Alliance Financial & Income Tax is a veteran-owned and operated income tax and financial services business in Blue Springs, Missouri. We have been helping families and small businesses in the Kansas City area with their taxes and finances since 2002.
The
Tax Cuts and Jobs Act includes changes to moving, mileage and travel expenses: Move-related
vehicle expense The new
law suspends the deduction for tax years beginning after Dec. 31, 2017, through
Jan. 1, 2026. During the suspension, no deduction is allowed for use of an auto
as part of a move using the mileage rate listed in IRSNotice 2018-03. This does
not apply to members of the Armed Forces on active duty who move related to a
permanent change of station. Unreimbursed
employee expenses The Act
also suspends all miscellaneous itemized deductions subject to the 2 percent of
adjusted gross income floor. This change affects unreimbursed employee expenses
such as uniforms, union dues and the deduction for business-related meals,
entertainment and travel. For
additional guidance, see IRS
Notice 2018-42. Standard
mileage rates for 2018 The
standard mileage rates for the use of a car, van, pickup or panel truck for
2018 remain:
54.5
cents for every mile of business travel driven, a 1 cent increase from
2017.
18
cents per mile driven for medical purposes, a 1 cent increase from 2017.
14
cents per mile driven in service of charitable organizations, which is set
by statute and remains unchanged.
Increased
depreciation limits The
recent legislation also increases the depreciation limitations for passenger
autos placed in service after Dec. 31, 2017, for purposes of computing the
allowance under a fixed and variable rate plan. The maximum standard automobile
cost may not exceed $50,000 for passenger automobiles, trucks and vans placed
in service after Dec. 31, 2017. For
additional details, see the May 25, 2018 IRS news release: Law
change affects moving, mileage and travel expenses.
Most Americans are finished with income taxes for the year, having completed and filed their returns under the old rules.
But now, a bunch of new rules have taken effect, thanks to the reform legislation enacted late last year. Affected taxpayers would be wise to brush up on the details, as several key provisions already have become sources of potential confusion.
According to one survey released in April, 13 percent of consumers hadn't even heard of tax reform, and others were confused about the impact of key provisions — all of which make it harder to plan ahead.
Here are some of the myths and misconceptions of tax reform to which experts are pointing:
1. Myth: Tax reform will make filing returns a lot easier
Simplification was a major goal of tax reformers, and the new rules will make things easier for some filers. In particular, an estimated one in five taxpayers will switch from itemizing to taking the standard deduction. These people no longer will need to hang onto charitable-donation receipts and other paperwork.
However, not everyone will find tax-return filing to be any simpler, especially those who continue to itemize.
"Overall, the legislation was not simplifying," said Mark Luscombe, a tax analyst with Wolters Kluwer Tax & Accounting. "The only thing you can point to is the increased standard deduction."
In addition, there are some new provisions that taxpayers will need to learn about. Among them is a new 20-percent deduction, a tax-shaving break for people who own "pass-through businesses."
This provision "will require complex calculations that have never existed in the past," said LBMC, a Tennessee company that provides accounting and other services.
There's also a lingering lack of clarity regarding which business owners can take advantage of this deduction and other details, Luscombe said.
In addition, the reform law didn't simplify other potentially complex areas, such as sorting through capital gains/losses or assessing eligibility to make deductible contributions to Individual Retirement Accounts.
2. Misconception: Mortgage interest no longer is widely deductible.
Actually, mortgage interest will remain deductible for the majority of homeowners.
The new law did change the rules so that mortgage interest now only can be deducted on up to $750,000 in debt (on your primary home and one additional dwelling).
But that's still enough to cover loans on most U.S. homes, where the median price is near $246,000, according to the National Association of Realtors ($261,000 in metro Phoenix).
Besides, many buyers make substantial down payments of 20 percent or more, thus taking out smaller loans.
At any rate, this restriction applies only to newer loans taken out after Dec. 14, 2017, noted Tim Steffen, director of advanced financial planning for Baird Private Wealth Management.
"Any loans in place prior to then are still subject to the (previous) $1-million debt limit," he said. "So if the interest on a loan was deductible in 2017, it will likely still be deductible in 2018."
3. Myth: Borrowers no longer can deduct interest on home equity loans
For many people with home-equity loans, the interest deduction was eliminated. But some borrowers still will be able to make use of this tax break. It really boils down to how loan proceeds are used.
As long as the borrowed amount is used to buy, build or substantially improve a home, the interest remains deductible, said Steffen.
But if the proceeds are used to buy a vehicle, pay off other debts (such as credit-card balances) or for other, non-housing purposes, then the interest is no longer deductible.
"This means that borrowers will need to carefully track the use of their home-equity loan proceeds in order to maintain the tax deduction," he said.
4. Myth: Reform means parents no longer will receive tax breaks for their kids.
The personal exemption was repealed, which means there's no longer a $4,050 deduction for a spouse and each dependent, noted Steffen. However, the newly expanded child tax credit will help to offset that.
The tax credit for children under age 17 has doubled to $2,000, plus there's a new $500 credit for other dependents. "So older kids or even your parents who are dependents can qualify for a new credit," Steffen said.
Also, the income levels for eligibility have risen dramatically, meaning many additional families will benefit. For many households, "The new credits will more than offset the loss of the deduction," Steffen said.
5. Misconception: Federal tax reform doesn't affect state income taxes.
Not quite. Most states including Arizona base their own income-tax systems on the federal tax code almost entirely or use it as a starting point. So the drastic changes at the federal level could affect some of these states and the taxes their residents pay.
Reform will broaden the federal tax base, subjecting more personal income to taxation, by eliminating various deductions and exemptions. Congress largely offset this by cutting federal tax rates.
But so far, most states haven't yet cut their own rates or made other adjustments. Unless they do, "Most states will experience a revenue increase" and residents of those states will pay more, the Tax Foundation predicted.
"The vast majority of filers will receive a tax cut at the federal level, but they could easily see a state-tax increase unless states act to prevent one," the group said.
In particular, federal tax reform eliminated the personal exemption but increased the standard deduction. Yet "eliminating the personal exemption broadens the tax base considerably more than raising the standard deduction narrows it," subjecting more income to taxes, the Tax Foundation said.
Thus, it will be important for people to monitor what actions, if any, their state legislatures take.
Reach the reporter at russ.wiles@arizonarepublic.com or 602-444-8616.
If you have questions regarding your specific situation, please contact our Blue Springs tax office at 816-220-2001
Mike Mead, EA, CTC
Alliance Financial & Income Tax
807 NW Vesper Street
Blue Springs, MO. 64015
P - 816-220-2001 x201
F - 816-220-2012 AFITOnline.com
Taxpayers who sell a home may qualify to exclude from their income all or
part of any gain from the sale. Below are some things taxpayers should keep in
mind when selling a home: Ownership and use. To claim the exclusion, the homeowner
must meet the ownership and use tests. During a five-year period ending on the
date of the sale, the homeowner must have:
Owned the home for at least two years.
Lived in the home as their main home for at least two
years.
Gain. Taxpayers who sell their main home and have a gain
from the sale may usually be able to exclude up to $250,000 from their income
or $500,000 on a joint return. Homeowners who can exclude all of the gain do
not need to report the sale on their tax return. Loss. Taxpayers experience a loss when their main home
sells for less than what they paid for it. This loss is not deductible. Reported sale. Taxpayers who cannot exclude the gain from
their income must report the sale of their home on a tax return. Taxpayers who
choose not to claim the exclusion must report the gain on a tax return.
Taxpayers who receive a Form
1099-S, Proceeds from Real Estate Transactions, as part of the real estate
transaction must also report the sale on their tax return. Mortgage debt. Some taxpayers must report forgiven or
canceled debt as income on their tax return. This generally includes people who
went through a mortgage workout, foreclosure, or other process in which a
lender forgave or canceled mortgage debt on their home. Taxpayers who had a
written agreement for the forgiveness of the debt in place before January 1, 2017,
might be able to exclude the forgiven amount from income. Possible exceptions. There are exceptions
to these rules for persons with a disability, certain members of the
military, intelligence community and Peace Corps workers, among others. Worksheets. Worksheets included in Publication
523, Selling Your Home, can help taxpayers figure the:
Adjusted basis of the home sold.
Gain or loss on the sale.
Excluded gain on the sale.
Multiple homes. Taxpayers who own more than one home can
only exclude the gain on the sale of their main home. They must pay taxes on
the gain from selling any other home. Tax credit. Taxpayers who claimed the first-time
homebuyer credit to purchase their home have special
rules that apply to the sale. Taxpayers can use the First
Time Homebuyer Credit Account Look-up to get account information, such as
the total amount of their credit or repayment amount. More Information:
With most employees seeing withholding changes in their paychecks, the IRS
recommends taxpayers use the Withholding Calculator to do a “paycheck checkup.”
This will help taxpayers check that they are having the correct amount of
income tax withheld from their paychecks.
Doing a checkup can help protect against having too little tax withheld and
facing an unexpected tax bill or penalty at tax time in 2019. Some taxpayers
might prefer to have less tax withheld up front and receive more in their
paychecks, which would reduce their tax refund next year.
The IRS encourages everyone to check their withholding as soon as possible,
but it’s especially important for these people to use the Withholding
Calculator to make sure they have the right amount of tax withheld:
Two-income families
People with two or more jobs at the same time or who
only work for part of the year
People who claim credits such as the Child Tax Credit
People who claim older dependents, including children
age 17 or over
People who itemized deductions in 2017
People with high incomes and more complex tax returns
People with large tax refunds or large tax bills for
2017
Remember, the Withholding Calculator does not ask the user for personally
identifiable information, such as name, social security number, address, or
bank account numbers. The IRS does not save or record the information the
taxpayer enters in the calculator.
The IRS can piece together a taxpayer’s income and deductible expenses if it suspects the person didn’t correctly report them. That’s what happened in one case when the tax agency performed a “bank deposits reconstruction” of a married couple’s income. The couple questioned the validity of the reconstruction but a federal appeals court ruled that it was properly handled because the taxpayers didn’t keep adequate records or offer any evidence to rebut the IRS’s calculations.
Alliance Financial & Income Tax, a Blue Springs tax resolution firm, is here to help you resolve your tax problem and put an end to the misery that the IRS can put you through. We pride ourselves on being very efficient, affordable, and extremely discrete. The IRS problems will not just go away by themselves but will keep getting worse with penalties and interest added each day if not addressed quickly.
If you owe the IRS, you have a very serious problem. It may take the IRS several years to catch up to you, but they're relentless and have no mercy in collecting all the money that is owed. When the collection process starts, they'll make your life miserable and literally ruin all aspects of your life. This is where Alliance Financial can help with IRS debt and other problems with taxes.
Do you have any of these questions listed below? If so, call Alliance Financial and Income Tax today so we can help.
IRS Problems
Have you received an IRS audit notification?
Haven't filed your tax returns for years?
Do you owe back taxes?
Do you have payroll tax problems?
Has the IRS placed tax liens on your home?
Is the IRS threatening to seize your bank account and take your money out of the bank.
Is the IRS threatening to take your paycheck, 401(k), and other retirement accounts?
Is the IRS threatening to seize your personal property?
Has the IRS placed tax liens on your home?
Is the IRS threatening to seize your bank account and take your money out of the bank.
Is the IRS threatening to take your paycheck, 401(k), and other retirement accounts?
Is the IRS threatening to seize your personal property?
IRS Solutions
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Pleasecontact usif you have any questions or if we may be of any assistance. If you are ready to schedule a time for us to visit you may choose a time online that is convenient for you.
Many taxpayers may need to take out money early from their Individual
Retirement Account or retirement plan. Doing so, however, can trigger an
additional tax on early withdrawals. They would owe this tax on top of other
income tax they may have to pay. Here are a few key points to know:
Early withdrawals. An early withdrawal is
taking a distribution from an IRA or retirement plan before reaching age
59½.
Additional tax. Taxpayers who took
early withdrawals from an IRA or retirement plan must report them when
they file their tax return. They may owe income tax on the amount plus an
additional 10 percent tax if it was an early withdrawal.
Nontaxable withdrawals. The additional 10
percent tax doesn’t apply to nontaxable withdrawals, such as contributions
that taxpayers paid tax on before they put them into the plan.
Rollover. A rollover
happens when someone takes cash or other assets from one plan and puts it
in another plan. They normally have 60 days to complete a rollover to make
it tax-free.
Exceptions. There are many exceptions
to the additional 10-percent tax. Some of the rules for retirement plans
are different from the rules for IRAs.
Disaster Relief. Participants in certain
disaster areas may have relief
from the 10-percent early withdrawal tax on early withdrawals from their
retirement accounts.
File Form 5329. Taxpayers who took
early withdrawals last year may have to file Form
5329, Additional Taxes on Qualified Plans (including IRAs) and
Other Tax-Favored Accounts, with their federal tax returns. Alliance Financial & Income Tax, a tax and financial services firm in Blue Springs Missouri can help.
The IRS has started releasing refunds for taxpayers who claimed the earned income tax credit and the additional child tax credit. Many of the refunds should arrive in bank accounts or on debit cards this week. The IRS also explained some facts about tax refunds, such as: Nine out of 10 are usually issued in less than 21 days, IRS customer service representatives can’t provide refund information until 21 days have passed since a return was filed and requesting a transcript won’t reveal the status of a refund.
