee does not have available sick time, how do you make sure they do not come to work if they are sick?

 

4.How will you respond if an employee is diagnosed with coronavirus?

 

5.Who can work from home?

 

6.How will your employees get access to the necessary information and documents they need to work from home?

 

7.Will you allow employees to travel?

 

8.If employees must travel, what steps will you take to ensure their medical safety?

 

9.How will you respond if an employee needs to care for an infected family member?

 

10.If an employee contracts coronavirus, will they only be allowed to use their accrued sick time?

 

Questions about your operations

 

11.What parts of your business are crucial to keep operating?

 

12.When should you exclude visitors from your offices?

 

13.How will you decide if you need to close an office?

 

14.Will you close your business for the recommended two-week quarantine or longer?

 

15.How will you disinfect your office?

 

16.How will you keep employees, customers, and vendors informed?

 

17.Should you postpone meetings, events, or travel?

 

18.How will you communicate with employees, customers, and vendors if you have to close your offices?

 

19.Is your IT system robust enough to handle the demand if more employees are working from home?

 

Questions about your finances

 

20.If your offices are closed, how will you collect payments?

 

21.How long can your business survive without any new sales?

 

22.How will you pay your bills and payroll if your office is closed?

 

23.Do you have available lines of credit?

 

24.Will you pay your employees, and for how long, if you close your office and employees are not working? Do you know what the legal requirements are for such payment?

 

Questions about your customers

 

25.Will you notify customers if an employee is diagnosed?

 

26.How will you stay connected to customers if employees are out sick or the office is closed?

 

27.How will you deliver on contracts if the office is closed or there is a disruption in your supply chain?

 

28.Do you have a “force majeure” clause in your contracts that might alleviate some liability in the case of a crisis such as this?

 

29.How will you respond if a customer is affected by the coronavirus and does not pay your invoice on time?

 

30.Are there ways you can assist your customers in addressing the coronavirus?

 

Questions about your supply chain

 

31.Who are your mission-critical vendors?

 

32.Which vendors should you call to discuss their coronavirus plans?

 

33.Do you currently source any supplies or products from China?

 

34.How would a delay in delivery of materials and products affect your production?

 

35.Do you have alternate suppliers?

 

 

Our policy updates regarding COVID-19

Posted by Admin Posted on Mar 17 2020

Our firm continues to monitor the rapidly changing situation related to the spread of the coronavirus (also known as COVID-19). We also understand that concerns surrounding the coronavirus are affecting our clients, especially during tax season.

At our office, we are committed to maintaining all appropriate sanitary, health and safety measures.  However, and whenever possible, we are currently rescheduling in-person appointments to hold them over the phone or sometime after-tax season.  Clients may mail, email, utilize our secure document upload via our website or drop off their tax information at our door.  Additionally, we are encouraging our clients to receive their tax returns electronically and/or via mail.  Forms that need a signature may be done electronically or be signed and sent in via fax, e-mail, mail or dropped at our door.  We also advise that you can make payments over the phone via credit card or ACH via a signed form we can provide to you.

The health and welfare of our staff and clients is of utmost importance to our firm, and we will continue to monitor the situation and provide updates as necessary. Please contact our office if you have concerns, or if you’d like to modify an upcoming meeting.

Do you run your business from home? You might be eligible for home office deductions.

Posted by Admin Posted on Mar 13 2020

300x200

If you’re self-employed and work out of an office in your home, you may be entitled to home office deductions. However, you must satisfy strict rules.

If you qualify, you can deduct the “direct expenses” of the home office. This includes the costs of painting or repairing the home office and depreciation deductions for furniture and fixtures used there. You can also deduct the “indirect” expenses of maintaining the office. This includes the allocable share of utility costs, depreciation and insurance for your home, as well as the allocable share of mortgage interest, real estate taxes and casualty losses.

In addition, if your home office is your “principal place of business,” the costs of traveling between your home office and other work locations are deductible transportation expenses, rather than nondeductible commuting costs. And, generally, you can deduct the cost (reduced by the percentage of non-business use) of computers and related equipment that you use in your home office, in the year that they’re placed into service.

Deduction tests

You can deduct your expenses if you meet any of these three tests:

Principal place of business. You’re entitled to deductions if you use your home office, exclusively and regularly, as your principal place of business. Your home office is your principal place of business if it satisfies one of two tests. You satisfy the “management or administrative activities test” if you use your home office for administrative or management activities of your business, and you meet certain other requirements. You meet the “relative importance test” if your home office is the most important place where you conduct business, compared with all the other locations where you conduct that business.

Meeting place. You’re entitled to home office deductions if you use your home office, exclusively and regularly, to meet or deal with patients, clients, or customers. The patients, clients or customers must physically come to the office.

Separate structure. You’re entitled to home office deductions for a home office, used exclusively and regularly for business, that’s located in a separate unattached structure on the same property as your home. For example, this could be in an unattached garage, artist’s studio or workshop.

You may also be able to deduct the expenses of certain storage space for storing inventory or product samples. If you’re in the business of selling products at retail or wholesale, and if your home is your sole fixed business location, you can deduct home expenses allocable to space that you use to store inventory or product samples.

Deduction limitations

The amount of your home office deductions is subject to limitations based on the income attributable to your use of the office, your residence-based deductions that aren’t dependent on use of your home for business (such as mortgage interest and real estate taxes), and your business deductions that aren’t attributable to your use of the home office. But any home office expenses that can’t be deducted because of these limitations can be carried over and deducted in later years.

Selling the home

Be aware that if you sell — at a profit — a home that contains (or contained) a home office, there may be tax implications. We can explain them to you.

Pin down the best tax treatment

Proper planning can be the key to claiming the maximum deduction for your home office expenses. Contact us if you’d like to discuss your situation.

© 2020

The 2019 gift tax return deadline is coming up

Posted by Admin Posted on Mar 13 2020

300x200

If you made large gifts to your children, grandchildren or other heirs last year, it’s important to determine whether you’re required to file a 2019 gift tax return. And in some cases, even if it’s not required to file one, it may be beneficial to do so anyway.

Who must file?

Generally, you must file a gift tax return for 2019 if, during the tax year, you made gifts:

  • That exceeded the $15,000-per-recipient gift tax annual exclusion (other than to your U.S. citizen spouse),
  • That you wish to split with your spouse to take advantage of your combined $30,000 annual exclusion,
  • That exceeded the $155,000 annual exclusion for gifts to a noncitizen spouse,
  • To a Section 529 college savings plan and wish to accelerate up to five years’ worth of annual exclusions ($75,000) into 2019,
  • Of future interests — such as remainder interests in a trust — regardless of the amount, or
  • Of jointly held or community property.

Keep in mind that you’ll owe gift tax only to the extent that an exclusion doesn’t apply and you’ve used up your lifetime gift and estate tax exemption ($11.4 million for 2019). As you can see, some transfers require a return even if you don’t owe tax.

Who might want to file?

No gift tax return is required if your gifts for 2019 consisted solely of gifts that are tax-free because they qualify as:

  • Annual exclusion gifts,
  • Present interest gifts to a U.S. citizen spouse,
  • Educational or medical expenses paid directly to a school or health care provider, or
  • Political or charitable contributions.

But if you transferred hard-to-value property, such as artwork or interests in a family-owned business, you should consider filing a gift tax return even if you’re not required to. Adequate disclosure of the transfer in a return triggers the statute of limitations, generally preventing the IRS from challenging your valuation more than three years after you file.

April 15 deadline

The gift tax return deadline is the same as the income tax filing deadline. For 2019 returns, it’s April 15, 2020 — or October 15, 2020, if you file for an extension. But keep in mind that, if you owe gift tax, the payment deadline is April 15, regardless of whether you file for an extension. If you’re not sure whether you must (or should) file a 2019 gift tax return, contact us.

© 2020

The IRS provides guidance on meal and entertainment deductions

Posted by Admin Posted on Mar 13 2020

300x200

The IRS has released proposed regulations addressing the deductibility of meal and entertainment expenses in tax years beginning after December 31, 2017. Among other things, the proposed regs clear up lingering confusion regarding whether meals are considered entertainment and, therefore, generally nondeductible.

TCJA rule changes

Prior to the Tax Cuts and Jobs Act (TCJA), Section 274 of the Internal Revenue Code generally prohibited deductions for expenses related to entertainment, amusement or recreation (commonly referred to as “entertainment” expenses). The tax code granted exceptions, however, for entertainment expenses “directly related to” or “associated with” actively conducting business. Businesses generally could deduct 50% of such expenses.

The tax code also limited deductions for food and beverage expenses that satisfied one of the exceptions. A deduction was permitted only if 1) the expense wasn’t lavish or extravagant under the circumstances, and 2) the taxpayer (or an employee of the taxpayer) was present when the food or beverages were furnished. The amount of the deduction was limited to 50% of such expenses.

The TCJA amended Sec. 274 to generally prohibit deductions for any expenses related to entertainment, regardless of whether they’re directly related to or associated with conducting business. Some taxpayers wondered if the amendment also banned deductions for business meal expenses.

The IRS responded to this question in the fall of 2018 with Notice 2018-76. The notice listed several circumstances under which businesses could continue to treat business meal expenses, including meals consumed by employees on work travel, as 50% deductible expenses until the IRS published its proposed regs explaining when business meal expenses are nondeductible entertainment expenses.

Applicability of the proposed regs

The proposed regs provide that the deduction limitation rules generally apply to all food and beverages, whether characterized as meals, snacks or other types of food or beverage items. The deduction limitations apply even to food and beverages treated as de minimis fringe benefits.

The proposed regs define food or beverage expenses as the cost of food or beverages, including any delivery fees, tips and sales tax. But the deductible expenses for employer-provided meals at an eating facility don’t include operating expenses for the facility (for example, the salaries of employees preparing and serving meals and other overhead costs).

Food and beverages at entertainment activities

Food or beverages provided during or at an entertainment activity aren’t considered nondeductible entertainment expenses under the proposed regs as long as they’re purchased separately from the entertainment, or their cost is stated separately from the entertainment cost on a bill, invoice or receipt. For example, let’s say you take a client to a football game. You buy some food at the game and pay for it separately from the game tickets. The amount may qualify for a deduction, if you meet certain other requirements.

The 2018 notice provided that taxpayers couldn’t circumvent this entertainment disallowance rule by inflating the amount charged for food and beverages. The proposed regs tackle this issue by requiring that the amount charged for food or beverages reflect 1) the venue’s usual selling cost for those items if purchased separately from the entertainment, or 2) the reasonable value of the items.

Business meal expenses

The proposed regs generally follow the lead of the 2018 guidance on the deductibility of business meal expenses, but also incorporate other statutory requirements taxpayers must meet to deduct 50% of the expense. Thus, businesses may deduct 50% of business meal expenses if:

  • The expense isn’t lavish or extravagant under the circumstances,
  • The taxpayer (or an employee of the taxpayer) is present at the furnishing of the food or beverages, and
  • The food and beverages are provided to a business associate.

The proposed regs also clarify the requirement in Notice 2018-76 that the food and beverages be provided to a “business contact.” The notice described such an individual as a current or potential business customer, client, consultant, or similar business contact.

The proposed regs use the term “business associate,” defined as a person the taxpayer could reasonably expect to engage with in business, including a current or prospective customer, client, supplier, employee, agent, partner, or professional advisor. The inclusion of employees makes the standard applicable to employer-provided meals and situations where a business provides meals to both employees and nonemployee business associates at the same event.

Travel meal expenses

Although the TCJA didn’t explicitly change the rules for travel expenses, the proposed regs are intended to provide comprehensive rules for food and beverage expenses. As a result, they apply the general rules for meal expenses to travel meals.

The proposed regs also incorporate statutory substantiation requirements for travel meal expenses — evidence of the amount, time and place, and business purpose of the meal. In addition, meal expenses for spouses, dependents or other individuals accompanying the taxpayer (or an employee of the taxpayer) on business travel generally aren’t deductible unless the individual is an employee of the taxpayer and traveling for a bona fide business purpose.

Other food and beverage expenses

In addition, the proposed regs provide that business meal expenses and 50% deduction limits don’t apply to expenses that fall within one of the following exceptions:

  • Expenses treated as compensation,
  • Reimbursed food and beverage expenses,
  • Expenses related to recreational, social or similar activities for employees, such as holiday parties, annual picnics and summer outings that don’t favor highly compensated employees (but not free food and beverages in break rooms or provided for the convenience of the employer, such as that provided for employees who must stay on call for emergencies),
  • Items available to the public (as long as more than 50% of the actual or reasonably estimated consumption is by the general public, including customers, clients and visitors), and
  • Goods and services sold to customers (for example, food or beverage items that are purchased as part of preparing and providing meals to a restaurant’s paying customers, which are also consumed at the worksite by employees).

These expenses all are fully deductible.

Final regs are on the way

Comments on the proposed regs must be submitted by April 13, 2020, and a public hearing may be held. In the meantime, you can rely on the proposed regs as well as the guidance in Notice 2018-76 until the IRS issues final regs. If you have questions on business-related meal and beverage expenses, please don’t hesitate to contact us.

© 2020

Home is where the tax breaks might be

Posted by Admin Posted on Mar 04 2020

300x200

If you own a home, the interest you pay on your home mortgage may provide a tax break. However, many people believe that any interest paid on their home mortgage loans and home equity loans is deductible. Unfortunately, that’s not true.

First, keep in mind that you must itemize deductions in order to take advantage of the mortgage interest deduction.

Deduction and limits for “acquisition debt”

A personal interest deduction generally isn’t allowed, but one kind of interest that is deductible is interest on mortgage “acquisition debt.” This means debt that’s: 1) secured by your principal home and/or a second home, and 2) incurred in acquiring, constructing or substantially improving the home. You can deduct interest on acquisition debt on up to two qualified residences: your primary home and one vacation home or similar property.

The deduction for acquisition debt comes with a stipulation. From 2018 through 2025, you can’t deduct the interest for acquisition debt greater than $750,000 ($375,000 for married filing separately taxpayers). So if you buy a $2 million house with a $1.5 million mortgage, only the interest you pay on the first $750,000 in debt is deductible. The rest is nondeductible personal interest.

Higher limit before 2018 and after 2025

Beginning in 2026, you’ll be able to deduct the interest for acquisition debt up to $1 million ($500,000 for married filing separately). This was the limit that applied before 2018.

The higher $1 million limit applies to acquisition debt incurred before Dec. 15, 2017, and to debt arising from the refinancing of pre-Dec. 15, 2017 acquisition debt, to the extent the debt resulting from the refinancing doesn’t exceed the original debt amount. Thus, taxpayers can refinance up to $1 million of pre-Dec. 15, 2017 acquisition debt, and that refinanced debt amount won’t be subject to the $750,000 limitation.

The limit on home mortgage debt for which interest is deductible includes both your primary residence and your second home, combined. Some taxpayers believe they can deduct the interest on $750,000 for each mortgage. But if you have a $700,000 mortgage on your primary home and a $500,000 mortgage on your vacation place, the interest on $450,000 of the total debt will be nondeductible personal interest.

“Home equity loan” interest

“Home equity debt,” as specially defined for purposes of the mortgage interest deduction, means debt that: is secured by the taxpayer’s home, and isn’t “acquisition indebtedness” (meaning it wasn’t incurred to acquire, construct or substantially improve the home). From 2018 through 2025, there’s no deduction for home equity debt interest. Note that interest may be deductible on a “home equity loan,” or a “home equity line of credit,” if that loan fits the tax law’s definition of “acquisition debt” because the proceeds are used to substantially improve or construct the home.

Home equity interest after 2025

Beginning with 2026, home equity debt up to certain limits will be deductible (as it was before 2018). The interest on a home equity loan will generally be deductible regardless of how you use the loan proceeds.

Thus, taxpayers considering taking out a home equity loan— one that’s not incurred to acquire, construct or substantially improve the home — should be aware that interest on the loan won’t be deductible. Further, taxpayers with outstanding home equity debt (again, meaning debt that’s not incurred to acquire, construct or substantially improve the home) will currently lose the interest deduction for interest on that debt.

Contact us with questions or if you would like more information about the mortgage interest deduction.

Tax credits may help with the high cost of raising children

Posted by Admin Posted on Mar 04 2020

300x200

If you’re a parent, or if you’re planning on having children, you know that it’s expensive to pay for their food, clothes, activities and education. Fortunately, there’s a tax credit available for taxpayers with children under the age of 17, as well as a dependent credit for older children.

Recent tax law changes

Changes made by the Tax Cuts and Jobs Act (TCJA) make the child tax credit more valuable and allow more taxpayers to be able to benefit from it. These changes apply through 2025.

Prior law: Before the TCJA kicked in for the 2018 tax year, the child tax credit was $1,000 per qualifying child. But it was reduced for married couples filing jointly by $50 for every $1,000 (or part of $1,000) by which their adjusted gross income (AGI) exceeded $110,000 ($75,000 for unmarried taxpayers). To the extent the $1,000-per-child credit exceeded a taxpayer’s tax liability, it resulted in a refund up to 15% of earned income (wages or net self-employment income) above $3,000. For taxpayers with three or more qualifying children, the excess of the taxpayer’s Social Security taxes for the year over the taxpayer’s earned income credit for the year was refundable. In all cases, the refund was limited to $1,000 per qualifying child.

Current law. Starting with the 2018 tax year, the TCJA doubled the child tax credit to $2,000 per qualifying child under 17. It also allows a $500 credit (per dependent) for any of your dependents who aren’t qualifying children under 17. There’s no age limit for the $500 credit, but tax tests for dependency must be met. Under the TCJA, the refundable portion of the credit is increased to a maximum of $1,400 per qualifying child. In addition, the earned threshold is decreased to $2,500 (from $3,000 under prior law), which has the potential to result in a larger refund. The $500 credit for dependents other than qualifying children is nonrefundable.

More parents are eligible

The TCJA also substantially increased the “phase-out” thresholds for the credit. Starting with the 2018 tax year, the total credit amount allowed to a married couple filing jointly is reduced by $50 for every $1,000 (or part of a $1,000) by which their AGI exceeds $400,000 (up from the prior threshold of $110,000). The threshold is $200,000 for other taxpayers. So, if you were previously prohibited from taking the credit because your AGI was too high, you may now be eligible to claim the credit.

In order to claim the credit for a qualifying child, you must include the child’s Social Security number (SSN) on your tax return. Under prior law, you could also use an individual taxpayer identification number (ITIN) or adoption taxpayer identification number (ATIN). If a qualifying child doesn’t have an SSN, you won’t be able to claim the $1,400 credit, but you can claim the $500 credit for that child using an ITIN or an ATIN. The SSN requirement doesn’t apply for non-qualifying-child dependents, but you must provide an ITIN or ATIN for each dependent for whom you’re claiming a $500 credit.

The changes made by the TCJA generally make these credits more valuable and more widely available to many parents.

If you have children and would like to determine if these tax credits can benefit you, please contact us or ask about them when we prepare your tax return.

© 2020

How business owners may be able to reduce tax by using an S corporation

Posted by Admin Posted on Feb 19 2020

300x200

Do you conduct your business as a sole proprietorship or as a wholly owned limited liability company (LLC)? If so, you’re subject to both income tax and self-employment tax. There may be a way to cut your tax bill by using an S corporation.

Self-employment tax basics

The self-employment tax is imposed on 92.35% of self-employment income at a 12.4% rate for Social Security up to a certain maximum ($137,700 for 2020) and at a 2.9% rate for Medicare. No maximum tax limit applies to the Medicare tax. An additional 0.9% Medicare tax is imposed on income exceeding $250,000 for married couples ($125,000 for married persons filing separately) and $200,000 in all other cases.

Similarly, if you conduct your business as a partnership in which you’re a general partner, in addition to income tax you are subject to the self-employment tax on your distributive share of the partnership’s income. On the other hand, if you conduct your business as an S corporation, you’ll be subject to income tax, but not self-employment tax, on your share of the S corporation’s income.

An S corporation isn’t subject to tax at the corporate level. Instead, the corporation’s items of income, gain, loss and deduction are passed through to the shareholders. However, the income passed through to the shareholder isn’t treated as self-employment income. Thus, by using an S corporation, you may be able to avoid self-employment income tax.

Salary must be reasonable

However, be aware that the IRS requires that the S corporation pay you reasonable compensation for your services to the business. The compensation is treated as wages subject to employment tax (split evenly between the corporation and the employee), which is equivalent to the self-employment tax. If the S corporation doesn’t pay you reasonable compensation for your services, the IRS may treat a portion of the S corporation’s distributions to you as wages and impose Social Security taxes on the amount it considers wages.

There’s no simple formula regarding what is considered reasonable compensation. Presumably, reasonable compensation is the amount that unrelated employers would pay for comparable services under similar circumstances. There are many factors that should be taken into account in making this determination.

Converting from a C to an S corp

There can be complications if you convert a C corporation to an S corporation. A “built-in gains tax” may apply when appreciated assets held by the C corporation at the time of the conversion are subsequently disposed of. However, there may be ways to minimize its impact.

As explained above, an S corporation isn’t normally subject to tax, but when a C corporation converts to S corporation status, the tax law imposes a tax at the highest corporate rate (21%) on the net built-in gains of the corporation. The idea is to prevent the use of an S election to escape tax at the corporate level on the appreciation that occurred while the corporation was a C corporation. This tax is imposed when the built-in gains are recognized (in other words, when the appreciated assets are sold or otherwise disposed of) during the five-year period after the S election takes effect (referred to as the “recognition period”).

Consider all issues

Contact us if you’d like to discuss the factors involved in conducting your business as an S corporation, including the built-in gains tax and how much the business should pay you as compensation.

© 2020

Reasons why married couples might want to file separate tax returns

Posted by Admin Posted on Feb 19 2020

300x200

Married couples often wonder whether they should file joint or separate tax returns. The answer depends on your individual tax situation.

It generally depends on which filing status results in the lowest tax. But keep in mind that, if you and your spouse file a joint return, each of you is “jointly and severally” liable for the tax on your combined income. And you’re both equally liable for any additional tax the IRS assesses, plus interest and most penalties. This means that the IRS can come after either of you to collect the full amount.

Although there are provisions in the law that offer relief, they have limitations. Therefore, even if a joint return results in less tax, you may want to file separately if you want to only be responsible for your own tax.

In most cases, filing jointly offers the most tax savings, especially when the spouses have different income levels. Combining two incomes can bring some of it out of a higher tax bracket. For example, if one spouse has $75,000 of taxable income and the other has just $15,000, filing jointly instead of separately can save $2,512.50 for 2020.

Filing separately doesn’t mean you go back to using the “single” rates that applied before you were married. Instead, each spouse must use “married filing separately” rates. They’re less favorable than the single rates.

However, there are cases when people save tax by filing separately. For example:

One spouse has significant medical expenses. For 2019 and 2020, medical expenses are deductible only to the extent they exceed 7.5% of adjusted gross income (AGI). If a medical expense deduction is claimed on a spouse’s separate return, that spouse’s lower separate AGI, as compared to the higher joint AGI, can result in larger total deductions.

Some tax breaks are only available on a joint return. The child and dependent care credit, adoption expense credit, American Opportunity tax credit and Lifetime Learning credit are only available to married couples on joint returns. And you can’t take the credit for the elderly or the disabled if you file separately unless you and your spouse lived apart for the entire year. You also may not be able to deduct IRA contributions if you or your spouse were covered by an employer retirement plan and you file separate returns. You also can’t exclude adoption assistance payments or interest income from series EE or Series I savings bonds used for higher education expenses.

Social Security benefits may be taxed more. Benefits are tax-free if your “provisional income” (AGI with certain modifications plus half of your Social Security benefits) doesn’t exceed a “base amount.” The base amount is $32,000 on a joint return, but zero on separate return (or $25,000 if the spouses didn’t live together for the whole year).

No hard and fast rules

The decision you make on your federal tax return may affect your state or local income tax bill, so the total tax impact should be compared. There’s often no simple answer to whether a couple should file separate returns. A number of factors must be examined. We can look at your tax bill jointly and separately. Contact us to prepare your return or if you have any questions.

© 2020

Do your employees receive tips? You may be eligible for a tax credit

Posted by Admin Posted on Feb 10 2020

300x200

Are you an employer who owns a business where tipping is customary for providing food and beverages? You may qualify for a tax credit involving the Social Security and Medicare (FICA) taxes that you pay on your employees’ tip income.

How the credit works

The FICA credit applies with respect to tips that your employees receive from customers in connection with the provision of food or beverages, regardless of whether the food or beverages are for consumption on or off the premises. Although these tips are paid by customers, they’re treated for FICA tax purposes as if you paid them to your employees. Your employees are required to report their tips to you. You must withhold and remit the employee’s share of FICA taxes, and you must also pay the employer’s share of those taxes.

You claim the credit as part of the general business credit. It’s equal to the employer’s share of FICA taxes paid on tip income in excess of what’s needed to bring your employee’s wages up to $5.15 per hour. In other words, no credit is available to the extent the tip income just brings the employee up to the $5.15 per hour level, calculated monthly. If you pay each employee at least $5.15 an hour (excluding tips), you don’t have to be concerned with this calculation.

Note: A 2007 tax law froze the per-hour amount at $5.15, which was the amount of the federal minimum wage at that time. The minimum wage is now $7.25 per hour but the amount for credit computation purposes remains $5.15.

How it works

Example: A waiter works at your restaurant. He’s paid $2 an hour plus tips. During the month, he works 160 hours for $320 and receives $2,000 in cash tips which he reports to you.

The waiter’s $2 an hour rate is below the $5.15 rate by $3.15 an hour. Thus, for the 160 hours worked, he or she is below the $5.15 rate by $504 (160 times $3.15). For the waiter, therefore, the first $504 of tip income just brings him up to the minimum rate. The rest of the tip income is $1,496 ($2,000 minus $504). The waiter’s employer pays FICA taxes at the rate of 7.65% for him. Therefore, the employer’s credit is $114.44 for the month: $1,496 times 7.65%.

While the employer’s share of FICA taxes is generally deductible, the FICA taxes paid with respect to tip income used to determine the credit can’t be deducted, because that would amount to a double benefit. However, you can elect not to take the credit, in which case you can claim the deduction.

Get the credit you’re due

If your business pays FICA taxes on tip income paid to your employees, the tip tax credit may be valuable to you. Other rules may apply. Contact us if you have any questions.

© 2020

Numerous tax limits affecting businesses have increased for 2020

Posted by Admin Posted on Jan 29 2020

300x200

An array of tax-related limits that affect businesses are annually indexed for inflation, and many have increased for 2020. Here are some that may be important to you and your business.

Social Security tax

The amount of employees’ earnings that are subject to Social Security tax is capped for 2020 at $137,700 (up from $132,900 for 2019).

Deductions

  • Section 179 expensing:
    • Limit: $1.04 million (up from $1.02 million for 2019)
    • Phaseout: $2.59 million (up from $2.55 million)
  • Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at:
    • Married filing jointly: $326,600 (up from $321,400)
    • Married filing separately: $163,300 (up from $160,725)
    • Other filers: $163,300 (up from $160,700)

 

Retirement plans

  • Employee contributions to 401(k) plans: $19,500 (up from $19,000)
  • Catch-up contributions to 401(k) plans: $6,500 (up from $6,000)
  • Employee contributions to SIMPLEs: $13,500 (up from $13,000)
  • Catch-up contributions to SIMPLEs: $3,000 (no change)
  • Combined employer/employee contributions to defined contribution plans (not including catch-ups): $57,000 (up from $56,000)
  • Maximum compensation used to determine contributions: $285,000 (up from $280,000)
  • Annual benefit for defined benefit plans: $230,000 (up from $225,000)
  • Compensation defining a highly compensated employee: $130,000 (up from $125,000)
  • Compensation defining a “key” employee: $185,000 (up from $180,000)

 

Other employee benefits

  • Qualified transportation fringe-benefits employee income exclusion: $270 per month (up from $265)
  • Health Savings Account contributions:
    • Individual coverage: $3,550 (up from $3,500)
    • Family coverage: $7,100 (up from $7,000)
    • Catch-up contribution: $1,000 (no change)
  • Flexible Spending Account contributions:
    • Health care: $2,750 (no change)
    • Dependent care: $5,000 (no change)

These are only some of the tax limits that may affect your business and additional rules may apply. If you have questions, please contact us.

© 2019

Answers to your questions about 2020 individual tax limits

Posted by Admin Posted on Jan 29 2020

300x200

Right now, you may be more concerned about your 2019 tax bill than you are about your 2020 tax situation. That’s understandable because your 2019 individual tax return is due to be filed in less than three months.

However, it’s a good idea to familiarize yourself with tax-related amounts that may have changed for 2020. For example, the amount of money you can put into a 401(k) plan has increased and you may want to start making contributions as early in the year as possible because retirement plan contributions will lower your taxable income.

Note: Not all tax figures are adjusted for inflation and even if they are, they may be unchanged or change only slightly each year due to low inflation. In addition, some tax amounts can only change with new tax legislation.

So below are some Q&As about tax-related figures for this year.

How much can I contribute to an IRA for 2020?

If you’re eligible, you can contribute $6,000 a year into a traditional or Roth IRA, up to 100% of your earned income. If you’re age 50 or older, you can make another $1,000 “catch up” contribution. (These amounts are the same as they were for 2019.)

I have a 401(k) plan through my job. How much can I contribute to it?

For 2020, you can contribute up to $19,500 (up from $19,000) to a 401(k) or 403(b) plan. You can make an additional $6,500 catch-up contribution if you’re age 50 or older.

I sometimes hire a babysitter and a cleaning person. Do I have to withhold and pay FICA tax on the amounts I pay them?

In 2020, the threshold when a domestic employer must withhold and pay FICA for babysitters, house cleaners, etc. is $2,200 (up from $2,100 in 2019).

How much do I have to earn in 2020 before I can stop paying Social Security on my salary?

The Social Security tax wage base is $137,700 for this year (up from $132,900 last year). That means that you don’t owe Social Security tax on amounts earned above that. (You must pay Medicare tax on all amounts that you earn.)

I didn’t qualify to itemize deductions on my last tax return. Will I qualify for 2020?

The Tax Cuts and Jobs Act eliminated the tax benefit of itemizing deductions for many people by increasing the standard deduction and reducing or eliminating various deductions. For 2020, the standard deduction amount is $24,800 for married couples filing jointly (up from $24,400). For single filers, the amount is $12,400 (up from $12,200) and for heads of households, it’s $18,650 (up from $18,350). So if the amount of your itemized deductions (such as charitable gifts and mortgage interest) are less than the applicable standard deduction amount, you won’t itemize for 2020.

How much can I give to one person without triggering a gift tax return in 2020?

The annual gift exclusion for 2020 is $15,000 and is unchanged from last year. This amount is only adjusted in $1,000 increments, so it typically only increases every few years.

Your tax picture

These are only some of the tax figures that may apply to you. For more information about your tax picture, or if you have questions, don’t hesitate to contact us.

© 2020

Help protect your personal information by filing your 2019 tax return early

Posted by Admin Posted on Jan 22 2020

300x200

The IRS announced it is opening the 2019 individual income tax return filing season on January 27. Even if you typically don’t file until much closer to the April 15 deadline (or you file for an extension), consider filing as soon as you can this year. The reason: You can potentially protect yourself from tax identity theft — and you may obtain other benefits, too.

Tax identity theft explained

In a tax identity theft scam, a thief uses another individual’s personal information to file a fraudulent tax return early in the filing season and claim a bogus refund.

The legitimate taxpayer discovers the fraud when he or she files a return and is informed by the IRS that the return has been rejected because one with the same Social Security number has already been filed for the tax year. While the taxpayer should ultimately be able to prove that his or her return is the valid one, tax identity theft can cause major headaches to straighten out and significantly delay a refund.

Filing early may be your best defense: If you file first, it will be the tax return filed by a would-be thief that will be rejected, rather than yours.

Note: You can get your individual tax return prepared by us before January 27 if you have all the required documents. It’s just that processing of the return will begin after IRS systems open on that date.

Your W-2s and 1099s

To file your tax return, you must have received all of your W-2s and 1099s. January 31 is the deadline for employers to issue 2019 Form W-2 to employees and, generally, for businesses to issue Form 1099 to recipients of any 2019 interest, dividend or reportable miscellaneous income payments (including those made to independent contractors).

If you haven’t received a W-2 or 1099 by February 1, first contact the entity that should have issued it. If that doesn’t work, you can contact the IRS for help.

Other advantages of filing early

Besides protecting yourself from tax identity theft, another benefit of early filing is that, if you’re getting a refund, you’ll get it faster. The IRS expects most refunds to be issued within 21 days. The time is typically shorter if you file electronically and receive a refund by direct deposit into a bank account.

Direct deposit also avoids the possibility that a refund check could be lost or stolen or returned to the IRS as undeliverable. And by using direct deposit, you can split your refund into up to three financial accounts, including a bank account or IRA. Part of the refund can also be used to buy up to $5,000 in U.S. Series I Savings Bonds.

What if you owe tax? Filing early may still be beneficial. You won’t need to pay your tax bill until April 15, but you’ll know sooner how much you owe and can plan accordingly.

Be an early-bird filer

If you have questions about tax identity theft or would like help filing your 2019 return early, please contact us. We can help you ensure you file an accurate return that takes advantage of all of the breaks available to you.

© 2020

Why doing the easy parts of your to-do list first can be a bad idea

Posted by Admin Posted on Jan 14 2020

It feels good to cross things off of your to-do list—especially when you’ve got a heavy workload. Taking care of quick tasks, such as answering email or sending invoices, at the beginning of the day can give you a sense of accomplishment. But tackling the easy stuff first might actually harm your productivity in the long run, according to a new study.

“In the short-term, the person could actually feel satisfied and less anxious,” says Maryam Kouchaki, associate professor of management and organizations at Kellogg School of Management at Northwestern University. “But avoiding hard tasks indefinitely also cuts off opportunities to learn and improve one’s skills.

The idea for the study came after Kouchaki had a conversation with Bradley Staats of University of North Carolina at Chapel Hill and Francesca Gino at Harvard Business School about their own tendencies to delay hard tasks, such as writing a paper, in favor of easy ones, such as prepping for a routine class.

“We were curious if this was something the average person was doing and, more importantly, what were the short- and long-term effects,” she says.

EASY TASK BIAS

Kouchaki, Staats, and Gino collaborated with Diwas KC at Emory University to study data that had been collected about emergency room doctors’ case choices. While factors such as specialties, patient waiting time, and bandwidth were considered, the researchers discovered that doctors were more likely to choose easier patients during times of higher workloads. In fact, each additional patient under their care was linked to an 8% higher chance of selecting a lower-acuity case.

To confirm the results in another setting, the researchers conducted an experiment, giving participants a sideways picture of a book page to read, asking them to type as much of the text as possible in three minutes. Half the participants, dubbed the “high-workload group,” were also asked to simultaneously listen to a song and count the number of times that certain words were used.

After the task was complete, the participants reported their sense of progress, fatigue, and stress level. Then they were asked to choose a second task, one of which was easy while the other was somewhat difficult. Seventy-six percent of the high-workload group picked the easy second task, compared to 64% of the low-workload group.

WHY WE LIKE EASY TASKS

Finishing tasks provides a sense of progress and makes us feel good. “We all have limited time and attention,” says Kouchaki. “In any moment, if you have a choice of doing an easy or difficult task, most of us tend to pick the easy task. Easier tasks are often quicker to complete, and they are more likely to be chosen first when people are busier. We call this ‘task completion preference.'”

The problem is that when you create a habit of choosing easier tasks over hard, you can impact your long-term productivity.

“This preference for easy tasks pays off in the short-term with high performance; the department is more likely to finish more tasks,” says Kouchaki. “But in the long run, the most learning happens through difficult tasks. When you avoid them, you escape those benefits.”

WHAT TO DO INSTEAD

While you might think that it’s best to fill your day with harder tasks, a better strategy is doing a combination of both.

“Saying that we should always do the difficult task first can be extreme,” says Kouchaki. “We don’t have data, but my intuition is if people start with a difficult task and try to stick with it until they finish it, they could become demotivated without a sense of progress and super fatigued. Having a combination of easy and difficult is a more effective strategy. You get sense of completion but at the same time mindful focus on difficult tasks as well.”

You can also tackle complex projects by breaking them down into smaller, simpler milestones. This can provide the reward you feel from completing an easy task, while staying on track to address and learn from challenges.

Difficult tasks often provide more learning opportunities, but Kouchaki points out that it doesn’t mean that easy tasks aren’t important. “What’s more important is the psychological sense of completion and that it matters,” she says. “Ultimately, the goal should be to be aware and be more intentional and mindful of what you do.”

Should You Pay Off Your Mortgage Before You Retire?

Posted by Admin Posted on Jan 14 2020

A senior couple using their laptop to keep track of their finances.

PAYING OFF YOUR HOME mortgage before you retire is a major financial achievement, but you don't necessarily have to eliminate all housing debt in order to retire well. Low mortgage interest rates mean it can make financial sense to continue to make mortgage payments during your retirement years. "Interest rates are changing the game," says Bryson Roof, a certified financial planner for Roof Advisory Group, a division of Fort Pitt Capital Group, in Harrisburg, Pennsylvania.

Here are five major scenarios where you can come out ahead by keeping your mortgage going into retirement:

  1. You are earning a better rate on your investments than you pay on your mortgage.
  2. You would be paying off your mortgage with savings.
  3. You have other higher-interest debt.
  4. You can qualify for a tax deduction by saving elsewhere.
  5. You're making an emotional rather than financial decision.

Deciding whether to pay off your mortgage before retirement depends on how much you've saved for retirement, your cash flow and how your investment accounts are doing. Here's a look at when it makes sense to continue making mortgage payments during your retirement years.

1. You Earn a Better Rate on Your Investments Than You Pay on Your Mortgage

A mortgage can help you come out ahead if you earn more on your investment portfolio than you are paying for mortgage interest. "My mortgage was 3.6%," Roof says. "If I can earn 6% on my portfolio and pay interest of 3.6% on my mortgage, I'm better off letting my portfolio grow."

It's important to run the numbers for the interest you are paying on your mortgage and compare it to your expected investment returns. "Do the math," says Barry Bigelow, lead advisor at the Duluth, Minnesota, branch of Great Waters Financial. "Make sure if you can't do the math yourself, someone is helping you."

Sometimes it may not make sense to pay off the loan, but it could be beneficial to refinance. "If they have a variable rate, in retirement rates could begin to rise," Roof says. "It makes sense to lock in a fixed rate today."

2. You Would Be Paying Off Your Mortgage With Savings

You don't want to use all of your savings to pay off your mortgage and then be unable to cope with other expenses in retirement. "If you pay your mortgage off and don't have money set aside for emergencies, now you have to get a loan or home equity line of credit to put on a new roof or get a new car, whatever that may be," Roof says. An emergency expense could force you to take on higher interest debt, which would eliminate the benefit of paying off your mortgage.

Using your retirement savings to make mortgage payments could also trigger taxes. If you withdraw $60,000 from your IRA to pay off your mortgage, you might end up with less than $50,000 after taxes. It might not make sense to pay off your mortgage from your retirement accounts. "I do discourage it for those who have not been disciplined enough and want to reduce what they save for retirement to pay off a home," says Nicolas Abrams, a certified financial planner for AJW Financial Partners in Baltimore, Maryland. "If you have a retirement shortfall, all your money is in your house. You will have to get a line of credit." Sometimes paying off a mortgage can also impact other retirement objectives, such as requiring you to work longer.

3. You Have Other Higher-Interest Debt

Consider paying off the debt with the highest interest rate first. "If you have high interest rate student loans and credit cards, you are better off prioritizing reducing that high interest debt versus a low interest rate mortgage," Roof says.

4. You Can Qualify for a Tax Deduction by Saving Elsewhere

Remember to consider taxes when deciding whether to pay down your mortgage or maintain investments. The 2017 Tax Cuts and Jobs Act changed the rules for the mortgage interest tax deduction. Due to the new tax law, many people can't necessarily deduct mortgage interest because of the higher standard deduction, and if you don't have enough deductions, you can't itemize.

However, you may be able to qualify for a tax deduction by putting money into retirement accounts. While it can be emotionally gratifying to pay off your mortgage, sometimes you can come out ahead by saving elsewhere instead of paying off your house. "By not paying off your mortgage, you can divert that money into 401(k)s, 403(b)s and IRAs, and reduce your taxes," Roof says.

Instead of paying off a home mortgage, Abrams often recommends that clients put more money in their retirement account or IRA. "You will have access to that money," Abrams says. "If you have taken the cash and paid off the mortgage, that is not liquid money. If you do access it, you have to pay it back with interest."

5. You're Making an Emotional Rather Than Financial Decision

There are some people who want to pay off their mortgage just for peace of mind in retirement. "If a client wants to have the mortgage paid off, it's not a bad thing," Abrams says. "I have some clients who have their mortgage paid off before retirement. Their finances are structured, and they still have enough to fund their retirement."

Some people want to pay down their mortgage, even when mortgage rates are low and their portfolio is earning more. "What I like to talk to people about is understanding the emotional components and understanding mathematical components," Roof says. "It's a unique question per each individual. There is no dead set answer. You need an action plan that fits each person's unique circumstances."

Certain people are just not comfortable having debt in retirement, whether it's how they were raised, an aversion to risk, a nagging feeling about owing money or the sense of accomplishment of living without debt. "If you have done the math, it makes it less of an emotional decision," Bigelow says.

Rodney Brooks, Contributor

How the Best Managers Identify and Develop Talent

Posted by Admin Posted on Jan 14 2020

 

Great managers are typically experts in their fields with a strong performance history and an interest in being in charge. But to lead effectively they need to develop another skill, one that is often overlooked: talent management.

The ability to see talent before others see it (internally and externally), unlock human potential, and find not just the best employee for each role, but also the best role for each employee, is crucial to running a topnotch team. In short, great managers are also great talent agents.

But becoming a great talent agent is not always easy. It requires us as leaders to be more open minded and to throw away outdated, albeit popular, hiring tactics. Too many of us look for talent in the same old (wrong) places, or follow the popular trend of thinking the “best hire” is the “best culture fit.” These approaches undermine efforts to boost diversity (demographically and cognitively) and ultimately hinder creativity and innovation.

While there is no one “best” way to hire talent, there certainly are better approaches than those we have relied on in the past. After carefully scrutinizing the performance of what makes a competent and incompetent boss, my colleagues and I have outlined seven science-based recommendations to help you update your hiring tactics, and develop your talent management skills along the way.

1) Think ahead.

Oddly, prospective employees are often asked during job interviews what their five-year career aspirations are or where they see themselves in five years; yet few managers ask themselves what their five-year talent strategy is. Most leaders know what kind of talent they are looking for in the moment, but far fewer think ahead to figure out whether or not their new hire has skills that align with their long-term strategy. If you know where you want to go, focus your efforts on hiring someone with the skills, abilities, and expertise you will need to move forward. Don’t assume everyone you have today will stay. You must simultaneously play the long game while executing your shorter term goals.

2) Focus on the right traits.

The two biggest mistakes managers make when they evaluate other people’s talents are: focusing too much on their past performance (even when they lack reliable metrics) and overrating the importance of their resume, hard skills, and technical expertise. The World Economic Forum predicts that 65% of today’s jobs will no longer be around in 15 years.  This means that leaders cannot place too much emphasis on the current educational curriculum, which is primarily designed to prepare people for present, rather than future, jobs. While we may not be able to guess what those jobs will be, it is clear that people will be more equipped to do them if they have certain soft skills, such as emotional intelligence, drive, and learnability. They are the foundational traits that determine new skill and knowledge acquisition. Moreover, these foundational aspects of talent are likely to become even more important with the rise of AI.

3) Don’t go outside when you can stay inside.

Firms often hire externally when they could source better talent from within. Scientific reviews show that external hires will take longer to adapt and have higher rates of voluntary and involuntary exits — yet, they are generally paid more than internal candidates. That’s why it’s valuable to look for talent internally before you search outside your organization. Internal hires tend to have higher levels of adaptation and success rates than external hires, not least because they are better able to understand the culture and navigate the politics of the organization. They are also more likely to be loyal and committed to their company. Further, promoting internal candidates boosts other employees’ engagement.

4) Think inclusively.

Most managers have a tendency to hire people who remind them of themselves. This tendency harms diversity and inhibits team performance. When we hire people just like us, we reduce the probability of creating teams with complementary skillsets, those with different and even opposite profiles. The only way to think about talent inclusively is to embrace people who are different from you and others already on your team. But we suggest you take it a step further and celebrate people who challenge traditional norms. The engine of progress is change, and change is unlikely to happen if you only hire people who perpetuate the status quo. We all know that companies with a diverse talent pipeline tend to have better financial results.

5) Be data-driven.

Every human — managers are no exception — makes bad decisions from time to time. But very few are interested in acknowledging this, which is why hiring biases are often so pervasive. In fact, research shows that hiring managers would rather inflate performance ratings than admit they hired the wrong person. Those of us in positions of power, therefore, need to be extra self-critical and test the outcomes of our decisions. For instance, when you hire someone, outline clear performance goals that can be easily evaluated by others, and see whether your view of their performance aligns with what others think and see. Likewise, before you nominate someone as a high-potential employee, arm yourself with solid data and evidence to ensure that your decision is fair and sensible, even if the future proves you wrong. Talent identification is an ongoing process of trial and error, and the point is not to get it right, but to find better ways of being wrong.

6) Think plural rather than singular.

We live in a world that often glorifies individualism and bemoans collectivity. However, almost everything of value that has ever been produced is the result of a collective human effort — people with different backgrounds coming together to turn their unique talents into a high performing synergy. Thus when you think about your talent pipeline, focus less on individuals and more on the configuration of your team: will people work together well, are they likely to complement each other, and do their functional and psychological roles align with what the team needs? On great teams, each individual is like an indispensable organ in charge of executing a specific function, making each part different from others, and the system greater than the sum of its units. Talent agents know that for teams to be successful, the individuals on them must embrace a “we before I” attitude.

7) Make people better.

Great managers recognize potential where others don’t — and so do great talent agents. No matter how skilled your employees may be, you still need to help them grow in new ways. No matter how much an employee is struggling, you are responsible for attempting to help them find their footing. As professors Herminia Ibarra and Anne Scoular recently noted, “The role of the manager, in short, is becoming that of a coach.” This means mastering the art of giving critical feedback, including the ability to have difficult conversations and address poor performance. It also means predicting your future talent needs so that you can stay ahead of the demand and have people on your team remain relevant, valuable assets for years to come. As our ManpowerGroup research surveying nearly 40,000 organizations across 43 countries shows, almost one in two employers report that they just cannot find the skills they need, which suggests that their talent planning strategies are not effective enough.

In sum, being a great manager is, in large part, about being an expert in talent matters. Fortunately, there is a well-established science of talent management, grounded on decades of industrial-organizational and management research. But unless you know how to apply it, this science is useless. And the most important part of this process is to never stop thinking about your employees’ potential and talent. No other factor is likely to make such a big difference when it comes to building a high performing team.

January 09, 2020

IRS sets the opening of tax season

Posted by Admin Posted on Jan 07 2020

Image result for tax season 2020

Tax season begins for individual filers on Monday, Jan. 27, 2020, when the IRS will begin accepting and processing 2019 returns.

The deadline to file 2019 tax returns and pay tax owed is Wednesday, April 15, 2020. More than 150 million individual tax returns for the 2019 tax year are expected to be filed.

The IRS set the opening date to “ensure the security and readiness of key tax processing systems and to address the potential impact of recent tax legislation on … returns.”

“We encourage taxpayers to plan ahead and use the tools and information available on IRS.gov,” said IRS Commissioner Chuck Rettig in a statement. “The IRS and the nation’s tax community are committed to making this another smooth filing season.”

The IRS has also reminded taxpayers that they don’t have to wait until late this month to start their return or to contact a preparer.

 

Putting more thinking into charitable giving

Posted by Admin Posted on Jan 06 2020

The decision to give to charity is often made hurriedly at the end of the year for business taxpayers and investors as they combine their impulse to give with a desire to generate a tax benefit. However, it’s a decision that needs careful consideration, according to Tom Wheelwright, CPA, CEO of WealthAbility.

“Small-business owners, entrepreneurs and investors can make a difference and impact the world for good by donating to charity,” he observed. “But it’s important that they check with a CPA before doing so in order to maximise the tax-saving potential of their donations.”

Wheelwright advised CPAs to educate their clients about the impact of charitable giving, with a number of guidelines in mind. “They should know that any major contribution should be cleared first with their CPA,” he said. “The CPA can verify that a donation to a particular group or organization qualifies for a tax deduction. Many taxpayers understand that they can deduct donations to a nonprofit 501(c)(3), but they may not know that there are other organizations that also qualify.”

Does it matter what motivates business philanthropy? “No,” said Wheelwright. “It’s who you give the donation to that makes a difference — it doesn’t matter why you’re doing it.”

While not a factor in the business entity decision, there are differences between a C corporation and an S corporation in the charitable deduction realm, Wheelwright indicated.

“While a C corporation can only deduct 10 percent of its income, an owner of an S corporation that does not take the standard deduction can deduct up to 60 percent of their adjusted gross income for cash contributions,” he said. “For non-cash donations, the deduction limit is 30 percent. And corporations on the accrual method of accounting may elect to have a charitable contribution treated as paid during the taxable year, if payment is actually made on or before the 15th day of the third month following the close of the taxable year, if authorized by the board of directors,” he said.

Wheelwright sees donor-advised funds as the answer for many taxpayers, both individual and business, that want to make a contribution and get a deduction but don’t yet know where to donate: “They’re an intermediary between the donor and the eventual donee. They’re becoming more and more popular with our clients.”

A donor-advised fund is a separately identified fund or account that is maintained and operated by a 501(c)(3) organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it, but the donor retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. The funds donated to the account are typically invested for tax-free growth, and the donor can direct the donation to any charity that qualifies under the IRS guidelines.

“It’s like having your own private foundation without having to set it up and maintain it,” said Wheelwright. “The reason they’ve become increasingly popular over the past five years is that the donor has control over where and when the funds are donated. They can make a contribution in one year to the donor advised fund and get the charitable contribution deduction, and then make the actual donation in the following year.”

Promissory notes, Ponzi schemes top investor threats for 2020, says NASAA

Posted by Admin Posted on Jan 06 2020

Promissory notes and Ponzi schemes are the leading products or schemes that are likely to trap investors in 2020, according to the North American Securities Administrators Association. 

 

Filling out the top five likely investor traps are real estate investments, cryptocurrency-related investments and social media/Internet-based investment schemes, NASAA said in a release. 

 

The organization of state and provincial securities regulators in the United States, Canada and Mexico, said its top-five list is based on investor complaints, ongoing investigations and current enforcement trends.

 

The most common telltale sign of an investment scam, said Christopher W. Gerold, NASAA president and chief of the New Jersey Bureau of Securities, is an offer of guaranteed high returns with no risk, who noted that many of the threats facing investors involve private offerings, which are exempt from federal securities registration requirements and are not sold through public stock exchanges.

 

Dec 24, 2019 @ 3:39 pm

By Investment News

Why retiring at 65 could become a thing of the past

Posted by Admin Posted on Jan 06 2020

GP: Expand Social Security protester Whitehouse 150713

Raising the retirement age is an emotional issue.

For evidence, just look at proposals to move up the full retirement age for Social Security. Even the idea upsets advocates who want to see the program expanded and individuals receiving benefits. Because of that, lawmakers tend to tiptoe around the issue.

 

Outside the U.S., French citizens have taken to the streets to protest President Emmanuel Macron’s plan to overhaul the country’s pension system. Among the proposed changes is raising the retirement age to 64 from 62 .

Most workers do not want to be told they have to work longer.

Yet it turns out that in the U.S., many already anticipate extending their working years, according to recent research from the Transamerica Center for Retirement Studies.

A majority of workers — 54% — said they expect to stop working sometime after age 65 or never retire at all, the research found.

Meanwhile, just 24% said they plan to retire at 65, and 22% said they plan to retire earlier.

 

“People want to extend their working lives and plan to keep working in retirement,” said Catherine Collinson, CEO and president of the Transamerica Center for Retirement Studies. “By and large, many simply have not yet saved enough to retire comfortably.”

More than half of workers — 55% — said they plan to work either part-time or full time in retirement. While most of those respondents cited financial reasons for those plans, many also pointed to other reasons, many related to healthy aging, such as avoiding social isolation.

U.S. workers may also be driven to work longer for another reason: concerns about the future of Social Security, Collinson said. Three in 4 workers said they are worried that Social Security will not be there for them when they retire.

Separate research Transamerica conducted in collaboration with the Aegon Center for Longevity and Retirement looked at what age workers around the world expect to retire from all paid employment.

While the median (the middle in a list of numbers) age in the U.S. was 66, other countries varied. The Netherlands came in with the highest age, 67. China and Turkey came in with the lowest at 58.

The median was 65.

Still, the retirement age is creeping higher in the U.S. and elsewhere, Collinson said.

In the U.S., according to the Social Security Administration, full retirement age for individuals born in 1960 and later is 67.

Other countries are also moving in that direction, Collinson said. The Netherlands is already at 67, while France, Spain and Poland all have plans to move towards that age.

“That tends to be the prevailing benchmark,” Collinson said.

Posted by Admin Posted on Jan 02 2020

IRS updates mileage rates for 2020

Posted by Admin Posted on Jan 02 2020

The Internal Revenue Service issued the 2020 optional standard mileage rates Tuesday that taxpayers and tax professionals can use to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Starting on Jan. 1, 2020, the standard mileage rates for the use of a car (along with vans, pickups or panel trucks) will be:

  • 57.5 cents per mile driven for business use, down half a cent from the 2019 rate;
  • 17 cents per mile driven for medical or moving purposes, down three cents from the 2019 rate; and
  • 14 cents per mile driven on behalf of charitable organizations.


The business mileage rate declined half a cent for business travel driven and three cents for medical and certain moving expenses from the 2019 rates. The charitable rate is set by statute and stays unchanged.

The IRS stressed that under the Tax Cuts and Jobs Act, taxpayers can’t claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. They also can’t claim a deduction for moving expenses, except members of the Armed Forces who are on active duty and moving under orders to a permanent change of station. For more details, check out Rev. Proc. 2019-46.

The standard mileage rate for business use is based on a yearly study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes depends on the variable costs.

Taxpayers also have the option of calculating the actual costs of using their vehicle as opposed to using the standard mileage rates.

A taxpayer can’t use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (or MACRS for short) or after claiming a Section 179 deduction for that vehicle. Furthermore, the business standard mileage rate can’t be used for more than five vehicles simultaneously. These and other limitations are explained in section 4.05 of Rev. Proc. 2019-46.

Notice 2020-05 discusses the standard mileage rates, the amount a taxpayer needs to use in figuring reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer can use in computing the allowance under a fixed and variable rate plan. For employer-provided vehicles, the notice also describes the maximum fair market value of automobiles first made available to employees for personal use in calendar year 2020 for which employers can use the fleet-average valuation rule or the vehicle cents-per-mile valuation rule.

Posted by Admin Posted on Jan 02 2020

Posted by Admin Posted on Jan 02 2020

Posted by Admin Posted on Jan 02 2020

Posted by Admin Posted on Jan 02 2020

Posted by Admin Posted on Jan 02 2020

Posted by Admin Posted on Jan 02 2020

Posted by Admin Posted on Jan 02 2020

Posted by Admin Posted on Jan 02 2020

Posted by Admin Posted on Jan 02 2020

2020 Q1 tax calendar: Key deadlines for business and other employers

Posted by Admin Posted on Dec 27 2019

300x200

Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2020. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

January 31

  • File 2019 Forms W-2, “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.
  • Provide copies of 2019 Forms 1099-MISC, “Miscellaneous Income,” to recipients of income from your business where required.
  • File 2019 Forms 1099-MISC reporting nonemployee compensation payments in Box 7 with the IRS.
  • File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2019. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.
  • File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2019. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return. (Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944, “Employer’s Annual Federal Tax Return.”)
  • File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2019 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

February 28

  • File 2019 Forms 1099-MISC with the IRS if 1) they’re not required to be filed earlier and 2) you’re filing paper copies. (Otherwise, the filing deadline is March 31.)

March 16

  • If a calendar-year partnership or S corporation, file or extend your 2019 tax return and pay any tax due. If the return isn’t extended, this is also the last day to make 2019 contributions to pension and profit-sharing plans.

© 2019

2019 tax calendar

Posted by Admin Posted on Jan 28 2019

T

To help you make sure you don’t miss any important 2019 deadlines, we’ve provided this summary of when various tax-related forms, payments and other actions are due. Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them. 

Federal government shutdown creates tax filing uncertainty

Posted by Admin Posted on Jan 14 2019



The IRS has announced that it will begin accepting paper and electronic tax returns for the 2018 tax year on January 28, but much remains to be seen about how the ongoing shutdown of the federal government will affect this year’s filings. Although the Trump administration has stated that the IRS will pay refunds during the closure — a shift from IRS practice in previous government shutdowns — it’s not clear how quickly such refunds can be processed.

Effects of the shutdown on the IRS so far

An estimated 800,000 federal government workers have been furloughed since December 22, 2018, due to the impasse between President Trump and Congress over funding for a southern border wall. The most recent contingency plan published for the IRS lapsed on December 31, 2018, but it provided that only 12.5% of the tax agency’s approximately 80,000 employees would be deemed essential and therefore continue working during a shutdown.

The furloughs are necessary because the standoff over the border wall has prevented the enactment of several of the appropriations bills that fund the federal government. Tax refunds aren’t paid with appropriated funds, but IRS employees are. In the past, the IRS hasn’t paid tax refunds during shutdowns because it didn’t have the appropriated funds it needed to pay the employees who process refunds. Trump administration attorneys, however, have determined that the agency can issue refunds during a shutdown.

The IRS likely will need far more than 12.5% of its employees on the job to process refunds when it starts accepting filings. In 2018, the IRS received 18.3 million returns and processed 6.1 million refunds in the first week of tax season. By just one week later, it had received 30.8 million returns and issued 13.5 million refunds. Even though the IRS has indicated that it intends to recall “a significant portion of its workforce” to work, it has provided few details, and those employees would have to work without pay. The IRS says it will release an updated contingency plan “in the coming days.”

TCJA complicates the picture

The implementation of the federal tax overhaul could further complicate matters for taxpayers. The 2018 tax year is the first to be subject to the Tax Cuts and Jobs Act (TCJA), which brought sweeping changes to the tax code, as well as new tax forms. Various TCJA implementation activities, such as the development of new publications and instructions, will continue because they’re funded by earlier appropriations legislation.

Be aware that taxpayers and their accountants may not be able to contact the IRS with questions. When the IRS’s main number on January 9 was called, this recorded message was received: “Live telephone assistance is not available at this time. Normal operations will resume as soon as possible.”

During the 2013 government shutdown, taxpayers also couldn’t receive live telephone customer service from the IRS, and walk-in taxpayer assistance centers were shuttered. At that time, the IRS website was available, but some of its interactive features weren’t. Treasury Secretary Steve Mnuchin has stated that the IRS will call back enough employees to work to answer 60% to 70% of phone calls seeking tax assistance during this shutdown, which could lead to widespread taxpayer frustration.

Tax filing deadlines are still in effect

Regardless of how IRS operations proceed, taxpayers still need to comply with the filing deadlines. Individual taxpayers in every state but Maine and Massachusetts must file by April 15, 2019; filers in those two states have until April 17, 2019. Individuals who obtain a filing extension have until October 15, 2019, to file their returns but should pay the taxes owed by the April deadline to avoid penalties. If you have questions about tax filing, please contact us.

What do the 2019 cost-of-living adjustments mean for you?

Posted by Admin Posted on Nov 20 2018

The IRS has announced its 2019 cost-of-living adjustments to tax items that might affect you. Many of the amounts increased to account for inflation, but some remained at 2018 levels. As you implement 2018 year-end tax planning strategies, be sure to take these 2019 adjustments into account in your planning.

Bear in mind that, under the Tax Cuts and Jobs Act, annual inflation adjustments are now calculated using the chained consumer price index (also known as C-CPI-U). This increases tax bracket thresholds, the standard deduction, certain exemptions and other figures at a slower rate than was the case with the consumer price index previously used, potentially pushing taxpayers into higher tax brackets and making various breaks worth less over time. The law adopts the C-CPI-U on a permanent basis.

Individual income taxes

Tax-bracket thresholds increase for each filing status but, because they’re based on percentages, they increase more significantly for the higher brackets. For example, the top of the 10% bracket increases by $175 to $350, depending on filing status, but the top of the 35% bracket increases by $10,300 to $12,350, again depending on filing status.

2019 ordinary-income tax brackets

Tax rate

Single

Head of household

Married filing jointly or surviving spouse

Married filing separately

10%

 $0 - $9,700

$0 - $13,850

 $0 - $19,400

 $0 - $9,700

12%

    $9,701 -   $39,475

  $13,851 -   $52,850

  $19,401 -   $78,950

    $9,701 -   $39,475

22%

  $39,476 -   $84,200

  $52,851 -   $84,200

  $78,951 - $168,400

  $39,476 -   $84,200

24%

  $84,201 - $160,725

  $84,201 - $160,700

$168,401 - $321,450

  $84,201 - $160,725

32%

$160,726 - $204,100

$160,701 - $204,100

$321,451 - $408,200

$160,726 - $204,100

35%

$204,101 - $510,300

$204,101 - $510,300

$408,201 - $612,350

$204,101 - $306,175

37%

         Over $510,300

         Over $510,300

         Over $612,350

         Over $306,175

 

The Tax Cuts and Jobs Act (TCJA) suspended personal exemptions through 2025. However, it nearly doubled the standard deduction, indexed annually for inflation through 2025. For 2019, the standard deduction is $24,400 (married couples filing jointly), $18,350 (heads of households), and $12,200 (singles and married couples filing separately). After 2025, standard deduction amounts are scheduled to drop back to the amounts under pre-TCJA law.

Changes to the standard deduction could help some taxpayers make up for the loss of personal exemptions. But it might not help a lot of taxpayers who typically itemize deductions.

AMT

The alternative minimum tax (AMT) is a separate tax system that limits some deductions, doesn’t permit others and treats certain income items differently. If your AMT liability is greater than your regular tax liability, you must pay the AMT.

Like the regular tax brackets, the AMT brackets are annually indexed for inflation. For 2019, the threshold for the 28% bracket increased by $3,700 for all filing statuses except married filing separately, which increased by half that amount.

2019 AMT brackets

Tax rate

Single

Head of household

Married filing jointly or surviving spouse

Married filing separately

26%

         $0  -  $194,800

         $0  -  $194,800

         $0  -  $194,800

          $0  -  $97,400

28%

         Over $194,800

         Over $194,800

         Over $194,800

          Over $97,400

 

The AMT exemptions and exemption phaseouts are also indexed. The exemption amounts for 2019 are $71,700 for singles and heads of households and $111,700 for joint filers, increasing by $1,400 and $2,300, respectively, over 2018 amounts. The inflation-adjusted phaseout ranges for 2019 are $510,300–$797,100 (singles and heads of households) and $1,020,600–$1,467,400 (joint filers). Amounts for separate filers are half of those for joint filers.

Education- and child-related breaks

The maximum benefits of various education- and child-related breaks generally remain the same for 2019. But most of these breaks are limited based on a taxpayer’s modified adjusted gross income (MAGI). Taxpayers whose MAGIs are within the applicable phaseout range are eligible for a partial break — and breaks are eliminated for those whose MAGIs exceed the top of the range.

The MAGI phaseout ranges generally remain the same or increase modestly for 2019, depending on the break. For example:

The American Opportunity credit. The MAGI phaseout ranges for this education credit (maximum $2,500 per eligible student) remain the same for 2019: $160,000–$180,000 for joint filers and $80,000–$90,000 for other filers.

The Lifetime Learning credit. The MAGI phaseout ranges for this education credit (maximum $2,000 per tax return) increase for 2019. They’re $116,000–$136,000 for joint filers and $58,000–$68,000 for other filers — up $2,000 for joint filers and $1,000 for others.

The adoption credit. The MAGI phaseout ranges for eligible taxpayers adopting a child also increase for 2019 — by $4,020 to $211,160–$251,160 for joint, head-of-household and single filers. The maximum credit increases by $240, to $14,080 for 2019.

(Note: Married couples filing separately generally aren’t eligible for these credits.)

These are only some of the education- and child-related breaks that may benefit you. Keep in mind that, if your MAGI is too high for you to qualify for a break for your child’s education, your child might be eligible.

Gift and estate taxes

The unified gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption are both adjusted annually for inflation. For 2019, the amount is $11.40 million (up from $11.18 million for 2018).

The annual gift tax exclusion remains at $15,000 for 2019. It’s adjusted only in $1,000 increments, so it typically increases only every few years. It increased to $15,000 in 2018.

Retirement plans

Not all of the retirement-plan-related limits increase for 2019. Thus, you may have limited opportunities to increase your retirement savings if you’ve already been contributing the maximum amount allowed:

Type of limitation

2018 limit

2019 limit

Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans

$18,500

$19,000

Annual benefit for defined benefit plans

$220,000

$225,000

Contributions to defined contribution plans

$55,000

$56,000

Contributions to SIMPLEs

$12,500

$13,000

Contributions to IRAs

$5,500

$6,000

Catch-up contributions to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans

$6,000

$6,000

Catch-up contributions to SIMPLEs

$3,000

$3,000

Catch-up contributions to IRAs

$1,000

$1,000

Compensation for benefit purposes for qualified plans and SEPs

$275,000

$280,000

Minimum compensation for SEP coverage

$600

$600

Highly compensated employee threshold

$120,000

$125,000

 

Your MAGI may reduce or even eliminate your ability to take advantage of IRAs. Fortunately, IRA-related MAGI phaseout range limits all will increase for 2019:

Traditional IRAs. MAGI phaseout ranges apply to the deductibility of contributions if a taxpayer (or his or her spouse) participates in an employer-sponsored retirement plan:

  • For married taxpayers filing jointly, the phaseout range is specific to each spouse based on whether he or she is a participant in an employer-sponsored plan:
    • For a spouse who participates, the 2019 phaseout range limits increase by $2,000, to $103,000–$123,000.
    • For a spouse who doesn’t participate, the 2019 phaseout range limits increase by $4,000, to $193,000–$203,000.
    • For single and head-of-household taxpayers participating in an employer-sponsored plan, the 2019 phaseout range limits increase by $1,000, to $64,000–$74,000.

Taxpayers with MAGIs within the applicable range can deduct a partial contribution; those with MAGIs exceeding the applicable range can’t deduct any IRA contribution.

But a taxpayer whose deduction is reduced or eliminated can make nondeductible traditional IRA contributions. The $6,000 contribution limit (plus $1,000 catch-up if applicable and reduced by any Roth IRA contributions) still applies. Nondeductible traditional IRA contributions may be beneficial if your MAGI is also too high for you to contribute (or fully contribute) to a Roth IRA.

Roth IRAs. Whether you participate in an employer-sponsored plan doesn’t affect your ability to contribute to a Roth IRA, but MAGI limits may reduce or eliminate your ability to contribute:

  • For married taxpayers filing jointly, the 2019 phaseout range limits increase by $4,000, to $193,000–$203,000.
  • For single and head-of-household taxpayers, the 2019 phaseout range limits increase by $2,000, to $122,000–$137,000.

You can make a partial contribution if your MAGI falls within the applicable range, but no contribution if it exceeds the top of the range.

(Note: Married taxpayers filing separately are subject to much lower phaseout ranges for both traditional and Roth IRAs.)

2019 cost-of-living adjustments and tax planning

With the 2019 cost-of-living adjustment amounts trending higher, you have an opportunity to realize some tax relief next year. In addition, with many retirement-plan-related limits also increasing, you have the chance to boost your retirement savings. If you have questions on the best tax-saving strategies to implement based on the 2019 numbers, please give us a call. We’d be happy to help.

© 2018

Welcome to HTSG news!

Posted by Admin Posted on May 16 2016

Welcome to HTSG news. Here we will place firm announcements, news, and other updates for our clients. Check back often for updates!