Thanks to much larger standard deduction amounts under the Tax Cuts and Jobs Act (TCJA), fewer filers are itemizing deductions. But that doesn't mean they aren't still writing off some tax-deductible expenses. During this first filing season after the many changes wrought by the latest tax reform law, taxpayers are still claiming what used to be called above-the-line deductions. Technically, they are and always have been adjustments to income. They got the above-the-line moniker because they previously appeared in the last section of the old long Form 1040, just above the last line of that form's first page where your adjusted gross income (AGI) was entered. These deductions are still around. But perhaps we should call them Schedule 1 deductions, since they now appear on that new attachment to the revised Form 1040. Deductions for all: Despite the change in form location, these deductions/income adjustments still can be claimed by eligible taxpayers, regardless of whether they itemize tax deductions on Schedule A or opt to use the standard deduction that applies to their filing statuses. If you qualify to claim them, they can save you hundreds, perhaps thousands even, of tax dollars. How? They lower a filer's adjusted gross income. The less money that's taxed, the less you owe Uncle Sam. Sometimes, a lower AGI also makes taxpayers eligible for income-determined tax credits, which reduce your tax bill dollar for dollar. Below is a quick look at the 11 above-the-line deductions/adjustments to income as they now appear on Schedule 1. 1. Educator expenses (line 23): Eligible educators (more on this in a minute) can deduct here up to $250 (adjusted annually for inflation) of qualified unreimbursed classroom expenses you paid out-of-pocket in 2018. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses here. Chances are you'll have more than the $250 (or $500 joint filer) limit. Sorry. Before the TCJA you could the excess as an itemized miscellaneous expense on Schedule A. That added write-off is no longer available. As for who is an eligible educator, the IRS says this includes kindergarten through grade 12 teachers, instructors, counselors, principals or aides who worked in a school for at least 900 hours during a school year. 2. Certain business expenses (line 24): Don't get too excited thinking this might make up for the now-gone miscellaneous business expenses deduction. Schedule 1 notes that these write-offs are limited to folks in special job categories, specifically military reservists, performing artists and fee-basis government officials. Also, reserve military personnel can only use this for costs incurred when they travel more than 100 miles from home to perform services as a National Guard or other armed forces reserve member. All taxpayers who take this deduction also will need to fill out Form 2106. 3. Health savings account deduction (line 25): Here you can write off your contributions to one of these medical coverage plans, commonly referred to as HSAs. However, you'll need more paperwork here, too: Form 8889. 4. Moving expenses for members of the Armed Forces (line 26): Folks who've claimed this tax break in the past probably have notice the added info on this line's description. It previously was shown only as moving expenses. The TCJA, however, changed that. Now relocation costs are limited to military personnel who are on active duty and who move pursuant to a military order related to a permanent change of station. These relocating U.S. Armed forces members also will have to fill out Form 3903 to detail their eligible costs, the total of which go here. 5. Self-employment tax (line 27): If you worked for yourself, either full-time or as a side job to bring in some extra spending money, you likely had to pay self-employment tax. Half of that amount can be subtracted here. You'll have to include your Schedule SE, too. 6. Self-employed SEP, SIMPLE, and qualified plans (line 28): Staying in the be-your-own-boss vein, if you were able to contribute to a retirement plan (e.g., SEP-IRA or Keogh), note that amount here. 7. Self-employed health insurance deduction (line 29): One more break for the independent worker. If you paid for your own medical policy, those premiums are fully deductible here. The insurance also can cover your child who was under age 27 at the end of 2018, even if the child wasn't your dependent. If you don't use a tax pro or tax software, there's a worksheet for the self-employed insurance deduction in the Form 1040 Schedule 1 instructions (page 91). 8. Penalty on early withdrawal of savings (line 30): If you had to cash in a CD or other savings account and paid a price for getting your money from your bank, you can write off that fee here. 9. Alimony paid (line 31): This is a holdover from the prior long Form 1040, hence the small letter "a" notation that got transferred to the Schedule 1. Under the TCJA, the deduction for alimony payments will remain in effect for folks with divorce agreements reached in 2018 or before. In these cases, you'll need to also pay attention to the "b" part of line 31, which is the Social Security number (SSN) of the ex getting the payment. 10. IRA deduction (line 32): If you have a traditional IRA, you might be able to deduct some or all of your contribution. This Schedule 1 deduction depends on many variables, such as income and workplace retirement plans. Again, there's a worksheet on page 94 of the form's instructions. 11. Student loan interest deduction (line 33): Write off up to $2,500 in interest on your school debt here. Yes, there's yet another worksheet (page 96) to make sure you qualify and figure how much you can enter here. Tuition and fees possibly OK again in the future: Schedule 1 also has a couple of lines reserved for possible future income adjustment adjustments, most notably the tuition and fees deduction. This educational tax break is part of the package of tax laws known as extenders that expired at the end of 2017. When it was in effect, it allowed eligible taxpayers to claim up to $4,000 of specified schooling costs. If Congress does renew it, this tax break it will be claimed here. The renewal, however, isn't going to happen by next Monday, April 15, so you'll be able to use this only if you get an extension to file your taxes. If you've already filed and can claim tuition and fees when it's back in the tax code, you'll need to file an amended return (Form 1040-X). Another former adjustment to income, the claim for domestic production activities, used to go on line 35. It was repealed, but the line remains on Schedule 1 as one reserved for special tax situations ("domestic production activities deduction from a fiscal-year pass-through entity") or for future form use. More miscellaneous adjustments: OK, we're done with Schedule 1 deductions, right? Wrong. Line 36 of Schedule 1 says "Add lines 23 through 35. Do that, but also check the instructions one more time, this time pages 96 and 97. Reading tax instructions is something you do all the time, right? There you'll find that the IRS has jammed 11 more above-the-line deduction options that can be claimed here. They are:
Yes, most of these additional 11 costs you can claim are arcane and can add to your total on Schedule 1 line 36 probably won't apply to you. But they also are why you should at least glance at the instructions, or at least check out the ol' tax blog. If you are one of the few who can claim these tax breaks added at the end Schedule 1, be sure to take advantage of them when you file this year. That same advice goes for all 22 of these deductions/income adjustments, the 11 enumerated on their on special lines and the catch-all 11 at the end. Make sure you don't miss any that apply to your tax circumstances. Even if they require you to do a bit more tax calculating and fill out another form or two, the added work could cut your tax bill. And that's the ultimate goal of all of us every tax filing season. Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/deductions-for-all-22-tax-write-offs-that-dont-require-itemizing.html
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Tax Day every April is the biggie for individual taxpayers. That's when our annual Form 1040 is due. And yes, I know this year there are two Tax Days, since Patriot Day celebrants in Maine and Massachusetts get until April 17 to send in their federal returns. But most of us must meet the April 15 deadline, so that's what I focus on in this post. Completing a 1040, however, is not the only mid-April tax deadline. It's just one of the 10 tax tasks listed below that many taxpayers also must make by next Monday, April 15. 1. File something to cover your 2018 individual taxes. 2. Pay any due tax. 3. File household employees forms. 4. Pay your estimated taxes. 5. File your 2015 tax return. 6. Open or contribute to your IRA. 7. Contribute to your Health Savings Account. 8. Don't forget about FBAR. 9. File your state taxes. 10. Corporate taxes are due, too. OK, that's a lot for some folks to take care in less than a week. But do your best because missing a deadline will cost you more in the long-run. Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/one-april-tax-day-10-tax-tasks.html Afraid you'll face an Internal Revenue Service audit? Don't bet on it, says a veteran oddsmaker. The tax audit odds for 2019 will be approximately 1 in 172, says SportsInsider.com's James Murphy, a sportsbook consultant and specialist in novelty betting odds. 25% of filers worry about audits: That slim audit possibility, however, didn't seem to affect folks who participated in a LexingtonLaw survey conducted before this tax season started. The Salt Lake City-based law firm found that a quarter of Americans are afraid they'll be audited. Older filers are more worried. Thirty-three percent of those older than 65 are concerned about a possible tax audit. And in an apparent flip of gender worry roles, men who participated in the survey were 12 percent more fearful of an IRS follow-up than women. Not to worry, at least not so much: Murphy, however, says we all should chill. Americans are much more concerned than we should be about tax audits. Thanks to a confluence of factors, including budget cuts for the IRS, the odds of being audited by the IRS had dropped from 1 in 90 at the peak in 2010 and 2011 to around 1 in 160 last year, says Murphy. And while the actual number of federal tax audits varies from year, Murphy's projections suggest that this year the chances that the IRS will take a closer, second look at your 1040 are even lower. Specifically, the aforementioned 1 in 172. To give us non-bettors a better idea of what that means, Murphy compiled the following table that compares the odds of being audited by the IRS to an assortment of other random life events:
Wow. I'm never going to scoff at bowlers again! Specific IRS audit odds: If you do happen to unluckily fall into that audit category, Murphy also has calculated the odds of what probably caught the IRS' attention in his 2019 IRS income tax audit odds. The odds that an individual will be subject of a federal tax audit if he or she:
Murphy also points out that anyone's true odds of an IRS audit are dependent on a number of variables, many of which are discussed in his SportsInsider.com article and my post on 10 tax audit triggers. Dealing with an audit: Sometimes you beat the odds. Sometimes they beat you. When it comes to an audit, though, here are some things you can do to improve your chances. The bottom line, betting and otherwise, is to fill out your returns on time — that's April 15 for most of us, just a week from today! — and as completely as you can. Don't ignore any notices from the IRS when it has questions about your filing. Have good documentation to support your Form 1040 entries. And if you're confused or concerned about any of the IRS inquiries, hire a tax professional who's experience in the audit process. Heck, hire a tax pro to handle your audit even if you're confident you can answer the IRS questions. If you've never been though an audit before, you're probably not as ready to deal with it as you might think. Finally, don't panic. Audits aren't fun, but if are one of the few who has to face one, being prepared is your best chance of satisfying any IRS questions without additional damage to your bank account. You also might find these items of interest:
Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/irs-tax-audit-odds-are-low-but-be-prepared-just-in-case.html The larger standard deduction amounts created by the Tax Cuts and Jobs Act (TCJA) mean that fewer filers claim itemized expenses. That also could be trouble for those of us who still will file a Schedule A. With fewer itemized expenses to review, the Internal Revenue Service theoretically could have more time to spend looking at everything we write off on this Form 1040 attachment. And excessive deductions are one of the common tax audit triggers. What's the DIF? Of course, if your itemized deductions are legitimate, by all means claim them. Just make sure you have the documentation to show the IRS is one of its examiners gives you’re a call. And realistically, unless you're aggressively pushing the tax envelope, your itemized deductions are not something that should keep you up at night. The IRS' audit rate has hovered around less than 1 percent of returns filed for the last few years. Still, you might face an examination if your numbers set off the tax agency's automatic initial review system. This computer-scoring audit filter, known as Discriminant Information Function, or DIF, evaluates tax returns based on IRS formulas it has created from years of data collection. Basically, it looks at deductions, credits and, in pre-TCJA years, exemptions and sets norms for taxpayers in each of the income brackets. While the IRS doesn't release its actual DIF figures, tax industry analysts can parse much of the same data the tax agency uses. And these numbers crunchers typically release the average deductions that they believe influence the IRS' initial audit choices. Wolters Kluwer Tax & Accounting is one of those tax specialists. The company each year puts together a table based on prior filing data that shows its professional estimates of the average amount of popular deductions found on Schedule A in various income ranges. The WK table below is based on preliminary 2016 data. Remember, IRS reports lag because of the time needed to compile figures.
SOURCE: Wolters Kluwer 2019 Averages for info only: Wolters Kluwer points out that its averages take into account only those individuals who claimed an itemized deduction for that type of expense. Zero deductions are not factored in. So the average taxpayer with adjusted gross income between $50,001 and $100,000 did not take an average medical expense deduction of $9,375, only the average taxpayer who itemized and claimed a medical expense deduction did. Also keep in mind that this filing season, the amount of state and local taxes (SALT) that can be claimed on Schedule A is capped at $10,000 for all filers, except married couples filing separately, who can each only deduct $5,000. If you're in the three highest income brackets in this table, then you won't face any problems with your $10K SALT claim being more than the average because under the new tax law it can't be. Folks who made less, however, could raise DIF red flags if they top out at $10,000 in the taxes deduction category. Finally, Wolters Kluwer cautions that these numbers are for our information and, if you're a tax geek (and you probably are if you're here!) entertainment, only. Do not base your itemized deductions on these figures. And speaking of numbers, I'm picking that now unachievable $50,851 average deduction amount for the wealthiest filers as this week's By the Numbers figure. Relieving SALT in tax wounds: That large itemized deduction amount explains why the SALT deduction was a target during the formulation of the new tax laws. As proponents of the tax deduction limitation argued, the richest filers did get the most tax benefit — and cost the U.S. Treasury the most — when it came to the state and local taxes itemized deduction. Still, some lawmakers are looking to revisit the SALT cap. In February, two New Jersey Congressional Democrats, U.S. Sen. Bob Menendez and Rep. Bill Pascrell, Jr., both senior members of their chambers' tax-writing committees, unveiled a bipartisan, bicameral bill to repeal the SALT deduction cap. That's not a surprise, since the Garden State represented by the pair is almost always leads the country when it comes to states with large real property taxes. Menendez and Pascrell note that many of their constituents are finding that under the TCJA they owe significantly more on their taxes than they did in prior tax seasons. A pair of freshman House Democrats from Illinois, Reps. Sean Casten and Lauren Underwood, also have introduced SALT legislation. Their bill, however, would revise but not eliminate the TCJA's $10,000 limit. The Casten-Underwood bill would increase the cap to $15,000 for single filers and $30,000 for married couples. It also would index the higher deduction amounts to inflation. While it's possible SALT cap changes could happen in the Democrat-controlled House, there's no way they'll get through the Senate where the GOP remains in charge. In fact, the bills likely won't even make through the Senate Finance Committee, where Chairman Charles Grassley (R-Iowa) has resisted calls to make changes to the Republicans biggest — cynics would say only — accomplishment of the last few Congressional sessions. Still, keep an eye on the proposals. Depending on what happens in the 2020 elections, the TCJA could be revised before 23 of the bill's individual tax provisions expire in 2025. You also might find these items of interest:
Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/irs-audit-interest-piqued-by-different-deduction-amounts.html Folks in Belzoni, Mississippi, aren't thinking about taxes today. They're celebrating the 44th Annual World Catfish Festival. But in addition to being the catfish capital of the world (the closing of its museum notwithstanding), Belzoni is the county seat of the most audited county in the United States. Residents of Humphreys County, a rural county in the Mississippi Delta, is one of the country's poorer counties, with more than a third of its residents living below the poverty line. Those low incomes also probably contribute to a new study's findings that Humphreys County is the area that is most audited by the Internal Revenue Service. That study, first published in Tax Notes, is featured in a recent ProPublica article that earns this weekend's Saturday Shout Out. Tax break for poor prompts audits: According to the article and study author Kim M. Bloomquist, who spent 20 years as a senior economist with the IRS' research division, more than half of Humphreys County's taxpayers claim the Earned Income Tax Credit (EITC). This program, designed to help low-income workers, can provide eligible 2018 tax year filers a credit of up to $6,431. Since it's a tax credit, it offsets any taxes a filer owes dollar-for-dollar. Even better, it's refundable. That means if there is some EITC money left after it wipes out your tax liability, you get the excess credit as a refund. Claiming the EITC, however, often is confusing, meaning folks can easily make honest mistakes. It's also been cited as a tax break that's used frequently by tax cheats. That's one of the reasons that the IRS now must hold onto any tax returns where the filer gets a refund based on the EITC, as well as the Additional Child Tax Credit (ACTC). Most, least audited U.S. counties: The ProPublica piece has a couple of maps illustrating which areas in the United States are subject to the most and fewest IRS audits. I see that the hubby and I have tended to live in areas that are tax audit hot spots. That's because we've usually made our homes in or near larger cities, where residents tend to make more money. Earning a lot is one of the things that triggers tax audits. Obviously so does not making much money and claiming a tax break designed to help you if you're in that economic situation. Don't be easy audit bait: The EITC didn't make my initial post detailing 10 tax audit triggers. But I annotated it today to mention the special place the EITC and ACTC have when it comes to attracting extra IRS attention. I hope wherever you live, you never have to answer added questions from the IRS about your taxes. The best way to ensure that doesn't happen is to avoid, if at all possible, being in any audit trigger situations. It's sure a lot easier than moving to a less audit-prone place. You also might find these items of interest:
Advertisements from https://www.dontmesswithtaxes.com/2019/04/do-you-live-in-a-tax-audit-hot-spot.html The surest sign that summer is on the way is not temperature changes, but increasing gasoline prices. Oil companies traditionally take advantage of the seasonal shift, as families here in Texas and elsewhere across the country load up their cars — and fill up the gas tanks — to hit the road. Not too long ago, I topped off my tank with regular at $1.89 per gallon. Today the lowest price I've seen in the area is $2.36. True, that's about half of what we saw at gas stations a couple of years ago. But we've been spoiled by low pump prices. That may be why some lawmakers in Washington, D.C., are talking about, gasp, raising the federal gas tax. Fuel tax timing: One school of thought is if they can slip the tax through while fuel prices are relatively low, maybe the increase won't cause to much of an uproar, especially if it is phased in over several years. That's the plan now being discussed by both Republicans and Democrats on Capitol Hill. It's also gotten the support the U.S. Chamber of Commerce, the American Trucking Associations and, back in 2017, even Donald J. Trump. When Trump met with trucking industry representatives and drivers two years ago, he indicated he was amenable to increasing the gas tax as long as the funds went to highway projects. The federal gas tax has been stuck at 18.4 cents per gallon since 1993. The corresponding diesel fuel rate also has remained at 24.4 cents since then. Most drivers opposed: Professional truck drivers are likely the only motorists who support the increase. Most Americans, however, have consistently balked at the prospect of paying more for gas due to a fuel tax increase. We love our fossil-fueled cars (sorry Tesla and other electric vehicle makers) and fuel price increases can have a major impact on many drivers' budgets. I get it. I grew up in West Texas where a round trip of 100 or more miles to run errands or eat at a fancy restaurant was (and still is) not unusual. Also, outside of major cities, sparse public transportation options (yes, I'm looking at you, Austin, Texas) makes driving the only viable way for a lot of folks to get around. But the realization that America's bridges and roads are in alarming disrepair — insert your own infrastructure week joke here — is starting to sink into the public and political consciousness. States taking fuel tax lead: Many states have recently (both in 2017 and 2018) bumped up their fuel taxes. The latest increase came this week in the politically important heartland state of Ohio. The increases are needed, say the supporters, because newer vehicles get better mileage, meaning drivers don't fill up as often, cutting into the fuel tax revenue. Others jurisdictions are spreading the fuel tax burden by imposing fees on electric vehicles since those drivers use the same roads, but escape the gas tax completely. Some have even experimented with a per-miles-traveled tax. A similar national demonstration project has been proposed by a couple of House members, one a Republican and the other a Democrat. But when it comes to the national fuel tax rates established 26 years ago, most federal lawmakers have resisted any increases. Now, however, it's starting to look like some are ready to take a gas tax detour. Replenishing the road fund: Part of the political shift is coming from industry support of the fuel tax increase. Private sector buy-in has always been important, so much so that early in his presidency Trump proposed formal partnership between government and investors who would finance projects in return for revenue from tolls or other user fees. That's still an outside possibility, but most in the public and private arenas are leaning toward the old-fashioned revenue raising option. They want to increase the federal fuels tax amounts to bulk up the Highway Trust Fund (HTF). The HTF is where Uncle Sam gets the money to pay for roadways, bridges and mass transit. It was established in 1956 to provide a more dependable source of federal funding for the construction of the interstate highway system. Dependable, however, is a relative term. The HTF's two sub-funds, the Highway Account that's largely devoted to construction and maintenance of highways and bridges and the Mass Transit Account that's used toward buses, rail, subways, ferries and other types public mass transit. The balances of both of those funds have been dropping. The reason is because the HTF receives around 90 percent of its revenue from the federal fuel excise taxes. Taxes on tires and heavy vehicles (trucks) make up the rest of the fund’s income. Since the federal gas tax is not pegged to inflation and has not been raised since 1993, the purchasing power of the revenue has eroded over time. If the current fuel tax rates had been indexed to inflation, the Congressional Research Service says that in 2017 the amounts would have been 31.7 cents for a gallon of gas and 42.1 cents for diesel. The Peter G. Peterson Foundation estimates that the HTF's ability to pay for transportation projects has been cut by more than 40 percent since the last tax rate hike. Private sector support: That's why many on Capitol Hill and beyond are supporting a gas tax increase. The tax hike option is the easiest (relatively speaking; more on this in a minute) to implement and have minimal administrative costs since they already are being collected. The U.S. Chamber of Commerce has endorsed a 25-cent increase over five years. The American Trucking Associations has endorsed a 20-cent increase over four years. Leaders of the groups made their arguments last month at a Ways and Means Committee hearing on, as the committee's chairman described it, "our nation's infrastructure crisis." Chamber President Thomas Donohue told Congress it should increase both the gas and diesel taxes by a total of 25 cents, then index the new tax rates for inflation so that there would be no need to revisit this issue in the future. "The proposal would raise $394 billion over the next 10 years, which would be invested in our highways, bridges, and transit systems in a fiscally responsible fashion," said Donohue. Chris Spear, president and CEO of the American Trucking Associations (ATA), offered the lawmakers a similar proposal: "ATA's proposed solution to the highway funding crisis is the Build America Fund. The BAF would be supported with a new 20 cent per gallon fee built into the price of transportation fuels collected at the terminal rack, to be phased in over four years. The fee will be indexed to both inflation and improvements in fuel efficiency, with a five percent annual cap. We estimate that the fee will generate nearly $340 billion over the first 10 years. It will cost the average passenger vehicle driver just over $100 per year once fully phased in." Earlier this month, Spear reiterated his group's support of a higher gas tax and placed the possibility of passage on Trump. "If the president puts his full weight behind this and wants infrastructure and wants real money to fund it, I am confident that the votes are there, both chambers, House and Senate," Spear said on an April 3 conference call with reporters. Political potholes ahead: But any tax increase, even one characterized as a user fee, faces obstacles. Yep, here's that political component I mentioned a few paragraphs earlier. Although members on both sides of the aisle support to some degree an increase in the gas tax, it's unclear whether there are enough to ensure passage of even a modest hike in such a politically polarized Congress. That concern is exacerbated by the 2020 election. It will be here before we realize. Please, please hurry. I am already sooooo tired of the campaigning by all White House wannabes. But I digress. No candidate or party, especially in a presidential election year, wants to be tagged in campaign ads as the embracer of any tax increase, even one that would ultimately improve services most of us use on a daily basis. The best chance any gas tax increase could happen would be for it to pass this year, providing time for any drivers'/voters' anger to subside before Tuesday, Nov. 3, 2020. You also might find these items of interest:
Advertisements // // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // from https://www.dontmesswithtaxes.com/2019/04/federal-gas-tax-increase-gaining-support-but-political-potholes-remain.html The surest sign that summer is on the way is not temperature changes, but increasing gasoline prices. Oil companies traditionally take advantage of the seasonal shift, as families here in Texas and elsewhere across the country load up their cars — and fill up the gas tanks — to hit the road. Not too long ago, I topped off my tank with regular at $1.89 per gallon. Today the lowest price I've seen in the area is $2.36. True, that's about half of what we saw at gas stations a couple of years ago. But we've been spoiled by low pump prices. That may be why some lawmakers in Washington, D.C., are talking about, gasp, raising the federal gas tax. Fuel tax timing: One school of thought is if they can slip the tax through while fuel prices are relatively low, maybe the increase won't cause to much of an uproar, especially if it is phased in over several years. That's the plan now being discussed by both Republicans and Democrats on Capitol Hill. It's also gotten the support the U.S. Chamber of Commerce, the American Trucking Associations and, back in 2017, even Donald J. Trump. When Trump met with trucking industry representatives and drivers two years ago, he indicated he was amenable to increasing the gas tax as long as the funds went to highway projects. The federal gas tax has been stuck at 18.4 cents per gallon since 1993. The corresponding diesel fuel rate also has remained at 24.4 cents since then. Most drivers opposed: Professional truck drivers are likely the only motorists who support the increase. Most Americans, however, have consistently balked at the prospect of paying more for gas due to a fuel tax increase. We love our fossil-fueled cars (sorry Tesla and other electric vehicle makers) and fuel price increases can have a major impact on many drivers' budgets. I get it. I grew up in West Texas where a round trip of 100 or more miles to run errands or eat at a fancy restaurant was (and still is) not unusual. Also, outside of major cities, sparse public transportation options (yes, I'm looking at you, Austin, Texas) makes driving the only viable way for a lot of folks to get around. But the realization that America's bridges and roads are in alarming disrepair — insert your own infrastructure week joke here — is starting to sink into the public and political consciousness. States taking fuel tax lead: Many states have recently (both in 2017 and 2018) bumped up their fuel taxes. The latest increase came this week in the politically important heartland state of Ohio. The increases are needed, say the supporters, because newer vehicles get better mileage, meaning drivers don't fill up as often, cutting into the fuel tax revenue. Others jurisdictions are spreading the fuel tax burden by imposing fees on electric vehicles since those drivers use the same roads, but escape the gas tax completely. Some have even experimented with a per-miles-traveled tax. A similar national demonstration project has been proposed by a couple of House members, one a Republican and the other a Democrat. But when it comes to the national fuel tax rates established 26 years ago, most federal lawmakers have resisted any increases. Now, however, it's starting to look like some are ready to take a gas tax detour. Replenishing the road fund: Part of the political shift is coming from industry support of the fuel tax increase. Private sector buy-in has always been important, so much so that early in his presidency Trump proposed formal partnership between government and investors who would finance projects in return for revenue from tolls or other user fees. That's still an outside possibility, but most in the public and private arenas are leaning toward the old-fashioned revenue raising option. They want to increase the federal fuels tax amounts to bulk up the Highway Trust Fund (HTF). The HTF is where Uncle Sam gets the money to pay for roadways, bridges and mass transit. It was established in 1956 to provide a more dependable source of federal funding for the construction of the interstate highway system. Dependable, however, is a relative term. The HTF's two sub-funds, the Highway Account that's largely devoted to construction and maintenance of highways and bridges and the Mass Transit Account that's used toward buses, rail, subways, ferries and other types public mass transit. The balances of both of those funds have been dropping. The reason is because the HTF receives around 90 percent of its revenue from the federal fuel excise taxes. Taxes on tires and heavy vehicles (trucks) make up the rest of the fund’s income. Since the federal gas tax is not pegged to inflation and has not been raised since 1993, the purchasing power of the revenue has eroded over time. If the current fuel tax rates had been indexed to inflation, the Congressional Research Service says that in 2017 the amounts would have been 31.7 cents for a gallon of gas and 42.1 cents for diesel. The Peter G. Peterson Foundation estimates that the HTF's ability to pay for transportation projects has been cut by more than 40 percent since the last tax rate hike. Private sector support: That's why many on Capitol Hill and beyond are supporting a gas tax increase. The tax hike option is the easiest (relatively speaking; more on this in a minute) to implement and have minimal administrative costs since they already are being collected. The U.S. Chamber of Commerce has endorsed a 25-cent increase over five years. The American Trucking Associations has endorsed a 20-cent increase over four years. Leaders of the groups made their arguments last month at a Ways and Means Committee hearing on, as the committee's chairman described it, "our nation's infrastructure crisis." Chamber President Thomas Donohue told Congress it should increase both the gas and diesel taxes by a total of 25 cents, then index the new tax rates for inflation so that there would be no need to revisit this issue in the future. "The proposal would raise $394 billion over the next 10 years, which would be invested in our highways, bridges, and transit systems in a fiscally responsible fashion," said Donohue. Chris Spear, president and CEO of the American Trucking Associations (ATA), offered the lawmakers a similar proposal: "ATA's proposed solution to the highway funding crisis is the Build America Fund. The BAF would be supported with a new 20 cent per gallon fee built into the price of transportation fuels collected at the terminal rack, to be phased in over four years. The fee will be indexed to both inflation and improvements in fuel efficiency, with a five percent annual cap. We estimate that the fee will generate nearly $340 billion over the first 10 years. It will cost the average passenger vehicle driver just over $100 per year once fully phased in." Earlier this month, Spear reiterated his group's support of a higher gas tax and placed the possibility of passage on Trump. "If the president puts his full weight behind this and wants infrastructure and wants real money to fund it, I am confident that the votes are there, both chambers, House and Senate," Spear said on an April 3 conference call with reporters. Political potholes ahead: But any tax increase, even one characterized as a user fee, faces obstacles. Yep, here's that political component I mentioned a few paragraphs earlier. Although members on both sides of the aisle support to some degree an increase in the gas tax, it's unclear whether there are enough to ensure passage of even a modest hike in such a politically polarized Congress. That concern is exacerbated by the 2020 election. It will be here before we realize. Please, please hurry. I am already sooooo tired of the campaigning by all White House wannabes. But I digress. No candidate or party, especially in a presidential election year, wants to be tagged in campaign ads as the embracer of any tax increase, even one that would ultimately improve services most of us use on a daily basis. The best chance any gas tax increase could happen would be for it to pass this year, providing time for any drivers'/voters' anger to subside before Tuesday, Nov. 3, 2020. You also might find these items of interest:
Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/federal-gas-tax-increase-gaining-support-but-political-potholes-remain.html It's official. House Democrats have formally requested copies of the last six years of Donald J. Trump's personal and business federal tax returns. Trump has steadfastly refused to make public his taxes, breaking a modern-day tradition set by presidential candidates — and in-office presidents (and vice presidents) — of letting the public have a glimpse of White House 1040s. The main reason Trump has given for keeping his taxes private is that his personal and business filings are under audit.
But that's precisely why Rep. Richard Neal (D-Mass.), chairman of the House Ways and Means Committee, says his Congressional panel should see them. "The IRS has a policy of auditing the tax returns of all sitting presidents and vice-presidents, yet little is known about the effectiveness of this program," Neal said in a statement announcing the letter he sent Wednesday, April 3, to Internal Revenue Service Commissioner Charles Rettig seeking Trump's returns. "On behalf of the American people, the Ways and Means Committee must determine if that policy is being followed, and, if so, whether these audits are conducted fully and appropriately," said Neal. "In order to fairly make that determination, we must obtain President Trump's tax returns and review whether the IRS is carrying out its responsibilities," added Neal. "The Committee has a duty to examine whether Congressional action may be needed to require such audits, and to oversee that they are conducted properly." After hearing of Neal's request, Trump reiterated that he was "not inclined" to release his tax return until he no longer was under audit. Yeah, stock up on popcorn and settle in folks. This is going to take a while. Audits decreasing: This next phase of the great Trump Tax Return Quest, however, does make me think about what prompts the IRS to take an extra-long look at anyone's taxes. Granted, the tax audit rate has been minuscule in recent years, in large part because of the IRS hasn't had a lot of money to spend on examining returns. According to the IRS' Data Book for 2017, released in March 2018, the percentage of individual tax audits that year fell to its lowest level since 2002. It also was the sixth consecutive year that audits have declined. Just 1 in about 160 individual tax returns were audited in 2017. The biggest drop in audits was of those aimed at high-income household filings, although those returns still were examined (that's the word the IRS likes to use instead of audited) at a higher rate than filers in other income levels. That trend has continued into fiscal year 2018, according to research by TRAC, a nonpartisan, nonprofit data research center affiliated with the Newhouse School of Public Communications and the Whitman School of Management, both at Syracuse University. Avoid tax audit triggers: So if there are fewer audits examinations, should we non-wealthy quit worrying whether we'll hear from the IRS after we file? I'm not. I'm worrier by nature and I'm always rethinking what I put on my 1040 and wondering if it will cause the IRS pause. No, I don't push the tax envelope. But part of the reason for my concern is that I once got an IRS notice, also known as a correspondence audit, about one of my returns. I've saved the document, which started out: Dear Taxpayer, So I still flinch a bit when I get anything from the IRS, like the transcript that arrived last week. I forgot I ordered it online to check out the system for an article. If you're there with me in stressing at least a little over whether you'll get audited, here some tax issues we should avoid, if all possible. These 10 things are what typically tempt the IRS to take another look at tax returns. 1. You earned a lot of money. 2. You are self-employed. 3. You are part of the gig economy. This so-called correspondence audit (like the one I got, mentioned earlier in this post) is much less invasive than a full-scale audit, but it's an audit nonetheless. You need to clear up the discrepancy ASAP since Uncle Sam has been tallying interest and penalty charges for your oversight. 4. You overlooked other income. 5. You have overseas accounts. 6. You claim large itemized or business deductions. But do so legally. Don't go padding the remaining itemized expenses you can claim. Unusually large write-offs, which are those that seem to be excessive in relation to your income, will attract IRS scrutiny thanks to its computer scoring system, aka DIF, the acronym for discriminant information function. The same deduction issue comes into play for the self-employed, mentioned in tax trigger #2. Don't try to fudge your business' expenses on your Schedule C. Unusually high amounts on that form draw added attention from an IRS that already skeptical of many independent contractor claims. 7. You made a mistake on your Obamacare reporting. If you signed up for medical coverage through a health care marketplace, you might be eligible for the federal subsidy, aka the premium tax credit, to help pay some of the insurance policy's costs. This also will get you a 1095-A form, which you'll need to help reconcile your credit, either advance or claimed at filing, or determine whether you owe an ACA-related penalty. Although folks have been dealing with Obamacare for years, it still can be confusing. If you mess up any part of it, the IRS will let you know. 8. You have rental real estate activity. 9. You filed the old-fashioned paper way. 10. You fell for one of the Dirty Dozen tax scams. Are you scared now? Don't be. I know most of the ol' blogs readers are honest taxpayers. And ever if you do make an innocent error, that won't spark a full-blown audit. As long as you have good records for everything you enter on your tax return — and hire a tax pro who's experienced in the audit process — you should come through any IRS examination unscathed. And you'll definitely escape the IRS' additional prying eyes when you don't wave any of these 12 audit red flags. Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/tax-audit-triggers-red-flags.html Broad City image via Giphy.com Do you have to file a return? Sorry to be the bearer of bad news, but the answer usually is yes. But there's a difference between having to file a tax return and submitting a 1040 form because you should. And by should, I mean when it's to your advantage to do so. Yes, that does happen in the tax world now and then. When filing is required: First, though, let's look at when the tax code says we must send the Internal Revenue Service a Form 1040. If you are a U.S. citizen or resident who made money last year, whether you must tell the Internal Revenue Service about it depends on three things:
The IRS created the table (shown as Chart A in the 2018 Form 1040 instructions) below to give you an idea of whether you should start getting your filing material together. 2018 Filing Requirements for Most Taxpayers
A quick filing note for some older New Year's Day babies. The IRS says that if you were born on Jan. 1, 1954, you are considered to be age 65 at the end of 2018. That one-day shift lets you make a little more before you have to mess with filing. Also, for filing requirement purposes, the IRS says that gross income means all income you received in the form of money, goods, property, and services that isn't exempt from tax, including any income from sources outside the United States or from the sale of your main home, even if you can exclude part or all of it. In this gig economy world, all income definitely means money from these jobs, be they your full-time work or simply side hustles to supplement your wage income. And the earnings count even if you don't get an official tax form, usually a 1099-MISC or 1099-K. You don't, however, have to include any Social Security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2017 or (b) one-half of your Social Security benefits plus your other gross income and any tax-exempt interest is more than $25,000 or $32,000 if married filing jointly. And since the IRS has seen it all, it notes that if even if you're married, if you didn't live with your spouse at the end of 2018 (or on the date your spouse died) and your gross income was at least $5, you must file a return regardless of your age. That's the same as the five-buck income threshold for married filing separately folks. There also are filing matters to consider if someone can claim you as a tax dependent. Basically, your filing requirement again takes into account your filing status, age and income. Chart B in the 2018 Form 1040 instructions has details. Again, I'm just the messenger when it comes to keeping the IRS off your back when it comes to filing, so please, as the old saying goes, don't shoot me. Other filing factors: One of the biggest complaints about taxes, aside from the actual dollars we pay, is how complicated they are. That's obvious in the rules regarding income and filing status above that determine whether you must file a 1040. But there also are other factors that, well, factor into the decision. They include --
You can find more about filing requirements in the IRS' general tax guide, Publication 17. You also can use the IRS' online tool to determine whether you need to file this year. When you should file: OK, you've discovered you technically don't have to file a return. Great, right? To borrow one of Donald J. Trump's favorite words, Wrong! Sometimes even if you don't have to file a tax return, it's to your benefit to do so. Here are a dozen situations when you should file a federal income tax return:
The main reason to file, though, even if you don't have to is to get tax cash. The IRS doesn't know what tax breaks you qualify for, so it's not just going to send you the cash. The only way to get any tax money you're owed because of over-withholding or tax credits you qualify for is to file a return and claim them. So if any of these 12 potentially positive tax-filing circumstances apply to you, send in a 1040! Advertisements // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ // <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> // ]]> from https://www.dontmesswithtaxes.com/2019/04/12-reasons-to-file-a-tax-return-even-if-you-dont-have-to.html
Well, I missed this one until today in working on more tax update materials for presentations. On December 31, 2018, P.L. 115,407, Veterans Benefits and Transition Act of 2018, was signed into law. The summary on the congressional website for this bill notes it deals with headstones, markers, and cemeteries. But, it deals with a lot more. Relevant for state tax purposes is Section 302 of the Act. It provides:
"For any taxable year of the marriage, the spouse of a servicemember may elect to use the same residence for purposes of taxation as the servicemember regardless of the date on which the marriage of the spouse and the servicemember occurred.”
The summary of the bill provides: “Sec. 302. Residence of spouses for servicemembers for tax purposes: This provision would amend SCRA to allow the spouse of a servicemember to elect to use the same state of residence as the servicemember for state or local tax purposes regardless of when or where the two individuals were married. These changes would apply with respect to any return of state or local income tax filed for any taxable year beginning with the taxable year that includes enactment.”
This change is effective for any state or local income tax returns filed for the tax year that includes enactment date. So it applies starting with 2018 tax returns.The California Franchise Tax Board didn't miss the tax provision of the Act. FTB Pub 1032 for 2018 (2018 Tax Information for Military Personnel) states:
“This change also applies to California. Income of a servicemember spouse for services performed in California is not subject to tax if the spouse elects to use the same residence as the servicemember who is a nonresident of California. If the spouse makes the election, write “VBTA” at the top of the tax return in RED INK, or include it according to the software’s instructions.”
It is also explained in the FTB’s 2018 conformity report.
If you or a client is married with one spouse serving in the military, see if this provision is relevant and if so, how your states of residence treat this, so income is reported in the most tax favorable state, and the state that might be expecting reporting knows that an election was made.
Seems like a fair provision given what is asked of members of the military and their families and the reality of multiple and frequent moves.
What do you think?
from http://21stcenturytaxation.blogspot.com/2019/04/2018-law-change-benefits-state-tax.html |