Our Most Recent Blog Posts

RMD Missed?

on .

 
RMD (Required Minimum Distribution) if not timely made is subect to a 50% non-deductible penalty!  YES, 50%
 
If you can show cause (illness, bad advice, the broker/banker screwed up) and that you took steps to comply just follow the instructions on Form 5329 and attach a letter of explanation.  The penalty will be due only if IRS denies it.

2019 Charitable Donations

on .

Taxpayers aged 70 1/2 (and older) can make Donations of up to $100,000 DIRECTLY from an IRA to a 510(c)(3) charity.
 
You don't get your hands on the money... it goes DIRECT.
 
This QCD (Qualified Charitable Distribution) is NOT TAXABLE but it DOES COUNT toward RMD (Required Minimum Distribution).

1099 Reporting Requirement

on .

Any individual to whom you pay $600 or more in a calendar year should receive a 1099.

If you pay MARY JONES INC.... that is not an individual so no 1099.

If you pay MARY JONES, that would require a 1099.

And, only businesses are required to generate the 1099. The home you rent out is considered a business.

If Mary Jones cleaned your personal residence, your home is not a business so no 1099 is required.

NOTE:  IF ANY BUSINES PAYS ANY LAW FIRM (WHETHER INCORPORATED OR NOT) IS REQUIRED TO PREPARE A 1099 IF PAID $600 or more!

1099's are prepared in January for the previous year.

Whether you properly do a 1099 or not, Mary Jones is required to report her income.

The 1099 actually protects you. You don't want IRS thinking you are helping Mary not report her income by not doing a 1099!

NOL (Net Operating Loss) Changes for 2018

on .

A net operating loss (NOL) is when business losses exceed income.

Prior toJanuary 1, 2018, NOLs were able to offset 100% of taxable income. They were allowed to be carried back two years and carried forward for twenty years.  You could affirmatively elect with a timely filed return to NOT carryback (the default) and instead carry forward only (permanent, could not change it for that year).

Under the new law effective in 2018, an NOL can offset only 80% of taxable income in any given tax year. NOLs can be carried forward only. The 20-year carryforward period is changed to an indefinite carryforward period NOLs created in tax years beginning before January 1, 2018 are subject to the old rules. Only NOLs generated in tax years beginning after December 31, 2017 are subject to the new rules.

2018 Can Unreimbursed Employee Expenses be Deducted?

on .

Can unreimbursed employee expenses be deducted?

            No, not for a W2 employee. Any of the 2017 expenses and years prior that were subject to a 2% of AGI limitation are no longer deductible.

            Yes, for independent contractors.

            Yes, for Statutory employees.

The best example of a Statutory Employee is an outside insurance agent.

Statutory Employees | Internal Revenue Service

https://www.irs.gov/.../statutory-employees

Apr 23, 2018 · Statutory Employees. An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors,...

I have never seen a mortgage agent classified as a statutory employee.

Now, what if you are both a W2 employee AND an independent contractor?

            No for employee expenses.

            Yes for independent contractor expenses.

BUT we are talking about the same business field. It would be fair if unreimbursed expenses should are pro-rated……

i.e. W2 $80k       Form 1099 Independent $5k

Expenses $4k

$80 + $5 = $85k

$4k/85k = 4.7%

4.7% x $4k expenses = $188 Sch C expenses to reduce the $5k F1099.