Through the last tax season, I often wrote about how it was not yet time to go through the weeds on just how the Tax Cuts and Jobs Act would affect your tax return. There were just too many variables involved that it didn’t feel the time to get deep into it while we were still doing final returns under the old rules. Now, though, things are starting to flesh themselves a bit more, so we can get a little deeper.
In one of those tax news bits that those who use it keep an eye out for, the IRS has issued mileage rates for 2018. This starts at a 54.5 cent rate per mile traveled for business, a one-cent increase over the previous year. Now that’s clearly not huge, but nice for those who do use mileage on their taxes.
One also has to realize, though, that there are going to be fewer people using mileage on their taxes this coming year. The TCJA also suspended the miscellaneous itemized deduction for those who claimed expenses that their employer did not reimburse, and that could include an amount of mileage for some workers.
Even there, however, there are exceptions being made for reserve components of the armed forces, certain state and local government officials, and also some performance artists. They will still be allowed to use this business standard mileage rate.
There is not much more to say about that, but I did think that the news offered a chance for me to highlight the fact that it’s not only the business use of a vehicle comes with a mileage rate. There is also an 18-cent-per-mile rate for medical purposes (another one-cent bump up) and a 14-cent-per-mile rate for miles driven for charitable organization (but that is set by statute and remains unchanged).
Now granted, these are deductions that not as many will be using with the increased standard deduction. Over the years, though, I have found many people who come to me for tax help might know about deducting medical expenses and charitable donations, but they are not always that there can be the mileage deductions taken along with those. So consider this a reminder, or maybe even a light-bulb moment, for those who will still be tracking those numbers.
Another vehicle-related note, the TCJA also suspended the deduction for moving expenses for tax years beginning after December 31, 2017 until January 1, 2026. However, this does not apply to active-duty armed forces members who had to move because of an order that changed their station.
One thing you may notice about all these updates and changes is that there are few places where the alterations are so universal that it is easy to predict how it will affect tax returns on a whole. Even when a deduction changes, there is also the issue of whether or not you will even be able to take advantage of it anymore. So if you are in a position where you think any of these changes are going to affect you, or you just want to know if they will affect you, please let us know and let’s set up a planning session.
Sometimes after you file a tax return, you realize it was wrong. Sure, we pride ourselves on putting together valid and accurate returns, but that does not mean that you can’t come across income or deductions that you forgot to include, or didn’t know you could include, the first time. So this week I wanted to go over what one should do if you realize you need to amend a tax return.
The first point here is just bluntly to state that, yes, you can file an amended tax return. In general, the IRS gives you three years to do so. That means that there rarely is a time crunch going on with these returns, but you should still get it done as quickly as possible. After all, if the changes mean you get more money back, why wouldn’t you want to receive it faster? And if you will owe money due to the changes, the sooner you pay, the less penalties and interest that will accrue.
There are some things, however, that will not require filing an amended return. For instance, any math errors will be corrected by the IRS and handled appropriately. Also, if there are any forms or schedules you neglected to include, the IRS will mail out a request for them if needed.
This means that what usually requires amending are when things were not reported on the original return. Was there some income you forgot about or didn’t realize was taxable that you should have included? Were there deductions that you did not realize you qualified for that you wished you claimed? Those are the types of things that will be at play here.
Unfortunately, the amended return is not really as easy to file as the original return, because it cannot be processed electronically. Instead, this has to happen on a special form, 1040X, which must be mailed in. The form also includes a space on it to explain the changes you are making to the original return. And as a little note, if this is something that is affecting returns from multiple years (which is allowed under that three-year window) you need a separate form, in a different envelope, for each year.
A final couple quick notes, if you have not received a refund for your 2017 taxes, wait until you do receive it before sending in an amended return. You can cash that original check refund, though, while waiting for the amendments to go through. And if you then want to check the status of the amended return, the IRS offers a “Where’s My Amended Return” page, where you can track it.
This is similar to the agency’s “Where’s My Refund” page, which you will want to use if by some chance you are someone who has not yet received an expected 2017 refund. Almost everyone has received their refunds by this point (assuming the tax return was filed on time), but there are some things that could hold it up, especially for those returns filed in the final hours. That page will give you the best information as to where things stand.
I think it is always a good idea to be open to taking lessons from those who are successful. There is always a level of luck involved in getting there, but there is also always a level of dedication and skill that allowed that turned that luck into something great. So I was drawn to a recent CNN article on Richard Branson.
First, I want to comment on the fact that Branson says he was seen as “the dumbest kid in school.” And that first comment is that I don’t really believe it. I’m not saying that he must have already been a smart visionary as a teen, but I’m sure he wasn’t THE dumbest. Most of us are somewhere in the middle in all matters. That’s not a good or bad thing, just a matter of mathematics. The story we tell ourselves, however, does matter.
For even if the words Branson uses aren’t necessarily true, they set up the story; they gave him something to battle against. We need a reason for being. We need a reason for doing. So what is your story? Where did life take you and what did it make you want to do?
Those things that you want to do, they are what Branson refers to as passions, and he has had many. It is important that you care about what you’re doing. If you want to thrive both personally and financially, you can’t simply try to identify a possible business space, you must also care about what you are doing within it.
When it comes to Branson, he has found many of those spaces throughout his career, going from music to space flight. That is not a trajectory that one could have projected as a logical progression. Being open to new ideas, however, lets you travel new paths and remain relevant. More importantly, it might keep you from becoming irrelevant.
When Branson started in business, being into private space travel would not have been a feasible plan.
Where Branson is now in business, selling records is not a plan that would keep him there.
This is not to say that there weren’t mistakes and missteps along the way. In the article, Branson says he has had many failures, but thinks of them as the chance to learn something. Just as one needs to be ready to move into new places, one can’t be afraid of jumping out of them when they are not working.
Embracing these types of ideas aren’t going to automatically shift you into the financial realm where Branson resides. Refusing to embrace them, though, could guarantee that you’ll never get there.
So embrace your story and let it push you to where your passions lie. Pursue what you desire, but not with such single-minded focus that you miss new opportunities and the chance to engage new passions. And don’t be afraid to make mistakes along the way.
Being who are you is important in life, and it’s important in business that people relate to and want to support you. We are in a wonderful position here to embrace that in our work, and our work is to help others succeed in theirs.
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So we have had the chance to decompress and not only think about taxes now that the filing season has passed, but remaining vigilant about tax scams should never cease. After all, it will be disconcerting whenever you are contacted by someone saying that you have an outstanding tax bill, but scammers are also trying to take advantage of the post-filing season.
One of their latest scams involves calling you from a phone number that is programmed to appear as if it comes from an IRS Taxpayer Assistance Center. This way, if someone questions the caller’s legitimacy, they are directed to look up the phone number on IRS.gov. The scammer then will call back a short time later, and it will look like the call is coming from the number the target has been instructed to look up, adding apparent legitimacy to fraudulent claims.
This represents how scam artists are continually trying to push their efforts forward to get around the knowledge the public has. This is a sly move, too, for it seems very intuitive that if you wanted to determine if the call is real, looking up the number seems a very obvious first step. And if you find the number is an actual IRS number, that can lead to dropping your guard.
It is not just an IRS TAC office that has been used in this manner. There are also reports of scammers programming in numbers to make it appear they’re calling from a local sheriff’s office, a state Department of Motor Vehicles, or other federal agencies. Those may not be as immediately unsettling as an IRS number, but they do add that extra bit of apparent legitimacy.
So this means there are other things one must remember to try to keep yourself safe. First, know that the first correspondence from the IRS will be through the mail, not through a phone call. That piece of mail will not fun to receive, either, but it will contain enough information that you can at least determine that it is genuine.
And then, there are some things that the IRS will not do that you should remain aware of. Even if there is an apparent legitimacy to a call, the IRS will never have you pay a tax bill with a specific payment method, like a prepaid debit card, gift card, or wire transfer. The IRS will also never demand you pay a tax bill without giving you the chance to question it or appeal the amount owed. A scam often works by trying to get you to act quickly, for the more time you have to gather information the more chance you will uncover that it’s fake. The government will actually give you some time (at least to start).
Finally, any threat to bring in law enforcement or immigration officers is an immediate tipoff to a scam. The IRS also cannot revoke your driver’s license, business license, or immigration status.
So hold on to the pieces that you are know are true, and do not let a shred of apparent legitimacy overrule them. Listen to yourself when things seem fishy, give yourself time to figure out what is going on, and know there are people on your side ready to help you through tax issues, be they real or fake.
Happy National Small Business Week!
What, you didn’t know?
Alright, I suppose that’s probably largely because this isn’t exactly the biggest of celebrations. Some of it, though, is may also be because small business owners often have their heads down.
I don’t mean this as a bad thing, because those heads are only down so often because being a business owner is hard. There is a lot that goes into it, and just about every business owner will tell you that there is much more involved in it than they realized at the start. Not only is there a lot of work, but it is also a position where it is difficult to feel comfortable. Profit does not tend to come immediately, and success takes time. That makes all that work feel even more overwhelming.
It is not an endless journey of frustration, though, for the payoffs can be huge. First, these businesses are usually started out of passion. Even when things feel overwhelming, there can be great comfort in working on something that you love. Second, there is a great feeling of power and fulfillment in doing it yourself. Even during the tough times, it can be wonderful to know you are the one who can do something about it and not worry about how higher-ups are handling critical decisions.
And these are also the reasons why it can be so rewarding in my line of work to help these small businesses. It is great to engage with people who love what they do, and it is great to help give them the power to make good decisions for their business.
This can also be one of these tasks that business owners did not expect when they started their venture. You may have been pretty good at balancing your checkbook, but tracking income and expenses in a business inherently involves a little more work (to do it correctly, anyway), and ideally will only become a larger and more involved process as the business grows.
The better these aspects of the business are done, though, the better for the business. As a simple example, the better recordkeeping you have, the more you can take advantage of potential tax benefits. And just being on top of things can let you make better estimates about what your tax burden will be, too, and prevent any surprises.
So it is great when we can give business owners the peace of mind that comes with keeping on top of their bookkeeping. Things get even better when you push into higher levels, though.
After all, how can you really tell how well your business is doing if you aren’t breaking down numbers and running frequent reports? Do you really just want to know if there’s enough money in the bank to pay your bills? How can you decide on future moves if you don’t understand your present?
What types of answers one needs in these higher levels depends on your individual business, and what you want to do with that business. Every business, though has something they can do better. Those that feel like they don’t probably are not going to thrive.
So no matter where you are on this spectrum, contact us and let’s figure out what we can do to help your business thrive and grow. We are committed to our clients’ success, for when they succeed, we succeed.
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