If the Internal Revenue Service hasn’t heard from you yet, it’s time to think about taking an extension!

April 15 really is Tax Day this year; there are no weekends or holidays pushing back the filing deadline, as in some previous years.  And, while there’s been some talk in Congress about giving everyone more time to file, those proposals haven’t turned into law yet.

Nonetheless, the government does give taxpayers six more months to file the paperwork. An extension can be filed online or by mail. Better yet, it’s automatically approved.

The IRS won’t ask you why you need it. BUT – and it can be a big “but” – the IRS still expects you to estimate income and pay any taxes due by the deadline.

If you can’t make the deadline, it’s time to join the multitudes of taxpayers asking the Internal Revenue Service some extra days on Form 4868, named or “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.” For a copy of the form, see https://www.irs.gov/pub/irs-pdf/f4868.pdf

The IRS suggests using its online service called Free File. But the agency also notes that tax preparation software typically provides the form. It’s still legit to mail in a paper Form 4868 and a check – postmarked on or before April 15, of course.

The tax collectors also offer other online ways to pay, sch as IRS Direct Pay, which is available online and on the IRS2Go app. In fact, if you make an electronic payment and label it for an extension, you don’t need to file the extension form. The IRS automatically counts it as an extension.

Finally, don’t forget any state taxes you owe. In Minnesota, you don’t have to file an extension form. BUT – just as with the federal return – you must pay an estimate of taxes due to avoid penalties. Minnesota Department of Revenue accepts tax payments through its Web site.

We at EricJohn Ltd. wish you easy and accurate filings for your 2018 tax return!

Minnesota taxpayers now are discovering that what works on their federal income tax returns doesn’t always work on state returns. There is an unusual disconnect between the two systems this tax season. In short, the federal government made sweeping changes that began in the 2018 tax year, and Minnesota’s government hasn’t yet coordinated with them as it has in the past.

The result?  Minnesotan and their tax preparers now are dealing with numerous adjustments and some extra forms to undo those federal changes when filing state returns.

Let’s take a couple of examples that affect most taxpayers. The tax reforms in the new federal Tax Cuts and Jobs Act doubled the past standard deduction and dropped personal exemptions for individuals. (The new standard deduction for singles is $12,000; for married taxpayers, it’s $24,000.)

Minnesota didn’t change either of those basic allowances. So, a single individual can count on an automatic $6,500 deduction from income and a married couple receives a $13,000 standard deduction. Each person also is entitled to a personal exemption of $4,250.

However, for some Minnesotans, it’s still practical to lower taxes by claiming itemized deductions instead of the standard deduction. That’s less likely on federal taxes, because of its higher standard deduction.  So, the Minnesota Department of Revenue created a new form , Schedule M1SA, to allow itemized deductions. (Yes, you can use it even if you took the standard deduction for the federal return.)

On another schedule, Form M1NC, taxpayers must reconcile about 25 types of income or deductions that differ between state tax codes and the new federal law.

For a much more complete listing of Minnesota’s updates, go online to:  https://www.revenue.state.mn.us/Pages/Tax-Law-Changes-FAQs.aspx  

Also check into “Tax Law Changes” button on the Minnesota Department of Revenue’s main site, https://www.revenue.state.mn.us/Pages/default.aspx

The phrase “For Minnesota purposes” is meaningful this year. Eric Buechler, owner of tax preparation firm EricJohn Ltd. can take on those differences between Minnesota and federal tax codes for you this season.

While the federal government largely remains on “Stop!”, the month-long shutdown apparently will not stand in the way of a normal beginning to the tax filing season.

The Internal Revenue Service has called in about two-thirds of its work force to start processing of 2018 tax returns on Monday, Jan. 28. Of course, those 46,000 workers will be working without pay, like other government employees caught in the partial shutdown.

The Minnesota Department of Revenue also kicks off its annual income tax rush on Monday.  Minnesota Revenue did note that many individual taxpayers who use tax professionals or tax prep software can have their returns prepared and ready to go automatically to both tax collecting agencies on Monday.

More important for many millions of taxpayers is the other end of the season, the income tax due date. This year, Monday, April 15, actually is the date for both federal and state tax returns in Minnesota. The federal deadline had been extended in recent years for calendar reasons, including weekends and a holiday in the nation’s capital.  (If you’re interested, only Maine and Massachusetts get extensions because of calendar conflicts this year.)  

But let’s get to the question we’re all wondering. Will the federal shutdown halt or delay taxpayer refunds? Well, they are going out. “We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown,” IRS Commissioner Chuck Rettig pledged in a news release.   

The sweeping changes made by the 2017 Tax Cuts and Jobs Act (TCJA) could become a factor, some pros in the accounting industry are saying. We’ll talk about some of those changes in future posts this tax season.

As the season begins the IRS is making a temporary change that benefits taxpayers with estimated payments.  According to its announcement last week, the taxing agency will waive normal penalties if their payments were at least 85 percent of what they owe in taxes for the year.  The relief has to do with the numbers of taxpayers who did not change their withholding rates this year, after the new law took effect.

The speed of IRS service could well be affected by the shutdown, though.  Accounting Today recently quoted a tax expert from accounting firm CBIZ MHM, who noted that a backlog of taxpayer questions is greeting IRS staff when they return from their furloughs. The TCJA, which largely takes effect for 2018 taxes, also prompts its own questions, Nate Smith noted.

With tax season upon us, now’s the time to reserve time to talk taxes with Eric Buechler, proprietor of EricJohn Ltd. and an enrolled agent certified by the IRS, or your tax preparer.

It’s New Year’s Eve and the clock has just a few hours to tick away until the beginning of 2019!

Benevolent taxpayers might still be able to reduce their 2018 income taxes with a very last-minute donation to a favorite charity. In fact, some non-profits have been reminding their benefactors about an opportunity to contribute.

Making a donation online today or mailing a check in a letter postmarked on Dec. 31 are two ways that often can beat the year-end deadline. However, from a tax standpoint, donors also will want to remember that their gifts still are itemized deductions. Last year’s federal tax reform greatly increased the standard deduction, and the boost may be a better tax deal than itemizing donations and other expenses.

Some other tax-saving moves actually linger until April.They involve contributions by workers to their retirement plans. The rules vary by the type of retirement account.

Retirees who are taking money out of those accounts also should remember that Dec. 31 is the annual deadline for collecting Required Minimum Distributions from most IRAs.

Sweeping changes from recent tax reforms took effect in 2018, and you’ll be encountering them during the coming tax reporting season.  We at EricJohn Ltd. will be ready to assist.

For now, HAPPY NEW YEAR as you celebrate the arrival of 2019!  

The tax status of a business meal with a client has been a perplexing problem for companies and their tax pros since last year’s Tax Cuts and Jobs Act took effect.

Deductible? Not allowed? Partially taxed?

It’s been clear that businesses no longer can deduct 50 per cent of entertainment expenses bought for clients – tickets to events, golf outings, fishing trips, night clubs, hotel stays, etc. – even if they are business-related. But, in the words of the Internal Revenue Service, “the Act does not specifically address the deductibility of expenses for business meals.”

Well, in October, the IRS finally filled in that blank. Yes, businesses still can write off half of the costs of meals and food/beverages connected to legitimate business dealings, the IRS clarified. That assumes the tab is not “lavish or extravagant under the circumstances,” and a company employee is involved, of course.

At the same time, the “how” is important.  Businesses must keep meal or other food billings separate.  An employee cannot lump entertainment and food expenses together, as might have happened in the past (Both were 50 percent deductible). He/she can’t take client to a basketball game or the theater and mix snack expenses along with ticket costs. For example, food included as part of a ticket package to a skybox at a stadium is not deductible.

The IRS says any food/ beverage costs must be stated on separate receipts.  So, while the admission ticket to a game is not deductible at all, the company can deduct 50 percent of a hot dog or drink at the stadium, if its employee obtains a receipt at the cash register.

For a more common meal – say, discussing business with a client over dinner at a local restaurant – the IRS guidance clearly allows the 50 percent deduction.

For a fuller discussion, check IRS Notice 2018-76, which delves deeper into definitions of “entertainment.” And, this isn’t the final word yet. The agency announced that it intends to issue more guidance in the future.

Of course, we at EricJohn Ltd. can provide more specific guidance tailored to your situation as you wrap up your 2018 tax year.

 

 

 

 

 

 

 

Amid the biggest tax code overhaul in 30 years comes this not-so-surprising warning:  The 2019 tax season might start later than normal.

The Internal Revenue Service itself might not agree. But the Treasury Department’s Inspector General for Tax Administration is not convinced that the IRS will be accepting filings of 2018 tax returns on the normal schedule. That skepticism came in a Sept. 25 report.  See it at: https://www.treasury.gov/tigta/auditreports/2018reports/201824064fr.pdf

Usually, taxpayers can count on the season starting by the last week of January.

The TIGTA is skeptical because of the large number of code changes made by Congress in last year’s Tax Cuts and Jobs Act and because of some internal deadlines already missed by IRS.  Most of the changes went into effect for the first time for 2018.

The IRS estimated it must rewrite or create about 450 forms and publications and, to process those returns, the tax agency will have to update about 140 computing systems, accounting industry newsletter Tax Pro Today highlighted in its coverage of the report. IRS also plans to reassign or hire and, of course, train hundreds of new workers.

The chief of IRS technology, S. Gina Garza,  chief of IRS information technology, debated some conclusions in the Treasury Department’s report but seemed optimistic about the upcoming tax season. “Internal Revenue Service Information Technology is committed to implementing the modifications required. . .and ultimately providing a successful filing season for the American Taxpayers,” she responded.

Congress did provide $320 million to the tax collectors to incorporate the new tax codes into the IRS systems, the Treasury’s report noted.  Included was about $291 million for computer systems and operations support.

Can early bird filers count on getting returns in and tax refunds sent by the end of January? EricJohn Ltd. will be ready to help with your personal return, whenever the next tax season starts.