Employer Alert!

As of January 2019, the Social Security Administration (SSA) will once again be sending out mismatch letters to employers who incorrectly reported their workers social security number (SSN). This practice was “paused” several years ago, but it is back in an attempt to enforce immigration laws. So, how can you avoid these notices?

  • Be sure to have Form W-4 for each employee and/or Form W-9 for each independent contractor on file before you pay them! Also, confirm with the employee/contractor annually the information on these forms is still accurate and update for any changes.
  • Take advantage of the Social Security Number Verification Service (SSNVS). This is a free online service that will verify the name and SSNs of employees using SSA file records. Alternatively, use the automated telephone service, Telephone Number Employer Verification (TNEV). These two verification services can only be used for confirming wage reporting issues, not to verify work authorization.

While often the mismatch is a simple mistake that can easily be corrected, we recommend responding timely since both the IRS and the SSA will be involved. If you would like to discuss your hiring procedures, please give us a call.

Statute of Limitations

After you file your taxes, you’ll have many records that may help document items on your tax return. You’ll need these documents should the IRS select your return for examination. Generally, this means you must keep records that support items shown on your return until the statute of limitations for that return runs out.

The statute of limitations is the period of time in which you can amend your return to claim a credit or refund or the IRS can assess additional tax. Generally, this is the later of three years from the date the return was due or filed. The statue for claiming a refund is the later of three years from the date the return was filed or two years from the date the tax was paid, if no return was filed. Returns filed before the due date are treated as being filed on the due date.

Unable to Pay?

April 15th, 2019 is the official filing deadline for Form 1040, U.S. Individual Income Tax Return. Whether you submitted a return or filed an extension, many taxpayers find they cannot pay the full amount of taxes owed. You also should contact the IRS to discuss your payment options, such as a short-term extension to pay, an installment agreement or an offer in compromise. In some cases, the IRS may even be willing to waive penalties. Remember though, no matter what option you choose, don’t ignore your tax obligations; they won’t go away but will likely get worse, resulting in tax liens or garnishment of wages. Remember, the IRS is far more willing to work with you if they believe you’re making reasonable efforts to resolve the issue on your end!

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.

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