Earlier this year, South Carolina lawmakers determined $61 million of the tax dollars generated by the 2018 Mega Millions winner would be used to fund $50 tax rebate checks for qualifying taxpayers. A rebate check may be on its way to your mailbox!
Here are some changes made by TCJA. IRS also made a few revisions to help protect taxpayers.
State and local tax (SALT) deductions are now limited to $5,000 for a married person filing a separate return and $10,000 for all other filers. This limit applies to the 2018 to 2025 tax periods. Click to learn which taxpayers are impacted by the SALT limit.
Special Tax Breaks for U.S. Armed Forces
Key tax benefits are available to members of the military including combat pay, foreign earned income exclusion, filing deadline postponement, automatic extensions and earned income tax credit; just to start. Dependent care assistance programs available for military personnel, are also excludable and not included in the military member’s income. Click to get more benefits.
To provide greater security and improve transparency, IRS now requires an ITIN or SSN from individuals named as “responsible party” on Form S-4, Application for Employer Identification Number. This revision is effective May 13, 2019. Only government entities are exempt from the responsible party requirement, to include military and state national guards. Click to get the entire news release.
Penalty Relief Threshold Lowered to 80 Percent
IRS expands penalty waiver for taxpayers whose withholding and estimated tax payments fell short in 2018. The usual threshold is 90 percent to avoid a penalty. An 85 percent threshold was announced Jan 16. “Taxpayers who have already filed for tax year 2018 but qualify for this expanded relief may claim a refund by filing Form 843, Claim for Refund and Request for Abatement and include the statement “80% Waiver of estimated tax penalty” on Line 7. This form cannot be filed electronically.” Click to learn more.
A taxpayer affected by disaster could be any individual whose principal residence is located in a disaster area; the spouse of an affected taxpayer; or any business or sole priorietor whose principal place of business is located in a disaster area. Also included is any individual, business or sole proprietor not located in a covered disaster area, but whose records necessary to meet an IRS deadline are located in the disaster area.
There are four (4) types of disaster relief:
• Administrative relief is the granting of additional time to file tax returns, pay taxes and perform other time sensitive tasks. You may also be able to get late filing and payment penalties waived or abated.
• Tax relief is claiming casualty losses on your tax return.
• For Safe harbor provisions see your tax professional.
• Election to claim disaster losses on a prior year tax return.
Taxpayers may elect to deduct a casualty loss that occurred in the current tax year on their preceding year tax return if the casualty loss occurred in a federally declared disaster area determined to warrant federal assistance.
The election to claim disaster losses on a preceding year tax return can be made up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file.) Effective for tax returns filed after October 13, 2016. Click to learn more about disaster relief.
Enrolled Agent Week is February 4-10, 2019 in the State of South Carolina.
Those taxpayers who usually file early in the year and have all of the needed documentation, there is no need to wait to file. You should file when you’re ready to submit a complete and accurate tax return.
The U.S. tax system is pay-as-you-go. Taxpayers are required, by law, to pay most of their tax obligation during the year rather than at the end of the year. This can be done by either having tax withheld from paychecks or pension payments, or by making estimated tax payments.
The filing deadline to submit 2018 tax returns is Monday, April 15, 2019 for most taxpayers. Because of the Patriots’ Day holiday on April 15 in Maine and Massachusetts and the Emancipation Day holiday on April 16 in the District of Columbia, taxpayers who live in Maine or Massachusetts have until April 17, 2019 to file their returns.
The IRS announced January 16, 2019, that it is waiving the estimated tax penalty for many taxpayers who’s 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year. This relief is designed to help taxpayers who were unable to properly adjust their withholding and estimated tax payments to reflect an array of changes under the Tax Cuts and Jobs Act (TCJA), the far-reaching tax reform law enacted in December 2017. Taxpayers are urged to check their withholding again this year to make sure they are having the right amount of tax withheld. [ Withholding Calculator ] Continue reading
Did you know that you can deposit money into an IRA for retirement through a:
- bank or other financial institution?
- life insurance company?
- mutual fund?
Contributions can be either tax-deductible, matched by an employer, controlled by the employee or tax-free. Distributions can be voluntary or mandatory, and funds can be rolled-over if changing employment. Click here to learn more.
More than 14 million taxpayers filed for an extension in 2018 and, although Oct. 15 is the last day for most people to file, some may have more time. They include:
- Members of the military and others serving in combat zone localities still have more time. They typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due.
- Taxpayers in several disaster area localities who already had valid extensions now have more time to file. Currently, taxpayers in parts of California, North Carolina, South Carolina and Texas qualify for this relief. For details, see the disaster relief page on IRS.gov. However, like other extension filers, these taxpayers were required to pay what they owed by April 18, which was this year’s filing deadline for 2017 tax returns.
Click here for information about how long to keep tax return copies, why you should adjust your paycheck withholding, how to pay balance(s) due and more.
Did you know that your filing status could change during the year? If this happens just remember that your marital status on Dec. 31 is your status for the whole year.
Sometimes more than one filing status may apply to taxpayers. When that happens, taxpayers should choose the one that allows them to pay the least amount of tax.
Claiming the wrong filing status can affect the amount of tax you owe for the year. Learn about the five filing statuses and a description of who claims them by clicking here.
Tax reform brings major changes for the current tax year. To avoid an unwelcome surprise at tax time, filers who need to pay their taxes quarterly are reminded that the third estimated tax payment for 2018 is due on Monday, Sept. 17, 2018.
The Tax Cuts and Jobs Act, enacted in December 2017, changes the way tax is calculated for most taxpayers. As a result, many taxpayers may need to raise or lower the amount of tax they pay each quarter through the estimated tax system.
Form 1040-ES is designed to help taxpayers figure these payments simply and accurately. The estimated tax package includes a quick rundown of key tax changes, income tax rate schedules for 2018 and a useful worksheet for figuring the right amount to pay. The IRS also mailed 1 million Form 1040-ES vouchers with instructions in late March to taxpayers who used this form last year.
Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, which can help taxpayers determine whether they should pay estimated tax. Also look for Pay As You Go in this publication.
The fastest and easiest way to make estimated tax payments is to do so electronically using IRS Direct Pay or the Treasury Department’s Electronic Federal Tax Payment System (EFTPS). For information on other payment options, visit IRS.gov/payments. For filers paying by check, the check must be made payable to the “United States Treasury.”
Find out more about who needs to pay quarterly, whether employees have a choice and how to perform a paycheck checkup by searching online for IRS Issue Number: IR-2018-184.
Most veterans who received a one-time lump-sum disability severance payment when they separated from their military service will receive a letter from the Department of Defense with information explaining how to claim tax refunds they are entitled to. The letters include an explanation of a simplified method for making the claim.
Statute of Limitations
The amount of time for claiming these tax refunds is limited. However, the law grants veterans an alternative timeframe – one year from the date of the letter from DoD. Veterans making these claims have the normal limitations period for claiming a refund or one year from the date of their letter from the DoD, whichever expires later. As taxpayers can usually only claim tax refunds within 3 years from the due date of the return, this alternative time frame is especially important since some of the claims may be for refunds of taxes paid as far back as 1991.
Amount to Claim
Veterans can submit a claim based on the actual amount of their disability severance payment by completing Form 1040X, carefully following the instructions. However, there is a simplified method. Veterans can choose instead to claim a standard refund amount based on the calendar year (an individual’s tax year) in which they received the severance payment. Write “Disability Severance Payment” on line 15 of Form 1040X and enter on lines 15 and 22 the standard refund amount listed below that applies:
- $1,750 for tax years 1991 – 2005
- $2,400 for tax years 2006 – 2010
- $3,200 for tax years 2011 – 2016
Claiming the standard refund amount is the easiest way for veterans to claim a refund, because they do not need to access the original tax return from the year of their lump-sum disability severance payment.
All veterans claiming refunds for overpayments attributable to their lump-sum disability severance payments should write either “Veteran Disability Severance” or “St. Clair Claim” across the top of the front page of the Form 1040X that they file. Because all amended returns are filed on paper, veterans should mail their completed Form 1040X, with a copy of the DoD letter, to:
Internal Revenue Service
333 W. Pershing Street, Stop 6503, P5
Kansas City, MO 64108
Veterans eligible for a refund who did not receive a letter from DoD may still file Form 1040X to claim a refund but must include both of the following to verify the disability severance payment:
- A copy of documentation showing the exact amount of and reason for the disability severance payment, such as a letter from the Defense Finance and Accounting Services (DFAS) explaining the severance payment at the time of the payment or a Form DD-214, and
- A copy of either the VA determination letter confirming the veteran’s disability or a determination that the veteran’s injury or sickness was either incurred as a direct result of armed conflict, while in extra-hazardous service, or in simulated war exercises, or was caused by an instrumentality of war.
Veterans who did not receive the DoD letter and who do not have the required documentation showing the exact amount of and reason for their disability severance payment will need to obtain the necessary proof by contacting the Defense Finance and Accounting Services (DFAS).
C Fitts Tax Solutions, LLC adjusts their office hours as needed during none peak tax season while its’ licensed tax practitioner(s) focus on bringing clients the latest federal tax law and ethics updates. We remain available year-round to help with your urgent tax matters so don’t hesitate to call (803)470-4938.
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Those who claimed allowances for itemized deductions under prior law should claim fewer allowances in 2018 for itemized deductions—even if they no longer itemize.
- Tax rates have decreased in general
- Standard deductions have almost doubled:
- Single: $6,350 → $12,000
- Head of Household: $9,350 → $18,000
- Married-Joint: $12,700 → $24,000
- Exemptions are eliminated
- Child Tax Credit increased from $1,000 to $2,000/child and eligibility expanded
- New credit for other dependents of $500/dependent is added
- Changes are made to allowable itemized deductions
Use the Withholding Calculator and determine if you need to fill out a new Form W-4 with your employer(s). Some of its features are:
- It allows for other types of income and offsets to income.
- It accounts for withholding-to-date (e.g., mid-year).
- It accounts for part-year jobs.
- It prevents users from entering unallowableor inconsistent amounts.