- Recent Tax Updates

FILING DATE EXTENDED

3/20/2020

The Treasury Secretary announced today that the April 15 filing deadline has been extended to July 15 for all taxpayers and businesses. This means taxpayers will no longer be required to file extensions for federal purposes. They also have until July 15 to pay, so long as they fall below the thresholds of $10 million due for C corporations, and $1 million due for all other taxpayers.
The information released today did not address the second quarter estimate payments due on 6/15, payroll tax filing deadlines, or IRA contribution deadlines. We will update you on this information as it becomes available.

The California Franchise Tax Board is postponing until July 15 the filing and payment deadlines for all individuals, trusts, and business entities for:

2019 tax returns;
2019 tax return payments;
2020 1st and 2nd quarter estimate payments;
2020 LLC taxes and fees; and
2020 Non-wage withholding payments.

The FTB extended their initial extension period of June 15, 2020, to be more consistent with the IRS extension relief. Like the IRS extension, the FTB extension applies to both filing and payment deadlines, but does not limit the payment extension to those below $1 million ($10 million for corporations), and applies to estimated tax and withholding payments.
Other states will probably take similar actions. If you have questions about what your state has done or is proposing to do, check your local news or the state tax office's website.

IRS TAKES ACTION

3/19/2020

The Internal Revenue Service is providing PAYMENT RELIEF to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns remains April 15, 2020. The IRS urges taxpayers who are owed a refund to file as quickly as possible. For those who can’t file by the April 15, 2020 deadline, the IRS reminds individual taxpayers that everyone is eligible to request a six-month extension to file their return. Turner's Tax Service will be happy to process an extension request for you. Please call our office for more information.

Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due. This payment relief applies to all individual returns, including self-employed individuals, and all entities other than C-Corporations, such as trusts or estates. IRS will automatically provide this relief to taxpayers. Taxpayers do not need to file any additional forms or call the IRS to qualify for this relief. This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.

Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. If you file your tax return or request an extension of time to file by April 15, 2020, you will automatically avoid interest and penalties on the taxes paid by July 15.

This relief only applies to federal income tax payments due April 15, 2020. Some states such as California are following suit but not all states have decided to do so yet. If you are unsure of your state's requirement, please contact Turner's Tax Service.

We are continuing to process tax returns but are currently not offering face-to-face appointments. You may send us your tax documents by mail, fax or electronically. For more information about your individual situation, please call the office at 530-626-8551.

Stay safe!

UPDATE ON FILING AND PAYING YOUR TAXES

3/18/2020

The Treasury Secretary made an announcement yesterday about tax relief due to COVID-19.

We expect the IRS to release detailed guidance soon, and we will share that information with you once it is available.

As of now, this is what we understand based on his announcement:

the individual filing deadline is still April 15
those who can file their taxes should file by the normal tax filing deadline
those who can’t file by the deadline should file an extension by April 15
taxpayers, both individuals and corporations, can defer a tax due payment, interest-free and penalty-free, for an additional 90 days after April 15

We anticipate the IRS will also address the following:

whether or not quarterly estimated tax payments can be deferred
any changes related to filing 1041 returns

Turner's Tax Service will continue to monitor this situation and keep you updated.

POSSIBLE TAX PAYMENT EXTENSION

3/17/2020

At a press conference held today, U.S. Treasury Secretary Mnuchin announced the following extensions for federal income tax payments:

Individuals and businesses with an April 15 filing deadline will be given an additional 90 days to pay taxes;
Individuals will be able to defer up to $1 million of tax liability; and
Corporations get an extension for up to $10 million.

Mnuchin was not specific about late-filing penalties for either the March 15 or April 15 deadlines, but it appears interest and penalties will be waived automatically. He stated, "All you have to do is file your taxes. You will automatically not get charged interest and penalties."

Turner's Tax Service will provide additional information when formal guidance is issued by the IRS.

CALIFORNIA REQUIRES HEALTH INSURANCE AS OF 1/1/2020

10/31/2019

The federal penalty for not having health insurance has been suspended. However, effective January 1, 2020, California residents must obtain minimum essential health care coverage to avoid the new California individual health care mandate penalty enacted by SB 78 (Ch. 19-38). Generally speaking, an individual who fails to secure coverage will be subject to an annual penalty of $695 or more when they file their 2020 California tax return.

Covered California is accepting applications for health care coverage from October 15, 2019, through January 31, 2020. California subsidies will be available for individuals and families with incomes up to 600% of the federal poverty line (federal subsidies are available for up to 400% of the poverty line).

People may sign up by going to www.coveredca.com

NEW REQUIREMENT FOR LANDLORDS

1/22/2019

The Tax Cuts and Jobs Act signed was signed into law in December 2017. One of the most significant provisions of the new tax bill was the creation of §199(A) of the Internal Revenue Code, which is a provision meant to benefit small business owners who pay tax on the profit from their business on their personal return by allowing a 20% credit on those profits. It was unclear whether landlords with profits from their rentals would be entitled to that new credit.

The IRS released final regulations regarding 199(A) on January 18th, and one of the differences between this and all previous guidance they had issued is that they made it clear that most landlords (other than those who rent on a triple net basis) will likely qualify for the §199(A) credit, as long as they are operating their rental as a trade or business.

However, the IRS additionally made it very clear that if you treat a rental activity as a trade or business for the purposes of §199(A), the activity would need to be also treated as a trade or business in other areas. This potentially includes the requirement to issue a 1099MISC for any unincorporated service provider or individual that you paid more than $600 to in 2018, though that issue wasn't specifically addressed in the regulations. Historically, landlords generally weren’t required to issue 1099MISC.

As a precautionary measure, Turner's Tax Service is recommending that you issue 1099MISC to any unincorporated business or individual that you paid more than $600 to in 2018 for services (not merchandise or products) related to your rental. 1099MISC for 2018 are supposed to be in the mail and also e-filed with the IRS by 1/31/19, and late filing penalties can be imposed for filing late. If you need to issue 1099MISCs, Turner's Tax Service can prepare them for you, or there are any number of online vendors who provide this service if you prefer to handle them yourself. For assistance with 1099MISCs please contact the office at 530-626-8551 no later than Friday, January 25. You will need to provide the name, address, Social Security number or Employer Identification Number of the vendor you paid as well as the amount paid.

EVERYTHING YOU ALWAYS WANTED TO KNOW ABOUT TAX BRACKETS

1/7/2019

Many taxpayers are confused about how tax brackets work and what they mean for your personal taxes. The Washington Post has a great article by Christopher Ingraham that explains the concept in plain English. To learn more check it out at -
www.washingtonpost.com/business/2019/01/07/how-tax-brackets-actually-work-simple-visual-guide/?utm_term=.cbe51bc1d725

WHAT'S NEW WITH THE CHILD TAX CREDIT AFTER TAX REFORM

11/27/2018

Many people claim the child tax credit to help offset the cost of raising children. Tax reform legislation enacted last year made changes to that credit. Here are some important things for taxpayers to know about the changes to the credit.

Credit amount. The new law increases the child tax credit from $1,000 to $2,000. Eligibility for the credit has not changed. As in past years, the credit applies if all of these apply:
- the child is younger than 17 at the end of the tax year (December 31, 2018)
- the taxpayer claims the child as a dependent
- the child lives with the taxpayer for at least six months of the year
Credit refunds. The credit is refundable, now up to $1,400. If a taxpayer doesn’t owe any tax before claiming the credit, they will receive up to $1,400 as part of their refund.
Earned income threshold. The income threshold to claim the credit has been lowered to $2,500 per family. This means a family must earn a minimum of $2,500 to claim the credit.
Phaseout. The income threshold at which the child tax credit begins to phase out is increased to $200,000, or $400,000 if married filing jointly. This means that more families with children younger than 17 qualify for the larger credit.

Dependents who can’t be claimed for the child tax credit may still qualify the taxpayer for the new credit for other dependents. This is a non-refundable credit of up to $500 per qualifying person. These dependents may also be dependent children who are age 17 or older at the end of 2018. It also includes parents or other qualifying relatives supported by the taxpayer.

If you have any questions about the changes to the child tax credit or the new dependent care credit, please call Turner's Tax Service at 530-626-8551.

NEW POSTCARD FORM MAKES FILING TAXES MORE COMPLICATED THAN EVER

6/26/2018

.On June 25th the New York Times took a look at the draft "postcard" tax form that is to be unveiled next week and reported the following -

The form shrinks the form to postcard size by eliminating more than half of the 78 lines on the current form
The new form omits lines for a variety of popular deductions, including those for student loan interest and the teachers' credit. Those are found on one of six accompanying worksheets.
Business income, capital gains and several other forms of income are also omitted from the postcard and must be reported on accompanying worksheets.
There is a line for the child tax credit but if you claim child care expenses you'll have to find the right worksheet to claim that credit along with a number of other credits.
There is no line to reconcile the health care premium, even though the requirement to have health insurance or be penalized remains for Tax Year 2018.

If you prepare your own taxes, it will be more complicated to do so with this new form unless you have a very simple tax life. The new form could also make things more complicated for the IRS. More than 90% of taxpayers now file electronically but if more people opt for the postcard return which has to be handled manually, the IRS could be overwhelmed, given the budget cuts over the past several years that have reduced staffing, delaying the issuance of refunds.

For many taxpayers, an additional complication may be created by the state tax return they need to prepare and submit. Many states have not adopted the changes in the federal law and so far no state has announced it will go to a "postcard" form.

The postcard form assumes that taxpayers will claim the standard deduction, rather than itemizing. That may not result in the highest deduction, but taxpayers will not know that unless they calculate their itemized deduction and compare that to the standard deduction. Additionally, while it may be advantageous to claim the standard deduction on your federal return, that may not be the case on your state return.

Turner's Tax Service will be closely monitoring this new form as well as all the other changes as a result of the Tax Cuts and Jobs Act (TCJA). As additional information becomes available, it will be posted here.

PLANNING FOR 2018

1/18/2018

The Tax Cut and Jobs Act is the biggest tax reform law in over 30 years. When you file your 2018 tax returns — about a year from now — your tax return will look very different. And because most changes don’t happen until then, there's time to learn about the changes and plan for next year. Here are a few of the biggest changes that may affect you.

Tax rate changes. Both individual and corporate rates have changed. The maximum individual rate is reduced to 37% and the corporate rate is now a flat 21%. Because each taxpayer's situation is unique, whether the rate changes help or hurt can't be determined without looking at the individual situation.

Standard deduction increases but personal exemptions eliminated. Again - each taxpayer's situation is unique and whether these changes help or hurt can't be determined without looking at the individual situation.

Increased Child Tax Credit and new Dependent Credit: The credit is increased for each child to $2,000 (up to $1,400 of which is refundable for each child) and each non-child dependent can now receive a new credit of $500. The phaseout thresholds for these credits are drastically increased. Married taxpayers filing a joint return can claim the full credits if their adjusted gross income is $400,000 or less ($200,000 for all others). The credits are fully phased out for married taxpayers filing a joint return when their adjusted gross income reaches $440,000 ($240,000 for all others). This means that many more taxpayers will be able to claim these credits in 2018 and beyond.

Disappearing deductions: Beginning with the 2018 tax year, you will no longer be able to deduct:

State income tax and property taxes above $10,000 per year in total;
Moving expenses (with an exception for certain military);
Employee business expenses such as mileage, travel, entertainment, home office expenses, union dues, tax preparation fees, and investment fees, among others;
Mortgage interest beyond interest on $750,000 of acquisition debt, if you purchase a new home; and
Mortgage interest paid on equity debt (this is no longer deductible for any taxpayers).

Some new benefits for individuals: These new benefits include:

The medical expense AGI threshold will temporarily drop to 7.5% of AGI for 2017 and 2018;
The AMT threshold is increased, so fewer middle-income taxpayers will be subject to AMT;
The estate tax exclusion has nearly doubled, to $10 million (adjusted for inflation); and
The annual gift tax exclusion remains the same ($14,000 for 2017 and $15,000 for 2018), but the maximum rate on gifts is 35%.

Small business benefit: Beginning in 2018, there will be up to a 20% deduction from net business income for a sole proprietorship, LLC (excluding those taxed as a C corporation), partnership, S corporation, and rental activity. The rules are incredibly complex but there is a lot of planning that we can do to maximize this deduction for you.