Tips & Advice
Filing and Payment Deadline Extended to July 15, 2020 - Updated Statement
March 21, 2020
The Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns has been extended from April 15 to July 15, 2020. The IRS urges taxpayers who are owed a refund to file as quickly as possible. For those who can't file by the July 15, 2020 deadline, the IRS reminds individual taxpayers that everyone is eligible to request an extension to file their return.
This filing and payment relief includes:
The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their Federal income taxes on April 15, 2020, are automatically extended until July 15, 2020. This relief applies to all individual returns, trusts, and corporations. This relief is automatic, taxpayers do not need to file any additional forms or call the IRS to qualify.
This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.
Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. You will automatically avoid interest and penalties on the taxes paid by July 15.
Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.
State tax returns
This relief only applies to federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details. More information is available at https://www.taxadmin.org/state-tax-agencies.
Earlier this year, the House of Representatives passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. This month it was unexpectedly included in an appropriations bill passed by the Senate on December 19, 2019 and signed into law the next day.
The SECURE Act brings substantial changes to the retirement system—and could affect your own retirement planning efforts. Here are some of the changes to watch out for.
5 Ways the SECURE Act Could Impact Your Retirement Planning
1. RMD Age (for Some) Pushed Back to Age 72
Right now, those with traditional IRAs have to start taking required minimum distributions (RMDs) by April 1 following the year in which they turned 70 ½. The SECURE Act, recognizing that people live longer, pushes back the age at which you have to start taking RMDs. Starting in 2020, you may begin taking them by April 1 in the year following the year in which you turn 72.
This provision takes effect on January 1, 2020. So, if you’re slated to turn 70 ½ in 2020, you’ll receive a reprieve until age 72. However, if you’re already 70 ½ as of the end of 2019, you’re stuck with the old rules and must take your first RMD no later than April 1, 2020. And if you’re already receiving RMDs (or required to) because you’re over 70 ½, you must still continue to receive your RMDs or face the 50% penalty. To sum it up, anyone born on or before June 30, 1949 will be age 70 ½ by December 31, 2019 and must begin/continue taking RMDs. The new rule does NOT affect you.
If you’re in a 401(k) or other employer qualified plan, you already had an exception to the normal 70 ½ required beginning date for RMDs, but you had to still be working for the company to take advantage of it. If you’re still working for the company with the 401(k) plan, and age 70 ½ or older, you can postpone your RMD until you quit/retire from your employer. This ability to delay RMDs until you actually quit/retire remains the same under the SECURE Act.
So what’s changed? If you’re no longer working for the company that offered you the 401(k), then you can wait until age 72 to take your first RMD. But remember, just like in an IRA if you’re already taking RMDs because you had reached age 70 1/2, then you must continue, no matter your age in 2020. Also if you turn 70 1/2 by December 31, 2019 (and are no longer working), then you’ll have to start RMDs no later than April 1, 2020. Thus, if you were born on or before June 30, 1949, you won’t be able to delay until age 72.
2. Removal of Traditional IRA Contribution Age Limit
Currently, if you're age 70 1/2 or older, you can't make contributions to a traditional IRA. However, as of January 1, 2020, that restriction is no longer in place. There will no longer be age restrictions on making IRA contributions. So, it’s possible that you could be taking RMDs at some point and still able to put money into your traditional IRA. Whether it’s deductible still will depend upon your modified adjusted gross income. (See IRS Pub 590-A for income limits for deductions.)
Note that the effective date won’t change your ability for the 2019 tax year. If you’re hoping to make a previous year contribution for 2019 after the first of the new year, and you’re above age 70 ½, that won’t work. The change is only for 2020 contributions and years going forward.
Remember that you can still make 2019 (and 2020) Roth IRA contributions regardless of age as long as your income is below the threshold (for 2019: $137,000 for single taxpayers and $203,000 for married filing jointly). That did not change under the SECURE Act.
3. Part-Time Workers Might Be Able to Access Retirement Benefits
The SECURE Act also expands access to certain employer-sponsored retirement plans. Starting with the 2021 plan year, employers are expected to offer retirement benefits to workers who have been with the company for at least three years, and who work 500 hours or more each year. Employers may not have to contribute for these employees, but will be required to allow employees to contribute for themselves. More information will be needed on this aspect of law, so stay tuned for more.
Right now, some employers aren’t required to offer coverage to those who work less than 1,000 hours for the company in a year. This may change the landscape for part-time workers, including older employees who work part-time during retirement.
4. Elimination of Stretch IRAs
Many folks save in IRA accounts for themselves but also because at their death they want to leave some of their savings to heirs or beneficiaries. Beneficiaries who receive an inherited IRA are generally able to elect how frequently they receive the money. One option is what is known as a "stretch" IRA, which allows beneficiaries to wit
hdraw money based on life expectancy. With the SECURE Act in place, however, this option goes away for many.
Instead, non-spouse beneficiaries have to draw down the IRA by the end of the 10th year following the plan owner’s death. These beneficiaries can take the money out of the account on any schedule they choose. It just has to be fully depleted by the end of the 10 year time horizon. There are some exceptions, such as for disability and beneficiaries not more than 10 years younger than the original account owner. Also minors won’t see that 10-year clock start until they reach the age of majority.
The elimination of stretch IRAs has the potential to force beneficiaries to take larger distributions from inherited IRAs and might result in higher taxes, depending on the situation. For example, Roth IRA distributions are generally not taxable to beneficiaries, so taking the money out of the Inherited Roth IRA account probably has minimal impact on Roth beneficiaries. Traditional IRA beneficiaries do have to pay taxes on most or all of their payments though.
5. Easier to Include Annuities in Plans
Right now, many employers don’t include annuity choices in their workplace retirement plans because of some of the legal and fiduciary requirements.
However, the SECURE Act reduces some of the fear of liability, and the result could be more lifetime income products being included in employer-sponsored retirement plans, like 401(k) plans. For those hoping to include these types of products in their retirement planning, the SECURE Act could be helpful.
Other Provisions of the SECURE Act
In addition to the above changes, the SECURE Act also includes other provisions designed to encourage small businesses in offering retirement benefits to employees. These provisions have different effective dates, so do your research before trying to utilize these provisions. Here are some of the other key ways this legislation impacts the retirement landscape:
Increases the tax credit cap for small plan startup costs to $5,000 from $500.
Provides a tax credit of up to $500 per year for employers who use automatic enrollment in their 401(k) or SIMPLE IRA plan.
Encourages small businesses to set up retirement plans by increasing access to “safe harbor” plans.
Allows penalty-free withdrawals from 401(k) to help offset costs related to having or adopting a child — up to $5,000.
Allows for the use of up to $10,000 per year from 529 accounts to make student loan payments.
Requires plan administrators to begin offering projections for lifetime income at least once a year, in addition to providing information about the size of the nest egg.
What’s Next for Your Retirement?
With the effective date of January 1, 2020 for some of the provisions, some planners and experts have been scrambling to make adjustments. And remember many of these law changes require operational changes, so please be patient and ask questions if you get information in conflict with what you learned about the SECURE Act. When making your own retirement plans, take into account some of the new provisions, including the later date for RMDs, as well as the possibility of continuing to make traditional IRA contributions later in life.
As the driving force in today's economy, small businesses benefit from numerous tax breaks in the tax code. One of these, the Qualified Small Business Stock (QSBS), was made permanent by the PATH Act (Protecting Americans from Tax Hikes Act of 2015). If you're a small business investor, here's what you need to know about this often-overlooked tax break.
What is the Qualified Small Business Stock Exclusion?
Sometimes referred to as Section 1202 (after Section 1202 of the Internal Revenue Code, the PATH Act made permanent for taxpayers (excluding corporations) the exclusion of 100 percent of the gain on the sale or exchange of qualified small business stock (QSBS) acquired after September 27, 2010, that is held longer than five years.
Two tax provisions apply to gain from the sale or trade of qualified small business stock. Taxpayers may qualify for a tax-free rollover of all or part of the gain, or they may be able to exclude gain from income.
Qualified stock must also meet the active business test, and it can't be an investment vehicle or an inactive business. A corporation meets this test for any period of time if, during that period, both the following are true:
It was an eligible corporation, defined below.
It used at least 80 percent (by value) of its assets in the active conduct of at least one qualified trade or business.
Further, QSBS gain excluded from income is not subject to the 3.8 percent Net Investment Income Tax from capital gains (and other investment income) on high-income taxpayers.
Qualified Small Business. The definition of a qualified small business under the IRS varies; however, examples of businesses that do NOT qualify include, but are not limited to:
A regulated investment company,
A real estate investment trust (REIT)
One involving services performed in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services;
Any business of operating a hotel, motel, restaurant, or similar business.
Any farming business (including the business of raising or harvesting trees).
What is Qualified Small Business Stock (QSBS)?
Qualified small business stock is stock that meets all of the following tests:
It must be stock in a C corporation.
It must have been originally issued after August 10, 1993.
The corporation must have total gross assets of $50 million or less at all times after August 9, 1993, and before it issued the stock. Its total gross assets immediately after it issued the stock must also be $50 million or less.
When figuring the corporation's total gross assets, you must also count the assets of any predecessor of the corporation. In addition, you must treat all corporations that are members of the same parent-subsidiary controlled group as one corporation.
You must have acquired the stock at its original issue, directly or through an underwriter, in exchange for money or other property (not including stock), or as payment for services provided to the corporation (other than services performed as an underwriter of the stock). In certain cases, your stock may also meet this test if you acquired it from another person who met this test, or through a conversion or trade of qualified small business stock that you held.
The corporation must have met the active business test, defined next, and must have been a C corporation during substantially all the time you held the stock.
Within the period beginning two years before and ending two years after the stock was issued, the corporation cannot have bought more than a de minimis amount of its stock from you or a related party.
Within the period beginning one year before and ending one year after the stock was issued, the corporation cannot have bought more than a de minimis amount of its stock from anyone, unless the total value of the stock it bought is five percent or less of the total value of all its stock.
The QSBS exclusion, as with many tax provisions, is complicated. Don't hesitate to call if you have any questions or would like more information on this topic.
Refundable vs. Non-Refundable Tax Credits
Tax credits can reduce your tax bill or give you a bigger refund, but not all tax credits are created equal. While most tax credits are refundable, some credits are nonrefundable, but before we take a look at the difference between refundable and nonrefundable tax credits, it's important to understand the difference between a tax credit and a tax deduction.
Tax credits reduce your tax liability dollar for dollar and are more valuable than tax deductions that reduce your taxable income and tied to your marginal tax bracket. Let's look at the difference between a tax credit of $1,000 and a tax deduction of $1,000 for a taxpayer whose income places them in the 22% tax bracket:
A tax credit worth $1,000 reduces the amount of tax owed by $1,000--the same dollar amount.
A tax deduction worth the same amount ($1,000) only saves you $330, however (0.22 x $1,000 = $220). As you can see, tax credits save you more money than tax deductions.
Tax Credits: Refundable vs. Nonrefundable
A refundable tax credit not only reduces the federal tax you owe but also could result in a refund if it more than you owe. Let's say you are eligible to take a $1,000 Child Tax Credit but only owe $200 in taxes. The additional amount ($800) is treated as a refund to which you are entitled.
A nonrefundable tax credit, on the other hand, means you get a refund only up to the amount you owe. For example, if you are eligible to take an American Opportunity Tax Credit worth $1,000 and the amount of tax owed is only $800, you can only reduce your taxable amount by $800--not the full $1,000.
Refundable Tax Credits
The Earned Income Tax Credit
The Child and Dependent Care Credit
The Saver's Credit
Nonrefundable Tax Credits
Examples of nonrefundable tax credits include:
Adoption Tax Credit
Foreign Tax Credit
Mortgage Interest Tax Credit
Residential Energy Property Credit
Credit for the Elderly or the Disabled
Child Tax Credit (tax years prior to 2018)
Partially Refundable Tax Credits
Some tax credits are only partially refundable such as:
Child Tax Credit (starting in 2018)
American Opportunity Tax Credit
Questions about tax credits or deductions?
If you have any questions or would like more information about either of these tax topics, please call.
Reporting Foreign Income
If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship.
In addition, U.S. taxpayers with foreign accounts exceeding certain thresholds may be required to file Form FinCen114, known as the "FBAR" as well as Form 8938, also referred to as "FATCA."
FBAR is not a tax form, but is due to the Treasury Department by April 15, 2019, but may be extended to October 15. Form 114 must be filed electronically through the BSA E-Filing System website. The BSA E-Filing System supports electronic filing of Bank Secrecy Act (BSA) forms (either individually or in batches) through a FinCEN secure network.
FATCA (Form 8938) is submitted on the tax due date (including extensions, if any,) of your income tax return.
Here's what else you need to know about reporting foreign income:
1. Report Worldwide Income. By law, Americans living abroad, as well as many non-U.S. citizens, must file a U.S. income tax return and report any worldwide income. Some key tax benefits, such as the foreign earned income exclusion, are only available to those who file U.S. returns. Any income received, or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars. Both FinCen Form 114 and IRS Form 8938, require the use of a December 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently.
2. Report Foreign Accounts and Assets. Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts.
3. File Required Tax Forms. In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, with their tax returns. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
Some taxpayers may need to file additional forms with the Treasury Department such as Form 8938, Statement of Specified Foreign Financial Assets or FinCEN Form 114 (formerly TD F 90-22.1), Report of Foreign Bank and Financial Accounts ("FBAR").
FBAR. Taxpayers do not file the FBAR with individual, business, trust or estate tax returns. Instead, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2018 (or in 2019 for next year's filing returns) must file a Treasury Department FinCEN Form 114 (formerly TD F 90-22.1), Report of Foreign Bank and Financial Accounts ("FBAR").
The deadline for filing the FBAR is the same as for a federal income tax return and must be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 15, 2019. FinCEN grants filers missing the April 15 deadline an automatic extension until October 15, 2019, to file the FBAR.
Taxpayers who want to paper-file their FBAR must call the Financial Crimes Enforcement Network's Regulatory Helpline to request an exemption from e-filing.
Form 8938. Generally, U.S. citizens, resident aliens, and certain nonresident aliens must report specified foreign financial assets on Form 8938, Statement of Specified Foreign Financial Assets if the aggregate value of those assets exceeds certain thresholds:
If the total value is at or below $50,000 at the end of the tax year, there is no reporting requirement for the year, unless the total value was more than $75,000 at any time during the tax year
Taxpayers who do not have to file an income tax return for the tax year do not have to file Form 8938, regardless of the value of their specified foreign financial assets.
The threshold is higher for individuals who live outside the United States and thresholds are different for married and single taxpayers. In addition, penalties apply for failure to file accurately.
Please contact the office if you need additional information about thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided.
An individual may have to file both forms, and separate penalties may apply for failure to file each form.
4. Review the Foreign Earned Income Exclusion. Many Americans who live and work abroad qualify for the foreign earned income exclusion when they file their tax return. This means taxpayers who qualify will not pay taxes on up to $103,900 of their wages and other foreign earned income they received in 2018 ($105,900 in 2019). Please contact the office if you have any questions about foreign earned income exclusion.
5. Don't Overlook Credits and Deductions. Taxpayers may be able to take either a credit or a deduction for income taxes paid to a foreign country. This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income. However, you cannot claim the additional child tax credit if you file Form 2555, Foreign Earned Income or Form 2555-EZ, Foreign Earned Income Exclusion.
6. Automatic Extension. U.S. citizens and resident aliens living abroad on April 15, 2019, qualified for an automatic two-month extension (until June 15) to file their 2018 federal income tax returns. The extension of time to file also applies to those serving in the military outside the U.S. Taxpayers must attach a statement to their returns explaining why they qualify for the extension.
7. Additional Extension of Time to File. U.S. citizens and resident aliens living abroad may be granted a filing extension of up to six months (October 15, 2019) by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return prior to the due date of the tax return (April 15, 2019). However, a taxpayer filing an extension must pay any tax due by the original date or be subject to late payment penalties and interest.
8. Get Tax Help. If you're a taxpayer or resident alien living abroad that needs help with tax filing issues, IRS notices, and tax bills, or have questions about foreign earned income and offshore financial assets in a bank or brokerage account, don't hesitate to call.
Scam Alert: Fake Calls from Taxpayer Advocate Service
Like clockwork, every year, there's a new twist on old scams. This year, it is the IRS impersonation phone scam whereby criminals fake calls from the Taxpayer Advocate Service. The TAS is an independent organization within the IRS that help protect your taxpayer rights. TAS can help if you need assistance resolving an IRS problem, if your problem is causing financial difficulty, or if you believe an IRS system or procedure isn't working as it should. Typically, a taxpayer would contact TAS for help first, and only then would TAS reach out to the taxpayer. TAS does not initiate calls to taxpayers out of the blue.
How the scam works
Like many other IRS impersonation scams, thieves make unsolicited phone calls to their intended victims fraudulently claiming to be from the IRS. In this most recent scam variation, callers "spoof" the telephone number of the IRS Taxpayer Advocate Service office in Houston or Brooklyn. Calls may be 'robo-calls' that request a call back. Once the taxpayer returns the call, the con artist requests personal information, including Social Security number or individual taxpayer identification number (ITIN).
In other variations of the IRS impersonation phone scam, fraudsters demand immediate payment of taxes by a prepaid debit card or wire transfer. The callers are often hostile and abusive. Alternately, scammers may tell would-be victims that they are entitled to a large refund but must first provide personal information. Other characteristics of these scams include:
Scammers use fake names and IRS badge numbers to identify themselves.
Scammers may know the last four digits of the taxpayer’s Social Security number.
Scammers spoof caller ID to make the phone number appear as if the IRS or another local law enforcement agency is calling.
Scammers may send bogus IRS emails to victims to support their bogus calls.
Victims hear background noise of other calls to mimic a call site.
After threatening victims with jail time or with, driver's license or other professional license revocation, scammers hang up. Others soon call back pretending to be from local law enforcement agencies or the Department of Motor Vehicles, and caller ID again supports their claim.
Telltale signs of a scam call
While the IRS or the TAS will never do any of the following, scammers will often:
Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
Demand that taxes be paid without giving taxpayers the opportunity to question or appeal the amount owed.
Ask for credit or debit card numbers over the phone.
Call about an unexpected tax refund.
Tax scams can happen any time of year, not just at tax time and its important to stay alert to scams that use the IRS or other legitimate companies and agencies as a lure. If you have any concerns, please call the office.
Don't Delay: Late Filing and Late Payment Penalties
April 15 (April 17 if you live in Maine or Massachusetts) is the deadline for most people to file their federal income tax return and pay any taxes they owe. The bad news is that if you miss the deadline (for whatever reason), you may be assessed penalties for both failing to file a tax return and for failing to pay taxes they owe by the deadline. The good news is that there is no penalty if you file a late tax return but are due a refund.
Here are ten important facts every taxpayer should know about penalties for filing or paying late:
1. A failure-to-file penalty may apply. If you owe tax, and you failed to file and pay on time, you will most likely owe interest and penalties on the tax you pay late.
2. Penalty for filing late. The penalty for filing a late return is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late and starts accruing the day after the tax filing due date. Late filing penalties will not exceed 25 percent of your unpaid taxes.
3. Failure to pay penalty. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of 1/2 of 1 percent of your unpaid taxes. That penalty applies for each month or part of a month after the due date and starts accruing the day after the tax-filing due date.
4. The failure-to-file penalty is generally more than the failure-to-pay penalty. You should file your tax return on time each year, even if you're not able to pay all the taxes you owe by the due date. You can reduce additional interest and penalties by paying as much as you can with your tax return. You should explore other payment options such as getting a loan or making an installment agreement to make payments. Contact the office today if you need help figuring out how to pay what you owe.
5. Extension of time to file. If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date.
6. Two penalties may apply. One penalty is for filing late and one is for paying late--and they can add up fast, especially since interest accrues on top of the penalties but if both the 5 percent failure-to-file penalty and the 1/2 percent failure-to-pay penalties apply in any month, the maximum penalty that you'll pay for both is 5 percent.
7. Minimum penalty. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
8. Reasonable cause. You will not have to pay a late-filing or late-payment penalty if you can show reasonable cause for not filing or paying on time. Please call if you have any questions about what constitutes reasonable cause.
9. Penalty relief. The IRS generally provides penalty relief, including postponing filing and payment deadlines, to any area covered by a disaster declaration for individual assistance issued by the Federal Emergency Management Agency (FEMA).
10. File even if you can't pay. Filing on time and paying as much as you can, keeps your interest and penalties to a minimum. If you can't pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS. If you do owe the IRS, the sooner you pay your bill, the less you will owe.
If you need assistance, help is just a phone call away!
There's Still Time to Make a 2018 IRA Contribution
If you haven't contributed funds to an Individual Retirement Arrangement (IRA) for tax year 2018, or if you've put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 15 due date, not including extensions.
Be sure to tell the IRA trustee that the contribution is for 2018. Otherwise, the trustee may report the contribution as being for 2019 when they get your funds.
Generally, you can contribute up to $5,500 of your earnings for tax year 2018 (up to $6,500 if you are age 50 or older in 2018). You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.
Traditional IRA: You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you or your spouse, if filing jointly, are covered by an employer's pension plan.
Roth IRA: You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.
Saving for retirement should be part of everyone's financial plan and it's important to review your retirement goals every year in order to maximize savings. If you need help figuring out which retirement strategies are best for your situation, give the office a call.
Fringe Benefit Deductions Change; Affect Business
The Tax Cuts and Jobs Act included a number of tax law changes that affect small businesses such as deductions for fringe benefit, which can affect both a business's bottom line and its employees' deductions. Here's a summary of what these are:
Transportation fringe benefits. The new law disallows deductions for expenses associated with qualified transportation fringe benefits or expenses incurred providing transportation for commuting, except as necessary for employee safety.
Bicycle commuting reimbursements. Under the new tax law, employers can deduct qualified bicycle commuting reimbursements as a business expense for 2018 through 2025. The new tax law suspends the exclusion of qualified bicycle commuting reimbursements from an employee's income for 2018 through 2025. Employers must now include these reimbursements in the employee's wages.
Moving expenses. Employers must now include moving expense reimbursements in employees' wages. The new tax law suspends the former exclusion for qualified moving expense reimbursements. There is one exception for active duty members of the U.S. Armed Forces. They can still exclude moving expenses from their income. There is additional guidance on reimbursements for employees' who moved in 2017, but were reimbursed for expenses in 2018. Generally, reimbursements in this situation are not taxed.
Achievement awards. Special rules allow an employee to exclude achievement awards from wages if the awards are tangible personal property. An employer also may deduct awards that are tangible personal property, subject to certain deduction limits. The new law clarifies the definition of tangible personal property.
Don't hesitate to call if you have any questions about tax law changes affecting fringe benefits and your small business.
Tracking Jobs in QuickBooks: Part 2
Last month, we showed you how to start building a foundation for tracking jobs in QuickBooks. We explained that you can use the software's jobs tools to track income and expenses for any related group of items and/or services (you can think of them as projects, if you prefer).
We covered three elements of preparing to use "jobs":
Creating job records that you can use in transactions (example: develop promotional materials)
Creating item records that can be assigned to jobs (example: website development)
Determining whether you'll need to create a new account in your Chart of Accounts for your job income and expenses. You should consult with a QuickBooks professional anytime you think it might be necessary to modify the Chart of Accounts.
Using Your Job-Related Records
Now that you've recorded the items and jobs themselves, you can start using them in transactions, and eventually track your progress by generating reports.
Let's say you worked eight hours on website development for your promotion job. You would open the Employees menu and select Enter Time | Time/Enter Single Activity to open this window:
Figure 1: You can enter individual, billable activities and assign them to jobs.
In the example above, you are limited to recording one day's work on a specific SERVICE ITEM. You would verify the date and select from the drop-down lists to complete the fields for employee NAME, CUSTOMER:JOB, and SERVICE ITEM. You can either use the timer to time the job or enter the number of hours manually in the DURATION box. Click in the Billable box to create a checkmark and add NOTES if you would like. The CLASS field is optional; talk to us if you're not familiar with this feature.
If you worked on two separate service items on the same day for that CUSTOMER:JOB, you would create two individual records. You can also enter billable activities directly on a timesheet by clicking Employees | Enter Time | Use Weekly Timesheet. Once you select the employee NAME at the top, any single activity(ies) you created that week will appear as individual records, and vice versa.
Writing a check or using a credit card for a job-related purchase that should be billed to the customer? You would fill out these forms in QuickBooks like you usually do, making sure that you document the items or services by highlighting the Items tab, select the correct CUSTOMER:JOB, and make a checkmark in the BILLABLE? column.
Figure 2: If you write a check or charge your credit card for purchases that can be billed to a CUSTOMER:JOB, be sure to record it in QuickBooks.
If you will be doing some billable driving for your job, you should also be tracking your mileage in QuickBooks. Open the Company menu and select Enter Vehicle Mileage. If you haven't created a VEHICLE record in QuickBooks, click and easily do so. Complete the rest of the fields and save.
Tip: Do you want to see some of your overhead expenses on job costing reports? Create a CUSTOMER:JOB named "Overhead" and assign related costs to it.
Billing the Billables
When the time comes to invoice your customers (Customers | Create Invoices), you'll see how your careful work in QuickBooks simplifies that task. Open an invoice form and select a CUSTOMER:JOB. If you've entered billable items for him or her, this small window will open:
Figure 3: When you create an invoice for a CUSTOMER:JOB who has billable time, mileage, or other expenses, QuickBooks can automatically add them.
If you leave the first option checked and click OK, another window will open that lists all of the expenses you've marked as billable to the customer, arranged by type. Click in the first column of each expense you want to include and click OK. Your invoice containing those entries will open. Do any editing necessary, and then save it.
Note: You'll probably notice two fields in the Choose Billable Time and Costs window that refer to Markup. This is an advanced concept that we can explore with you, should you want to charge customers more for expenses you've incurred on their behalf.
QuickBooks contains a wide variety of reports related to your work billing customers for jobs. Click Reports in the navigation pane or Windows menu, then Jobs, Time & Mileage to see what's available. Choose a date range and click Run to see them appear with your own data.
If you've never worked with jobs in QuickBooks, we strongly recommend that you let us help you here. There are a lot of moving parts, and you don't want to miss out on any of your efforts or expenses that are billable.
Tax Due Dates for April 2019
Electronic filing of Forms 1097, 1098, 1099, 3921, and 3922 - File Forms 1097, 1098, 1099, 3921, and 3922 with the IRS (except a Form 1099-MISC reporting nonemployee compensation). This due date applies only if you file electronically.
Electronic Filing of Form W-2G- File copies of all the Form W-2G (Certain Gambling Winnings) you issued for 2018. This due date applies only if you electronically file.
Electronic Filing of Forms 8027 - File copies of all the Forms 8027 you issued for 2018. This due date applies only if you electronically file.
Electronic Filing of Forms 1094-C and 1095-C and Forms 1094-B and 1094-B - If you're an applicable Large Employer, file electronic forms 1094-C and 1095-C with the IRS. For all other providers of essential minimum coverage, file electronic Forms 1094-B and 1095-B with the IRS.
Employees who work for tips - If you received $20 or more in tips during March, report them to your employer. You can use Form 4070.
Individuals - File an income tax return for 2018 and pay any tax due. If you want an automatic 6-month extension of time to file the return, file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return or you can get an extension by phone if you pay part or all of your estimate of income tax due with a credit card. Then file Form 1040 by October 15.
Household Employers - If you paid cash wages of $2,100 or more in 2018 to a household employee, file Schedule H (Form 1040) with your income tax return and report any employment taxes. Report any federal unemployment (FUTA) tax on Schedule H if you paid total cash wages of $1,000 or more in any calendar quarter of 2017 or 2018 to household employees. Also, report any income tax you withheld for your household employees.
Individuals - If you are not paying your 2019 income tax through withholding (or will not pay in enough tax during the year that way), pay the first installment of your 2019 estimated tax. Use Form 1040-ES.
Corporations - File a 2018 calendar year income tax return (Form 1120) and pay any tax due. If you want an automatic 6-month extension of time to file the return, file Form 7004 and deposit what you estimate you owe in taxes.
Corporations - Deposit the first installment of estimated income tax for 2019. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.
Employers - Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in March.
Employers - Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in March.
Employers - Social Security, Medicare, and withheld income tax. File form 941 for the first quarter of 2019. Deposit any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until May 10 to file the return.
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