How Does the New Tax Law Affect You?
With the start of the new tax year, it’s critical that we all get our financial houses in order. What follows is our Hot Tip Tuesday column from 2019 concerning the Tax Cuts and Jobs Act that took effect January 1, 2018. Its tips remain timeless, but be sure to attend our webinar An Inside Look at the IRS and Tax Saving Strategies—presented at 1:00 pm (EST) TODAY by IRS Problem Solver Phil Liberatore, CPA—so you will know what has changed since last year. And remember that this session will be recorded. Premium Access members receive a recorded version of all webinars in their member lounge.
1. Sooner really is better.
Start gathering your paperwork. Of course, you already have all your business expenses entered into a spreadsheet or software program, and all the receipts to back them up in a file, right? If you use an accountant, get in touch to make an appointment, find out what you will need, and send over your paperwork. It’s always a good idea to get everything filled out in advance, so you know whether you owe or are getting a refund. If it’s the former, you can wait until the last minute to file with the IRS; if it’s the latter, put it in the mail immediately and get your check. (Filing early also helps protect you from fraud – see #3 below.)
2. Be organized.
The more organized you are, the more deductions you can claim and the faster you can file. It’s not necessary to tape each receipt into a scrapbook and file them in chronological order, but storing all your business expenses in one file—and keeping a running tally of the totals for each category in QuickBooks or even Excel—takes just a few minutes and goes a long way toward making the process simple when April 15 rolls around.
3. Keep your data safe.
This is prime time for scammers, who love to access the Social Security numbers of unsuspecting folks and beat you to the punch by filing for your refund. So be sure always to use a secure server when filing taxes or sending information to an accountant. Ask about the steps he or she takes to guard your personal information and whether the information is backed up and stored safely.
4. If the phone rings, it’s not the IRS calling.
If you ever receive a call from the IRS telling you that you owe money for taxes or a threatening email asking for personal information, just ignore it. The IRS contacts taxpayers only through the address on its tax forms.
Here are some of the highlights of the law, according to Phil Laboratore:
For W-2 Income Earners
- There is NO penalty for not having health insurance coverage.
- Miscellaneous tax deductions (claimed on Schedule A) will NO longer be tax deductible. That means all unreimbursed work-related expenses (home office, business travel, meals, business use of telephone, membership dues and subscriptions) are no longer deductible.
For Incorporated Travel Agents and Sole-Proprietor Travel Agents
- A NEW 20% deduction on income from pass-through income entities (Schedule C, LLC, S-Corp, Partnership) for Qualified Businesses Income of $315,000 (married) or $157,500 (single).
- TAX SAVINGS TIP: CONSIDER INCORPORATING. The Schedule C is subject to a higher level of scrutiny because it’s essentially the entry/beginner level for closely-held businesses. There is an overall assumption that preparation of a Schedule C comes with a lower level of proficiency with Tax Law. It’s presumed that these taxpayers are more prone to commit mistakes and typically have co-mingling of personal accounts with business expenses.
One final tip…
It’s always a good idea to seek the advice of a certified public accountant or other tax professional to help you avoid making costly mistakes.
This week’s Hot Tip Tuesday was based on information in a Travel Market Report article. For more learning, register immediately for Phil’s webinar An Inside Look at the IRS and Tax Saving Strategies.