In FAQs just posted on their website, the IRS answered many the questions regarding the July 15 filing and payment extension announced in IRS Notice 2020-18. Note the following highlights:
The FAQs are available at:
The IRS has issued Notice 2020-18, which clarifies some provisions for extended returns, but leaves other questions unanswered.
Here are the questions that were answered:
I will continue to keep you posted as additional filing and payment information is released
At a press conference held today, U.S. Treasury Secretary Mnuchin announced the following extensions for federal income tax payments:
A Kiplinger-Barclays poll shows that most Americans aren't feeling a financial boost from the tax overhaul.
By THE EDITORS OF KIPLINGER'S PERSONAL FINANCE
February 6, 2020
From Kiplinger’s Personal Finance
A majority of Americans surveyed in a new poll conducted by Kiplinger in partnership with Barclays Bank say their taxes stayed about the same after the 2017 Tax Cuts and Jobs Act, with remaining respondents almost equally split between higher and lower taxes.
SEE ALSO: 20 IRS Audit Red Flags
The tax overhaul lowered tax rates and expanded income thresholds, but employers also reduced withholding for many wage earners. That may have reduced refunds or inflated balances due with the returns of many taxpayers—and given the impression that savings under the new law were less generous. In addition, the law scaled back itemized deductions. Some 15% of respondents report being affected by the new $10,000 cap on deducting state and local taxes. Some 20% said they felt the impact of no longer being able to claim miscellaneous itemized deductions to write off items such as tax preparation and investment fees and unreimbursed business expenses.
Other highlights: Nearly 40% of respondents say they switched from itemizing deductions to taking the standard deduction, which increased to $12,000 for individuals and $24,000 for married couples filing jointly for the 2018 tax year (higher for taxpayers age 65 or older). Nonitemizers can’t deduct charitable contributions, and roughly 20% of respondents report reducing donations. But about two-thirds of those surveyed say they give to charity regardless of any tax break.
About three-fourths of respondents got a refund on their last return. Nearly two-thirds say they’d rather get a refund than a bigger paycheck throughout the year.
The poll surveyed a national sampling of 852 taxpayers between December 3 and 13, 2019. The median age was 49 years old, and the median household net worth was $203,850 (excluding a primary residence).
We’ve included highlights here (figures are medians unless otherwise indicated).
Which of these tax changes affected you?
I CAN NO LONGER TAKE MISCELLANEOUS ITEMIZED DEDUCTIONS: 20%
I CAN’T DEDUCT STATE AND LOCAL TAXES THAT EXCEED $10,000: 15%
I CAN ONLY DEDUCT INTEREST ON A MORTGAGE OF UP TO $750,000 (DOWN FROM $1 MILLION): 8%
NOW I CAN ONLY DEDUCT CASUALTY LOSSES IF THEY OCCURRED IN A FEDERALLY DECLARED DISASTER AREA: 7%
I CAN NO LONGER DEDUCT MOVING EXPENSES WHEN RELOCATING FOR A JOB: 4%
I CAN NO LONGER DEDUCT ALIMONY PAYMENTS: 1%
NONE OF THESE 58%
Has your charitable giving changed?
NO, I GIVE REGARDLESS OF ANY TAX BREAK: 66%
YES, I HAVE DECREASED THE AMOUNT I DONATE TO CHARITY: 20%
YES, I COMBINED TWO OR MORE YEARS OF CHARITABLE GIVING INTO A SINGLE YEAR TO QUALIFY FOR THE TAX DEDUCTION: 8%
I’M OVER 70 AND NOW GIVE TO CHARITY DIRECTLY FROM MY IRA: 3%
YES, I OPENED A DONOR-ADVISED FUND: 1%
I CAN NO LONGER DEDUCT ALIMONY PAYMENTS: 3%
Do you usually hire someone to prepare your tax return?
If you prepare your own return, do you use tax software?
Which tax software do you use?
H&R BLOCK: 17%
TAX ACT: 13%
Did you receive a refund after filing your last tax return?
SEE ALSO: 10 Tax Breaks for the Middle Class
Would your rather get a tax refund or have less tax withheld throughout the year and receive bigger paychecks?
BIGGER PAYCHECK: 37%
The median tax refund for 2018 was $2,154. What did you do with your refund?
SAVED IT: 38%
SPENT A PORTION; SAVED THE REST: 23%
CREATED AN EMERGENCY FUND: 6%
INVESTED IT: 10%
PAID CREDIT CARD BILLS: 25%
PAID STUDENT LOANS: 3%
BOUGHT GIFTS FOR FRIENDS OR FAMILY: 3%
BOUGHT MYSELF A GIFT: 6%
SPLURGED ON A VACATION: 7%
SPENT IT ON EVERYDAY ITEMS: 7%
After filing your last tax return, did you make changes to your W-4 to adjust your withholding?
NO, I’M FINE WITH THE WAY IT IS: 88%
YES, I HAD MORE TAXES TAKEN OUT OF MY PAYCHECK: 8%
YES, I HAD FEWER TAXES WITHHELD: 4%
In France, from the 14th Century until 1946 (minus short repeals), citizens paid the "Gabelle" tax. In its original form, prior to the 14th Century, the Gabelle was an indirect tax on agricultural products and commodities like spices and wine. However, from the 14th Century onward, the word "Gabelle" was only used to refer to the salt tax. The salt tax was repealed and reinstated numerous times over six hundred years before being completely stricken from the books in 1946.
On December 20, 2019, Congress and the President agreed on a tax extender package as part of the “Taxpayer Certainty and Disaster Tax Relief Act of 2019”.
The Act reinstates many expired tax provisions RETROACTIVE to the 2018 tax year through 2020. An amended return for 2018 must be filed to take advantage of these extenders IF you qualify.
These are the provisions:
The House, Senate and White House have reached a deal on dozens of tax extenders ( many retroactive to 2018) as well as the all new SECURE ACT, which makes significant changes to various retirement-related provisions impacting taxpayers and their employers. The President is expected to sign the bill.
A few highlights of these changes include:
Dear Friends and Valued Clients:
Hoping everyone had the Happiest of Holidays! Congratulations to the Washington Nationals on their first World Series victory in Franchise history. As this is written, the country as a whole is going through some trying times but we will get through them. In the tax world, not too much has happened; mostly clarifications however the State of California is undergoing some large changes which we will discuss.
Let’s talk taxes:
For 2019, the President has ended the shared responsibility penalty which required all taxpayers to have health insurance…in ENGLISH NO PENALTY IN 2019 for not having health insurance; however, you may still have received the government subsidy helping to pay for your coverage. IF so, you will received FORM 1095 A (usually page 9 of the health booklet). I NEED THIS FORM to calculate if you need to pay back some of the subsidy you received. BEGINNING 1/1/2020, CALIFORNIA MANDATES HEALTH COVERAGE FOR ALL CALIFORNIA RESIDENTS. The program is similar to the old Federal program except you need to exceed 600% or the poverty line rather than 400%. There are penalties for not having coverage
$12,200 (Single); $24,400 (MFJ); $18,350 (HH)
ALTERNATIVE MINIMUM TAX:
This is just FYI: Only 78,000 taxpayers were subject to the AMT for the 2018 tax year with the government receiving an additional $967 million; in 2017 4 million taxpayers were subject to the tax and the AMT owed was $21.7 billion…Now that gets a “WHAT A DEAL”.
CHILD TAX CREDIT:
Children MUST have a Social Security number to be eligible.
MILEAGE REIMBURSEMENT FOR 2019:
58 cents. Charity: 14 cents; medical: 20 cents.
Your books (QuickBooks or whatever you are using) MUST break out entertainment from Meals. This is now required or you get nothing on audit.
RENTAL REAL ESTATE AND THE QBI DEDUCTION:
This area has been the “hot” topic for most of 2019. The question…Does rental property qualify for the 20% QBI deduction? Yes, BUT if the owner of the rental property, or agents, spend 250 or more of rental services on the enterprise. A property you may own that is TRIPLE NET LEASE does NOT qualify. Here are the requirements, 1) Separate books and records must be maintained reflecting rental revenue and expense; 2) 250 or more hours of rental service must be performed with respect to EACH rental; 3) MUST keep contemporaneous records (waived for 2019); 4) Must attach a signed election statement to your return and 5) The requirements must be met annually.
Rental services that count towards the 250 requirement; advertising, negotiating leases, Verify information contained in applications, rent collection, daily operation payment of expenses, maintenance including supplies, management, and supervision. DRIVING TO AND FROM REAL ESTATE, although deductible is not part of the 250 hour requirement.
IRS is issuing 1 of 3 letters when they believe you are trading in virtual currency. If you have traded any virtual currency, you have to report it as like kind exchanges are no longer available. In addition, Coinbase has been subpoenaed to provide records of all holders of virtual currency.
Taxpayers can now elect to defer all or a portion of their capital gain if:
ORGANIZERS AND CHECKLISTS:
If you would like an organizer showing the previous year’s items, please call me and I will send you one. If you prefer a checklist, please go to www.censoprano.com. There you can find a generic organizer and the checklists.
S Corporations are due March 15, C Corporations are due April 15; Partnerships are due March 15.
Please let me know if you DO NOT want me to e-file your return. All states are requiring e-filing unless you have reasonable cause.
LATE FILING PENALTIES:
Please note that filing an extension is an extension of time to FILE your tax return; it is not an extension of time to PAY your taxes due. So if you owe money and file AFTER April 15, IRS will charge a penalty which is .5% of the tax due plus 6% interest. This is calculated on a monthly basis. You can only avoid the penalty if you pay your tax IN FULL by the due date. Sometimes that is not possible because you have not received certain information such as a K1 schedule. Beginning in 2019, IRS is mandating that if you file your return subsequent to April 15 and have a balance due, the penalty and interest will be reflected on the bottom of the tax return.
I must have an email or phone call verification from you asking for an extension. This is due to the problems concerning identity theft. Please make sure you let us know you want an extension otherwise it will not be filed.
1099’s AND PENALTIES:
You MUST issue 1099’s by January 31. If you file these later, the penalty is $260 per return not filed.
IF you are sending me your papers by email, please ask me for my portal “VERIFYLE” I will send it to you and your information will be protected. The old email address is being shut down.
In English, this is usually Uber and Lyft drivers; but could also reflect items sold on EBAY. Usually these gig entities do not send a 1099-MISC but rather a 1099-K. Please be aware of this.
I will be posting on the website the various deductions afforded to these drivers.
For divorce decrees finalized in 2019, alimony is not taxable to the recipient and not deductible by the payer. Decrees prior to 2019, if you wish to follow the new rules, you must amend your decree in writing.
Must now exceed 10% of your adjusted income. A DNA collection kit (like 23 and me) is now deductible for health purposes; but any portion of DNA testing that is attributable to ancestry testing is NOT!
If the solar was placed in service ion 2019, the credit is 30%; 2020 26%; 2021 22%
Reached its maximum number of cars sold. IF you took possession in the first half of 2019, your credit is $3750; in the second half you get $1,875.
My musician friends are in a frenzy over this one! Beginning 1/1/2020, most workers will now be presumed to be an EMPLOYEE for purposes of the Labor code following a 3 factor test: A) The worker is free from control and direction of the hiring entity in connection with the performance of the work, B) The worker performs work that is outside the usual course of the hiring entity business; C) The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.
There are numerous exemptions from this new rule which I will post on the website.
Maximum IRA $6000 (you might not qualify); Maximum SEP: $56,000 based on a formula;401k maximum $19,000 under age 50; $25,000 50 and older.
Sal Censoprano is a Certified Public Accountant (CPA) and tax practice owner for over 40 years. He was born and raised in Brooklyn, New York and earned his master’s degree in taxation.