5 February tax moves

Miss a January tax tip? Find them on their special page

Challenges of using tax incentives

Be sure to claim the EITC if you qualify

Business tax deduction changes under the TCJA

Be on the lookout for these tax statements

New filing season + new tax law = new Form 1040, schedules

IRS filing season delays likely even though shutdown is over

Who wants to tax a millionaire? It's not a game show, but the latest Congressional and political campaign theme

IRS workers calling in sick by thousands during shutdown

Note these key 2019 tax filing (and paying) deadlines

Documents you need to file your 2018 return, including a look at the new Schedule A for itemizers

Tax Court movie playing nationwide while real court closed due to government shutdown

Donor advised funds and donation bunching get renewed interest in wake of tax reform

IRS offers tax penalty relief to some who didn't have enough withheld or paid too little estimated taxes

IRS explains how the new 20% pass-through tax deduction for small businesses works

Top 4 Client Retention Strategies for Your Tax Preparation Business

If you haven’t done it already, this is the perfect time of year to put any one of these top 4 client retention strategies for your tax preparation business into place. Client retention should be a strong, foundational piece in your overall marketing strategy. Some of these strategies can be (and should be) used throughout the year – but there’s no doubt that the new year and the beginning of a new tax filing season are an essential time to put your client retention strategies into motion.

Find reasons to stay in touch 

Stay in touch with your clients throughout the year, so that when tax season rolls around, you’ll be top of mind for them. If you haven’t been keeping in touch, now is the time to contact your clients and make up for lost time while getting ahead of the tax prep crowd. If you’re looking for something to talk to them about, try some of these topics:

• • Offer a Client Loyalty Discount of 5% for each year they return up to a maximum of 20%. Tell clients this is a discount to thank them for their past business and to reward them for their loyalty – rather than just a discount that cheapens your services in general. Offering discounts in exchange for referrals (i.e. Refer-A-Friend) is another great strategy to keep loyal clients while growing your customer base.
  • Life changes: A great getting-back-in-touch letter or email can include asking your clients if they’ve experienced any major life changes that could have changed their tax situation in the past year, such as the birth or adoption of a child, the purchase of a new home, divorce, marriage, retirement, or the start of a new business.
  • News: Do you have any special news to share? Be careful with this one. There are two kinds of news: bragging news and news that clients can use. It’s alright to brag if something great has happened, especially if it’s something such as a reward for service. However, make sure to also have news your clients can use to make the communication about them. Include tax tips, major changes in tax law and regulations, or community news.
  • Holiday cards: If you missed sending a message for Thanksgiving, Hanukkah, Solstice, Eid (which changes dates each year), or Christmas (because you may have diverse clients who celebrate different holidays), you can always send New Year’s cards in January – which have the added benefit of being non-denominational and better timed for your business. Your message won’t have to cut through the clutter of many other holiday cards and marketing messages.

In other words: To make your contacts count, personalize your points of contact, and make them useful to the reader.

Request feedback and suggestions

A great way to stay in touch with clients and get to know them better is to ask for feedback about your services. Are there areas where you can improve? Are there areas in which you excel that you could then highlight in your messaging to new clients? Are there new services you could be offering that your clients are looking for? Look for ideas that can help you to stay sharp, stay competitive, and offer the services your clients want and need most.

Offer year-round services

Are there year-round services you can offer (which can also be a great way to increase your income potential)? Another idea: Think about offering a mid-year or autumn check-in with clients. This check-in can be a great way to help clients be more prepared for tax season. Offering help in the form of a check-in along with some early bird discounts could help to encourage even the worst procrastinators among your clients.

Reward loyalty

Rewarding loyalty doesn’t always have to come in the form of money, gift cards and discounts. Think about throwing a few networking events throughout the year to help clients get to know each other. Perhaps there’s a fun community or volunteer event everyone would appreciate getting together for. This idea goes along with our “give to get” philosophy of networking and business in general. Help your clients find the people and services they need for their homes or businesses. They’ll remember you for being the one who helped them find these services and people. Networking and community events will in turn naturally bring more referrals and visibility to your own tax prep business.

The link between client retention and marketing

You may have noticed that these 4 client retention strategies for your tax preparation business were tied in with marketing ideas and tips. That’s because client retention should be one of your top goals when coming up with marketing strategies. New clients are great and necessary for growing your business. However, it takes less money, time and effort to market to existing clients who already know you and your services. Therefore, treat your current clients right. They’re the foundation of your business – and a strong foundation will help you grow better in the long run. If your client retention rate is, say, 85%, you would need to replace 15% of your clients with new client before you would realize any growth.  Getting it to 90-95% would make it much easier for you to grow your tax business.

source https://www.theincometaxschool.com/blog/top-4-client-retention-strategies-tax-preparation-business/

Unemployment benefits are taxable income

5 things to know about workplace retirement plan hardship distributions

IRS calling back half its employees to process returns and issue taxpayer refunds

Shutdown could revive tax refund advance products

Where IRS offices are closed and the tax services that we're not getting during the shutdown

Free File 2019 is open with taxpayer protection upgrades

22 days and counting into the longest federal government shutdown ever

Encourage Clients to File Their 2018 Tax Returns Early

 

It’s official, the 2019 tax season kicks off on Monday, January 28th. As you know, the government shutdown is not going to delay the start of the tax season or the processing of refunds. Unfortunately, your clients don’t know that. The shutdown is likely giving them a false sense of security that they now how more time. Here’s the thing: they don’t!

As their trusted advisor, it’s up to you to inform them of the benefits of filing early. It’s also advantageous of you to get them in your office as early as possible. For one, you want to reduce the number of late season appointments and for two, you want some revenue coming in this month.

So, how will you convince them? Give them these six reasons to file early.

Reason #1: Filing Early Prevents Tax ID Fraud

ID thieves are out in full force during tax season. If they file a client’s return first, you’ve got a big mess to clean up! First off, they’ll use all the unlawful tricks in the book to get the most money back, putting a red flag on your client. Second, there’s no guarantee your client will ever see that refund money. Filing as early as possible prevents all of this from happening.

Reason #2: They Need Time to Consider Different Tax Strategies

There are several new provisions in the Tax Cuts and Jobs Act that may change the way a client files. For one, the standard deduction was increased, which means people who normally itemize, you may want to reconsider. The new deductions are:

• $12,000 for Single filers and married taxpayers who file separately
• $24,000 for married couples filing jointly
• $18,000 for heads of household

There’s also a new $10,000 limit on total state and local tax deduction (SALT). If a client’s SALT deduction is typically more than $10k, they may want to take the standard deduction. Filing early means more time to talk to clients about their options and more time for them to make a decision how to file.

Reason #3: They May End Up Owing 

There’s a reason the IRS has been encouraging people to check their withholding this year. The elimination of the personal exemption under the new tax law means many taxpayers have been under withholding. That may mean a surprise when an anticipated refund turns out to be a tax bill!  According to a report by the Government Accountability Office, more than 30 million Americans may owe taxes this year due to underwithholding. That surprise is better to get now than in April when there’s less time to cough up the money.

Reason #4: Tax Simplification is a Myth

We’ve all seen the new tax forms. Four new schedules on the new Form 1040 does not equal simpler! But the public has been told otherwise. It’s your job to inform that the new tax law did not make filing simpler and that now more than ever they should seek the help of a professional.

Reason #5: Your Schedule is MUCH More Open Now

It’s important to communicate to clients that making an appointment now will be much easier than in late March or April. Waiting until the last minute to get an appointment is never a good strategy – because that’s what everyone does!

Reason #6: It’s Off Their Plate

It feels good to not have to worry about things, doesn’t it? Remind your clients of that. Filing early means all their worries about tax returns are over.

Now is the time to get messaging out to your clients and potential clients about filing early. Write a blog post, put it out on social media channels, put it in an email, give them a call, mail them a tax planner, or a reminder card. Whatever it takes to get them through the door!

source https://www.theincometaxschool.com/blog/encourage-clients-file-2018-tax-returns-early/

Fed shutdown underscores why to adjust payroll withholding

Tax reform reminders

The Tax Cuts and Jobs Act enacted on December 22, 2017 was mostly effective starting in 2018. That was not enough time for anyone to get a good understanding of all of its over 100 changes and the effect and relevance.  The IRS has issued a lot of guidance, but there wasn't enough time to even get all of this finalized by the due date of 2018 returns. If any practitioners have ever used Reg. 1.163-8T, 1.163-10T or temporary regulations under section 469, that's a reminder that guidance on some areas changed or added by the Tax Reform Act of 1986 are not yet final!  And there are areas of many Code sections without sufficient guidance, such as Section 1202 added in 1993, but now widely used due to its now 100% gain exclusion (rather than the original 50%) and its reference in new Section 199A on the qualified business income deduction.

So, a few reminders to consider for yourself and if you're a practitioner, your clients:

• Regulations and other IRS guidance are likely to continue through the extended due date of 2018 returns (and likely beyond).

• Some issues might not get addressed! Look at legislative history; read the Bluebook from the Joint Committee on Taxation although there are a few places it conflicts with IRS guidance.

• IRS Notices, such as Notice 2018-76 on deductibility of client meals, are often transitional or interim guidance. So, the rule might be different for 2019.

• Non-binding guidance is also being issued: forms, instructions, pubs, websites, FAQs, information letters, news releases. But look at them still; they might just be clarifying the statute. If you rely on an FAQ, be sure to make a copy of it. The IRS can change an FAQ and has no archival responsibilities for this informal, non-binding guidance.

• There are areas where what the JCT Bluebook says and IRS guidance are not the same. For example, page 189 of the Bluebook says that a meal connected with an entertainment event is non-deductible entertainment. In contrast, Notice 2018-76 says if separately charged, the food is still 50% deductible.

• State treatment of the TCJA provisions might not be clear or complete. For example, California does not (yet?) conform to most of the TCJA provisions. Will it even conform to some? If yes, will that be retroactive to 1/1/18?

What do you think?



source http://21stcenturytaxation.blogspot.com/2019/01/tax-reform-reminders.html

Some IRS online services, including ways to pay estimated taxes, are working despite shutdown

7 divorce tax tips in light of the Bezos' breakup

Tax filing season 2019 will start Jan. 28, even if the IRS is still in partial shutdown

Tax refunds will be issued even if partial shutdown continues

6 top tax issues of 2018 and what to expect in 2019

Whew! We made it through 2018, the first full year that the latest major tax law changes were in effect.

Now we're about to see, depending on when Congress and the White House can agree to get the government (including the Internal Revenue Service) fully operational, if we can deal with the first tax filing season under those laws.

But before we get lost in the intricacies of the Tax Cuts and Jobs Act (TCJA), I'm taking this one early day in 2019 to look at the six tax stories that turned out to be big deals last year.

These are not the most popular posts in 2018 from the ol' blog, although you'll find some of those links below. Instead, this list covers tax matters that I believe had the most tax impact last year.

And because we all want some warning of what's coming, I'll also pull my crystal ball out of storage for some predictions of what we're likely to see in 2019 on these tax topics that will, for the most part, have continuing implications in 2019. My predictions as to what might happen in these tax areas are posted right after last year's reviews.

That consolidation of these half dozen cross-year tax topics also earns this post my weekly By the Numbers featured post designation.

Here goes!

1. Tax reform takes effect.
No surprise that this tops the list. The TCJA was the first bill to make major changes to the Internal Revenue Code, not just tweak tax rates, since the historic Tax Reform Act of 1986. The problem with the TCJA, though, is how it came to be. Republicans rammed it through late in 2017, without the usual array of hearings on the many changes or any substantive input from their Democratic colleagues. In fact, some of the legislative language was scribbled on printed pages, sometimes at the behest of lobbyists, during the bill's final debate.

This has led to some — OK, a lot of — confusion about just what some provisions mean. I'm looking at you section 199A small business deduction.

2019 Prediction: Look for a messy tax filing season, even if House Democrats, with the Republican Senate along for a ride, and Donald J. Trump can reach a deal relatively soon to get the 2019 filing season on track. Tax software, which most folks use, will help. Tax professionals, which more people are using nowadays, will help even more. But there are bound to be problems as individual taxpayers discover how their individual situations are finally, fully affected by the new tax laws (and those that are now gone). Things also could worse for folks who didn't adjust their payroll withholding to reflect the TCJA's changes.

2. Tax Reform 2.0 languishes.
Not satisfied with getting the TCJA in the books, Republicans looked to make even more tax law changes as 2018 wound down. The Party also was acutely aware that its time in the House — and in in charge of the tax-writing Ways and Means Committee — was rapidly running out. Ways and Means Chair Rep. Kevin Brady was able to get three measures, dubbed Tax Reform 2.0, through his committee and ultimately passed by the GOP House. The bills would have expanded retirement and other savings incentives and offered tax breaks for startup businesses, but were never considered by the Senate.

2019 Prediction: Tax Reform 2.0 is dead in the water. So is most other tax reform. The reason is divided government. If the GOP couldn't get one more round of taxes through when it controlled both the House and Senate, there's no way any tax bills will be able to satisfy the warring political parties now that the House is back in Democratic control. That said, it is possible that some technical corrections, those fixes to unintended tax law glitches, could be made to the TCJA. This is something everyone has known needs to be done for more than a year; it topped my 2018 tax prediction list. But knowing and doing are two different things. Brady released a technical corrections discussion draft on Jan. 2, the day before the Democrats took control. He's hopeful Neal and the Democrats will consider his proposal. Politically, there's strong opposition among Democrats to any TCJA technical corrections. That's understandable given that the GOP refused to help Democrats fix problems in the Affordable Care Act (aka Obamacare) after it passed on a party-line vote. But it's possible that some of the tax errors could get past the political issues. 

3. Extenders weren't extended.
One tax package the GOP couldn't get through was the extenders. This is a collection of tax laws that are temporary and must be periodically renewed or extended. In December 2015, the Protecting Americans from Tax Hikes (PATH) Act made many, but not all, extenders permanent. Some of those that weren't taken care of under path were renewed in February 2018 retroactively for the 2017 tax year. But other tax breaks and those who relied on them weren't so fortunate.

We went through all of 2018 without those tax breaks, including the tuition and fees above-the-line tax deduction, the ability to count private mortgage insurance (PMI) premiums as deductible home loan interest, the tax credit for some energy efficient home improvements. Unless Congress extends these, again retroactively for the 2018 tax year and the 2019 and/or future tax years, they won't be available to taxpayers who want(ed) to claim this this filing season

2019 Prediction: The extenders will be passed for 2018. Congress tends to do this when they have to back into the laws' renewal to accommodate folks who operated on the presumption that, once again, the tax breaks would be renewed. Yeah, that's a dangerous tax strategy, but Congressional history has lulled many taxpayers into the presumption that tax breaks are hard to kill. Fingers are crossed for affected filers that the retroactive extensions are granted before the April filing deadline (which has to be met even if we're still in government shutdown then). But extenders' future beyond retro reactivations for 2018 is cloudy. There is a growing sentiment on Capitol Hill and among trade and activist groups that temporary tax laws are bad tax, fiscal, and economic policy. Some lawmakers on both sides of the aisle are arguing for an end to the extenders, at least those specifically those are targeted to a very small segment of the taxpaying world.

4. New IRS commissioner inherits same old IRS problems.
Almost 11 months after beleaguered John Koskinen served out his full term as IRS Commissioner, the agency finally got a new leader. Charles Rettig, a California tax litigator, took over as the IRS' 49th commissioner on Oct. 1, 2018. Rettig inherited not only the office in northwest D.C., but also the same problems, primarily agency personnel attrition and a perpetually reduced budget.

2019 Prediction: Most in the tax world, both the private sector and on Capitol Hill, are pleased with Rettig's credentials. Lawmakers also realize that they need the IRS to not only implement the new tax laws, but also to collect as much money as possible. While purse strings are tight due to the still-growing (due in large part to the TCJA changes) and the IRS has been has been bringing in more tax money even with lower budgets, I expect Congress to try to give the IRS a bit more money in the coming fiscal year (once they get it its due cash for this one!).

Charles Rettig sworn in as new IRS commissioner by Treasury Sec. Steven Mnuchin.

However, the potential politicization of the IRS is still a worry. Throughout Koskinen's term, Republicans accused him of, among other things, hiding what they saw as IRS tendencies to unfairly treat conservative nonprofits when it came to enforcing tax rules. Now it's Democrats who are concerned. A Trump administration policy revision now lets nonprofits that are involved in politics be more secretive about their donors. They argue that this limited disclosure is a thinly veiled attempt to weaponize the tax code to punish political adversaries and benefit so-called dark money groups on the far-right that seek to buy elections. Dems were not satisfied with answers from Rettig on this issue during his confirmation hearing. Now that they have House control, look for them to call the new commish to the Hill for further discussions. But the conflict between Rettig and Capitol Hill Democrats will not get to the operatic overdrive that characterized Koskinen's interactions with GOP tax-writers, who tried repeatedly to impeach him.

5. Online sales tax collection is OK'ed.
This was one of the least dramatic Supreme Court decisions in recent memory. As expected, the High Court's 5-to-4 ruling last June in South Dakota v. Wayfair struck down the prior Quill nexus requirement and opened the door for states to devise systems to collect sales tax from all remote sellers.

A handful of states had sales tax collection efforts underway or in place. Others are working on it, including the nation's largest states. But essentially, the ruling has added a lot of uncertainty to the online marketplace. Retailers and consumer advocates want Congress to step in and create a national standard to clear up the confusion created by the multiple state methods of collecting remote sales taxes.

2019 Prediction: Congress will continue to talk about national sales tax legislation, as lawmakers have done for years, but they aren't likely to hammer out a bill that can pass a Democratic House and Republican Senate. Soon after the Wayfair decision, the House Judiciary Committee met to discuss the federal role in states' remote sales tax collection. Then-Chairman Rep. Bob Goodlatte (R-Virginia) again offered his seven internet sales tax principles, first set out in 2013, that he believes Congress should address. After that hearing, nothing. Same Congressional nothing on the three bills newer online sales tax bills that were introduced in the last Congress. With the arrival of the 116th Congress, it's back to square one legislatively and politically when it comes to federal involvement in state online sales taxes. With all the other matters that House Democrats want to address, this topic isn't likely to get much traction.

6. Sports betting legalized nationwide.
In another landmark 2018 decision, the Supreme Court of the United States (SCOTUS) essentially legalized nationwide sports betting at the discretion of each states.

Bettors in a Las Vegas casino watch the odds and payoffs alongside the sporting events on which they've placed bets. (Kay Bell photo)

Some states, including New Jersey which brought the lawsuit setting up the SCOTUS decision, have taken advantage of the new gambling revenue stream. Around two dozen more are considering it.

2019 Prediction: This one's easy. States still are desperate for money. So the states that are looking into adding sports betting opportunities for residents and visitors will continue these revenue-raising efforts. Most will succeed. And there's no need for Congress to be involved, since the SCOTUS ruling invalidating the Professional and Amateur Sports Protection Act (PAPSA) not only made in-state betting OK, but also cleared the path for fantasy sports wagers and online betting, the two areas where Capitol Hill had been trying to intervene.

This 2018 review and 2019 preview list isn't as long as it's been in some years. That's an indicator of how jammed up Congress was even when the GOP controlled both Congressional chambers and the White House.

Now that Congress is divided, I look for even less to happen on the tax front. And maybe that's the best news for all of us right now!

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source https://www.dontmesswithtaxes.com/2019/01/2018-tax-review-2019-tax-preview.html

It's Filing Season 2019 Tax Tip time

New year brings notable state tax changes

December Tax News Recap: Shutdowns, Changes, and more Scams

Oh December! As the world winds down for the holidays, tax preparers gear up for tax season – a season that is bound to be a tough one between the threat of a government shutdown and all of the tax law changes that go into effect. Here are the top stories in the tax industry for December.

Will they/won’t they… shut down? 

Will there be a government shutdown? Only time will tell. Either way, the IRS seems confident that it won’t affect the start of the tax season. It will, however, delay returns if the shutdown happens and continues through the start of the season. The IRS’s contingency plans in the event of a government shutdown were updated in November and can be found here.

IRS News

A few things came up on the IRS Newswire in December. First, the IRS announced a number of e-Services changes that will make account registration easier on tax pros. Student loans have been added to the alternative list of financial account data that the IRS will accept for verification. There’s also a new exemption process that allows tax pros who don’t have an e-Services account and who can’t complete the identity-proving process online to instead go through the process in person at an IRS Taxpayer Assistance Center. You can read all about it here.

Second, the IRS is giving non-profits leeway on the tax provision that eliminated deductions for pre-tax commuter benefits. The law previously set a 21 percent tax rate for nonprofits on so-called fringe benefits like parking and commuter fair provided to employees.  You can read more about it here.

Third, a reminder from the IRS for those with disabilities: The Tax Cuts and Jobs Act made major changes to Achieving a Better Life Experience (ABLE) accounts. Eligible individuals may now put more money into their ABLE account and also roll money from their qualified tuition programs (529 plans) into their ABLE accounts. And certain contributions made to ABLE accounts by low- and moderate-income workers may now qualify for the Saver’s Credit.

A Speech from the Commish

As you know, the IRS has a new Commissioner, Charles Rettig. In his first speech as the commissioner at the AICPA National Tax Conference, about his plan to improve the technology at the IRS for interacting with both taxpayers and practitioners and to ready the agency for the Tax Cuts and Jobs Act.

“I, Chuck Rettig, work for the Internal Revenue Service and I’m very proud to do so. I hope that as my term moves on, others inside the Internal Revenue Service will stand up and say the same thing and that each practitioner will actually reach out and shake their hand.”

Watch out… 

…for scammers! The IRS has recently seen a surge of fraudulent emails where the sender impersonates the IRS and uses tax transcripts as bait to entice users to open documents containing malware. Don’t Mess with Taxes has the details here. Scammers have also been caught sending fake emails to tax professionals as part of payroll direct deposit and wire transfer scams. More on that here.

…for the IRS! Be careful what you post on social media. Because the IRS is watching! A request for information issued by the IRS’s National Office of Procurement suggests that the IRS is looking for ways to use social media platforms in its quest to catch tax cheats.

source https://www.theincometaxschool.com/blog/december-tax-news-recap-shutdowns-changes-and-more-scams/

Tax Day 2019 is April 15 and April 17

Trump's tax returns, plus future candidates' filings, are first target of House Democrats

6 tax breaks that are gone or reduced

New year, new baby, new tax breaks