Between now and December 31, 2020, 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. During the Pandemic, in order to keep our clients and staff safe, please call our office prior to stopping in. Starting January 1, 2021 through January 31, 2021 we will resume our January tax season office hours, Monday thru Friday 9:00 AM to 5:00 PM. Starting February 1, 2021 through April 15, 2021 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.
We hope all of you are doing well. Dealing with COVID-19 has been stressful for everyone. Everyone needs to take a step back and realize the good things going on in all of our lives. We would like to hear from all of you as to what you were doing during the shutdown. We have a few clients who were puzzling, cleaning out storage areas, housecleaning, baking, gardening, etc. We have a special section on our website for you to share funny pictures or good thoughts on your experiences during the shutdown. From the Home page, you can find this section by clicking on WHAT’S NEW then GOOD THINGS. Please forward to email@example.com anything you would like to share; you name is confidential information, so when you send us your goodies please do not include your name.
As Berks County moves into the Yellow Phase we will be allowing clients to come into the office BY APPOINTMENT ONLY. Your safety and well-being and the well-being of our office staff is our major concern. You will be required to wear a mask while you are in our office. If possible, we will always suggest handling the meeting over the phone. If the phone call will not work for you we will then schedule an appointment.
If you have negative thoughts, turn them into positive thoughts. There is always something positive going on in all of our lives. We hope the summer brings you lots of smiles, positive thoughts and new adventures. We are here to help you. Be kind and considerate to everyone. We all need hugs right now; the new “air hug” is the best thing in the world. Thank you for your loyalty. Take care, stay safe and healthy.
Your Friends at Main Street,
Denise, Sarah, and Barb
Important words from our greeter:
Wow this nasty COVID-19 thing is terrible. I really missed quite a few of you and at the same time I am so grateful you stayed safely at home. Hey, there is plenty of time to pet me and give me treats. Next year will be here before you know it. I heard a few of you purchased/adopted a new pet during the pandemic. Please send me pictures; I would love to see your new pet.
There is some information related to this COVID-19 thing below under STIMULUS PAYMENT and REQUIRED MINIMUM DISTRIBUTIONS. Take a look because some of this may relate to you.
You take good care of yourself. I will keep you in my doggie dreams.
Hugs and lots of love,
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.
STIMULUS PAYMENT (ECONOMIC IMPACT PAYMENT)
Stimulus payments might be sent to you using a prepaid debit card versus a paper check. The Economic Impact Payment Cards will arrive in a plain envelope from Money Network Cardholder Services. The Visa name will appear on the front of the card; the back of the card has the name of the issuing bank, MetaBank, NA. Information included with the card will explain that the card is an Economic Impact Payment Card.
Those who receive Economic Impact Payment by prepaid debit card can do the following without any fees:
- Make purchases online and also make purchases at any retail location where Visa is accepted
- Get cash from in-network ATMs
- Transfer funds to their personal bank account
- Check their card balance online, by mobile app, or by phone.
This free, prepaid card also provides consumer protections available to traditional bank account owners, including protection against fraud, loss, and other errors.
The card will come with instructions on how to activate and use it. Learn more at www.eipcard.com.
REQUIRED MINIMUM DISTRIBUTIONS (RMD) – change starting 01/01/2020
Just as a reminder, Required Minimum Distributions are waived for 2020 due to COVID-19.
The Secure Act increased the age for required minimum distributions to age 72. This legislation does not affect the rules for 2019. If you were 70 ½ or older on December 31, 2019 you will be required to continue to pull your RMD and follow the old rules. This legislation change only effects individuals who were not 70 ½ on December 31, 2019.
On December 20, 2019 the President signed into law the Further Consolidated Appropriations Act 2020. This act passed the following:
- Retroactive reinstatement for the mortgage insurance premium (PMI) deduction and is extended through 2020.
- Retroactive reinstatement for the above-the-line qualified tuition and related expenses deduction and is extended through 2020.
- Retroactive reinstatement for the construction of energy efficient home and is extended through 2020.
- The medical expense deduction returns to 7.5% for 2019 and 2020.
- The employer credit for paid family and medical leave and the work opportunity credit has been reinstated for 2020.
NEW VIRTUAL CURRENCY GUIDANCE
The IRS has issued new guidance to help taxpayers better understand their reporting obligations for specific transactions involving virtual currency. The new guidance includes Revenue Ruling 2019-24 and frequently asked questions. Please call our office if you are dealing with virtual currency so we can assist you in your required recordkeeping.
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.
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.”
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 fall under Required Minimum Distribution requirements 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.
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.