Changes in tax law are here and we want to help you navigate the landscape. Contact us soon for an appointment to identify tax planning strategies to capitalize on opportunities within the new law.
- Due to the increase in the standard deduction and changes in itemized deductions, it is more important than ever to consider the timing of deductible expenses.
- The child tax credit increased to $2,000 per qualifying child. Plus, more people will qualify for this credit since the threshold at which the credit is phased out is increased to $400,000 for married taxpayers ($200,000 for other taxpayers).
- There is a new $500 credit for dependents who do not qualify for the child tax credit.
- For divorces finalized after 2018, alimony payments will no longer be taxable to the recipient and no longer deductible to the payer.
- There are now limitations on the ability to unwind Roth IRA contributions.
- With an increased estate exemption, a discussion about the appropriateness of your current estate plan would be valuable.
- There is a new deduction for business income. The calculation and limitations are complex, but we can help you.
- With the decrease in tax rate for corporations, now may be the time to consider a change in the structure of your business.
- Expenses for entertainment are no longer deductible.
- Bonus depreciation and Sec. 179 expensing have been expanded for purchases of equipment and improvement property.
- More businesses will qualify to use the cash method of accounting; businesses with $25 million or less in gross receipts are eligible.
It depends on the type of mistake you made:
- Many mathematical errors are caught during the processing of the tax return and corrected by the IRS, so you may not need to correct these mistakes.
- If you didn't claim the correct filing status or you need to change your income, deductions, or credits, you should file an amended or corrected return using Form 1040X, Amended U.S. Individual Income Tax Return.
When filing an amended or corrected return:
- Include copies of any forms and/or schedules that you're changing or didn't include with your original return. To avoid delays, file Form 1040X only after you've filed your original return. Generally, for a credit or refund, you must file Form 1040X within 3 years after the date you timely filed your original return or within 2 years after the date you paid the tax, whichever is later.
- Allow the IRS up to 16 weeks to process the amended return.
You must make estimated tax payments for the current tax year if both of the following apply:
- You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding and refundable credits.
- You expect your withholding and refundable credits to be less than the smaller of:
- 90% of the tax to be shown on your current year’s tax return, or
- 100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)
There are special rules for Farmers and fishermen; certain household employers; certain higher income taxpayers; and non-resident aliens. Your notice or letter will explain the reason for the contact and give you instructions on how to handle the issue.
Every new business needs a tax ID number. To get a federal tax ID number, you must fill out IRS Form SS-4 (available from the IRS Web site at www.irs.gov --click on "Forms and Publications"), and either mail or fax it to the IRS office indicated in the Instructions to Form SS-4. In most cases, the quickest way to get a tax ID is to apply online. Once you complete the online application, you will be able to print the confirmation with the assigned tax ID. There is no fee to get an EIN. Contact us for help on completing the application.
First and foremost, we will prepare the tax returns for the unfiled tax years to determine whether you have tax due or should expect a refund. This will stop the late-filing penalty from growing to the maximum. The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.
If there is tax due, we will present the payment options available to you. If you do not pay your taxes by the tax deadline, you normally will face a failure-to-pay penalty of ½ 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. If both the 5 percent failure-to-file penalty and the ½ percent failure-to-pay penalties apply in any month, the maximum penalty that you’ll pay for both is 5 percent. Most tax agencies will also charge interest on the unpaid balance, in addition to any penalties assessed.
In some cases, you may be eligible for relief of the applicable penalties, referred to as Penalty Abatement. Please contact us for details pertaining to your personal tax situation.
The IRS sends notices and letters for the following reasons:
You have a balance due; you are due a larger or smaller refund; there is a question about your tax return; your identity needs to be verified; additional information is necessary to process your tax return; the IRS is proposing a change to your tax return; and notification that processing of your tax return will be delayed.
Each notice or letter contains a lot of valuable information, so it’s very important that you read it carefully. Please contact us immediately to help you understand and properly respond to the letter within the required timeline. It is critical to respond by the date specified to minimize additional interest and penalties and to preserve your appeal rights if you disagree.
A tax audit can be highly intimidating and complicated, which is why your first move should be to retain a professional tax firm to represent you during the audit process. We have over twenty of experience in representing clients in various tax matters with the Internal Revenue Service and California’s Franchise Tax Board. Our formula for success is based on three principles;
- Strong command of the tax code;
- Clear communication and
- Unparalleled client care. Because of the wide range of complexity and possible outcomes in tax resolution cases, we offer a free initial consultation to discuss your matter and the options available to you. We are optimistic people and see every tax challenge as an opportunity for the good.
Withdrawing money early from a retirement account comes with a 10 percent tax penalty plus regular income tax on the amount withdrawn. Watch out if that additional retirement money bumps you into the next tax bracket, which could affect Social Security taxes and other considerations.
Yes, it is possible you will have to pay tax on the capital gains from the sale of your house. If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.
In general, to qualify for the Section 121 exclusion, you must meet both the ownership test and the use test. You're eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you're not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. Contact us for the complete eligibility requirements, limitations on the exclusion amount, and exceptions to the two-year rule.