Employee (Form W2) or Independent Contractor (Form 1099-Misc)?

There are rules that govern how an employee is to be treated versus an independent contractor but one of the easiest ways to decipher the difference is, are employment taxes paid on your behalf during the year by you and your employer? How can you tell? If you receive a paycheck stub and it shows withholdings for federal and state income tax and social security and Medicare tax then yes, you pay employment tax as you go and are considered an employee.

If you work for the same guy everyday but he cuts you a check without withholding taxes then you are most likely an independent contractor, not a true employee for tax purposes. The form(s) that you receive at the end of the year will be different. If you are an employee then you would receive a W2 but if you are considered an independent contractor then you would receive a 1099-misc( or not in some cases, see self employed self help).

Form W2 = Employee where employment taxes are “paid as you go”

Form 1099-Misc or Income Statement = Independent Contractor or self employed person who should be adding in additional expenses and usually employment taxes due are paid when the return is filed.

SMC$Hint(s): Do these things now, be less angry later!

 

Quickly, because contrary to popular belief, my job doesn’t just end on April 15th every year, a few public service announcements…

 

A big thank you to everyone who checked in on my well-being this tax season.  It was especially difficult rolling out and implementing a new tax plan to hundreds of folks that didn’t understand the previous version of this shit show.

 

Secondly, if you’re receiving an email from me every morning at 4 am, it’s most likely because you didn’t follow the instructions to login to the portal and check the messages and/or download your client copy that I sent to you for review.

 

Third, if you were pissed this year because you didn’t realize that all last year you weren’t withholding as much money as the prior year or the correct amount of tax in general, “they” are adjusting things again this year…. so, the same thing is happening right now.  Know your TAX from Tax Year 2018 and review your paycheck stub’s YTD’s to determine your withholding’s.

*The object of this game is no refund, no balance due *

  • Hint #1 If you have multiple jobs, they’re supposed to be added together.
  • Hint #2: Don’t include social security or Medicare tax withheld when calculating federal or state income tax information.

 

It is every individual taxpayer’s responsibility to understand this stuff, and if you don’t or can’t, in most cases, it might not be you, it’s the system. We need a real system of taxation!

 

Other helpful HINTS

Form W4 = Employees Withholding certificate; employee of someone else.

form W9 = Self-employed person required to give their business information for work performed, not an employee of someone else.

Form W2 = Employee’s Wage and Tax statement (employee of someone else and in most cases cannot deduct un-reimbursed employee business expenses).

1099 Misc (this is not a W2) = Generally, self employed income or Rents received (think subcontractors, taxi driver, or landlord’s;  business expenses can be deducted).

 

Alright, well there’s enough information to blow your minds for a few.

 

 

$SMCtaxhints$Keepyourmoney$Taxscam$thedollarsignisthenewhashtag$realtaxreform

 

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.

If you “write off” any employee business expenses for yourself or your employee’s, this article may be for you.

Tax reform brings changes to fringe benefits that can affect an employer’s bottom line and what employee’s can actually deduct on their personal returns. 

 

Source: Tax Reform Tax Tip 2018-162: Tax reform brings changes to fringe benefits that can affect an employer’s bottom line

 

As most of you are aware we have a new tax plan in place for tax year’s 2018 – 2026 (as of now).  Among the many changes previously deductible employee business expenses (including fringe benefits) may be excluded or the process has changed.

Continue reading….

 

The IRS reminds employers that several programs have been affected as a result of the Tax Cuts and Jobs Act passed last year. This includes changes to fringe benefits, which can affect an employer’s bottom line and its employees’ deductions.

Here’s information about some of these changes that will affect employers:

Entertainment Expenses & Deduction for Meals
The new law generally eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.

However, under the new law, taxpayers can continue to deduct 50 percent of the cost of business meals if the taxpayer or an employee of the taxpayer is present, and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact. Food and beverages that are purchased or consumed during entertainment events will not be considered entertainment if either of these apply:

  • they are purchased separately from the entertainment
  • the cost is stated separately from the entertainment on one or more bills, invoices or receipts

Qualified Transportation
The new law also disallows deductions for expenses associated with qualified transportation fringe benefits or expenses incurred providing transportation for commuting. There is an exception when the transportation expenses are necessary for employee safety.

Bicycle Commuting Reimbursements
Under the new law, employers can deduct qualified bicycle commuting reimbursements as a business expense. The new tax law suspends the exclusion of qualified bicycle commuting reimbursements from an employee’s income. This means that employers must now include these reimbursements in the employee’s wages.

Qualified Moving Expenses Reimbursements
Employers must now include moving expense reimbursements in employees’ wages. The new tax law suspends the exclusion for qualified moving expense reimbursements.

There is one exception as members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if they meet certain requirements.

Employee Achievement Award
Special rules allow an employee to exclude achievement awards from their wages if the awards are tangible personal property. An employer also may deduct awards that are
tangible personal property
, subject to certain deduction limits. The new law clarifies the definition of tangible personal property.

 

Like or share this article if it pertains to you or someone you know.

-Thanks, Stephanie

http://www.paulinestaxservices.com

http://www.sctaxlady.com

http://www.irs.gov

http://www.Colorado.gov/revenueonline

 

 

It’s not too late to do your taxes.

Even though the October 15th deadline has passed to file late Tax Year 2017 returns, they can still be prepared, submitted, and even e-filed.  The process is pretty simple.

Gather your documents. W2’s, 1099’s, 1098’s, Charitable Contribution info, or business income and expense numbers, and more (depending on your situation).  It’s a good time to start thinking about where you are going to start organizing and holding information for the next tax season which will be the filing of Tax Year 2018.

Submit your documents to P.T.S. (Pauline’s Tax Service) or Stephanie.  Items can be submitted electronically or dropped off at the office on 124th and Huron.

Review and finalize.  The tax returns will be prepared and discussed, then paid for.

Submit to IRS and States.  The ultimate last step after reviewing and finalizing is e-filing, so the returns will be e-filed and there is nothing more you need to do.  Unless you have a balance due instead of a refund, then you are responsible for making the payment(s).

 

Pauline’s Tax Service, Ltd.
12365 Huron ST. suite 1800
Westminster CO 80234

 

Contact Information

 (303) 301-7167     |    stephanie@paulinestaxservices.com   | stephanie.securefilepro.com

 

Checkout the IRS’ site at http://www.irs.gov for more information about the latest tax news and information. Older tax returns can still be prepared too.  Ask about which one’s can still be e-filed, but they can always be paper filed.

 

Filling out a new withholding form for your employer is beneficial. The form is called W4 and there is a new version out.

Employee’s Withholding Allowance Certificate – Form W4

A new version of Form W-4 is available to help taxpayers check their 2018 tax withholding following passage of the Tax Cuts and Jobs Act.

 

Purpose. Complete Form W-4 so that yourUntitled
employer can withhold the correct federal
income tax from your pay. Consider
completing a new Form W-4 each year and
when your personal or financial situation
changes.

 

If changes to withholding should be made, the Withholding Calculator gives employees the information they need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate. Employees will submit the completed W-4 to their employer.

 

Generally, on line 5 you will enter 0 to withhold the maximum amount.  However, if you are looking to come out even at the end of the year on your tax liability you may be able to get away with claiming 1 or higher, even without and dependents.

 

Updated 2018 Withholding Tables Now Available; Taxpayers Could See Paycheck Changes by February

 

weekly wages paid income tax withholding

 

The Internal Revenue Service today released Notice 1036, which updates the income-tax withholding tables for 2018 reflecting changes made by the tax reform legislation enacted last month. This is the first in a series of steps that IRS will take to help improve the accuracy of withholding following major changes made by the new tax law.

The updated withholding information, posted today on IRS.gov, shows the new rates for employers to use during 2018. Employers should begin using the 2018 withholding tables as soon as possible, but not later than Feb. 15, 2018. They should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.

Many employees will begin to see increases in their paychecks to reflect the new law in February. The time it will take for employees to see the changes in their paychecks will vary depending on how quickly the new tables are implemented by their employers and how often they are paid — generally weekly, biweekly or monthly.

The new withholding tables are designed to work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances. This will minimize burden on taxpayers and employers. Employees do not have to do anything at this time.

“The IRS appreciates the help from the payroll community working with us on these important changes,” said Acting IRS Commissioner David Kautter. “Payroll withholding can be complicated, and the needs of taxpayers vary based on their personal financial situation. In the weeks ahead, the IRS will be providing more information to help people understand and review these changes.”

The new law makes a number of changes for 2018 that affect individual taxpayers. The new tables reflect the increase in the standard deduction, repeal of personal exemptions and changes in tax rates and brackets.

For people with simpler tax situations, the new tables are designed to produce the correct amount of tax withholding. The revisions are also aimed at avoiding over- and under-withholding of tax as much as possible.
To help people determine their withholding, the IRS is revising the withholding tax calculator on IRS.gov. The IRS anticipates this calculator should be available by the end of February. Taxpayers are encouraged to use the calculator to adjust their withholding once it is released.

The IRS is also working on revising the Form W-4. Form W-4 and the revised calculator will reflect additional changes in the new law, such as changes in available itemized deductions, increases in the child tax credit, the new dependent credit and repeal of dependent exemptions.

The calculator and new Form W-4 can be used by employees who wish to update their withholding in response to the new law or changes in their personal circumstances in 2018, and by workers starting a new job. Until a new Form W-4 is issued, employees and employers should continue to use the 2017 Form W-4.

In addition, the IRS will help educate taxpayers about the new withholding guidelines and the calculator. The effort will be designed to help workers ensure that they are not having too much or too little withholding taken out of their pay.

For 2019, the IRS anticipates making further changes involving withholding. The IRS will work with the business and payroll community to encourage workers to file new Forms W-4 next year and share information on changes in the new tax law that impact withholding.

More information is available in the Withholding Tables Frequently Asked Questions.

There are some major changes for individuals on the Schedule A (Itemized Deductions) per the Tax Cuts and Jobs Act

Many of the deductions that people have been taking over the last several years are going away for years’ 2018 and later.  These particular items can be found on the 1040 Schedule A.  See below.

 

Deduction for personal casualty and theft losses suspended (unless incurred in federally-declared disaster area)

Limitations to the deduction for state and local taxes

Limitations to the deduction for home mortgage interest in certain cases

Eliminating most miscellaneous itemized deductions such as:

  • Deductions for employee business expenses
  • Tax preparation fees
  • Investment expenses, including investment management fees
  • Employment related educational expenses
  • Job search expenses
  • Hobby losses
  • Safe deposit box fees
  • Investment expenses from pass-through entities

Eliminated the limitation on itemized deductions for certain high-income taxpayers.

Resources: IR-2017-210IR-2018-32IR-2018-122IR-2018-127

Stash invest has some advise on kids and budgeting. Here it is.

https://learn.stashinvest.com/back-to-school-budgeting

Teach your kids how to navigate the back-to-school shopping jungle with this budgeting activity.

3 min read

The summer is drawing to a close, and it’s almost time for your kids to head back to school.

To get ready, you’ll need to do some back-to-school shopping, for new sneakers, notebooks, pencils and all the other items that your kids will need for a new year of classes.

But do your children know how much it will cost to buy all of that gear? It’s important for kids to learn the value of money, and how much things cost, whether that’s for a new hobby, game, or all that back-to-school merchandise.

In this activity, your children will learn how to create a budget and a spending plan. This activity will help your child practice these skills when it comes to making purchases for school. This activity is for children between 3rd and 8th grades.

What will your kids learn? Most children participate in preparing to go back to school. New clothes, shoes, backpacks, school supplies, haircuts, and technology are often found on wish lists, but they can be budget breakers. Teaching children to classify “needs” versus “wants,” prioritize needed items, and spend within a set budget, are valuable life lessons. While working on this activity, children will practice and learn valuable lessons about budgeting and buying.

Teach your kids about back to school budgeting

Download the activity sheet

What You’ll Need

Getting Started

  • Set a dollar amount for your child’s back-to-school spending budget.
  • On the “Back-to-School Wishlist,” create a list of items your child wishes to buy.
  • Decide which of these items are needs, and which are things you want, but could do without. Circle your selection.
  • Have your child prioritize the list. Number the most important item on my list as 1.
  • The child will transfer the list to the “Back-to-School Shopping List.” Help your child research each item to determine its price, and where to buy it.
  • The child will find the total cost of the list. Does it if within his or her budget? If not, work together discussing priorities and possibly needing to save for an important item.

Talk to your kids!

Parents should check in with their children to make sure they understand what they’ve learned.

It is important that your child understand needs versus wants. When working on the list or reviewing after your child has completed it, discuss different opinions. Children need sneakers for school. Do children need the latest popular sneaker? There is a computer available to them at school, do they need their own?

  • What do you need to start the school year? Encourage your child to set a reasonable budget and stick to it.
  • Do they need to spend all of their money? What can they do with any extra? (encourage savings)
  • Have a discussion about the best time to buy certain items. Although stores have back-to-school sales on clothes during the summer, if you wait those same items are permanently discounted in early fall.
  • Assist your child in researching where they can get the best price. Don’t make purchases until a plan is in place.
  • How can you save for items that fall outside the budget? If your child wants something you deem extravagant, make a plan.
  • After completing the activity, encourage your child to continue the practice of keeping a list, identify needs vs. wants and prioritizing. Talk about continued planning for other items and events.

By Stash Team

IRS Tax Reform Tax Tip 2018-124: IRS tells taxpayers who got a big refund to do a “paycheck checkup”

Source: IRS Tax Reform Tax Tip 2018-124: IRS tells taxpayers who got a big refund to do a “paycheck checkup”

 

After filing tax returns, many people put taxes far out of their mind. However, taxpayers who received a large tax refund this year should think about taxes again…and the sooner the better. The IRS urges these taxpayers to visit the Withholding Calculator on IRS.gov and do a “paycheck checkup.” Doing so will help them make sure their employers are withholding the correct amount of taxes from their paychecks.

Most taxpayers receive refunds averaging around $2,800. Taxpayers who receive large refunds could receive more of their money throughout the rest of this year, rather than waiting until they file their tax return next year.

The Tax Cuts and Jobs Act was passed last year, and it included many tax law changes. Taxpayers who calculate their tax payments throughout the year in order to receive a refund at tax time should check to see how the new tax law affects them. A “paycheck checkup” can help taxpayers apply the new law changes to their situation.

Here are some of the changes that affect taxpayers who received a refund this year, but also many other people:

  • The law reduced tax rates and changed tax brackets.
  • The standard deduction nearly doubled. The new rules raise the standard deduction to $24,000 for joint filers and $12,000 for singles for 2018. Many taxpayers who previously itemized their deductions will find the standard deduction is now of bigger benefit.
  • The law removed personal exemptions.
  • The child tax credit is bigger and the phaseout amount is higher.
  • The law added a new tax credit for dependents who can’t be claimed for the child tax credit.
  • The law limited or discontinued certain deductions.

The calculator can help navigate each tax situation to make sure the amount withheld best fits the need of every taxpayer. It can help taxpayers decide if getting more money in each paycheck could make more financial sense than getting a refund at tax time next year. Adjusting withholding amounts now can also prevent having too little tax withheld, resulting in an unexpected tax bill next year.

For information about how to use the calculator and how to change withholding, taxpayers can check out the IRS Tax Reform Tax Tips on IRS.gov.

Taxpayers may also need to determine if they should make adjustments to their state or local withholding. They can contact their state’s department of revenue to learn more.

Reminder for extension filers: Oct. 15 is just around the corner

Source: Tax Tip 2018-110: Reminder for extension filers: Oct. 15 is just around the corner

Monday, October 15, 2018, is the extension deadline for most taxpayers who requested an extra six months to file their 2017 tax return.

For taxpayers who have not yet filed, here are a few tips to keep in mind about the extension deadline and taxes:

  • Try IRS Free File or e-file. Taxpayers can still e-file returns for free using IRS Free File. The program is available only on IRS.gov. Filing electronically is the easiest, safest and most accurate way to file taxes.
  • Use direct deposit. For taxpayers getting a refund, the fastest way to get it is to combine direct deposit and e-file.
  • Use IRS online payment options. Taxpayers who owe taxes should consider using IRS Direct Pay. It’s a simple, quick and free way to pay from a checking or savings account. There are other online payment options.
  • Don’t overlook tax benefits. Taxpayers should be sure to claim all entitled tax credits and deductions. These may include income and savings credits and education credits.
  • Keep a copy of the tax return. Taxpayers should keep copies of tax returns and all supporting documents for at least three years. This will help when adjusting withholding, making estimated tax payments and filing next year’s return.
  • File by October 15. File on time to avoid a potential late filing penalty.
  • More time for the military. Military members and those serving in a combat zone generally get more time to file. Military members typically have until at least 180 days after leaving a combat zone to both file returns and pay any tax due.

 

 

IRS Tax Tip 2018-101: What taxpayers can do when a letter arrives this summer

Source: IRS Tax Tip 2018-101: What taxpayers can do when a letter arrives this summer

 

What taxpayers can do when a letter arrives this summer

Some taxpayers will receive a letter from the IRS this summer. Taxpayers should not panic and remember that they have fundamental rights when interacting with the agency.   Forward copies of any letters to your tax preparer and they can often help you navigate your options and requirements.

These rights are in the Taxpayer Bill of Rights. Among other things, these rights dictate that letters from the IRS must include:

  • Details about what the taxpayer owes, such as tax, interest and penalties.
  • An explanation about why the taxpayer owes the taxes.
  • Specific reasons about why the IRS may have denied a refund claim.

Taxpayers who receive a letter from the IRS can do some simple things when it arrives. Taxpayers should remember to:

  • Read the entire letter carefully. Most letters deal with a specific issue and provide specific instructions on what to do.
  • Compare it with the tax return. If a letter indicates a changed or corrected tax return, taxpayer should review the information and compare it with their original return.
  • Respond. Taxpayers should:
    • Respond to a letter with which they do not agree.
    • Mail a letter explaining why they disagree.
    • Mail their response to the address listed at the bottom of the letter.
    • Include information and documents for the IRS to consider.
    • Allow at least 30 days for a response.
  • Reply timely if necessary. If a taxpayer agrees with the information, there’s no need to contact the IRS. However, when a specific response date is in the letter, there are two main reasons a taxpayer should respond by that date:
    • To minimize additional interest and penalty charges.
    • To preserve appeal rights if the taxpayer doesn’t agree.
  • Pay. Taxpayers should pay as much as they can, even if they can’t pay the full amount they owe. They can pay online or apply for an Online Payment Agreement or Offer in Compromise.
  • Contact the IRS if necessary. For most letters, there’s no need to call the IRS or make an appointment at a taxpayer assistance center. If a call seems necessary, the taxpayer can call the phone number in the upper right-hand corner of the letter. They should have a copy of the tax return and letter on hand when calling.
  • Keep the letter. A taxpayer should keep copies of any IRS letters or notices received with their tax records.

Tax Preparation Costs and Fees

Source: Tax Preparation Costs and Fees

 

Tax Preparation Costs and Fees

The costs associated with professional tax preparation can be considerable, depending on how much assistance you need. However, using a tax preparation service does give you the advantage of having a tax professional point out the various tax credits and tax deductions you are eligible for. Additionally, you may even have the extra benefit of being able to deduct the tax preparation fees themselves.

The Cost of Tax Preparation

Recently, the National Society of Accountants (NSA) conducted a survey which showed that the average cost of professional tax preparation is $261. This is price that most tax preparers will charge for a 1040 Tax Form with itemized deductions (Schedule A) plus a state tax return.

On the other hand, the cost of getting a simple 1040 Form (without itemized deductions) prepared by a professional averages around $152.

The NSA survey also looked at the average costs of having a professional prepare various other types of tax forms, and found the following information:

  • The average cost for preparing a 1040 (Schedule C) Tax Form is $218
  • The average cost for preparing an 1120 Tax Form (C corporation) is $806
  • The average cost for preparing an 1120S Tax Form (S corporation) is $761
  • The average cost for preparing a 1065 Tax Form (partnership) is $590
  • The average cost for preparing a 1041 Tax Form (fiduciary) is $497
  • The average cost for preparing a 990 Tax Form (tax-exempt organization) is $667
  • The average cost for preparing a 940 Tax Form (Federal unemployment) is $63
  • The average cost for preparing a Schedule D (capital gains and losses) is $142
  • The average cost for preparing a Schedule E (supplemental income and loss) is $165
  • The average cost for preparing a Schedule F (farming) is $196

While the cost of tax preparation may not sound appealing, keep in mind that a professional tax preparer can often catch credits or deductions that you may have missed — saving you money that can pay for the cost of the tax preparation! Additionally, you should consider the time it would take to prepare your income tax return yourself. Just having to read through the instructions and understand all the IRS rules can take you hours! For a lot of people, this alone makes the cost of professional tax preparation worthwhile.

Finally, remember that certain taxpayers qualify to use the IRS Free File system. If your Adjusted Gross Income (AGI) is $58,000 or less, you can file your Federal income tax return using a participating Free File Alliance company. (See the IRS website for a list of approved companies.) Keep in mind, each participating company has its own requirements and not all taxpayers may be eligible for all companies.

Time for a “Payroll Checkup”

As we all know, we have a new <income> tax plan – at least until 2026.  The new plan has many changes that will affect how we prepare for “tax time”.  Paying less tax should be a concern for everyone.  I just want to throw out there that some folks are not aware of the payroll taxes they contribute to like to social security and medicare.

In the year 2018, the employer’s portion of the FICA tax is 7.65% (the Social Security tax of 6.2% plus the Medicare tax of 1.45%) on each employee’s first $128,400 of salary and wages. On each employee’s salary and wages in excess of $128,400 the employer’s portion is the Medicare tax of 1.45%.  You, the employee, also pays 7.65% of the first $128,400.   In my humble opinion the percentages should be decreased and the amount of income taxed should be expanded.  As the owner of my small business I pay both portions so that’s 15.3% – just for employment taxes.

Quick reminder on the taxes we pay. . . before monies can be diverted to budgeting expenses like housing, food, transportation, health care, etc.

  • Sales tax
  • Individual Income tax
  • Employment tax (social insurance)
  • Property Tax
  • Corporate income tax
  • Other taxes

 

Itemizers_encouraged_to_check_withholding_in_light_of_TCJA_changes__05_18_2018_

In a news release, IRS has encouraged taxpayers who have typically itemized their deductions to use the withholding calculator on IRS’s website to perform a “payroll checkup,” noting that changes made by the Tax Cuts and Jobs Act (TCJA; P.L. 115-97 , 12/22/2017) may warrant an adjustment.

Changes made by the TCJA. The TCJA made a number of law changes, effective for tax years beginning after 2017 and before 2026, that affect the amount of itemized deductions that can be claimed and whether taxpayers choose to itemize or claim the standard deduction.

These changes include:
• nearly doubling standard deductions;
• limiting the deductions for state and local taxes;
•limiting the deduction for home mortgage interest in certain cases; and
•eliminating deductions for employee business expenses, tax preparation fees and investment expenses, including investment management fees, safe deposit box fees and investment expenses from pass-through entities.

In light of these changes, some individuals who formerly itemized may now find it more beneficial to take the standard deduction, which could affect how much a taxpayer needs to have their employer withhold from their pay. Also, even those who continue to itemize deductions should check their withholding because of TCJA changes. IRS warned that having too little tax withheld could result in an unexpected
tax bill or penalty at tax time in 2019, and also noted that taxpayers who have too much tax withheld may prefer to receive more in their paychecks instead of in the form of a tax refund.

IRS encourages payroll checkup. IRS is urging taxpayers to perform a “paycheck checkup” and to do so as early as possible so that if a withholding amount adjustment is necessary, there’s more time for withholding to take place evenly throughout the year. IRS cautioned that waiting means there are fewer pay periods to make the tax changes – which could have a bigger impact on each paycheck. Using the withholding calculator. When taxpayers use the withholding calculator (available at http://www.irs.gov/individuals/irs-withholding-calculator), they can indicate whether they are taking the standard deduction or itemizing their deductions. If they are itemizing, they’ll enter estimates of their deductions. The withholding calculator applies the new law to these amounts when figuring the user’s
withholding.

IRS encourages taxpayers to have their 2017 tax return when using the withholding calculator, as well as their most recent pay stubs. IRS also noted that if a taxpayer’s personal circumstances change during the year, they should re-calculate their withholding at that time.

Adjusting withholding. Employees who need to complete a new Form W-4, Employee’s Withholding Allowance Certificate, should submit it to their employers as soon as possible. Employees with a change in personal circumstances that reduce the number of withholding allowances must submit a new Form W-4 with corrected withholding allowances to their employer within 10 days of the change.

 

 

References: For withholding on wages, see FTC 2d/FIN ¶ H-4220 ; United States Tax Reporter ¶

IRS: Deadline extended through 4/18/18

 

Need more time to do your taxes?

Urgent Deadline Update: File by April 18. Taxpayers have an additional day to file returns and pay following system issues. If you need more time, you may request an automatic six-month extension to file your return when you make a payment using Direct Pay or Debit or Credit Card. Simply select “Extension” in the “Reason for Payment” box.

P.S. If you receive refunds at tax time (not a balance due to the IRS/State) then your return is not “DUE” on the  deadline of April 15-18. The week of the the 15th, extensions and returns with balances due take priority. At least in my office.