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Avoiding The Rush

Below is a notice published by the IRS with regard to the upcoming Presidents Day holiday and the increased calls with the IRS and what you might be able to find online to answer your questions.  Hope it helps.

IRS: Avoid the rush over Presidents Day holiday; online tools, resources can help

WASHINGTON — With a new tax law in effect and a surge of tax returns expected during the Presidents Day weekend, the Internal Revenue Service is offering taxpayers several tips and various time-saving resources to get them the help they need quickly and easily.

The IRS receives more phone calls on the day after Presidents Day than on any other day of the year. Ahead of the Presidents Day weekend, the IRS is reminding taxpayers to “Avoid the Rush,” detailing online options taxpayers and tax professionals can use to get information quickly to avoid long wait times on the IRS toll-free hotline this week and during the week of February 19.

“IRS employees are working hard to provide taxpayers the help they need,” said IRS Commissioner Chuck Rettig. “Given the high call volumes at this time of the year, we encourage people to first visit our many online resources available at IRS.gov. And when it comes time to file, we continue to encourage people to use e-file or Free File to get their refunds as quickly as possible.”

Most tax issues can be resolved from the convenience of a home or office. The IRS Services Guide links to many online IRS services.

Here are a few featured tips to avoid the rush:

  • Use IRS.gov to track refunds – The IRS issues more than nine out of 10 refunds in less than 21 days. IRS customer service representatives cannot answer refund questions until after the 21-day period. But taxpayers can track their refund anytime by using the “Where’s My Refund?” tool on IRS.gov and the IRS2Go app. Taxpayers can also call the IRS refund hotline at 800-829-1954.
  • Use the “Where’s My Refund?” tool starting February 23 to track refunds containing the Earned Income Tax Credit and/or the Additional Child Tax Credit. By law, the IRS cannot release refunds that include EITC or ACTC. The earliest those refunds will be deposited into accounts is February 27.
  • Use IRS.gov to find answers to tax questions – The IRS offers a variety of online tools to help taxpayers answer common tax questions. For example, taxpayers can search the Interactive Tax Assistant, Tax Topics, Frequently Asked Questions, Tax Trails and the IRS Tax Map to get faster answers.
  • Review Publication 5307, Tax Reform Basics for Individuals and Families, for more information about tax reform.
  • Let free tax software or free volunteer assistance do the hard work. Taxpayers can get free tax preparation assistance through IRS Free File, for those who want to prepare their own returns, or through the Volunteer Income Tax Assistance (VITA) program, for those who want a volunteer to help prepare their returns.
  • Use digital payment options if you owe additional tax. Some taxpayers may receive a smaller refund or even owe an unexpected tax bill when they file their 2018 tax return, particularly if they didn’t do a Paycheck Check Up in 2018. Use the Paycheck Check Up to make sure you are withholding enough tax in 2019.
  • Make an appointment before visiting an IRS Taxpayer Assistance Centers. Anyone who needs face-to-face service should make an appointment before showing up. But, as with the toll-free telephone calls, most TAC visits can be resolved by searching IRS.gov.
  • Call your employer first for that missing Form W-2. Those who did not receive a Form W-2, Wage and Tax Statement, from one or more employers by Jan. 31 should first contact the issuer to inform them of the missing form. Those who do not get a response must still file on time and may need to use Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRA’s Insurance Contracts, Etc..

A redesigned Form 1040 now takes the place of both the Form 1040-A and Form 1040-EZ. Tax return preparation software will automatically use taxpayer’s answers to the tax questions to complete the Form 1040 and any needed schedules.

Throughout 2018, the IRS has been working closely with partners in the tax return preparation and tax software industries to prepare for tax reform and tax form changes affecting tax year 2018. This ongoing collaboration ensures that taxpayers can continue to rely on the IRS, tax professionals and tax software programs when it’s time to file their returns.

Taxpayers who call the IRS before and after Presidents Day weekend should be prepared for long wait times because of the high volume of calls received on all toll-free lines. Tuesday, Feb. 19, will be the busiest day of the year. See Let Us Help You for alternatives to calling and for documents, such as prior-year tax return information. Taxpayers may need to validate their identities.

Income Tax Refunds

Are you lucky enough to be receiving a refund for overpayment of income taxes?  Here are some tips from the IRS on receiving that refund quicker. 

For a faster refund, choose e-file

Electronically filing a tax return is the most accurate way to prepare and file. Errors delay refunds and the easiest way to avoid them is to e-file. Using tax preparation software is the best and simplest way to file a complete and accurate tax return. The software guides taxpayers through the process and does all the math. The IRS is working with the tax community to incorporate the tax law changes and form updates. Nearly 90 percent of all returns are electronically filed.

There are several e-file options:

Use Direct Deposit

Combining Direct Deposit with electronic filing is the fastest way for a taxpayer to get their refund. With Direct Deposit, a refund goes directly into a taxpayer’s bank account. There’s no reason to worry about a lost, stolen or undeliverable refund check. This is the same electronic transfer system now used to deposit nearly 98 percent of all Social Security and Veterans Affairs benefits. Nearly four out of five federal tax refunds are Direct Deposited.

Direct Deposit also saves taxpayer dollars. It costs the nation’s taxpayers more than $1 for every paper refund check issued but only a dime for each Direct Deposit.

 

How The New Tax Law May Affect Your Income Tax Return

You may notice several of the following items that may affect your individual income tax return:

  • A change in the tax rates which should result in most people paying less tax during the year. However, the increase in the standard deduction, suspension of personal exemptions, an increase in the child tax credit and the limiting or discontinuing certain deductions may have an overall effect on your bottom line.
  • Because of the change in rates and the way taxable income is calculated, you may find that if you have unearned income and haven’t made estimated payments, you may owe an estimated tax penalty.
  • Changes have occurred to the Standard Deduction. Beginning in 2018, the standard deductions for each filing status has increased. However, the deduction for personal exemptions has been suspended.
  • Many changes have been enacted which affect Itemized Deductions. People who have itemized in the past may no longer find it advantageous to do so. Some changes regarding Itemized Deductions are:
    • The deduction for state and local income, sales and property taxes has been modified by a limitation on the deduction to $10,000 ($5,000 if Married Filing Separate). Any amount in excess of $10,000 is not deductible.
    • A deduction for home mortgage and home equity interest has been modified. Interest paid on most home equity loans is no longer deductible unless the loan proceeds were used to buy, build or substantially improve the home.  Further, there is a new dollar limit on total qualified residence loan balances based upon the date the loan was taken, i.e., on or before December 15, 2017 ($1,000,000 cap on deductible interest) or after December 16, 2017 ($750,000 cap on deductible interest).
    • Casualty and theft losses have been modified to allow deductions only to the extent that they are attributable to a federally declared disaster.
    • The deduction for miscellaneous itemized deductions has been suspended. This means that investment management fees, safe deposit box fees, tax preparation fees among other expenses are no longer deductible.
  • The Alternative Minimum Tax (AMT) exemption amount has increased.
  • Student loans discharged due to death or disability are no longer included in income.
  • A traditional IRA, SEP or SIMPLE can no longer be recharacterized in a conversion to a Roth IRA.

If you have questions regarding tax laws, the Interactive Tax Assistant may help to provide answers to a number of questions.  Visit irs.gov for further assistance.

Let’s Get Ready For Tax Season

Tax season is upon us and we have begun to receive those pieces of mail marked “Tax Information – Important”.  So now what?  Here are some suggestions to help ease the stress of tax season.

Where do we start?  The best place to start is to find a copy of last year’s return.  Even if you have someone else prepare your returns, it is a good idea to have a copy of last year’s return.  This gives us a guide as to sources of income, whether we may have disposed of assets previously providing income, etc.  Also, it can be a guide as to when you have received all income tax information.

If you can’t find a copy and need a transcript, you can get one by ordering transcripts online Get Transcript Online on IRS.gov; by calling (800) 908-9946; or by mail.

If you have previously received a refund in the past, due to the new tax changes, you may not get a refund or as big a refund as in previous years.  Also if there is a refund on returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit, the refund will not be issued before mid-February. More broadly, precautions instituted by the IRS and its Security Summit partners to combat tax-related identity theft may delay refunds.

The Individual Income Tax Form 1040 has a new look this year.

The current 1040, 1040-A and 1040-EZ are all being replaced by a single, shorter 1040 this year, which can be supplemented by up to six extra schedules.

Those who file their own taxes electronically will need to validate their electronic return with their prior-year AGI, as noted above, or their prior-year Self-Select PIN. (Their AGI would be on Line 37 of last year’s 1040, Line 21 of the 1040-A and Line 4 of the 1040-EZ.)

My final suggestion is that you designate a specific location where you will accumulate all of your tax information until you are ready to deliver to your tax preparer or begin to prepare your taxes.  Keeping information in one place will lessen stress associated with taxes.

 

Checking In On Your Resolutions – #2

Last week we started our check on our resolutions and we will wrap up our suggestions this week.

ARE YOUR HARD-EARNED ASSETS WORKING FOR YOU?  If you have a savings account or certificates of deposit, are you getting the best interest possible on these assets?  If you have a brokerage account, are your assets working to your best advantage?  When was the last time you spoke with your broker?  In today’s world, there are many discount brokerage firms, but if you have an account at one, you don’t receive the same advice as you would with a regular broker.  There isn’t anyone to guide you with where the best investments are, what investments will generate the most income, are less risky, etc.  If you have an IRA with a broker, it is a good idea to meet to discuss your goals to maximize the assets and meet the obligations of required minimum distributions.

ONLINE ASSETS – With each passing day, we rely more and more upon technology.  We shop, we do our banking, we perhaps do our taxes, socialize, follow favorite charities, sports teams, cultural postings, just to name a few – online.  We have computers, laptops, tablets, phones – all with the ability to handle our technological needs.   And along with this activity and array of devices, we have logins and passwords.  But, what happens if YOU are unable to access these devices or websites?  What is our exposure to fraudulent activity or identity theft?  You have heard it many times – change your passwords every six months, have strong passwords with a combination of letters, numbers and symbols, don’t share your passwords, be careful in what you access using public wi-fi and the list goes on.  Some simple suggestions – store your login and password information securely – either using a secure password inventory program or perhaps on paper stored in a secure location.

Also, remember that you may own digital assets and should provide for accessibility to these assets in your estate planning documents.  Failure to do so may present problems when you are no longer able to do so.  Talk to your estate planning attorney to ensure your documents address these assets.

ARE YOU COVERED?  We purchase a home and get insurance which coverage is adequate at the time.  We buy a car and purchase insurance based upon the day we purchase the car.  We buy life insurance that is adequate for us at the time purchased.  But, life happens – market values of real estate change, we add on to our home, our car ages and we may not need the same coverage as the day it was new, we have a baby, a spouse passes, we divorce – all of which can change our insurance needs.  We suggest that you discuss with your insurance carriers whether you are adequately protected for your individual situations.  Unless you are proactive in this regard, the coverage does not change automatically and you may be paying more in premiums than necessary or may be underinsured.

STUFF – I started this two-part blog with “stuff” and my final item is “stuff”.  I offer you a simple challenge – close your eyes and pick a room in your home.  Go around that room and list EVERY item that is in the room from floor to ceiling, inside every drawer, on every shelf.  When you think you are finished, open your eyes and go look in that room.  You will most likely be surprised to spot items you didn’t list.  We can’t remember everything, so my suggestion is to either take a video or still pictures of your home inventory and store the images in a secure location.  In the unfortunate event that you have a disaster, you will be able to retrieve these images to assist with insurance claims. You will have enough to deal with without having to remember each and every item in your home.

I hope that these recent blogs will help you to determine what areas you should address.  It’s the third week in January and I hope you are staying on track with your resolutions.  If not, I have just given you some new ones to consider.

 

Checking In On Your Resolutions

So, we are in the first full week of January and life is regaining a normal routine.  How are you doing on your resolutions?  Last week, Yasmeen Khaleel gave a list of suggestions of areas to address with regard to estate planning.  If you read that blog, have you even given it any further thought?  I would hope so as it is so important to have your estate planning and financial matters in order.  I know, it’s not the easiest of matters to think about, but it is invaluable should something happen.

This week, we will continue with suggestions on estate planning and taxes.

STUFF WE OWN – We all have “stuff”.  And probably much more than we need or use.  The things we don’t use take up space, so why not start your spring cleaning during the dreary winter months when we aren’t outside enjoying the weather?  Start small in cleaning out an area.  Eliminate what you don’t need (someone will thank you later).  But, now that you have items you are willing to part with, what do you do with them?  GIVE THEM AWAY!  Perhaps family members or friends could use the items.  Better yet, give them to a charity.  There are several charities that will come to your home to pick up the items as long as they are bagged or boxed and one person can handle the parcel.  Charities will use these items in their thrift stores to generate funds to help others.  Go online or keep your eyes open in your mailbox for flyers of charities willing to pick up items.  Remember the saying, “one man’s trash is another man’s treasure”.

SECURITIES – Do you want to benefit a charity or an individual by gifting some securities?  All gifts less than $15,000 can be gifted without any gift tax consequences known as annual exclusion gifts.  If you are inclined to pass along securities, check with your attorney or accountant with regard to considerations to be made in this regard.

BENEFICIARIES – Have you checked your beneficiaries on your IRA/pension accounts and/or life insurance policies lately?  This is an area frequently overlooked but very important.  If the primary designated beneficiary is deceased, are there contingent beneficiaries?  If not, then the asset upon your death will pass to your estate to be distributed pursuant to the provisions in your will rather than to a specific beneficiary.  Is this the disposition plan you want?  What happens if the designated beneficiary is a former spouse from whom you are divorced?  Who will benefit from the asset upon your passing?

ASSETS YOU HAVEN’T THOUGHT ABOUT FOR A WHILE – Many of our parents may have taken out life insurance policies on us when we were younger.  Some of us may have had a 401(k) from a former employer.  Ring any bells?  If you haven’t thought about these recently, you should put this on your list of things to address.  If you haven’t thought about these for a while, now is the time.  Determine who the beneficiary is, what the current value is, whether the company may have merged and the current contact information.  Don’t let these assets escheat to the state as unclaimed funds for someone to deal with in the future.  It is much easier to deal with these assets sooner, rather than later.

UNCLAIMED PROPERTY – Did you know that you can search on the internet for unclaimed property in your name?  The site is “Missing Money” and you simply put in your name and the state and it will produce a report of individuals with similar names of funds being held by the state.  If you have lived in multiple states, check each state in which you resided.  You never know, you might find a surprise.

Next week we will continue with more suggestions.  Have a good week.

Salient Considerations in a Time of Transition

NEW YEAR’S RESOLUTION

WELCOME 2019!  The new year is upon us and like most individuals, you may have made resolutions for the new year.  Often times when making resolutions, we forget to address the important matters and I challenge you this year to think outside the box and make a resolution to address your estate planning matters using the 7 steps below.

The burden on the family of an incapacitated loved one is increased when they are unprepared.  Crisis often arises as a result of their lack of knowledge of their loved one’s personal matters and these crises require legal counsel.  Many of these situations can be avoided with proper planning.  We counsel our clients to be proactive in these areas and minimize the stress and expense for their family.  The following are some of our top suggestions:

1. Tell Your Story:

Prepare a letter of last instruction to help transition the details of your personal life to those who will be helping you when you are no longer able to act for yourself.

1a.       Personal Financial “Blue Print” Prepare a list of your passwords, assets, and liabilities – complete with account numbers.  Include the names, addresses, and telephone numbers for your financial planner, attorney and accountant.  Identify the location of your bank/brokerage statements, bills, and tax returns.

1b.       Personal Medical “Blue Print” Prepare a list of your health insurance policies and claim centers, medications, physicians and pharmacies.  Prepare a medical history or obtain a copy from your primary care physician.  State your preferences for hospitals, rehabilitation centers and care services.

2. Financial Spring Cleaning:

Review the manner in which your assets are titled with your fiduciary team (consisting of your lawyer, accountant and financial planner).  Many clients name a joint account holder for convenient access to the account.  However, a creditor of the joint account holder could attempt to collect that money or the joint account holder could inherit it to the exclusion of the other heirs. This result is normally not contemplated and can be avoided by designating an agent under a power of attorney for the account as opposed to a joint account holder.

3. Secure Your Finances:

Identity theft is rampant.  Predators are very creative and we have even seen the elderly duped by paying for sham “investments” by credit cards leaving clients with huge credit card debt and no viable recourse.

4. Fiduciary Check:

Review your Health Care Power of Attorney/Advanced Health Care Directive, Durable Power of Attorney and Last Will and Testament.  Do your fiduciary choices remain viable?  Prepare a list of fiduciaries along with their contact information and display it in a prominent location so it is available in the case of emergency.

5. Care Consultant:

Consider engaging a geriatric care consultant to help ease any transition between your apartment here and the health center or a hospital or an extended care facility.  A geriatric care consultant can monitor, navigate the administrative maze which accompanies this process, identify care requirements and advocate for you or your loved one.  This is a particularly useful tool for those whose loved ones are not local.

6. Make Binding Final Arrangements:

Under New Jersey law, the only way to make legally binding funeral arrangements is to sign a document in the same fashion you would sign a will with witnesses and a notary.  Avoid the potential for disagreements by executing a proper binding statement.

7. Decide Who Gets Your Engagement Ring and the Family China:

The disposition of your personal property by your heirs is a common catalyst for disputes.  New Jersey law allows you to dispose of your tangible personal property by way of a memorandum which is a written statement provided it is signed and dated by you.  Make sure the use of the technique is described under your will.

As The Year Winds Down…

It is hard to believe that 2018 will soon give way to 2019.  Where does the time go?

When I was younger, whenever I would wish for some date in the future to be here – my birthday, the end of school, a special event, my mother would tell me not to wish my life away for the older you get, the faster time flies.  I did not understand or appreciate what she said until I got older.  Yes, time does seem to pass more quickly and I wish now that it would just SLOW down!

With that said, 2018 has been quite a year – storms, floods, fires, violence, politics all stand out in one’s mind.  But, let’s not forget the moments we are thankful for.  In this season beginning with Thanksgiving thru New Year’s Day, regardless of your beliefs, we celebrate with gratitude our loved ones, our health, our prosperity, our happiness, our wellbeing.

To our clients, we thank you for the opportunity to serve you this year.  To our professional acquaintances, we thank you for your assistance, your referrals, for the opportunity to work with you.

As we take a break from our departmental blogs for the next couple of weeks, we wish each and every one of you the best wishes for a happy, healthy and prosperous 2019.

Happy Holidays and Happy New Year!

What Happens If Large Gifts Are Made Now?

With the Tax Cuts and Jobs Act of 2017, the increased gift and estate tax exclusion amounts are set to sunset in 2025.  The exclusions are $11.2 million in 2018 and will increase each year until 2025, indexed for inflation.  But, what will happen if you make a large gift now?  Will you risk the tax benefit of the higher exclusion level if the exemption decreases after 2025 to the pre-TCJA amount indexed for inflation (or perhaps sooner depending upon any new laws)?

The Treasury Department and the IRS issued proposed regulations to enable individuals planning to make large gifts to do so without concern of losing the tax benefit of the higher exclusion level.

Gift and estate taxes are calculated, using a unified rate schedule, on taxable transfers of money, property and other assets. Any tax due is determined after applying a credit – formerly known as the unified credit – based on an applicable exclusion amount.

The applicable exclusion amount is the sum of the basic exclusion amount established in the statute, and other elements (if applicable) described in the proposed regulations. The credit is first used during life to offset gift tax and any remaining credit is available to reduce or eliminate estate tax.

The TCJA temporarily increased the exclusion amount from $5 million to $10 million for tax years 2018 through 2025, with both dollar amounts adjusted for inflation. In 2026, the exclusion amount will revert to the 2017 level of $5 million as adjusted for inflation.

To address concerns that an estate tax could apply to gifts exempt from gift tax by the increased exclusion amount, the proposed regulations provide a special rule that allows the estate to compute its estate tax credit using the higher of the exclusion amount applicable to gifts made during life or the exclusion amount applicable on the date of death.

Stay tuned for more information regarding large gifts and possible impact in the future.

Don’t Get Scammed

Tis the season. . . .

For a risky time for people and their sensitive data.  Online shopping, impostors posing as charities seeking donations, spam, robocalls, tax scams, . . . .

What can you do to protect your information?  The IRS encourages people to review some simple steps to protect their data and protect their tax returns during filing season.  What are these simple steps?

  • Use strong security software
  • Use strong passwords
  • Don’t share your passwords
  • If you get a call from someone alleging to be from the IRS, HANG UP. Don’t buy into their scam.
  • Watch your emails for suspicious mail.
  • When using the internet, use “HTTPS” rather than “HTTP”. What’s the difference?  The “S” stands for secure and means that all communications between your browser and the website are encrypted.

The IRS is launching a special Twitter handle called @IRSTaxSecurity to share the latest scam and security alerts that routinely increase during tax season. Taxpayers can follow @IRSTaxSecurity. The Summit partners encourage people to share security information using the #TaxSecurity hashtag.

Do what you can to protect yourself from becoming a victim.

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