TAX+BUSINESS
ALERT
News for your business and your life.
| Hawkins Ash CPAs
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In this edition
January 8, 2019
Laying the Groundwork for Your 2018 Tax Return
Podcast: 529 Plans and Saving for Education
Tax Calendar
7 Ways to Prevent Elder Financial Abuse
Employee Benefit Plan and IRA Quick Reference Table
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The Tax Cuts and Jobs Act (TCJA) made many changes to tax breaks for individuals. Let’s look at some specific areas to review as you lay the groundwork for filing your 2018 return.
Personal Exemptions
For 2018 through 2025, the TCJA suspends personal exemptions. This will substantially increase taxable income for large families. However, enhancements to the standard deduction and child credit, combined with lower tax rates, might mitigate this increase.
Standard Deduction
Taxpayers can choose to itemize certain deductions on Schedule A or take the standard deduction based on their filing status instead. Itemizing deductions when the total will be larger than the standard deduction saves tax, but it makes filing more complicated.
The TCJA nearly doubles the standard deduction for 2018 to $12,000 for singles and separate filers, $18,000 for heads of households, and $24,000 for joint filers. (These amounts will be adjusted for inflation for 2019 through 2025.)
For some taxpayers, the increased standard deduction could compensate for the elimination of the exemptions, and perhaps even provide some additional tax savings. But for those with many dependents or who itemize deductions, these changes might result in a higher tax bill — depending in part on the extent to which they can benefit from enhancements to the child credit.
Child Credit
Credits can be more powerful than exemptions and deductions because they reduce taxes dollar-for-dollar, rather than just reducing the amount of income subject to tax. For 2018 through 2025, the TCJA doubles the child credit to $2,000 per child under age 17.
The new law also makes the child credit available to more families than in the past. For 2018 through 2025, the credit doesn’t begin to phase out until adjusted gross income exceeds $400,000 for joint filers or $200,000 for all other filers, compared with the 2017 phaseout thresholds of $110,000 for joint filers, $75,000 for singles and heads of households, and $55,000 for marrieds filing separately. The TCJA also includes, for 2018 through 2025, a $500 tax credit for qualifying dependents other than qualifying children.
Assessing the Impact
Many factors will influence the impact of the TCJA on your tax liability for 2018 and beyond. For help assessing the impact on your situation, contact us.
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Contact:
Jeff Tillema, CPA
Direct: 608.793.3128
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Podcast: 529 Plans and Saving for Education
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According to the Wall Street Journal, the average college graduate has student loan debt of over $37,000, and as a group, the Federal Reserve Bank of New York says the amount is over 1.3 trillion dollars. This student loan debt is really affecting the new graduate’s ability to start their lives and even buying a home. A lot of these things are being delayed because they have a large student loan debt.
Starting a college savings plan can help reduce this debt and help with the student loan crisis.
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Individual taxpayers’ final 2018 estimated tax payment is due.
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File 2018 Forms W-2 (“Wage and Tax Statement”) with the Social Security Administration and provide copies to your employees.
File 2018 Forms 1099-MISC (“Miscellaneous Income”) reporting nonemployee compensation payments in box 7 with the IRS and provide copies to recipients.
Most employers must file Form 941 (“Employer’s Quarterly Federal Tax Return”) to report Medicare, Social Security, and income taxes withheld in the fourth quarter of 2018. 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 February 11 to file the return. Employers who have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944 (“Employer’s Annual Federal Tax Return”).
File Form 940 (“Employer’s Annual Federal Unemployment [FUTA] Tax Return”) for 2018. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 11 to file the return.
File Form 943 (“Employer’s Annual Federal Tax Return for Agricultural Employees”) to report Social Security, Medicare and withheld income taxes for 2018. 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 year in full and on time, you have until February 11 to file the return.
File Form 945 (“Annual Return of Withheld Federal Income Tax”) for 2018 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, etc. 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 year in full and on time, you have until February 11 to file the return.
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File 2018 Forms 1099-MISC with the IRS.
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2018 tax returns must be filed or extended for calendar-year partnerships and S corporations. If the return isn’t extended, this is also the last day for those types of entities to make 2018 contributions to pension and profit-sharing plans.
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7 Ways to Prevent Elder Financial Abuse
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As tax season ramps up, so do the efforts of scam artists looking to steal people’s financial data and money. Such fraudulent activities often target older adults. Whether you’re in this age bracket or worry about senior parents and other relatives, here are seven ways to prevent elder financial abuse:
- Keep both paper and online financial documents in a secure place. Monitor accounts and retain statements.
- Exercise caution when making financial decisions. If someone exerts pressure or promises unreasonably high or guaranteed returns, walk away.
- Write checks only to legitimate financial institutions, rather than to a person.
- Be alert for phony phone calls. The IRS doesn’t collect money this way. Another scam involves someone pretending to be a grandchild who’s in trouble and needs money. Don’t provide confidential information or send money until you can verify the caller’s identity.
- Beware of emails requesting personal data — even if they appear to be from a real financial institution. After all, shouldn’t your banker or financial professional already know these things? Ignore contact information provided in the email. Instead, contact the financial institution through a known telephone number.
- As much as possible, maintain a social network. Criminals target isolated people because often they’re less aware of scams and lack trusted confidants.
- Work only with qualified professionals, including accountants, bankers and attorneys.
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Contact:
David Howell, EA
Direct: 920.337.4550
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Employee Benefit Plan and IRA Quick Reference Table
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The Internal Revenue Service has announced the cost-of-living adjustments applicable to dollar limitations for various qualified retirement plans and other amounts for 2018. While the pension plan deferral and catch-up limits did not change, many of the annual pension plan limits and compensation thresholds did. Plan sponsors should verify that their administrative and payroll systems reflect the appropriate limits. Communications that specify benefit plan limits should be reviewed for accuracy before materials are given to participants.
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More Resources from CPA-HQ
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2019 Key Tax Fact Sheet
Download our 2019 Key Tax Fact Sheet to ensure you’re up to date for mileage rates, Social Security, Medicare and Federal Unemployment Rates and more.
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December 2018 QuickBooks Newsletter
The December QuickBooks Newsletter from Hawkins Ash CPAs is now available. View and sign up today.
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General Business: Revenue Recognition Standard
This guide outlines the five-step approach to determine when revenue and gains included within the scope of the new standard should be recognized.
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Part of your business. Part of your life. | www.HawkinsAshCPAs.com
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