Moving Expense Deduction Tax Tip

February 13th, 2019

The deduction and exclusion from income for job related moving expenses has been suspended under the new tax law that became effective January 1, 2018 for all taxpayers EXCEPT members of the U.S. Armed Forces on active duty who move due to a permanent change of station.

Dear Friends and Clients,

February 13th, 2019

Sorry to get this out so late, but it’s time to gather all your tax documents.  This has been an interesting year as a lot of changes to the tax code have been made, including a major overhaul of Form 1040.
 
The Tax Questionnaire, Engagement Letter and Worksheets are on our website, http://www.setcpa.com/resources.php.  As all Paid Preparers must now comply with IRS Due Diligence regulations, the Due Diligence Questionnaire has been added to the Tax Questionnaire. Please complete all forms and enclose them with your tax documents.
 
Tax filing with IRS began on January 28, 2019. 
 
We have two really good reasons for requesting that you gather your tax records now so that you can file early this year! 
 

  • The first reason is that there is a growing threat of identity theft involving tax returns. When someone files a return in your name with your identity, it can take two years for the IRS to get to the bottom of it. You can imagine the mess that creates with your finances. The best defense is a good offense. File your return as early as you can and beat identity thieves.
  • The second reason we encourage you to file your return early is that if your documents are not in our office by March 21th, additional fees will apply.  Please don’t wait for any brokerage statements or K-1’s   that have not been received.  You can send them when received.

 
Please call the office to either schedule your appointment or make arrangements to drop off or email your records. The earlier, the better.  Please email documents to Ashley@setcpa.com
 
Remember to download your Social Security statement online at www.ssa.gov.  You will need to register with them first, if you haven’t already. Please include it with your tax information so that we can review it to ensure all of your earnings have been posted.
 
We look forward to seeing all of you and hope you all are staying warm! We appreciate all the referrals you have given us in the past, and we hope you will continue to recommend us to your family and friends. Thank you for your continued confidence in us.

Alimony Tax Tip

February 13th, 2019
Alimony that is granted in divorces finalized after 12/31/18 is no longer deductible by the payor and no longer taxable to the recipient. This also includes modifications to prior divorce decrees where modifications are finalized after 12/31/18. This change affects tax years 2019 and later.

College Athletic Event Tax Tip

February 13th, 2019

For tax years beginning after 12/31/18 amounts paid to an institution of higher learning in exchange for receiving the right to purchase tickets or seating at an athletic event are no longer deductible. This includes “Seat License” or other fees paid in exchange for the right to buy seating at college athletic events.

Roth IRA Conversion Tax Tip

February 13th, 2019

Although you can still convert a Traditional IRA, SEP-IRA, or Simple IRA to a Roth, changes in the tax law prohibit the recharacterization of a Roth IRA. This means once you convert to a Roth IRA you are stuck with the decision.

Document Retention Tax Tip

February 13th, 2019

The IRS is cracking down on several credits and the Head of Household filing status. If you claim any of these credits or use the Head of Household filing status please retain the following documents:

Head of Household:
If you are divorced or separated: Keep the entire divorce, separate maintenance, or separation agreement. 

If you are married and your spouse did not live with you during the last 6 months of the year: Keep documents showing this, such as: lease agreement, utility bills, or a letter from clergy or social services. 

For your qualifying child: Keep birth certificates, and records showing the child lived with you for more than half the year. Such as: school, medical, daycare, or social services records. A letter on letterhead from the same places showing names and common address and dates.

For cost of keeping up the home: Keep rent receipts, utility bills, grocery receipts, property tax bills, mortgage interest statements, and other household bills.

Earned Income Credit:
Keep everything in the above list AND:
If your qualifying child is at least 19 but under the age of 24: Keep school records showing that the child was a full time student for some part of at least 5 months of the year.

If  your qualifying child is any age and permanently and totally disabled: Keep letter from doctor or social service program verifying the child is permanently and totally disabled.

Child Tax Credit and Additional Child Tax Credit:
For your qualifying child: Keep birth certificates, and records showing the child lived with you for more than half the year. Such as: school, medical, daycare, or social services records. A letter on letterhead from the same places showing names and common address and dates.

If you are not the custodial parent: Keep copies of Form 8332 Release of Claim to Exemption signed by the custodial parent, a copy of which must also be attached to your tax return.

American Opportunity Credit:
Keep Form 1098-T and a copy of the Bursar’s statement from the college or university showing actual amounts paid during the year.

Partnership Audit Regime Tax Tip

February 13th, 2019

Partnership returns filed for tax years beginning on or after January 1, 2018 will now be subject to the Central Partnership Audit Regime.

What is this? It changes how adjustments are applied when a partnership is audited. Under the new rules, a partnership will name a ‘Representative’ instead of a ‘Tax Matters Partner’. The ‘Representative’ has sole authority to sign off on the audit regardless of how it might affect individual partners on their personal returns. If adjustments are made to the partnership return during an audit the adjustments and any additional tax due are paid at the partnership level instead of at the partner level. This could create a higher amount of tax due than if adjustments were handled at the individual partner level.

Can you opt out? Yes. This will allow your partnership to fall under the old audit rules. We suggest that our client Partnerships ‘Opt Out’ of the Central Partnership Audit Regime when filing your partnership tax return.  It would be a good idea to amend your partnership operating agreement, as well, to document this election.