Were you unsatisfied with the results of your 2018 income tax returns? Perhaps you had a big surprise: Maybe you owed the government a lot of money. Or, you got a refund much larger than expected, money you could have used during the year. Either way, it’s a good time to make a withholding adjustment. Keep in mind that we’re already 5 months into the calendar year. If you need some help deciding on the adjustment amount, contact us. Or try the IRS Withholding Calculator.
In an Information Letter, the IRS advised that, while the U.S. tax code imposes certain requirements on qualified employer plans that offer loans to participants, such plans don’t have to offer loans at all. And even if they do, they may restrict the loans to certain situations, such as “hardships.” The IRS can’t force a plan to offer loans or stop a plan from imposing certain restrictions on loans. The IRS letter was in response to a taxpayer’s question concerning obtaining a loan from a 401(k) plan. Read Information Letter 2019-0004.
The April tax filing deadline has passed, but tax-related myths on social media continue, warns the IRS. One such myth is this: If you received a tax refund this year, there’s no need to adjust your 2019 withholding. To help avoid an unexpected tax outcome next year, taxpayers should use the IRS Withholding Calculator to make sure the right tax amount is being withheld. Make necessary changes now to prepare for next tax filing season, especially if you got unexpected results from your 2018 federal return. IRS Tax Reform Tax Tip 2019-45
Self-employed? A key deadline is approaching. The IRS is reminding self-employed individuals, retirees, investors and others who pay their taxes quarterly that the first estimated tax payment for tax year 2019 is due 4/15/19 for most of these taxpayers. The Tax Cuts and Jobs Act changed the way tax is calculated for most taxpayers. This includes those with substantial income that isn’t subject to withholding. So, you may need to raise or lower your quarterly estimated tax payments. Contact us for advice about your situation.
The U.S. House Ways and Means Committee on 4/2 unanimously approved the Taxpayer First Act of 2019. The bill is intended to modernize the IRS, improve taxpayer services and strengthen taxpayer protections. For example, it contains provisions to help protect taxpayers from tax ID theft and improve taxpayer interaction with the IRS should they become a tax crime victim. The proposed law would establish an independent office of appeals within the IRS. It would also require the IRS to submit to Congress redesign plans to improve efficiency and modernize technology.
By law, U.S. individuals are required to report and pay taxes on worldwide income to the IRS, regardless of whether they live abroad or in the U.S. This includes income from offshore accounts and other assets. A new Government Accountability Office report found several problems with compliance. For example, the “IRS has had difficulties matching the information reported by foreign financial institutions (FFIs) with U.S. taxpayers’ tax filings due to missing or inaccurate Taxpayer Identification Numbers provided by FFIs.” Read the report.
The Tax Cuts and Jobs Act generally suspended the exclusion of qualified moving expense reimbursements from wages. And it eliminated the moving expense deduction for tax years 2018 through 2025. But the exclusion is still available for U.S. Armed Forces members on active duty who move because of a permanent change of station. The IRS notes that some employers have mistakenly been reporting reimbursements for moves on W-2 forms. Code P on the 2018 Form W-2 should only be used to report qualified military moving expenses. More information available on the IRS website. (Clarification on Code P Reporting in Box 12 of the 2018 Form W-2)
LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.