Starting April 18, 2018 to December 31, 2018 our office hours are Monday thru Thursday 9:00AM to 5:00PM. Our Tax Professionals are available by appointment only.
Denise will be out of the office for a tax conference August 6, 2018 to August 12, 2018
We hope everyone has a safe and enjoyable summer. Denise, Sarah & Barb
From our official greeter “Boomer”
Boomer here! I hope everyone is enjoying the beautiful weather. Talk about changes … lots of tax law changes in 2018. I know Mom tried to prepare all of you during tax season for the changes. Yes, this attributed to her huge backlog during this past filing season. I know she appreciated your patience, kindness and understanding. She wanted to be sure all of you were ready for the changes especially those who might have a negative effect with any of the new tax laws. She noted a few of the changes below. I know I will miss her while she attends all the tax workshops over the summer getting the knowledge she will need to prepare accurate returns and at the same time giving you the maximum write off. The great thing is she leaves me and her office in good hands with Barb and Sarah.
On the bright side, recently Mom and Dad took me on a camping vacation to Vermont. I had so much fun. Mom and I went for a lot of daily walks. Dad joined us when he was not fishing. I love going on vacation, but I did miss the girls at the office and was excited to get back home to see them!
Let’s talk about security. Because of how important it is to protect yourself, Sarah recently updated our security information. Please be sure to review the information in our “Security Awareness” section because those bad people are always working on new scams to try and steal from innocent people. Go to the column which says “Security Awareness” on the main screen and you will see “Identity Theft” and “Scams & Security”. The “Identity Theft” section explains what you should do if you suspect a bad person has stolen your identity. The “Scams & Security” section has lots of really good ideas on how to protect yourself from those bad people who want to steal your identity. Please be sure to read through this and don’t hesitate to share with family, neighbors and friends.
A reminder to our clients, feel free to let others know how you feel about Main Street’s services and staff by leaving a testimonial. On Main Street’s web site, simply click on “Contact” and “Share Testimonial” and fill out the form.
Well, I better let you go so you can take a look at all the new information on our web site. If you do have any questions on anything noted on our web site you can always ask me, but I think my Mom, Barb or Sarah might have a lot better answers for you.
I hope you and your family have a great summer and safe travels.
Hugs and Love, Boomer
SNAP SHOT ON SOME OF THE TAX LAW CHANGES. PLEASE KEEP IN MIND THE GOVERNMENT HAS BEEN TWEAKING PIECES OF THE LAW ON A DAILY BASIS:
- The personal exemptions are now $0, no longer allowed
- There are now seven tax rates 10%, 12%, 22%, 24%, 32%, 35% and 37%
- Standard deduction has increased for everyone. Additional amounts for those 65 years and older or blind and unmarried $1,300.00. Those married, 65 years and older or blind and are married will receive an additional amount of $1,300.00 per spouse meeting the criteria.
- Single and Married Filing Separately $12,000.00
- Married Filing Joint $24,000.00
- Head of Household $18,000.00
- Itemized Deductions
- State and local taxes along with real estate taxes will be limited to $10,000.00
- Foreign taxes will still be deductible and are not part of the $10,000.00 limit
- Medical expenses will still use the 7.5% AGI base in 2018. The 10% AGI base will be effective for tax years beginning after December 31, 2018. There is no longer an AMT addback for medical expenses.
- Mortgage Interest will be allowed only on the interest paid on acquisition indebtedness. The maximum of acquisition indebtedness on the first and second home is reduced to $750,000.00 ($375,000.00 for MFS). If the loan incurred before December 15, 2017 the acquisition indebtedness is allowed using the former law limitation of $1,000,000.00 ($500,000.00 for MFS). If there was a binding contract before December 15, 2017 to close on the purchase of a principal residence before January 1, 2018 and the purchase occurred before April 1, 2018 the $1,000.000.00 limitation is allowed. Please note the interest paid on equity indebtedness is no longer deductible after December 31, 2017. If the equity indebtedness proceeds are used for a business, farm, or rental property and can be tracked to those usages the interest will be deductible on the applicable Schedule C, F, E, etc.
- Charitable contributions – The current limitation of 50% of income is increased to 60% of income.
- Casualty losses are no longer deductible unless the loss was in a federally declared disaster area.
- 2% miscellaneous itemized deductions will no longer be deductible. These include tax preparation fees, advisor fees, employee expenses, investment expenses, etc. Just as a side note there has been some chatter related to an above the line deduction for employee expenses. We will have to wait and see on this issue.
- The phase-out of itemized deductions will no longer exist.
- Capital gains and qualified dividends rates have changed.
- Single – 0% up to $38,600.00 – 15% up to $425,800.00 – 20% over $425,800.00
- Head of Household – 0% up to $51,700.00 – 15% up to $452,400.00 – 20% over $452,400.00
- Married Filing Jointly – 0% up to $77,200.00 – 15% up to $479,000.00 – 20% over $479,000.00
- Married Filing Separately – 0% up to $38,600.00 – 15% up to $234,500.00 – 20% over $234,500.00
- Estates and Trust – 0% up to $2,600.00 – 15% up to $12,700.00 – 20% over $12,700.00
- Kiddie Tax – Instead of using the parent’s tax rate the unearned income of the child will use the trust tax rates. In 2018 the maximum tax rate for estates and trust is 37%. This tax only applies to children under the age of 19 and college students under the age of 24.
- Child Tax Credit has increased to $2,000.00 per qualifying child and will be refundable up to $1,400.00 subject to phase out rules. Also included is a temporary $500.00 nonrefundable credit for other qualifying dependents who are not qualifying children.
- Alimony paid will no longer be deductible. At the same time Alimony received will no longer be taxable. These rules only apply to instruments executed or modified after December 31, 2018.
- The adoption credit – $13810.00 is the maximum credit with the phase out starting at $207,140.00 and completely phased out at $247,140.00.
- The Alternative Minimum Tax (AMT) has changed drastically. The GOP is hoping with the new tax law changes there will be fewer taxpayers who are affected by the AMT Tax.
- ROTH IRA – The ability to recharacterize a contribution to a ROTH IRA as a contribution to a traditional IRA will be repealed. Also the ability to recharacterize a conversion of a traditional IRA to a ROTH IRA back to the traditional IRA will also be repealed.
- Like-Kind exchange rules will now only apply to real estate. These rules will no longer apply to exchange of personal property. Any exchange of personal property will be treated as a sale.
- Affordable Care Act – The penalty for failing to maintain minimum essential coverage for individuals is repealed beginning in 2019.
- Entertainment expenses will no longer be deductible. Food and beverage expenses associated with operating a trade or business are still deductible at 50%, this includes meals consumed by employees on work travel. These expenses must be documented as to who, what was discussed, where, when and why.
- Business Deduction – Sole proprietors, partnerships, S corporations, trusts and estates who have domestic qualified business income (QBI) are allowed to deduct 20% of business-related income, subject to certain wage limits and exceptions. This deduction will reduce your taxable income. It will not reduce income subject to SE tax. The deduction is not allowed for businesses offering certain personal services. This is a deduction which has a lot of “what ifs” in the law.
- Tax rate for corporations is reduced to 21% and is made permanent.
- Like-Kind Exchanges – If you trade-in business equipment you will need to treat the trade as a sale. Only the sale of real property can use the like-kind exchange laws.
Even though we have new tax laws the following will not change. Please remember in order for us to file your income tax returns we will always need the following information:
- Bank Account Verification Form signed and dated – Under “Worksheets & Forms” on our web site you will find the bank verification form. If you want your refund directly deposited into your bank account or your income tax balance due or estimated tax payments withdrawn from your bank account, we will need this form completed by you and if filing a joint return, by your spouse.
- Copy of your driver’s license and if filing a joint return, a copy of your spouse’s driver’s license.
- Children under the age of 17 – we will need verification your child lived under your roof for the year. We will need a document dated 2018 which will note the child’s name along with your name as parent and your address. An example would be school records, medical bills, health insurance bills, etc. We should be able to use any document dated 2018 as long as the document notes these three items: child’s name, your name or your spouse’s name and the address where the child lives.
- If your child is attending college – we will need the Form 1098T and full year account statement from the college noting student’s name, amounts billed and payments received.
- Form 1095 (health insurance coverage) will be needed to file your 2018 income tax return. Unless the mandate changes, 2018 should be the last year we will need this form.
DID YOU KNOW THE IRS COULD HAVE YOUR PASSPORT TAKEN AWAY FROM YOU?
The Internal Revenue Service (IRS) doesn’t have control over passports. The State Department doesn’t generally have access to taxpayer information because of privacy laws. To bridge the two, the law now requires the IRS to advise the State Department about seriously delinquent taxpayers. The State Department may then refuse to issue or renew a passport for a seriously delinquent taxpayer. The Secretary of State is also permitted to revoke any passport previously issued to a seriously delinquent taxpayer.
For purposes of the new law, a seriously delinquent tax debt is defined as “an unpaid, legally enforceable federal tax liability” greater than $50,000 which includes interest and penalties. The $50,000 limit will be adjusted each year for inflation and cost of living. The limit is not per year; it is the total tax debt.
There are some exceptions under the law. Tax debt which is being timely paid as part of an installment agreement or under an Offer in Compromise doesn’t count. It also does not include any tax debt for which a Collection Due Process hearing is timely requested in connection with a levy or a debt where the collection has been suspended due to an innocent spouse claim.
If you are seriously delinquent under the new law, the IRS is required to notify you in writing at the time that it certifies the debt to the State Department. The State Department will then hold your passport application or renewal for 90 days to allow you to resolve any errors, make full payment, or enter into a satisfactory payment plan. There is no grace period for resolving your debt before the State Department revokes an existing passport.
To get off the list, you must prove that the debt is fully satisfied, is legally unenforceable or is not a seriously delinquent tax debt under the statute (in case you’re wondering, that does not include debt that dips below $50,000 – once you’ve hit that threshold, you must either pay it down or meet one of the other criteria).
PA DRIVER’S LICENSE – FEDERAL REAL ID ACT:
Under another law federal agencies cannot accept driver’s licenses and identification cards issued by states that do not meet certain standards. PA is currently one of those states. PA is under a REAL ID enforcement grace period until October 10, 2017, which means that PA residents will not face access issues when entering federal facilities through that date.
Under the federal REAL ID Act, beginning January 22, 2018, residents in states which have not come into compliance with federal requirements or obtained an extension will need to show an alternative form of identification such as a passport at airports and when accessing federal buildings and military bases. Penn DOT anticipates the U.S. Department of Homeland Security will continue to issue extensions to Pennsylvania until REAL ID products are available for residents. Under SB 133, no Pennsylvania resident will be required to get a REAL ID-compliant driver license or identification card, but residents who choose to do so will be able to use those forms of identification when the new federal requirements go into effect.
System, building infrastructure and process changes will be necessary for Pennsylvania to issue REAL ID-compliant products. Work will begin immediately and Penn DOT estimates REAL ID compliant driver licenses and identification cards will be available by March 2019. This will allow ample time for customers who want a REAL ID product to get one before the final DHS effective date of October 1, 2020.
DO YOU OWE THE FEDERAL GOVERNMENT MONEY?
Congress passed legislation requiring the IRS to use private collection agencies to assist in collecting certain overdue tax accounts. The law does include strong protection of taxpayer rights and the taxpayer’s privacy must be fully maintained. Confidentiality requirements and restrictions required by law will be strictly enforced. If the taxpayer does not wish to work with an assigned private collection agency to settle their overdue tax account, they must submit a request in writing to the private collection agency. The Private Agencies cannot take any type of enforcement action against you to collect this debt; like filing a Federal Tax Lien or issuing a levy. Remember the IRS does have the legal authority to take these types of enforcement actions to collect an overdue account.
How will you know if your account was turned over to one of the Private Agencies? You will first receive a notice from IRS stating your overdue account was assigned to a private collection agency. You will then receive a notice from the private collection agency. You need to save both of these notices. Because of identity theft issues the notices will include numbers which both you and the private collection agency will use to identity each other. The four Private Collection Agencies selected are; CBE Group, Conserve, Performant, and Pioneer. If you are one of our clients the most important item to remember is if you receive the notice from IRS, you contact us.
TUITION (FORM 1098-T) AND BILLING STATEMENTS
If you have a child attending college we will need the 1098T from the college (this will be in your child’s name). We will also need the tuition and fees billing statements from the college for the full calendar year. We want to be sure we are not missing any qualified expenses. You may have to go on the school’s web site to retrieve the billing statements. The information will most likely be in the student’s name. The student most likely will have access to this information. Tax preparers are mandated by IRS to verify the numbers we enter on your return. The only way for us to verify this information is to review the billing account statement for the calendar and Form 1098T.
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.