IRS Announces Start Date For The New Tax Filing Season
The Internal Revenue Service (IRS) has announced that tax season will open on Monday, January 27, 2020. The IRS will begin accepting paper and electronic tax returns that day.
The due date for 2019 federal income tax returns is April 15, 2020, for most individual taxpayers (sorry, it’s a Wednesday so there’s no extra time this year). The IRS expects to process more than 150 million individual tax returns, with most of the returns filed before the April due date.
“As we enter the filing season, taxpayers should know that the dedicated workforce of the IRS stands ready to help,” said IRS Commissioner Chuck Rettig. “We encourage taxpayers to plan ahead and use the tools and information available on IRS.gov. The IRS and the nation’s tax community are committed to making this another smooth filing season.”
Every year, taxpayers have questions about early filing. Many software companies and tax professionals will accept tax returns before opening day, January 27, 2020. That doesn’t mean that your tax return will be filed early. Software companies and tax professionals will submit returns when IRS systems open. The same applies to the IRS Free File program.
https://www.forbes.com/sites/kellyphillipserb/2020/01/06/irs-announces-start-date-for-2020-tax-filing-season/#2732be7f51a6
The New QBI Deduction = Huge Tax Savings
QBI Deduction = Huge Tax Savings
by: Mike Ward, EA
The Qualified Business Income (QBI) Deduction is a game changer for small business! In its basic terms the deduction is 20% of business income. “Wow” is what we should be thinking on this deduction. It will include most individuals who have income from the following:
- K1 income from 1120S SCorps & 1065 Partnerships
- Schedule C Sole Proprietors
- Schedule E Rental Properties
- Schedule E Other Rental Activities
- Statutory Employees
- Schedule F Farm income
There are details to this deduction and each situation is different. See a tax professional this year so you can take advantage of this once in a generation Tax Deduction.
How will tax reform affect you? Contact a local tax expert today!
TAX REFORM
By: Mike Ward, EA
The Tax Cuts and Jobs Act is the largest change to the tax code since 1986. This bill will be effective for the 2018 tax year and beyond. For the vast majority of taxpayers this means they will not see a change in there taxes until they file a return in early 2019. Below are a FEW key changes that will impact the majority of our clients.
Individual, Married Filing Joint, and Head of Household Filers:
- Lower tax brackets for the large majority of filers. (new brackets listed below)
- Doubling (approximately) of the standard deduction from to $12,000 for individuals and $24,000 for married filing joint, and $18,000 for head of household.
- Doubling the Child Tax Credit to $2,000 per child.
- Add the 529 savings accounts for child education savings (was a Maryland State deduction not federal deduction).
- 20% deduction on “Qualified Business Income” for most S-Corps, Partnerships and even a few Sole Proprietors.
- Repeal of the Affordable Care Act’s individual mandate beginning 2019.
- Elimination of the interest deduction on home equity loans.
- Elimination of most itemized deductions OTHER THAN home mortgage interest, state and local taxes, property tax, charitable deductions, and medical deductions.
| Tax Rate | Income Range for Individuals | Income Range for Married Joint Filers |
| 10% | $0 – $9,525 | $0 – $19,050 |
| 12% | $9,526 – $38,700 | $19,051 – $77,400 |
| 22% | $38,701 – $82,500 | $77,401 – $165,000 |
| 24% | $82,501 – $157,500 | $165,001 – $315,000 |
| 32% | $157,501 – $200,000 | $315,001 – $400,000 |
| 35% | $200,001 – $500,000 | $400,001 – $600,000 |
| 37% | $500,001 and Up | $600,001 and Up |
Businesses: SCORPs, PARTNERSHIPS
The new tax code favors these structures with a 20% deduction on pass through income. Please call OC Tax today and see if your business could benefit by converting to a “Pass-Through” entity structure.
This is a brief description of key points that effect our clients and potential new clients, we will being updating the information in the coming weeks.
Commingling Accounts: Keeping Business Accounts Separate from Personal Accounts
By: Mike Ward EA, OC Tax LLC
As a seasoned Tax Professional at OC Tax Service in Berlin, MD I have had the opportunity to meet and work with many talented and driven small business owners. New and experienced entrepreneurs alike make the common mistake of comingling there business and personal accounts thus leaving themselves vulnerable to costly legal and financial roadblocks. Piercing the “Corporate veil” is a legal concept used in law suits to access your personal assets. This happens when businesses and individual shareholders or company owners commingle funds and/or accounts. Keeping accurate records and making sound financial choices when setting up your business structure can save many headaches. These are the most common mistakes, and steps that can be taken to avoid future complications.
Common Mistake:
- Using 1 bank account for personal and business activities
- Paying personal expenses with a business credit card or writing checks for personal expenses from the business account.
- Using personal accounts to pay business expenses
- Depositing company funds into personal accounts
- Mixing bank accounts with multiple businesses
Solutions:
- Use a separate account for all business activities
- Never pay personal bills with business accounts.
- Keep accurate records of any business expenses paid with personal funds and issue corresponding reimbursement checks.
- If you have multiple businesses keep accurate records and maintain separation on all activities.
- Have a qualified professional help when structuring your financial workflow and account set up.
Setting up a company for accurate bookkeeping is a quintessential tool for the success of any size business. Small individually owned businesses struggle with allotting the proper time for administrative duties such as bookkeeping and tax preparation. OC Tax LLC has qualified professionals available for services ranging from basic consultation all the way to full service on site bookkeeping. We can customize a Tax and Bookkeeping package that works best for your individual needs.
Previous Newsletters:
Ocean City Today Article: OC Tax Service serves customers on Racetrack Rd
