IRS provides last-minute tips for last-minute filers

WASHINGTON — With the July 15 tax-filing deadline − postponed from April 15 – only a few days away, the IRS is reminding taxpayers who have yet to file their tax returns that IRS.gov has tools and services to help them meet their tax obligations.

IRS tax help is available 24 hours a day on IRS.gov. Whether filing a tax return, requesting an extension or making a payment, the IRS website can help last-minute filers on just about everything related to taxes. Taxpayers can also use the Interactive Tax Assistant tool to answer many tax questions they may encounter.

The IRS reminds taxpayers they have a range of expert help available through a qualified tax professional, including certified public accountants, enrolled agents and attorneys. The IRS encourages people who need the help of a tax professional to visit a special page on IRS.gov.

Prepare and file taxes for free

Taxpayers also have several options for preparing and filing their tax returns:

• Taxpayers with income of $69,000 or less can use IRS Free File to find free tax preparation software.

• Taxpayers with incomes above $66,000 and comfortable doing their own taxes can use Free File Fillable Forms for free.

• Use commercial tax prep software to prepare and file taxes through IRS approved electronic channels.

• Use an authorized e-File provider accepted by our electronic filing program. Authorized IRS e-file providers are qualified to prepare, transmit and electronically file returns.

• Members of the military and qualified veterans can use MilTax, a free online tax service provided by the Department of Defense and Military OneSource.

Receive refunds faster

The fastest way to receive a refund is to file electronically and use direct deposit. Taxpayers who file electronically and request direct deposit for their refund need to know that:

• Nine out of 10 tax refunds are issued in 21 days or less.

• The best way to check on a refund is the “Where’s My Refund?” tool.

• The “Where’s My Refund?” tool available on IRS.gov and the IRS2Go mobile app.

• “Where’s My Refund?” is updated once a day, usually overnight.

•  Refunds can be divided into up to three accounts.

Delays for paper tax returns

The IRS is experiencing delays in processing paper tax returns due to limited staffing. This is another reason that taxpayers should choose to electronically file their taxes.

Taxpayers who filed a paper tax return and expect a refund may experience a delay beyond the normal time frame of four to six weeks from the time they mailed the return. The IRS will process paper returns in the order they are received.

Taxpayers should not file the same return again or call the IRS if they filed a paper tax return and are experiencing a refund delay.

Get more time to file

Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension to Oct. 15 in one of two ways:

• Filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov.

• Submitting an electronic payment with Direct Pay, Electronic Federal Tax Payment System or by debit, credit card or digital wallet options and selecting Form 4868 or extension as the payment type. The automatic extension of time to file will process when taxpayers pay all or part of their taxes, electronically, by the July 15 due date. An extension to file is not an extension to pay. Taxes are still due by July 15.

Special rules may apply for some military personnel if they are:

• Serving in a combat zone or a qualified hazardous duty area

• Living outside the United States

Pay with ease

Taxpayers can file now and schedule their federal tax payments up to the July 15 due date. They can pay online, by phone or with their mobile device using the IRS2Go app. When paying federal taxes electronically taxpayers should remember:

• Electronic payment options are the optimal way to make a tax payment.

• They can pay when they file electronically using tax software online. If using a tax preparer, taxpayers should ask the preparer to make the tax payment through an electronic funds withdrawal from a bank account.

• IRS Direct Pay allows taxpayers to pay online directly from a checking or savings account for free, and to schedule payments up to 365 days in advance.

• Taxpayers can choose to pay with a credit card, debit card or digital wallet option through a payment processor. The payment processor adds a fee; no fees go to the IRS.

• The IRS2Go app provides the mobile-friendly payment options, including Direct Pay and through payment providers.

• Taxpayers may also enroll in the Electronic Federal Tax Payment System and have a choice of paying online or by phone by using the EFTPS Voice Response System.

Get more time to pay

Qualified taxpayers can choose to pay any taxes owed over time through an installment agreement. An online payment plan can be set up in a matter of minutes. Interest and late-payment penalties continue to accrue on any unpaid taxes after July 15.

Payment options include:

• Short-term payment plan (paying within 120 days).

• Long-term payment plan (paying in more than 120 days).

However, a taxpayer’s specific tax situation will determine which payment options are available.

The IRS has more information for taxpayers who owe taxes, but cannot afford to pay the full amount.

Get the full picture

Taxpayers can go to IRS.gov/account to securely access information about their federal tax account. They can view the amount they owe, access their tax records online, review their payment history and view key tax return information for the most recent tax return as originally filed.

Source: IRS Newswire

Tax reform brings changes to fringe benefits that can affect an employer’s bottom line

The IRS reminds employers that several programs have been affected as a result of the Tax Cuts and Jobs Act passed last year. This includes changes to fringe benefits, which can affect an employer's bottom line and its employees' deductions.

Here’s information about some of these changes that will affect employers:

Entertainment Expenses & Deduction for Meals
The new law generally eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.
 
However, under the new law, taxpayers can continue to deduct 50 percent of the cost of business meals if the taxpayer or an employee of the taxpayer is present, and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact. Food and beverages that are purchased or consumed during entertainment events will not be considered entertainment if either of these apply:

• they are purchased separately from the entertainment

• the cost is stated separately from the entertainment on one or more bills, invoices or receipts

Qualified Transportation 
The new law also disallows deductions for expenses associated with qualified transportation fringe benefits or expenses incurred providing transportation for commuting. There is an exception when the transportation expenses are necessary for employee safety.

Bicycle Commuting Reimbursements 
Under the new law, employers can deduct qualified bicycle commuting reimbursements as a business expense. The new tax law suspends the exclusion of qualified bicycle commuting reimbursements from an employee’s income. This means that employers must now include these reimbursements in the employee’s wages.
  
Qualified Moving Expenses Reimbursements 
Employers must now include moving expense reimbursements in employees’ wages. The new tax law suspends the exclusion for qualified moving expense reimbursements.

There is one exception as members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if they meet certain requirements.

Employee Achievement Award 
Special rules allow an employee to exclude achievement awards from their 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.

At Zhong & Sanchez, we provide high-quality tax and financial reporting services to privately-held entities and small business owners. Our expertise ranges from income tax filing and accounting services to international compliance and financial analysis. Located in the Silicon Valley, you can reach us at 510-458-4451 or schedule your first consultation today at https://calendly.com/zhongsanchez

Source: IRS

Picture credt: Jaclyn Morgan, Foodable

5 ways to hone retirement plans under new tax regime

The Tax Cuts and Jobs Act passed by Congress late last year represents the most significant changes to the tax code since 1986. The changes are biggest for corporate taxpayers. C corps will see their statutory tax rate decline from 35 percent to 21 percent, and pass-through corporate entities — partnerships, sole proprietorships and S corps — where income is taxed at the individual level, will also see permanent and dramatic reductions in their tax liabilities.

The decreases in individual tax rates, on the other hand, are smaller and less certain, with rates set to revert back to current levels by 2026. As a matter of fact, the tax plan will help out corporations a lot more than average Americans. Middle-class Americans itemizing their deductions may actually get hurt by tax reform.

The rule changes regarding deductible expenses, exemptions, credits and the tax brackets pose new income-tax planning challenges for all Americans. They also have implications for retirement planning — most prominently for wealthy Americans — but for taxpayers of more modest means, as well.

Here are five strategies worth considering to improve your retirement planning in the new tax environment.

1. Move to a low-tax state. The lure of the Sunbelt for retirees got a little stronger with tax reform. The capping of the so-called SALT (state and local taxes) deductions at $10,000 will hit taxpayers in high-tax (and invariably blue) states such as California and New York particularly hard. New York Gov. Andrew Cuomo has threatened to sue the federal government over the roughly $14 billion his Department of Finance says it will cost New Yorkers annually.

While the standard deduction on federal tax returns was nearly doubled to $12,000 for individuals, the average SALT deduction on federal returns for New Yorkers in 2015 was $22,000, according to the Tax Policy Center. In California — which also has high income-tax rates — an all-in property tax rate of 1.25 percent on a $1 million home would already put taxpayers over the $10,000 cap.

2. Convert your traditional IRA to a Roth IRA. Roth IRAs provide the ultimate benefit in retirement — tax-free income. You can't deduct your contributions to a Roth IRA, but the investment returns in the account are tax-free and so are account withdrawals (optional-not required) as long as you make them after age 59½.

People need to diversify their tax risk. A tax-free retirement account is important over the long haul because higher rates in the future may hurt you in retirement.

The lower marginal income-tax rates that take effect this year make the conversion of a traditional IRA to a Roth IRA significantly less expensive. With those rates potentially reverting back to current levels by 2026, paying the taxes now could be far less expensive than in retirement. 

One major consideration: The tax bill did away with the option to undo a conversion by the tax-return date of the following year. If the market has a big downturn, you will owe tax on the full amount at conversion even if the account value drops by 30 percent before year-end. We suggests waiting until after Thanksgiving to make a conversion. Taxpayers could also consider converting smaller amounts over several years to reduce taxable income and potentially their marginal rates.

3. Give to charity in a smart way. The deduction for charitable donations was preserved in the tax bill, but with the standard deduction raised to $24,000 for a married couple, you'll have to give a lot to warrant itemizing deductions.

One strategy is to front-load your anticipated donations over multiple years into one tax year. People can bundle up their anticipated donations for the next five years in a donor-advised fund. Of course, that means it's likely only a one-year tax-saving strategy.

If you're over 70½ years old, make your charitable donations directly from your IRA — whether you itemize deductions or not. The donation counts against your required minimum distribution from the retirement account but is excluded from taxable income. The qualified charitable distribution enables a taxpayer to claim the standard deduction and still get the charitable deduction. If you qualify, it's the only way you should give to charity.

4. Mind your business and estate. The tax bill doubled the estate-tax exemption to $11.2 million per person ($22.4 million per married couple) and kept it indexed for inflation. In 2026 it will revert back to 2017 levels indexed for inflation. For the vast majority of Americans, the increase is meaningless, but for high-net-worth taxpayers — particularly business owners — it raises new issues.

Individuals with a net worth of close to or more than $11 million ($22 million for couples) can still lower the tax hit to their heirs with the use of trusts and estate-planning strategies. With the estate and gift tax still unified, it may also make sense to gift large amounts of assets tax-free to heirs now given the bigger but potentially temporary exemption.

The downside of gifting assets before you die is that heirs do not get a step up to market value in the cost basis of the assets. If and when they sell them, they will be on the hook for capital gains taxes. In a perfect world, people would pay no estate taxes and get a step up in cost basis at death. That sweet spot, however, may require your dying before the exemption reverts back to a lower level.

We suggests that married couples with an estate valued at less than $20 million take a "wait and see" attitude regarding the value of their business or assets before a potential in life transfer.

5. Talk to a financial advisor or CPA. The numerous changes to the tax code provide a lot of income-tax planning opportunities, which can translate into more retirement savings. But it is complicated. Any decision regarding something like a Roth conversion should be made in conjunction with other issues.

At Zhong & Sanchez, we are dedicated to provide high-quality tax and financial reporting services to privately-held entities and small business owners. Our expertise ranges from income tax filing and accounting services to international compliance and financial analysis. Located in the Silicon Valley, you can reach us at 510-458-4451 or schedule your first free consultation today at https://calendly.com/zhongsanchez

Picture credit: USA Today; Source: CNBC