Un-reimbursed Employee Business Expenses are no longer deductible for individuals: Default your anger to the new tax plan and not your tax professional.

 

You are considered an employee of a company if that company provides you with a form W2 (W2’s coincide with form W4 to estimate tax withholding’s).  Prior to 2018, some expenses that were not reimbursed by the employer were eligible to be included on the Schedule  A (Itemized deductions). 

The standard deduction amounts were doubled for Tax Years 2018-2025 and some of those previously eligible deductions are no longer…. like tax preparation fees (for states conforming to the new tax law).  You should still keep track and provide that information.

     * Note: The law gives a “standard deduction” amount, but there is an opportunity to calculate an itemized amount based on many other items. Then, take the amount that generates the largest and most favorable deduction. 

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.

It’s tax time. Now what?


Updated January 27, 2019

By Stephanie Cardenas

 

The new tax plan is intimidating, for everyone, including tax professionals.  The <numbers> changed, many of the forms changed, many rules were revised, added or removed and much more. But the process is essentially the same just a bit more time consuming at this time.   * Tax plan for 2018-2025 mind you*

 

Taxpayer’s should provide their information in the same way they had in the past, the result may or may not be the same however.  Essentially, prepare the returns as you normally would.  Yes, some of your calculated deductions may not “qualify” as they had in prior years, and that will be discussed when TY18 is prepared and can be compared to TY17.

  • For Pauline’s Tax Service clients: There’s a forecast in the 2017 client copy that estimates the changes per your situation… assuming it stays relatively the same. Dropping or gaining a dependent will affect the estimate.
  • For other folks: Grab your 2017 client copy (form 1040, 1040EZ, or 1040A) and locate your key numbers.  Taxable income and Tax due per that income.   When 2018 is prepared you can compare your taxable income for both years and the tax due per that income for both years see what the changes were.  Pay special attention to last years’ tax rate compared to this years tax rate.

What you will need to prepare your returns

 

Collect and save all necessary tax related items and documents as they arrive.  Create a folder on your desktop or computer if necessary. Once you’re positive nothing else will arrive, upload to the portal or mail/drop off in the office. Use the 2018 tax planning document document as a guide.

-W2’s, 1099’s, 1098’s, 1095’s, any spreadsheets you create, etc.

 

If you had a baby. That’s fantastic.  You will need a copy of the social security card/number, their name, birth date.  Additional questions for divorced or separated parents and people who qualify for the earned income credit (EIC).

  • The exemption amounts no long apply but the child tax credit is available (For children under age 17).

 

If you started a business, awesome.  You will need a statement that shows the total of all of your income and expenses.  Every business is different and has different needs so tailor your income statement to suit you.  Here’s an example template.

template income statement

income statement template

 

 

Use the tax organizer or tax planning document as a checklist to ensure you have the required information.  2018 tax planning document

 

You’re ready to file

 

Upload your documents to the portal https://ptsdocs.securefilepro.com or mail/drop off packet at the office: 12365 Huron St. Suite 1800 Westminster Co 80234. Remote processing preferred.  In the event we need an in-office appointment, ask about the availability of a Saturday appointment.

 

We’ll prepare your returns and provide you with a copy so that we can chat about what the changes were, if any.  E-copies and/or hard copies will be provided, generally within 24-48 hours.

 

Pay the tax preparation costs: Cash, check or charge. Generally, the tax prep fees range from $100-350 depending on the required forms and worksheets.  Most returns are anticipated to be average resulting in fees of $150-200.  The tax prep fee includes federal, state(s), e-filing, and many other features.   I’m available year round for help with notices and responses to the IRS.

  • The audit process is generated electronically and randomly so always understand what they are PROPOSING before you agree and/or pay. But ALWAYS respond in a timely fashion.

 

stephanie@paulinestaxservices.com

https://ptsdocs.securefilepro.com

  • Double check if the question is asking for the last 4 of your social or the last 5.
  • You will need your username and password to log on to the portal, and if any client copies are password protected use the last 5 of the primary taxpayer’s social security number.
  • Try using the forgot password, if you already have an account.  For new clients Ill need the last 4 of the social to set up a client portal so upload as a guest.

 


 

You should know, generally, what your tax liability is for the year and plan on a 3 year basis.  Take a look at the last 3 years tax return copies and locate your tax due for those years.  Pauline’s Tax Service Clients:  Included in every client copy is a Comparison Sheet that lists the last 3 years side by side.

 

If you generally receive large refunds, you are doing this all wrong.  Refunds aren’t extra money… unless it is like from the Earned Income Credit but that’s another topic.  Refunds are of  your money previously withheld from your paychecks to cover your estimated tax liability.  The goal is to only withhold your estimated tax liability, in which case and in theory you would come as close to receiving nothing and owing them nothing at the end of the year.

 

If you over estimate your tax liability the IRS holds your money interest free all year long and gives it back when its convenient for them.   A more in depth piece to come about this but the point will be to keep more of your money on your paychecks during the year.

 

 

   

 

Schedule C (Self Employment) Changes for TY 2018.

Schedule C Provisions

Entertainment Expenses
In prior years, a taxpayer generally could deduct expenses for activities considered to be
entertainment, amusement, or recreation if the expenses were directly related or associated with the active conduct of the taxpayer’s trade or business. For amounts incurred or paid after December 31, 2017, deductions for entertainment expenses are disallowed.

The TCJA deemed entertainment expenses as nondeductible regardless of the relationship of the expenses to the business activity, including meals purchased during entertainment activities. There are a few exceptions outlined in Code Sec. 274(e) including:

  •  Expenses for goods, services, and facilities that are treated as compensation to an
    employee
  • Expenses paid or incurred by the taxpayer in connection with the performance of
    services for another person, under a reimbursement or other expenses allowance
    agreement
  • Expenses for recreational, social, or similar activities primarily for the benefit of the taxpayer’s employees, other than highly compensated employees
    Businesses can still deduct 50% of amounts paid for meals associated with the active conduct of the taxpayer’s trade or business.

For example, employee travel meals are still 50% deductible.

 

Meals and Ent changes large.png

Are you using the correct portal?

 

With the tax season approaching it is a good time to verify that all of your contact information is updated, especially across social media.  Notify people like myself that need to know your current address, phone number, or e-mail if there have been any changes. 

 

If you are using the portal to communicate with Pauline’ s Tax Service be aware that there are 2 versions and you should ensure that you are using the correct one.   Login here. 

 

*Notice there is a “Public” tab in addition to the “Private” tab.  Under the public tab you will find helpful templates and information. 

 

TAX REFORM BASICS Publication 5307

 

Get 2018 tax documents ready for upcoming filing season (irs.gov)

Source: IR-2018-225, [UPDATE] Get 2018 tax documents ready for upcoming filing season

 

Get Ready for Taxes:

Get 2018 tax documents ready for upcoming filing season.

WASHINGTON –The IRS reminds taxpayers to keep a copy of their past tax returns and supporting documents for at least three years. Certain key information from their prior year return may be required to file in 2019.

This is the fifth in a series of reminders to help taxpayers Get Ready for the upcoming tax filing season. The IRS has recently updated its Get Ready page with steps to take now for the 2019 tax filing season.

Keeping copies of prior year tax returns saves time. Often previous tax information is needed to file a current year tax return or to answer questions from the Internal Revenue Service. Taxpayers claiming certain securities or debt losses should keep their tax returns and documents for at least seven years.

Use a tax return to validate identity

Taxpayers using tax filing software for the first time may need their adjusted gross income (AGI) amount from their prior year’s tax return to verify their identity. Learn more at Validating Your Electronically Filed Tax Return. Those who need a copy of their tax return should first check with their software provider or tax preparer. Taxpayers can also obtain a free tax transcript from the IRS, or for a fee, order a copy of their tax return.

 

Order a transcript

A tax transcript can be ordered from the IRS. It summarizes tax return information and includes AGI. Tax transcripts are free and available for the most current tax year after the IRS has processed the tax return. Tax transcripts are available for the past three tax years.

 

Plan ahead. Delivery times for online and phone orders typically take five to 10 days from the time the IRS receives the request. Taxpayers who order by mail should allow 30 days to receive transcripts and 75 days for tax returns.

 

There are three ways for taxpayers to order a transcript: 

  • Online. Taxpayers can use Get Transcript Online on IRS.gov to view, print or download a copy of all transcript types. Those who use it must authenticate their identity and create an account using the Secure Access process. Please allow five to 10 calendar days for delivery.
  • By phone. Call 800-908-9946.
  • By mail. Taxpayers who are unable to register or prefer not to use Get Transcript Online may use Get Transcript by Mail. Taxpayers can complete and send the IRS either Form 4506-T, Request for Transcript of Tax Return, or Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Use Form 4506-T to request other tax records: tax account transcript, record of account, wage and income and verification of non-filing. These forms are available on the Forms, Instructions and Publications page on IRS.gov.  Those who need an actual copy of a tax return can get one for the current tax year and as far back as six years. The fee per copy is $50. Taxpayers can complete and mail Form 4506 to request a copy of a tax return and mail the request to the appropriate IRS office listed on the form. 
  • If taxpayers need information to verify payments within the last 18 months or a tax amount owed, they can view their tax account.
  • The IRS is now redacting tax transcripts so that sensitive information, such as the taxpayer’s name, address and Social Security number, is partially masked. However, all financial entries, such as the adjusted gross income, are visible. The redacted transcript will better protect taxpayers from identity theft.

Watch out for scammers!

 

IRS warns of “Tax Transcript” email scam; dangers to business networks

WASHINGTON – The Internal Revenue Service and Security Summit partners today warned the public of a surge of fraudulent emails impersonating the IRS and using tax transcripts as bait to entice users to open documents containing malware.

The scam is especially problematic for businesses whose employees might open the malware because this malware can spread throughout the network and potentially take months to successfully remove.

This well-known malware, known as Emotet, generally poses as specific banks and financial institutions in its effort to trick people into opening infected documents. The Summit partnership of the IRS, state tax agencies and the nation’s tax industry remind taxpayers to watch out for this scam.

However, in the past few weeks, the scam masqueraded as the IRS, pretending to be from “IRS Online.” The scam email carries an attachment labeled “Tax Account Transcript” or something similar, and the subject line uses some variation of the phrase “tax transcript.”
These clues can change with each version of the malware. Scores of these malicious Emotet emails were forwarded to phishing@irs.gov recently.

The IRS reminds taxpayers it does not send unsolicited emails to the public, nor would it email a sensitive document such as a tax transcript, which is a summary of a tax return. The IRS urges taxpayers not to open the email or the attachment. If using a personal computer, delete or forward the scam email to phishing@irs.gov. If you see these using an employer’s computer, notify the company’s technology professionals.

 

Contact me if you still need to have your 2017 or prior year’s tax returns prepared.

 

Stephanie C.

stephanie@paulinestaxservices.com   |      http://www.paulinestaxservices.com

303-301-7167

 

 

 

401(k) contribution limit increases to $19,000 for 2019; IRA limit increases to $6,000

Source: IR-2018-211: 401(k) contribution limit increases to $19,000 for 2019; IRA limit increases to $6,000

One way that income tax liability can be lowered for the year is if some the earnings was shifted to retirement savings (ie IRA’s or 401-K’s).  For example, $19,000 per year can be subtracted from taxable income if that money was put into a 401-K.   An obvious point to make is that many folks live paycheck to paycheck and don’t see saving hundreds of dollars extra per month as an option,  however for the folks capable of living within a certain means that would be a pretty favorable benefit assuming it wasn’t “lost” in some sort of crash/incident.

401(k) contribution limit increases to $19,000 for 2019; IRA limit increases to $6,000

WASHINGTON — The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019.  The IRS today issued technical guidance detailing these items in Notice 2018-83.

Highlights of Changes for 2019

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000.

The limit on annual contributions to an IRA, which last increased in 2013, is increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver’s credit all increased for 2019.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2019:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $64,000 to $74,000, up from $63,000 to $73,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $103,000 to $123,000, up from $101,000 to $121,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000, up from $189,000 and $199,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married

couples filing jointly, the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $64,000 for married couples filing jointly, up from $63,000; $48,000 for heads of household, up from $47,250; and $32,000 for singles and married individuals filing separately, up from $31,500.

Highlights of Limitations that Remain Unchanged from 2018

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000.

Detailed Description of Adjusted and Unchanged Limitations

Section 415 of the Internal Revenue Code (Code) provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made following adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

Effective Jan. 1, 2019, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $220,000 to $225,000. For a participant who separated from service before Jan. 1, 2019, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2018, by 1.0264.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2019 from $55,000 to $56,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2019 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $18,500 to $19,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $275,000 to $280,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $175,000 to $180,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five year distribution period is increased from

$1,105,000 to $1,130,000, while the dollar amount used to determine the lengthening of the five year distribution period is increased from $220,000 to $225,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $120,000 to $125,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $6,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $3,000.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $405,000 to $415,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,500 to $13,000.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $18,500 to $19,000.

The limitation under Section 664(g)(7) concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan remains unchanged at $50,000.

The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $110,000. The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $220,000 to $225,000.

The dollar limitation on premiums paid with respect to a qualifying longevity annuity contract under Section 1.401(a)(9)-6, A-17(b)(2)(i) of the Income Tax Regulations remains unchanged at $130,000.

The Code provides that the $1,000,000,000 threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is adjusted using the cost-of-living adjustment provided under Section 432(e)(9)(H)(v)(III)(bb). After taking the applicable rounding rule into account, the threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is increased for 2019 from $1,087,000,000 to $1,097,000,000.

The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2019 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $38,000 to $38,500; the limitation under Section 25B(b)(1)(B) is increased from $41,000 to $41,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $63,000 to $64,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the Retirement Savings Contribution Credit for taxpayers filing as head of household is increased from $28,500 to $28,875; the limitation under Section 25B(b)(1)(B) is increased from $30,750 to $31,125; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $47,250 to $48,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the Retirement Savings Contribution Credit for all other taxpayers is increased from $19,000 to $19,250; the limitation under Section 25B(b)(1)(B) is increased from $20,500 to $20,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $31,500 to $32,000.

The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions is increased from $5,500 to $6,000.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) increased from $101,000 to $103,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers who are active participants (other than married taxpayers filing separate returns) increased from $63,000 to $64,000. If an individual or the individual’s spouse is an active participant, the applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $189,000 to $193,000.

The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $189,000 to $193,000. The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $120,000 to $122,000. The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.

 

Find more information at

www.irs.gov

 

 

Working poor, lower middle class, upper middle class, 1%… where do you fall on the grand scheme of their scale? and food for thought on getting a bigger piece of the pie.

 

The scholar Richard Reeves, as detailed in the above piece by the PBS Newshour, describes the various “classes” as defined by wealth.  He also theorizes that it is not the top 1 percent necessarily obstructing the rest of us from accruing some financial stability, but the “upper middle class” group earning $117,000 (the top 20%) or more may be unintentionally keeping the the majority out of the equation.