Seasonal Jobs, and How They Change the Bottom Line

This is the time of year when many businesses are hiring seasonal employees, or simply increasing the hours for staff already on the payroll. Because of these changes, some may not realize how this influx of income can affect their overall tax responsibility. When getting a new job, no matter how long you are working there, a Form W-4 must always be completed. This form details the amount an employer should keep from an employee’s paycheck. Thanks to recent IRS guidance, we know that it will not be changed by the Tax Cuts and Jobs Act until 2020 at the earliest.
         When it comes to a job that involves tips, it is a good practice to keep a log of the amount, and date of the tip. All tip income must be reported and keeping good records makes the tax return process that much easier. Sometimes, the amount made from a seasonal job will not be high enough to end up owing income tax. Often it is students and other young people who are getting their first jobs at this time, so this exper…

Will Cooperation Be Helpful?

You may be surprised to find out that the IRS, and state income tax agencies, do not communicate very well with each other. This has been true for many years. However, a recent review has shown that this has led to almost $300 million in taxes going unpaid. When there is confusion, certain individuals can slip through the cracks.
          The IRS response to this problem is the State Audit Program. This program creates a way for state agencies and the IRS to share information and make sure that tax laws are followed. In theory, this would be a great way to stop tax cheats and make sure everyone paid their fair share. In reality, this program is voluntary, and it takes a lot of work for government organizations to work together and share. While this program is being streamlined, the state and Federal governments are getting closer to being able to work together and enforce tax law.

The Tax Cuts and Jobs Act: Withholding Form W-4 Update

A few months ago, the IRS debuted a draft of what the Form W-4 would look like next year. You can read our post discussing it here. The key point is that it was a draft. The IRS expected to make changes before putting it into use and wanted to hear feedback on the adjustments. Apparently, there was a great deal of response. So much so, that this new form will not be used until 2020 at the earliest.
          The feedback led the IRS to take a hard look at what they were trying to do, and decided to use a temporary Form W-4 for 2019 in its place. The plan is to create the new Form reflecting changes made by the TCJA by 2020. They need more time to give appropriate guidance on how to handle withholding. This is more evidence that clearly shows how fluid the Tax law situation is, and the nothing can be taken for granted.

The Tax Cuts and Jobs Act: Business Expense Update

One of the more surprising aspects of the Tax Cuts and Jobs Act was the removal of tax deductions for meals and entertainment. It basically eliminated any deductions related to expenses from recreational activities with clients or prospective clients. This concerned a great number of people.
Aside from the businesses who made use of this opportunity to reduce their tax liability, there were other businesses that provided the entertainment, amusement, and recreation. For example, sports teams that sell luxury boxes for their games were unsure if they were going to see a steep decline in sales. This is a source of revenue that the teams keep, and do not share with their leagues. However, after a few months, the IRS has issued some guidance on this issue. Taxpayers can continue to deduct 50% of the cost of meals, if they are not considered lavish. In the last 2 months of the year, we can expect a great deal of regulations and clarifications to be released. These refinements will …

The Tax Cuts and Jobs Act: Divorce Agreements

It’s not an overstatement to say that the Tax Cuts and Jobs Act is going to affect just about every area of life. When it goes into effect next year, there will be many changes we all will have to get used to. One drastic change will be regarding divorce agreements. Currently, alimony can be deducted by the payor, and is taxed as income for the payee. Starting in January 2019, that will no longer be the case.
     This will create a benefit for one person in the divorce proceedings. However, another concern will be the dividing of assets. When considering the valuation of business interests, the old ways of making those calculations are over! Many of these businesses are now considered “pass-through entities”. This means more cash will be going through them for tax purposes and modern accounting methods must be applied to adjust to the times we are living in.
      The more we investigate the TCJA, the more we can appreciate how monumental the law is. The way divorces were handled …

The Tax Cuts and Jobs Act: Qualifying for Business Deductions

The Tax Cuts and Jobs Act is known for its lowering of certain tax rates. That fact is made clear in its name. However, some of these benefits are not as easy to take advantage of. That is why there is a provision called Section 199A. This has been added to allow as may businesses as possible to have a sizable deduction of “qualified business income”. What type of income is this? How do you know that the “reputation or skill” of your business will allow you to qualify? Recent IRS guidance has shed some light on this topic.
          The reputation and skill clause will only be used to describe a unique set of business circumstances. For example, if a business or taxpayer was receiving income from the use of a name, image, or appearance fee. This will apply to actors, singers, and others in the performing arts industry. This same guidance has stated that brokerage services, including real estate and insurance, will not be defined in this way.
          At this point, the propose…

Is the Right to Representation Under Attack?

For many, one of the key parts of the Taxpayer Bill of Rights is found in right #9, The Right to Representation. This provision allows for a taxpayer to choose an individual to represent them in dealings before the IRS. This fills a critical need, especially since many will only seek help after they have an issue with the IRS. However, it seems that proposed changes are going to make it much more difficult to provide care in this area.
          The IRS has proposed some troubling new changes to the Transcript system. When a Taxpayer has an issue with the IRS and does not have their own Qualified Tax Professional, they will likely look for one. In that case, the Tax Professional will need to see the documents in question, to provide the best care for their client. Unless their client has kept immaculate records, copies know as transcripts, will need to be requested from the IRS. This is a standard procedure.
          Now under the new rules, which could take effect as early as…