New Tax Law Puts Business Meals On A Diet

December 17th, 2018

capture2If you are a business owner who is accustomed to treating clients to sporting events, golf getaways, concerts and the like, we have some bad news for you. The tax-reform bill of last year eliminated the business-related deduction for entertainment, amusement or recreation expenses, effective beginning in 2018.

This doesn’t mean you can’t still entertain your clients; it just means you can no longer deduct 50% of the cost of that entertainment as a business expense, making it more costly for you to entertain clients.

But all is not lost! The Act does retain a deduction for business meals that are directly related to or associated with the active conduct of your business. The term “directly related” means that actual business discussions were conducted during the meal and you anticipated a specific business benefit from the meal. The term “associated with” is more liberal and includes meals either preceding or following a bona fide business discussion. In either case, the business deduction continues to be 50% of the actual expense. Also remember that business meals must be documented, including the amount, business purpose, date, time, place and names of the guests as well as their business relationship with you.

That’s not all! In the past, employers have been accustomed to deducting 100% of the cost of food and beverages provided to employees at or near the place of business. That too has changed, and the Act now subjects food and beverages supplied to employees to the 50% limitation. But that deduction is only allowed through 2025. As of 2026, employers’ costs for food and beverages furnished to employees will not be deductible.

Meals while traveling out of town on business continue to be deductible and are also subject to the 50% limitation

What Taxpayers Should Know About the New Form 1040-Tip #7

December 17th, 2018

capture2In summary, filing a federal income tax return in 2019 is shaping up to be somewhat of an adventure. There are sweeping changes to the tax code, such as the Republican tax overhaul, that are still being defined and implemented, and now there is a new tax form with a host of new schedules that isn’t even finalized yet. Depending on what happens in the November elections, Congress could make still more changes to the laws, forms and processes.

What Taxpayers Should Know About the New Form 1040-Tip #6

December 17th, 2018

capture2One expert in the tax industry wonders about all the changes. “Is this a question of form over substance?” Also, “If the redistribution of IRS resources required to implement these changes will be worth the cost, and points out that many state and local tax forms flow from the federal Form 1040. Are states ready to adjust their programming as IRS iterates versions of the new Form 1040?

What Taxpayers Should Know About the New Form 1040-Tip #5

December 17th, 2018

capture2For paper filers, the change will be dramatic. For those who file electronically – and almost 90 percent of the returns processed by the IRS this year were e-filed, according to the IRS – the change will be more subtle.

While the process likely will be the same, with tax software and/or paid professionals asking for the same information in the same ways, the output will be different, and taxpayers need to understand what they are filing.

The new form, as well as the IRS e-file signature authorization (IRS Form 8879), still require taxpayers to sign, under penalty of perjury, that they have examined the return and accompanying schedules and believe them to be true, correct and accurately list all amounts and sources of income received during the tax year.

Stay tuned…….

What Taxpayers Should Know About the New Form 1040-Tip #4

December 17th, 2018

capture2What does this mean for taxpayers? While the final verdict is still out, shorter may not mean simpler. Many of the lines on the new form and schedules link to other forms containing external calculations, and results from one page often transfer from that page to another page, or schedule, elsewhere in the tax return.

For example, capital gains and losses will be reported on one of six forms 8949 before flowing to the Schedule D, then to the Schedule 1 and then to the Form 1040. Is this really simpler? Time will tell.

Stay tuned…….

What Taxpayers Should Know About The New Form 1040-Tip #3

December 17th, 2018

capture2All of those lines removed from the old Form 1040 contained important information that needs to be reported elsewhere for an individual’s income to be properly reported, and for the tax to be properly calculated. The result is six new numbered schedules, or attachments, which will feed into the new, shorter Form 1040. They are as follows:

Schedule 1: Additional Income and Adjustments to Income (37 lines)
Schedule 2: Tax (7 lines)
Schedule 3: Nonrefundable Credits (10 lines)
Schedule 4: Other Taxes (12 lines)
Schedule 5: Other Payments and Refundable Credits (14 lines)
Schedule 6: Foreign Address and Third-Party Designee (3 rows of information)
Stay tuned…….

What Taxpayers Should Know About the New Form 1040-Tip #2

December 17th, 2018

capture2Here are a few things to know about the new tax form.It is not a postcard, although that seems to be the form’s new nickname. It is larger than the average postcard and is not formatted for mailing.

One side contains personally identifiable information, including legal names, addresses and Social Security numbers, so an envelope will be required along with a stamp and a trip to the post office for those who file on paper.

Stay tuned…….

What Taxpayers Should Know About the New Form 1040-Tip #1

December 17th, 2018

capture2Taxpayers will be in for a surprise when they file their 2018 federal income tax returns next year as the Internal Revenue Service recently announced plans to streamline the Form 1040 into a shorter, simpler form for the 2019 filing season.

A draft of the new form reveals it to be much shorter than the old one – reduced from 79 lines to 23. The new form is expected to replace the current Form 1040 as well as the shorter Forms 1040A and 1040EZ traditionally used by taxpayers with less complex tax situations.
However, it seems that there’s always a “but…..”
(stay tuned for more info)