Starting April 17, 2019 thru December 31, 2019, unless you have an appointment scheduled with Barb or Sarah, our office hours will be Tuesday thru Thursday 9:00 AM to 3:00 PM. Starting January 2, 2020 thru January 31, 2020 we will resume our January tax season office hours, Monday thru Friday 9:00 AM to 5:00 PM. Starting February 3, 2020 thru April 15, 2020 someone will be in our office Monday thru Friday 9:00 AM to 7:00 PM. THROUGHOUT THE ENTIRE YEAR OUR TAX PROFESSIONALS ARE AVAILABLE BY APPOINTMENT ONLY.
Denise will be out of the office for a tax conference the week of July 22, 2019.
Thank you for all your support and kindness during tax season. Sometime I wish instead of preparing returns for only 3-1/2 months it would be 12 months. This would take pressure off of me plus give me more time to spend with you, my client, throughout your appointment. This would give me sufficient time to assist you with future tax planning.
Tax planning now is more important than before. Since the new tax laws are a little simpler than before, less time is needed for me to assist you with your plans; maximizing your tax savings. This is why you, my clients, want to always share with me your future plans. After you read some comments from Boomer, I will include a little more information on tax planning. If you have any questions please call me.
All of your friends here at Main Street hope you and your family have a fun and relaxing summer. Always remember to enjoy each moment. Thanks again!
Denise E Brandt, EA
Important words from our greeter:
Hi Everyone … Boomer here,
It was so awesome to see everyone. You all spoil me. Thank you to everyone for those awesome treats … I gained a few extra pounds during tax season. This year I met this really cool family member of one of Mom’s clients. His name is Darby. Darby is a standard size Goldendoodle, much younger and larger than I. He is really awesome. He and I had an opportunity to meet each other and play in my fenced in yard when his parents came in to pick up their income tax return. I hope Darby stops by this summer I am really looking forward to seeing him again.
Check out Main Street’s web site:
- Security Awareness – Sarah has added some new items for your review, plus updated the existing information. Keep you and your family’s personal information away from the scammers and hackers and feel free to share this information with your friends.
- Scams & Security – Note that Sarah has added a section called Recent Scams under Scams & Security. This can be found under Security Awareness. This section will be updated throughout the year with the most current scams.
- Tax Facts – Note the updated limits for 2019. I believe Sarah and Mom left the 2018 information so you would be able to see the change.
- What’s New – Mom updated some of the items she reviewed with you during your tax appointment.
I hope you have a very nice, safe and enjoyable summer. Please stop in and say hello. Most importantly enjoy each day!
DISCLAIMER: Any tax advice noted below is based on the facts provided to us and on current tax law interpretation. Tax law is subject to continual change, at times on a retroactive basis and may result in incremental taxes, interest or penalties. Should the information below be incorrect or incomplete or should the law or its interpretation change, our advice may be inappropriate. We are not responsible for updating our advice for changes in law or interpretation after the date noted above. The following cannot be used as support in any tax audit.
TAX PLANNING WHY OR WHY NOT?
If you are planning on improving your home how are you going to pay for the cost? Pulling the money from your Retirement Savings might cost you way too much in income tax. Using a home equity loan might be a good idea; the problem might be your home equity loan you had for the past 10 years may not be set-up properly. Here is where tax planning might be helpful. I will give you ideas on how to fund the improvements and at the same time review the tax advantages or disadvantages with each scenario.
Do you want to buy a vacation property or rental property? Again proper planning may just save you income taxes. You have a child or grandchild attending college and you would like to gift them some money towards their college tuition. Call Denise so she can tell you the best way you can assist your child or grandchild.
Remember prior to refinancing, purchasing or taking out a home equity loan please call Denise for proper guidance.
Since the standard deduction is so much higher a lot of our clients will not qualify for itemizing. Those clients who are 70-1/2 and older, can make special contributions to their favorite charities, when pulling their required minimum distributions from their IRA accounts. This is part of tax planning and might save you quite a few tax dollars. Let Denise know your plans when donating to your favorite 501C3 organization.
Some of you might be able to just call Denise, ask the question and she will give you a pretty quick answer. Others, additional time might be needed depending on the complexity of the question.
Most important to remember is Denise is here to save you time and tax dollars. Please call her anytime.
CHANGES IN ITEMIZED DEDUCTIONS EFFECTIVE 01/01/2018:
As you all are aware, your standard deduction almost doubled in 2018 from the 2017 amount. Some of those deductible items have also changed:
- Home Mortgage Interest – Interest is only deductible if the funds were used to improve or purchase (acquisition debt) the home, your second home or vacation home. The home will need to be used as collateral in order to be deductible. If your principal balance of your mortgage exceeds $750,000 or you would like to know a little more on a few other changes related to this tax law, contact Denise.
- Charitable contribution – The cap went from 50% of your adjusted gross income to 60% of your adjusted gross income for most of your charitable contributions.
- State and Local taxes – has a cap of $10,000 for the year. This one really hurt quite a few of you this past tax season. Thank goodness the other changes made up for it so no one felt the pain in their pockets.
OTHER CHANGES EFFECTIVE 01/01/2018:
- We all definitely like those new individual tax rates. Everyone was a winner.
- Those with children under the age of 17 definitely like those new child tax credits.
- 30% wind and solar energy credit are extended through 2019 – 26% in 2020 – 22% in 2021
- There are three qualified dividends and long-term capital gains rates depending on your income and filing status – 0 percent, 15 percent and 20 percent.
What is sharing economy? Sharing economy is a term for a new way of distributing goods and services – a way that differs from the traditional model of corporations hiring employees and selling products to consumers. An economic system in which assets or services are shared between private individuals, either free or for a fee, typically by means of the Internet. Thanks to the sharing economy you can easily rent out your car, your house, your apartment, your bike, even your Wi-Fi network when you do not need it. Sharing economy activity is generally taxable even when:
- The activity is only part time
- The activity is something you do on the side
- Payments are in cash
- You receive a 1099 form or W-2 form for your service
You will want to call Denise if you are participating in sharing economy. We will review the items you will want to track and receipts you will want to save in order to take a deduction for these expenses to offset the income.
MARKETPLACE SALES or commonly known purchasing items online
PA has issued guidance on its website related to the Marketplace Sales legislation that was passed by the General Assembly in 2017. The legislation required certain remote sellers and referrers facilitation, making or referring sales to PA customers to make an election to either
- Register to collect and remit sales tax or
- Comply with tax notification and reporting requirements
Beginning April 1, 2018 PA customers will begin receiving information notices from businesses who have elected not to collect sales tax. The information notice will list the purchases and the purchase price of the products for which sales tax was not collected by the seller.
It is important you bring to me these notices which will give me the proper information I need to file your PA use tax when we file your PA income tax return. Please remember PA Dept of Revenue is receiving copies of these notices and will be looking for this information on your PA-40.
CHANGES FOR THE BUSINESS COMMUNITY
PA WITHHOLDING MIGHT BE REQUIRED FOR PAYMENTS TO CONTRACTORS – Payments you make to out of state subcontractor doing work here in PA might need to have PA income tax withheld before you submit your payments to the subcontractor. The moment you hire someone to do work on your PA property and their business is NOT located in the State of PA please call Denise before hiring the contractor or submitting any payments to the contractor. Denise will help you decide if PA tax must be withheld.
MEALS AND ENTERTAINMENT CHANGES
Effective 01/01/18 entertainment expenses are non-deductible no matter what. Your business can still pay for the cost of the entertainment; the expense will be non-deductible on the tax return.
If you are giving a client hockey or baseball tickets: This could be classified a gift. The tax laws state you can deduct business gifts given to your clients up to $25.00 per recipient; this is per year per recipient. You cannot give a client 2 deductible gifts in one year. Your business can pay for the expense. If the cost is above $25.00, the difference will be non-deductible. Be sure to note on your receipt the client’s name and business.
MEALS (Deductible 50% or non-deductible)
What is considered a meal versus entertainment is the big issue. Clarity has been added and it seems the rules are a little more lenient than what was noted in the initial tax bill.
As of now we can rely on the following guidance for expenses of business meals. Taxpayers may deduct business meal expenses if:
- The expense is an ordinary and necessary expense paid or incurred during the taxable year in carrying on any trade or business
- The expense is not lavish or extravagant under the circumstances
- The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverage.
- The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
- In the case of food and beverages provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoice, or receipts. The entertainment disallowance rule may not be circumvented through inflating the amount charged for food and beverages.
Please remember if you are traveling on business and away from your office the meals you purchase for yourself, while you are away will be deductible. Always remember to document.
Example – You take a client to a baseball game. The tickets for the game will not be deductible. If you buy hot dogs and drinks at the game for you and your client; those expenses will be deductible, since the food is separately billed from the baseball tickets. Using the same example; after the game you take your client out for dinner to a restaurant, which is not extravagant, and discuss business while enjoying your dinner, the dinner will be a business deduction.
Example – You have a meeting with a client and after the meeting you take the client for dinner. The cost of the dinner, as long as the dinner is not considered lavish or extravagant, will be a business deduction.
Documentation – you will still need all the documentation you needed in the past.
HOTEL AND TRAVEL
As of the writing of this document there has not been any change as to the deductibility of hotel and travel expenses for business purposes. You need to note the business purpose and of course who, what, when, where and why for the expense to be deductible to the entity.
You are allowed to deduct ordinary and necessary expenses paid or incurred during the tax year in carrying on your trade or business. As long as the food and beverage is not considered lavish or extravagant and you have the documentation to back up the necessary expense your meals should be deductible. You will still need to discuss business and document the cost with a receipt. Briefly noting what was discussed will help you back up the cost; verifying it is an ordinary and necessary business expense for you to carry out your trade or business.
RENTAL PROFITS SECTION 199A RENTAL REAL ESTATE TRADE OR BUSINESS ACTIVITY Federal update 01/18/2019
The following is not a summary of the entire law related to rental activities or 199A. The following is related to the revenue procedure for treating a rental activity as a trade or business for purposes of 199A.
Safe Harbor Test
- Separate books and records are maintained which reflects income and expenses for each rental activity
- For taxable years beginning prior to January 1, 2023, taxpayers must perform 250 or more hours of rental services per year for each rental activity. For taxable years beginning after December 31, 2022, taxpayers must perform 250 or more hours of rental services per year for each rental activity in any three of the five consecutive years that end with the taxable year (every year if the activity was held for less than five years).
- The taxpayer must maintain contemporaneous records, including time reports, logs or similar documents:
- Hours of all services performed
- Description of all services performed
- Dates the services were performed
- Who performed the services
Rental Services may be performed by owners or by employees, agents, and/or independent contractors of the owners. They include:
- Advertising to rent or lease the property
- Negotiating and executing leases
- Verifying information on prospective tenant applications
- Collection of rent
- Daily operation, maintenance and repair of the property
- Management of the real estate
- Purchase of materials
- Supervision of employees and independent contractors
Rental Services DO NOT include financial or investment management activities such as:
- Arranging financing
- Procuring property
- Studying and reviewing financial statements on operations
- Planning, managing or construction long-term capital improvements
- Hours spent traveling to and from the rental property
There are other rules and issues which might have you excluded from using the safe harbor method. Please be sure to review this entire law with your tax professional.
The taxpayer must include a statement attached to the return claiming or passing through the 199A deduction information that the requirements in Section 3.03 of this revenue procedure have been satisfied. The statement must be signed by the taxpayer, or an authorized representative of an eligible taxpayer which states:
“Under penalties of perjury, I (we) declare that I (we) have examined the statement, and, to the best of my (our) knowledge and belief, the statement contains all the relevant facts relating to the revenue procedure, and such facts are true, correct, and complete.”
BEFORE BAD WEATHER AND DISASTER STRIKES – BE PREPARED!
Being prepared for the worst is always a good idea. Your plan shouldn’t only include bottled water, batteries and candles— but also your financial and family documents. While putting together your emergency kit, don’t neglect your financial kit:
- Store copies of important documents either in a safety deposit box at the bank or in a weather-proof box at home.
- Another option would be to put PDF copies on a password-protected USB drive or in cloud storage.
- Have accessible copies of insurance documents and contacts, bank statements, credit card bills, family records (birth, marriage, and death certificates), photocopies of credit and identification cards (e.g., passports, driver’s licenses), all tax records and any supporting documents.
- Take inventory of your home (and business) by photographing or videotaping all of the items inside and out. When taking inventory, also make it a habit to back up your computer, especially if you store important documents and pictures on it.
DISCLAIMER: Any tax advice noted above is based on the facts provided to us and on current tax law interpretation. Tax law is subject to continual change, at times on a retroactive basis and may result in incremental taxes, interest or penalties. Should the information below be incorrect or incomplete or should the law or its interpretation change, our advice may be inappropriate. We are not responsible for updating our advice for changes in law or interpretation after the date noted above. The above information cannot be used as support in any tax audit.