About Padgett Team

Our firm is a leader in outstanding accounting, tax payroll and business services. Our dedication to the 3 dominating business requirements of Professionalism, Timeliness and Excellence dictate the day-to day service we provide equally to each client. No small business is too small.

Top Ten Things You Should Discuss with Your Tax Preparer

Your accountant or tax preparer is a knowledgeable resource, not only for tax preparation but also for planning and advisory services. Below is a list of topics that you should discuss with your tax preparer.

1. Short-term and long-term goals for your small business. Planning to sell your business in the near future? Looking for ways to grow? Or, perhaps, planning a large asset purchase? Your tax preparer may be able to provide direction and advice.

2. The NEW 20% qualified business deduction. The Tax Cuts and Jobs Act (TCJA) introduced a new deduction for small business owners that could impact your bottom line. Find out how to qualify and reap the benefits.

3. Your retirement plan. Will you have enough saved? Are there ways to increase your nest egg?

4. Saving for college. There is no doubt that higher education is expensive. But there are some ways to reduce the burden. Talk to your tax professional about 529 Plans, Educational Savings Accounts (ESA) and Educational IRAs.

5. Tax withholdings. Are you withholding enough or maybe too much? If you commonly face underpayment or late payment penalties, talk to your accountant!

6. Commonly overlooked deductions. Are you taking advantage of the deduction allowed? The new law, Tax Cuts and Jobs Act (TCJA), is complex and different. Don’t miss out on some new deductions! Learn more and take advantage!

7. Life changes. Getting married or having kids? What about changing jobs or expecting a change in income levels? Discussing major life changes before they happen is a smart idea… these changes will often affect your tax position and your tax preparer can guide you.

8. Legal documents. Do you have a will? Or a living will? Are your finances in order in case of an unforeseen tragedy? Discuss with your tax professional the important steps you can take to ensure that your loved ones are not burdened with your financial affairs should you die.

9. Budgeting. A budget is a great way to provide an illustration of what you “think” you save or spend and what actually occurs. Whether this is for your small business or your household, budgets tend to make people more accountable. Your accountant can assist you in preparing a budget…all you have to do is ask.

10. Securing your personal data. Discuss with your tax advisor how long you need to keep tax records and the best ways to prevent identity theft. Simple changes can make big differences in protecting your personal financial data.

2nd Quarter 2019 Due Dates

April 15:

    • Individuals:
      • 2018 Form 1040 due, or file Form 4868 for a 6-month automatic extension.
      • 2018 FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), due. Automatic 6-month extension will be granted for filers who fail to meet the due date.
      • Last day to contribute to an IRA and ESA for 2018.
      • First installment of 2019 estimated tax due.
      • 2018 Form 709, US Gift Tax Return, due if more than $15,000 was gifted to any individual besides a spouse or charity in 2018, or file Form 4868 or 8892 for a 6-month automatic extension.
    • Calendar-Year End C Corporations:
      • First installment of 2019 estimated tax due.
      • 2018 Form 1120 due, or file Form 7004 for automatic 6-month extension.

April 30:

    • Employers: File Form 941 for 1st quarter 2019.

May 15:

    • Partnerships & S Corporations: File Form 8752 if on fiscal year under Section 444 election.

June 17:

    • Individuals:
      • 2nd installment of 2019 estimated tax due.
      • 2018 Form 1040 due for U.S. citizens or resident aliens living/working (or active duty military) outside the U.S. or Puerto Rico or file Form 4868 for an additional 4-month automatic extension.
    • Calendar-Year End C Corporations: Second installment of 2019 estimated tax due.

Delegation is Crucial to Success and Peace of Mind

Owning and managing a business requires time and energy…and honesty, a lot of both! Could your time be better spent by focusing on the tasks requiring only your attention and expertise? Many small business owners find it hard to give up control on certain aspects of the business but what are you forfeiting by trying to “do it all”? In our opinion, by delegating some tasks to others, you can regain meaningful time and reduce stress. It’s a win-win!

Jenny Blake of the Harvard Business Review suggests six categories of tasks, each beginning with a letter “T”, which take too much time and make sense to delegate. She used these measures to help triple the income of her business within three years. Below is a summary of Blake’s Six T’s:

Tiny: Small tasks can add up and devour your time. Tasks such as booking your plane flight and hotel aren’t urgent and can be handled by someone else.

Tedious: Tasks that are simple and straightforward, such as data entry or updating a list of performance indicators from last month’s sales results.

Time-consuming: Complex tasks are often important and may require lots of research. Often, you can delegate 80-percent of those time-consuming tasks and then oversee the finality of the project.

Teachable: Tasks which may seem complex can be broken into smaller tasks that become part of a system with integrated checkpoints so that you maintain quality and final approval.

Terrible At: Some tasks are beyond your abilities to complete efficiently and effectively, often leading to inadequate results and wasted time. Hire a professional for those tasks and you will be happier.

Time-sensitive: Some tasks must be completed simultaneously with others. Delegate the tasks which someone else can do, such as waiting on hold with someone on the phone while trying to locate your luggage which was lost at the airport. This frees you up to focus on more important tasks or projects.

With these thoughts in mind, look at your daily routine and tasks. There are some things which you, and only you, can do. But for everything else, delegate them to someone else!

Penalty Waiver for Estimated Tax Penalty

Good news! The IRS is waiving the estimated tax penalty for many taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year. The IRS is generally waiving the penalty for any taxpayer who paid at least 85% of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. If you are concerned about the tax payments you made for 2018, give us a call to discuss this waiver.

Don’t Miss Out on the 20% Qualified Business Deduction for Rental Activities!

The Tax Cuts and Jobs Act (TCJA) allows for certain businesses to take a deduction equal to 20% of their income! This is applicable to rental real estate activities as long as you meet certain conditions or prove the activity rises to the IRS’s definition of a trade or business. To help rental real estate owners determine if their rental activity qualifies for this deduction, the IRS has issued proposed regulations with a safe harbor. To qualify, you must meet the following conditions:

  • Separate books/financial reports are maintained for each rental activity,
  • 250 hours or more of "rental services" are performed per year for the activity, and
  • The taxpayer maintains detailed records, including time reports regarding hours of all services performed, description of all services performed, dates on which such services are performed and who performed the services.

The Service provided some examples of “rental services” that would count towards the 250 hours. These include advertising to rent, negotiating and executing leases, verifying tenant applications, collecting rent, performing daily operation and maintenance, managing the real estate, purchasing materials, and supervising employees and independent contractors.

If you own rental properties, don’t miss out on this deduction. Contact us to determine if you qualify.

Benefits of a Power of Attorney

Only Certified Public Accountants (CPAs), enrolled agents (EAs) and attorneys may represent you in front of the IRS. In order for the IRS to discuss your tax issues with your tax preparer, a completed Form 2848, Power of Attorney and Declaration of Representative, must be on file to give the preparer power of attorney (POA). Checking the box on your tax return to let the IRS speak to the person who prepared the return gives limited authority to discuss IRS questions that arise in the processing of that return and this authorization automatically expires on the due date of the return for the following year.

Having a POA form on file with the IRS means both you and the preparer will be notified of any issues on your returns. This can be helpful if you travel, given IRS notices are usually time-sensitive. Also, if the notice concerns a mismatch of income your tax preparer may be able to resolve it easily, saving you work and anxiety. Lastly, a POA will remain in effect until either party revokes it. Therefore, if you have changed preparers, you should revoke your POA with your previous tax preparer and create a new one with your current preparer. For your convenience, tax preparers are now routinely asking clients to sign the POA form when they prepare a return. Contact us to learn more about the benefits of this form.

Limit on Deduction of Business Interest Expense

A provision of the Tax Cuts and Jobs Act (TCJA) places a limitation on the amount of business interest expense which can be deducted beginning in 2018. In general, there is an exception to the limitation of business interest expense for most businesses which have annual gross receipts of less than $25 million over the prior three years. For those businesses which are subject to the limitation, their allowed business interest deduction may be capped. The calculation of the limitation considers the businesses’ interest income, adjusted taxable income and financing options.

In addition to the exception for businesses which have less than $25 million in annual gross receipts, there are also exceptions to the interest expense limitation for many service-based businesses.

Please contact us for more details if you feel that your business may be affected by the business interest expense limitation.

The 2019 Tax Filing Season Will Be Like No Other!

As if the Tax Cuts and Jobs Act (TCJA) wasn’t enough to make the 2019 tax filing season complicated, add a government shutdown to the mix and we are in for an unprecedented filing season!

What can you expect when filing your 2018 tax return? For starters, there might be a possible filing delay. Although the filing season officially begins on January 28th, not all the tax forms and schedules have been finalized for changes related to the TCJA. The partial government shutdown could delay the IRS in finalizing these forms, which means some may not be able to file right away. State taxing authorities will also face similar issues finalizing their forms.

Secondly, taxpayers will see a new Form 1040 for 2018. The new form is condensed, making it easier for simple filings, but not exactly as small as the “postcard-sized” originally promised, given the six new schedules. We expect individuals with somewhat complex filings to face challenges navigating the new forms.

The TCJA lowered tax rates, so the amount of federal tax withheld from paychecks decreased in 2018. That, coupled with the elimination of personal exemptions and limitations on certain itemized deductions, could result in smaller refunds, and some may even owe! However, with the higher standard deductions, larger child tax credits, and the new 20% qualified business income (QBI) deduction, others may see a boost in their refunds.

Lastly, after the dust settles on this first year under the new tax law, many will benefit from tax planning in 2019 and beyond. For some, it may be as simple as adjusting payroll withholdings or estimated tax payments to prevent owing penalties and interest next year. For others, especially those who are eligible for the new 20% QBI deduction, tax planning may be more complicated and time sensitive. Give us a call to schedule a meeting on how you can be better prepared under the new tax law.

1st Quarter 2019 Due Dates

January 15:

  • Individuals: Fourth quarter 2018 estimated tax payments are due (final installment).

January 31:

  • Employers:
    • Give your employees their copies of Form W-2 for 2018. File Form W-3 with Copy A of all Forms W-2, regardless of whether you file these forms by paper or electronically. The SSA encourages all employers to e-file. Don’t e-file the same returns which were paper filed.
    • File Form 941 for 4th quarter 2018, or annual Form 944. File Form 940 for 2018.
    • File Form 1096 with Copy A of Forms 1099-MISC reporting non-employee compensation payments in Box 7 only.
    • As a part of the employer reporting requirements under the Affordable Care Act, you may need to give your employees copies of Form 1095-B (Health Insurance Coverage Statement) and/or Form 1095-C (Employee Statement) for 2018. If you’re unsure of your reporting requirements for these forms, please contact us.
  • Businesses: Distribute Form 1099 to recipients for 2018.

February 28:

  • Employers who paper file: File Form 1096 with Copy A of all Forms 1099, except for any 1099-MISC reporting non-employee compensation payments in Box 7. As a part of the reporting requirements under the Affordable Care Act, you may need to file Forms 1094-B, 1095-B, 1094-C, and 1095-C with the IRS. If you’re unsure of your reporting requirements for these forms, please contact us.
  • Large food or beverage establishments who paper file: File Form 8027 to report 2018 tip income, reported tips, and allocated tips.

March 15:

  • Calendar-Year S Corporations: 2018 Form 1120S due or file Form 7004 for an automatic six-month extension. Provide shareholders with copy of Schedule K-1.
  • Partnerships: 2018 Form 1065 due or file Form 7004 for automatic six-month extension. Provide partners with copy of Schedule K-1.
  • C Corporations & LLCs: File Form 2553 to choose to be treated as an S corporation beginning on January 1, 2019.

April 1:

  • Employers who e-file: E-file Form 1096 with Copy A of all Forms 1099, except any 1099-MISC reporting non-employee compensation payments in Box 7. As a part of the employer reporting requirements under the Affordable Care Act, you may need to e-file 2017 Forms 1094-B, 1095-B, 1094-C, and 1095-C. If you’re unsure of your reporting requirements for these forms, please contact us.
  • Large food/beverage establishments who e-file: E-file Form 8027 to report 2018 tip income, reported tips, and allocated tips.

Tax Cuts and Jobs Act

As we kick off the 2019 filing season under the Tax Cuts and Jobs Act (TCJA), it’s hard to say if you’ll see an increase or decrease in your taxes, or if your tax return will become simplified or more complex. But what we know for sure is, ALL taxpayers will be affected by the new legislation!

The TCJA has provided new opportunities for tax savings and tax planning for you and your business. Below is a brief summary of some provisions in the Act. In addition, the IRS has interpreted several provisions of the tax bill, which may provide answers to your questions. Unfortunately, we’re still awaiting interpretation and guidance on some of the more complicated areas of the new law and it’s unlikely we’ll get anymore direction from the IRS before tax season begins.

Tax Provisions Affecting Individuals for 2018

  • There are still seven tax brackets, but the tax rates are lowered to 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
  • The standard deduction has almost doubled from the prior year to $12,000 for individuals and to $24,000 for married couples.
  • Personal and dependency exemptions are eliminated.
  • Child Tax Credit has increased to $2,000 and expands the refundable tax portion of the credit to $1,400.
  • Alternative Minimum Tax (AMT) exemption amount has been increased to $109,400 for married filling joint and surviving spouses and $70,300 for other filers.
  • Individual Healthcare Mandate penalty has been eliminated for individuals who fail to maintain minimum essential health care coverage, but only for years after 12/31/2018. The penalty is still applicable for 2018.
  • Earned Income Tax Credit is still available for low to middle-income wage earners, which can be over $6,000 for a family with three kids.
  • Taxpayers, who itemize, can deduct up to $10,000 in state and local income taxes, sales tax and real estate taxes.
  • Mortgage interest deduction is capped on new home loans of $750,000, and no longer includes home equity line of credit (HELOC) interest.
  • A deduction is allowed for qualified medical expenses in excess of 7.5% of adjusted gross income.

Tax Provisions Affecting Business Owners for 2018

  • Lowers the corporate tax rate to 21%, and the tax rate for Personal Service Corporations is also lowered to 21%.
  • Repeals Corporate Alternative Minimum Tax (AMT).
  • Allows sole proprietors and passthrough businesses a 20% deduction of its Qualified Business Income (QBI). Specified Service Trades and Businesses (SSTB) are not eligible for the deduction, if the taxpayer’s taxable income before the QBI deduction is over $415,000 if filing MFJ or over $207,500 if filing Single, HOH, or MFS.
  • Expands the limits on cash accounting and removal of some of the requirements to track inventory.
  • Allows businesses to fully expense qualified purchases for the 5 years after 2017.
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