Dustin Dumars, CPA

Receiving unemployment? Withholding taxes on your unemployment? Don’t forget unemployment benefits are taxable.

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New sales and use tax rates with California Department of Tax and Fee Administration effective April 1, 2019. West Sacramento is now 8.25% and the City of Sacramento is 8.75%. Make sure to update your records! See additional rates here: https://www.cdtfa.ca.gov/taxes-and-fees/rates.aspx

Don't forget your CDTFA quarterly sales and use tax returns are due April 30. See other prepayment and reporting deadlines here: https://www.cdtfa.ca.gov//sales-use-tax-returns-filing-dat

S corporations and partnerships who file late tax returns face a stiff penalty. $195 per month for each shareholder/partner up to a maximum of twelve months.

Many small businesses that are an S corp return will now have to include their basis information with their 1040. Owners of S corps can only deduct losses up to their stock basis and loans THEY make to the firm. Loans from third parties like banks do not count. Certain shareholders are now being required to check a box on line 28 of schedule E and attach a basis computation to help curtail losses taken in excess of basis. Are you taking losses in excess of your shareholder basis?

Tax prep fees are no longer deductible on your schedule A. This is due to the new tax reform law which eliminated all miscellaneous itemized deductions subject to the 2% AGI limitation. However, if you file a schedule C, E, or F you can still write-off part of the tax prep cost. You can still write-off your your 2% misc itemized deductions with the state. California did not conform to this new federal tax change.

Many taxpayers are seeing less of a refund this year. The tax tables were adjusted to minimize under withholding...and over withholding. The IRS was scrambling to inform people to check their withholding after the tables were released, but many did not heed their advice. The average tax refund is down 8.7%. But this doesn't mean that individuals are paying more taxes. Most people's federal income tax liability was actually less. Receiving less of a refund is actually a good thing. Who wants to give the government an interest-free loan?

Experts are saying that after the five week government shutdown it could take 18 months for the IRS to recover. 5 million pieces of mail are unprocessed. The IRS lost 125 IT employees. Training of new tax laws was delayed. The future doesn't look bright for the IRS as well. 33% of IRS employees are over age 55 and only 125 workers are under age 26. How do you think this will effect audit rates?