Tax Year 2018
.January 2019 Newsletter
Tax Year 2018
1301 Riverplace Blvd, Suite 800
Jacksonville, FL 32207
2233 Park Avenue
Building 500, Suite 204
Orange Park, FL 32073
HAPPY NEW YEAR!!!
As always, we trust you and your family had a meaningful holiday season and that 2019 will be a great year for you. In the last quarter of 2018 we have completed and implemented our digital programs. As mentioned last year the new encrypted tax system will help us to practically eliminate electronic theft. You will notice that the beginning of this newsletter is very similar to the previous one. The reason for that centers around the new system. It is paramount that we incorporate the digital process into the tax preparation process.
We are encouraging you to send us your tax information through the online system because we can now track your documents securely online. As you know, during the tax season my availability gets stretched very thin. Last season there were snowstorms, flight delays, icy road conditions and we anticipate more of the same. Unfortunately, we cannot control mother nature. The new digital system will help us get around some of these obstacles and still get your returns processed timely. We must have your cooperation to remain as efficient and expeditious as possible.
Do not wait and do not hesitate to send your documents through our secure encrypted system and let us show you how well the system works and saves TIME!!
Supplying us with a completed questionnaire, drivers licenses and bank information from the start, will make things run much smoother and will allow us to complete your return quickly.
We use the same technology that banks use and they are extremely secure.
To save time please do not provide us with all of your receipts as we will have to then charge a bookkeeping fee of $65.00 per hour. Please try to categorize them for us. We can provide you with an Itemized Deduction sheet.
As with any business there will be a modest increase in the pricing. I assure you that we will remain competitive in the tax preparation arena.
The staff can answer most of the calls and questions because Mr. Stubbs is not always available. Conference calls will cost $45.00 - $60.00 with Mr. Stubbs.
Any tax documents that come into our office after April 4th will automatically be put on extension. When we file extensions (at $45.00 per extension) we must file with the IRS and the State, if your state requires a return to be filed. The extensions normally gives us six (6) more months to file without penalty as long as you are receiving a refund. If there is a balance due then we should attach a check to the extension whether the balance is federal or state.
If you do receive a letter from the IRS or State please forward us a copy of the letter so we can review and respond. The IRS will not call you on the phone
When we take our processing fees from your refund, we must use a bank that has a contract with the IRS. Once the refund is processed by the IRS the bank (Refund Advantage) takes their fee. The fee for 2019 is $49.99 for a Federal Return and $11.95 for each State return.
New York and New Jersey snowstorms do happen and unfortunately it does cause cancellations, delays and rescheduling.
LET’S LOOK AT THE NEW TAX LAW CHANGES
The Obama care individual mandate is gone. The requirement that folks have health insurance, qualify for an exemption, or pay a fine is repealed for post 2018 years. Keep in mind the mandate continues to apply for 2018.
The child tax credit is doubled to $2,000.00 for each dependent under age 17, with up to $1400.00 of the credit refundable to lower income taxpayers. The income phaseout thresholds are now much higher. AGIs (Adjusted Gross Income) over $400,000.00 for couples and $200,000.00 for all other filers. Keep in mind a social security number is needed for each child. Also, there is a new $500.00 credit for each dependent who is not a qualifying child. For example, (an elderly parent that you take care of or a disabled adult child.) It is nonrefundable and phases out under the same thresholds as the child credit.
Generally, the tax benefit for retirement savings have not been curtailed. There is an important change involving Roth IRA conversions. The new law bars IRA owners who converts their traditional IRA to Roth IRAs from later undoing the conversion and recovering the income tax paid on the switch. 529 College Saving Plans are enhanced to allow distributions of up to $10,000.00 per student to pay tuition for elementary and secondary education.
The new tax law dramatically reforms the taxation of businesses of all sizes. Regular Corporations (C Corps) will now pay tax at a flat 21% rate down from 35% top rate now. This lower rate began in 2018 and is permanent. Many individual owners of pass throughs will get a 20% deduction. These rules cover sole proprietors and owners of S Corporations, Partnerships and LLCs.
It appears that the housing industry is in for a lengthy slowdown in sales as more “would be buyers” give up on finding a place. After five straight years of average home prices rising by 5% annually, affordability has become an obstacle for many buyers. In addition, mortgage rates are up about nine-tenths of a point in 2018 alone. Even in the markets where demands are strongest, supply remains an issue. Builders just cannot find enough finished lots or labor to put up new homes to keep up. It does not appear that this problem will go away anytime soon. Only about 3% of folks ages 18-25 show any interest in the building trades. This has become a major concern for home builders who are already struggling to find enough workers in a time of low unemployment. It appears mortgage rates will continue to grind higher which further hamper buyers.
Let’s ask, just how much of a financial strain are home buyers under these days? Consider this statistic reported by the housing industry. About one-third of Americans live in countries where purchasing a median priced home requires an income of $100,000.00 or more assuming a typical mortgage. The median US household is about $61,000.00. Urban markets are generally the hardest to afford, such as San Francisco Bay Area, New York City and San Diego. Some of these areas are losing residents to cheaper locales. Of course, there may be hope that conditions will improve in the Spring. The run-up in prices has many owners thinking that now is a good time to sell. If enough of them go for it during the traditional Spring selling season the extra supply may spark more sales as discouraged buyers start seeing more and more affordable options to choose from.
QUICK OVERVIEW OF TAX LAW CHANGES FOR TAX YEAR 2018
The standard deductions amount has nearly doubled: Single -$12,000.00, Head of Household -$18,000.00, Married Filing Joint - $24,000.00. With the higher standard deductions, personal exemptions for your spouse, children and other dependents have been eliminated. Many taxpayers will find they will not itemize their deductions on Schedule A anymore, simplifying your tax return to some extent.
State Tax/Real Estate Tax
If you do find itemizing in 2018 and subsequent year, state/local income taxes and real estate taxed will be capped at $10,000.00 combined ($5,000.00 if Married Filing Separate). You may still opt for state sales tax instead of income tax. This cap is only for Schedule A real estate taxes for primary and second homes. If you have a for profit rental property (Schedule E) real estate taxes are deductible in full.
Other Itemized Deductions
Medical expenses on Schedule A currently have 10% threshold of AGI (Adjusted Gross Income) meaning qualifying out-of-pocket medical expenses have to exceed 10% of AGI to be deductible. The new tax law decreases this back to the 7.5% AGI threshold for 2017 & 2018. In 2019 the threshold moves back to 10%. All miscellaneous itemized deductions subject to the 2% AGI threshold have been eliminated. This includes tax preparation fees, unreimbursed employee expenses, investment expenses, safe deposit boxes, and more. The personal theft and personal casualty losses have also been eliminated as deductions except for certain casualty losses in federally declared disaster areas.
Moving Expenses will not be deductible after 2018
Alimony for divorce settlements after 12/31/18 will no longer be tax deductible (payor) or included in income (payee).
No individual tax mandate for health insurance after 2017.
Tax Law Remaining the Same
Home exclusion laws stay the same. If you live in and own the home two (2) out of five (5) years as a primary residence and exclude $500,000.00 (Married Filing Joint) of gain from taxable income.
Student Loan interest is still deductible up to $2,500.00 with income limitations.
Unreimbursed Teacher Expense are still deductible up to $250.00.
Electric Car Tax Credit is still valid.
Education Credits like the American Opportunity Tax Credit are the same 529 plan money can now be used to pay up to $10,000.00 of expenses for public, private or religious elementary or secondary schools.
A new IRS scam to watch out for this tax season
The new scam involves fake tax bills tied to the Affordable Care Act, and there are a couple of different versions making the rounds.
People are receiving notices that look exactly like legitimate letters from the IRS — asking for payment based on information that the letter claims doesn’t match other records on file that were reported to the IRS by a third party, such as interest on some type of financial account.
The IRS does send notices like this through the mail, asking for payments or other updated information that needs to be verified, but the problem is that scammers have made it almost impossible for consumers to tell the difference between a real IRS letter and a fake one.
What the new scam looks like
According to a warning issued by the IRS, the fake notices typically ask the person who received the letter to pay a balance they owe in connection with Affordable Care Act health coverage for 2014. Taxpayers without proper health coverage have to pay a penalty, so of course scammers jumped on the opportunity as a way to sound legit to a vulnerable consumer.
According to the IRS, criminals across the country are sending fraudulent versions of CP2000 notices for tax year 2015, which are letters that inform taxpayers about discrepancies on their tax return.
As the tax scams start to ramp up this season, taxpayers should beware of the same notices marked for tax year 2016!
What makes this scam different from other IRS scams is that the notices are being sent via email — as well as through the mail.
Typically, the way to spot this type of scam is knowing that the IRS will never communicate this information via email — but since the notices are coming through as actual paper mail, that no longer applies.
However, the IRS says there are ways for potential victims to spot and avoid fake notices demanding payment.
Here are a few warning signs that a notice ‘from the IRS’ is fake:
Appears to be issued from an Austin, Texas, address.
Says the issue is related to the Affordable Care Act and requests information regarding 2014 coverage.
Lists the letter number in the payment voucher as 105C.
Requests checks made out to I.R.S. and sent to the “Austin Processing Center” at a post office box.
This IRS says the type of notice scammers are using is usually several pages long, so another thing to remember if you receive this type of letter in the mail.
How to protect yourself
While IRS scams are carried out in a variety of ways, there are a few guidelines to keep in mind in order to help protect yourself.
With any IRS scam, the criminals use extremely intimidating and aggressive tactics to convince people to hand over money. So when you think about a caller claiming to be from the IRS threatening someone with jail time if they don’t pay up immediately, it’s a little easier to understand how a person could be fooled into putting thousands of dollars on an iTunes gift card to pay back the IRS — which is another scam that’s been making the rounds.
So, to protect your information and your money, here are some things to keep in mind!
The IRS will never:
Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
Require you to use a specific payment method for your taxes, such as a prepaid debit card, gift card or wire transfer.
Ask for credit or debit card numbers over the phone.
If you get a phone call from someone claiming to be from the IRS and you still aren’t sure if it’s a scam or not, here’s what the IRS says you should do:
Do not give out any information and hang up immediately.
Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” page or call 800-366-4484.
Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
If you think you might owe taxes, call the IRS directly at 800-829-1040.
It is critical that you give my staff a chance to assist you with your tax concerns and questions. During the off season we spend a considerable amount of time going over the tax issues and questions in preparation to respond to your questions. Give them a chance and if they cannot answer your questions those issues will be forwarded to me. We ask for your patience on issues referred to me as I will be traveling the entire tax season. Please allow forty-eight (48) hours for me to respond.
This is our Schedule for the 2018 tax year. Please keep in mind it is tentative because we are encouraging as many as possible to send their documents to us digital
Martin O. Stubbs