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Improve Next Year’s Tax Situation Now!

Tax day is more than the end of tax filing season – it’s the start of tax-planning season.

Tax Day is Here!- Last-minute details, tips and freebies

The individual tax-filing deadline is Monday, April 15. Here is your guide to tax day deadlines, payments, forms and of course … free stuff!

Reminder: First 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 a 2019 estimated quarterly tax payment using Form 1040-ES. The first quarter due date is now here.

First-quarter due date: Monday, April 15, 2019

Remember, you are required to withhold (prepay) at least 90 percent of your current tax obligation, or 100 percent of last year’s federal tax obligation throughout the tax year.* A quick look at last year’s tax return and a projection of this year’s obligation can help determine if a quarterly payment might be necessary in addition to what is being withheld from any paychecks. Here are some things to consider:

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

W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 wage withholdings to make up the difference.

Self-employed. Self-employed workers must account for the need to pay 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 to pay your estimated taxes.

Use your refund? An alternative option to pay your first-quarter estimated tax is to apply some or all of your prior-year tax refund towards this year’s tax bill.

Pay more in the first quarter. By paying a little more than necessary in the first quarter you can then adjust your payments later in the year. This helps reduce the risk of an underpayment penalty based on the timing of your estimated payments.

Not sure if you need to make a quarterly payment? Take a quick look at your recently filed tax return to see the amount of tax you paid last year. Divide the tax by the number of paychecks for the year. Is enough being withheld from your paycheck? Consider adjusting your withholdings with your employer if you think it is necessary to cover last year’s tax bill.

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

Owe Taxes? Make Payment Arrangements Now!

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.

The Tax-Free Retirement Savings Option- Is a Roth IRA right for you?

If you are looking for tax-free income and more flexibility during retirement, perhaps you should look into investing in a Roth IRA. While Roth IRA contributions are not sheltered from current taxes like contributions to traditional IRAs, they offer other tax benefits during retirement.

The Roth IRA advantage

  • Retirement withdrawals (including earnings) are tax-free. As long as you wait to take distributions until you are 59 ½ or older, the full amount of your Roth account is tax-free!
  • Save taxes on other earnings. During retirement, withdrawals from traditional IRAs increase your taxable income. This can bump other earnings into a higher tax bracket and potentially increase the taxability of your Social Security benefits. Conversely, Roth withdrawals are not reported as income, keeping tax rates as low as possible.
  • More flexibility during retirement. Once you turn 70 ½, the IRS requires that you take required minimum distributions (RMDs) from traditional IRAs. If you don’t, you’ll get hit with a 50 percent penalty! There is no such requirement for Roth IRAs. You can leave (and even contribute) funds to grow in the account as long as you want.
  • Contributions can be withdrawn tax-free at any age. If you have financial hardship and need to make an early withdrawal, only the earnings in a Roth are subject to a 10 percent early withdrawal penalty. Meaning, Roth contributions can be withdrawn tax-free and penalty-free at anytime. This is because you use after-tax funds to make your original Roth contributions. This is not the case with traditional IRAs — the full withdrawal is subject to the penalty if you make it before you turn 59 ½.

The Roth IRA is not for everyone

While there are many reasons to consider contributing to a Roth IRA, they are not for everyone. Here are some factors to consider:

  • Income limits. While there are no income limits if you wish to roll funds from other accounts into a Roth IRA, there are income limits to contribute to a Roth IRA. For 2018 they are $135,000 single ($137,000 in 2019) and $199,000 married ($203,000 in 2019).
  • 5-year account requirement. To receive the full tax-free benefit of Roth investment earnings, you must have your Roth account for five years before making withdrawals.
  • Future tax uncertainty. While no one knows what the future holds, keeping tabs on tax trends is an important aspect of retirement planning. Increasing or decreasing tax rates may ultimately determine the best type of retirement investment for you. In addition, the government has the power to change the taxability of your IRA if they deem it necessary.

If you are looking to maximize your savings for 2018, you still have until April 15, 2019 to contribute into an IRA.

Where's My Refund?

The popular “Where’s My Refund” feature on the IRS website allows you to see the status of your refund after filing your income tax return.

What you should know

  1. Refunds of e-filed returns usually take 10 to 21 days to process. Paper returns take longer than e-filed returns. The IRS states that 90 percent of refunds are processed within this 21-day time period.
  2. Original refund processing projections can change. This can be due to processing backlogs, or errors in your tax return.
  3. Sometimes a delay is a good thing. The IRS acknowledges there is a huge increase in identity fraud as thieves try to steal tax withholdings. The IRS is using their data match programs to catch as much of this illegal activity as possible. Because of this, if the IRS is suspicious there is fraudulent activity, they will hold up processing your refund.
  4. No shutdown delay. The recent government shutdown did delay many IRS activities, but refunds are expected to be issued within the normal timeframe.

Checking your refund status

In the meantime, if you wish to check on the status of your refund this is what you should know.

Go to: and click on “Check My Refund Status”

When to check

  • 24 hours after an e-filed tax return confirmation
  • 4 weeks after a mailed tax return is sent

What you need to provide

  • Social Security number
  • Filing status
  • Exact refund amount

Remember, the information provided to you by the IRS is not a guarantee of payment. So please fight the urge to spend your refund before you receive it. Unfortunately, no amount of calling or checking will change the speed of returning your money. With 150 million tax returns processed each year, sometimes all you can do is wait.

Save Those Receipts!- These tips are money in your pocket

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.

Tax Scam Alert! Defend Yourself Now

Now is the time for tax fraud and theft. As the IRS continues to neutralize these threats, scammers are developing improved tactics to steal your identity and tax refund. Here is a recap of what the IRS is seeing this year:

  • More sophisticated email scams. A recent IRS alert warns taxpayers to be on the lookout for new, sophisticated email phishing scams. Thieves may use these fraudulent emails to try to access your personal data through a hyperlink or trick you into providing financial information. This year, thieves are better able to make emails look like they are coming directly from the IRS.

    Your defense: The IRS will not contact you via email asking for personal or financial information so do not provide it! If you receive a suspicious email, don’t click any links or open any attachments. Simply forward the message to and delete it.

  • More realistic phone scams. Scammers are going to great lengths to impersonate the IRS by providing fake badge numbers and appearing as the IRS on your caller ID. They may threaten you with a lawsuit or with arrest, demanding that you make an immediate payment over the phone.

    Your defense: If you get a call from someone claiming to be the IRS, hang up immediately. The IRS does not call and ask for information over the phone. Even if you think it’s actually the IRS, get the caller’s name and badge number. Then hang up and call back directly to the IRS at 1-800-829-1040. Do not call back on a phone number provided to you by the caller!

  • Evolving identity theft scams. Scam artists are now going around you to get your information. For example, a popular scam is to send a phishing email to your employer’s human resources department with the intention of getting your W-2 information. Once they have enough of your information, they can file a fake tax return and send the refund to their bank account. The problem is, you won’t have any idea it happened until you file your tax return and the IRS rejects it.

    Your defense: To combat this threat, file your tax return as soon as possible to shrink the filing window available to crooks.

Criminals make a lot of money on tax scams, so they will keep trying to figure out new ways to get your information. Even while the IRS is working to stop the threats, you are your best defense. Stay alert, be skeptical and protect your information. Should you think your information is stolen, please ask for help. The IRS has staff to help correct your situation and will place you in their identity theft protection program.

Do You Need to File a Tax Return?- Getting this wrong can cost you

One of the more common tax questions is whether you need to file a federal tax return this year. The answer is: it depends. But not filing a tax return when you should can cost you plenty. Here are some quick tips to help you determine your answer.

Income thresholds matter

If your gross income is less than federal standard deduction you usually do NOT need to file a tax return. This is because the deduction effectively eliminates any taxable income. The amounts for 2018 are:

  • Married filing joint: $24,000
  • Head of household: $18,000
  • Unmarried (single): $12,000

Over the age of 65?

If you or your spouse are over the age of 65 the income required to file a tax return goes up by $1,300 (married) to $1,600 (single/Head of Household) for each of you that meets the age threshold. So a single person, age 65 or older, for example, does not need to file a federal tax return if their gross income is $13,600 or below.

Not so quick! There are exceptions

Like most tax laws, there are exceptions to the income limits mentioned above. Here are some of the more common situations where filing a tax return still makes sense.

  • You have federal or state withholdings. The ONLY way to get money back that was withheld from a paycheck or 1099 is to file a tax return. If you do not do so within three years, your refund will be absorbed by the government. While the IRS is quick to let you know that you owe them money, there is no such program to let you know that a refund is due to you.
  • You are eligible for a refundable credit. Refundable credits will pay you money even if you don’t owe income tax. For example, if you have a tax liability of $750, but you are eligible for a $1,000 tax credit you normally can only receive the $750 tax benefit. But with a refundable tax credit you can receive the additional $250, even without a tax liability. The most common examples of refundable credits are the Child Tax Credit, the Earned Income Tax Credit and the American Opportunity Tax Credit.
  • If you are a dependent. Special filing rules apply if you are a dependent on someone else’s tax return. If this is the case, filing rules vary depending on your age, your earned income (like wages) and your unearned income (like interest income). In this case it is usually best to conduct a review of your situation.
  • Other reasons. Sometimes filing a tax return can be used for other purposes. This includes using your tax return to obtain financing or to receive college financial aid. Another reason is to limit the amount of time your tax return can be audited. Once a tax return is filed, the audit time limit clock starts. After 3 to 4 years most tax returns can no longer be audited by the IRS. However, if the return is not filed, this audit clock never starts.

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.