Showing posts from February, 2020

Do You Know About This Tax Credit?

         When preparing to file their taxes, most hope to get a refund. If worst comes to worst, pay as little as possible. This is the challenge presented to most Taxpayers. There are, however, some tax credits available that many simply do not know about. The Internal Revenue Service ( IRS ) is actively trying to create awareness about the Earned Income Tax Credit ( EITC ). Why is that?           This tax credit was designed to help individuals and families who live on modest incomes. The IRS is focusing efforts on making people aware of the EITC because many seem to overlook it. Some estimates claim that over 6 million who were eligible did not claim it. The EITC is known as a refundable credit. That means if a Taxpayer did not owe any taxes, they could file a tax return and claim this credit if they qualified, and their refund would include the EITC . This is unusual, and certainly makes it worth your time to check and see if you qualify. Please discuss this with your Qualif

Getting Rid of Tax Myths

        When it comes to taxes, there is a certain amount of anxiety for most people. According to some surveys, there is a greater amount of anxiety for younger Taxpayers than most. It might be due to inexperience and it might involve a lot of misconceptions that continue to confuse people every year. Not having a clear understanding of how the tax code in the United States works cost many people lots of money every year. In this post we will discuss 2 of the most common tax myths.           A tax extension means I have until October 15 to pay the Internal Revenue Service . A tax extension usually means there are documents that need to be gathered or complicated situations to handle. If that is the case, an extension is the right choice. However, in the eyes of the IRS , any taxes owed must be paid by April 15. It is not an extension on your tax obligation and penalties and interest can be added to the balance. Not paying taxes that are due can be directly linked to our second

Why This Year Might Be Worse Than Last Year

        One of the big surprises created by the Tax Cuts and Jobs Act ( TCJA ) was the disappointment many Taxpayer’s received when it came to their refund, or lack thereof. As many now understand, the tax savings that were promoted can be found in each paycheck. As a result, their tax refund was smaller, or it even an unexpected tax bill. This led to strong reactions and encouragement to do a Paycheck Checkup to make sure the next year would not turn out the same.           Next year has arrived. Did you make the necessary changes to your withholdings? If not, the problem could be magnified. In 2018, the new withholdings table was only in effect from about February or March. This means it did not cover the entire year. All of 2019 was covered, so if the withholding was too little, the amount owed will be greater . Nothing can change that now. But making changes now will keep you from dealing with the same problem next year. The Internal Revenue Service ( IRS ) has released a ne

Keeping Up With the Speed of Change: What this Year Might Bring

        It can be easily said that the Tax Season last year was the most difficult in recent memory. It can also be said that this year will probably not be any easier. As we have stated in previous posts, the Internal Revenue Service ( IRS ) still must provide written guidance for all the changes brought about by the Tax Cuts and Jobs Act ( TCJA ) of 2017. There were also many tax breaks extended by Congress in December of 2019. So, this filing season is shaping up to be very busy and challenging.           For Taxpayers who are involved in Partnerships or Hedge Funds , many are opting for extensions. In this way, they might have all available guidance provided for them by the September deadline. This type of strategy might also work for those who are looking to see if the recently extended tax breaks will apply to them. Talk to a Qualified Tax Professional to determine the best choice for you.           Tax refunds can take a little extra time. This is true for those who cl

Internal Revenue Service Goals for 2020 - Part 2

         The Internal Revenue Service ( IRS ) has goals to accomplish in 2020 just like everyone else. Some of their goals might be considered ambitious, but it’s always best aim high. That is especially true when it comes to providing guidance related to defining changes created by the Tax Cuts and Jobs Act ( TCJA ).           There are about 100 topics that need some sort of written clarification. To provide all that by September would be a remarkable feat, since the Taxpayer First Act signed last year still needs to have a written plan about how it will be applied. How all this will happen we still do not know, but we can look forward to some guidance given on very popular topics that were impacted by the TCJA .           The deductions related to Meals and Entertainment were shaken up by the TCJA . These expenses can now only be deducted up to 50%. A clarification may be issued soon that will explain when these meals are deductible and when they do not qualify. Many comp

Internal Revenue Service Goals for 2020 - Part 1

       The focus of the Internal Revenue Service ( IRS ) going into 2020 is to apply the changes stated in the Taxpayer First Act . This law was signed in July 2019 and is supposed to have a detailed written plan , that brings it from the page to real life by September 2020 . The goal behind it is to change how the IRS interacts with taxpayers, handles appeals, and upgrade the technology it uses.           This will create an independent Office of Appeals to handle taxpayer challenges. Until then, there is a Taxpayer First Act Office which oversees guiding these changes into reality. Before anything happens, the IRS wants to hear feedback and gather information from the private sector, lawmakers, and even IRS employees. This gathering period could last until February. The idea is to be able to present IRS leadership with different options to choose from that can be used to implement the new law. This could mean restructuring the IRS employee base as we know it to better assi

Keeping Up With The Speed of Change: Where Can You Be Taxed?

       When a person has an income, they typically pay taxes on it. The more they make, the higher rate of tax they pay. This has been the accepted pattern of life. When it comes to a business, people generally expect that pattern to continue. However, this is not always the case. For example, the Tax Cuts and Jobs Act ( TCJA ) changed the corporate tax code so that all businesses will be taxed at the flat rate of 21% . Another reason is that it has been proven that some companies have made billions but paid little or no taxes on that income.           This is because the companies and their subsidiaries were placed all around the world. As a result of this, they were taxed based on where they were located. This is scheme is not new but is now being implemented in a very sophisticated way. Reporting income in low tax countries has become an even more tempting option with the growing digital economy. Governments around the world are banding together to fight back and get their sh

New Mileage Rates Released and What They Mean

        The standard mileage rates that can be used to deduct the costs of operating a vehicle for business uses have been updated. When it comes to driving for business ( 57.5 cents per mile ) or for moving ( 17 cents per mile ), the rates have come down when compared to 2019. A half cent for business driving and 3 cents for the purpose of moving. One reason for this is that the mileage rate for business use is based on a yearly study of different costs related to using cars, trucks, vans, and pick-ups. Taxpayers always have the option using the actual cost of using their vehicle, instead of the mileage rate.           The Internal Revenue Service ( IRS ) stated that under the Tax Cuts and Jobs Act ( TCJA ) only members of the Armed Forces on active duty, who are moving under orders, can claim a deduction for moving expenses. A taxpayer cannot combine the business mileage rate, with any other depreciation method. There are other limitations that have been put in place for busi