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Homeowner Alert! Review Your Tax Forms- New tax rules are creating confusion

Because of new laws many home related tax rules have changed and now require you to prove how funds are used to qualify for a deduction. This is catching many taxpayers by surprise. So when your mortgage company reports tax-related information to you and the IRS using Form 1098, it no longer means all the interest and points reported on these statements are tax-deductible.

  • Mortgage interest deductions have new loan amount limits. For new mortgages starting on or after Dec. 15, 2017, you can deduct interest on up to $750,000 of the loan (down from $1 million for mortgages initiated before Dec. 15, 2017). If your original mortgage is above the threshold, a calculation will be done to determine the deductible amount of interest. You can’t simply deduct the full amount of interest being reported on your Form 1098.
  • Proceeds not used to buy a home add complexity. Proceeds from home equity debt that are not used to build, buy or substantially improve a qualified home are no longer tax-deductible. This includes mortgage or home equity proceeds used to pay for college expenses, debit consolidation or other purposes. Mortgage companies issuing these loans will still send you a Form 1098, but it’s up to you to prove how you use the funds during the current year and any prior year.
  • Mortgage points requires review of settlement statements. Points are paid as a way to obtain a lower interest rate. Generally, points are deductible in the year they are paid, but they have more restrictions than mortgage interest. Points paid to refinance an existing mortgage, for example, may need to be deducted over the life of the loan. If you bought or refinanced a home in 2018, a review of your mortgage settlement statement may be required to ensure proper tax treatment of the cost of your points.
  • Mortgage insurance premiums are not deductible. Congress did not extend the mortgage insurance premium deduction for 2018. If you pay mortgage insurance, don’t wait to file your taxes thinking Congress will change their minds. File your taxes on a timely basis and expect to feel the impact of this eliminated deduction.

With these changes, properly calculating 2018 mortgage deductions is more complicated. For each Form 1098 you receive, make a note on the form to explain what the loan is for to ensure a proper deduction.



Audit Proof Your Tax Return

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Willis & Jurasek have any control over, or responsibility for, the content of any such Websites. All rights reserved.



IRS Announces Impact of Government Shutdown – See how due dates, collections and audits are affected

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Willis & Jurasek have any control over, or responsibility for, the content of any such Websites. All rights reserved.



Early Filers Alert!- Know whether you should file early

Tax filing season officially begins on Monday, Jan. 28. While the U.S. government remains shut down, the IRS will be bringing back 36,000 employees, without pay, to process returns and issue refunds. With the new rules and uncertainty around the shutdown, it’s more important than ever to get your tax records organized early. If any of the following situations pertain to you, consider filing your taxes as soon as possible.

  1. You’re worried about tax identity fraud. One of the most popular scams by identity thieves is to impersonate someone, file a return on their behalf, and steal their refund. But once you’ve filed, the window of opportunity for identity thieves closes. If you’ve had problems with your identity being stolen in the past or your information has been compromised, consider filing early.
  2. You wish to avoid a dependent dispute. One of the most common reasons a tax return is rejected is when you claim a dependent already claimed by someone else. This often happens when there is shared custody of a child.
  3. Someone needs a completed return from you. If you anticipate buying a house early in 2019 or making any other transaction that will need a tax return as proof of income, you may want to file early so you can provide current tax information. This is especially important if you are self-employed and don’t have pay stubs to use as proof of income.
  4. You have a complex problem to work out. If you have a complex tax problem to work out, do yourself a favor and get your tax return appointment scheduled early. One of the more complex items to tackle for 2018 is the new 20 percent qualified business income deduction. If you receive a K-1 or have any business or rental income, there may be additional calculations required to complete your taxes.
  5. You need the refund ASAP. Of course, everyone would like their refund as soon as possible. One thing to remember is that while the IRS starts accepting returns on Jan. 28, they won’t begin processing paper returns until mid-February. Tax returns that claim the Earned Income Tax Credit and the Additional Child Tax Credit will have their refunds further delayed until some time after Feb. 15.

Remember, the sooner your tax return is in the queue, the sooner you will receive your refund. If you have questions, don’t hesitate to call.



Caution! Watch For Incoming Tax Forms- Tax forms are arriving. Time to be prepared!

Tax forms come in more varieties than flavors of ice cream. Nearly any time something of value changes hands, there’s a specific tax form available to capture it for posterity. Check out the list below to familiarize yourself with some of the forms that are likely to hit your mailbox this tax season:

For Earnings:

  • W-2 – Wages received from an employer during a calendar year.
  • W2-G – Gambling earnings. You can expect to receive one of these from a casino or other betting entity if you have gambling earnings above a certain level. The minimum amounts that require a form depend on the kind of gambling.
  • 1099-MISC – Income earned when you are not an employee, but a contractor, small-business owner, etc. Each customer billed more than $600 should send you one.
  • 1099-K – Business payments received through credit cards (you may get one if you are an Uber driver or make a lot of sales through websites like Ebay or Amazon).
  • 1099-G – Government payments, including for unemployment insurance or state and local tax refunds.
  • K-1 – Earnings from business partnerships, LLCs and S corporations.

For Investments:

  • 1099-INT – Interest earned. You’ll get one for every interest-paying account, no matter how small.
  • 1099-DIV – Dividends paid to you.
  • 1099-B – Investment sales, documenting taxable capital gains. You’ll get these if you sold stocks or mutual funds during the year.
  • 1099-R – Distributions from retirement accounts (like a 401k or IRA).

For Health Care:

  • 1095 – Proof of health insurance, required under the Affordable Care Act. NOTE: The IRS has approved delays in sending many of these to you. Just make sure you have proof of insurance prior to filing your tax return!
  • 1099-SA – Documents the use of HSAs to pay medical expenses.

For Tax Breaks:

  • 1098 – Mortgage interest statement.
  • 1098-T – Confirmation of tuition and fees paid to qualified educational institutions.
  • 1098-C – Confirmation of the value of property (such as used clothes or vehicles) donated to charitable organizations.
  • 1098-E – Student loan interest paid, from a lender.

Gathering all these forms is important, because the IRS gets copies of each form sent to them as well. Missing one can trigger a letter from the IRS and a correspondence audit that can make extra work and delay your refund. Create a list of expected forms and check them off as they arrive.

As you await your forms, reach out to schedule your tax-filing appointment ahead of the April 15 filing deadline.



Reminder: Fourth Quarter Estimated Taxes Now Due- Now is the time to make your estimated tax payment

If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. The 2018 fourth-quarter due date is now here.

Normal due date: Tuesday, January 15, 2019

Remember you are required to withhold at least 90 percent of your current tax obligation or 100 percent of last year’s federal tax obligation.* A quick look at last year’s tax return and a projection of this year’s obligation can help determine if a payment is necessary. Here are some other things to consider:

Underpayment penalty. If you do not have proper tax withholdings, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year. So a payment at the end of the year may not help avoid the underpayment penalty.

Self-employed. Remember to account for the need to pay your Social Security and Medicare taxes as well. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter when you pay your estimated taxes.

Don’t forget state obligations. With the exception of a few states, you are often required to make estimated state tax payments when required to do so for your federal tax obligations. Consider conducting a review of your state obligations to ensure you meet these quarterly estimated tax payments as well.

* If your income is over $150,000 ($75,000 if married filing separate), you must pay 110% of last year’s tax obligation to be safe from an underpayment penalty.



Get Ready! Here Comes the New 1040…

If you’ve seen the film Jurassic Park, you may remember the dilemma chief engineer Ray Arnold is faced with after a fellow employee steals dinosaur embryos and cuts the power to one of the border fences. Not knowing if the power will come back on and facing the prospect of releasing all the dinosaurs, Ray reaches for the power switch, and delivers the most iconic line in the movie “… hold on to your butts!”

While the example of potentially being attacked by dinosaurs might be a tad extreme compared to filing your taxes, we are all in for a wild ride as we navigate the biggest tax overhaul in 30 years on a new Form 1040 with six new schedules. Now that the new Form 1040 is finalized, here are three main takeaways for this tax season:

  • The main form is shorter, but additional schedules will likely be required. The new Form 1040 may appear to be simpler, but the filing process is more complex. In fact, the instructions to help complete the new form checks in at 117 pages — 10 more pages than last year. Most of the same information from the previous year is still required, except now it’s spread over multiple schedules. Industry experts are planning for a 20 percent increase in tax prep time for this filing season.
  • Forms 1040A and 1040EZ are no longer available. If you previously filed with one of these forms, you will now be using the new Form 1040. In addition to learning the new form, there’s a good chance that you’ll need to add at least one of the new schedules to complete your tax return.
  • Filings could be delayed. Because of the vast changes in tax laws this year, additional IRS taxpayer guidance is expected throughout the filing season. Because of this, the U.S. Treasury Department put out a warning that there might be delays to the start to the filing season. The most recent government shutdown doesn’t help the situation. If filing season starts late, tax season condenses and refunds could be delayed.

What can you do?

The best advice is to start preparing now. Grab last year’s tax return and create a checklist of documents you need to gather. Pull together receipts, travel logs and other documentation. The more organized you are, the quicker and easier the process will be for you. Have questions? Call for help or to set up an appointment.



New Baby? Tax Tips Everyone Should Know- Especially parents, grandparents and relatives

For new parents, information is coming from every direction – feeding times, car seats, sleep schedules, strollers, child development and of course … taxes. What most new parents do not consider is that this little bundle of joy just complicated their tax situation!

Whether you are a new parent, grandparent, or know someone who is expecting, here are some tax tips to consider:

  • Initiate a 529 education savings plan. 529 education savings plans are a great way to kick off the baby’s savings for the future. These plans offer low-cost investments that grow tax-free as long as the funds are used to pay for eligible education expenses (including up to $10,000 for elementary and secondary tuition). States administer these plans, but that doesn’t mean you are stuck with the plan available in your home state. Feel free to shop around for a plan that works for you. Starting to save early, even a little bit, maximizes the amount of tax-free compound interest you can earn in the 18+ years you have before going to college.

    Bonus tip for family and friends: Anyone can contribute up to $15,000 per year to the plan for each child! In addition, there is a special provision for 529 plans that allows five years worth of gifts ($75,000) to be contributed at once — a great estate-planning strategy for grandparents.

  • Update Form W-4. Once parent(s) return to work, year-to-date withholding and current allowances on the Form W-4 need a review. Remember the birth of a child brings new tax breaks including a $2,000 Child Tax Credit and Child and Dependent Care Credit for child-care expenses. These credits can be taken advantage of now by lowering tax withholdings and increasing take-home pay to help cover diapers and other needs that come with a new baby.
  • Track medical expenses. Having a baby is expensive. According to Business Insider, the average cost to deliver a baby (without complications) is over $10,000. That doesn’t include the extra doctor visits and other medical expenses that might accumulate. There are ways to pay for medical expenses with pretax dollars or take tax deductions, but there needs to be a plan and receipts need to be saved. Many employers offer tax-advantaged accounts such as a Health Savings Account (HSA) or Flexible Spending Account (FSA). If not, an individual account might be available, depending on your insurance, or itemized deductions may be taken.

Given the tax considerations of having a new child in the family, review this information and forward this tip to anyone expecting a new addition. Bringing home a new baby is one of the great joys in life. Taking full advantage of the tax benefits that come with being a new parent make it even better. Please call if you have any questions.



2019 Mileage Rates- New mileage rates announced by the IRS

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Willis & Jurasek have any control over, or responsibility for, the content of any such Websites. All rights reserved.



Last-Minute Tax Deductions Hiding in Your Closet- There is still time to lower your tax bill!

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Willis & Jurasek have any control over, or responsibility for, the content of any such Websites. All rights reserved.