Some popular tax benefits renewed for 2019. Tuition, Medical expense, Discharge of Indebtedness etc..

Some popular tax benefits renewed for 2019; IRS Publication 17 Helps with 2019 Taxes

WASHINGTON ― The Internal Revenue Service reminds taxpayers that it is processing tax returns claiming benefits extended or changed by recent legislation. Most taxpayers can file when they are ready – and as they normally would – if they are eligible for one or more of these benefits and claim them on their 2019 federal tax return.

Taxpayers can get the most out of various tax benefits and get useful tips on preparing their 2019 federal income tax returns by consulting a free, comprehensive tax guide available on IRS.gov. Publication 17, Your Federal Income Tax, features an in-depth look at on tax changes for 2019 including recent legislative changes and covers the general rules for filing a federal income tax return. It supplements the information contained in the tax form instruction booklet. This 277-page guide – available online as a PDFHTML or eBook − also provides thousands of interactive links to help taxpayers quickly get answers to their questions.

Certain individual tax provisions extended

  • Deduction for above-the-line qualified tuition and related expenses claimed on Form 8917, Tuition and Fees Deduction
  • Deduction for mortgage insurance premiums treated as qualified residence interest, claimed on Schedule A, Itemized Deductions
  • Deduction for unreimbursed medical and dental expenses as the floor was lowered to 7.5% of adjusted gross income and claimed on Schedule A, Itemized Deductions
  • Credit for nonbusiness energy property claimed on Form 5695, Residential Energy Credits
  • Income exclusion for canceled debt for qualified principal residence indebtedness where the taxpayer defaulted on a mortgage that they took out to buy, build or substantially improve their main home claimed on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness

Kiddie Tax modification

Recent legislation also modified the rules related to what’s commonly called the “Kiddie Tax” for certain children who may be able to calculate their tax based on the tax rate of the child’s parent. For tax year 2019, taxpayers can elect this alternative application for the tax on their unearned income by completing Form 8615, Tax for Certain Children Who Have Unearned Income, differently depending on their election. See the Form 8615 instructions for Part II Tax for more information. Taxpayers who make this election for 2019 must include a statement with their return specifying “election to modify tax of unearned income.” The statement can be made on the return (for example, on line 7 or at the top of Form 8615) or on an attachment filed with the return.

Disaster tax relief

Disaster tax relief was also enacted for those affected by certain Federally declared disasters. This includes an increased standard deduction based on qualified disaster losses and an election to use 2018 earned income to figure the 2019 earned income credit and additional child tax credit.

Certain taxpayers affected by federally declared disasters may be eligible for an automatic 60-Day extension for filing, paying their taxes, and other administrative deadlines.

Special rules may apply for taxpayers who received a distribution from an individual retirement arrangement, profit-sharing plan or retirement plan and their main home was in one of the federally declared disaster areas eligible for these special rules.

Amended returns

Three tax laws were enacted on Dec. 20, 2019. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 extended certain previously expired tax benefits to 2018 and 2019 and provided tax relief for certain incidents federally declared as disasters in 2018 and 2019. The extended benefits and the disaster relief may now be claimed on 2018 and 2019 tax returns, by those who qualify.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act) made other changes, such as increasing the penalty for failing to file a tax return and modifying the rules related to the taxation of unearned income of certain minor children. The SECURE Act relaxed certain retirement plan contribution and distribution requirements beginning Jan. 1, 2020.

While the IRS has released the vast majority of tax year 2019 products, the IRS must also update 2018 tax products affected by these legislative changes. Taxpayers may have to file an amended return to claim these benefits on their 2018 return. See Form 1040-X, Amended U.S. Individual Income Tax Return, and its instructions at IRS.gov/Form1040X. Impacted 2018 forms, instructions and schedules are being revised to reflect the legislation enacted Dec. 20, 2019. The updated 2018 revisions will be posted to IRS.gov for taxpayers to file amended returns accurately.

The IRS works closely with tax professionals and partners in the tax return preparation and tax software industries to prepare for and address issues that may occur during the filing season. This ongoing collaboration ensures that taxpayers can continue to rely on the IRS, tax professionals and tax software programs when it’s time to file their returns. As always, filing electronically and choosing direct deposit is the fastest, most accurate and most convenient way to receive a tax refund.

Back to Top

MEALS AND ENTERTAINMENT EXP.

IRS updates guidance on business expense deductions for meals and entertainment

WASHINGTON — The Internal Revenue Service issued proposed regulations on the business expense deduction for meals and entertainment following changes made by the Tax Cuts and Jobs Act (TCJA).

The 2017 TCJA eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. It also limited the deduction for expenses related to food and beverages provided by employers to their employees.

These proposed regulations address the elimination of the deduction for expenditures related to entertainment, amusement or recreation activities and provide guidance to determine whether an activity is considered to be entertainment. The proposed regulations also address the limitation on the deduction of food and beverage expenses.

The proposed regulations affect taxpayers who pay or incur expenses for meals or entertainment. These proposed regulations generally follow Notice 2018-76, issued on Oct. 15, 2018, which provided transitional guidance on the deductibility of expenses for certain business meals.

Taxpayers affected by this change and other interested parties may submit comments on the proposed regulations. The IRS will hold a public hearing on these proposed regulations on April 7, 2020.

Back to Top

Don’t be victim to #‘ghost’ #tax#return#preparers

WASHINGTON – With the start of the 2020 tax filing season near, the Internal Revenue Service is reminding taxpayers to avoid unethical “ghost” tax return preparers.

According to the IRS, a ghost preparer does not sign a tax return they prepare. Unscrupulous ghost preparers will print the return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost will prepare but refuse to digitally sign as the paid preparer.

By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.

Ghost tax return preparers may also:

  • Require payment in cash only and not provide a receipt.
  • Invent income to qualify their clients for tax credits.
  • Claim fake deductions to boost the size of the refund.
  • Direct refunds into their bank account, not the taxpayer’s account.

The IRS urges taxpayers to choose a tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

Free basic income tax return preparation with e-file is available to qualified individuals from IRS-certified volunteers at Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites across the country. For more information and to find the closest visit Free Tax Return Preparation for Qualifying Taxpayers on IRS.gov

No matter who prepares the return, the IRS urges taxpayers to review it carefully and ask questions about anything not clear before signing. Taxpayers should verify both their routing and bank account number on the completed tax return for any direct deposit refund. And taxpayers should watch out for ghost preparers inserting their bank account information onto the returns.

Taxpayers can report preparer misconduct to the IRS using IRS Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.

Back to Top

No age limit for IRA contribution and RMD age raised to 72

A $1.4 trillion year-end spending bill was signed into law on December 20, 2019 in order to keep the government running. Tucked away inside this mammoth piece of legislation is the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which became effective January 1, 2020.

This new law includes significant changes to retirement accounts, including:

Age Limit Eliminated for Traditional IRA Contributions

Beginning in 2020, the new law eliminates the age limit for traditional IRA contributions (formerly 70 ½). Now, those who are still working can continue to contribute to a traditional IRA, regardless of their age.

RMD Age Raised to 72

The SECURE Act also raises the age for beginning RMDs to 72 for all retirement accounts subject to RMDs. IRA owners reaching age 70 ½ in 2020 catch a break and will not have to take their first RMD in 2020 now that the RMD deadline has been extended to age 72.

from article by Sarah Brenner, JD
IRA Analyst

IRS: Make a tax payment now, avoid a tax-time surprise

Bookmark and Share
IRS NewswireDecember 18, 2019
News EssentialsWhat’s HotNews ReleasesIRS – The BasicsIRS GuidanceMedia ContactsFacts & FiguresAround The Natione-News SubscriptionsThe Newsroom TopicsMultimedia CenterNoticias en EspañolRadio PSAsTax ScamsThe Tax GapFact SheetsIRS Tax TipsArmed ForcesLatest News HomeIRS ResourcesCompliance & EnforcementContact My Local OfficeFiling OptionsForms & InstructionsFrequently Asked QuestionsNewsTaxpayer AdvocateWhere to FileIRS Social MediaTaxpayers who paid too little tax during 2019 can still avoid a tax-time surprise by making a quarterly estimated tax payment now, directly to the Internal Revenue Service. The deadline for making a payment for the fourth quarter of 2019 is Wednesday, Jan. 15, 2020.Income taxes are pay-as-you-go. This means that by law, taxpayers are required to pay most of their tax during the year as income is received. There are two ways to do this:Withholding from paychecks, pension payments, Social Security benefits or certain other government payments. This is how most people pay most of their tax.Making quarterly estimated tax payments throughout the year. Self-employed people and investors, among others, often pay tax this way.Either method can help avoid a surprise tax bill at tax time and the accompanying penalty that often applies. If a taxpayer failed to make required quarterly estimated tax payments earlier in the year, making a payment to cover these missed payments, as soon as possible, will usually lessen and may even eliminate any possible penalty.The IRS recommends that everyone check their possible tax liability by using the IRS Tax Withholding Estimator. This online tool allows taxpayers to see if they are withholding the right amount and find out if they need to make an estimated tax payment. Form 1040-ES, available on IRS.gov, includes a worksheet for figuring the right amount to pay as well.This is especially important for anyone who owed taxes when they filed their 2018 return. Taxpayers in this situation may include those who itemized in the past but will now claim the increased standard deduction, as well as two wage-earner households, employees with non-wage sources of income and those with complex tax situations.Taxpayers who owed taxes when they last filed and who did not adjust their 2019 withholding may find that they owe taxes again, and even a penalty, when they file their 2019 return next year. Making a quarterly estimated tax payment now can help. In addition, various financial transactions, especially late in the year, can often have an unexpected tax impact. Examples include year-end and holiday bonuses, stock dividends, capital gain distributions from mutual funds and stocks, bonds, virtual currency, real estate or other property sold at a profit.Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, that can be especially helpful to those who have dividend or capital gain income, owe alternative minimum tax or self-employment tax, or have other special situations.The fastest and easiest way to make an estimated tax payment is to do so electronically using IRS Direct Pay or the Treasury Department’s Electronic Federal Tax Payment System (EFTPS). For information on other payment options, visit IRS.gov/payments. If paying by check, be sure to make the check payable to the “United States Treasury.”Though it’s too early to file a 2019 return, it’s never too early to get ready for the tax-filing season ahead. For more tips and resources, check out the Get Ready page on IRS.gov.Back to Top

Taxpayers can take steps now to Get Ready to file their taxes in 2020

There are steps people can take now to make sure their tax filing experience goes smoothly next year. First, they can visit the Get Ready page on IRS.gov to find out more.

Here are a few other things people can do now:

Check their withholding and make any adjustments soon
Since most employees typically only have a few pay dates left this year, checking their withholding soon is especially important. It’s even more important for those who:

  • Received a smaller refund than expected after filing their 2018 taxes this year.
  • Owed an unexpected tax bill last year.
  • Experienced personal or financial changes that might change their tax liability.

Some people may owe an unexpected tax bill when they file their 2019 tax return next year. To avoid this kind of surprise, taxpayers should use the Tax Withholding Estimator to perform a quick paycheck or pension income checkup. Doing so helps them decide if they need to adjust their withholding or make estimated or additional tax payments now. 

Gather documents
Everyone should come up with a recordkeeping system. Whether it’s electronic or paper, they should use a system to keep all important information in one place. Having all needed documents on hand before they prepare their return helps them file a complete and accurate tax return. This includes:

  • Their 2018 tax return.
  • Forms W-2 from employers.
  • Forms 1099 from banks and other payers.
  • Forms 1095-A from the marketplace for those claiming the premium tax credit.

Confirm mailing and email addresses
To make sure these forms make it to the taxpayer on time, people should confirm now that each employer, bank and other payer has the taxpayer’s current mailing address or email address. Typically, forms start arriving by mail or are available online in January.

People should keep copies of tax returns and all supporting documents for at least three years. Also, taxpayers using a software product for the first time may need the adjusted gross income amount from their 2018 return to validate their electronically filed 2019 return.

File electronically and choose direct deposit for a faster refund
Errors delay refunds. The easiest way to avoid them is to file electronically. Using tax preparation software is the best and simplest way to file a complete and accurate tax return. Tax prep software guides taxpayers through the process and does all the math. In fact, taxpayers can start looking into their filing options now.

Another way to speed thing up is to use direct deposit. Combining direct deposit with electronic filing is the fastest way to get a refund. With direct deposit, a refund goes directly into a taxpayer’s bank account. They don’t need to worry about a lost, stolen or undeliverable refund check.

Share this tip on social media — #IRSTaxTip: Check their withholding and make any adjustments soon https://go.usa.gov/xpBfX

Back to Top

#401(k) #contribution #limit increases to #$19,500 for #2020; #catch-up limit rises to $6,500

WASHINGTON — The Internal Revenue Service today announced that employees in 401(k) plans will be able to contribute up to $19,500 next year.

The IRS announced this and other changes in Notice 2019-59, posted today on IRS.gov. This guidance provides cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020.

Highlights of changes for 2020

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $19,000 to $19,500.

The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.

The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2020.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor his or her spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2020:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $65,000 to $75,000, up from $64,000 to $74,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $104,000 to $124,000, up from $103,000 to $123,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $196,000 and $206,000, up from $193,000 and $203,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $124,000 to $139,000 for singles and heads of household, up from $122,000 to $137,000. For married couples filing jointly, the income phase-out range is $196,000 to $206,000, up from $193,000 to $203,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $65,000 for married couples filing jointly, up from $64,000; $48,750 for heads of household, up from $48,000; and $32,500 for singles and married individuals filing separately, up from $32,000.

Key limit remains unchanged

The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

Details on these and other retirement-related cost-of-living adjustments for 2020 are in Notice 2019-59, available on IRS.gov.

Back to Top

Here’s basic info for #businesses #filing #excise_taxes

Businesses providing goods and services that are subject to excise tax must file a Form 720 quarterly to report the tax to the IRS.

What is excise tax?
Excise taxes are charged on a wide variety of goods, services and activities. The tax may be imposed at the time of:

  • Import
  • Sale by the manufacturer
  • Sale by the retailer
  • Use by the consumer

Many excise taxes go into trust funds earmarked for related capital projects, such as highway and airport improvements. Excise taxes are independent of income taxes. People pay excise taxes on things like gasoline, indoor tanning, airline tickets and tires.

Since the excise cost is usually included in the price, the seller or manufacturer is responsible for sending these tax payments to the IRS and filing Form 720.

When to file?
Businesses must file the form for each quarter of the calendar year. Here are the due dates:

  • Quarter 1 – January, February, March: Deadline = April 30
  • Quarter 2 – April, May, June: Deadline = July 31
  • Quarter 3 – July, August, September: Deadline = October 31
  • Quarter 4 – October, November, December: Deadline = January 31

If the due date for filing a return falls on a Saturday, Sunday or legal holiday, the due date is the next business day.

How to file?
While the IRS still accepts paper Forms 720, they encourage businesses to file electronically. To help excise taxpayers do this, the IRS posts the contact information on IRS.gov of all approved e-file transmitters for excise forms. Businesses can submit forms online 24 hours a day.

That said, not all excise forms can be filed electronically. Those that are available for electronic filing are:

  • Form 720, Quarterly Federal Excise Tax.
  • Form 2290, Heavy Highway Vehicle Use Tax.
  • Form 8849, Claim for Refund of Excise Taxes, Schedules 1, 2, 3, 5, 6 and 8.

When businesses file Form 720 electronically, they not only get confirmation the IRS received the form, but it reduces processing time and errors. To electronically file Form 720, business taxpayers will have to pay the provider’s fee for online submission.

More information:
Form 720 e-file providers page
2290 Modernized e-file Providers
8849 Modernized e-file Providers
Excise Tax Forms and Publication

Share this tip on social media — #IRSTaxTip: Here’s basic info for businesses filing excise taxes. https://go.usa.gov/xpx7v

#Tax treatment for #family_members_working in the #family_business

One of the advantages of someone running their own business is hiring family members. But when including family members in business operations, certain tax treatments and employment tax rules apply. Here are some facts to know when working with a spouse, parent or child.

Both spouses carrying on the trade or business

If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. If so, they should report income or loss from the business on Form 1065. They should not report the income on a Schedule C (Form 1040) in the name of one spouse as a sole proprietor. But, the spouses can elect not to treat the joint venture as a partnership by making a qualified joint venture election. 

Qualified joint venture

Spouses may elect treatment as a qualified joint venture instead of a partnership. A qualified joint venture conducts a trade or business where:

  • The only members are a married couple who file a joint return,
  • Both spouses materially participate in the trade or business, and
  • Both spouses elect not to be treated as a partnership.

Only businesses owned and operated by spouses as co-owners and not in the name of a state law entity, such as a limited partnership or limited liability company, are eligible for the qualified joint venture election. Find more information on joint ventures in Publication 541, Partnerships.

Spouses electing qualified joint venture status are sole proprietors for federal tax purposes. Each spouse must file a separate Schedule C to report their share of profits and losses. They don’t need an EIN unless their sole proprietorship must file excise, employment, alcohol, tobacco or firearms returns. One spouse cannot continue to use the partnership’s Employer Identification Number (EIN) for the qualified joint venture. The EIN must stay with the partnership; it’s used by the partnership for any year in which the business doesn’t meet qualified joint venture requirements.

Employment taxes

If the business has employees, either of the spouses as sole proprietors may report and pay the employment taxes. The spouse, as an employer, must have an EIN for their sole proprietorship. If the business filed or paid employment taxes for part of the year under the partnership’s EIN, the spouse may be considered the employee’s “successor employer” for purposes of figuring whether wages reached the Social Security and federal unemployment wage base limits.
 
One spouse employed by another. The wages for the services of an individual who works for their spouse are subject to income tax withholding and Social Security and Medicare taxes but not to the Federal Unemployment Tax Act (FUTA).

Child employed by parents. Payments for the services of a child under age 18 aren’t subject to Social Security and Medicare taxes, if the business is a sole proprietorship or a partnership in which each partner is a parent of the child. Payments to a child under age 21 aren’t subject to FUTA. Payments are subject to income tax withholding, regardless of the child’s age.

Payments for the services of a child are subject to income tax withholding as well as Social Security, Medicare and FUTA taxes if they work for:

  • A corporation, even if it’s controlled by the child’s parent, or
  • A partnership, even if the child’s parent is a partner, unless each partner is a parent of the child.

Parent employed by child. The wages for the services of a parent employed by their child are subject to income tax withholding and Social Security and Medicare taxes. They’re not subject to FUTA tax.

Employees complete Form W-4 so that their employer can withhold the correct federal income tax from their pay. The IRS encourages everyone to use the Tax Withholding Estimator to help them make sure they have the right amount of tax withheld from their paycheck. The estimator automatically links to Form W-4, Employee’s Withholding Allowance Certificate, which they can then fill out and submit to their employer.

More information:

Blog at WordPress.com.

Up ↑