2019 is barreling towards its completion and we can sit idly by and not tell you all we’ve learned this year.
But we won’t.
With the new Tax Cut and Jobs Act of 2017, deductions are not as beneficial as in the past. There are more IRS proposed regulations in the pipeline and we will update you as soon as we get the information.
End of Year To-Do’s:
- Review your stock portfolio. It takes time for stock transactions to process, so get your portfolio tax-deduction optimized well before the end of the year. Carefully structure your capital gains and losses to minimize your taxes.
- Do you give money to your parents to assist them with their retirement or living expenses? How about children (specifically, children not subject to the kiddie tax)? If so, consider giving appreciated stock to your parents and your non-kiddie-tax children. Why? If the parents or children are in lower tax brackets than you are, you get a bigger bang for your buck by gifting them stock, having them sell the stock, and then having them pay taxes on the stock sale at their lower tax rates.
- Don’t forget to take your 2019 RMD (Required Minimum Distribution – see our previous blog regarding these). You can use the Qualified Charitable Distribution (donation) process for more tax benefits.
- This is a good time to:
- Update your beneficiaries in your retirement plan
- Contribute to your CHET 529 plan, and
- If you have a flexible spending account at work, find out the last date that you can use this account. Pay attention or you could lose it!
Your tax refund may take longer to process this year. The IRS has upwards of 200 fraud detection filters that every return goes through. Patience is a virtue when it comes to the reduction of identity theft. We, too, continue to upgrade our systems to protect our clients from identity theft and cyber thieves. Also, *Windows 7 is obsolete, and we don’t just say this in an elitist, make way for Artificial Intelligence kind of way – we want to encourage you that your personal data is at risk when your operating system is antiquated.
A new W4 form will be available in 2020. This is the form you fill out when you start a new job or want to change what’s going on with your paycheck in your current job. We will have it on our site once it is finalized and be available to answer any questions you may have about filling it out. This is much more complex than the current form. When filling out said W4, it is recommended that you utilize a handy-dandy Tax Withholding Estimator tool the IRS developed. We’ve added it to our site on the Helpful Links page.
EFTPS is the Electronic Federal Tax Payment System. The IRS is encouraging us (and we in turn are encouraging you) to utilize this system to make your tax payments. In the past we have advised you to use the IRS DirectPay site, but EFTPS allows you to see all payments made, which is helpful, especially considering the majority of notices our clients received were mostly about misapplied or forgotten payments. To register for EFTPS, click here to enroll, accept the terms of agreement and enter all the information required. You will then be mailed a PIN. You need to be on the lookout for it and keep it in a safe, warm place so that you know exactly where it is in order to utilize this system. We are asking our clients for printed back up for estimated payments this year specifically due to the number of notices we dealt with this year, so this is one stop shopping for you!
You can also request your federal tax transcript online. Click here and click “Get Transcript Online.” From there, you will have to create an account in order to gain access to your transcripts, but this is a secure and fast way to do so.
New Connecticut Provisions:
- Social Security income can be 100% deducted if the Federal AGI (Adjusted Gross Income) is less than $75,000 (for taxpayers who are single and/or married filing separately) or $100,000 (for joint files and heads of household). If your income is equal to or greater than the above, you can potentially deduct 75% of your Social Security income.
- You can deduct a portion of certain retirement income that is included in Federal gross income if your Federal AGI is below $75,000 for single filers, married taxpayers filing separately, and heads of households; or $100,000 for married taxpayers filing jointly. The deduction is equal to 14% of pension or annuity income for the 2019 taxable year and increases annually over the next 6 years.
- Military and railroad retirement that is included in federal gross income is fully deductible.
- An increase in the teacher retirement system income tax deduction from 25% to 50% remains delayed.
Under Federal Provisions:
- We have been told that Connecticut residents have been included in the Federal IP PIN program, which allows residents to request an identity protection PIN and use that when filing Federal income taxes as an added layer of security. If you elect to sign up for this program, you will be mailed a new IP PIN each year and will need to keep track of it. To sign up, visit IP PIN. This link provides you with an overview of the IP PIN program. At the bottom of the page is the button to request a PIN, but the program will not be available until January, 2020, so save this link and check back later.
Final tips and thoughts: Have The Talk with your college student – the tax talk. Your college student may make his/her own decision to file their own tax return to get a highly anticipated refund. It is so important to discuss with them beforehand WHO will be claiming the dependency exemption; it most often is a greater benefit to the parent(s). It is complex reversing the decision. Before your college student files a tax return, know the ramifications. Call our office!
The penalty on individuals who fail to carry health insurance, part of the ACA, has been eliminated for 2019.
The annual gift tax exclusion for 2019 and 2020 is $15,000 per donee.
The 2019 IRA contribution can be made up until April 15, 2020. The 2019 SEP contribution can be made through April 15, 2020 or until the date of tax filing extension.
If you are going to make a donation to a charity, how about an appreciated stock rather than a cash donation? A donation of appreciated stock gives you more of a tax benefit: The fair market value of the stock gets deducted as a charitable donation and you don’t pay any of the taxes you would have if you had sold the stock. Example: You bought a publicly traded stock for $1,000, and it’s now worth $11,000. You give it to a 501(c)(3) charity. You get a tax deduction for $11,000, and you pay no taxes on the $10,000 profit.
We know – it’s a lot to digest, especially after all that turkey and pie – but forewarned is forearmed. As Sun Tzu said, “In the midst of chaos, there is also opportunity.” We hope to provide you with many opportunities to be victorious in the chaos that is tax season.