Author: Eric Buechler

First came “Where’s My Refund?”, a way for taxpayers to track refunds from  their federal tax returns.

Now, with more than 80 million Americans due for coronavirus relief dollars, the Internal Revenue Service is going online again with a tracking service for those Economic Impact Payments.

“Get My Payment,” which is located on the IRS Web site (www.irs.gov) , gives taxpayers a quick way to discover how much they will receive in payments and when the deposits might arrive. It tracks either electronic payments or paper checks. To use “Get My Payment,” taxpayers must provide a few identification details, including Social Security Account Number and date of birth.

The online tool also allows people to arrange for direct deposit to their bank accounts if they didn’t ask for direct deposit on recent income tax returns, the IRS said. The agency is taking its delivery information primarily from 2018 and 2019 (if filed) returns.

People who did not file income tax returns for those years still are eligible to receive the payments. They can use another program called ’The Non-filers: Enter Payment Info tool.”  It was designed for people who aren’t required to submit tax returns — perhaps because of too little income, the IRS said.

Last week, the tax agency also announced that people receiving Social Security retirement, disability or survivor benefits can expect their Economic Impact Payments to be paid  automatically “in the near future,” even if they did not file recent tax returns.

The Economic Impact Payments range to $1,200 per individual and to $2,400 for a married couple filing jointly. Parents also receive another $500 for each child under the age of 17. Payments phase out at $75,000 of adjusted gross income (on tax returns) for individuals and $150,000 for joint returns.

Find “Get My Payment” at https://www.irs.gov/coronavirus/get-my-payment and more information about the payments at https://www.irs.gov/coronavirus/economic-impact-payment-information-center .

As might be expected, the “Get My Payment” site is under heavy use now, as the first payments are going out. Sometimes, it also can’t track one because the data for it is not yet available, The IRS says it is updating the site once a day, usually in the early morning hours.

Here is a late-breaking update about estimated payments of Minnesota income taxes.

As noted in our previous post, the Minnesota Department of Revenue is requiring individual taxpayers to submit estimated taxes for the first quarter of the 2020 tax year by April 15. Those payments were not postponed by the emergency actions involving coronavirus.

On Friday (April 10), Minnesota Revenue announced three formulas that will avoid penalties, interest or extra taxes. Taxpayers will be safe if they base the payments on:

• 90 percent of their estimated tax liability for 2020 or
• 100 percent of the taxes they paid for the 2019 tax year.  (Exception:  It’s 110 percent for those with state adjusted gross incomes over $150,000.)
• 75 percent of Minnesota income tax paid for tax year 2018.

The guidance applies to taxpayers who are individuals, partnerships, fiduciaries and S-corporations reporting on a calendar year basis. They may or may not need to pay estimated taxes in Minnesota, depending upon their individual tax situations.

By now, everyone knows that Tax Day has been pushed back to July 15. That’s the new deadline for individual taxpayers to file 2019 returns and to pay their taxes.

Both federal and Minnesota governments gave us some more time because of the severe disruptions caused nationwide by the coronavirus disease emergency.  So, original due date, April 15, now looks like just another day in tax season for many of us.

 Here are a few details Minnesotans will appreciate about the three-month delay:

·   It’s automatic. There are no applications or extension forms required. File and pay by July 15, and you’re square with both Minnesota’s Department of Revenue and the Internal Revenue Service.

·   The longer filing time also comes with no penalties or interest from either government.

·   There is one important note for Minnesotans who use estimated tax payments. They still must make their first quarter payments for tax year 2020 by April 15. That is different than the IRS extension, which postpones those Q1 payments to July 15.

·  If you still can’t file by July 15, the normal extensions will delay the return until Oct. 15. But, as always, tax payments will be due on the new Tax Day, July 15.

Both state and federal tax agencies are urging taxpayers to file as soon as they can – especially if they expect refunds. The IRS announced that most refunds are being paid within 21 days.

 Minnesota Revenue also asks taxpayers to send in their returns and taxes as soon as possible to help fund the state’s battle against coronavirus. For more about the state’s extension, see https://www.revenue.state.mn.us/our-response-covid-19.

Of course, to discuss your personal taxes, feel free to contact Eric Buechler, owner of EricJohn Ltd. and an enrolled agent recognized by the Internal Revenue Service.

The Internal Revenue Service is streamlining again for the 2019 tax filing season. Its basic form for individual taxpayers, the IRS Form 1040, is a bit shorter and has some convenient changes.  Among them, the tax agency has trimmed the paperwork by dropping three numbered schedules from its main package.  The 1040 for 2018 included six of those related schedules.

The IRS did help senior citizens with a new, optional twist. Taxpayers who are 65 and older – born before Jan. 2, 1955 – can choose a customized version named. the “1040-SR.”  One convenience is a handy chart showing standard deduction amounts with age and blindness conditions included. Otherwise, it’s pretty much the new 1040 with bigger print.  

Which version should you senior taxpayers use?  Take your pick. The IRS says it will accept either the new 1040 or the 1040-SR.

The IRS did add a new report aimed at investors in its new 1040 package.  The first question on Schedule 1 asks about any investments in “virtual currency,” also known as cryptocurrency. The IRS has been focusing on those digital deals recently. 

The 2019 model of the 1040 can be more convenient for some taxpayers. Others will need to delve deep into underlying tax issues to fill out their 1040s.  Feel free to contact EricJohn Ltd. owner Eric Buechler for guidance or for full preparation of your 2019 tax return.

The Internal Revenue Service on Wednesday (Feb. 26) came out with new regulation to “provide guidance” about business meals and related tax deductions. Basically, the tax agency is issuing its  interpretations of the federal Tax Cuts and Jobs Act from 2017 that cut out some deductions — most notably, the tax breaks for entertainment expenses.

But, although those disappeared at the end of 2017, company owners and their employees still can deduct part of the costs of true business meals. For example, if a sales representative takes a potential client out to dinner for business reasons, the company can deduct half (50%) of the meal’s cost. However, they can’t get outrageous. The IRS rule says the deduction is okay if the “expense is not lavish or extravagant under the circumstances.”

Employees are considered to be business associates, so the company can deduct their meal costs while traveling for business at the 50 percent rate. 

Then, there also are some common situations when a business owner can write off the whole cost of food for employees.   For example, any food and drinks offered free of charge to the general public are 100 percent deductible. A company-wide party or lunch also qualifies. And, as you might suspect, if the business provides meals as part of employee’s taxable pay, then the business can take the deduction.

 A couple of years ago, an IRS ruling verified a full deduction for food expenses in business presentations involving the general public.  A real estate agent showing a house, for example, can write off the costs of cookies, hors d’oeuvres or even wine as legitimate business expenses.  The key is that the food must be available to the public as part of the open house.

Likewise, a financial adviser who hosts clients for a business presentation also can enjoy the full deduction at tax time. Both are considered business expenses, the Bradford Tax Institute noted. One main requirement in both cases is that all the clients are outside business prospects. They can’t be relatives, co-workers or “an exclusive list of guests,” as the IRS rule says.

The public can comment on the proposed regulation, called “Meals and Entertainment Expenses Under Section 274,” until April 13.  See https://www.federalregister.gov/documents/2020/02/26/2020-03723/meals-and-entertainment-expenses-under-section-274 .

Eric Buechler, owner of EricJohn Ltd. and an IRS-approved enrolled agent, commented on another common situation that was not directly covered in the new rules.  Employers can take a full (100 per cent) deduction for costs of food/beverages for employees at work meetings that are held in-house and are for the convenience of the employer, he said.   Eric who is an IRS-approved enrolled agent, can help small business owners deal with the details about deductions involving business meals.

It’s Monday, Jan. 27, and the computers at the Internal Revenue Service will begin to gulp in 2019 returns from individual taxpayers today. They’ll be processing a deluge of numbers. The IRS expects to collect 150 million returns just from individuals this season.

Nonetheless, the earliest filers won’t be the bulk of those returns. Many of us still are waiting for necessary records – such as W-2 and 1099 forms from employers – to land in our mailboxes before filing. For example,  Friday (Jan. 31) is the IRS’s deadline for employers to send out those pay reports to workers. In practice, that means they could arrive early in February.

The other end of the tax filing season – the due date for tax returns and payments – is standard April 15 this year. It’s been a day or two later in some recent years due to quirks in the calendar and a local holiday in the nation’s capital.  

If it’s any help, let us note that 2020 is a leap year, and the leap day, Feb. 29, falls deep in tax filing season. So, we all are getting one more day than usual to prepare and pay up, thanks to the calendar.

What will be new when taxpayers and their preparers start figuring?  They’ll encounter a redesigned Form 1040, for one change. It’s built to be simpler.

 Many taxpayers who work for companies also might want to adjust their withholding rates after seeing their tax bills.  There’s a new W-4 “Employee’s Withholding Certificate” that reflects changes made in the big revision of the tax code late in 2017.  (Making a change is not required just because of the redesign, though, the IRS says.) 

We’ll talk about the new 1040 and W-4 in future posts.  But, for now, Eric Buechler, owner of EricJohn Ltd. and an enrolled agent recognized by the IRS, says paying attention to the 2020 W-4 can be important. He compared withholdings from a tax return using a 2019 W-4 with the same return using the newest W-4 for 2020. Sure enough, “Withholdings were different,” he says.  

The IRS is offering a new tax withholding estimator at its Web site.  (See https://www.irs.gov/individuals/tax-withholding-estimator ) Eric says his clients also can stop in for a personal tax projection.

Actually, if you work with any tax preparer on your return, it’s a good idea to reserve some time soon.  Get on his/her work list. For example, Eric already is setting up schedules for interviews for preparing federal and state tax returns.

Welcome to a new tax filing season!

Would the International Organization of Historic Postal Stamp Collectors, if it existed, qualify for a tax-free charitable contribution on your return? How about disaster relief organizations? In the final two weeks of the tax year, you might want to know – and fast.

Last week we promised to pass along some guidance from the Internal Revenue Service about donations to charities and other tax-exempt organizations. Charitable giving is one of the few steps you can take to reduce taxes just before year-end, which now is less than two weeks away.

Taxpayers can write a check or send money electronically to a non-profit or other charity of their choice. Donating property also is allowed. Just make sure that any donations are made before the close of the year, which, for most individual taxpayers, is 11:59 p.m. on Dec. 31.

Is your favorite charity or non-profit eligible for a tax exemption on your return?  Here’s a short list of the types of organizations that qualify:

• Federal, state and local governments in the United States
• Community funds created and operated exclusively for religious, educational, scientific and other benevolent purposes, including prevention of cruelty to children or animals.
• Churches, synagogues, other religions organizations.
• Veterans organizations
• Fraternal societies, but only if the contribution is used exclusively for charitable purposes.
• Non-profit cemeteries, but not the individual lots within them.

Then, we can drill down further – even to specific, local charities on your list, with your computer or smartphone. The IRS provides a Tax Exempt Organization Search online and has announced that taxpayers can rely on it for their returns. Go to:   https://www.irs.gov/charities-non-profits/tax-exempt-organization-search  and click through at the bottom of the page to the search tool.

We’re just skimming the surface here, of course. For a deeper dive into donations, check IRS  Publication 526, “Charitable Contribution.” It is available at the IRS Web Site, www.irs.gov.  Of course, Eric Buechler, proprietor of EricJohn Ltd., also can show you how to navigate the tax rules for tax-deductible contributions to charities and other non-profit groups.

It’s the time of the year when charity abounds and, at the same time, tax returns loom ahead. 

Yes, you can help others AND, sometimes, yourself with year-end giving. But you might need to plan how to give, especially with tax reforms now solidly in place.

Briefly, the only way for individual taxpayers to claim a federal tax deduction for charitable contributions is to itemize on Schedule A.  That schedule basically adds together list of expenses ranging from medical insurance premiums to interest on home loans for deduction on the tax return. Charitable donations are among them.

But here’s also where many taxpayers willingly pass up the chance to deduct. The most recent tax reforms increased the standard deduction, which is an automatic benefit, to $12,200 for a single taxpayer or $24,400 for a married couple filling a joint return. If itemized deductions on Schedule A don’t reach those levels, taxpayers generally will pay less in taxes by taking the standard route. On the other hand, if their itemized deductions do exceed the standard, taxpayers usually will pay less tax using Schedule A’s values.

Many charitable deductions are more flexible than other expenses. You might be able to hasten or delay your contributions a few weeks in order to limit taxes.  “If (you’re)  at or over (the standard deduction  on Schedule A), take items in this year,” EricJohn Ltd. owner Eric Buechler says.  If you’re well under, it might pay to wait and bunch up two years of donations in January to help reduce taxes for your 2020 return.

Eric, who is an enrolled agent recognized by the Internal Revenue Service, can help taxpayers decide when charitable contributions make the best impact in lowering income taxes

The IRS also offers some tips about charitable contributions themselves. For example, in the upcoming year, most political groups – even if they are structured as non-profit organizations – won’t qualify for charitable deductions. We’ll pass along some of those guidelines in the next week.

Taking an IRA distribution before age 59½ is one of those times when a worker must watch the calendar. You’ll want to be acting quickly and counting the days, as you’ll see here.

Sometimes a taxpayer wants to move money from one retirement account to another, or perhaps he/she receives an unexpected distribution directly from a retirement account. If the taxpayer is younger than 59½ years old, a clock starts ticking on arrival.  He/she must roll over that money in a similar retirement account within 60 days, or the money will be heavily taxed.

 This is not a time to dawdle or delay. If the rollover is not deposited on time, the IRS will charge the person’s normal income tax plus another 10 percent tax for an early distribution.

Can the problem be avoided? Yes, by using a “direct rollover.”  With that strategy, the taxpayer never touches the distributed cash. The retirement plans themselves move the money.

This area of early distributions has a slew of exceptions to the extra 10 percent tax. Basically, if the taxpayer missed the 60-day deadline for some reason outside his/her control, the IRS can waive the penalty tax. A traditional IRA also waives the 10 percent tax on withdrawals of as much as $10,000 for taxpayers who want to buy their first homes.  

There are a number of exceptions and rules involved with early IRA distributions. Feel free to contact Eric Buechler, owner of EricJohn Ltd., for guidance on the tax implications of retirement plans.