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A FEW OF THE ADJUSTMENTS FOR 2019:
Taxable Gifts - Gift Tax Returns are required to be filed for total gifts of more than $15,000 per person per calendar year
2019 Standard Mileage Rates:
Business: 58 cents per mile
Medical: 20 cents per mile
Charitable is not indexed for inflation and remains at 14 cents per mile.
2019 Social Security:
Cost of Living Increase 2.8%
FICA Wage Limit: $132,900
Earnings Limit if drawing before age 66 $ 17,640
2019 IRA
Traditional & Roth IRA Limit $ 6,000
Over age 49 catch up $ 1,000
2019 SEP
Maximum Contribution $ 56,000
Over age 49 catch up $ 0
2019 SIMPLE
Maximum deferral $ 13,000
Over age 49 catch up $ 3,000
2019 401-K/403-B/457
Maximum deferral $ 19,000
Over age 49 catch up $ 6,000
Maximum contribution all sources $ 56,000 (plus catch up)
2019 Defined Benefit Plan Limit $ 225,000
2019 HSA
Single $ 3,500
Family $ 7,000
Over age 54 catch up $ 1,000
A FEW OF THE INFLATION ADJUSTMENTS FOR 2018:
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FICA Tax Limit - $128,400
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Taxable Gifts – Increased to $15,000 and greater
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Standard Mileage Rates – Business: 54.5 cents per mile; Medical: 18 cents per mile; Charitable is not indexed for inflation and remains at 14 cents per mile.
Some Tax Return Due Dates Changed beginning 1/1/2017 – Tax return due dates have changed for Partnership Form 1065, C Corporation Form 1120 and Trust and Estate Form 1041 beginning with the filing of 2016 returns due in 2017. Beginning with these 2016 returns:
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Partnership Form 1065 will be due March 15 instead of April 15 and the extended due date remains September 15.
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C Corporation Form 1120 will be due April 15 instead of March 15 and the extended due date remains September 15 until the year 2025 when it will change to October 15.
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Trust and Estate Form 1041 will still be due April 15 but the extended due date will change to September 30 instead of September 15.
From the 2017 Tax Extender Bill– The following items expired on 12/31/2017:
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Most residential energy credits
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Alternative fuel refueling credit
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Exclusion of COD income on qualified home residence debt
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Deduction of mortgage insurance premiums as mortgage interest
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Above the line tuition and fees deduction
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Extension of 3 year depreciation life for certain race horses
THE 2018 TAX RETURN YEAR (tax returns due in 2019): - The new Tax Cuts and Jobs Act is here. As we receive additional guidance on the new laws we will do our best to keep our website updated throughout the year.
TAX CUTS AND JOBS ACT HIGHLIGHTS:
For Individuals - for more detailed information click here-
Changes below are effective 2018 and sunset after 2025, unless otherwise noted. For individuals, the tax reform bill:
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Changes withholding rates and tables. The new rates will be 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent. (The rates in 2017 were 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent.)
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Almost doubles the standard deduction to $12,000 for single filers, $24,000 for married joint filers, and $18,000 for heads of households. (In 2017 the deductions were $6,350, $12,700, and $9,350, respectively.)
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Repeals personal exemptions. (In 2017, the IRS allowed a $4,050 exemption per family member.)
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Increases the maximum child tax credit to $2,000 (previously $1,000) and creates an additional $500 family credit for non-child dependents. The bill also raises the income level for the credit phase-out, so more taxpayers would be eligible for the maximum credit.
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Decreases the principal balance threshold for the mortgage interest deduction $750,000 on some new loans.
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Repeals the deduction for home equity line of credit interest (HELOC) on any loan principal balance where the proceeds were not used to improve your residence.
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Caps state and local tax deductions on Schedule A (Itemized Deductions) at $10,000, but takes into consideration sales, income, and property taxes to reach the cap.
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Reduces the threshold for deducting qualified medical expenses to pre-Affordable Care Act (ACA) levels. Individuals can deduct qualified medical expenses that exceed 7.5% percent of adjusted gross income, but only for the 2017 and 2018 tax years. After 2018, the threshold returns to 10%.
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Repeals the 2% miscellaneous itemized deductions: investment expenses; tax return preparation fees; safe deposit box; and unreimbursed employee business expenses.
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Increases the Alternative Minimum Tax threshold.
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Increases the estate and gift tax exemption.
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Repeals the deduction for moving expenses, except for members of the armed services.
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Repeals the special rule that allows re-characterization of individual retirement account (IRA) contributions between Roth and traditional IRAs. However, there is a carve-out to this rule.
For Businesses - for more detailed information click here-
The tax reform bill contains numerous provisions affecting businesses, which took effect in 2018 with no sunset date except where noted. The legislation:
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Reduces most corporate tax to a 21 percent flat rate from today's progressive tiered tax rate, which generally ranges from 15 to 35 percent.
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Repeals the corporate Alternative Minimum Tax.
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Repeals the deduction for all business Entertainment.
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Permits deductions for qualified business income for some pass-through entities (partnerships, LLCs, sole proprietorships, S corporations) of up to 20 percent. Complex rules and limitations apply. This deduction was lowered (previously 23%) and several rules/thresholds were altered, from what passed the Senate earlier this month. The provision falls under the individual tax code, and thus would sunset in 2026 without additional legislative action.
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Allows a tax credit for certain employers that provide paid family and medical leave to their workforce. The credit ranges from 12.5 percent to 25 percent of wages paid. The amount of the credit incrementally increases from 12.5 percent as the employer's payment under this arrangement exceeds 50 percent of normal wages paid. The credit is only available for wages paid in 2018 and 2019. The bill contains specific criteria and detailed definitions; one clarification carves out the amounts employers must contribute to a paid-leave policy under state or local leave laws. Businesses will need more guidance to sort out some remaining questions, and forms to calculate and file for the credit.
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Disallows business deductions for settlements and costs of settlements that relate to sexual harassment or sexual abuse, if settlements are subject to nondisclosure agreements.
A FEW REMINDERS AS YOU GATHER YOUR 2018 TAX INFORMATION FOR THE 4/15/2019 DEADLINE (INDIVIDUAL EXTENSIONS WILL EXPIRE 10/15/19):
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Investment Account 1099’s – They will be late. Please consider filing an extension on 4/15/18 as it is likely filing an extension will save you money and headaches. Most investment companies will not have “final” 1099’s available until March 16th (or later) although they may send out preliminary 1099’s in February. These February 1099’s are often corrected at a later date(s). If your returns are filed early and corrected 1099’s are issued, you may be required to file amended returns. Please keep in mind an extension is for filing the tax returns only. It is NOT an extension of time to pay tax due on April 15th. Be sure to have your information to us as early as possible so we can estimate your tax liability.
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Health Insurance - All Americans were affected in some manner by the Affordable Care Act from 2010. 5 new tax forms were released and required by the IRS as a result of this act beginning in 2015. If you received a Form 1095 from any issuer or agency, we MUST have all copies to prepare your tax return. Beginning in 2014 health insurance must be maintained for each individual and any dependent the taxpayer claims or a penalty tax will be assessed. Some individuals may be exempt. Coverage under Medicare, Medicaid, TRICARE, CHIP, Veterans Health, and employer sponsored plans starting in 2014 all meet the health insurance requirements. The penalties, if uninsured, will be 2.5% of household income over the filing threshold for 2017 and 2018. The penalty for not having ACA defined minimum essential health insurance becomes -0- effective 2019.
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Medical Expense Deductions- The 2017 Tax Cuts and Jobs Act changed, retroactively back to January 1, 2017, the amount eligible to be deducted as a medical expense. The amount of your medical expenses, regardless of your age, must be more than 7.5% of your income before you can deduct anything. Be sure to weigh carefully whether to go to the trouble of summarizing these costs. If you are self-employed, we always need to know how much you paid for health insurance. Beginning January 1, 2019, your medical expenses must be more than 10% of your income before you can deduct anything.
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Charity - ALL deductions of any amount must have a receipt. Any individual contribution over $250 must also have an acknowledgement letter from the charity. This letter must show the date and amount of the contribution and should also state that no goods or services were received in return for the contribution. If you are required to take an RMD from your IRA, please consider making your annual qualified charitable contributions directly from your IRA. Trustee to charity tax-free IRA transfers that qualify as RMD up to $100,000 are allowed. Donations properly made this way will reduce your adjusted gross income and may result in lower taxable Social Security income. Please consult the custodian of your IRA and our office for more details.
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Real Estate Tax 2018 Law - Real estate taxes paid before December 31, 2017 for 2018 were generally not deductible unless the tax had been assessed. Beginning January 1, 2018, the maximum deduction on Schedule A for real estate tax paid and state income/sales tax combined is $10,000. Real estate tax paid for rental and other business real property will continue to be a business expense deduction as they have been in pre-Tax Cuts and Jobs Act years.
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Rental Property - If you own rental property, the IRS is demanding substantially more information. We need, FOR EACH PROPERTY SEPARATELY, the physical location, the type of property (single-family, duplex, etc.), any Forms 1099-K received, and a record, by property of the number of days rented and the number of days used for personal purposes.
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Foreign Accounts - The IRS is looking closely for offshore accounts. If you have an account, retirement account, or business interest with a value over $10,000 in a foreign country, or a foreign business ownership (not through a mutual fund), please let us know as some special rules will apply to you. There are substantial penalties for failure to disclose these items.
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Refunds - Individual Tax Returns - Many states will no longer issue a paper check refund. Please make sure your Bank Information for Direct Deposit is accurate and complete in the Individual Tax Organizer Section 3.
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Delivery Methods for Final Copy of Your Returns - We offer two ways to receive your final copy once your returns have been completed. You may choose to receive your final copy via a password protected PDF file attached to an E-mail OR a bound paper copy. Please be sure to check the yes box on the last page of the Questionnaire stating your preference.
MARYLAND ESTATE TAX NEWS:
The Maryland Legislature passed an Act in July 2014 that gradually conforms the Maryland estate tax to the value of the unified credit under the federal estate tax, thereby increasing the amount that can be excluded for Maryland Estate tax purposes. The increase in the amount that can be excluded for Maryland estate tax purposes is phased in over five years and is equal to:
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$1.5 million for a decedent dying in calendar year 2015
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$2.0 million for a decedent dying in calendar year 2016
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$3.0 million for a decedent dying in calendar year 2017
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$4.0 million for a decedent dying in calendar year 2018
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$5.0 million for a decedent dying in, or after calendar year 2019
TAX-RELATED IDENTITY THEFT ATTEMPTS & PHONE SCAMS ARE ON THE RISE
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The IRS Will NOT Contact You Via E-mail –The IRS does not have your e-mail address on file and they will NEVER use e-mail to contact you. Any contact from the IRS will only be delivered to you via U.S. Postal Service. Please delete any of these types of e-mails from your computer.
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The Internal Revenue Service recently issued a consumer alert providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS. These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request. The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:
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Call you about taxes you owe without first mailing you an official notice.
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Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
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Require you to use a specific payment method for your taxes, such as a prepaid debit card.
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Ask for credit or debit card numbers over the phone.
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Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
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If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
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If you know you owe taxes or think you might owe, call your tax professional.
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If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.
Quick Links
Website Links
There are many great sites on the World Wide Web but trying to actually find those great sites can be a frustrating experience. We have compiled a list of Websites that we have found to be helpful resources of information. When you click on a link, a new window will pop up. Close the window when you are ready to return to this page.
The Internal Revenue Service - http://www.irs.gov
Home of the IRS on the Web. The IRS has definitely done a nice job on their Website.
Comptroller of Maryland - http://www.marylandtaxes.com
Home of Maryland State Comptroller's Office. Find both personal and business related tax sites.
State Department of Assessments & Taxation - http://www.dat.state.md.us
Find helpful guidance on setting up your business entity and facts concerning Maryland's Personal Property Tax filing requirements.
Money Magazine - http://time.com/money
Money Magazine offers an online edition that is a great resource for financial information.
Kiplinger Magazine - http://www.kiplinger.com
Kiplinger Magazine is another online edition that is a great resource for financial information and planning tools.
To compute your Required Minimum Distribution (RMD) go to: http://www.kiplinger.com/tool/retirement/T032-S000-minimum-ira-distribution-calculator-what-is-my-min/
Bankrate - http://www.bankrate.com
Bankrate has numerous Calculators on their website including those for preparing and printing an Amortization Schedule, Mortgage Calculator, various Auto Calculators, Retirement Calculators, College Calculators, Investment and Savings Calculators.
Website Terms of Use: The content and website links above are developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid federal or state tax-related penalties. Please consult legal or tax professionals for specific information regarding your individual situation. If desired, Pereira & Associates, P.A. would be pleased to perform the requisite research and provide you with a detailed written analysis. The opinions expressed and materials provided are for general information only.