Don't Let Disaster Befall Your Favorite Charity

Post Date:

April 12, 2019

A crucial deadline is approaching and you can help!

The filing deadline for most non-profit organizations is May 15. Missing this deadline results in penalties that can devastate the organization's budget, or worse, strip them of their non-profit status and make your donations non-tax deductible! Here's what you can do to help them:

Check the charitable status online.The IRS has a master list of charitable organizations recognized as non-profits in good standing. Here you can see the current status of your favorite charities and even view past tax returns to get an idea of where they stand.
Remind the organization.Many small non-profits, like youth sporting groups and local school booster clubs, often forget to file their annual report because officers are constantly rotating in and out of the organization. Each transition of responsibilities increases the likelihood that important data, like a filing requirement, will get lost. A simple reminder from you might be what they need to get back on track.
Get involved.Learn how the organization operates and see if there is anything you can do to help. Oftentimes, one individual is juggling multiple roles within the organization. Your skill set, whatever it may be, might be exactly what they need to free up someone else to properly handle the annual filings.
Tell them to get help!A simpler filing option may be available to them. If they have less than $50,000 in gross receipts, filing is much less complex with the Form 990-N e-Postcard. Larger organizations must fill out Form 990 or Form 990-EZ.

Take action now! The implications of losing the non-profit status are vast. Please call if your favorite charity needs help filing their non-profit tax return.

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Five Itemized Deductions to Still Consider

Post Date:

March 17, 2019

Beginning in 2018 and lasting though 2025, new tax laws modified or eliminated itemized deductions, while increasing the standard deduction. Here are five valuable deductions still available (albeit altered) to keep in mind as you file your 2018 taxes and plan for your 2019 tax savings:

Medical expenses: The medical deduction threshold is reduced from 10 percent of adjusted gross income (AGI) to 7.5 percent, but only through 2018. Beginning in 2019, it reverts to 10 percent of AGI. Therefore, your 2018 return may be your last shot at a medical deduction.
SALT payments: Like before the big tax law changes, you can deduct state and local tax (SALT) payments for (a) property taxes and (b) income or sales taxes. For 2018 through 2025, however, the annual SALT deduction can't exceed $10,000.
Charitable donations: Generally, the deduction for charitable donations is preserved, while the annual limit on monetary contributions rises from 50 percent of AGI to 60 percent. But other new law changes make tax breaks for charitable gift-giving more tricky. Accordingly, you might bunch charitable donations in 2019 (combine 2-3 years worth of donations into one year) if it suits your needs.
Interest expenses: The threshold for deducting mortgage interest on acquisition debt has been lowered from $1 million to $750,000 for loans after Dec. 15, 2017. But prior debts are grandfathered. Also, you can no longer deduct mortgage interest on home equity debt unless it was used to buy, build or substantially improve your home that secures the loan. Finally, investment interest expenses are still deductible up to net investment income.
Casualty losses: The deduction for casualty and theft losses is suspended for 2018 through 2025, except for losses in a federally declared disaster area. Therefore, catastrophe victims may salvage a 2018 deduction, subject to the usual 10 percent-of-AGI floor. For disaster-area losses in 2019, you can elect to claim the loss on your 2018 return.

Notably, the new law also eliminates the deduction for miscellaneous expenses, in addition to the other changes. But on the positive side, itemized deductions are no longer reduced for high-income taxpayers.

Burzenski and Company, P.C. office@burzenski.com

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Use your Tax Refund for an IRA contribution

Post Date:

February 1, 2019

You may already know that contributions to a traditional IRA may be deductible on your personal tax return (subject to certain limits). You're allowed to deduct a contribution on your 2018 return that is made as late as April 15.

But are you aware that you can use this year's tax refund to make your IRA contribution for the 2018 tax year?

How to fund your IRA with a refund

The IRS says it's OK to use this year's tax refund to make your 2018 IRA contribution as long as you meet the April 15 deadline. If you want to use this strategy, however, you'll want to file your tax return early.

Here's how it works: You can contribute up to $5,500 to a traditional IRA for 2018 ($6,500 if you're age 50 or older). All you have to do is claim the IRA contribution on your 2018 return and then ensure the same amount is deposited in your IRA by April 15.

The ability to deduct contributions is phased out if you (or your spouse) actively participate in an employer's retirement plan, and your income exceeds a certain level. For instance, the deduction is gradually reduced for a single filer with a modified adjusted gross income (MAGI) between $63,000 and $73,000 on a 2018 return. Further calculations to determine your maximum contribution amount will be needed if your income falls inside a phaseout range.

The IRA refund strategy is especially beneficial for taxpayers who are struggling to make ends meet, but still want to save for retirement

Extensions are not allowed for IRA contributions, so don't procrastinate! Typically you can file your tax return starting as early as late January.

Burzenski and Company, P.C. office@burzenski.com

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Employee Expense Rules Have Changed

Post Date:

January 20, 2019

Employee Expense Rules Have Changed

One of the things that’s going away under the new tax reform laws implemented this year is an employee’s ability to deduct unreimbursed expenses related to their job.

Farewell to miscellaneous itemized deductions

The deduction for unreimbursed employee expenses was among the qualified 2-percent miscellaneous itemized deductions that were eliminated by the Tax Cuts and Jobs Act (TCJA) passed in late 2017. This could be a blow for employees who had relied on it to deduct unreimbursed expenses for such things as work-related meals, entertainment, gifts, lodging, tools, supplies, professional dues, licensing fees, work clothes and work-related education.

A win-win solution

If you are an employee who has used this tax deduction, here are some tips to minimize its loss:

Determine the impact. Review your past tax records to help estimate how much you expect to pay in unreimbursed work expenses and what the tax deduction was worth to you.
Discuss the situation with your employer. If the loss of this deduction is a hardship, talk to your employer about how you will be affected.
The win-win. Ask your employer to consider reimbursing you for your work-related expenses directly. Your employer can probably deduct those expenses from their business return without increasing your taxable income. This will save them tax dollars when compared with the cost of raising your pay in order to indirectly compensate you for your unreimbursed expenses.

If you are an employer, consider talking to your employees about their unreimbursed expenses now that the tax laws have changed. If you wish to reimburse their qualified business expenses, make sure your reporting adheres to IRS accountable plan rules so that your reimbursements are deductible as a business expense and do not add to your employees' incomes.

Call us with any questions related to employee expense rules at 203-468-8133. office@burzenski.com

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Now is a Great Time to Organize Your Tax Records

Post Date:

December 13, 2018

The time to organize your tax records is now. Waiting until the end of the year or, even worse, waiting until you are audited can lead to headaches. Here are some tips to get on top of your tax records.

Storage Hints

Organize your records by tax year. If you have not already done so, create a folder for the current year’s files. Here are some filing suggestions.

Tax return and support. Create a file with copies of your signed tax return(s) for the year. Include any support documents provided with your filed tax return.
Files in tax return order. Create your annual files to match the flow of your 1040 tax return. Here are some suggestions.
- Income. Copies of W-2s, 1099s, Social Security statements, interest income, K-1s, and investment activity go in this file.
- Charitable Donations. Create a separate file for cash donations and one for non-cash donations. Include a copy of your charitable mileage log in this file.
- Medical and Dental. Create a file for all your medical related expenses. Include a copy of your medical related mileage log in this file.
- Other itemized deduction file. In this file include all other proof of itemized deductions. This includes property tax statements, mortgage interest, and state income tax documentation.
- Business activity. Have a file for each hobby and business activity. Include a copy of your business mileage log in this file.
- Education. Create a file for all documents related to educational expenses. Include in it copies of invoices, tuition and fees. Include invoices for music lessons, instruments and any materials required to purchase for your student.
- Other. Put all your miscellaneous receipts into this file. This includes receipts you are unsure about like receipts for daycare, Form 1095s and any other tax related items.
Statement file. Sort all your statements by vendor, then by month. Create a separate file for these statements. This can include bank statements, credit card statements, and investment account statements. Consider creating a digital back up copy of these statements and store them on a CD or USB drive.

The Digital Alternative

If more of your records are in digital format, consider creating a tax folder for each year on your computer and then place your digital records into sub-folders using the same sort as noted above. Create password protection for each folder.

Rotation idea

Finally, at the end of each tax year place a note on the tax return to confirm the date your tax return was sent into the federal and/or state government. Note on the outside of this file when you can toss the support documentation. Go back to old tax years and shred the old documents that are no longer needed. Do not take this action unless you know the length of time you will need to save these records.

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Now is a Great Time to Organize Your Tax Records

Post Date:

December 13, 2018

Storage Hints

Organize your records by tax year. If you have not already done so, create a folder for the current year’s files. Here are some filing suggestions.

Tax return and support. Create a file with copies of your signed tax return(s) for the year. Include any support documents provided with your filed tax return.
Files in tax return order. Create your annual files to match the flow of your 1040 tax return. Here are some suggestions.
- Income. Copies of W-2s, 1099s, Social Security statements, interest income, K-1s, and investment activity go in this file.
- Charitable Donations. Create a separate file for cash donations and one for non-cash donations. Include a copy of your charitable mileage log in this file.
- Medical and Dental. Create a file for all your medical related expenses. Include a copy of your medical related mileage log in this file.
- Other itemized deduction file. In this file include all other proof of itemized deductions. This includes property tax statements, mortgage interest, and state income tax documentation.
- Business activity. Have a file for each hobby and business activity. Include a copy of your business mileage log in this file.
- Education. Create a file for all documents related to educational expenses. Include in it copies of invoices, tuition and fees. Include invoices for music lessons, instruments and any materials required to purchase for your student.
- Other. Put all your miscellaneous receipts into this file. This includes receipts you are unsure about like receipts for daycare, Form 1095s and any other tax related items.
Statement file. Sort all your statements by vendor, then by month. Create a separate file for these statements. This can include bank statements, credit card statements, and investment account statements. Consider creating a digital back up copy of these statements and store them on a CD or USB drive.

The Digital Alternative

Rotation idea

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Does your year-end tax plan include these big changes

Post Date:

November 25, 2018

Most of the time, year-end tax planning is based on tried-and-true principles. For instance, people often end up accelerating deductions into the current year to offset their tax liabilities, while deferring income to the next year. But this year-end is much different than most.

Major tax legislation at the end of 2017 has suspended many prized deductions for 2018 through 2025, while cutting tax rates. As a result, your year-end tax planning will likely need some new moves. Here are a handful of the biggest changes to consider:

Altered and eliminated tax deductions

Personal exemptions. You can no longer count on personal exemptions, including dependency exemptions for children and other relatives. They are eliminated.
State and local tax (SALT). The deduction for state and local tax (SALT) payments is limited to $10,000 annually.
Mortgage interest. Mortgage interest deductions are modified, including eliminating deductions for home equity loan payments...unless funds from the loan were used to build, buy or substantially improve your home.
Miscellaneous expenses. The deduction for miscellaneous expenses, including unreimbursed employee expenses, is eliminated.
Moving expenses. Deductions for moving are eliminated (except for military personnel).
Casualty and theft loss. Casualty and theft loss deductions are eliminated (except for losses in federally declared disaster areas).

Enhanced tax deductions

Standard deduction. The standard deduction was nearly doubled to $12,000 ($24,000 for joint filers) for 2018.
20-percent business deduction. A new up-to-20 percent deduction is allowed for qualified business income (QBI) of pass-through entities, including sole proprietors.
Child Tax Credit (CTC). The Child Tax Credit (CTC) is doubled to $2,000 (with a maximum refundable amount of $1,400) per qualifying child.
Medical expenses. The threshold for deducting medical expenses is lowered from 10 percent of adjusted gross income (AGI) to 7.5 percent of AGI for 2018.
Alternative minimum tax (AMT). Favorable modifications apply to the AMT calculations, meaning far fewer taxpayers will be affected.

Upcoming alimony change: If you're planning on divorcing at year-end, consider that alimony payment deductions are eliminated for divorce settlements reached on or after Jan. 1, 2019.

Depending on your total itemized deductions, it may or may not make sense to accelerate certain deductions into this year. A review of your year-to-date deductions should be completed before you make any moves.

Call today if you have questions about your 2018 year-end tax plan.

Burzenski and Company, P.C. office@burzenski.com

"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.

The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.

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Fraud? Negligence? Know the Difference!

Post Date:

October 22, 2018

Each year the IRS opens thousands of investigations looking for possible tax fraud. In 2017 alone, the Criminal Investigation (CI) arm of the IRS identified $2.5 billion in potential tax fraud with a 91.5 percent conviction rate. While the IRS takes tax fraud seriously, they also understand that mistakes happen. Here is what you need to know.

Tax Fraud or Negligence?

Fraud. The IRS defines tax fraud as intentional wrongdoing, on the part of the taxpayer, with the specific purpose of evading a tax known to be owing. To be considered fraud, taxes must be owed and there must be deceitful intent. If convicted of tax fraud, penalties can be hundreds of thousands of dollars and may include prison time.

Negligence. On the other hand, tax negligence is an unintentional mistake. Common mistakes are wrong names or Social Security numbers, math miscalculations and errors in figuring credits or deductions. Most of these mistakes happen when individuals calculate taxes on their own. While a mistake is not usually considered fraudulent, it can create additional penalties and interest if the mistake results in more taxes owed.

Areas to be extra cautious

The majority of returns with false information will be considered a mistake, not fraud, due to a lack of nefarious intent. Even still, it's good to know when to be extra cautious to avoid unneeded scrutiny of your tax return. Here are some common areas the IRS is on the lookout for fraud:

Underreporting income. Income that doesn't get reported is usually from some form of non-wage income like a side job or contractor arrangement. Make sure you have documentation of all payments received by you. Be very suspicious if you are paid in cash. All income, regardless of the source, needs to be reported.
Including personal expenses as business deductions. Intentionally padding business deductions with non-deductible personal expenses can be deemed tax fraud. If you have a business, ensure that you have a separate bank account for your business transactions to avoid extra questions. For all deductions, keep your receipts in an organized fashion to prove the expense if necessary.
Concealing information during an audit. Going through an audit can be an unnerving event. Don't add to the pain by intentionally hiding information from an auditor and unknowingly creating a fraudulent situation. If you are selected for an audit, the first thing to do is get help!

The tax code is complex and the IRS understands this. Missing information from taxpayers is often considered an accident unless there is reason to believe it is intentional. If you have a situation you are concerned about, don't hesitate to call.

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Combat Employee Turnover

Post Date:

October 4, 2018

With unemployment at historically low rates, retaining employees is harder than ever. Here are some tips to help your practice maintain a thriving workforce:

Invest in current employees. One of the key opportunities for business success is continual investment in your current workforce. If you have employees with potential to grow, offer training and continuing education to help them realize that potential. With online courses, this is now easy to do without a major disruption in day-to-day activities. These courses can be as general as teaching supervisory skills or obtaining accreditation in a chosen field. Then when there is a need to be filled, often times it can be filled internally with a committed employee.
Convert contractors to employees. Utilizing contractors is a great strategy to handle overflow work. You can then have current employees manage the consultant's work to develop their supervisory skills. At the same time you can vet contractors to see if they could take an expanded role as a full-time employee. Many contractors prefer to be independent, but that is not always the case. Circumstances change and the security of being an employee might be intriguing.
Review compensation and benefits packages. Conduct an annual review to ensure that your company is offering competitive salaries and benefits. This will help protect your business against current employees seeking greener pastures. Consider giving impromptu pay increases and spot awards to top employees to show your appreciation. Also look at being creative with benefits and vacation packages.
Explore the benefits of internships. An internship program can not only help you identify your next employees, it can help develop your current employees. While it can be seen as a hardship by your current workforce, it can be a rewarding way to cement your employee's knowledge and value to the organization as they are seen as a teacher. Plus you may find your next group of potential hires.
Assess your practice culture. Employees want to enjoy going to work every day. Consider conducting an anonymous survey of your current employees to see what they like and get ideas for possible improvements.

With some planning and a little creativity, keeping your practice running efficiently can be achieved even in times when employee retention can be challenging.

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Vacation homeowners: Maximize your tax benefits

Post Date:

July 9, 2018

If you rent out a living space such as a vacation home (or even a boat or recreational vehicle), consider these items as you determine whether or not you can take advantage of the tax breaks:

Know when you have to report income. If you rent out your home for 14 or fewer days during the year, you don't have to report the income. But it also means you can't deduct any other rental expenses, though you may be able to deduct mortgage interest and real estate taxes as itemized deductions.
Understand "personal use." Your vacation home is considered a residence if you use it for personal purposes for more than 14 days, or 10 percent of the total days you rent it to others at a fair rental price.
Figure out if you can offset rental income. If you use the property for more than 14 days or 10 percent of the number of days it's rented, the rules change. Your rental deductions (except for taxes and mortgage interest) are limited to the amount of your rental income.

For example, let's say you stayed in your vacation home 20 days last year. It was rented at fair market value for 190 days. In this example, your personal use exceeded the 10 percent limit (19 days). Your rental deductions are limited to the rental income you received.

The rules are complex, but a basic understanding of the rules and good recordkeeping will help you get the best tax breaks from your vacation home. Give us a call if you would like more information.

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