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Taxpayers with children, other dependents should check withholding ASAP

Taxpayers who have children and other dependents should use the Withholding Calculator on IRS.gov to perform a “paycheck checkup.” The Tax Cuts and Jobs Act, which was passed late last year, includes changes that will affect 2018 tax returns that people will file in 2019.

Doing a checkup ASAP will help taxpayers determine if they need to adjust their withholding on their paychecks. The earlier they do this, the better. The sooner someone checks it, the more time there is for withholding to take place evenly during the rest of the year. Waiting until later in the year means there are fewer pay periods to make the tax changes.

The new law made changes to the child tax credit and personal exemptions. Taxpayers should do a “paycheck checkup” to determine if the tax law changes could affect their tax situation this year. Here is an overview of the changes to the law that could affect the withholding of parents and caretakers:
Child tax credit
• The maximum child tax credit increased from $1,000 to $2,000 per qualifying child.
• Taxpayers whose income was too high to benefit from the Child Tax Credit in prior years may now find they qualify.
• The credit now phases out at $400,000 for couples and $200,000 for singles, compared with 2017 amounts of $110,000 for couples and $75,000 for singles.

Additional child tax credit
• The maximum additional child tax credit increased from $1,000 to $1,400.
• The ACTC is a refundable credit for taxpayers who owe little or no federal income tax.
Credit for other dependents
• There’s a new $500 credit that can benefit taxpayers who support other dependents.
• The taxpayer will claim the credit when filing a tax return.
• For purposes of this new credit, other dependents include qualifying children or qualifying relatives, such as a college student or an elderly parent.

Personal exemption
• The new law removes the personal exemption that taxpayers formerly claimed for themself, their spouse and dependents.
The Withholding Calculator allows taxpayers to enter their expected 2018 income, deductions, adjustments and credits – including the child tax credit. Users can click on definitions in the calculator for help in figuring out who qualifies for these expanded credits.
For information about how to use the calculator and how to change withholding, taxpayers can check out the IRS Tax Reform Tax Tips on IRS.gov.

For help with a “paycheck checkup” call one of our offices:
Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Livonia 734-462-6161,
Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Tax credits help offset higher education costs

Taxpayers who pay for higher education in 2018 can see tax savings when they file their tax returns. If taxpayers, their spouses or their dependents take post-high school coursework, they may be eligible for a tax benefit. There are two credits available to help taxpayers offset the costs of higher education. The American opportunity credit and the lifetime learning credit may reduce the amount of income tax owed. Taxpayers use Form 8863, Education Credits, to claim the credits.

The American opportunity credit is:
• Worth a maximum benefit up to $2,500 per eligible student
• Only for the first four years at an eligible college or vocational school
• For students pursuing a degree or other recognized education credential
• Partially refundable. This means if the credit brings the amount of tax owed to zero, 40 percent of any remaining amount of the credit, up to $1,000, is refundable.

The lifetime learning credit is:
• Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify
• Available for all years of postsecondary education and for courses to acquire or improve job skills
• Available for an unlimited number of tax years

To be eligible to claim the American opportunity credit, or the lifetime learning credit, the law requires a taxpayer or a dependent to have received a Form 1098-T from an eligible educational institution.

For help with any income tax question call one of our offices:
Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Livonia 734-462-6161,
Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Keeping Tax Documents

Paperwork is normal part of life, school, work and taxes. Owning a home is no different. It’s important that you keep records of anything relating to your home.

  • If you need to file a disaster, casualty, or theft loss, you’ll need paperwork.
  • If you install energy-efficient appliances, you’ll need the receipts.
  • Deducting mortgage interest? You’ll need a Form 1098 or other statement showing how much interest you paid.What Should You Keep?Credit and debit card receipts can be your records for any renovations or upgrades you did to the home. Receipts are also a record for deducting the residential energy credit. If you installed medically required equipment or upgrades, the receipts are supporting documents when deducting the expenses. The receipts are also helpful in valuing property if you file a disaster, casualty, or theft loss.Paperwork for selling a home: Any documents you receive or create while selling your home should be kept. This includes any appraisals, legal paperwork, mortgage documents, and receipts for improvement or repairs.How Long Should You Keep Records?How Should You Store Your Records?No scanner? Do you have a digital camera, cellphone, or other device with a camera? The IRS will accept digital photographs as valid records. Just snap and upload.
  • If you have paper documents, at a minimum you should store them in a home fireproof safe. Keep it in a place where you can easily grab it if you need to evacuate your home quickly. Storage outside the home is a good idea, such as in a bank safe deposit box.
  • This is the age of the Internet, so we recommend you use the cloud for your record storage. There are lots of options here, such as Google Drive or Dropbox. As your paper documents and important papers come to you, just scan and upload to your storage. And if you receive bank and credit card statements by email, take the time to save those records to your storage.
  • The IRS recommends that you keep any records or documents used for deductions or credits at least seven years after filing the return. Keeping the records helps in case of a questionable return or even an audit.
  • Rental property records: If you rent your home or a part of your home, it’s a good idea to hang on to any documents for the property. Records such as rental agreements, tenant payments, rental expenses, and any other legal or financial document associated with the property.
  • If you used a first or second home to secure a home equity loan for a substantial home improvement project, keep records like receipts for materials or invoices from qualified contractors. The receipts for materials and services support your home interest deduction.
  • Bank statements show both when and how much was withdrawn for mortgage payments.
  • All of these plus many other tax breaks and advantages require a paper trail, and having a way of keeping records is the first important step.

For help with any income tax question call one of our offices:
Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Livonia 734-462-6161,
Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Taxpayers should stay alert because scammers don’t take a summer vacation

While many people take summer vacations, data thieves do not. Phishing emails and telephone scams continue to pop up around the country. The IRS reminds everyone to be vigilant to avoid becoming a victim.

Here are some things for taxpayers to remember so they can keep their personal data safe:

  • The IRS does not leave pre-recorded, urgent messages asking for a call back. In one scam, the victim is told if they do not call back, a warrant will be issued for their arrest. Other variations may include the threat of other law-enforcement agency intervention, deportation or revocation of licenses. The IRS will never threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Criminals can fake or “spoof” caller ID to appear to be anywhere in the country, including from an IRS office. This prevents taxpayers from being able to verify the true call number. If a taxpayer gets a call from the IRS, they should hang up and call the agency back at a publicly-available phone number.
  • If a taxpayer receives an unsolicited email that appears to be from the IRS, they should report it by sending it to phishing@irs.gov. Some people might also receive an email from a program closely linked to the IRS, such as the Electronic Federal Tax Payment System. Recipients should also send these emails to phishing@irs.gov.
  • The IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS initiates most contacts through regular mail delivered by the United States Postal Service.

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Tips for teenage taxpayers starting a summer job

Now that school’s out, many students will be starting summer jobs…from working at a summer camp to being an office intern. The IRS reminds students that not all the money they earn may make it to their pocket. That’s because employers must withhold taxes from the employee’s paycheck. Here are a few things these workers need to know when starting a summer job:

  • New employees. Students and teenage employees normally have taxes withheld from their paychecks by the employer. When a taxpayer gets a new job, they need to fill out a Form W-4. Employers use this form to calculate how much federal income tax to withhold from the employee’s pay. The Withholding Calculator on IRS.gov can help a taxpayer fill out this form.
  • Self-employment. Students who do odd jobs over the summer to make extra cash – like baby-sitting or lawn care – are considered self-employed. They should remember that money earned from self-employment is taxable. Workers who are self-employed may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments during the year. Taxpayers who do this should keep good records of all money they receive.
  • Tip income. Someone working as a waiter or a camp counselor who receives tips as part of their summer income should know that tip income is taxable income and subject to federal income tax. They should keep a daily log to accurately report them, as they will report tips of $20 or more received in cash in any single month.
  • Payroll taxes. This tax pays for benefits under the Social Security system. While taxpayers may earn too little from their summer job to owe income tax, employers usually must still withhold Social Security and Medicare taxes from their pay. If a taxpayer is self-employed, then Social Security and Medicare taxes may still be due and are generally paid by the taxpayer.
  • Reserve Officers’ Training Corps pay. If a taxpayer is in an ROTC program, active duty pay, such as pay for summer advanced camp, is taxable. Other allowances the taxpayer may receive – like food and lodging allowances paid to ROTC students participating in advanced training – may not be taxable. The Armed Forces’ Tax Guide on IRS.gov has more details.

For help with any income tax question  call one of our offices:

Plymouth 734.454.4100,  Allen Park 313.388.7180, Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Tips for Taxpayers Who Need to Amend a Return

Taxpayers who discover they made a mistake on their tax returns after filing can file an amended tax return to correct it. This includes changing the filing status and dependents, or correcting income, credits or deductions. The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list more reasons to amend a return. Taxpayers should not file an amended return to fix math errors, because the IRS will correct those.

Here are some tips on how a taxpayer amends a tax return. Taxpayers should:

  • Complete and mail the paper Form 1040X, Amended U.S. Individual Income Tax Return, to correct errors to an original tax return the taxpayer has already filed. Taxpayers can’t file amended returns electronically and should mail the Form 1040X to the address listed in the form’s instructions. However, taxpayers filing Form 1040X in response to a notice received from the IRS, should mail it to the address shown on the notice.
  • Prepare Form 1040X. Many taxpayers find the easiest way to figure the entries for Form 1040X is to make the changes in the margin of the original tax return and then transfer the numbers to their Form 1040X indicating the year they are amending.  Use the second page of Form 1040X in Part III to explain the changes.
  • Know when not to amend. Aside from math errors, taxpayers also do not need to amend their return if they forgot to include a required form or schedule. The IRS will mail a request to the taxpayer, if needed.
  • Use separate forms for each tax year. Taxpayers amending tax returns for more than one year will need a separate 1040X for each tax year. Mail each tax year’s Form 1040X in separate envelopes.
  • Wait to file for corrected refund for tax year 2017. Taxpayers should wait for the refund from their original tax return before filing an amended return. It is okay to cash the refund check from the original return before receiving any additional refund.
  • Pay additional tax. Taxpayers filing an amended return because they owe more tax should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.
  • File within three-year time limit. Generally, to claim a refund, taxpayers must file a Form 1040X within three years from the date they timely filed their original tax return or within two years from the date the person pays the tax – usually April 15 – whichever is later.
  • Track an amended return. Taxpayers can track the status of an amended return three weeks after mailing using “Where’s My Amended Return?” Processing can take up to 16 weeks. 

    For help with any income tax question or an amendment call one of our offices:

    Plymouth 734.454.4100,  Allen Park 313.388.7180, Livonia 734-462-6161,

    Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

     

Disasters Don’t Plan Ahead, but You Can

Hurricane Preparedness Week is May 6-12. The IRS reminds taxpayers to prepare for hurricanes and other natural disasters now. By taking a few steps before disaster strikes, taxpayers can reduce their stress when it comes time to file claims or rebuild after the catastrophic event.

Here are some things for folks to consider:
<ul>
<li><strong>Update Emergency Plans</strong>. Because a disaster can strike any time, taxpayers should review emergency plans annually. Personal and business situations change over time, as do preparedness needs.</li>
<li><strong>Create Electronic Copies of Documents</strong>. Taxpayers should keep documents – including bank statements, tax returns and insurance policies – in a safe place. Doing so is easier now that many financial institutions provide statements and documents electronically. Even if original documents are available only on paper, people should scan them into an electronic format and store them on DVD, CD or cloud storage.</li>
<li><strong>Document Valuables</strong>. It’s a good idea for people to photograph or videotape the contents of any home, especially items of higher value. Documenting these items ahead of time will make it easier to claim insurance and tax benefits after a disaster strikes. The IRS has a disaster loss workbook</a> which can help taxpayers compile a room-by-room list of belongings. Photographs can help prove the fair market value of items for insurance and casualty loss claims.</li>
</ul>
For questions about your taxes and planning ahead contact one of our offices:
<p style=”text-align: center;”>Plymouth 734.454.4100, Allen Park 313.388.7180,</p>
<p style=”text-align: center;”>Grayling 989.348.4055,  Livonia 734-462-6161,</p>
<p style=”text-align: center;”>Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600</p>
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Withholding Calculator Frequently Asked Questions

Q: For 2018, when should I check the Withholding Calculator?

A: As soon as possible. Withholding takes place throughout the year. The earlier you check, the more time there is for withholding to take place evenly during the rest of the year. However, it is a good idea to check the Withholding Calculator when you have a copy of your 2017 tax return or your 2016 return available; having this will make using the Withholding Calculator easier.

Q: Why should I check on my withholding? 

A: The IRS always recommends employees check their withholding each year to make sure they’re having the right amount of tax withheld from their paychecks. This year, it’s more important than ever to check following major changes from the new Tax Cuts and Jobs Act. Among other things, the new law increased the standard deduction, removed personal exemptions, increased the child tax credit, limited or discontinued certain deductions and changed the tax rates and brackets. These changes mean it’s an especially good idea to do a “paycheck checkup” to review your tax withholding. Also, if you experience a change in your status that affects the number of your withholding allowances – such as a divorce – then you should check withholding so that you can give your employer a new Form W-4.

Q: Are some employees more likely to need to change their withholding in 2018?

A: Yes. For people with simpler tax situations, the 2018 withholding tables were designed to produce the correct amount of tax withholding—avoiding under- and over-withholding of tax. This means that people with simple situations do not need to make any changes, assuming their current Form W-4 on file with their employer was filled out following the form instructions. Simple situations include singles and married couples with only one job, who have no dependents, and who do not claim itemized deductions, adjustments to income or tax credits.

But many people have more complicated financial situations, and tax withholding from their wages might need to be revised.  With the new tax law changes, it’s especially important for these people to use the Withholding Calculator on IRS.gov to check if they have the right amount of withholding.

Among the groups with more complicated financial situations who should check their withholding are:

Families with more than one earner.
People with two or more jobs at the same time or who only work for part of the year.
People with children who claim credits such as the Child Tax Credit.
People with older dependents, including children age 17 or older.
People who itemized deductions in 2017.
People with high incomes and more complex tax returns.

Taxpayers with more complex situations might need to use Publication 505, Tax Withholding and Estimated Tax, expected to be available on IRS.gov in early spring, instead of the Withholding Calculator.  For example, this includes those who owe self-employment tax, the alternative minimum tax, or tax on unearned income from dependents, and people with capital gains or dividends.

For questions about your taxes and the new tax act contact one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

IRS Urges Travelers Requiring Passports to Pay Their Back Taxes or Enter into Payment Agreements; People Owing $51,000 or More Covered

WASHINGTON ─ The Internal Revenue Service today strongly encouraged taxpayers who are seriously behind on their taxes to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy.

This month, the IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. See Notice 2018-1. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.

Taxpayers affected by this law are those with a seriously delinquent tax debt.  A taxpayer with a seriously delinquent tax debt is generally someone who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.

There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following:

  • Paying the tax debt in full
  • Paying the tax debt timely under an approved installment agreement,
  • Paying the tax debt timely under an accepted offer in compromise,
  • Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
  • Having requested or have a pending collection due process appeal with a levy, or
  • Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

A passport won’t be at risk under this program for any taxpayer:

  • Who is in bankruptcy
  • Who is identified by the IRS as a victim of tax-related identity theft
  • Whose account the IRS has determined is currently not collectible due to hardship
  • Who is located within a federally declared disaster area
  • Who has a request pending with the IRS for an installment agreement
  • Who has a pending offer in compromise with the IRS
  • Who has an IRS accepted adjustment that will satisfy the debt in full

For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport is not subject to denial during this time.

In general, taxpayers behind on their tax obligations should come forward and pay what they owe or enter into a payment plan with the IRS. Frequently, taxpayers qualify for one of several relief programs, including the following:

  • Taxpayers can request a payment agreement with the IRS by filing Form 9465. Taxpayers can download this form from IRS.gov and mail it along with a tax return, bill or notice. Some taxpayers can use the online payment agreement to set up a monthly payment agreement for up to 72 months.
  • Some financially distressed taxpayers may qualify for an offer in compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to determine the taxpayer’s ability to pay. To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.

IRS.gov has other tips for taxpayers to catch up on their filing and tax obligations and more information about the revocation or denial of passports because of unpaid taxes

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Tax update!!!

Individual focused – Tax Cuts and Jobs Act H.R. 1 expires after 2025.
1. All of these changes do not affect tax year 2017 unless stated.
2. Inflation adjustments (tax brackets, standard deduction, AMT etc.) but it is “chained CPI” which is a slower measure of inflation.
3. Individual Mandate – ELIMINATED (penalty will still be assessd in 2017 and 2018)
4. Personal exemptions – ELIMINATED
5. Standard Deduction – raised to $12,000(single)/$24,000(Married filing Jointly)
6. Schedule A –
a. Deduction for
i. State income tax or sales tax paid – Now grouped with Property taxes and total combined is    capped at $10,000
ii. Property taxes – capped at $10,000
iii. Tax Prep Fees – ELIMINATED
iv. Personal casualty losses – ELIMINATED if the loss is not an official national disaster.
v. Mortgage Interest – Home Equity interest ELIMINATED if the HELOC isn’t used for    home        acquisition debt on up to $100,000.
vi. Mortgage Interest – Threshold lowered to $750,000 of debt. Will apply to debt incurred after December 15, 2017. Older mortgages grandfathered in.
vii. Medical Expenses – deductibility kept and temporarily lowered to 7.5% for 2 years then up to 10% of AGI.
viii. All 2% AGI deductions (employee business expnses etc.) – ELIMINATED
7. Moving Expenses – ELIMINATED except for certain members of the military.
8. Adoption Credit preserved.
9. Child tax credit – $2000 For children 16 and under. Phase-out begins at $200,000/$400,000.
10. Family tax credit – new concept; $500 for non-child dependent
11. Educator Expense deduction – Kept at $250
12. Principal Residence gain exclusion – Must own home for 2 out of 5 years. Amount that can then be excluded is $250,000/$500,000.
13. College accounts that are Section 529’s – New concept – $10,000 annually can be withdrawn to pay to send the child to a public, private, or religious or secondary school.
14. Alimony – No longer deductible to the paying spouse and no longer taxable to the receiving spouse. This applies to the final divorce decrees that happen after December 31, 2018.
15. Pass-through income – New Concept – Shareholders, Partners, Schedule E’s and Schedule C’s get a 20% deduction on their business income. So if the K-1 shows $100,000 then 20% of that is excluded and the $80,000 is taxed. There is a cap on this. The full 20% deduction is available for $157,500(single)/$315,000(married filing jointly). Income above the limit has to go through a formula which will include employee wages paid and/or value of qualified property purchased. Real estate investors are most likely to benefit from this. Special Service trades get lower phase-out amounts. Types of special service trades are CPA’s, Lawyers, Doctors.
16. Discharge of student debt – excludes from income in event of death or disability.

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

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