Thursday, January 17, 2019

Standard Mileage Rates for 2019

Starting January 1, 2019, the standard mileage rates for the use of a car, van, pickup or panel truck are as follows:

  • 58 cents per mile driven for business use, up 3.5 cents from the rate for 2018
  • 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018.
  • 14 cents per mile driven in service of charitable organizations.

The business mileage rate increased 3.5 cents for business travel miles driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate remains unchanged.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas, and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

Prior to tax reform, these optional standard mileage rates were used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. However, it is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for mileage related to moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station.

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 more than four vehicles used simultaneously. Please call if you need additional information about these and other special rules.

If you have any questions about standard mileage rates or which driving activities you should keep track of as the new tax year begins, do not hesitate to contact the office.


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Tuesday, January 15, 2019

The Tax Consequences of Losing your Job

If you've lost your job you may have questions surrounding unemployment compensation, severance, and other issues that could affect your tax situation. Here are some answers:

Q: What if I receive unemployment compensation?

A:Unemployment compensation you receive under the unemployment compensation laws of the United States or of a state is considered taxable income and must be reported on your federal tax return. If you received unemployment compensation, you will receive Form 1099-G, Certain Government Payments (Info Copy Only), showing the amount you were paid and any federal income tax you elected to have withheld.

Types of unemployment benefits include:

  • Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
  • Railroad unemployment compensation benefits
  • Disability payments from a government program paid as a substitute for unemployment compensation
  • Trade readjustment allowances under the Trade Act of 1974
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act

A:You must also include benefits from regular union dues paid to you as an unemployed member of a union in your income. However, other rules apply if you contribute to a special union fund and your contributions are not deductible. If this applies to you, only include in income the amount you received from the fund that is more than your contributions.

Q: Can I have federal income tax withheld?

A:Yes, you can choose to have federal income tax withheld from your unemployment benefits by filling out Form W-4V, Voluntary Withholding Request. If you complete the form and give it to the paying office, they will withhold tax at 10 percent of your payments. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year and you may owe tax when you file your tax return in April.

Q: What if I lost my job?

A: The loss of a job may create new tax issues. Severance pay and unemployment compensation are taxable. Payments for any accumulated vacation or sick time are also taxable. You should ensure that enough taxes are withheld from these payments or make estimated tax payments to avoid a big bill at tax time. Public assistance and SNAP (formerly known as food stamps) are not taxable.

Q: What if I searched for a job?

A: Under tax reform, many miscellaneous deductions were eliminated. As such, for tax years 2018-2025, you are no longer able to deduct certain expenses such as travel, resume preparation, and outplacement agency fees incurred while looking for a new job. In prior years, job-seekers were able to deduct these expense-even if they did not get a new job. Moving costs for a new job at least 50 miles away from your home were also deductible; but again, under tax reform, and for tax years 2018-2025, job-related moving expenses are not deductible.

Q: What if my employer went out of business or into bankruptcy?

A: Your employer must provide you with a Form W-2 showing your wages and withholding by January 31. You should keep up-to-date records or pay stubs until you receive your Form W-2. If your employer or its representatives fail to provide you with a Form W-2, contact the IRS. They can help by providing you with a substitute Form W-2. If your employer liquidated your 401(k) plan, you have 60 days to roll it over into another qualified retirement plan or IRA.

If you've experienced a job loss and have questions about how it affects your tax situation, help is just a phone call away.

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Monday, January 14, 2019

IRS: Make an Estimated Tax Payment Now to Avoid a Tax Time Surprise

The Internal Revenue Service is advising taxpayers, whose 2018 federal income tax withholding unexpectedly falls short of their tax liability for the year, that they can still avoid a tax-time surprise by making a quarterly estimated tax payment directly to the IRS. The deadline for making a payment for the fourth quarter of 2018 is Tuesday, January 15, 2019.

Although the Tax Cuts and Jobs Act (TCJA), the tax reform law enacted last December, lowered tax rates for most people, it also nearly doubled the standard deduction and limited or discontinued many deductions, among other changes. Though most 2018 tax filers are still expected to get refunds, the number who owe tax, and in some cases a penalty, is likely to be larger than in recent years, and many of them are likely to be people who have always gotten refunds.

Taxpayers who itemized in the past who now choose to take advantage of the increased standard deduction, as well as two-wage-earner households, employees with nonwage sources of income and those with complex tax situations, are at most risk of having too little tax withheld from their pay. This is especially true if they didn’t update their withholding earlier this year.

In addition, various financial transactions, especially those occurring 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, real estate or other property sold at a profit.

The fastest and easiest way to make an estimated tax payment is to do so electronically using IRS Direct Pay which can be accessed through the IRS website.

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.”


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Friday, January 11, 2019

Tax Tips for Older Americans

Everyone wants to save money on their taxes, and older Americans are no exception. If you're age 50 or older, here are six tax tips that could help you do just that.

1. Standard Deduction for Seniors. If you and/or your spouse are 65 years old or older and you do not itemize your deductions, you can take advantage of a higher standard deduction amount. There is an additional increase in the standard deduction if either you or your spouse is blind.

2. Credit for the Elderly or Disabled. If you and/or your spouse are either 65 years or older--or under age 65 years old and are permanently and totally disabled--you may be able to take the Credit for Elderly or Disabled. The credit is based on your age, filing status, and income.

You may only take the credit if you meet the following requirements:

Your income on Form 1040 line 38 must be less than $17,500 ($20,000 if married filing jointly and only one spouse qualifies), $25,000 (married filing jointly and both qualify), or $12,500 (married filing separately and lived apart from your spouse for the entire year).

and

The non-taxable part of your Social Security or other nontaxable pensions, annuities or disability income is less than $5,000 (single, head of household, or qualifying widow/er with dependent child); $5,000 (married filing jointly and only one spouse qualifies); $7,500 (married filing jointly and both qualify); or $3,750 (married filing separately and lived apart from your spouse the entire year).

3. Retirement Account Limits Increase. Once you reach age 50, you are eligible to contribute (and defer paying tax on) up to $24,500 in 2018 ($25,000 in 2019). The amount includes the additional $6,000 "catch up" contribution for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan.

4. Early Withdrawal Penalty Eliminated. If you withdraw money from an IRA account before age 59 1/2 you generally must pay a 10 percent penalty (there are exceptions, please call the office for details); however, once you reach age 59 1/2, there is no longer a penalty for early withdrawal. Furthermore, if you leave or are terminated from your job at age 55 or older (age 50 for public safety employees), you may withdraw money from a 401(k) without penalty--but you still have to pay tax on the additional income. To complicate matters, money withdrawn from an IRA is not exempt from the penalty.

Thursday, January 10, 2019

How to Manage Unexpected Retirement Expenses

What is the true cost of retirement and what are the driving forces behind unexpected and expected retirement expenses?

Whether you plan to globetrot or enjoy life at home in retirement, your main goal is likely not running out of money. In order to live the life you hope with the income you have, consider developing a budget that accounts for planned and unplanned retirement expenses.

Over time, how we spend money changes, so as you develop your plan it is important to assess what costs may go up, what costs may go down (or away), and what factors are driving these costs. Many retirees can expect to spend less in certain areas. For example, in retirement the costs associated with commuting diminishes and the demand for multiple cars and/or high-end cars may lessen.

However, those newfound savings can be offset by unexpected costs that come with retirement life. As we enjoy longer, healthier retirements, it becomes more and more difficult to budget for one-time travel plans. From a grandchild's graduation to a long-time friend's wedding anniversary, there will be unexpected adventures you do not want to miss.

Retirement Expense Solutions

Retirement planning would be easier without surprises. While we cannot anticipate every unexpected retirement expense, we can prepare for them. As your plan develops, establish retirement income solutions that help you manage unanticipated line items, such as:

  • Establish Guaranteed Income Stream
  • Protect Hard-Earned Savings
  • Secure Safe-Money Reserve Access
  • Create Legacy Plan 

To demonstrate where these solutions can benefit your retirement, below we highlight five common types of real life retirement expenses. Included are the average annual spending amounts for retirees and the average inheritance figures, according to the US Bureau of Labor Statistics and an HSBC retirement study. In each instance, we outline examples of expected and unexpected cost factors to consider as you prepare for your retirement future.



Everyone's retirement priorities and lifestyles differ. By starting with universal demands like savings protection, a guaranteed revenue stream and flexible income, anyone can develop the foundation of a retirement spending plan that accounts for what may lie ahead.

The true costs of retirement will never be totally fixed, but there are ways to make unexpected costs less stressful. As you plan your own retirement, focus less on what could happen and more on what strategies can be put in place for whatever happens.

Tuesday, January 8, 2019

IRS Confirms Tax Filing Season to Begin January 28

WASHINGTON ― Despite the government shutdown, the Internal Revenue Service today confirmed that it will process tax returns beginning January 28, 2019 and provide refunds to taxpayers as scheduled.

“We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown. I appreciate the hard work of the employees and their commitment to the taxpayers during this period,” said IRS Commissioner Chuck Rettig.

Congress directed the payment of all tax refunds through a permanent, indefinite appropriation (31 U.S.C. 1324), and the IRS has consistently been of the view that it has authority to pay refunds despite a lapse in annual appropriations. Although in 2011 the Office of Management and Budget (OMB) directed the IRS not to pay refunds during a lapse, OMB has reviewed the relevant law at Treasury’s request and concluded that IRS may pay tax refunds during a lapse.
The IRS will be recalling a significant portion of its workforce, currently furloughed as part of the government shutdown, to work. Additional details for the IRS filing season will be included in an updated FY2019 Lapsed Appropriations Contingency Plan to be released publicly in the coming days.

“IRS employees have been hard at work over the past year to implement the biggest tax law changes the nation has seen in more than 30 years,” said Rettig.

As in past years, the IRS will begin accepting and processing individual tax returns once the filing season begins. For taxpayers who usually file early in the year and have all of the needed documentation, there is no need to wait to file. They should file when they are ready to submit a complete and accurate tax return.

The filing deadline to submit 2018 tax returns is Monday, April 15, 2019 for most taxpayers.  Because of the Patriots’ Day holiday on April 15 in Maine and Massachusetts and the Emancipation Day holiday on April 16 in the District of Columbia, taxpayers who live in Maine or Massachusetts have until April 17, 2019 to file their returns.

Software companies and tax professionals will be accepting and preparing tax returns before Jan. 28 and then will submit the returns when the IRS systems open later this month. The IRS strongly encourages people to file their tax returns electronically to minimize errors and for faster refunds.

Monday, January 7, 2019

Tax Refunds Will Be Paid During Shutdown, White House Says


New policy meant to ‘mitigate the impact’ of shutdown, Vice President Mike Pence says

The IRS will pay tax refunds even though the agency is subject to the federal government shutdown, after the Trump administration reversed a longstanding policy.

The decision, announced Monday by the White House Office of Management and Budget, would remove one of the biggest potential pains for Americans from the shutdown and allow hundreds of billions of dollars to flow once tax filing opens later this month in the event that the shutdown lasts that long.

The administration is trying to make the shutdown as “painless as possible consistent with the law,” Russell Vought, the acting OMB director, told reporters.

“We’re going to continue to take steps like that to mitigate the impact,” Vice President Mike Pence said of the tax refunds.

Until Monday, the Trump administration and its predecessors had said refunds couldn’t be paid while the IRS was shut because that wasn’t necessary to protect life or government property.



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