Changes to the Georgia Income Tax rate

Effective 1/1/19, the Georgia rate goes to 5.75% from 6% and on 1/1/20 the rate drops to 5.5% if the legislature approves and the governor signs on to the 1/1/20 drop. They want to analyze the effect of the 2019 rate decrease on state revenues before approving the scheduled 2020 additional decrease. Both of these reductions are temporary and expire on 12/31/25 when the rate goes back to 6%. Hopefully the reductions will stay permanent.

Mortgage Interest on Home Equity Loans, Home Equity Line of Credit, and Second Mortgages

If the borrowed funds were used to substantially improve your principal or second residence and your acquisition indebtedness does not exceed $750,000 then the mortgage interest on home equity loans is deductible. If the home equity loans existed at December 15, 2017 then the cap is $1,000,000 on acquisition indebtedness. However, if the home equity loan was used for anything other than improving your first or second home like a new car, then it will not be deductible under the new rules regardless of when you obtained the loan. In other words there is no grandfathering on home equity loans allowing a mortgage interest deduction if you use the funds for anything other than improving your home.

Constructive Receipt of Income

If your business receives a payment from a client on December 30 but you wait to deposit it in January, do you have to declare that income in 2018? Yes you do because you have control over the funds. You can choose when to deposit the money. One way to defer income to 2019 is by delaying your December billing so you won't receive payments until January.

Reduce Your Taxes for 2018 Right Now

You have less than a month to take action. What should you do? See below for some ideas:

1. Clean out your garage and your closets. Make donations of clothing and household goods to Goodwill. Keep the receipt and a record of items donated and use the valuation guide at salvationarmyusa.org to value the donation.
2. Organize your tax documents in one file folder for 2018.
3. If you have a business on the cash basis, delay mailing bills until late December so that the payments won't be received until 2019.
4. Buy office supplies, stamps, and equipment for your business.
5. Increase your 401k contribution to the maximum. The employee deferral is $18,500 ($19,000 for 2019) for 2018 plus $6,000 more if you are at least age 50 by year end.
6. Donate appreciated stock to a  charity.
7. Do a qualified direct contribution of your required minimum distribution from your retirement account to a charity.
8. Sell securities with losses to offset your capital gains.
9. Consider setting up a donor advised fund to concentrate your charitable contributions in one year.
10. Check to make sure all of your estimated tax payments for 2018 have been made. The final one is due January 15, 2019.
11. Consider an opportunity zone investment to defer the tax on capital gains for 7 years. You have 6 months after the transaction to invest the capital gains so this is a step you could do in 2019 to reduce 2018 taxes. 
12. If you have a specified service trade or business and your individual taxable income exceeds $315,000 joint or $157,500 single, then it would be advantageous for you to take steps to reduce your income below those thresholds so you could benefit from the new 20% qualified business income deduction. Steps to take include conservation easements, oil and gas investments, retirement plan contributions, large charitable donations, and business equipment purchases.

U.S. Citizens Working Abroad

In 2018 taxpayers can exclude up to $104,100 in wages or earned income. To qualify you have to satisfy either the bona fide residence test or the physical presence test. To be a bona fide resident you have to be a resident for a full tax year in the foreign country. The physical presence test requires being present in a foreign country or countries 330 full days during a period of 12 consecutive months. Spending more than a month in the U.S. will cause you to fail the physical presence test.  If you only qualify for part of the tax year you get a pro-rated amount of the exclusion. You have to track the days you come back to the U.S. and whether it was work or vacation.

Extension of Time to Pay Tax

There is a way to extend your payment of tax for six months from the due date of your 1040 return. You have to file form 1127 and show that the payment would be an undue hardship. You have to show that you can't sell any assets without severe losses or borrow money under reasonable terms. If the extension is approved then you are not subject to the late payment penalty of .5% per month. You are still subject to interest charges.

Documentation of Cash Donations

If you make a cash donation under $250 to a charity, then all you need is a cancelled check or bank statement to support your tax deduction. However a donation of $250 or more requires a written acknowledgement from the charity dated prior to the filing date of the return to support the deduction. The acknowledgement letter indicates your tax deductible donation and if you received any goods and services in exchange for the donation which reduces the tax deduction. I like to keep a copy of your acknowledgement letters in your tax file to respond to any IRS audits of your tax return. Deductible charitable contributions also do not include political contributions, cost of raffle tickets, contributions to foreign organizations(except certain Canadian, Mexican, and Israeli charities), payments to nonprofit organizations other than 501(c)(3) organizations, and payments to individuals. If you make recurring payments to a charity under $250, but that total over $250 for the calendar year, the charities are not required to give you an acknowledgement letter which is one reason why I recommend you do lump sum contributions in December of every year.

Meals and Entertainment Deductions Under the New Rules

The IRS has just issued guidance on meal and entertainment expenses in Notice 2018-76. Client business meals are 50% deductible if business is conducted, taxpayer is present, and it is not lavish or extravagant. Meals during business travel, meals in the office for employee meetings, and meals provided occasionally to employees are 50% deductible. There are no deductions for sporting event tickets or club memberships. Water, snacks, and coffee provided to employees is now only 50% deductible. Office holiday parties and picnics are 100% deductible.

When should you sign up for Social Security?

You are first eligible when you turn 62, but should you take it then? You will get 25% less than the amount at full retirement age which is 66 for most now looking at retirement if you do. I believe you should only take social security before age 70 if you really need the money to live on or your health is not good. If you wait until age 70, then your monthly benefit is 32% more than it would be at age 66. In other words for each year you wait after full retirement age of 66 you get another 8% increase in your monthly benefit. That is a pretty good return and it is for life. After age 70, there is no longer any increase in benefits if you wait. If you are married, then the spouse with the higher lifetime income should wait until age 70, but the other spouse could claim at full retirement age. Only 4 percent of women and 2 percent of men wait until age 70 to collect social security benefits per the Center for Retirement Research at Boston College.

Medicare

When you turn 65 you are faced with the task of choosing the right medicare plan for your situation. The purpose of this blog is to give you some direction and some suggestions based on my experience. First of all medicare (parts A and B) only covers 80% of your medical costs for doctors and hospitals. You will see a lot of advertising for medicare advantage plans which will cover the 20% and also prescription drugs in many cases. An alternative is medicare supplemental which also covers the 20% but has no prescription drug coverage. Medicare supplemental is more flexible than advantage but more expensive. Supplemental may have more coverage by including the doctors you want to use. Supplemental F covers all out of pocket while supplemental G has a small deductible. I believe the best plan for most seniors is medicare supplemental G and a separate prescription drug coverage(part D). This coverage will just about duplicate the health insurance provided by large companies. The cost to you of medicare parts A, B, supplemental G, and prescription drug coverage will be about $3,333 a year.

Scams

If the IRS calls you, then you know it is not the IRS but a scam. Hang up. The IRS communicates with letters. If someone from your bank calls you and asks for a PIN code, then it is not your bank but a scam. The bank would not ever do this. Hang up. Don't ever provide your bank account information or social security number to anyone who calls you on the phone or online. Even if the caller tells you part of your account number or social security number, it is still a scam. Hang up.

S Corporation Basis

If you are a shareholder in an S corp, you have to have basis in order to deduct losses. One way to make sure you have enough basis is to lend money directly to the S corp before year end. Guaranteeing a corporate loan or having the S corp get a bank loan does not give the shareholder basis. You cannot reduce your basis below 0 so any losses that you cannot deduct are suspended.

Changes in the Divorce Tax Rules

Beginning with 2019 divorce decrees, taxpayers who pay alimony will no longer get a tax deduction and those who receive alimony will no longer have to include in taxable income. This will be a huge incentive for alimony payers to get the agreement done before the end of 2018.

Moving Cost Tax Deduction

If you move in 2018, you will no longer be able to deduct moving costs unless you are in the armed forces. Also if you receive employer reimbursements for moving expenses, it will now be taxable income. This change came about in the Tax Cuts and Jobs Act effective 1/1/2018.

IRS interest rate on late income tax payments

The current rate is now 5% (annual basis). It increased from 4% on April 1, 2018. The rate can change each quarter.

Trust Tax Rate

Trusts (form 1041) are taxed at rates from 10% to 37%. However the 37% rate kicks in at taxable income over $12,500. The government is trying to encourage the current distribution of income from trusts by having the tax rate so high. The kiddie tax on children's unearned taxable income will also now be based on the trust rates instead of the parents' tax rate.

The New Corporate Tax Rate

C corporations now pay at flat rate of 21%. In 2017 the top rate was 35% and the first $50,000 in taxable income was 15%. Most large public companies will now pay at the lower rate. In order to level the playing field between C corporations and pass through entities such as partnerships and S corporations, the new tax reform act allows a 20% deduction of qualified business income.

2018 Tax Rates Comparison to 2017 Tax Rates

There are 7 tax rates in both years going from 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% in 2017 to 10%, 12%, 22%, 24%, 32%, 35%, and 37% in 2018. Every tax bracket in 2018 is better than 2017 by 3 to 4 points except for the 10%, 32%, and 35% tax brackets which are basically the same for both years. The bracket spread in taxable income is better also. For example, the top rate for joint returns kicked in at $470,700 of taxable income in 2017 but now in 2018 it doesn't start until taxable income reaches $600,000.

When do You Have to Send 1099's?

If you have a business and use the services of an individual paying them $600 or more during a calendar year, then you need to send that person a 1099-Misc.  You don't have to worry about sending 1099's to corporations, when you buy merchandise, and when you make payments for personal services for your home. You should ask anyone providing services to your business to fill out a form W-9 before you make the first payment to them. This will give you their address and social security number for the 1099. It can be very difficult getting that information at the end of the year. Penalties for not filing  1099's are up to $250 per failure.

Pass Through 20% Deduction for 2018

The new 20% deduction for qualified business income is simple for those taxpayers with taxable income (line 43 on the 2017 form 1040) less than $315,000 filing joint or  $157,500 filing single. They get to deduct the lesser of 20% of qualified business income or 20% of taxable income minus net capital gains. Qualified business income is income from a US trade or business which can be a sole proprietorship, partnership, S corp, LLC, trust. or estate. Qualified business income is not W-2 wages, interest, capital gains or most dividends.

2018 Kiddie Tax

In order to prevent parents from shifting income from investments to their children who would be in a lower tax bracket, the IRS has devised the kiddie tax. Starting in 2018 the tax rates on such income are based on the the trust rates which get to the highest 37% bracket at only $12,501 and above. It used to be based on the parents top tax rate. There is a threshold for unearned income (interest, dividends, and capital gains) of $2,100. The kiddie tax only applies above the threshold. Kids also get a standard deduction of the greater of $1,050 or earned income (wages) plus $350 not to exceed $12,000. For example, say a child has wages of $2,000 and interest income of $7,000. His standard deduction would be $2,350 and his taxable income would be $6,650. The first $2,100 would be taxed at 10% which is the regular rate for single taxpayers. The next $4,550 would be taxed at the trust rates of 10% on the first 2,550 and the next $2,000 would be at the 24% rate for a total of $735. The total tax bill would be $945 vs a regular tax rate of $665(10%).

2018 Standard Deduction

Singles and married filing separate get a $12,000 standard deduction. The standard deduction for head of household is $18,000. Joint filers get $24,000. Singles and head of household get an additional $1,600 when they turn 65 and married filers get an additional $1,300 each at age 65.

Miscellaneous Itemized Expenses

Miscellaneous itemized expenses including unreimbursed employee business expenses, office in the home expenses for employees, union and professional dues, appraisal fees, hobby expenses up to hobby income, tax preparation fees, safety deposit box fees, job hunting expenses, attorney fees for tax matters, and investment management fees are now gone for 2018 tax returns. Hopefully the increase in the standard deduction will cover what you used to deduct in this area.

Obamacare Penalty

The Obamacare penalty will still be applicable for 2018 tax returns. If you don't have qualified health insurance (the individual mandate) in 2018, you will be subject to substantial penalties. In 2019, the penalty goes to 0 so you will not be forced to have health insurance coverage.

The New Child Tax Credit

Under the new tax act effective 1/1/2018, families with children really do well. The credit has increased to $2,000 per child 16 and under from $1,000. Even if tax is 0, $1,400 of each $2,000 is refundable. Older children and other dependents also qualify for a new $500 credit.

Opportunity Zones

Governors of 18 states have set up qualified opportunity zones on April 19, 2018 where new investment can be eligible for preferential tax treatment. An opportunity zone is an economically distressed area. The Federal government is trying to direct development dollars to these areas and create jobs. It is estimated that these areas will attract 6 trillion dollars from investors. Why would investors want to do this? They get to defer any capital gains even short term gains if they reinvest their capital gains in an opportunity zone within 180 days. The process is somewhat similar to like kind exchanges except that you don't have to reinvest basis and you don't need an escrow agent. It is a temporary deferral. You have to recognize the capital gains on the earlier of the disposal of the opportunity zone investment or 12/31/2026. If you hold the investment for 5 years,  you get to exclude 10% of the deferred capital gains from tax. Holding for 7 years gives you a 15% exclusion. The investment in the opportunity zone also grows tax free like a Roth if you hold it for 10 years. The list of approved opportunity zones can be found at Opportunity Zones Resources and will be continually updated.

Donations of clothing and household items to charity

What should you do if you donate over $5,000 worth of clothing and household items to Goodwill? First of all you should list all of the individual items donated and get a receipt from the charity. You should also take pictures of the donations. Obtaining the value of the donated items is the tricky part. Usually such items are worth at most only 20% of the retail cost. Many charities have online guidelines for what clothing and household items are worth in good condition. To avoid complications with an IRS audit you should consider getting an appraisal before you donate the items.

Charitable Donations and 501(c)(3)

The Internal Revenue Code section 501(c) covers tax exempt non-profit organizations. There are 29 different types but only one of them allows you to deduct contributions on your tax return which is 501(c)(3). This subsection covers organizations operated exclusively for "religious, charitable, scientific, testing for public safety, literary, educational purposes, to foster national or international amateur sports competition ( no part towards athletic facilities or equipment), or for the prevention of cruelty to children or animals.  No part of the net earnings can be for the benefit of any private shareholder or individual." The IRS has to approve an organization requesting 501(c)(3) status. The IRS issues a publication every year listing all of the 501(c)(3) organizations which can be searched online by federal ID #. Most foreign organizations do not qualify. However certain Canadian, Mexican, and Israeli charities qualify by tax treaty.

Publicly Traded Partnerships(PTPs)

These are partnerships that are  traded on a securities market. Passive losses from a PTP can only be used against passive income from the same PTP so they don't fall under the sames rules for deducting passive losses on form 8582. However when you sell your  partnership interest you can then deduct suspended passive losses if you have basis. Investing in PTPs usually results in a very complicated K-1 that may increase your tax preparation fees.

Business vs. Hobby

The IRS requires that a business has a profit motive in order for you to deduct reasonable, ordinary , and necessary business expenses from it. How do you prove a profit motive? If you show a profit in 3 out of 5 years on a schedule C business, that will work. If you don't, the IRS will wonder why you are working without making any money. The IRS might think you are trying to write off personal expenses against your other W-2 income. There are also 9 factors which the IRS looks at to determine a profit motive such as the time and effort in the activity, the manner the activity is carried on, and whether there are elements of personal pleasure or recreation. It is a facts and circumstances test. If the IRS determines that your activity is not a business but a hobby, then you have to report the income on line 21 of form 1040 and the expenses are not deductible.

Travel Per Diem Rates for Lodging

A per diem rate for lodging can only be used by employers for employee reimbursements in certain situations. The Federal government sets these rates by location which are accepted by the IRS which are currently either $216 or $134. However, if you are self employed filing a schedule C or F you have to use actual lodging receipts for your tax deduction. 

Defined Benefit Retirement Plans

This is termed a qualified plan by the IRS and allows business owners to contribute over $300,000 a year in certain cases where you combine a 401k profit sharing and cash balance plan. The ages of the employees are a big factor in determining the contribution along with years of service which has to be done by an actuary and can't be discriminatory between employees. A defined benefit plan determines how much each participant gets in retirement. These sort of plans are best when there are few employees and the owner is much older than the other employees. The administration cost of defined benefit plans are about $1,500 a year now vs. $10,000 ten years ago. I believe actuaries are benefiting from better computers. One disadvantage is that you have to contribute every year even if you are having a bad year so the business should be profitable for at least three years in a row to consider such a plan.

Section 529 Plans

Section 529 plans are even better now under the new tax law than they were before, and they were pretty good before. As of 1/1/2018 you can now take out tax free  $10,000 a year per beneficiary to cover tuition expenses for private elementary and secondary schools. Under the old rules you could just take out withdrawals for qualified college expenses. Georgia also gives you a $4,000 tax deduction per child for contributions to the State of Georgia 529 plan. Contributions are not deductible on the federal return but the plan grows tax free and qualified withdrawals are not taxed. The named beneficiary of the 529 plan does not have any legal rights to the funds so you retain control. If you withdraw funds for reasons other than education you are subject to taxes on the earnings plus a 10% penalty. You also have the right to change the beneficiary to another qualifying family member. 529 plans do not have any income, age, or annual contribution limits except for a lifetime contribution limit of $235,000 to $520,000 which varies by state plan. You can also treat a large contribution  as a gift over a 5 year period to fall under the annual gift tax exclusion of $15,000.

Extended Returns for 2017 and Estimated Taxes for 2018

If you paid estimated taxes for 2017, you should plan on paying estimated taxes for 2018 even if we have extended your 2017 tax return. You should at least pay in the same federal and state quarterly amounts for 2018 that you paid in 2017. I will adjust the 2018 estimates when I finish the 2017 tax return. The next quarterly estimate is due on June 15 so it would be helpful if we could finish your 2017 tax return by then. You pay an underpayment penalty of 5% on an annual basis for unpaid 2018 federal taxes at each quarter due date. The GA amount is even higher. Let me know if you need any quarterly estimate forms.

Charitable Contributions of $250 or more

A donation of $250 to a charity in any one day requires that the charitable organization give you an acknowledgement letter which must state if you received anything of value in exchange for your contribution. The acknowledgement must be received by the taxpayer the earlier of the filing date of the return or the extended due date. There is no going back to the charity for a letter when your return gets picked for an audit two years later. You may want to reconsider monthly contributions where the amount donated is less than $250 but add up to more than $250 for the year. The charity is not required to give you an acknowledgement letter in that situation, but it may be helpful in an audit to have one.

Cash is Always Taxable

If you receive cash, gift cards, gift certificates, or any cash equivalent item from your employer, it is taxable and should go through payroll and end up on your W-2. De mimimus fringe benefits such as holiday or birthday gifts such as a turkey, coffee or soft drinks, occasional use of office equipment, and occasional sports or theater tickets are not taxable to employees.

2018 Estate and Gift Tax Exclusion

In 2018 the estate and gift tax exclusion increases to $11,180,000 from $5,490,000 in 2017. The exclusion is indexed for inflation each year until 2025. On January 1, 2026 the exemption reverts back to the 2017 level. The highest marginal rate for estate and gift tax is 40%. The annual gift exclusion is now $15,000 which means a gift tax return should be filed reporting the taxable gift but no tax is due by the donor until lifetime taxable gifts exceed $11,180,000. I believe that gift tax returns are not required when gifts of less than $30,000 are paid out of a joint account.

How Long to Keep Tax Records

Right now in 2018 you should have all the supporting records for tax return years 2014 through 2017. I also advocate that you keep your tax return copies forever. If you discard the supporting records for the older years,  then it should not take up too much space. Other than that here are just some general guidelines:

1. Brokerage statements:Just keep the most recent month.
2. Bank statements: Keep only those that support items on the tax return for the current year and the last 4 years.
3. Closing statements on real estate transactions: Keep until the property is sold and store with the tax return in the year of sale.
4. Credit card statements: Keep only those statements that support items on the tax return for the current year and the last 4 years.
5. Business assets: Keep records of purchase transaction until sold or disposed of and store with the tax return in year of sale or disposal.

The New 20% Deduction Continued- Anti Abuse Rules

The anti abuse rules of the new 20% deduction for pass through businesses don't kick in until your taxable income is over $157,500 single or $315,000 married. So if you have qualified business income and your taxable income is under these amounts, you can take the 20% deduction. One limiting factor is that the deduction is limited to the lesser of 20% of qualified business income or 20% of taxable income less net capital gains. If your taxable income is greater than $157,500 or $315,000 then the anti abuse rules come into play. Specified service businesses such as law, accounting, health, actuarial science, performing arts, consulting, athletics, financial services or any trade or business where the principal asset is the skill of one or more employees have the 20% deduction phased out over the next $100,000 over the $157,500 and $315,000. Note that architecture and engineering companies are not included in this limitation. The government is trying to encourage the building trades. If you are not a specified service business and have taxable income over the thresholds, then your deduction can be limited to the greater of 50% of W-2 wages or 25% of W-2 wages plus 2.5% of the unadjusted basis of tangible depreciable property.

The New 20% Deduction Continued

There is a taxable income limit on the new 20% of qualified business income deduction. If single, your limit is $157,500 and joint is $315,000. The anti abuse rules limiting the 20% deduction only kick in above these amounts. So if your taxable income is under these amounts the full 20% deduction applies to your business net income. Then the rest of your business income including wages is subject to up to a 37% tax rate. I will discuss the anti abuse rules limiting the 20% deduction in my next tax blog.

The new 20% deduction for Qualified Business Income

How can you take advantage of this new rule and what does qualified business income mean? Now is the time to start that side business you always dreamed of when you had the time as the new deduction takes effect in 2018. The new law requires that qualified business income be earned in a qualified trade or business. The IRS defines a trade or business as any activity carried on in the production of income from selling goods or providing services. Section 162 of the Internal Revenue Code requires that the business be regular, continuous, and substantial which is a higher standard. In the absence of further guidance from the IRS and the courts which I'm sure is coming soon, I believe that schedule C profit or loss from business, schedule E page 1 rental income, schedule F farm income, and K-1's from non passive activities all are qualified business income eligible for the 20% deduction. No portfolio income from K-1's such as interest, dividends, or capital gains is eligible however except for qualified cooperative dividends, qualified real estate investment trust dividends, and qualified publicly traded partnership income.

When to take Social Security

When should you take social security? You are eligible when you reach age 62. If you take benefits then, your benefit will be 75% of what you would get at age 66 the full retirement age for the baby boomer generation. However if you wait until age 70 to collect your social security benefit you will get 132% of your benefit at age 66. The benefit increases 8% for each year from age 66 up until age 70 when the increase in benefit ceases. If you are in good health and you don't need social security to make ends meet, then wait and get more for the rest of your life. Cash flow is king in retirement and social security can be a cornerstone of your strategy. Social security will be there for the boomer generation but maybe not in the same form for our children.

Tax Extenders for 2017

The following expiring provisions were extended for 2017 per a law passed this month:

1. The above the line deduction for qualified tuition and related expenses of $4,000 for joint filers with adjusted gross income up to $160,000 was extended.
2. The discharge of qualified principal residence debt was excluded from taxable income.
3. The deduction for mortgage insurance premiums was extended.
4. The $500 lifetime credit for qualified energy efficient improvements to a taxpayer's principal residence came back again.

Meals and Entertainment Expenses Accounting for 2018

If you have a business I suggest that you set up the following accounts:

Meals Expense: To record all client meals and employee business meals including travel meals. These expenses are 50% tax deductible.

Entertainment Expenses: Any cost of client entertaining other than meals. These expenses are not tax deductible anymore.

Employee Relations: To record all costs of company parties or employee meetings where all are included. Costs are 100% tax deductible.

Grocery Expenses: To record costs for coffee, soft drinks, and snacks for employees. These are 100% tax deductible.

Meals and Entertainment Expenses for 2018

The new tax act eliminates any deductions for business client entertainment such as event tickets, golf games, tickets to charity events, football games, etc. However social and recreational activities for the benefit of all employees like holiday parties and summer picnics are still 100% deductible. Business meals for all employees should fit in the 100% deductible category under the social and recreational activities for the benefit of all employees. Travel business meals for employees are 50% deductible as before. The deductiblility of client business meals is uncertain. If such meals are considered entertainment, then they are not deductible. In the absence of further guidance from the IRS or court decisions, I believe they are still 50% deductible.

Filing Requirements for Children

When should you file a tax return for your child? If your child receives a W-2 and the amount is greater than $6,350 then a return is required. Also if withholding was done on your child's W-2 then you should file a return to obtain a refund even if the W-2 amount is less than $6,350. You don't want to let the government keep it. If your child receives a 1099 with box 7 filled out which is nonemployee compensation, then a return is required if the amount is $400 or more because self employment tax of 15.3% is due on net self employment income. The IRS considers interest, dividends, and capital gains unearned income and your child is required to file a return if the amount of such income is greater than $1,050.

1099's and W-2's

The season of 1099's and W-2's is now here for 2017. You are supposed to receive them by 1/31/2018. In the next two weeks you will be receiving many 1099's and W-2's relating to interest and dividend income, social security income, wage income, other income, mortgage interest, college tuition payments, pension and IRA distributions, etc. Make sure you save all of these tax documents as they have been reported to the IRS and you will be subject to penalties if you don't report the same amounts on your return. Give these documents to me for your 2017 tax return. I make a computer copy for your file in case you get a notice from the IRS in the future regarding your tax return.

Mileage Rates for 2018

The IRS has changed the mileage rate for business miles starting January 1, 2018 from 53.5 cents per mile to 54.5 cents per mile. The medical and moving rate is up one cent to 18 cents per mile. Charitable mileage remains at 14 cents per mile.

Obamacare Question on the 2017 Tax Return

Unfortunately you won't have the option of not answering the question concerning your qualified health care coverage during 2017 like you did on the 2016 income tax return. The IRS is now going to force you to answer the question. This means that you will will have to pay a substantial penalty if you didn't have qualified health insurance unless you qualify for one of the exemptions such as low income or only a two month break in coverage.

Expired Tax Breaks

The provisions below expired at the end of 2016 and won't be available for the 2017 tax return.
1. The $4,000 tuition and fees deduction for adjusted gross income is no longer available.
2. The cancellation of mortgage debt for a principal residence which allowed up to a $2 million  income exclusion from taxable income has expired.
3. The personal energy property credit up to $500 has finally expired.
4. The mortgage insurance premium deduction is gone.