Lawrence J. Danny CPA JD Former IRS Agent

IRS now accepting Cash as payments for your taxes!IRS now accepting Cash as payments for your taxes!

Filing Season Start - Did You Know? The IRS has confirmed that the individual tax filing season will start on Monday, January 27, 2020 and the deadline to file 2019 tax returns and pay any taxes owed is Wednesday, April 15, 2020. Although the IRS systems open for processing on January 27, you do not have to wait until then to begin preparing for your tax return.

Smart Tax Planning for Those with Irregular Income Did You Know? If your income varies from year to year for instance, if you change jobs often or get a significant part of your income from the gig economy tax planning can get complicated. Certain activities that increase your tax bill during higher-income years might have little impact during lower-income years. Similarly, an expense that results in a sizable tax deduction during a lower-income year might not be deduct...ible at all during a year when your income is higher. For example, if your income for a particular year falls into the 10% or 12% IRS tax bracket ($39,475 or below for single filers, or $78,950 or below for joint filers), you might qualify for a 0% long-term capital gains tax rate. Therefore, it might be an especially good year to sell property that you have held for 12 months or longer. Meanwhile, the two major advanced education tax credits, the American Opportunity Credit (AOC) and the Lifetime Learning Credit (LLC), have different income limits. As a result, some years might be more favorable than others for pursuing particular educational goals. A qualified tax advisor can help you determine which activities with potential tax implications would be most appropriate to undertake this year, and which others you might want to defer until a later year. Thoughtful planning can yield substantial tax savings over time.

'Tis the Season for Important Tax Paperwork Keeping your records organized will help make sure you don't miss out on valuable deductions when it is time to file. Some documents to be on the lookout for are:... Wage and income statements (like W-2 or 1099-MISC) Health Insurance statements (like Form 1095) Proof of qualifying educational expenses (like Form 1098-T) Mortgage interest statements Retirement distribution statements Investment account statements

AOTC or LLC Education Tax Credit Which Is Best for You? The IRS offers two important tax credits for higher education expenses: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). You may claim both credits on the same tax return, but not for the same person. For example, you might claim the AOTC for your college-age dependent children and the LLC for your spouse. If two or more members of your household are enrolled in qualifying post-seconda...ry education programs, you may be able to claim multiple AOTCs. The LLC, on the other hand, may only be claimed once per return. The biggest advantage of the LLC is that you may use it an unlimited number of times for the same person over the years. By contrast, a student can qualify for the AOTC a maximum of four times in a lifetime. In addition, although the AOTC offers a larger maximum credit and higher income limits than the LLC, it places more restrictions on the student's enrolment status and the nature of the educational program. A qualified tax advisor can help you determine which combination of these credits will serve your family best.

Retirement Plan Contribution Limits Increase in 2020 Did You Know? IRS limits for individual contributions to employer-sponsored retirement plans are increasing in 2020. If you are an employee who participates in 401(k), 403(b), the Thrift Savings Plan for civil and uniformed service members, or most types of 457 plans, you may contribute up to $19,500 in 2020, up from $19,000 in 2019. The catch-up contribution limit for employees 50 years of age or older also increases in ...2020, from $6,000 to $6,500. Therefore, if you are an employee age 50 or over, you may be able to contribute as much as $26,000 to your 401(k) in 2020. The contribution limit for SIMPLE retirement accounts likewise increases by $500 in 2020, from $13,000 to $13,500. In addition, income limits for both Roth IRA contributions and tax-deferred contributions to traditional IRAs are higher. A qualified tax advisor can help you develop a strategy to take advantage of all these increases to boost your retirement savings in the New Year.

Giving Tuesday and Charitable Donations - Did You Know? Giving Tuesday is an annual event that highlights charitable giving after Thanksgiving. If you are considering charitable donations, you may be able to donate to a Donor-Advised Fund (DAF) every two or three years instead of every year. This may qualify you to receive tax benefits now, allow the amount to grow tax-free, and the decision on which qualified charity to fund can be made later.... If you are 70.5 years or older, you may be able to make a qualified charitable distribution (QCD) from your IRA this year, and this may satisfy all or part of the required minimum distribution (RMD) each year. The IRS has released a tool to make it easier to get information about qualified charitable organizations. The Exempt Organizations Select Check tool can be found at: https://www.irs.gov/charitie/tax-exempt-organization-search.

IRS Announces New Per Diem Rates Did You Know? The IRS recently raised the per diem rates for employee travel expenses, effective October 1, 2019. Within the Continental U.S., the new basic daily rates are $297 for high-cost regions (of which $71 is allotted for meals), and $200 for low-cost areas (with $60 for meals). The "incidentals only" per diem, which covers expenses like tipping bellhops, remains at $5 for all locations. Per diems allow companies to reimburse employe...es for travel expenses at fixed rates, rather than having to process receipts for actual expenses. In most cases, per diem reimbursements can be deducted on the employer's tax return and do not count toward employee wages, as long as employees file appropriate expense reports showing the location, dates and purpose of the trip. Note, however, that the meals portion of a per diem is subject to the standard 50% deduction limit for meal expenses. Because the Tax Cuts and Jobs Act (TCJA) eliminated most deductions for unreimbursed employee expenses, finding the most efficient way to reimburse employees for travel expenses is more important than ever. An experienced tax pro can help you determine whether it is best for your company to use standard per diems or to track actual employee travel expenses.

Renewing ITINs - Did You Know? Individual Taxpayer Identification Numbers are used for taxpayers who are required for U.S. tax purposes to have a U.S. taxpayer identification number but do not qualify to get a social security number. If you use an ITIN, you should check if it expires this year. If it does, information about how to renew your ITIN can be found at: https://www.irs.gov/credits-deduct//how-do-i-renew-my-itin. Keeping your ITIN current helps avoid tax refund and... processing delays. Taxpayers who have not used their ITIN to file a federal return at least once in the last three years will see their number expire Dec. 31, 2019. Additionally, ITINs with middle digits of 83, 84, 85, 86 or 87 (e.g. 9NN-83-NNNN) will also expire at the end of the year.

Claiming the Other Dependent Tax Credit Did You Know? If you have a dependent who does not meet the criteria for the Child Tax Credit (CTC), you may still qualify for a $500 credit called the Other Dependent Credit. Also called the Family Tax Credit, this nonrefundable credit was created under the Tax Cuts and Jobs Act (TCJA) of 2017. Examples of qualifying dependents include children of age 17 or 18 (or up to age 23 if they are full-time students), and adult relatives who ...are unable to support themselves due to a disability. Your claimed dependents must be US citizens, resident aliens, or nationals, and must have a taxpayer ID number (SSN or ITIN). Children must not have been claimed for the CTC by you or anyone else, must rely on you for at least half of their financial support, and generally must live with you for over half the year. Claimed adult dependents (called qualifying relatives by the IRS) must have a gross income of less than $4,200 for 2019, and must either be your true relative or live with you full time. The term true relative covers a broad range of relationships, including in-laws and stepchildren. A qualified tax advisor can help you determine your eligibility for the Other Dependent Credit. If you have more than one qualifying dependent, you may be able to take the credit for each of them.

Tracking Utilities for Home Office Expense Did You Know? If you plan to claim a deduction for Expenses for Business Use of Your Home (home office expense) on your tax return, you need a reliable method to calculate your deductible utility costs. IRS rules require that you separate utility expenses that apply to only the residential portions of your home (such as cooking gas or electricity used by your refrigerator) from those that pertain to the entire property. Only the la...tter type can qualify as home workspace expenses. For example, if your cooking range, water heater and furnace all run on natural gas, you may need to figure out the gas cost associated specifically with heating your home. One way to do this is to average your gas bills from summer months when you did not use heat. This average shows how much of your gas bill is attributable to your range and water heater. By subtracting this amount from your gas bill for every month, you can calculate how much money you spent specifically on heat during the year. You may then be able to deduct a portion of this total as a home office utilities expense, based on the area of your workspace. An experienced tax pro can give you other ideas for tracking and calculating the allowed utility costs associated with your home office. The IRS does not require perfect accuracy, but your calculation methods must be logical, reasonable and based on written evidence such as monthly utility bills.

QBI Tax Deduction for Self-Employed Individuals Did You Know? If you are a freelancer or otherwise participate in the gig economy, you may be able to claim a new tax deduction under the Tax Cuts and Jobs Act (TCJA). The Qualified Business Income (QBI) Deduction applies to self-employment earnings (basically, any income you receive in a setting where you are not classified as an employee). Under the provision, individuals may be able to deduct up to 20% of their self-emplo...yment income on their tax returns. Because the QBI deduction is claimed above the line, you can reduce your gross income without itemizing deductions. However, the deduction is subject to a number of rules, including income restrictions for certain self-employment activities, and limits on the size of the deduction relative to your taxable income. A qualified tax advisor can help you understand how these rules apply to your situation.

Saving Receipts to Document Expenses Did You Know? For most personal or business expenses that you claim as deductions on your tax forms, the IRS requires that you preserve written documentation of each expense. Acceptable forms of written evidence include receipts, invoices, canceled checks, and credit card and bank account statements. These documents should clearly show the date, location, amount and, if possible, nature of each expense. An experienced tax pro can help yo...u review your supporting evidence to make sure it satisfies IRS rules. Importantly, your documents need not be originals. Photocopied, scanned or photographed receipts are okay, as long as they clearly show all the information on the original document. However, since you may be required to present your evidence on paper in the event of an audit, you should save digital files in a form that allows you to print hard copies. In most cases, IRS rules require you to save your written documentation for three years after you file your return. However, if there is any chance that you have omitted income from your tax return that you should have reported, you must maintain your records for six years after filing.