Category Archives: Individual Tax Prep

  • Home   /  
  • Archive by category "Individual Tax Prep"
13
Mar, 2019
home office

Do You Have a Second Office in the Home?

In today’s virtual world, home offices are becoming the norm. Many professionals are creating a hybrid work environment, splitting time between the office and home office.  Here are some tips when the Second Office in the Home Is a Principal Place of Business:

When possible, you want to claim that your second office in the home qualifies as a principal place of business because this classification

  • gives you the home office deduction, and
  • eliminates commuting from your home to your regular office.

Current law gives you two ways to claim your office in the home as a principal office:

  • First, as a principal office under the rules that the Supreme Court finalized in Soliman
  • Second, as a principal office under the alternative after-Soliman rules, wherein lawmakers added this alternative: “… the term principal place of business includes a place of business which is used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer if there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business”

Test Your Knowledge:  If you have an office downtown where you spend 40 hours a week, can you claim that you have an office in your home that qualifies as a principal office if you spend only 12 hours a week working in the home office? If you said no, you are not alone. But you would also be wrong.

With the administrative or management rule, you can have your principal office in your home with 12 hours of work a week, even when you work at your other office for 40 hours.

Want to find out more?  Contact Emerald Financial Partners today!  We help individuals and businesses with all of your tax requirements!

Source: IRS Home Office Definition

 

Photo Credit:  https://www.steinhafels.com/office

28
Feb, 2019
didn't get my w2

What happens if you haven’t received a W-2 yet?

Word on the tax professional "street" is that tax filing numbers are down across the board so far.  It seems that many taxpayers are a little skittish about all of the changes this year.  And some folks are seeing lower refunds than they might have expected.  It makes for a stressful time of year.    One of the most common questions we receive is about what happens if you haven't received a W-2 yet?

 

So, I thought I'd take a moment to answer that for you.  If you work, or have worked, for somebody else, you know a W-2 form is essential when filing your taxes. Without it, you're stepping into the batter's box without a bat.  This particular tax form summarizes your annual income, benefits and taxes.

But if you have yet to receive your W-2 from a current or past employer, I want you to first contact them and ask why the delay. If you receive little response, or an unhelpful one, please consider these three important steps. You might need to implement one or all three of them in an effort to obtain the document and get on with your filing.

If none of these three options work, please reach out to me immediately. We can discuss the next best steps you can take moving forward.
Reach out to the IRS
The good part is that the IRS has made an effort to streamline their customer service questions through a toll-free number: (800) 829-1040. Calling this number is your first step toward receiving a substitute W-2 which you'll need ASAP.
The bad part in dialing this number is the automated process it will walk you through (and the potentially long wait time). But if it's a matter of receiving such an important document, enduring the process is a solid option. In addition, before you call, make sure you have these documents/details on hand:
- SSN
- Employer's name, address and phone
- Dates you had or have been employed
- Estimate of wages you earned from the previous year
We can help you with this.
Fill One of These Out Instead
If you're low on patience with the IRS, and your employer has yet to deliver your W-2, there are a couple more forms you could fill out.
Form 4852 is a "create your own" W-2 form, and you can use some of the information you prepared for the IRS, and therefore have on hand, to fill it out.
If the thought of creating a substitute W-2 makes you wary, you could request a filing extension using Form 4868, which will give you an extra six months to file your taxes. And if an extra six months is not enough to receive a W-2 from your boss, then you might have other issues to resolve in addition to filing taxes on time.
We can also help you with this.
Correct Any Mistakes
Sometimes, after completing the custom W-2 using Form 4852, taxpayers will send that form into the IRS, only to receive their actual W-2 days later. Use the real W-2 to double-check the information you wrote down on your 4852.
And if, for instance, you forgot to mark down a bonus you had received (in addition to your income from the year before), I don't want you to panic.
Form 1040X isn't as intimidating as it sounds. It will help you record the changes necessary to your W-2, which the IRS will fix after you mail it in.
Again, if you complete these steps or have further questions, please give me a call. Trying to file your taxes without a W-2 is not a happy feeling ... but you're not alone.
I commend any effort you take to resolve this issue on your own, but don't hesitate to reach out for help. Talking with people like you is why I love my job.

23
Jan, 2019

Real Estate & QBI Deduction

On Friday, January 20, 2019 the IRS issued final regulations as well as some additional guidance in regard to the QBI deduction for 2018. Much of the final regulations simply make the temporary regulations from August 8, 2018 permanent. However, there is some additional guidance for persons involved in real estate (information on real estate & QBI deduction) below.  We've also provided some checklists below that can help you determine if you qualify for the Qualified Business Income Deduction (QBID).

Rental Activities
Taxpayers can continue to apply the trade or business tests, which is the “regular, continuous, for profit” 3-part test of Code Section 162. However, in IRS Notice 2019-07 they also provided a safe harbor to qualify rental real estate activities for the QBI deduction that meet these three tests (applied separately to each property, or similarly at the taxpayer’s choice for all properties of the same type: residential or commercial):

1.      Maintain separate books and records for each rental activity;

2.      Perform at least 250 hours (or agent/employee or subcontractor)  of rental services for each year for each rental activity; and

3.      Maintain contemporaneous records, logs or similar documents showing time, description, dates and who performed the services.

We have 2 checklists below: first for real estate professionals; and second for clients claiming the safe harbor exemption for regular rentals. The safe harbor rules may be used by individuals and pass-through entities such as LLC’s. The tests apply until 2023.

Rental services that qualify include advertising; negotiating leases; verifying tenant applications; daily operation and maintenance; management; and supervision of employees and contractors.

Some rental activities are excluded from being able use the safe harbor including triple net lease activities and real estate used by the taxpayer as a residence (such as an Air BNB).

Finally, the taxpayer must include a signed statement with the return that they meet the requirements of this procedure.

Due Diligence Checklist for QBI Deduction-Real Estate Rental

Instructions: Meet either 1 of the 2 tests and taxpayer qualifies for QBID @ 10/31/18 rules

Real Estate Professional Test 1 YES NO
Does taxpayer spend at least 50% of total annual work hours in a real estate trade or business?
Does taxpayer have detailed time records to prove 50% test?
Are the records substantiated (written) and currently maintained?
Does the taxpayer spend at least 750 annual hours in the trade or business (not counting time as a W-2 employee unless >5% owner)
Does the taxpayer spend at least 500 annual hours on this specific property (may include spouse’s time)?
Does taxpayer have detailed time records to prove the 500 hour test?
Are the records substantiated (written) and currently maintained?
Summary: if all above answers are “Yes” the  taxpayer is a real estate professional and would generally be considered to meet the “regular, continuous, for-profit” rules to qualify for the QBI deduction
Conventional Rental IRS Notice 2019-07 Safe Harbor Test 2
On a regular basis does the taxpayer consult with advisors, negotiate and execute leases, consult with or act as property managers or personally maintain, manage or supervise the rental activity of the above property?
Does this activity continue throughout the year?
Does the taxpayer, employees, agents or independent contractor of the taxpayer spend at least 250 hours annually dealing with the advisors, managers or personally with tenants, repair or maintenance companies or on-site issues?
Does the taxpayer maintain contemporaneous written calendar time records to prove the above regular, continuous activity?

At Emerald Financial Partners, we are devoted to sifting through all of the rules and regulations to ensure you maximize your tax deductions.

 

Do You Qualify for the QBI?

Get help with your taxes today!

Schedule A Call
19
Jan, 2019
government shutdown tax

How Will The Government Shutdown Impact Taxes?

Free 15 Minute Quick Call

Emerald Financial Partners is offering 10 Free Quick-Call Consultations from 1/21/19 - 1/29/19 for Government Contractors & Businesses affected by the shutdown.

Schedule A Quick Call Consultation

As of this writing, the federal government is still in a "partial shutdown", and things are starting to fray around the edges, even for those whose paychecks aren't being affected. Already, it's the longest government shutdown in history.  But, how will the government shutdown impact tax filings, refunds, and your returns?

By the time you read this, things could be back to "normal" but here's one thing that won't stop during this shutdown, however long it lasts: your taxes.

That's right, the IRS confirmed last week that they will remain operational during the shutdown, your taxes will STILL be due this year (including your estimated payments, if that applies to you), and the official start of tax filing begins on January 28th. But refunds might still be affected. We'll keep you posted.

So, here are the things you need to remember:

  1. Get your taxes prepared early.  The 2018 tax changes affect many of our individual and business clients. You may expect a refund this year, but you may be in for a surprise!  And, if you owe, you'll want to know that NOW so you can plan ahead if you have to write that check in April.
  2. The Government Shutdown likely won't dramatically impact tax return deadlines.  While the government determines how it will handle tax season during the shutdown, there likely won't be a big change in the tax deadlines, so there is absolutely no reason to wait.

Since there were a lot of changes made to the tax laws as part of the 2018 tax reform, you'll want to be sure to work with a professional tax advisor, like Emerald Financial Partners.

We provide individual tax preparation to help you get every deduction you’re entitled to and help you avoid audits and costly mistakes that can arise from DIY online software.

And, if you ever do need help with the IRS, we provide the support you need.  Can your online software do that?

Contact Emerald Financial Partners today to get started!

 

Schedule A Consultation

Get Answers Now!
5
Jan, 2019

How the New Tax Law Changes Affect Individuals

Everyone seems to think that the new “postcard” return will make income tax preparation easier! Not true. The recurring theme in all of our continuing education classes this year has been the 20% increase in time we can expect to properly complete your return. Here are some of the major changes that have occurred.

Fewer People Will Get Refunds

The new Federal withholding tables were designed to lower your total tax bill for the year by giving you a bigger paycheck throughout the year. Unfortunately, they were not designed to give you a refund at year end, and for those of you that did not heed our warnings to change your withholding, your refund will be very small (if any) because you already received it in bits and pieces through larger paychecks throughout the year. One of our simple recommendations for 2019 is that all married individuals fill out a W-4 reflecting “single and zero” withholding.

Itemized Deductions Reduced Dramatically

The ability to itemize deductions has been dramatically decreased because the new law provides a much, much larger standard deduction. (You are allowed to deduct the greater of the two).

However, we still need to accumulate th

e information on your medical, tax, mortgage interest, charity and other deductions in order to apply the new rules, and to complete your state tax returns.

Home Equity & 2nd Mortgages

A major change has occurred on home equity lines and 2nd mortgages, most of which are now not deductible. In order to get your largest deduction, we will need to know much more information on these amounts than in the past such as amounts borrowed and use.

Other Tax Changes

Employee work related business expenses are no longer deductible on the Federal return, but we may still need
the information for your state return, and if you incur a lot of these types of expenses, you need to discuss the use of an accountable plan with your employer.

Most home-related energy efficiency credits are now expired, but an incredible 30% Federal credit still exists for
solar, wind and geothermal costs; and a $7,500 Federal credit for buying a fully electric car still applies through the end of 2018.

If you are retired, over age 70 ½, and have an IRA you must utilize the direct IRA to charity transfer tool to make charitable contributions. This simple trick can save you  hundreds of dollars in income tax.

Start a Health Savings Account Now

With over 50% of working Americans now covered by health savings insurance policies, it is of absolute importance that you start a health savings account, even with $50, and discuss some excellent tax-savings ideas with us for these tax-beneficial plans. And yes, you were still required to maintain health insurance for every member of your family for 2018 or face a potential penalty.

Future Tax Planning Is Key

Every year we are told “I pay too  much in taxes” or “I want some of the tax loopholes that rich people get”. We can answer both statements with one answer. Rich people get no more tax deductions or “loopholes” than anyone else, they just take advantage of what is there to keep their taxes at a low legal level. The single greatest tax “loophole” that they use, which few average people use to its limit is the
ability to defer nearly $20,000 into a 401-K if your  employer has one. If your employer has a 401-K and you are not putting the maximum deferral in it, there is no reason to even think about other tax planning ideas.

In the current tax era of greatly increased requirements to itemize deductions, a tax “bunching” strategy is absolutely mandatory. The “bunching strategy” recognizes that the best tax deductions are obtained by putting deductions in one year rather than spreading them amongst several years. For example, in years where your charitable contributions
are very low, hold off until the next year to catch up, then also pay the full amount of the next year’s contributions in the “catch up” year in order to double your chances of itemizing. Similarly, few Americans receive medical deductions anymore, but if you incur a large expense for say, the deductible on surgery, then try to do all of your other medical items in the same year, such as dental and vision exams, check-ups, etc.

Check into your employer’s handbook to see what employer provided fringe benefits are available. Taxpayer’s are often surprised at the available benefits, or at our explanation of what some benefits really mean.

Contact Emerald Financial Partners today! We are happy to meet with you throughout the year for tax planning, retirement and similar income tax related
issues, and sincerely appreciate your continued business each year.

11
Dec, 2018
Proactive Accountant

Is Your Accountant Proactive or Reactive?

When you own a business, there are many aspects of your business where you will want to be proactive vs. reactive.  For example, you may be proactive in managing your monthly cash flow, or you may be reactive when you run out of money! In this article, we’ll discuss some of the ways you can determine if your accountant is proactive or reactive, and why it matters.

In a reactive business, the tendency is to respond to events after they occur, while proactive strategies are designed to anticipate possible challenges and plan ahead.  At Emerald Financial Partners, we believe that the accounting of your business should always have a proactive element.

By definition, the word proactive is, “creating or controlling a situation by causing something to happen rather than responding to it after it has happened.”  What does this all of this mean when it comes to accounting?

A reactive accountant addresses issues after they’ve happened and, in some cases, performs routine crisis management.  That can be stressful on the business! Often, the accountant is dealing with numbers as a historical event; that is, the income and expenses that have already happened.  They are responding only after something else has caused a concern to arise.  At tax time, they put numbers in boxes, perform calculations and provide a synopsis of what could be changed going forward, based on this history.  This is reactive accounting.

A proactive accountant, on the other hand, is working side by side with the owner, collaboratively to help them grow their business.  A proactive accountant is an adviser that is looking for opportunity to position the business for profitability, tax savings, expense reduction, and more.  A proactive accountant addresses the client’s needs before they become urgent issues.

In 2018, the difference between a proactive accountant and a reactive accountant was never more obvious.  With all of the tax changes affecting small businesses, a proactive accountant, like Emerald Financial Partners, suggested a review with their clients to ensure that the business was pivoting to take advantage of new tax benefits before year end.  Some of the ideas we reviewed with our clients included:

  • Whether their business was categorized under the proper entity based on new tax laws,
  • Would be impacted by the new Qualified Business Income deduction,
  • That the salary calculations and requirements for business owners was being met

In addition, we meet with clients regularly and advise them on ways to grow their business.  Is your accountant:

  • Focused on real-time tax planning or just a once a year look-back?
  • Knowledgeable about your specific industry and/or challenges? Able to make recommendations, based on this knowledge, about ways to grow your business or increase profitability?
  • Providing ideas to save you taxes for the coming year?
  • Aware of your business goals and providing regular guidance and feedback to help you reach those goals?

As a business owner, the difference between a proactive or reactive accountant could mean the difference between success and failure.  Are you working with a proactive accountant?  If you’re not sure, contact Emerald Financial Partners and we’ll get you and your business on the right path.

13
Sep, 2018

How Will Recent Tax Law Changes Affect Your 2018 Return?

Now is a good time to start preparing for the 2019 tax season so you won't be surprised with tax bills when the new year rolls around.  This year, it's even more important to review your situation with the new tax-law changes.  One thing you can do to ensure that your taxes will be in order is to schedule a consultation with Emerald Financial Partners now.  We offer Top Rated Local® tax services for individuals and businesses in Maryland.  Whether you’re interested in personal tax preparation or small business accounting and tax services, we can help!

Are You Withholding the Too Much or Too Little?

Earlier this year, IRS officials updated their withholding tables and issued a new Form W-4 for 2018 after passage of the Tax Cuts and Jobs Act last December. The act reduced employees' income tax rates, adjusted tax brackets and eliminated personal exemptions, among other changes.  The Treasury Department, which includes the IRS, "may make more significant changes to withholding in 2019 given its new discretion over the withholding structure provided in the Tax Cuts and Jobs Act," the GAO noted in a July report.

"It's important every year for people to review if they're having the right amount of tax withheld from their paychecks," acting IRS Commissioner David Kautter said in April. "This year, it's even more urgent for people to review their situation following the new tax-law changes."

"Many taxpayers have preferences about the tax refund that they will receive or the balance they will have to pay when they file their tax returns," the GAO report stated. "The tax withholding tables that Treasury and IRS update each year are an important tool that both employers and employees rely upon to form their expectations."

Will Your Income Change During the 4th Quarter?

Are you expecting a large year end bonus?  Are you changing jobs?  Any dramatic changes in income during the 4th quarter can impact your tax liability.  Schedule a consultation with the experts at Emerald Financial Partners today, so that you can prepare for your tax liability in April 2019.  It's better to be prepared than to be caught off guard!

Unreimbursed Employee Expenses

One of the biggest changes under the new tax law changes was the elimination of the deduction for unreimbursed employee business expenses, beginning with 2018 tax returns. This means that employees will no longer be able to offset their taxable income by common business expenses they may incur.  This can have a dramatic impact on your taxable income.  You may want to change your spending, talk with your employer, or plan for a larger taxable income.  The experts at Emerald Financial Partners can provide sound advice for your unique situation.

Don't Wait!

Don't wait until the New Year to evaluate your 2019 tax situation.  Schedule a consultation with the experts at Emerald Financial Partners.  

Emerald Financial Partners believes you should have a trusted partner, on call, to support you through the financial decisions that impact your life, your family, and your business. We provide a holistic approach to your tax, accounting, and financial needs.  Our team goes above and beyond to understand your unique needs and create strategies that will help you reach your goals.   Our services are structured to provide you unlimited access and on-call support to help you make better financial decisions, every day.

© Copyright 2018 Emerald Financial Partners.

Powered by Top Rated Local®