Small businesses' many new tax considerations, plus some tax tips, to celebrate Small Business Week 2018

W&M members demand IRS explain Tax Day system failure

House-passed FAA bill leaves existing excises taxes intact

IRS backtracks on tax law changes to 2018's maximum family HSA contribution amount

Texas sales tax holiday encourages emergency preparedness

How to Fix the Tax Preparer Shortage

One of the biggest challenges tax business owners face (besides the tax law changes) is staffing their firms with qualified tax preparers.  The qualified tax pros of yesterday are either retiring, happy where they are, or have gone out on their own to start their own businesses. The applicants that do come in, know enough about doing tax returns for their friends and family, but not enough to qualify as tax preparers for a tax firm with business and multi-form clients. Unfortunately, there’s just not a steady stream of new talent to choose from.

All hope is not lost. There’s a solution to your staffing woes. Want a pool of talent with basic skills you can mold into your own perfect tax pros? Do it yourself by running your own tax school.

Yep. We’re telling you to do what we do. The Income Tax School got its start because our sister business, Peoples Tax, was having trouble finding qualified applicants. So, we decided to do what the National firms do; recruit and train our own people.

Why run a tax school?

Running your own tax school is a great way to make money in the off-season while filling your pipeline with qualified applicants. Recruit people in need of a career change or early retirees who are looking for some extra income and teach them the skills they need to become tax preparers. They pay you for the much needed skills and training, and you now have a pool of applicants to choose from!

The beauty of running your own tax school is that you don’t have to hire everyone you train. You get to know your students during training so you know exactly who you’re hiring when the time comes.

You don’t have to reinvent the wheel

Developing curriculum to run a tax school seems like a lot of work but it doesn’t have to be. The Income Tax School provides a turnkey solution to running a successful tax school! We provide everything you need to recruit and train high quality tax preparers.

We provide student manuals, an instructor guide with lesson plans, an online dashboard with automatic grading, a resource center, and a tax school operations manual.

Stop stressing about staffing and get started with your tax school now so that you have a pool of well trained applicants (with no bad habits) when the time comes. Learn more here.

 

source https://www.theincometaxschool.com/blog/why-run-your-own-tax-school/

Big businesses benefit most from new tax pass-through law

New tax phone scam spoofs taxpayer assistance numbers

How Americans spend their tax refunds

IRS still waiting for new commissioner to take charge

How did you celebrate Tax Freedom Day on April 19?

Tracking Cryptocurrency Transactions for Tax Compliance

I was surprised to see today a survey result that 46% of cryptocurrency traders don't plan to report the transactions for income tax purposes (TeamBlind survey - see 4/17/18 article in The Wealth Advisor). There is, of course, no reason for not reporting income. The IRS is well aware that people have virtual currency transactions. It is also an agenda item for the Criminal Investigation Division of the IRS per their 2017 annual report.

To help track crypto transactions, there are a few software tools readily available.  A recent entry to this market is CryptoTrader.Tax.  Here is information from their recent press release (with permission of the company):

"CryptoTrader.Tax released a web-based tool developed with the intention of helping users calculate the capital gains and losses associated with their cryptocurrency investment endeavors. The tool is currently in the ‘beta’ phase of development, and can be accessed from their website at, www.CryptoTrader.Tax. CryptoTrader.Tax aims to provide its users with an easy and accurate tool to use when it comes time to do their taxes. It properly considers the user’s set time zone, trades across all exchanges, and the sale of their uploaded cryptocurrency income.

CryptoTrader.Tax uses a safe, streamlined workflow to gather the data needed to accurately calculate gains and losses. Users upload trade data via exported .csv files from supported exchanges or manually using the provided template. They can also upload several types of cryptocurrency income, such as mining, gifts, etc. The tool then generates detailed reports using the uploaded information. User’s can view an IRS 8949-esque form showing gains and losses for each sell of a coin or view a detailed breakdown of each sell with even more information. There are also views for income items and coins still being held at the end of the year. Future updates planned for the tool include: population of IRS forms, automatic trade importing from a wide variety of exchanges, and more."

You can find a few others out there as well. What is important is to check these out and use one. 

What do you think?




source http://21stcenturytaxation.blogspot.com/2018/04/tracking-cryptocurrency-transactions.html

Special circumstances give some taxpayers more filing time

3 Easy Ways To Destress After Tax Season

The tax deadline may be in the past but we all know there’s still work to do. The good news is that the influx of people who need things last minute is on a downturn and the end of the season is in sight! At this point of the year, we generally encourage tax pros and business owners to keep up the momentum. Don’t just throw your hands in the air and declare it the end. Before you take a break, while tax season is still fresh in your mind, you should do the following:

• Evaluate tax season
• Send Client Surveys
• Clean the office and check off some of these other post tax season to dos

Once you’ve worked through those tasks to close out the season, we encourage you to do more than just going out for a beer or a nice meal. Make changes to your routine to ensure that you completely decompress from the season so that you can come back refreshed and ready to generate revenue during the off season. Here are 3 easy ways to destress after tax season.

Take some time off

For many of us, going on vacation seems like a pretty foreign concept. After all, with how stringent our demanding schedules can be, it seems like the most obvious option would be to forego any break or time-off and grind through. A vacation is a healthy change of pace that will make you more productive in the long-run. After all, that overworked brain of yours truly needs a break. 

Getting out of town on a trip is ideal but you could also take a staycation at home. Catch up on some much-needed couch therapy or get out there and reacquaint yourself with the city you haven’t seen since January. You could also spend some time catching up with friends and family – who probably haven’t seen you in a while.

The overarching goal is to get yourself in a place where you’re completely relaxed and ready to re-approach work with a fresh mind.

Embrace a healthier routine

After you’ve taken some time away, start looking for ways you can adapt to a healthier routine – one that lends more to dealing with stress in your day-to-day. A healthy routine doesn’t necessarily mean going on a strict diet or starting a new exercise routine. It means being mindful about bad habits you may have picked up while trying to get through tax season. 

While most of us know that diet and exercise can be a great deterrent of stress, the hardest part is implementing these practices on a daily basis. As noted by the ADAA, only 14 percent of people exercise regularly to cope with stress. Coping with stress through exercise doesn’t have to mean hitting the gym or going for a run. Just going for a walk on your lunch break or riding your bike to work can help tremendously. Additionally, be mindful of your intake of high-fat foods and sugar. According to PCRM, high fat foods and sugar add to your stress load. 

The best way to approach improving diet and exercise is to take it one day at a time. As silly as that sounds, it’s how habits are formed. 

Make Adjustments to your work routine

Finally, make some adjustments to your work routine to avoid burnout. This can include adjusting your hours and changing up your processes to optimize your output. For example, if you’re someone who has a lot of energy in the morning but tends to slow down in the afternoon, scheduling all your appointments and calls for the evening enables you to have an entire chunk of time to be productive. Fine-tuning your routine and evaluating your productivity levels will only help when things get busy again.

Keep on keeping on tax pros! We hope you can use these tips to relax, reset, and get back to work.

source https://www.theincometaxschool.com/blog/destress-after-tax-season/

Missouri shoppers say show me sales tax free items

Your tax e-file and, if necessary, e-payment options

The Internal Revenue Service had issues with some of its online systems on Tuesday, April 17, the day that was supposed to be the filing deadline for our 2017 tax returns.

Those problems notwithstanding, e-fling and electronically paying any tax that's due today, Wednesday, April 18 — yes, today, the new filing deadline provided by the IRS to make up for its online inconveniences yesterday — is still the best move for many filers.

The agency for years has been encouraging, and in some cases forcing, electronic filing and paying of taxes. The reasons are that it's easier (definitely for the IRS, which has to process more than 140 million forms each year) and more accurate than going the old fashioned paper route.

Most taxpayers agree. Through the first week of April this year, the IRS reported that 92.3 percent of filers, or almost 96 million, had e-filed their 2017 tax returns.

If you want to join them, there's still time. Here are your options.

E-filing choices: Tax e-filing actually covers two things, using software to prepare your 1040 and associated schedules and forms and then submitting that tax package electronically.

Nowadays you can choose from many different tax preparation software products. Or you can use a tax preparer who is an IRS authorized e-file provider who has selected his/her own tax prep and filing software.

Click image to go to the IRS.gov e-filing overview page for links to other services. 

Picking the perfect tax software: If you're a do-it-yourself kind of taxpayer, the tax software options might seem a bit overwhelming.

After all, you can use the software's online version or buy a program to download to your computer or take advantage of a partner tax filing offer from your bank or broker or use the IRS' Free File.

It's the tax version of option overload when you try to pick a tube of toothpaste at the grocery store!

Take a breath. Now check out NerdWallet's Guide to Choosing Tax Software, as well as my piece on getting the most from your tax software. 

Transition tasks: If you're new to tax software, converting from your paper filing will take some work. You typically have to enter a lot of the info from the printed forms into your software.

In some cases, the software is able to locate your data if your employer and other payers, such as investment companies, have partnered with the tax program manufacturers.

The good news, though, is that once that's data entry is done, the next year your software will find the prior filing's data and enter whatever is the same into your new e-forms. That way if your taxes are substantially similar, you're ready to go more quickly.

But I digress. Or is it progress, since I was talking about 2018 tax filing due in 2019? Either way, back to this year's e-filing.

Free File choices: The IRS doesn't endorse any particular tax software, but you can get a look at those who meet its filing standards by checking out the companies that are participating in Free File. Most also offer paid versions of their Free File software if you don't qualify to use the no-cost online option.

If you are, however, eligible for Free File — that's folks, regardless of filing status, whose adjusted gross income is $66,000 or less — consider using it. Or some other free option, either through the software companies or, as mentioned earlier, via a special deal with your bank or other financial account.

Taxes are pain enough. If you can do them without shelling out more of your hard-earned (and taxable) money, then great.

E-filing details: With tax software, as with old-school paper filing, you still have to sign your tax return (that means both spouses if you're filing jointly).

You do so in e-filing by using a Self-Select PIN or by entering your prior-year adjusted gross income. Generally, the tax software will automatically enter the information for returning customers. If you're new to the process, you may have to enter the information yourself.

As for the actual submission of your return to the IRS, most software companies offer at least one free federal e-filing.

State return e-file options: State taxes, however, tend to be a different, and more expensive, deal. If state returns are important to you, and they are for folks in 43 states and the District of Columbia, then you need to check your software for that option.

Most states, though, offer their own version of Free File for residents.

Since I live in Texas and don't have to worry about filing state returns, I'm not sure how easy these options or if you have to re-enter a lot of stuff that you put into your federal tax software program.

But a check with your state tax department should provide you the details.

And again, free! So a little extra data entry is probably worth it.

Electronic refunds, too: Finally, if your e-filed federal tax return produces a refund, the IRS suggests you have that money directly deposited into your bank account. It's much quicker than asking for a paper check to be snail mailed to you.

Or, if you must also pay estimated taxes on Tax Day and three other times a year, you can have all or some of your refund credited toward your those 2018 payments.

E-payment options: OK, let's get real. Most of us who file as late in the tax season as possible do so because we owe Uncle Sam.

That's a bummer, but at least we can pay electronically, too.

Taxpayers who owe taxes can now choose among several quick and easy electronic payment options, including the following:

• Electronic Funds Withdrawal (EFW) allows taxpayers to e-file and pay from their bank account when using tax preparation software or a tax professional. EFW is only available when electronically filing a tax return.
• Direct Pay is a free online tool allows taxpayers to securely pay their taxes directly from checking or savings accounts without any fees or preregistration. Taxpayers can schedule payments up to 30 days in advance. Those using the tool will receive instant confirmation when they submit their payment.
• Credit or debit card tax payments are available online, by phone or with their mobile device through any of the authorized debit and credit card processors. Note, however, that you will pay a fee to the card processor, not the IRS. The IRS has a special Web page with details about and links to IRS-authorized card processors.

• IRS2Go is the tax agency's mobile app. It's free and offers the option to make a payment with Direct Pay for free or by debit or credit card through an approved payment processor for a fee. You can download IRS2Go from Google Play, the Apple App Store or the Amazon App Store.
• Electronic Federal Tax Payment System, or EFTPS, is a free payment portal, but you must be enrolled beforehand. It's too late for this coming April deadline, but check it out for future filings, including paying of your estimated taxes.
• Cash payments can be made using the PayNearMe option. Payments in actual dollars are limited to $1,000 per day; a $3.99 fee applies to each payment. The cash tax payment option is offered in cooperation with Official Payments and participating 7-Eleven stores in 34 states. You can get more details, including answers to frequently asked questions, are at IRS.gov's special cash Web page.

Electronically ask for more time: Just can't make the April 18 deadline? Then ask electronically ask for an extension to file.

You can do so by filing Form 4868 via your software, your tax preparer or Free File, including Free File Fillable Forms.

You also can get an extension without filing Form 4868. Simply use Direct Pay, EFTPS or a credit or debit card (see details above) to e-pay all or part of any tax you've guestimated you owe and indicate that the payment is for an extension.

Although you don’t have to file a separate extension form if you use this e-pay option, you will receive a confirmation number of filing for an extension for your records.

And remember, as the discussion about e-paying indicates, an extension is just extra time to fill out and submit your forms. It's not an extension to pay any tax you may owe. Not paying will cost you more in late-payment penalties and interst.

More tax questions on this last (we hope) day of the 2018 tax-filing season? Check out the Daily Tax Tips.

You also might find these items of interest:

• 17 last-minute tax-filing tips 
• Don't make these 12 tax-filing mistakes
• 5 mailing or delivery service tips for paper tax return filers 

Advertisement

source http://www.dontmesswithtaxes.com/2018/04/your-tax-e-file-and-if-necessary-e-payment-options.html

Tax Day pushed to April 18 due to IRS system problems

5 mailing or delivery service tips for paper tax return filers

Revised 1040-ES takes new 2018 tax law into account

April 17 - Doubly A Big Tax Day!

April 17 is the due date for 2017 individual returns as well as for calendar year corporations. It's not April 15 for 2018 because that was a Sunday so even with e-filing, a weekend date moves the due date to the next weekday.  But, if that is a holiday in the District of Columbia, then it is the next day. April 16 is Emancipation Day in DC making April 17 tax day.  But, isn't everyday really tax day since we pay taxes every day?

But April 17, 2018 is also a big day because the U.S. Supreme Court will hear oral argument in South Dakota v Wayfair, et al. The issue is whether the physical presence standard for sales tax nexus, dating back to 1992 from the Court's decision in Quill, should be changed. The relevance is that per Quill, if a seller does not have physical presence in a state, it doesn't have to collect sales tax from its customers in that state. The customers must instead self-assess and pay the use tax (same amount as the sales tax). States don't like this because many consumers don't know about use tax and it is much easier to have vendors charge it and remit it.

I have more on the background and relevance (and links) at this blog for the Southwestern Federal Tax textbooks that I help write and edit - here.  I hope you'll take a look.

What do you think? Is the physical presence standard outdated or still necessary to allow e-commerce to continue to grow?

source http://21stcenturytaxation.blogspot.com/2018/04/april-17-doubly-big-tax-day.html

17 last-minute tax filing tips

Tax Day 2018 freebies and discounts

Houston, we have a tax filing deadline problem

10 tax tasks to take care of by April 17

Tax Evasion vs. Hollywood Actors

Guest blog post by Mitchell Collins

The IRS likes going after Hollywood actors and other famous people for tax evasion because it puts the fear of audit into the hearts and minds of fans everywhere. When the IRS audits popular celebrities or hauls them off to prison for failure to pay their taxes, people quickly realize that they could be next. Here’s a rundown of some of these high-profile cases of Hollywood actors facing off against the IRS on tax evasion charges.

Wesley Snipes

One of the most famous tax evaders in Hollywood is Wesley Snipes who, in 2008, was sentenced to three years in prison for failing to file taxes in the years 1999 through 2004. These misdemeanor convictions were a relaxed penalty compared to the felony conspiracy charges that were filed for attempting to defraud the government. Snipes served his three-year sentence beginning in 2010 at a medium-security federal prison in Pennsylvania, then moved to an adjacent minimum-security “Club Fed,” finishing with a term of house arrest in 2013.

Nicolas Cage

In 2009, Nicolas Cage ran into trouble with the IRS for failing to pay taxes in 2007 amounting to over $6.2 million.The IRS filed tax liens against property owned by Nicolas Cage for 2007 as well as the period of 2002 to 2004, leading Cage to sell off a number of his properties and assets. Cage filed suit against his business manager, Samuel Levin, for his failure to pay taxes on time, among other things. Once believed to be one of the highest paid actors in Hollywood, Cage’s net worth is now estimated at a meager (by Hollywood actor standards) $25 million, with many remaining debts to pay off.

Judy Garland

Judy Garland, famous for starring as Dorothy in the The Wizard of Oz at age 17 and winning many acting awards over her career, ran into substance abuse problems and financial trouble later in life. In 1964, Garland received a $4 million tax bill in New York that she couldn’t pay, plus a failure to pay taxes in 1951 and 1952. This resulted in the IRS repossessing her home, forcing her to live in rental homes and hotels until her death in 1969.

Richard Pryor

The comedian and actor Richard Pryor is famous as much for his history of drug and alcohol abuse as his professional career, a level of fame that overshadowed his run-ins with the tax man. In 1974, Pryor was convicted of tax evasion and served ten days in a Los Angeles county jail. Perhaps trying to add some levity to his trial, Pryor quipped to the judge, “You know, I forgot.”

Stephen Baldwin

Apparently, Stephen Baldwin also forgot to pay his income taxes from the years 2008-2010. In 2013, Baldwin paid $300,000 in back taxes according to an agreement that would have put him on probation for five years until he paid the amount.

Abbot and Costello

The comedy duo of Abbott and Costello, well-known for their “Who’s on first?” routine as well as numerous movies, were forced to sell off their homes, many assets and some valuable film rights to pay off back taxes stemming from tax evasion charges in 1956. They broke up their  partnership in 1957.

Christina Ricci

Christina Ricci’s acting career took off in 1991 with her role as Wednesday Addams in the Addams Family franchise of movies. In 2010, the IRS filed a $180,000 tax lien due to unpaid taxes on 2008 earnings. Also in 2010, the IRS informed Shannen Doherty that she owed the government over $44,000 in unpaid taxes.

Lindsay Lohan

Lindsay Lohan, who first became famous as a child actress in the Disney film The Parent Trap, had her assets frozen by the IRS in 2012 for failure to pay taxes in 2009 and 2010 amounting to over $233,000. Lohan paid the 2009 amount of $100,000, but currently still owes for 2010. He also has new tax liens related to 2014 and 2015 totaling over $100,000.

Pamela Anderson

The actress who made Baywatch famous, Pamela Anderson, was hit with a tax lien of $1.7 million in 2009, over $490,000 in 2010 and then for over $370,000 in 2012. In 2010, Anderson landed a spot on California’s list of 250 delinquent taxpayers.

Chris Tucker

In 2014, actor and stand-up comedian Chris Tucker reached a deal to settle a tax lien of $2.5 million. A representative for Tucker blamed “poor accounting and business management.”

John Travolta

In 2000, John Travolta, who achieved fame in the 70s for acting in Saturday Night Fever and Grease,  paid over $600,000 related to an IRS bill of $1.1 million in improper reported losses in the years from 1993 to 1995.

Robert Downey Jr.

The actor Robert Downey Jr. has had his share of substance abuse problems and legal troubles, spending some time in jail during the 80s and 90s, and after that time, he ended up owing $2 million in back taxes. His earnings from the successful Iron Man series of movies doubtlessly helped him pay all of it back.

Val Kilmer

Val Kilmer, famous for his roles in Top Gun, Batman Forever and The Doors, faced a tax lien of almost $500,000 in 2010 for back taxes owed from 2008. Kilmer, who is also battling with throat cancer, has certainly had his share of challenges.

The combined influence of fame and fortune seems to lead many Hollywood actors to take risks when it comes to paying (or not paying) taxes. Clearly, the IRS doesn’t care how famous you are, they want your money. According to a law firm that routinely handles federal fraud cases, “the penalties under federal law are often higher than they would be under equivalent state laws” and “the prosecutors are supported by the investigative work of highly trained, well-staffed federal agencies with a lot of resources at their disposal.” As these cases show, the IRS zeroes in on high-profile cases as a way to draw out warnings for the rest of us to heed.

source https://www.theincometaxschool.com/blog/tax-evasion-vs-hollywood-actors/

Sales Tax Discounts - Still Warranted?

I've got a blog post on the sales tax discounts that several states offer to vendors to help address the costs they incur in getting sales tax remitted. See the post at SalesTaxSupport.com. Two things caught my attention recently that led to me to this topic.

1. Governor Greitens of Missouri has proposed repealing that states 2% unlimited discount. Certainly, it would raise revenue, but he also states that with improve compliance technology, the discount is no longer needed.

2. I reviewed many parts of Texas' tax law in preparing for testimony I presented to the Texas Commission on Public School Finance on April 5. I first noticed that they gave a discount for paying hotel taxes on time. They also have penalties for filing and paying late. The discount along with the penalty seemed to me worth addressing. After all, who gets a bonus for doing what they are supposed to do? I have not heard of employees getting bonuses for showing up for work on time. I also noted they had both a discount and a prepayment bonus in their sales tax system. A prepayment bonus is intriguing and one that technology can certain eliminate the need for.  If states want their tax dollars earlier, such as to pay bills rather than have to borrow to pay bills, why not use technology to get the payment to the government real time rather than have the sales tax first go to the vendor and then to the government (see my 6/23/08 (!) post for this topic).

For more on discounts, what states use them, which have limits and which do not and the tax policy considerations of them, please take a look at the post.

What do you think?

https://www.salestaxsupport.com/

source http://21stcenturytaxation.blogspot.com/2018/04/sales-tax-discounts-still-warranted.html

Don't make these 12 common tax filing mistakes

Make the most of your 2017 itemized deductions, many of which change or disappear in 2018

Most taxpayers have never itemized their deductions. And the new tax law that took effect this year will ensure that even fewer filers fill out a Schedule A.

By nearly doubling the standard deduction amounts, the Tax Cuts and Jobs Act (TCJA) will prompt more folks to use them instead of messing with the record keeping and extra paperwork itemized deductions require.

Plus, as I'm sure you've heard by now, starting with the 2018 tax year and running through, for now, 2025, other TCJA changes will make itemizing even less valuable.

The amount of state and local taxes, including your home's property tax bill, is limited to $10,000. You can claim casualty losses only if they're from a major disaster. And the miscellaneous section on Schedule A will be gone completely on next year's form.

Schedule A (Form 1040)  

So if your 2017 tax return is your last year of taking an itemized deduction amount, make the most of it.

Here's a closer look at what you can claim and where it goes on your 2017 Schedule A. You can click on each image for a larger look or click on the Schedule A header above to see the full form.

Medical and Dental Expenses  

Being sick sucks. Having to pay a lot of out-of-pocket medical expenses is a pain, too. But if you have a lot of medical and dental costs, you might be able to put them to tax deduction use in this first section of Schedule A.

The key here is to make sure the expenses are OK by the Internal Revenue Service, aka qualified medical expenditures. There are some you might not have considered. You'll find some in my earlier post on maximizing medical deductions, as well as the full list in IRS Publication 502.

When you do have to have enough medical costs to claim, they go in this first section of Schedule A. Note that there's no mention of a 10 percent threshold on the 2017 form. That's thanks to one good thing about the TCJA for itemizers: it cut that percentage threshold, which had gone up to 10 percent for filers younger than 65 under an Affordable Care Act provision, to the previous 7.5 level for the 2017 retroactively as well as for 2018. That means more of your medical costs might be deductible.

Taxes You Paid   

Residents of 43 states and the District of Columbia pay at least some state income taxes. If you live in one of those locations, you can deduct those taxes here.

Don't forget your local income taxes. Yes, some cities and counties collect them, too, as well as some special taxing jurisdictions, such as for mass transportation in your area. They're also deductible as an itemized expense.

If, however, you live in one of the seven states without an income tax — that's Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming — or your state income tax is low, you'll want to deduct instead your state and local sales taxes in this Schedule A section.

The IRS provides average amounts for each state so you don't have to hang onto all those receipts. But you will need the sales document for any made a major taxable purchase, such as a car or boat, during the year. You can add that general sales tax amount to the total from the IRS table that you claim.

Remember, it's an either/or choice. You can't mix and match sales and income tax deductions. You must choose just one to claim on this section of your Schedule A.

Homeowners also get to write off their annual property taxes here. And if you have a second home or any other personal-use, not rental, properties, those real estate taxes are claimed here.

Some places levy personal property taxes, too, typically on autos and other vehicles. Deduct that amount here.

If you live in a high tax area, your 2017 tax filing could be the last one, at least for a while, where you get to claim all the state and local taxes you paid. Make sure you get them all.

Starting in 2018, this itemized amount is capped at $10,000.

Interest You Paid   

Schedule A has two lines for claiming mortgage interest paid. The first is for the amount reported on your annual Form 1098 or an accepted IRS substitute that you (with a copy to the IRS) get early each year from your lender. That goes on line 10. If you pay mortgage interest that's not reported on a Form 1098, it goes on line 11.

The interest you can claim here is from your primary residence's loan and on a second home loan. If you own more than two houses, you're out of tax deduction luck. You only get to write off interest on your main and one second home. Don't be confused here by the property taxes mentioned in the previous section. Yes, you get to deduct all property taxes on Schedule A for all your personal real estate, but mortgage interest for only two homes.

And note the margin note on the form that "your mortgage interest deduction may be limited." This comes into play when the total of your home and second home mortgages are more than $1 million. It also refers to home equity loans, the interest on which also is tax deductible. When you or your spouse if you file jointly got a home equity loan or home equity line of credit (HELOC) and used the money for reasons not related to your home (e.g., to pay a child's college costs or pay off credit card bills), these loans can't be over $100,000.

This deduction will remain under the TCJA, but in some cases is reduced a bit. Deductible interest on home acquisition debt after Dec. 15, 2017, goes from $1 million to $750,000 ($375,000 in the case of married taxpayers filing separately).

Don't worry if you got your loan on your expensive home before then. Mortgage debt incurred before Dec. 15, 2017, is grandfathered at $1 million limit ($500,000 for married but separately filing couples). That's also true if you had a contract to buy a house by the December date and closed by Jan. 1, 2018.

Refinancing debt from before Dec. 15, 2017, keeps the grandfathered limit providing the mortgage is not increased. But starting in 2018 the TCJA does away with the deduction for interest on home equity indebtedness that's not related to the property itself.

Some homeowners also get to deduct private mortgage insurance (PMI) premiums as interest on this section of Schedule A. PMI policies typically are required by lenders when a home buyer can't make at least a 20 percent down payment on their home. This itemized deduction first appeared in 2006 and was renewed periodically as part of tax extenders packages over the years. However, it expired at the end of 2016. The good news is that when Congress passed the fiscal year 2018 budget in early February, it renewed the PMI deduction (and other tax breaks) for the 2017 tax year.

A final home-related expense can be an itemized deduction here if you paid points. These are added loan application payments — each is 1 percent of your loan amount — to get a lower mortgage rate.

Investment interest, which is the amount you paid on money you borrowed to buy stocks, bonds and other equities also is deductible. You enter it on line 14 of your Schedule A.

Gifts to Charity   

Most people don't donate to charity for tax reasons, but if you can claim a deduction for your charitable gift, then by all means do so. This deduction includes cash, check and credit card donations, as well as gifts of household goods and clothing.

Don't forget about other, atypical types of donations, such as appreciated stocks. Volunteering doesn't count, but you can count the value of out-of-pocket expenses you incur while giving of your time, as well as the miles you drive your own car for charitable purposes.

No matter how you give to your favorite nonprofit, get a receipt.

The good TCJA and itemizing news here is that this Schedule A deduction remains. In fact, the new tax law allows those who can give more to public charities in a tax year to do, upping the giving limit from 50 percent of your adjusted gross income to 60 percent.

Casualty and Theft Losses 

If you suffered damages last year from a natural disaster, an unexpected accident or you were the victim of a crime, your recovery costs could be tax deductible in this section of Schedule A.

This filing, however, is the last where you can claim this many types of losses. The TCJA now restricts such itemized claims only to losses suffered in what is declared a major natural disaster.

Job Expenses and Certain Miscellaneous Deductions  

Sometimes you have to cover some costs in connection with your job. This includes such things as buying work-required uniforms and keeping them presentable or memberships in professional organizations. You might be able to claim those 2017 expenses here.

You also can claim money spent in 2017 searching for a new job in this section of your Schedule A.

And if you paid a tax pro to fill out your Schedule A and other tax forms last year, deduct your tax preparation fees, as well as any fees you paid then to e-file. You also can count the tax software you bought last year to do your taxes yourself.

Other miscellaneous expenses you can include in this section are those that paid to produce income. This includes certain legal and accounting fees, some investment expenses, even the annual charge for a safe deposit box to hold your securities.

There's one problem here, though. All these miscellaneous amounts accrued in 2017 must be more than 2 percent of your AGI before they count as itemized deductions.

And as for the 2018 tax year, you can toss any receipts you were holding onto for this section when you file next year. The TCJA eliminated all miscellaneous deductions starting with this tax year.

Other Miscellaneous Deductions  

As you've figured out by its separate section on Schedule A, this is a different category of deductible miscellaneous expenses. These are not subject to the 2 percent limitation.

The most commonly claimed expense here — or at least the most popularly referred to — is gambling losses that offset your winnings you report on line 21 of your Form 1040.

You also can enter here casualty and theft losses of income-producing property, losses from other activities from box 2 of a Schedule K-1, certain unrecovered investment in a pension and impairment-related work expenses of a disabled person. Yeah, they're rather arcane claims. You can find more details in IRS Publication 529.

And while the job related and miscellaneous expenses won't be on the 2018 Schedule A, these other miscellaneous deductions will remain.

Total Itemized Deductions  

In this last section, you total up all your allowable Schedule A deductions. But if you made more than a certain amount last year, then some of your itemized deductions could be reduced.

This is known as the Pease limitation, one of several laws named after their advocates. The late Rep. Don Pease (D-Ohio) championed the deduction limits on higher-income taxpayers. When you hit the threshold for your filing status, your Schedule A amounts for home mortgage interest, state and local tax claims, charitable gifts and miscellaneous deductions is reduced by either 3 percent of your adjusted gross income in excess of your threshold amount or 80 percent of the amount of itemized deductions you otherwise could claim for the tax year.

Yeah, this is one of those things you let your tax pro or tax prep software figure for you!

And for 2018, you won't have to worry about it all. The Pease limitations are gone under the TCJA.

Picking your deduction method: If you made it through this post and your Schedule A, which is today's Daily Tax Tip, you understand why most people will likely opt for the larger standard deduction method under the new tax law.

Claiming the standard deduction is so much easier. And with the larger amounts for tax years 2018 through 2025, the shift will be a no-brainer for many filers.

But even with the TCJA itemized deduction changes, don't automatically discount using Schedule A next year. You can make your deduction type decision each tax filing season, depending on your tax circumstances for that year.

If something happens that could increase your 2018 or beyond itemized amounts to where they exceed the http://www.dontmesswithtaxes.com/2018/03/irs-revises-2018-inflation-changes-to-follow-newly-enacted-tax-cuts-and-jobs-act-provisions.html new and bigger standard deduction you can claim, then by all means itemize. You always want to use the tax deduction method that's larger, even if it means more work.

And if that means you itemize, make sure you maximize your Schedule A write-offs.

You also might find these items of interest:

• Bunching your deductions
• 12 overlooked tax breaks to hunt for as you file your taxes
• Tax deductions even if you don't itemize for 2017 and 2018

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source http://www.dontmesswithtaxes.com/2018/04/make-the-most-of-your-2017-itemized-deductions-many-of-which-end-in-2018.html

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3 Ways to Earn PR for Your Tax Business

In the world of digital marketing, there are three types of content (or medias): earned media, paid media, and owned media. Earned media is press (PR). When you get a mention or article written about you (without paying for it), that’s earned media. Paid media is content about you that you paid for like advertisements, advertorials, social media ads, or influencers you paid to write about you. Owned media is all of the content you create for your business like your blog, website, and social media.

Owned media costs time and labor to produce; 

Paid media costs a significant amount of money (and some time) to buy;

Earned media costs nothing but takes a little effort.

While these three types of media are all necessary, earned media generally has the most impact. So how do you get it? We were recently featured in the Richmond Times Dispatch, our hometown’s major news source, and thought why not share our tricks and tips with other business owners? Getting earned media is easier said than done but there are some things you can do to position your business for it. Here are three ways to earn PR for your tax business.

Build relationships

PR is more about building relationships than it is about writing press releases. Want to earn some PR? Get to know the journalists who write about business and taxes locally. Research local newspapers, news stations, and new sites that cover your industry (or business in general) and find emails for the journalists assigned to those beats. Send them an email introducing yourself and your business and let them know you’d be happy to be a resource.

It’s the first step to building that relationship. When the Richmond Times Dispatch or Accounting Today need someone for a quote or insight into a particular topic, we are top of the list because we have good relationships within those organizations and have proven to be knowledgeable. That’s the type of relationship you need to foster.

Reach out

Don’t sit back and wait for someone to contact you. Send press releases and reach out with information that would be interesting to readers. Our most recent article was a result of a press release we sent out about the new book, Guide to Start and Grow Your Successful Tax Business. We also regularly send blogs and information to journalists that might help them with a story or give them an idea for a story based on what we see as important information. The tax law changes that will affect business owners and taxpayers are a great example.

We also tag journalists on Facebook and Twitter when we post blogs that might be of interest to them.

Keep them updated

Did you do something newsworthy like publish a book or partner with a charity? Are you hosting a seminar or event? Do you have a quirky promotion going on? Write up a press release with all of the relevant information and send it out to your list of contacts.

You won’t always get a bite but it’s worth a shot and another way to keep building that relationship. Here’s a link to the article written about us recently – a great story about the beginnings of The Income Tax School:

Trade Names: Peoples Income Tax and The Income Tax School are filling niches in the tax business industry

 

source https://www.theincometaxschool.com/blog/pr-tips-tax-pros/

State tax ties to federal tax laws, from shared deadlines, income designations, deductions and more

Tax Day 2018 is almost here. This mid-April deadline, which falls on April 17 this year due to the Emancipation Day federal holiday in Washington, D.C., means that millions of us are in the midst of finishing up our federal tax returns.

Many filers also are doing double tax duty right now. That's because they live in a state that taxes some portion of income.

And most of those income tax collecting states follow the IRS filing calendar.

That means the states' deadlines this year also are April 17.

No, some or all state taxable income: Here in Texas, the hubby and I don't have to worry about fling a state return. The Lone Star State is one of seven that has no individual income tax at all.

Joining my native Texas in not taxing income are Alaska, Florida, Nevada, South Dakota, Washington and Wyoming.

The other 43 states and Washington, D.C., however, tax at least some portion of residents' earnings.

If you live in New Hampshire or Tennessee, you only have to report interest and dividend income. And in the Volunteer State, the tax on these unearned income types is being phased out. In 2022, Tennessee will become the eighth state without any income tax at all.

But if you call elsewhere home, state and federal tax time is bearing down!

Most on IRS filing schedule: As noted earlier, the deadline for most of these 44 tax-collecting states (and some more-local jurisdictions) is mid-April each year, just like the IRS due date. When the 15th falls on a weekend or federal holiday, it moves to the next business day.

So this year, folks in the following states will have to file their state tax return forms by April 17 or get an extension.

I'm talking to all you money-making residents of:

Alabama	Indiana	Montana	Oregon
Arizona	Kansas	Nebraska	Pennsylvania
Arkansas	Kentucky	New Hampshire	Rhode Island
California	Maine	New Jersey	South Carolina
Colorado	Maryland	New Mexico	Tennessee
Connecticut	Massachusetts	New York	Utah
District of Columbia	Michigan	North Carolina	Vermont
Georgia	Minnesota	North Dakota	West Virginia
Idaho	Mississippi	Ohio	Wisconsin
Illinois	Missouri	Oklahoma

Going their own way: I know. We're all a bit obsessive/compulsive in tax season, so you counted the states plus D.C. above and it comes to only 39 jurisdictions.

That's because taxpayers in five states get a few more days to file their state returns.

The states that don't follow the IRS calendar, listed in order of their nonconforming tax due dates, are:

• Hawaii, April 20
• Delaware, April 30
• Iowa, April 30
• Virginia, May 1
• Louisiana, May 15

The delay in the usual April deadline doesn't give you filers much more time, especially if you live in Hawaii, but every extra day helps.

State tax law changes, too: Most state taxes also are connected to federal returns beyond the deadlines.

States tend to conform in most cases with the Internal Revenue Code. That's why they tend to tell you to finish your federal filing before you start working on your state tax paperwork.

That's also why as soon as the Tax Cuts and Jobs Act (TCJA) was signed into law, these states' lawmakers began analyzing the federal tax changes' possible implications to their revenues. Many state legislatures are now in the midst of determining which state tax laws they want to tweak (or more) to conform to the new federal law.

Money, of course, will be the main driver of any state tax revisions.

"Changes to federal tax rates have no bearing on state tax rates, but changes in federal taxable income, adjusted gross income, exemptions and deductions will impact state taxable income – and therefore, state revenues – depending on how a state's tax laws conform to the federal tax code," noted John Hicks, executive director of the National Association of State Budget Officers, in a December 2017 post on his organization's blog.

In a follow-up post a few weeks later, Hicks detailed the varying considerations that state lawmakers must take into account in connection with the TCJA changes. They include:

• Six states (Colorado, Idaho, Minnesota, North Dakota, Oregon-which uses its own standard deduction and personal exemption, and South Carolina) use federal taxable income as a starting point for their state taxable income calculations, with some state-specific income additions and subtractions.
• Thirty states use federal adjusted gross income (AGI) or federal gross income as a starting point for their state taxable income calculations, with many state-specific income additions and subtractions.
• Eight states use the federal personal exemption (five of the six states that tie to federal taxable income, mentioned above, plus Maine, New Mexico, and Utah). That's an issue now that the federal exemption, starting in 2018 and through 2025, is no longer available.
• Eight states use the federal standard deduction as their state standard deduction (Colorado, Idaho, Minnesota, Missouri, New Mexico, North Dakota, South Carolina, and Utah). Again, this must be considered since the new federal tax law nearly doubles the standard deduction amounts.

No surprises this year, but issues in 2019: Filing your 2017 state return shouldn't pose any major surprises this filing season. You just need to buckle down and take care of that task ASAP if you haven't already. 

But be prepared for next year. The new federal tax laws mean that millions of state taxpayers will likely see changes on their state returns when tax filing season 2019 arrives.

I'll follow-up on major state tax changes, both related to the federal tax code or independent of what happens in Washington, D.C., here on the ol' blog.

You also can check with your state tax department for details on 2018's tax duties and what at to expect next year.

You also might find these items of interest:

• SCOTUS' online state sales tax ruling might not be the final word
• Arizona and Georgia consider accepting bitcoin as payment for state taxes
• Federal tax bill's $10,000 deduction cap includes state and local income and sales taxes

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source http://www.dontmesswithtaxes.com/2018/04/state-tax-ties-to-federal-tax-laws-from-shared-deadlines-income-designations-deductions-and-more.html

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Drug Ad Deductions and Tax Policy - S. 2478

S. 2478 (115th Congress), End Taxpayer Subsidies for Drug Ads Act, caught my attention for a few reasons. First, I'm always surprised at the number of television and multi-page magazine articles on various drugs. I don't think the drug companies are solely trying to reach doctors who could actually prescribe these drugs as there are less expensive and more direct ways to reach that audience. So, apparently, they are trying to convince viewers that they might need one of these drugs and they should ask their doctor.  It seems very puzzling to me.

S. 2478 would add IRC Section 280I, to provide that "no deduction shall be allowed for expenses relating to direct-to-consumer advertising of prescription drugs." It also defines this term.

Senator McGaskill (D-MO), sponsor of S. 2478, says that in 2015, drug companies deducted $6 billion for these ads. She is concerned that consumers suffer via increased cost of the drugs and the public's subsidy of the advertising. Per McGaskill, the drug companies "are surfing off taxpayer dollars to push prescription drugs." She also suggests that some drug companies spend more on marketing than on R&D. In addition, she notes that this bill does not prohibit the ads, it just removes the taxpayer subsidy for them via the tax deduction.  [3/1/18 press release]

Is this good tax policy? Consider the following:

Equity - Are similarly situated taxpayers treated similarly? Well, drug companies are treated similarly. But other companies can still get a deduction for their ads despite the public's subsidy for them.

Simplicity - Generally, special rules add complexity to the law because it isn't usually easy to define the exception. For example, what about an ad that is primarily informing us about an illness or disease and with less magazine space or television time, telling us about the drug?

Neutrality - Tax systems are for raising revenue for government operations, not for affecting our decisions. S. 2478 seems aimed at encouraging drug companies to decide to devote less dollars on advertising. That won't mean they spend it on R&D though. They could use it for larger dividends.

Appropriate design of an income tax - The design of an income tax is that businesses report revenues and deduct the costs of generating those revenues. Denial of a deduction goes against the design of an income tax. Expenses contrary to public policy can justify denial of a deduction, such as denial of a deduction for fines and penalties. Are drug ads contrary to public policy? Shouldn't the company and its board of directors decide what is appropriate to generate revenues and profits?  Customers (doctors and patients) can also vote by boycotting products where the company spends more than the customers think is appropriate, or voicing their concern with letters to the company or via social media.

Senator McGaskill's bill brings attention to the issue. Additional data to share with the public might also help encourage companies to move advertising dollars to R&D or lower prices.

What do you think?



source http://21stcenturytaxation.blogspot.com/2018/04/drug-ad-deductions-and-tax-policy-s-2478.html

12 overlooked tax breaks to hunt for as you file your taxes