What's Your Resolution?
We are about to be blasted with endless advertisements that will seek to help you stop smoking and lose weight as it is the time of year for resolutions to be made. It is easy to be cynical about this and their chances of sticking, but it is also easy to see that these resolutions come from a good place and are from people who want to make genuine changes in their lives.
The key to making them work is taking action and doing it quickly. The longer that you put something off, the easier it is to keep putting it off.
Recently, I have talked in this space about how it is more difficult to make financial moves that affect your tax picture as the calendar year winds down. It is really easy to make those plans once the calendar turns, though, and they can feel less dramatic with greater results because they have more time to play out.
But again, you must take action.
I don’t want to spend a lot of time going over any specific plans this week – we will have enough time to do that in the new year, and I know most people are still mentally checked out until all the holidays have passed. But let this be the seed of an idea that can grow.
So think - what is one thing that you would like to change in your financial picture to make 2019 feel better than 2018? It could be as simple and front-of-mind as putting away enough money to make gift buying next holiday season stress-free. It could be as huge and potentially complicated as increasing your business’s profitability.
Either way, here is to you staying committed to making it happen. But remember you must take action, so make an appointment with us now to start keeping yourself accountable and starting the path to success as soon as possible.
Happy New Year!
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It feels difficult to believe that 2018 is almost over. I know everyone says that toward the end of every year, but that feeling has definitely increased around here this time around.
The biggest reason has been the amount of tax changes that have been coming since the passage of the Tax Cuts and Jobs Act. This even continued over the past week or so when we finally saw the final version of the new 1040 form. And that coming just about a month before you can start to really use it.
So we started the year with many questions, and along the way we got many answers. As we go into the filing season, we are bound to find many more questions, and we will hope that we are given answers.
In such a time of change and upheaval, it is always heartening to have so many clients we work with so closely that trust us to travel the path together. So to all of you out there, thank you.
In such times, as well, it can be even more important to trust in your family and friends. They are the ones who give you the energy to travel that work path. So to all of you out there, thank you.
At this time of year, we celebrate different holidays in different ways. No matter what you do or how you do it, though, let this be a wish that you take the time to embrace who you’re doing it with. Let this be a time when you get to relax and reenergize.
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Red Flags - No Problem
It happens to all of us, even me, as earlier this week, I got click baited. No one wants to face a tax audit, right? So why wouldn’t you click on an ad that says it will lead you to a list of red flags that could cause the IRS to give your tax return an extra look and potentially trigger an audit.
And I’ll even allow you the chance to give into this impulse by providing you a link to the article here.
This article is from Kiplinger, and although its eye-catching title and slideshow presentation are very clickbait-y, it is not as if the article is full of bad information. Some of it is even very good, as people should know that the IRS receives copies of your W2s and 1099s, so if you try to not report all of your income, the agency can figure that out without much work.
At the same time, though, I find the idea of red flags that can to an audit kind of misleading.
For instance, another entry on the list is owning your own business, because of how it can open up a sea of potential deductions of which the IRS may want proof. And sure, your business transactions could potentially lead the agency to want to look deeper into your return, but does that mean you should not take deductions to which you’re entitled in the hopes of avoiding an audit?
Of course not. Instead, I think that the proper mindset to take when doing a tax return is to make sure you are submitting a legitimate one. As long as you do that, you can have as many red flags on it as you want. That will just mean that you are using the system to your best advantage and getting a better return.
This type of mindset may be even more crucial as we head into the first tax return season following the passage of the Tax Cuts and Jobs Act. Are you just assuming that you will now fit into the larger standard deduction and that will essentially sum up your return? Well, that is certainly going to be the case for a number of people, but it’s an assumption that could also lead you to not looking into everything for which you could still qualify and benefit from. And if there are legitimate credits or deductions, don’t you want to use them?
Sure, the more that you do take advantage of those things, the more chances there are that your tax return will look different enough from the norm that the IRS may question it. But why should this be a worry if everything you are doing is legitimate and legal?
As always, we are happy to help you find the best answers for your individual situation. If you want some of those answers before the end of the year, time is starting to run short, but we can still offer appointments before year end. Even if you don’t look deep into the situation by then, though, we will still be here once we get into 2019 and are again ready to help you with another tax return.
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It's Already December?
As hard as it is to believe that 2018 is nearly over, it’s the truth. For a lot of families, the news on the new tax laws bodes well, but the “experts” on television have made such a fuss that getting the truth out of the buzz words can be extremely difficult.
I know we have talked about it here for the last few months, but here’s some straight talk…
The new tax law delivers a host of benefits to taxpayers at all levels. For starters, not only is the top rate lowered from 39.6% to 37%, but that rate also kicks in at a higher income level. And, note that whatever new bracket you fall in, more of your taxable income will be hit with lower rates.
A hallmark of the new law is the near-doubling of the standard deduction to $12,000 on single returns, $18,000 for head-of-household filers and $24,000 on joint returns. Congressional analysts say bulking up the standard deduction will let more than 30 million taxpayers avoid the hassle of itemizing write-offs on their tax return because the bigger standard deduction would exceed their qualifying expenses.
Starting in 2018, the $1,000 tax credit for each child under age 17 is doubled to $2,000. Additionally, the new law significantly increases the income phase-out thresholds so that more higher-income families will pocket child credits. This is a HUGE change for many of our clients. And it doesn’t stop there – there is a new credit for older children and other dependents. So, there is much conversation to be had. Learn more here - https://www.tsbas.com/thenewchildcaretaxcredit
The law offers a different kind of relief to individuals who own pass-through entities—such as S corporations, partnerships and LLCs—which pass their income to their owners for tax purposes, as well as sole proprietors who report income on Schedule C of their tax returns. Starting in 2018, many of these taxpayers can deduct 20% of their qualifying income before figuring their tax bill. For a sole proprietor in the 24% bracket, for example, excluding 20% of income from taxation has the same effect of lowering the tax rate to 19.2%.
Now, all of that is great news, but it does come with one big “gotcha” and that’s the fact that, to maximize your savings and refunds, the smart money is on making moves before December 31st.
In years past, of course, retirement contributions after the first of the year helped many taxpayers to ensure a refund or to mitigate their tax bill. This year, though, with the various caps on state, local, and property taxes, I’m recommending to all my clients to make moves before December 31st.
Come in and let’s discuss if the new tax laws will have any negative effects on you and let’s stop that before it’s too late. Schedule online here - https://calendly.com/tsbas/taxcheckup
Time's Running Out
It’s difficult to believe that 2018 is nearly over, but this is true and with it comes a tremendous amount of uncertainty in the stock market and the world of taxes.
I’ve spoken with dozens of people recently that are concerned with the various challenges the new tax laws will impose on them – whether it’s the state, local, and property tax caps of $10,000 – which is a HUGE challenge in New York, as you know, or simply about if it makes sense to itemize anymore.
Here is a summary of the changes - https://www.tsbas.com/2018taxhighlights
Let me tell you, it’s going to be a messy tax season for a lot of people, whether you own a business or you’re earning a paycheck.
On the other hand, there are lot of places where you can still save a lot of money and mitigate your tax bill, but they’re not as readily apparent as they once were. For small businesses that have previously operated as a Schedule C and LLC, there are even more things to look at, and some may require changing the way you have traditionally looked at your business. You’re an S-Corp? Don’t worry, there are still conversations to be had!
There’s one other challenge that no one is talking about and that is whether or not the “off the shelf” software that a lot of taxpayers use is going to be up to the task of handling the changes in the Tax Code.
I’m optimistic that it will be, but I think it might still result in a lot of people missing out on deductions and credits they didn’t know they qualified for.
… and that’s what I wanted to tell you.
Between now and the first of the year, if you have any questions about how the new tax laws are going to impact you, I want you to reach out to me and my team. It’s even more critical than in years past, because so many “standard” deductions have been rethought or redesigned.
Professionally, I think there is every chance that most, if not all, of my clients can realize the same refunds or tax bills they have in year’s past, but strategies like making retirement contribution decisions in the spring have to change to managing these actions before December 31st.
So please, call and schedule a time to join us now, not after January 1st, and let’s make sure we keep money in your pocket. You can also schedule online here - https://calendly.com/tsbas/taxcheckup