Midyear 2019 Tax Planning Letter

A letter from Philip L. Liberatore, CPA

For better or worse, the past tax season provides you a clear picture of how the updated tax code impacts your situation. Now it’s time to use this insight to ensure you’re in the best position to effectively minimize your 2019 tax obligations.

Consider the actions you can take today that will make a difference to next year’s tax bill. Have you adjusted your withholdings or boosted your retirement plan contributions? Are you saving the right records for the deductions you want to take? If you own a business, have you made any equipment purchases or updated your employee benefits? Address these questions now while there’s still time to adjust your money-saving strategies for maximum results.

Call today to set up a midyear review so you can make the most of your tax-cutting efforts. And as always, feel free to share this newsletter with friends and associates who are interested in cutting their tax bills for 2019 and beyond.

Calling all taxpayers: Plan now and pay less

Procrastination is easy, especially when it comes to summertime tax planning. But waiting to implement strategies to reduce your 2019 tax obligations could cost you money. CONTINUE READING HERE

Add your business tax planning to your summer to-do list

A midyear tax review of your business can pay off in big ways. CLICK HERE

Fund retirement or your child’s education?

Should you prioritize your own future over your child’s education? This is an emotionally charged question that leads many parents to fund college at the expense of their own retirement. However, with proper planning, you may be able to fund your retirement and still offer financial support for college.

CONTINUE READING HERE

 

What to Do If You Receive a Dreaded IRS Letter

Now that most tax refunds are deposited directly into taxpayers’ bank accounts, the dream of opening your mailbox and finding an IRS refund is all but gone. However, the IRS still sends letters that can increase taxpayers’ heart rates; because of extensive computer matching, the IRS does most of its auditing through correspondence.

CP-Series Notice – When the IRS detects a potential issue with your tax return, it will contact you via U.S. mail; this is called a CP-series notice. Please note that the IRS’s first contact about a tax delinquency or discrepancy will never be a phone call or email. Such calls and emails are a common tool for scammers; if you get one, simply hang up the phone or delete the email. If you are concerned about the validity of a given message, please call this office.

Most commonly, CP notices describe the proposed tax due, as well as any interest or penalties. The notice will also explain the examination process and describe how you can respond.

These automated notices are sent out year-round, and they are quite common. As the IRS tries to close the tax revenue gap, it has become more aggressive in its collection efforts. In addition, as many taxpayers now use low-quality tax mills or do-it-yourself software, the number of notices sent because of preparer error have increased. Missed check boxes, misunderstandings of available credits, and overlooked income all add up to more errors.

The first step in this automated process involves matching what you reported on your tax return to the data that third parties (e.g., employers, banks, and brokers) reported. When this information does not agree, the automated collection effort begins.

Don’t Panic – These notices often include errors. However, you do need to respond before the 30-day deadline or else face significant repercussions. The notice may even be related to suspected ID theft. For instance, someone may have gained access to your tax ID (or that of your spouse or one of your dependents) and tried to file a return using the stolen ID. The first step is to determine which type of notice you have received.

A CP2000 notice is very different from the other CP notices (which deal with issues such as identify theft, audits, and the earned income credit,). The CP2000 notice includes a proposed—almost always unfavorable—change to your tax return, and it gives you the opportunity to dispute the proposed change. Procrastinating or ignoring this notice will only cause the IRS to ratchet up its collection efforts, which in turn will make it more difficult for you to dispute the proposed adjustment.

Sometimes, the IRS will be correct. You may have overlooked a capital gain or income from a second job. It is also possible that the IRS has caught someone else using your SSN to work or otherwise stealing your identity. Quite frequently, however, the IRS is incorrect, simply because its software isn’t sophisticated enough to pick up all the information that you report on the schedules attached to your return.

When you receive an IRS notice, your first step should be to immediately contact IRS Problem Solvers and provide us with a copy of the notice during your consultation. We will review the notice to determine whether it is correct, and then we will consult with you to determine how best to respond.

Phil Liberatore featured on Politics & Profits

Politics & Profits with Rick Amato 

Watch this short video clip as Phil Liberatore explains the reasons why Americans are receiving smaller refunds or no refunds this tax filing year.

According to IRS data for the second week of this year’s filing season, the average federal tax refund amount was down 8.7%, to $1,949, compared with the same window last year. The total number of refunds issued dropped by more than 15%.

Taxpayers who e-file and request direct deposit should see their refund hit their bank account within 21 days of submitting their return. Many have said they aren’t happy with the size of their refund this year, and some even owe money to the IRS.

PAP 021519_03 from EANTV on Vimeo.

March 2018 Online Advisor

We have just posted the MARCH 2018 issue of the ONLINE ADVISOR newsletter on our website. Here are a few headlines from that issue. To read any of these articles, click on the link at the end of this email.

ALERT: EXPIRED HOME AND EDUCATION TAX BREAKS REVIVED
Congress passed a federal budget bill in early February that temporarily revived several expired tax breaks for the 2017 tax year. Find out what’s included.

NEW TAX LEGISLATION REQUIRES PLANNING
With every simplification in the Tax Cuts and Jobs Act (TCJA), there are many more tax issues that still require planning to realize extra tax benefits. Here are seven of them.

TAX CHECKLIST FOR BUSINESS STARTUPS
Complying with regulations and tax requirements can be tricky when it comes to startups. You can make it a little easier with this checklist of things you’ll need to consider.

Just click here to read the full articles.

2018 NEW YEAR TAX PLANNING LETTER

Dear Client,

We have just posted the 2018 NEW YEAR TAX PLANNING LETTER on our website. Here are headlines from the Letter. To read any of these articles, click on this link:
http://www.planningtips.com/Planning_Tips.asp?Co_ID=42935&Tip_ID=4422

ARE YOU READY FOR THE 2018 TAX ACT CHANGES?
Major tax law changes are capturing the headlines lately, and with good reason. Early proposals from the House and Senate varied widely but were reconciled in December 2017. Soon after, the Tax Cuts and Jobs Act was signed into law. There’s only one thing left for you to do now: start preparing for 2018 and beyond.

WHAT’S NEW IN 2018
Here’s a quick review of some of the tax changes you’ll see from 2017 to 2018 as a result of inflation adjustments and tax law changes.

WANT TO KEEP MORE OF YOUR MONEY?
Effective financial planning is all about knowing how your income will be taxed, and understanding what moves will help you keep as much money as possible.

Just click on the link below to read the full articles.
http://www.planningtips.com/Planning_Tips.asp?Co_ID=42935&Tip_ID=4422

THE TAX REFORM BILL PASSED CONGRESS – What should I do?

Phil L. Liberatore CPA, A Professional Corporation is working hard to keep you informed and up to date on current tax and accounting news potentially affecting you, your families and your business.

THE TAX REFORM BILL PASSED CONGRESS

– What should I do?
Congress has put a bow on the biggest tax cut bill since 1986.It is estimated that 80% of tax payers will see some form of a reduction in their tax bill.

The legislation will go into effect Jan. 1, 2018. Tax filings for the 2017 year will largely resemble your 2016 tax return.

OUR RECOMMENDATIONS:

  1. Take a close look at your state income taxes that could be due for 2017. If you own your home and itemize your tax deductions, consider winter property tax bill by December 31, 2017. If you typically owe state income taxes, consider making an estimated tax payment by the end of December. The state and local income tax deductions will be limited to $10,000 in 2018.

To get an idea of what you paid for these taxes in 2016, refer to your 2016 taxes SCHEDULE A of form 1040, lines 5-8.

EXAMPLE: If your total state and local tax deduction for 2016 was 12,000, you will only be able to take up to $10,000 in deductions for 2018.

  1. Maximize your charitable organization donations. If you and your family have gotten in the habit of giving charitably, consider making your donation by December 31, 2017. This may also include ‘in-kind’ donations such as cars, etc.
  1. Consider paying down your home equity loans.They will no longer be deductible in 2018.
  1. Consider making a mortgage payment before December 31, 2017. This will increase your mortgage interest deduction for 2017.
  1. Prepare all of your 2017 miscellaneous tax deductions. They are being phased out in 2018. This includes unreimbursed work-related expenses, home office expenses, and tax preparation expenses. Have them ready for your tax return.
  1. Pay your medical bills. If you itemize, and have significant medical expenses, consider paying your medical bills. The threshold for medical expenses has actually been lowered for 2017 – 2018 to 7.5%.

FOR INDIVIDUALS:

1. Lowers (many) individual rates: The bill preserves seven tax brackets, but changes the rates that apply to: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
Today’s rates are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.

Here’s how income tax brackets will align according to the new rates:
– 10% (income up to $9,525 for individuals; up to $19,050 for married couples filing jointly)
– 12% (over $9,525 to $38,700; over $19,050 to $77,400 for couples)
– 22% (over $38,700 to $82,500; over $77,400 to $165,000 for couples)
– 24% (over $82,500 to $157,500; over $165,000 to $315,000 for couples)
– 32% (over $157,500 to $200,000; over $315,000 to $400,000 for couples)
– 35% (over $200,000 to $500,000; over $400,000 to $600,000 for couples)
– 37% (over $500,000; over $600,000 for couples)

The effect: It’s expected that the Treasury Department will come out with withholding tables in January, taxpayers might see the effect in their paychecks in February 2018.

2. Capital gains tax rates remain largely unchanged:The system for taxing capital gains and qualified dividends did not change under the act but the brackets will be adjusted.

3. Nearly doubles the standard deduction: For single filers, the bill increases it to $12,000 from $6,350 currently; for married couples filing jointly it increases to $24,000 from $12,700.

The effect: The percentage of filers who choose to itemize would drop sharply, since the only reason to do so is if your deductions exceed your standard deduction.

4. Eliminates personal exemptions: Today you’re allowed to claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. Doing so lowers your taxable income and thus your tax burden. The tax bill eliminates that option.

The effect: For families with three or more kids, that could mute if not negate any tax relief they might get as a result of other provisions in the bill.

5. Expands child tax credit: The credit is doubled to $2,000 for children under 17. It also would be made available to high earners because the bill would raise the income threshold under which filers may claim the full credit to $200,000 for single parents, up from $75,000 today; and to $400,000 for married couples, up from $110,000 today.

The effect: More Families will be able to get refundable child tax credits.

6. Eliminates mandate to buy health insurance:There would no longer be a penalty for not buying health insurance.

7. Changes to Itemized Deductions:

  1. Caps the state and local tax deduction: the final bill limits the state and local tax deduction for anyone who itemizes at $10,000. *For 2017 the deduction is unlimited for your state and local property taxes plus income or sales taxes.

The effect: If you own your home and itemize your tax deductions, you may be effected by this change, follow our recommendation on paying both real estate installments and any other state taxes you may be subject to in 2017. To get an idea of what you paid for these taxes in 2016, see your 2016 taxes SCHEDULE A of form 1040, lines 5-8.

EXAMPLE: if your total state and local tax deduction for 2017 will be 12,000, you will only be able to take $10,000 in deductions for 2018.

  1. Lowers cap on mortgage interest deduction: If you take out a new mortgage on a first or second home you would only be allowed to deduct the interest on debt up to $750,000, down from $1 million today. The bill would no longer allow a deduction for the interest on home equity loans, currently that’s allowed on loans up to $100,000.

The effect: Homeowners who already have a mortgage would be unaffected by the change. New mortgages taken after December 15 2018 will be fall under the limitation.

  1. No Major changes to the charitable donation deduction: The charitable donation deduction will remain in place with some adjustments upwards on limits for cash gifts. The charitable mileage rate will remain 14 cents per mile.

The effect: Currently, if you itemize your deductions, you can deduct certain donations to qualified charitable organizations.

  1. Miscellaneous itemized deductions: All miscellaneous itemized deductions subject to the 2% floor under current law are repealed.

The effect: Taxpayers who normally claim significant miscellaneous expenses (e.g. unreimbursed work-related expenses, home office expenses, and tax preparation expenses) will not be able to claim them anymore.

  1. Medical expenses: The act reduced the threshold for deduction of medical expenses to 7.5% of adjusted gross income for 2017 and 2018.

The medical expense deduction will remain in place with a lower floor of 7.5% for tax years 2017 and 2018. That means it is retroactive to 2017.

8. Curbs who’s hit by AMT: The AMT (Alternative Minimum Tax) is a secondary tax put in place in the 1960s to prevent the wealthy from artificially reducing their tax bill through the use of tax preference items. It is reduced by raising the income exemption levels to $70,300 for singles, up from $54,300 today; and to $109,400, up from $84,500, for married couples.

9. 529 College savings plans are expanded: Under the passed bill, up to $10,000 of 529 savings plans can be used per student for public, private and religious elementary and secondary schools, as well as home school students.

10. No changes to the college and tuition credits: The American Opportunity Credit (AOC) and Lifetime Learning Credit (LLC) remain unchanged under the passed bill.

11. No change to the exclusion of gain from sale of your home: There are no changes to the current law, you can still exclude up to $250,000 ($500,000 for married taxpayers) in capital gains from the sale of your home so long as you have owned and resided in the house for at least two of the last five years.

12. Exempts almost everybody from the estate tax: The tax bill essentially eliminates estate tax for all but the smallest number of people by doubling the amount of money exempt from the estate tax – currently set at $5.49 million for individuals, and $10.98 million for married couples. This measure will likely affect owners of businesses and farms who pass on those assets to their children.

FOR BUSINESSES:

  1. Corporate Tax Relief: Under the passed bill, the corporate tax rate would be lowered to 21% (presently 35%) beginning in January 1 2018. This will effect Corporations which do not pass through their income pay tax on profits at the corporate level.
  1. Pass-Through Entities: Businesses use structures like limited liability companies (LLCs) or S corporations to pass income through to the owners without paying tax at the company level. Under the passed bill, owners of pass-through companies (e.g. S corporations, partnerships, and LLCs) and sole proprietors will be taxed at their individual tax rates less a 20% deduction (to bring the rate lower) for business-related income (subject to certain wage limits and exceptions). Phase-ins begin at $157,500 for individual taxpayers and $315,000 for married taxpayers filing jointly.

Please contact me with any questions or concerns as I will strategize to ensure that you maximize your tax savings.

Sincerely,

Phil Liberatore

Update on Equifax Cyber-Security Data Breach

This is bigger than we orginally thought.

Not only was banking information and account numbers stolen, this time the hackers got a lot more than that… watch this short video clip that Phil recorded to find out more:

Also, if you haven’t yet checked to see if you were impacted, click here to find out.

We want to make sure you are completely in-the-know and protected. Feel free to give us a call if you’ve got any other questions concerning this, or the new IRS scams that Phil mentions in the video.

We are here to serve and look out for you, your family and your business.

Thank you for being the best part of Philip L. Liberatore, CPA.

October 2017 Online Advisor Released

We have just released the October 2017 issue of the Online Advisor and this month it’s packed with trending and emerging topics including “Tax Loss Harvesting Tips,” “Business Taxes—Time to Consider Section 179?” and “How to Fix Your Overfunded Account.” Get a glimpse of the articles are below and for full articles, just click on the link at the end of this article.

5 TAX-LOSS HARVESTING TIPS
If you’d like to get the most out of your financial portfolio, consider this tax strategy. Take a look at the best ways you can use losses to reduce short-term gains.

BUSINESS TAX: TIME TO CONSIDER SECTION 179?
Are you thinking about depreciating business assets? Find out more on how Section 179 works and whether or not using it is a good move to make this tax season.

HOW TO ACE THE FAFSA
A recent change makes the FAFSA available Oct. 1. Learn the common mistakes students make when filling it out and the best ways to avoid them.

HOW TO FIX YOUR OVERFUNDED ACCOUNT
Overfunding happens. Find out how and what steps you can take to fix the problem with your IRA or 401(k).

Just click on the link below to read the full articles.

www.planningtips.com

Phil Liberatore Discusses the IRS’s Battle This Tax Season

Phil Liberatore discusses why The Internal Revenue Service’s battle against fraud and identity theft is intensifying in 2017, as tax-filing season opens and the most needy taxpayers are getting caught in the middle.

(PRWEB) February 27, 2017

“During recent years, it is quite disheartening to know, criminals now have the skills and capacity to impact our entire system and control how Internal Revenue Service issues refunds,” says Liberatore.

The IRS was barred from issuing refunds before February 15, 2017 on any returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit. Congress mandated the delay to provide the IRS additional time to review returns and identify potential fraudulent claims before any refunds are issued.

According to Liberatore, taxpayers who take advantage of Earned Income Tax Credit or the Additional Child Tax Credit, will likely have to wait even longer to receive their refunds. According to the IRS, refunds will be further delayed until the week of February 27th, due to the President’s Day holiday and weekend considerations.

Liberatore notes that in the last three years tax payers have suffered tremendously due to Internal Revenue Service need for focus on fraud and identity theft and budget reductions.

Phil Liberatore and his team of CPA’s offer a full range of services including general accounting, tax strategy/tax preparation, and financial management for their clients throughout Southern California. Their experienced team consistently invests in continuing education and they are some of the most knowledgeable and credentialed professionals in the industry.

Contact Phil Liberatore, CPA
IRS Problem Solvers, Inc.
877-6-Solver
StopIRSPain.com