How to Choose a Tax Professional
New tax laws bring many opportunities and challenges for taxpayers causing more people to look for professional help. A tax adviser can be as important to someone's financial health as a doctor is to his physical health.
Select someone who shows an interest in your overall tax picture, not just in preparing a tax return. Your preparer should demonstrate an interest in your future plans and goals. Look for someone who is available year-round, who can represent you at all levels of IRS. Questions involving financial decisions come up throughout the year, and so do tax emergencies. Find someone who specializes in tax for the best results.
Don't make the lowest fee your top priority. It is of far greater importance to realize the best net benefit. You wouldn't want to pay a low preparation fee, at the expense of a larger tax liability than you were legally obliged to pay.
There is a Change in Mileage Rates for 2019
Source: Notice 2019-02, Jan 2019
The Internal Revenue Service has issued the above optional standard mileage rates to calculate the deductible costs of operating an automobile (also vans, pickups or panel trucks) used for business, charitable, medical or moving purposes.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Accounting Procedure Adoption
The adoption of new accounting procedures and the election of the Safe Harbor Elections for anyone with depreciable assets will be the hot topics this year. It will affect almost every taxpayer.
You will be exempt from gift tax if your annual gift to any one individual is not over $15,000 in 2018.
Taxpayers who have lost their homes are perhaps the worse affected by current economic conditions. Normally, cancelled debt is considered “phantom income” and taxable. Congress has formulated significant exceptions, however, for those who can qualify.
Deductible Contributions to Qualified Organizations
A qualified organization is a church or other charitable, not-for-profit, organization with a 501 (c) (3) exemption.
All cash contributions over $250 must be acknowledged by the donee in a contemporaneous written receipt with the date and description of the contribution.
All contributions of clothing or household items must be acknowledged with a contemporaneous receipt from donee with name of organization, date, and a description of the donated property received. Amounts over $250 must also have the fair market value stated, and Form 8253 must be filed with the return.
Contribution of a single item of clothing or household items over $500 must be reported on Form 8253 with a qualified appraisal attached.
Automobile expense incurred while providing services to a qualified organization can be deducted at a rate of 14 cents per mile, however, a contemporaneous log must be maintained.
Items Not Deductible to Qualified Organization
The value of services given to a qualified organization are not deductible as a charitable donation. The cost of raffles, bingo, lotteries and the like are not deductible. Dues paid to a fraternal order are not deductible. The cost of appraisal fees paid to determine the fair market value of donated property are not deductible as a charitable contribution.
A qualified charitable distribution from an individual retirement arrangement (IRA) is not deductible as a charitable contribution.
Contributions to a needy individual, contributions made to a fraternal society for the purpose of paying medical or burial expense of an individual, payments to a member of the clergy that can be spent as he or she wishes, and payments to a private school for tuition are not a deductible charitable contribution.
2018 Tax Reform & Jobs Act
TAX REFORM HAS ALREADY HAD ECONOMIC EFFECT FOR EMPLOYEES
Hundreds of companies, including some of America's largest employers, have already announced wage increases, bonuses, increased matches for retirement savings, price reductions for consumers, and investment in facilities and tens of thousands of new American jobs as a direct result of tax reform
The Child Tax Credit of $1,000 per child under age 17 and the dependent care credit is now made permanent. The credit will increase to $2,000 beginning with 2018.
Beginning in 2018 there will be no personal exemptions except for $1,250 for each taxpayer over 65.
New Standard Deduction
The standard deduction will increase to $24,000 for married filing joint (MFJ) and $12,000 for Single and Head of Household (HOH) filers.
Excise Tax Beginning 2013 Will Remain
The threshold for both the 3.8% of Net Investment Income Tax (NIIT) and for the .9% additional Medicare Tax is as follows:
$200,000 Single and Head of Household
Net Investment Income is defined as any income not earned. It will include dividends, interest, annuities (except 403(b) plans), royalties, net rental income and net capital gains after management and advisor fees paid. It will not include the gain on your personal residence, which is otherwise exempt.
Additional Medicare Tax
An additional .9% (that is less than 1%) will be assessed on any earned income over the same threshold as for NIIT above. For example, if you are single and earn over $200,000 in wages, you will add .9% tax to the amount over $200,000 earned.
Verification Letter 4464
Generally, Letter 4464 notices state that the IRS has received the taxpayer's income tax return and are holding the refund until they've completed a thorough review of the return. This review is part of an ongoing program the IRS conducts to ensure the accuracy of return information. Typically, the IRS checks with a 3rd party, such as the employer, to verify information on the return.
Letter 4464 does not require a response or action UNLESS the recipient did not file the return in question. Allow 60 days for a refund or more information when Letter 4464 is received.