Passwords are often the key to protecting access to private information and data stored on computers or sent over email. Because most taxpayers file their returns electronically and access account information online, it is essential for taxpayers to not only use strong passwords for all tax-related accounts, but to do everything they can to protect those passwords.
7 Tips for Creating Strong Passwords
Here are seven tips you should consider when creating and protecting passwords:
A tax reform bill known as the Tax Cuts and Jobs Act was passed by Congress recently and was signed into law by President Trump on December 22. Most of the new laws are relevant to the 2018 and 2019 tax years, but there are a couple items that you need to know about right away for your 2017 taxes.
1. The medical expense deduction threshold was retroactively lowered to 7.5 percent.
The tax reform bill retroactively lowers the threshold to deduct medical expenses in 2017 to 7.5 percent of adjusted gross income. The previous threshold was 10 percent. This new 7.5 percent threshold remains in place for 2017 and 2018, but reverts back to 10 percent in the following years.
What this means. If you were not planning on using the medical expense deduction this year because you fell short of the 10 percent threshold, you may want to reconsider your situation before year end. If there are any qualified medical expenses you can make (drug purchases, medical equipment, etc.) before Dec. 31 to push you over the new, lower threshold, consider doing so. But you must act now.
2. The healthcare individual mandate penalty stays in place until 2019.
The individual mandate (also known as the shared responsibility penalty) in the Affordable Care Act is effectively repealed by the tax reform legislation, but not right away. The penalty is set to zero in 2019, but remains in place for 2017 and 2018.
What this means. You still need to retain your Form 1095s this year and next in order to provide evidence of your healthcare coverage. Without proof of coverage, you may have to pay the higher of $695 or 2.5 percent of income. Unless there are further changes coming, 2018 may be the last year you'll need to worry about the individual mandate penalty.
More Changes to Consider for 2018 Tax Planning
We're experiencing one of most significant tax law changes in more than 30 years. There will be a lot of things to consider for 2018 tax planning. Here are some of the most significant:
The IRS recently announced mileage rates to be used for travel in 2018. The business mileage rate increases by one cent. The medical and moving mileage rates are also raised by one cent. Charitable mileage rates are unchanged.
New Mileage Rates for 2018
Remember to properly document your mileage to receive full credit for your miles driven.
The IRS recently announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2018. The rates will be:
Under the Internal Revenue Code, the interest rates are determined on a quarterly basis. For individual taxpayers, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
For most taxpayers, Dec. 31 is the last day to take actions that will impact their 2017 tax returns. For example, charitable contributions are deductible in the year made.
Donations charged to a credit card before the end of 2017 count for the 2017 tax year, even if the bill isn’t paid until 2018. Checks to a charity count for 2017 if they are mailed by the last day of the year.
Required Minimum Distributions
Taxpayers who are over age 70 ½ are generally required to receive payments from their individual retirement accounts and workplace retirement plans by the end of 2017, though a special rule allows those who reached 70 ½ in 2017 to wait until April 1, 2018, to receive them.
Workplace Retirement Accounts
Most workplace retirement account contributions should be made by the end of the year, but taxpayers can make 2017 IRA contributions until April 17, 2018. For 2018, the limit for a 401(k) is $18,500. For traditional and Roth IRAs, the limit is $6,500 if age 50 or older and up to $15,500 for a Simple IRA for age 50 or older. Check irs.gov for more information about cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2018.
Prepare Now to File Your Taxes
Taxpayers should be careful not to count on getting a refund by a certain date, especially when making major purchases or paying other financial obligations. Taxpayers can take steps now to make sure the IRS can process their return next year.
Taxpayers who have moved should tell the US Postal Service, employers, and the IRS. To notify the IRS, mail IRS Form 8822, Change of Address, to the address listed on the form’s instructions. For taxpayers who buy health insurance through the Health Insurance Marketplace, they should also notify the Marketplace when they move out of the area covered by their current Marketplace plan.
For name changes due to marriage or divorce, notify the Social Security Administration so the new name will match IRS and SSA records. Also notify the SSA if a dependent’s name changed. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of a return and may even delay a refund.
Some Individual Taxpayer Identification Numbers must be renewed. Any Individual Taxpayer Identification Number not used on a tax return at least once in the past three years will expire on December 31, 2017. Additionally, all ITINs issued before 2013 with middle digits of 70, 71, 72 or 80 (Example: 9XX-70-XXXX) will also expire at the end of the year. As a reminder, ITINs with middle digits 78 and 79 that expired in 2016 can also be renewed. Only taxpayers who need to file a U.S. federal tax return or are claiming a refund in 2018 must renew their expired ITINs. Affected ITIN holders can avoid delays by starting the renewal process now.
Those who fail to renew before filing a return could face a delayed refund and may be ineligible for some important tax credits. More information about ITINs, including answers to frequently asked questions is available on the IRS website.
Keep Old Tax Returns
Keeping copies of tax returns is important. Taxpayers may need a copy of their 2016 tax return to make it easier to fill out a 2017 tax return. Some taxpayers using a software product for the first time may need to provide their 2016 Adjusted Gross Income, or AGI, to e-file their 2017 tax return.
Taxpayers who do not have a copy of their 2016 return and are existing users can log in to their online IRS account if they need their AGI. Otherwise the IRS will mail a Tax Return Transcript if requested online or by calling 800-908-9946. Plan ahead. Allow five to 10 days for delivery.
Small business owners beware: the IRS may more closely scrutinize reporting of credit card transactions after it was criticized for lax enforcement.
The IRS' overseer, the Treasury Inspector General for Tax Administration (TIGTA), recently said the IRS had been missing opportunities to audit tax returns that had large discrepancies between income and the card payments reported on Forms 1099-K.
This means small businesses that accept credit, debit, or gift card payments can expect to draw the attention of IRS auditors if there are material differences between what is reported on their tax returns and what is on their 1099-Ks.
Tax Gap Concern Driving the Scrutiny
TIGTA has estimated an underpayment of more than $450 billion in income taxes every year. In an effort to close this "tax gap," it recommended the IRS focus on some of the larger or more obvious sources of underpayment.
One area TIGTA identified was on Forms 1099-K, where more than 20,000 taxpayers who received them had discrepancies of more than $10,000 on their returns. Calculating from this small sample size, there was at least a $200 million underpayment.
Who Is Impacted
If you have a business that accepts payment cards like debit cards or credit cards, you will probably receive a Form 1099-K from your payment processor. The form is also required for anyone who has $20,000 in card payments and 200 transactions or more per year. Examples of those who would receive Forms 1099-K include users of PayPal, sellers on Ebay and Etsy, cab drivers and any small business that accepts card transactions as a form of payment.
Here's How You Can Prepare
Receiving a Form 1099-K and reporting it in such a way that the IRS is satisfied can be complicated. You could easily double-report your revenue from 1099-Ks out of an excess of caution. Or, you may not be disclosing your correct reporting of card income in a way that IRS audit programs are able to identify. It's often best to get professional guidance to ensure your return does not stick out when the IRS tries to comply with the TIGTA request for more oversight.
While there are many holiday traditions, some of the most popular ones have strange and surprising origins. Get into the festive spirit with a smile by guessing the origins of these traditions:
The Christmas tree originated in 16th century Germany, but didn't become a popular tradition until it was decorated by a certain royal family. Who was the queen who made Christmas trees famous?
Queen Victoria, of the United Kingdom. In 1848, an illustration of Queen Victoria's decorated Christmas tree was published in a London newspaper. The tradition was quickly emulated throughout the United Kingdom and spread to the United States.
Which holiday tradition representing love and romance comes from the Anglo Saxon words meaning "poo on a stick?"
Mistletoe. This holiday plant is actually a parasite that relies on birds to eat the seeds and dispose of them on other trees. The plant then steals its nourishment from its host tree. To think it now creates the opportunity to steal a kiss from a loved one...
This traditional holiday game has its own league, abbreviated as the MLD. Can you name it?
Dreidel. This popular game played by spinning a wooden top is part of the Jewish tradition of Hanukkah. A Major League Dreidel (MLD) organization was founded in New York City in 2007.
According to folklore, what 250-year-old sweet has its humble beginnings as a way to keep children quiet during church services?
The candy cane. According to legend, a choirmaster in Germany purchased candy sticks to keep children quiet during holiday services. In the 1800's a curved stick with red stripes quickly made its lasting mark during the holidays representing a shepards staff and handy tree decoration.
This holiday tradition was created to promote use of a public service. Can you name it?
The holiday card. The Christmas card was created in England in 1843 as a way to increase public use of the country's new Penny Post mail service. With the increased use of the printing press, holiday cards soon became popular.
The maximum contribution to 401(k) accounts is being raised by $500 in 2018, the first increase in three years. If you have not already done so, now is the time to plan for contributions into your retirement accounts in 2018.
Retirement Contribution Limits
Don't forget to account for any matching programs offered by your employer as you determine your various funding levels for next year.
Both the House and Senate have passed versions of a tax reform bill. If a combined bill is passed and signed into law, it creates a unique window of possible tax savings during the last few weeks of 2017. But only if you prepare to act. Here are some tips.
4 Last-Minute Tax Moves to Make in 2017
1. Leverage less-valuable state and property deductions. The new bills reduce and potentially eliminate the ability to take state taxes and property taxes as an itemized deduction.
What to do now. Consider making next year’s initial estimated tax payment before the end of 2017. Do the same thing with property tax payments. As long as you are not subject to the alternative minimum tax (AMT), this is a one-time opportunity to get this tax benefit before it is reduced or eliminated.
2. Some itemized deductions are worth more this year. The tax law changes mean itemized deductions will be worth more to you this year than next.
What to do now. Charitable contributions may be more valuable this year because they may offset income taxed at a much higher rate than it will be next year. The same may be true of mortgage interest and medical expense deductions that may be reduced or eliminated next year.
3. New tax rates and income brackets complicate matters. With different income tax rates and income brackets, it will be very difficult to get your withholdings estimated correctly.
What to do now. Create a quick tax estimate based on your 2017 information before the end of the year. See if it makes sense to change your withholdings.
4. Lower small business taxes next year provide a unique opportunity. The tax rates on most businesses from C corporations to flow-through entities like S corporations and LLCs will be lower beginning next year with the passage of new legislation.
What to do now. Deductions will be worth more to you in the 2017 tax year than next year, when income will be taxed at a lower rate.
If everything goes smoothly, new tax legislation will be signed into law in late December. This timing will give you very little time to act, so now is the time to prepare. The nimble taxpayer may have the opportunity make some tax-efficient moves in the waning days of 2017.
There are a lot of new things to get used to when you change jobs, from new responsibilities to adjusting to a new company culture. One thing you may not have considered are the tax issues created when you change jobs. Here are tips to reduce any potential tax problems related to making a job change this coming year.
5 Tax Tips for Job Changers
Finding a new job can be an exciting experience, and one that can create tax consequences if not handled correctly. Feel free to call Ellsworth & Associates to discuss your individual situation.