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Dorinda Kisner CPA PLLC
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How to make your grandchildren's crafts tax deductible by DK CPA:
All Matters of Accounting and Taxation
Make note of your odometers on July 1 - track your mileage separately for the final half of the year!
For the final 6 months of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year. The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. These new rates become effective July 1, 2022.
So we are receiving calls and emails about the Advance Child Care Credit. Beware!!!! In some cases, you may be required to repay some or all of the credit to the IRS. BEWARE! This is your responsibility to know the rules and report income and family member changes to the IRS!!!!!
In a generic way, it is my advice you should ELECT out of this unless you read and prepare for all the different rules. If you do not elect out of receiving the advance you must keep track of how much you receive. While it is not taxable, we will have to reconcile it on the tax return for 2021. Anyone who has custody issues, divorcing, alternating years, income changes of a major amount, or tax issues different in 2021 than 2020 will be taking a major risk to not elect out. You will NOT lose any benefit you are entitled to; it just delays until you file your 2021 tax return when you will have ACCURATE information to determine the eligibility and amount. This is a terrible option and is bound to cause a lot of confusion now and when we file your 2021 tax return. Beware!!!!
https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021?fbclid=IwAR1SvKyX49OtaGeNtWZ3JvHmlnDkR75WkDOwerH2jm0lPeOanYciGdzmPRU
Payment Relief - Individuals
Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due. This payment relief applies to individuals, trusts and estates. IRS will automatically provide this relief to taxpayers. Taxpayers do not need to file any additional forms or call the IRS to qualify for this relief.
Estimated Tax Payments
This relief also includes estimated tax payments for the tax year 2020 that are due on April 15, 2020.
Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. If a tax return or extension is filed by April 15, 2020, the taxpayer will automatically avoid interest and penalties on the taxes paid by July 15.
States
This relief only applies to federal income tax (including tax on self-employment income) payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax. State filing and payment deadlines vary and are not always the same as the federal filing deadline. We expect state tax agencies to announce any available tax relief for affected taxpayers in the coming days; some have already published these notices on their websites.
Dorinda Kisner CPA PLLC plans:
Providing West Virginia follows the same protocol and we do NOT know that yet; we will postpone preparing estimates normally due on April 15 until after the filing deadline. However, if our state does NOT follow suit; then we will discuss with you individually the possible options we have. And, if, for any reason you want us to prepare and pay them, we can entertain that possibility, but there would be no advantage to doing so. We are committed to keeping you current on any matter of importance during these trying times. Stay safe and thank you for your patience.
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Notice 2020-17; Payment relief on account of Coronavirus Disease 2019 (COVID-19) emergency. The Treasury Department and IRS are extending the due date for Federal income tax payments due April 15, 2020, to July 15, 2020, for payments due of up to $10 million for corporations and up to $1 million for individuals - regardless of filing status – and other unincorporated entities. Associated interest, additions to tax, and penalties for late payment will also be suspended until July 15, 2020.
We just received advice from the IRS that Rentals are able to take the new 199A deduction of up to 20% of their income. In past years you have had rental income therefore this may affect your tax return. In order to qualify you must keep/have a log which shows at least 250 hours of activities which you have taken in management of each rental. We are not delinquent on providing this info; the IRS released it February 5th, 2019 but it is effective for 2018!
If you feel that you spend 250 hours per 1 or more of your rental activities you may want to attempt to create this log for your 2018 tax return for that rental. Please note that if you do not meet the 250 hour rule it is not pro-rated - it is completely lost on that rental. If you prefer NOT to reconstruct the log; that is fine but there will be no deduction without it. If you have 5 rental activities - you must be able to log 250 hours per activity - not a combined 250 hours across them. However, there are ways to combine properties but if you want to pursue that, you will need to make an appointment to discuss with one our preparers.
In future years you must keep this log timely throughout the year as you perform the activities. i.e 2018 allows you to "reconstruct" the log since there was not warning to do this. However for 2019 and forward the IRS says you must log it contemporanously (i.e. as it occurs; so daily, weekly, at the time the work is performed! Please note; this is a safe harbor; that means if you want to take risks without the log; you are at the challenge of the IRS. If you have the log; for now, the IRS will honor this deduction under these safe harbor provisions.
Your log must contain the following information:
Action Description
Time Spent Performing Action
Date of Action
Person Performing Action
Example:
2/5/19 - Bob Smith - Created lease agreement for new tenant Bubba Lewis- 1 hour
Example:
On 2/5/19 I (Bob Smith) collected rent from each of my apartment units which took 30 minutes.
Please note that if you use any portion of the rental for personal use it is not eligible. For example if you own a 3 bedroom house that you rent to your son and 2 of his friends or if you let your son live there free and charge 2 of their friends rent - you likely do not qualify but please contact us to discuss.
Rental Services that count towards your 250 hours explicitly provided:
Advertising
Negotiating / Executing Leases
Reviewing / Verifying Tenant Applications
Collecting Rent
Daily Operations / Maintenance / Repairs
Management of the Real Estate
Purchase of Materials
Supervision of Employees / Contractors
Services that explicitly do NOT count:
Financial / Investment Management Activities
Procuring Property
Reviewing Financial Statements / Reports
Planning / Managing / Constructing Long Term Capital Improvements
Travel Time to and from Rental
If you have questions regarding this email please feel free to call Niki and setup an appointment for your tax return. You do NOT have to participate on your 2018 tax return to be eligible to participate in future tax years. However, beginning in 2019 if you participate; you must continue unless there are extreme differences to defend why you did not. If you are asking why you would not want to take it; if you have more than one qualifying enterprise for the 20% deduction; then losses must reduce the gain from other eligible properties. Thus; you need to consider if your rentals suffer losses on a regular basis and you have other qualifying enterprises; it may be best if you don't use the rentals in the deduction. It is optional but after this year; it is binding even in loss years!
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The Tax Cuts and Jobs Act introduced a new general business credit for employers that pay employee wages during time away from work under the Family and Medical Leave Act (FMLA.) It applies to wages paid in tax years beginning after Dec. 31, 2019.
In order to claim the credit, an employer must first have a qualifying plan. The plan must be written and include several specific provisions.
Family and medical leave means leave for the following purposes:
birth of a child and to care for such child,
placement of a child with the employee for adoption or foster care,
other various including some for military
The base amount of the credit is 12.5 percent of wages paid during the FMLA leave. For each additional percentage of normal wages paid, the credit percentage is increased by 0.25 percent. A taxpayer cannot deduct a portion of the wages equal to the amount of the credit claimed.
The credit is not allowed for paid leave that is vacation leave, personal leave, or medical or sick leave (unless it qualifies under the FMLA). In addition, any leave which is paid by a state or local government or required by state or local law is not taken into account in determining the amount of paid leave provided by the employer. Related companies must be aggregated to determine whether the employer has a qualifying plan.
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The Internal Revenue Service today provided information to taxpayers and employers about changes from the Tax Cuts and Jobs Act that affect:
Move related vehicle expenses
Un-reimbursed employee expenses
Vehicle expensing
Changes to the deduction for move-related vehicle expenses
The Tax Cuts and Jobs Act suspends the deduction for moving expenses for tax years beginning after Dec. 31, 2017, and goes through Jan. 1, 2026. Thus, during the suspension no deduction is allowed for use of an automobile as part of a move using the mileage rate listed in Notice 2018-03. This suspension does not apply to members of the Armed Forces of the United States on active duty who move pursuant to a military order related to a permanent change of station.
Changes to the deduction for un-reimbursed employee expenses
The Tax Cuts and Jobs Act also suspends all miscellaneous itemized deductions that are subject to the 2 percent of adjusted gross income floor. This change affects un-reimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel.
Thus, the business standard mileage rate listed in Notice 2018-03, which was issued before the Tax Cuts and Jobs Act passed, cannot be used to claim an itemized deduction for un-reimbursed employee travel expenses in taxable years beginning after Dec. 31, 2017, and before Jan. 1, 2026. The IRS issued revised guidance today in Notice 2018-42.
Standard mileage rates for 2018
As mentioned in Notice 2018-03, the standard mileage rates for the use of a car, van, pickup or panel truck for 2018 remain:
54.5 cents for every mile of business travel driven, a 1 cent increase from 2017.
18 cents per mile driven for medical purposes, a 1 cent increase from 2017.
14 cents per mile driven in service of charitable organizations, which is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
Increased depreciation limits
The Tax Cuts and Jobs Act increases the depreciation limitations for passenger automobiles placed in service after Dec. 31, 2017, for purposes of computing the allowance under a fixed and variable rate plan. The maximum standard automobile cost may not exceed $50,000 for passenger automobiles, trucks and vans placed in service after Dec. 31, 2017. Previously, the maximum standard automobile cost was $27,300 for passenger automobiles and $31,000 for trucks and vans.
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Tis the "season" when businesses get "warnings" about the federal and state labor law poster requirements. Frequently we have clients who pay hundreds of dollars for these things. You can download the posters you need for free; don't be scammed by these mailings. https://labor.wv.gov/Pages/Required-Posters.aspx https://www.dol.gov/general/topics/posters http://workforcewv.org/workplace-posters.html. Yes you do have to poster labor laws; no you don't have to pay for them
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Recent changes to federal tax law allow funds to be used to pay tuition and expenses for children enrolled in K-12 private and religious schools. There are different options for West Virginia residents and Maryland:
Families with children enrolled in grades K – 12 at private and religious schools are eligible.
Parents/grandparents etc can pay for up to $10,000 annually of private and religious school expenses.
Qualified K – 12 distributions are tax exempt at the federal level.
Contributions to an account provide state tax advantages.
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It's never ending; and always evolving; TAX LAWS! ...... the IRS clarifies that despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled. The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.
Under the new law, for example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not. As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements.
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So here we go again. As a part of the Feb 9 budget; there are tax rules that have been RETROACTIVELY changed. (I don't do this; congress does!) Here is a major one that could affect any tax return already filed (or may force delay filing one immediately) that claimed or will claim education expenses. The provision extends through 2017 the above-the-line deduction for qualified tuition and related expenses for higher education. The deduction is capped at $4,000 for an individual whose adjusted gross income (AGI) does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers).
Another retroactive change made Feb 9 in the budget is a 2017 credit for purchases of nonbusiness energy property. The provision allows a credit of 10 percent of the amount paid or incurred by the taxpayer for qualified energy improvements, up to $500.
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This month, the IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. See Notice 2018-1. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.
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Least you are confused on filing 1099's and the due dates; it is confusing. (if you are a do-it-yourself 1099 filer)
For tax year 2017, the IRS recommends the following: If any of your Forms 1099-MISC reporting NEC (Non Employee Compensation) will be filed after the January 31, 2018 due date, separate the submission of those Forms 1099-MISC from the submission of any Forms 1099-MISC that do not report NEC.
Filing on paper: separate submissions, each with its own Form 1096
Filing electronically: separate transmissions, each with its own Payer “A” Record
PLEASE NOTE: IF YOU FILE AFTER JAN 31 this year; that is the "recommended" procedure (i.e. if you don't you will probably get an IRS notice of late filing and have to "fight" with them why they are wrong. So, we recommend you file them all by 01/31/18.
Having said that for 2018's 1099's that will be the RULE and you won't be able to appeal to get out of the penalty.
FILE those 1099's by 01/31 and you won't have to worry about this.
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Tax Reform; A LOT has changed. Note some of these highlights!
Corporate rates change under the "reform." Lots of debate in the media about corporate tax rate cuts. However, let's set aside political views and stick with the FACTS. Did you know the US has the HIGHEST corporate income tax rates among (OEDC) the Organization of Economically Developed Countries? Why does this matter? A short lesson in US global income taxes; for the most part, corporations are taxed on worldwide income. The best way to avoid the high US rates is to source your income outside of the US. So, if a CPA is helping manage and minimize income taxes; the planning must focus on moving overseas to reduce the tax paid here in the US. Thus; your jobs go overseas with the headquarters and sourcing. With the new reform; corporations will be able to repatriate global income back into the US without being taxed (also lose a foreign tax credit that is currently allowed) but the hope is those corporations will bring money home. To incentive that process; corporations with a threshold of ownership overseas will have to pay a tax for untaxed earnings overseas. Thus the reason to move overseas will be minimized and hopefully eliminated. Most of the media doesn't understand this "cause and effect."
Tax Cuts and Jobs Act amends I.R.C. § 170(l) to provide that, starting in 2018, contributions to a college or university that entitle the donor to purchase tickets or seating at an athletic event are not deductible. Under current law, 80% of such donations are deductible
Denial of deduction for settlements subject to nondisclosure agreements paid in connection with sexual harassment or sexual abuse: Under current law (Internal Revenue Code (“Code”) Section 162(a)), a taxpayer is generally allowed a deduction for ordinary and necessary expenses paid or incurred in carrying on any trade or business. Under the Tax Bill, no deduction is allowed for any settlement, payout, or attorney fees related to sexual harassment or sexual abuse if such payments are subject to a nondisclosure agreement.
1. Exemptions (for yourself/spouse and dependents) will be eliminated after the 2017 income tax return.
2. Standard deduction, however, will almost DOUBLE after 2017; will make itemizing more of a challenge especially with the cap on state taxes
3. Child Credit doubles from $1,000 to $2,000 in 2018
4. Added a credit for other non-child family members for 2018 $500
5. Remaining as an S –Corp may be more appealing than the media is portraying. However, it is a very complicated, challenging decision and the risk of C Corp rates raising back to higher levels has to be seriously considered. (when the parties in power change; anything can change)
6. Student loan forgiveness due to death or disability will not be taxable income
7. Charitable donations previously limited to 50% increases to 60%
8. Extended the 7.5% of AGI medical expenses for another 2 years; then goes to 10%
9. Alimony deduction (and taxability) will be repealed for any agreement entered into after 12/31/18
10. For tax years 2018-2025, the deduction for moving expenses and the income exclusion for qualified moving expense reimbursements is eliminated, except for members of the Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station.
11. Casualty losses repealed in 2018 (personal)
12. State and local tax deductions limited to $10,000 annually in 2018 and thereafter
13. 100% bonus depreciation is back effective 09/27/17 until 2022 and includes USED property; (used was not previously allowed for bonus depreciation.)
14. Section 179 property doubles from $500,000 annually to $1,000,0000
15. Expanded 179 property to include: roofs, heating and AC, alarm systems and security
16. Like kind exchanges now limited to real property; not personal property as previously allowed
17. The rumor about business interest deduction limit does NOT affect businesses that do NOT exceed $25 MILLION in gross receipts
18. NOL’s will not be carried back, but can be carried forward indefinitely (previously limited to 20 years)
19. Active business losses will be limited to $500K
20. Previously partnerships were technically terminated when 50% or more of the partnership ownership changed within 12 months; this has been repealed
21. Home equity interest is gone and home mortgage is limited to $750,000 of debt
22. Estates now have options on selecting year end dates
23. Charitable Contribution Deduction for College Athletic Seating Rights Eliminated. For tax years after 2017, no charitable deduction will be allowed for any payment to an institution of higher education in exchange for the right to purchase tickets or seating at an athletic event.
24. For tax years 2018-2025, the limitation on wagering) is modified to provide that all deductions for expenses incurred in carrying out wagering transactions, and not just gambling losses, are limited to the extent of gambling winnings
25. Affordable Care Act Individual Mandate Repealed.
26. Shortened Recovery Period for New Farming Equipment. The recovery period of new machinery or equipment placed in service after 12/31/17 and used in a farming business from seven to five years. In addition, use of the 150% declining balance depreciation method for these assets will no longer be required.
27. Domestic Production deduction is eliminated in 2018
28. Disallows deductions for entertainment expenses after 2017
The Tax Bill suspends all miscellaneous itemized deductions that are subject to the 2% floor under present law. This includes the following deductions that an employee had been permitted to deduct under current law: DON"T be confused; these relate to non reimbursed employee expenses NOT to business deductions!
Casualty and theft losses from property used in performing services as an employee;
Business bad debt of an employee;
Business liability insurance premiums;
Damages paid to a former employer for breach of an employment contract;
Depreciation on a computer a employee’s employer requires him or her to use in his or her work;
Dues to a chamber of commerce if membership helps the employee perform his or her job;
Dues to professional societies;
Educator expenses;
Home office or part of a employee’s home used regularly and exclusively in his or her work;
Job search expenses in the employee’s present occupation;
Legal fees related to the employee’s job;
Licenses and regulatory fees;
Malpractice insurance premiums;
Medical examinations required by an employer;
Occupational taxes;
Passport fees for a business trip;
Research expenses of a college professor;
Subscriptions to professional journals and trade magazines related to the employee’s work;
Tools and supplies used in the employee’s work;
Costs for travel, transportation, meals, entertainment, gifts, and local lodging related to the employee’s work;
Union dues and expenses;
Work clothes and uniforms if required and not suitable for everyday use; and
Work-related education.
Thus, under the provision, employees may not claim the above-listed items as itemized deductions for taxable years 2018 through 2025.
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If you make estimated payments at the state level for your personal income taxes you should make your 4th Qtr payment in Dec of 2017 to get the best tax effect after the new tax bill has passed. Also if you have unpaid property taxes please make sure to pay those in 2017 if possible.
For further information on what is known regarding the tax bill see:
https://www.journalofaccountancy.com/news/2017/dec/tax-reform-bill-changes-for-individuals-201718070.html
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IRS now requires we obtain your Drivers License and your spouse to e-file your tax returns. Please bring in when you come or send us a copy if you mail or email your return to us.
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West Virginia employers will be required to pay wages earned to a resigning or terminated employee on or before the next regular payday in the cycle. Previously, different time limits for final pay applied where an employee was terminated or resigned with no notice, and where an employee resigned with adequate notice.
An employee who gave notice equal to the length of at least one pay period would have been entitled to receive a paycheck on their last day of work. An employee who resigned without notice or was terminated would have been entitled to payment either by the next pay date or within four business days, whichever came first.
Employers are now required to pay employees at least twice a month, with no more than 19 days between payments. The law previously required payment every two weeks.
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Every Halloween, children knock on doors pretending they are everything from superheroes to movie stars. Scammers, on the other hand, don’t leave their impersonations to one day. They can happen any time of the year.
People can avoid taking the bait and falling victim to a scam by knowing how and when the IRS does contact a taxpayer in person. This can help someone determine whether an individual is truly an IRS employee.
Here are eight things to know about in-person contacts from the IRS.
The IRS initiates most contacts through regular mail delivered by the United States Postal Service.
There are special circumstances when the IRS will come to a home or business. This includes:
When a taxpayer has an overdue tax bill
When the IRS needs to secure a delinquent tax return or a delinquent employment tax payment
To tour a business as part of an audit
As part of a criminal investigation
Revenue officers are IRS employees who work cases that involve an amount owed by a taxpayer or a delinquent tax return. Generally, home or business visits are unannounced.
IRS revenue officers carry two forms of official identification. Both forms of ID have serial numbers. Taxpayers can ask to see both IDs.
The IRS can assign certain cases to private debt collectors. The IRS does this only after giving written notice to the taxpayer and any appointed representative. Private collection agencies will never visit a taxpayer at their home or business.
The IRS will not ask that a taxpayer makes a payment to anyone other than the U.S. Department of the Treasury.
IRS employees conducting audits may call taxpayers to set up appointments, but not without having first notified them by mail. Therefore, by the time the IRS visits a taxpayer at home, the taxpayer would be well aware of the audit.
IRS criminal investigators may visit a taxpayer’s home or business unannounced while conducting an investigation. However, these are federal law enforcement agents and they will not demand any sort of payment.
Taxpayers who believe they were visited by someone impersonating the IRS can visit IRS.gov for information about how to report it.
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If you receive an unexpected call from someone claiming to be from the IRS, here are some of the telltale signs to help protect yourself.
The IRS Will Never:
Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
Ask for credit or debit card numbers over the phone.
If you get a suspicious phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
Do not give out any information. Hang up immediately.
Search the web for telephone numbers scammers leave in your voicemail asking you to call back. Some of the phone numbers may be published online and linked to criminal activity.
Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page or call 800-366-4484.
Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
If you think you might owe taxes, call the IRS directly at 800-829-1040.
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