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2020 – 02/28

Good records are the key to tax deductions. In one case, an independent insurance agent’s claims for a variety of business deductions were largely denied. Notably, the U.S. Tax Court found he double counted some expenses. Also, his substantiation for various other items consisted of cancelled checks or credit card/ bank statements that showed expenses were paid, but they were made for such things as doctor visits, gas, and department store purchases for which there was no proof of a business purpose. However, he did substantiate some contract labor expenses to various persons for referrals and other services, including bookkeeping and answering phones. (TC Memo 2020-25)

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2020 – 02/21

Small employers may qualify to change the way they report and pay payroll tax. Generally, employers file Form 941 (Employer’s Quarterly Federal Tax Return) each quarter. Small employers with annual federal employment tax liability of less than $1,000 may now file Form 944 (Employer’s Annual Federal Tax Return) by Jan. 31 of the following year. Qualifying employers may ask the IRS to change their filing frequency from annual to quarterly or quarterly to annually. Requests may be made by U.S. mail (by March 16, 2020) or by phone (by April 1, 2020). If you request a change but the IRS doesn’t grant your request, you must continue with your current filing frequency. Contact us with questions.

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2020 – 02/10 – Do you want to go into business for yourself?

Many people who launch small businesses start out as sole proprietors. There are many tax rules and considerations involved in operating that way. For example, you may qualify for the pass-through deduction on qualified business income. You must pay self-employment taxes and make estimated tax payments on income earned. If you hire employees, you need a taxpayer ID number and must withhold and pay employment taxes. Keep complete records of income and expenses. Also, consider setting up a qualified retirement plan. Contact us if you want more information about the tax aspects of your business, or if you have questions about reporting or recordkeeping requirements.

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2020 – 02/07

How do dependents affect federal income taxes? The Congressional Budget Office recently issued a report (https://bit.ly/3bbJarM ) on this topic. It analyzed tax return data under 2019 tax rules and compared it with the rules that are scheduled to be in place for 2026. It estimated that the average tax benefit per dependent for 2019 is $2,300 ($3,800 per family). Under the 2026 tax rules, that benefit will be $1,700 per dependent ($2,800 per family), on average. Under current rules put in place by the Tax Cuts and Jobs Act, the tax benefit of children younger than 17 is generally greater than the tax benefit of older children or other relatives. Those rules are set to expire after 2025.

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2020 – 01/31

As we begin to file 2019 tax returns, a new report looks at how the IRS performed last tax season. A Treasury Inspector General for Tax Administration (TIGTA) audit shows that, by May 2019, the IRS received over 141 million returns and issued about 100.4 million refunds totaling more than $274 billion. In addition to standard processing, the IRS incorporated hundreds of changes brought by the Tax Cuts and Jobs Act. The audit uncovered errors in IRS processing systems, affecting about 251,000 e-filed returns. TIGTA concluded that “processes and procedures are needed to detect potential false deduction claims” for various items. To read the report: https://bit.ly/36EI7gC

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2020 – 01/17 – Time passages: Estate planning through the years

Virtually everyone needs an estate plan, but it isn’t a one-size-fits-all proposition. Even though each person’s situation is unique, general guidelines can be drawn depending on your current stage of life. If you’ve gotten married, for example, now is the time to build the foundation for your estate plan. And, if you’ve recently started a family, estate planning is even more critical. Your will is at the forefront. Essentially, this document divides up your accumulated wealth upon death by deciding who gets what, where, when and how. A will also designates the guardian of your children if you and your spouse should die prematurely. We can help review and revise your plan as needed.

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2020 – 01/13 – New rules will soon require employers to annually disclose retirement income to employees

The recently enacted SECURE Act includes a new requirement for employers that sponsor tax-favored defined contribution retirement plans that are subject to ERISA. Specifically, the law will require that benefit statements sent to plan participants include a lifetime income disclosure at least once during any 12-month period. It will need to illustrate the monthly payments that an employee would receive if the total account balance were used to provide lifetime income streams, including a single life annuity and a qualified joint and survivor annuity for the participant and his or her surviving spouse. The requirement won’t go into effect until 12 months after the DOL issues a final rule.

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2019 – 12/30

The start of the new year ushers in tax season. If you used your home to conduct business, you may qualify to take a home office deduction on your tax return, even if you’re a renter. Here are the basic rules: The home must be your principal place of business, or a place to meet clients in the course of business. If the office is in a separate structure, such as a detached garage, it will only qualify if you used it regularly and exclusively for business. Deductible expenses include mortgage interest, insurance and utilities, repairs, maintenance, depreciation and rent. You currently can’t claim a deduction if you’re an employee. Here are more details from the IRS: http://bit.ly/2MbhU3z

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2019 – 12/16 – Small Businesses: It may not be not too late to cut your 2019 taxes





Don’t let the holiday rush keep you from taking some important steps to reduce your 2019 tax liability. You still have time to execute a few strategies. For example, are you thinking about purchasing new or used heavy vehicles, heavy equipment, machinery or office equipment in the new year? Buy them and place them in service by December 31, and you can deduct 100% of the cost as bonus depreciation. Or you can put recurring expenses normally paid early in the year on your credit card before Jan. 1. That way, you can claim the deduction for 2019 even though you don’t pay the bill until 2020. Finally, before year-end, contribute to a SEP or 401(k) if you haven’t reached the contribution limit.

Expiring Temporary Tax Provisions

Many temporary tax provisions have expired since the end of 2017. Many more will expire by Dec. 31, 2019. A bipartisan U.S. Senate Finance Committee has been charged with studying the effectiveness of the provisions and identifying options for long-term solutions. In the last of six reports on these provisions, the Employment and Community Development Taskforce examined policies that were aimed at increasing participation in the workforce and expanding economic opportunity in low-income communities. Among the policies considered were the new markets tax credit; the work opportunity tax credit; the empowerment zone tax incentives and more. For the report conclusions: http://bit.ly/2jX3UO7 

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