The Taxman Blog
As 2018 is drawing to a close, there are a few tax-smart moves you can make to minimize what you owe in 2019. Curious what they are? Merrill-Lynch gives a good starter list, including conventional wisdom such as making more charitable donations, and maxing out your contributions to your retirement fund. Other items, such as “Decide whether itemizing is still for you,” might require you to “work closely with your tax specialist to make sure it’s the right choice, which will depend on factors ranging from your health expenses to charitable giving.”
Many of our clients are already making appointments for year-end tax planning. If you’d like a tax professional to look over your finances and give you customized recommendations before the end of the year, contact us now to schedule a meeting. We can help you determine what makes sense for your situation, help you reduce your tax bill come next year, and offer clarifications on how the new tax laws affect you.
“Just over 2 in 10 taxpayers will owe money to the IRS next year” due to insufficient withholding, says Darla Mercado of CNBC.
One of its recommendations is to “cross-check that number with your CPA or tax preparer to make sure it’s best suited for you.”
Do you need help figuring out your withholding, or questions about any other part of the new tax laws and how they affect you? Let’s schedule a meeting to make sure you’re getting the most out of filing your taxes.
I talk a little bit about the upcoming changes in 2018.
The Trump Administration has finally published its plan for tax reform, titled a “UNIFIED FRAMEWORK FOR FIXING OUR BROKEN TAX CODE.” Under the “Tax Reform” heading is the tagline: “MORE jobs | FAIRER taxes | BIGGER paychecks.”
Give it a read here:
Over my 35-year career span as a Tax Accountant, I have seen many changes to the Tax code. Some large, and some small. One thing I’ve noticed is, where they begin in committee or as an idea is vastly different from where they finish. Even though this proposed reconstruction to the tax code seems large and ominous, I suspect that changes will be made before we see the final passage.
You’ve probably heard about the recent security breach of Equifax, one of the United States’ three official credit bureaus, and how your data has most likely already been compromised. This is alarming news. What are next steps you can take to protect yourself? Anne Marie Stonich, Managing Director of Financial Planning at Paracle Personal Financial Management, has this to say:
“The recent security breach at Equifax has once again raised concerns regarding protecting your personal data. If you have a credit report, there’s a good chance that you’re one of the 143 million American consumers whose sensitive personal information was exposed. That’s nearly ½ of the US population! Here are the facts, according to Equifax: The breach lasted from mid-May through July. The hackers accessed people’s names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers. They also stole credit card numbers for about 209,000 people.
What should I do now?
As an initial step, we recommend you obtain and review your credit report, which is provided free on an annual basis (as a general rule, we recommend you do this every year). Go to:
annualcreditreport.com to get your free credit reports from all 3 credit bureau’s: Equifax, Experian, Transunion. If you prefer, you can do so over the phone by calling 1-877-322-8228. Review each report to make sure everything looks legitimate. If you find something you don’t recognize, call the company listed on the report to investigate.
What additional steps can I take?
If you don’t anticipate taking out new credit cards or loans, putting a freeze on your credit is an additional step that you can take that will provide a higher level of safety. There is a $10 fee for each of the three bureaus (Equifax, TransUnion, and Experian), unless you can prove you are a victim of ID theft or if you’re over the age of 65 in which case it is free. The freeze isn’t 100% fail-safe as some accounts can be opened without pulling credit; however, it’s a good start.
To put the freeze in place, you’ll need to contact each of the bureaus individually. Here is information from the Washington State office of the Attorney Generals providing the contact info for each bureau as well as instructions for how to lift the freeze should you need to allow access for your credit to be pulled in the future: http://www.atg.wa.gov/security-freeze-procedures .
After receiving your freeze request, each credit reporting company will send you a confirmation letter containing a unique PIN (personal identification number) or password. Keep the PIN or password in a safe place. You will need it if you choose to lift the freeze.
What if putting a freeze on your credit isn’t practical for you?
We recommend, in addition to running your free annual credit reports, that you consider an identity theft protection service, such as Lifelock. These services cost between $10 – $30/month for each individual, but offer many services if your identity is stolen in addition to ongoing monitoring.
What about children?
Children under 16 most likely will not have a credit score (although this can vary state by state). However, it is a good idea to check by running a free annual credit report using their social security number. If they do have a credit file, you can take the steps above for them as well. A helpful resource from the Federal Trade Commission (FTC) is:
The steps listed are something you must do on your own. During the process, you will be asked questions that only you will know the answer to and it’s also important that nobody have your PIN other than you. If married, both spouses will need to go through the various steps.
In addition to the specific actions recommended above in response to the Equifax breach, there are many other practical ways to guard your identity on a daily basis. Here is a link to a short Perspectives article we have prepared on this topic: How to Guard Against Identity Theft
As is evidenced by this security breach, we cannot simply rely upon others to protect our information for us. Unfortunately, the “safe” assumption needs to be that your information isn’t safe. While there is no 100% guarantee of keeping your information safe, we hope the steps above will help you protect yourself from identity theft.”
Thank you, Anne Marie. Taxpayers–I highly encourage you to take these steps to protect yourselves. It might be a pain now, but it’s much easier to be proactive than to have to deal with the consequences of identity theft later.
The scammers are at it again! This time, there’s an email phishing scheme going around from senders impersonating the IRS and FBI. The email asks you to fill out and send in a “questionnaire” from the FBI, which will then be used in a ransomware scam against you–holding your personal information hostage for money. Keep yourself and your information safe! View the official warning and a sample of the fraudulent email on the IRS Website.
Have overseas business, investments, or income, and can’t figure out if you’re required to file an FBAR (Foreign Bank Account Report)? There’s a new tool from Aaron Wiener called The FBAR Wiz, which provides a simple questionnaire to help you determine if you need to file one. The website also features a very informative blog – check it out!
Filing deadlines are approaching! If you own a business, your 3rd Quarter Business Returns must be filed by this Friday, September 15th, 2017. September 15th is also the deadline for getting your documents in to me if you’d like me to file your personal tax return by the extension deadline, October 16th, 2017! Many tax professionals have submission deadlines a month out from the filing deadline, so if you need help filing your taxes, don’t wait. Contact me now to get your tax return filed!
Earlier this month, the Seattle City Council unanimously voted to approve a city income tax, affecting those considered to be “high earners”–meaning individual income over $250,000 a year, or joint income over $500,000 a year.
Only 15 minutes after Mayor Ed Murray signed the ordinance on July 14, Seattle businessman Michael Kunath filed a lawsuit against the city in objection, according to Komo News.
The income tax is controversial not only because of its impact on taxpayers, but because Washington State actually has a law stating that cities may not levy a tax on net income.
Proponents of the tax state that “money from the tax could be used by the city to lower property taxes and other regressive taxes; address homelessness; provide affordable housing, education and transit; replace federal funding lost through budget cuts; create green jobs and meet carbon-reduction goals; and administer the tax,” says the Seattle Times.
Opponents of the tax have a list of objections, but they may not have to use them, since technically the law is on their side. Right now opponents are able to address the legality of establishing this tax through a city ordinance, rather than fighting the tax on its merits or faults.
“‘The problem that we have is that when cities enact ordinances they don’t have the authority to, it sets a precedent and cities will pass more ordinances, and you may like today’s ordinance … but you won’t like tomorrow’s,'” Matthew Davis, attorney for Michael Kunath, told the Seattle Times. “‘So if you wan[t] to fix it, change the constitution, but don’t pass an ordinance.'”
Even if if were to become legal, some residents would be unhappy: “Why is it fair that I work so hard to get to that point, and now I’m forced to pay more?” asked Seattle resident Kate Walter to Carolyn Adolph of NPR.
However, it seems that the voters on the city council see it a different way: “Seattle should serve everyone, not just rich folks,” asserted software developer Carissa Knipe before the council, prior to the vote. In what has become one of the most famous sound bites of the debate, she added:
Less chance of the IRS coming to knock on your door? Sounds like a good thing, right?
President Trump has proposed a $239-million cut to the Internal Revenue Service’s budget. This could mean, among other things, reduced personnel for performing enforcement functions such as auditing taxpayers. This seems like cause for celebration to many. On the other hand, is reduced government funding good for all of us? Some things to consider:
- The IRS is a top producer for the government, bringing in $300 for every $1 it spends, points out the DC Report. With the current administration’s stated goal to run the government in a more “businesslike” fashion, this seems like a counterproductive move–Reporter Vic Simon calls it “as un-businesslike as you can get” to cut down resources that contribute to revenue.
- A decrease in enforcement might result in fewer audits of law-abiding taxpayers, but it will also result in less collection of tax legitimately owed, funds the government needs to fight the increasing deficit, and it will increase the burden on those who do pay their taxes.
- It’s a safe bet that one of the first things to go will be taxpayer services. The IRS is already severely understaffed, with a decrease in personnel of “almost 30% over the last number of years,” Treasury Secretary Steven Mnuchin told the LA Times. “While taxpayers waited an average of 10.8 minutes when they called the IRS seven years ago, that wait had grown to nearly 17 minutes in 2014,” TIME says. Alan Rappeport of the New York Times adds, “Last year, it took nearly 20 minutes to navigate a maze of automation and hold times to reach someone.” Sound familiar?
- Security might also become an issue. With cyber-threats on the rise, the IRS needs the resources to keep taxpayers’ information protected, points out Rappeport.
Perhaps some taxpayers can breathe easier, knowing that their filing errors or accidental over-deductions are unlikely to be examined closely anytime soon. However, a major budget cut to the IRS will have consequences that reach far beyond a little tax fudging.
What do you think? Is this good news or bad news? Feel free to let me know what you think, and of course, reach out to me anytime if you need help making sure that the IRS’ eye won’t fall on you!
Did your summer just get a little less refreshing? If you’re a soda sipper, that may be the case. On June 5, the Seattle City Council approved a tax on soda, energy drinks, and other sugary beverages (though diet drinks get a pass). The tax will take effect in early July at a rate of 1.75 cents per ounce, which will add approximately $1.18 to the cost of a 2-liter bottle of soda, says the Seattle Times. The vote passed 7-to-1 and will be the eighth such tax to pass in the U.S., after cities including San Francisco, Boulder, and Philadelphia. A similar proposal was rejected in Santa Fe, New Mexico, last month.
Proponents of the tax included “public health advocates and community groups,” according to CBS News. “They say it would cut down on the consumption of sugary drinks that have little nutritional value and are linked to .”
Businesses and labor groups were against the measure, citing the negative impact on small business and jobs. “Other critics called it regressive, saying it would affect low-income consumers the most,” reports CBS.
Revenue from the tax is intended to go toward “programs that promote access to healthy food and help address education disparities between white and minority students.”
If your beverages of choice are sports drinks, sweetened iced teas, or fruit drinks, you also have price increases in your future–those are also included in the products to be taxed.
The Trump Administration is proposing a huge overhaul of the way Americans pay taxes. If successful, items on the new tax bill would have far-reaching repercussions for taxpayers and the government alike, cutting down an estimated $9.5 trillion over its first decade in taxes paid and in Federal revenue.
Some highlights from the proposed tax plan, according to the Tax Policy Center:
- Tax brackets would be cut down from the current seven brackets, starting at 10% and ending at 39.6%, to just three, at 12%, 25%, and 33%
- The standard deduction would be increased from the current $12,700 to $30,000
- Personal & dependent exemptions would be repealed
- Mortgage interest, charitable, and itemized deductions would be capped at $200,000
- The top corporate tax rate would be reduced from 35% to 15%
The Tax Policy Center has also released the below chart for a side-by-side comparison of the current tax laws, Trump’s proposed tax plan, and the House Republicans’ proposals, with the last being more moderate in the changes proposed than Trump’s plan.
Will the tax bill come through Congress in 2017? It’s unclear yet when these changes will take effect. Wondering what you can do in anticipation for these possible changes? Ask the Taxman what preparing for the next few years looks like for you.