tax

When Can I Expect My 2018 Tax Refund?

Many clients have called to ask when they can file their tax return and more importantly, when to expect to receive their refund? Now that the Government is open after a 35-day partial shutdown, refunds are expected to be provided in a timely manner.

For your convenience, here is a summary of recent updates in the news:

TAXDAY

According to TAXDAY, 2019/01/29, I.1 “the IRS has announced that it expects the first tax refunds to go out during the first week of February. Additionally, many refunds will be paid by mid-to-late February, as in previous years”.

CCH Treasury Secretary, Steven Mnunchin

  • In an interview, Secretary Mnuchin said, “the Treasury and IRS are prepared for the 2019 tax filing season”, which began January 28.
  • In a January 29th televised interview Treasury Secretary Mnuchin said “#we’re taking tax returns. We’ll be ready for tax refunds. We’ll have the phones re-staffed” and went on to say, “We are ready for tax season, and I can assure you that tax refunds will be paid as normal”. Mnuchin sounds like the Treasury and IRS have this tax season under control.

IRS Commissioner, Charles Rettig

  • In a statement, Commissioner Rettig said, “the IRS will be doing everything it can to have a smooth filing season”. We will all hope this is the case given the implementation of the Tax Cuts and Jobs Act (TCJA). Given the many changes created by TCJA we can only wonder what a “smooth filing season” is truly going to be. There will be an increase in taxpayer questions coupled with an anxiety to receive refunds while navigating the TCJA. This will be a daunting task for all taxpayers and the IRS.

Where can I go for more information or questions on my refund?

If you are wondering about the status of your refund, taxpayers can go to “Where’s My Refund” on the IRS website . You will need to have a copy of your tax return to answer IRS authentication questions before your tax refund status will be provided.

Given the partial Government shutdown and in order to avoid long call wait times, utilize the IRS website as much as possible.  The website has a lot of information that may be able to answer your question.

 

It is important this year that taxpayers and preparers exercise extreme diligence when preparing tax returns. The implementation of TCJA coupled with the partial government shutdown pose risks that could generate tax return processing delays.

If you enjoyed this post, I’d be very grateful if you’d help it spread by emailing it to a friend, or sharing it on social media. Thank you!

—Tom

 

Thomas D. Terranova, Jr., CPA, PFS, CITP is managing member of Terranova & Associates, LLC and member of the AICPA and MA Society of CPA’s.

Terranova & Associates, LLC is located in Danvers, MA.  Please contact at 978-774-7700 for consultations.

Posted by Terranova & Associates LLC in Credit, deduction, deductions, Internal Revenue Service, refund, tax, Tax Tips, taxes, 0 comments

I’m Nervous- When can I file my tax return?

It’s tax time again! Are you ready to file?

Many taxpayers are nervous and apprehensive regarding this upcoming tax season.

Questions that many have are:

  • Will I get my usual refund?
  • Did I have enough withheld to pay my tax?
  • Will I be able to itemize my deductions?
  • Will I receive the same deductions and credits for my children this year?
  • Will my refund increase under the new tax law?

These are just a few of the questions that we’ve already received this tax season.

When can you, the taxpayer, begin filing tax returns with the Internal Revenue Service? The IRS issued a notice on Monday January 7, 2019 stating they will process tax returns and issue refunds starting January 28, 2019.

The next logical question is how will the IRS accomplish this with approximately 88% of the staff on furlough as a result of the Government Shut Down? 

On January 7, 2011 Congress enacted 31 U.S.C. Section 1324, which the IRS believes Congress made an indefinite and perpetual appropriation for the IRS to issue refunds. This section goes on to state “Necessary amounts are appropriated to the Secretary of The Treasury for refunding Internal Revenue collections as provided by law”.

The IRS will be recalling required staff to return to work to accomplish this task. We are all appreciative to the Commissioner and Federal Employees who will return to work without being compensated so We the People can file our tax returns starting January 28, 2019.

The IRS Commissioner Mr. Rettig said “IRS employees have been hard at work over the past year to implement the biggest tax law changes the nation has seen in more than 30 years”!

The usual filing deadline for 2018 tax returns is Monday, April 15, 2019. This deadline is not the same for Massachusetts and Maine residents because of Patriots Day Holiday on April 15, 2019 and Emancipation Day Holiday on April 16, 2019; this results in a filing deadline of April 17, 2019 for Massachusetts and Maine residents.

Thomas D. Terranova, Jr., CPA, PFS, CITP is managing member of Terranova & Associates, LLC, member of the AICPA and MA Society of CPA’s.
Terranova & Associates, LLC is located in Danvers and contact be contact at 978-774-7700 for consultations.

Posted by Terranova & Associates LLC in deduction, deductions, individuals, Mortgage, tax, Tax Tips, 0 comments

How An LLC Is Taxed

How an LLC is taxed

Many clients are referred to our office with questions about Limited Liability Company’s taxation. What is an LLC? The Massachusetts LLC law became effective January 1, 1996 with the creation of the Limited Liability Act. An LLC is a form of business organization that is an unincorporated organization having one or more members formed pursuant to Massachusetts General Law chapter 156C. The various tax treatments available to LLC is Schedule C, Corporation, S Corporation, and Partnership. These options can be daunting.

Now that we have all of the legal jargon out of the way, let’s talk tax!

How is an LLC taxed and how will that affect you? I will start with explaining the automatic tax treatment by the IRS and then Tax Elections that are available. An LLC can have one or several members, based upon the number of member(s) the IRS automatically taxes the LLC as a Sole Proprietor if one member; and a Partnership if two members. Therefore, you must be extremely careful when applying for a tax identification number as that is the Form that you inform the IRS as to the number of members in the LLC and in turn the IRS issues a notice with the LLC tax identification number and specific tax return that needs to be filed. In both situations the profit of the Organization is taxed with your individual tax return subject to federal income tax and self-employment tax (subject to IRC limitations), along with Massachusetts income tax.

There are Tax Elections available for a LLC member or members to make with the IRS to have the Organization taxed as a Corporation or S Corporation. You might be thinking at this point how I make it through the maze of IRS Forms to complete this task. To be treated as a Corporation you must file an Entity Classification Election Form with the IRS. To be treated as an S Corporation you must file an Entity Classification Election Form along with Election by a Small Business Corporation (pursuant to Code section 1362). I recommend mailing the executed Forms to the IRS certified and return receipt to prove timely mailing and IRS receipt of the Form. You are correct, it is a long and precise process that you must go through, so please move through it with extreme care.

This process appears confusing on its face. However, if think of the process in terms of how you want to be taxed and what Form you desire the LLC to file, that will provide you with the road map of Forms you must file with the IRS to accomplish your goal. Remember, choosing the correct tax treatment of your LLC will cost you thousands of dollars or save you thousands of dollars.

 

Thomas D. Terranova, Jr., CPA, PFS, CITP

Terranova & Associates, LLC.

978-774-7700

Posted by Terranova & Associates LLC in Tax Tips, 0 comments

The Home Office Tax Deduction – Is It For You?

Let’s get things straight about home office deductions.

In this day and age, many individuals are starting and operating their own small businesses out of their homes and apartments. Against a backdrop of cost cutting and footprint reduction by Corporate America, many employees are required to maintain home offices in order to accommodate flexible work schedules and telecommuting. Per Code Section 280A(c)(5), those who use part of their residence to conduct business have the ability to take a tax deduction for associated expenses incurred for the exclusive business use of their home. These expenses are reported on Form 8829 – Expenses for Business Use of Your Home.

There are a few requirements you have to adhere to in order to qualify for this deduction. First and foremost, the home office must be used regularly for conducting business exclusively. For example, if you converted one of your bedrooms into an office that is used exclusively for business, all of the facets of that room must be used for business purposes. For example, if there is a closet in the room, that closet must also be used for business purposes.

Your home office must also be one of your primary business locations. The code states that your home office does not have to be your only business location, only that it has to be one of your primary business locations. For example, you may have a deduction for a home office in addition to an independent office that you rent.

To further qualify for tax reimbursement, your employer must require that you maintain a home office in order for you to perform your duties as an employee of

their company. Furthermore, your employer may not be reimbursing you for any expenses incurred in using part of your home as a home office, whether in the form of rent or expense reimbursement.

There are two methods of calculating home office deductions: the regular method and the simplified ‘Safe Harbor’ method.

The regular method of claiming the home office deduction requires that you to come up with a list of expenses incurred in maintaining your home. These expenses must be supported by financial records. A portion of these expenses can be determined by calculating the square footage of your home office vs. the total living square footage of your home. For example, if it costs you $10,000 to maintain your home, and the square footage of your home office is 10% of the total living area of your home, then you may deduct $1,000 as a home office deduction. The costs of maintaining your home includes, but is not limited to, mortgage interest, insurance, taxes, repairs, utilities and other expenses.

As a side note, any depreciation taken as a deduction reduces the cost basis of your home. While this might not matter on a day to day basis, it might affect you when you sell your home. The deduction, as computed under the regular method, also has gross and net income limitations, and excess deductions not taken may be carried forward to future years.

As you can see, claiming the home office deduction involves quite a bit of work: gathering the financial documents, computing the total expenses for each category, calculating the square footage of your home office vs. your home. As a remedy, the IRS introduced the ‘Simplified Safe Harbor method’ in 2013 pursuant to Revenue Procedure 2013-13. The goal of this method is to simplify the calculation of the home office deduction and also to streamline the documentation requirements related thereto. Using a prescribed rate of $5, taxpayers can compute their home office deduction by using the set rate and applying it to the allowable square footage of your home office (up to 300 square feet). For example, the maximum home office deduction using this method is $5 x 300 or $1,500. By using this method, taxpayers are released from the documentation requirements of the regular method. It is important to note that this deduction cannot exceed the net profit of the business, and cannot be carried forward. You may also not deduce depreciation.

Once you determine the best method to compute your home office deduction, you may use your selected method on your timely filed, original federal income tax return for that tax year. Once you have used either method, you may not make a change for that same tax year. You may change methods from year to year, however.

A special allocation rule exists for home based daycare businesses that do not exclusively use a specific area of the home for business purposes. In this case, the Internal Revenue Service allows you to use the total number of business hours to allocate and compute a home office deduction.

Contact us for further details on how to claim this deduction. As more and more people start their own small business, and as Corporate America keeps cutting costs and reducing their footprint, this deduction will be used more and more often. We can help you sort through the complex Internal Revenue Code and apply the best deduction for you.

Posted by Terranova & Associates LLC in Home Office, smallbusiness, 0 comments

What To Do If Identity Tax Fraud Happens To You

Identity tax fraud can happen to anyone. We’ll help you be prepared.

Are you who you say you are?

A number of new clients have come to my office for assistance with dealing with the tax repercussions of having their identity stolen. Identity thieves use stolen identities to perpetrate fraud in many ways, one of which is to file a fraudulent tax return and claim a refundable credit.

This is usually done early in the tax filing season, from mid-January to early February. Often, this fraud is not discovered until the individual files the real tax return, only to be told by the Internal Revenue Service that a return has already been filed. In most cases, this delays the processing of the legitimate return, which means that you may not receive your refund for several months.

What many people do not know is that the IRS is working diligently to reduce fraudulent tax returns (Yes they are on your side!). The IRS issues taxpayer alerts regarding identity theft scams on their website and YouTube. Through the joint efforts of the IRS, State Tax Agencies, and taxpayers reporting stolen identities the IRS hopes to continue reducing fraudulent tax returns filed.

Photo Identification

The IRS has implemented a new requirement this year to help combat the problem: photo ID. Tax return preparers are now required to ask for photo identification when preparing tax returns. Failure to do so will result in a delay when processing your return.

So bring your photo identification with you to your tax appointment, as you will be asked to provide this to your tax return preparer.

Other scams

This time of year, it is not unusual to see tax-related emails from your employer’s human resources department. Be careful when opening these emails, and be specially wary of opening any attachments. Phishers have been known to send emails requesting recipients to download or confirm their personal information. If you work in human resources, you might get an email from an employee requesting a copy of their W2.

What you should do if your identity is stolen

You can help the IRS and State Tax Authorities if you have experienced identity theft by communicating with them. Contact the IRS to obtain an Identity Protection Personal Identification Number (IP-PIN) and completing Form 14039 Identity Theft Affidavit. Complete Form Identity Theft Affidavit with the MA DOR. Complete Form IC3 – Internet Crime Complaint Center with the FBI and report it to the local Police.

If your identity is stolen, you should contact the IRS, MA DOR, FBI, and local Police as indicated above. In an attempt to stop further financial damage you should contact the three Credit Reporting Agencies (Equifax 866-349-5191, TransUnion 877-322-8228, and Experian 888-397-3742) to report the identity theft and lock your credit report. Each Credit Reporting Agency offers a host of services to monitor your credit, one service you should consider that is relatively inexpensive is a “Credit Lock”, a “Credit Lock” requires a personalized PIN and fee (in some cases) to lock and unlock your credit with each Credit Reporting Agency.

Preventive measures you should take to protect your credit is lock your credit with each credit reporting agency, at least annually if not quarterly obtain a copy of your credit report to review it for accuracy and unknown accounts, lock your mail box, watch for acceptance or rejection letters from credit card company’s you did not apply for, shred your mail when you dispose of it, secure your wireless networks, install a firewall, disable remote management of your router, disconnect from the internet or turn off your computer when not using it, install anti-virus software on your computer and update it regularly, disconnect or cover your computer camera when not in use, back up your data on an external hard drive regularly, use complicated passwords, regularly change your passwords, on mobile devices use finger print and complicated passwords to log into the device, be careful with the apps you down load, install anti-virus software, and turn off your GPS when not being used. Social Networks you should opt for maximum privacy, only accept invitations from people you know, do not past personal data on you site such as social security number, date of birth, telephone, bank, and credit card account numbers. On Line purchases should only be completed with known vendors. This list is not totally comprehensive but is a first good step to protecting your identity.

We all do our best to monitor our credit card and bank activity by reviewing our monthly statements in detail. If you see a suspicious entry, be sure to investigate immediately. The credit you are saving is your own.

Whilst we all do our best to monitor all of our monthly statements and credit reports, the unscrupulous predators do their best to take advantage of any one they can. So do your best to be mindful of this fact during your everyday life when using the internet, your mobile device, paying a bill with a credit card or check.

 

Posted by Terranova & Associates LLC in Tax Tips, 0 comments