Unpaid Tax at 4/15/2019

The IRS and Georgia will punish you if you haven't paid in enough tax by the due date of the 2018 tax return. They will really punish you if there is unpaid tax and no tax return or extension filed. The IRS failure to file penalty is 5% of the unpaid taxes per month or part of a month up to a max of 25%. The Georgia failure to file penalty is the same. The IRS and Georgia late payment penalties are 1/2 of 1% per month or part of a month on any unpaid tax balance. The IRS annual interest rate on unpaid taxes is currently 6%. The Georgia interest rate is the federal reserve prime rate plus 3% (8.5%) and can be adjusted every January.

Fulton County Senior Homestead Exemption

You have until April 1 to apply for a senior homestead exemption in Fulton County. This is a new law that gives homeowners that are age 65 and over another $20,000 in exemption regardless of income. To qualify you have to go in person to one of the 5 Fulton County Board of Assessors' offices and fill out a 1 page application. You need to bring with you your driver's license, current registration for all vehicles of owner and spouse, and your last property tax bill. I went last week to the North Fulton Service Center room 210 and it took about an hour.

Miscellaneous Itemized Deductions

The tax reform act eliminated miscellaneous itemized deductions such as employee business expenses and investment expenses. However there are still some left that are fully deductible you might not know about including the following: gambling losses to the extent of gambling winnings, job related expenses of the handicapped, estate taxes imposed on taxable income, and the unrecovered cost of annuities on a decedent's final return.

Corporate and Partnership Tax Returns

The due date for 2018 corporate and partnership tax returns is Friday, March 15, 2019. This also happens to be the Ides of March when Julius Caesar was assassinated and Rome started going downhill. You can extend the filing of the returns for six months until September 16, 2019.

Converting Your Home to Rental Property

When you make this transition you need to depreciate your old home that you have converted to rental property. How do you do that? Do you use the fair market value at time of conversion or something else? The answer is you use the lower of your cost or fair market value at the time you make it rental property. In a rising market for real estate most homeowners have to use their original cost plus the cost of significant improvements. Another step you have to take is to determine how much of your original cost should go to land if you have a single family home since land cannot be depreciated. Most property tax bills will tell you what % of the bill is for land vs the house so use that ratio to allocate an amount to land. Absent that information I allocate at least 20% of the original cost to land. If the rental is a condo,  I usually allocate all of the original cost to the building to depreciate.

Should you file a tax return for your child?

There are five situations where a federal tax return is needed for your dependent child:

1. If your child receives a 1099 showing non employee compensation over $400, a return is needed because self employment tax is due.
2. W-2 wages over $12,000
3. Dividends, interest, and capital gains over $1,050
4. Gross income greater than the larger of $1,050 of unearned income or wages up to $11,650 plus $350
5. Your child had federal withholding on his W-2 and you want to get it refunded.

In certain circumstances a child's income can be reported on the parent's return but it is usually better to file a separate return. 

Standard Mileage Rates for 2019

The business mileage rate increases to 58 cents per mile from 54.5 cents per mile for 2018. Medical and moving mileage goes to 20 cents a mile from 18 cents a mile. Charitable mileage remains at 14 cents a mile. Also for 2019, taxpayers cannot claim a deduction for unreimbursed employee travel expenses, and only the armed forces are allowed moving expenses now.