Tax Insights – February 2020

February 1, 2020 By Exclusive Tax Services Leave a Comment

Extenders Bill

In December, the president signed the Further Consolidated Appropriations Act, 2020, which contains the SECURE Act and extenders. These acts affect you in many ways.

First, the SECURE Act provides for several changes related to retirement plans. Provided you meet the requirements, the law allows you to make contributions to traditional IRAs regardless of your age. Before the SECURE Act, you could not contribute after age 70½. Also, the law raises the age at which you must take retirement distributions from 70½ to 72.

There are two new types of penalty-free distributions from qualified plans and IRAs for expenses related to the birth or adoption of a child, and expenses related to disasters. For expenses relating to having a child, up to $5,000 can be distributed from a retirement plan for qualified expenses. These expenses are those incurred within one year of the birth of the child, and within one year of the adoption of a child under age 18 or disabled. These distributions will still be taxed for income tax purposes, but the 10% penalty is waived.

If you are in a disaster area, and your insurance and other benefits do not cover your losses, you can now take a distribution from your retirement account to make up your losses. The distribution can be up to $100,000. It is taxed for income tax purposes, but is not subject to the 10% penalty.

The other portions of the act contain what are usually called extenders. Each year, some deductions and credits expire. Generally, last-minute legislation extends them for another year. In this case, there was no legislation in 2018. The act extends these benefits for tax years 2018, 2019, and in some cases 2020. This means that you may be able to amend your 2018 return to take advantage of these benefits. What is extended?

• The tuition and fees deduction allows an above-the-line deduction for education expenses. This is an option if you don’t qualify for the American Opportunity Credit.

• If you had cancellation of debt income from the foreclosure of your home, you may have had to include the cancellation in income. The income can now be excluded.

• Private mortgage insurance is often required if you do not make a 20% down payment on your home. It is reported on the same document on which your mortgage interest is reported. This is an itemized deduction, so if you itemized in 2018, this may impact you.

If any of these might affect you, please contact my office. We can review your 2018 return, and potentially amend it to provide a better result.

Tax Return Due Dates

• Form 1065 – March 16, 2020

• Form 1120S – March 16, 2020

• Form 1040 – April 15, 2020

• Form 1120 – April 15, 2020

Tax Notes

Taxpayers who claim the earned income tax credit or additional child tax credit will not receive a refund before February 15, 2020. The IRS expects funds to reach debit cards and bank accounts sometime in early March. If you claim either of these credits, you can check the status of your refund on the IRS website “Where’s My Refund” sometime after February 15. You should be able to see the projected date of funding by February 22, 2020.

Did You Know?

This year, Mardi Gras is on Tuesday, February 25. It’s a celebration of the last day of Carnival, before the first day of Lent, traditionally a time of fasting for those who observe. The biggest celebrations of Mardi Gras in the United States include New Orleans, Pensacola, Galveston, and St. Louis. The first Mardi Gras celebration in the United States was in Mobile, Alabama, dating back to 1703.

2020 Client Letter

January 30, 2020 By Exclusive Tax Services Leave a Comment

Dear Clients,

I hope that 2019 was a fantastic year for each of you. We have been in the new office for a year now and we love our new location. We have had lots of wonderful things happen this year. We have also had some sadness. As many of you know we lost Marty March 28, 2019. We will all miss his smile and sense of humor. We have lost a few clients also, and our heart goes out to their families.

We are changing a few things at the office to make things more secure. We now have a program named Canopy that we use to upload and download your information to when you need it and can’t come into the office. We no longer send any information by emails or by faxes. When you request we will send you a link and you can get to your information at your discretion. No one else can get your link and no one will know your password, we will not know your password either. If this is not for you, you are always welcome to call ahead and ask Terri or Carla to have it ready for you. All records need my permission to leave the office, by calling ahead this will decrease your wait time.

We have a monthly newsletter we would like to email to you if you like, you can let us know when you come in if you would like it sent to you each month. It has information that you might find interesting.

Our client appreciation day is set for Thursday February 13, 2020. It is from 9am-7pm. We hope you will come by and drop off your taxes, have refreshments with us and grab a door prize. All taxes dropped off this day will qualify for 10 percent off of your regular price. If you pay by check or cash you will receive an additional 2 percent off. Credit and debit cards are at the 10 percent only as we pay fees for you to use these.

Tax Season opens up on January 20, 2020. We will start processing returns that week. You can call us to make an appointment as soon as January 20, 2020. Please make sure you have received all your documents when you call to make your appointment.
Our hours for tax season will be : Mondays, Wednesdays and Fridays 9am-5pm, Tuesdays and Thursdays 9 am- 7pm, and Saturdays 10am-3pm. We suggest you call for an appointment rather than a walk-in so that your wait time is limited.

Sincerely, Dana Hatton

Tax Insights – January 2020

January 1, 2020 By Exclusive Tax Services Leave a Comment

The New W-4

The IRS released a new Form W-4, Employee’s Withholding Certificate for 2020. Let’s take a closer look at the new withholding calculation method provided with this form.

Instead of using the personal allowances worksheet, the calculation of whether you need to take additional withholding is now determined in five steps.

Step 1, Enter Personal Information, and Step 5, Sign Here, are required of all taxpayers. Only complete Steps 2–4 if they apply to your situation.

Step 2 is for taxpayers who have more than one job, or who are married filing jointly and both spouses work. There are three options: (1) use the estimator on the IRS site; (2) use the worksheet in Step 2b; and (3) check the box and have the normal amount withheld from each job. This may result in a higher withholding than necessary.

The worksheet to calculate additional withholding amounts is on Page 3 of the form. When completing the form, use the tables on Page 4 to determine the amount that is included on Line 1 of the worksheet. This gives you an amount to divide by the number of pay periods for the job. If you have three jobs on the tax return, the calculation becomes more complex.

Step 3 takes dependents into consideration. Add $2,000 for each qualifying child under 17, and $500 for each dependent who does not qualify for the child tax credit. Step 4, Other Adjustments, is optional and reviews (a) other income; (b) deductions; and (c) extra withholding. Finally, in Step 5, the taxpayer signs the form.

The IRS also has a withholding estimator widget, where you can fine tune your withholding. Use this widget to ensure that you have the best result possible.

I can help guide you through Form W-4 or the widget. Call my office to make an appointment.

Important Information

2020 Health Savings Account (HSA) contribution limits are $3,550 for individuals and $7,100 for families. If the HSA account beneficiary is age 55 or older at the end of the year, the annual contribution limit is increased by $1,000.
The IRA contribution limit for 2020 is $6,000 ($7,000 for taxpayers age 50 or older).
Starting in 2020, the age for required minimum distributions is 72.
Starting in 2020, new parents can take penalty-free distributions from a 401(k), IRA or another qualified retirement plan within a year after a birth or adoption.

Tax Notes

Worried about a balance due? I can help. If you participate in an HSA, or if you haven’t maxed out your IRA contributions, there are ways to decrease your balance due. Come see me about last minute tax planning for your 2019 taxes.

Did You Know?

January is named after Janus, the Roman god of beginnings and duality. Janus was pictured with two faces. One face looks back on the past year, and the other looks forward to the next year.

Quote Corner

“Every new beginning comes from some other beginning’s end.” ~ Seneca

Tax Insights – December 2019

December 1, 2019 By Exclusive Tax Services Leave a Comment

Year-End Tax Planning

As the year ends, you may be wondering what you can do to lower your taxes on your 2019 return. If you have cash on hand, there are several things that you can do to help your tax position in the new year and beyond.

Charitable giving. If you itemize, you can make gifts to charitable causes. This can include cash gifts or in-kind gifts. Any donation you make before the end of the year can be taken as a 2019 tax deduction. If you don’t have quite enough in any given year to itemize your deductions, you could consider holding off on donating until after the first of the year to double up your charitable giving for the following year.
Health Savings Accounts. If you have cash on hand, have a high-deductible health plan, and have not contributed the maximum to your Health Savings Account (HSA), consider maxing out your contribution. You’ll have that money for medical expenses in the new year and can deduct the after-tax contributions to your HSA. 2019 limits are $3,500 for individual coverage and $7,500 for family coverage. If you or your spouse are age 55 or older, you may be able to contribute up to $2,000 more to your HSAs. These contributions can be made up to the due date of your return.
Individual Retirement Arrangements. Another option if you have cash on hand is to max out your IRAs. The rules are somewhat complex, but generally, taxpayers can contribute $6,000 to an IRA (either Roth or traditional, or a mixture). If you’re 50 or older, you can contribute $7,000. See me to determine exactly how much you can contribute. Like an HSA, contributions to an IRA can be made until the due date of the return.

If you have a business, there are even more ways to lower your tax burden for next year. Schedule an appointment before the end of the year to see if you can lower your taxes by taking action now.

Important Tax Deadlines

January 31 – W-2s and 1099s
March 16 – Partnerships and S Corporations
April 15 – Individuals, Trusts and Estates, and C Corporations
September 15 – Extended deadline for Partnerships and S Corporations
September 30 – Extended deadline for Trusts and Estates
October 15 – Extended deadline for Individuals and C Corporations

Tax Notes

An Individual Taxpayer Identification Number is issued to taxpayers who must have a tax identification number, but cannot obtain a Social Security number. Taxpayers who have an ITIN with middle digits of 83, 84, 85, 86, or 87, or who have not filed a federal return in the last three years, must renew their number this year. Come see me to renew yours to avoid delays in processing your return.

Did You Know?

December 20 is U.S. Poet Laureate Day. The current Poet Laureate of the United States is Joy Harjo, who was appointed in June 2019. She is the first Native American Poet Laureate. Her books include An American Sunrise (2019), Conflict Resolution for Holy Beings (2015), and Crazy Brave (2012).

Quote Corner

“No act of kindness no matter how small is ever wasted.” ~ Aesop

Tax Insights – February 2020

2020 Client Letter

Tax Insights – January 2020

Tax Insights – December 2019

Year-End Tax Planning

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