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Raised Starting Age for Required Distributions

The 2019 SECURE Act raised the age at which those with qualifying retirement plans must begin taking annual required minimum distributions (RMDs) from 70 ½  to 72 years. If you turned 70 ½ in 2019, you must still take your 2019 RMD by April 1, 2020. However, if you were under 70 ½ years of age on December 31, 2019, you need to take your first RMD by April 1 of the year after you reach 72.

Due to the SECURE Act being signed into law near the end of December 2019, some banks may have sent out incorrect notices about RMDs in January 2020. If you turn 70 ½ in 2020 and received a notice from your retirement account manager that you must take a 2020 RMD, you should receive a correction notice by April 15, 2020 stating that no RMD is due this year.

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Additional Guidance on Business Deductions for Meals and Entertainment

The Tax Cuts and Jobs Act (TCJA) of 2017 placed new restrictions on business deductions for meals and entertainment expenses associated with meeting current or potential clients, customers, consultants and other business contacts. In response to ongoing confusion about the new rules, the IRS recently offered additional guidance and proposed regulations governing these deductions for recent and future tax years.

As a broad rule, business owners and self-employed taxpayers may deduct up to 50% of the cost of meals directly related to conducting business. Examples might include meeting with potential clients over lunch, purchasing meals during business travel, or ordering food delivery for an after-hours employee meeting.

Deducted meal expenses must not be lavish or extravagant.

In addition, the taxpayer, or an employee of the taxpayer, must be present for the furnishing of food and beverages. Therefore, sending pizzas to a potential client’s office would generally not qualify for the business meal deduction.

The recent IRS notices and proposed regulations emphasize that meal expenses incurred while traveling are subject to the TCJA’s expense substantiation rules. Therefore, these costs must be carefully documented with detailed records. The IRS has also clarified that whereas certain employer-provided meals for employees may have been fully deductible prior to tax year 2018, these meals are now generally subject to the 50% meal deduction limit.

Most importantly, with a very few rare and complicated exceptions, the TCJA eliminated the business deduction for entertainment expenses. In the past, potentially allowed entertainment expenses included tickets to concerts and sporting events. These expenses can no longer be deducted in any amount, and taxpayers are expressly forbidden from attempting to circumvent the law by reclassifying the expenses as “advertising,” “research,” etc.

The IRS recognizes, however, that certain entertainment activities also include food and beverage expenses. The proposed regulations affirm 2018 IRS guidelines, which state that meal expenses related to an entertainment activity may only be deducted if the food and beverage expenses are clearly separate from entertainment costs.

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How to Prevent Identity Theft & Protect Your Private Information

Identity theft is a constant threat in today’s world, and the threat only grows during tax season. As part of its “Taxes + Security = Together” campaign, the IRS recently published a list of recommendations to help taxpayers keep their private information out of the hands of identity thieves.

Use “always on” security software on your computer and mobile devices. The software should include antivirus protection to detect harmful code, a firewall to block unwanted or dangerous internet traffic, and encryption of your most sensitive data. If possible, configure the software to automatically scan all data coming into your device. If you need to transmit sensitive information over an unsecured connection (for example, using public WiFi), the IRS strongly recommends using a virtual private network (VPN).

Use strong, unique passwords for all of your online accounts. Most people have difficulty remembering strong passwords, so you may wish to use a password manager. Many reputable password managing apps are available free or at very low cost.

Stay alert at all times for phishing emails, threatening calls and suspicious texts. Many identity thieves and other scam artists are skilled at making email and text messages appear as if they came from the IRS. If you have any doubt about whether a message or call is from a legitimate IRS agent, delete the message or hang up. Then contact the IRS at one of the phone numbers shown here to inquire about the issue, or report phishing scams to phishing@IRS.gov.

Do not click on links in suspicious messages or download attachments from unknown senders. The links may expose your device to harmful software, or lead you to fake websites designed to harvest your private data. If a strange message appears to be from someone you know, send a separate email or text to that person to confirm whether the mysterious message is legitimate.

Protect documents containing you or your dependents’ private information. For example, do not carry Social Security cards with you, do not store any information about your passwords near your computer, and keep all tax records in a secure location in your home or office.

NEVER give your social security number (SSN), date of birth or other identifying information to anyone, unless you are absolutely certain who they are and why they need the information. Many IRS impersonators threaten taxpayers with swift arrest or freezing their social security numbers if they do not provide identifying information and/or immediate payment by methods such as wire transfer. The IRS never operates in this manner.

For more information, visit the IRS Tax Scams and Consumer Alerts page and Taxes + Security = Together news release.

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Your Taxpayer Bill of Rights – 10 IRS Rules That Protect You

The US Treasury operates under a Taxpayer Bill of Rights to ensure that the IRS applies and enforces the US Tax Code in a fair, impartial manner. These rights protect you during all your interactions with the IRS, including filing returns, paying your taxes, responding to an IRS letter or notification, going through an audit, and appealing IRS decisions about your taxes.

The right to be informed. You have the right to receive clear explanations of tax laws and IRS rules, and what you must do to comply with these regulations. Many IRS publications are available in English, Spanish, Chinese, Korean, Russian and Vietnamese; you may ask for a translator’s help if you need information in another language.

The right to quality service. You are entitled to prompt, courteous, professional service from IRS agents. You have the right to speak to a supervisor if you receive inadequate service.

The right to pay no more tax than you owe. This right includes the right to receive a refund if you overpay your taxes. However, you must apply for your refund within the timeframe allowed.

The right to challenge an IRS decision and be heard. If you believe that an IRS decision or proposed action related to your taxes is unfair or incorrect, you have the right to voice your objections and/or provide additional documentation to support your claim. You are entitled to a full and fair review of your objections and documentation, and a timely response from the IRS.

The right to have an independent body hear your IRS appeal. You have the right to appeal most IRS actions, including penalties assessed. You are entitled to a written response from the IRS Independent Office of Appeals, and you may have the option of taking your case to court.

The right to finality. You have the right to know all deadlines related to appealing an IRS decision, the maximum amount of time the IRS has to audit a return, and when an audit is over.

The right to privacy. The IRS must not unnecessarily intrude into your life.

The right to confidentiality. The IRS must protect your tax return information. You have the right to expect that no IRS employee will wrongfully share or disclose your sensitive data.

The right to representation. You have the right to designate an authorized representative, such as a CPA, to represent you in your dealings with the IRS. If you cannot afford representation, you may be entitled to assistance from a Low Income Taxpayer Clinic.

The right to a fair and just tax system. You have the right to expect that your tax situation will be evaluated impartially, with due consideration of any extenuating circumstances. If you believe this right has been violated, you have the right to get help from the Taxpayer Advocate Service.

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Upcoming Tax Deadlines | March 2020

Day

March Deadlines

02

Employees Who Work for Tips – If you received $20 or more in tips during November, report them to your employer. You can use Form 4070.

02

Corporations – Deposit the fourth installment of estimated income tax for 2019. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.

02

Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in November.

10

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in November.

16

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in February.

16

Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in February.

16

Partnerships – File a 2019 calendar year return (Form 1065). Provide each partner with a copy of their Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., or substitute Schedule K-1 (Form 1065). To request an automatic 6-month extension of time to file the return, file Form 7004. Then file the return and provide each partner with a copy of their final or amended (if required) Schedule K-1 (Form 1065) by September 15.

16

S Corporation Election – File Form 2553 to elect to be treated as an S corporation beginning with calendar year 2020. If Form 2553 is filed late, S corporation treatment will begin with calendar year 2021.

16

S Corporations – File a 2019 calendar year income tax return (Form 1120-S) and pay any tax due. Provide each shareholder with a copy of their Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc., or substitute Schedule K-1 (Form 1120-S). To request an automatic 6-month extension of time to file the return, file Form 7004 and deposit what you estimate you owe in tax. Then file the return; pay any tax, interest, and penalties due; and provide each shareholder with a copy of their Schedule K-1 (Form 1120-S) by September 15.

31

Electronic Filing of Forms – File copies of all the Forms W-2G you issued for 2019. This due date applies only if you electronically file. Otherwise, see February 28, earlier. The due date for giving the recipient these forms remains January 31.

31

Electronic Filing of Forms – File Forms 1097, 1098, 1099 (except a Form 1099-MISC reporting nonemployee compensation), 3921, 3922, and W-2G with the IRS. This due date applies only if you file electronically. Otherwise, see February 28, earlier. The due date for giving the recipient these forms generally remains January 31.

31

Electronic Filing of Forms – File Forms 8027 for 2019. This due date applies only if you electronically file. Otherwise, see March 2, earlier.

31

Electronic Filing of Forms – If you’re an Applicable Large Employer, file electronic Forms 1094-C and 1095-C with the IRS. For all other providers of minimum essential coverage, file electronic Forms 1094-B and 1095-B with the IRS. Otherwise, see February 28, earlier.

Day

April Deadlines

10

Employees Who Work for Tips – If you received $20 or more in tips during March, report them to your employer. You can use Form 4070.

15

Corporations – Deposit the first installment of estimated income tax for 2020. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.

15

Corporations – File a 2019 calendar year income tax return (Form 1120) and pay any tax due. If you want an automatic 6-month extension of time to file the return, file Form 7004 and deposit what you estimate you owe in taxes.

15

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in March.

15

Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in March.

15

Household Employers – If you paid cash wages of $2,100 or more in 2019 to a household employee, you must file Schedule H (Form 1040 or 1040–SR), Household Employment Taxes. If you’re required to file a federal income tax return (Form 1040 or Form 1040-SR), file Schedule H (Form 1040 or 1040-SR) with the return and report any household employment taxes. Report any federal unemployment (FUTA) tax on Schedule H (Form 1040 or 1040-SR) if you paid total cash wages of $1,000 or more in any calendar quarter of 2018 or 2019 to household employees. Also, report any income tax you withheld for your household employees.

15

Household Employers – If you paid cash wages of $2,100 or more in 2019 to a household employee, you must file Schedule H (Form 1040 or 1040-SR). If you’re required to file a federal income tax return (Form 1040 or Form 1040-SR), file Schedule H (Form 1040 or 1040-SR) with the return and report any household employment taxes. Report any federal unemployment (FUTA) tax on Schedule H (Form 1040 or 1040-SR) if you paid total cash wages of $1,000 or more in any calendar quarter of 2018 or 2019 to household employees. Also, report any income tax you withheld for your household employees.

15

Individuals – File a 2019 Form 1040 or Form 1040-SR and pay any tax due. If you want an automatic 6-month extension of time to file the return, file Form 4868 and pay what you estimate you owe in tax to avoid penalties and interest. For more information, see Form 4868. Then, file Form 1040 or Form 1040-SR by October 15.

15

Individuals – If you’re not paying your 2020 income tax through withholding (or won’t pay in enough tax during the year that way), pay the first installment of your 2020 estimated tax.

30

Employers – Federal unemployment tax. Deposit the tax owed through March if more than $500.

30

Employers – Social security, Medicare, and withheld income tax. File Form 941 for the first quarter of 2020. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter timely, properly, and in full, you have until May 11 to file the return.

Day

May Deadlines

11

Employees Who Work for Tips – If you received $20 or more in tips during April, report them to your employer. You can use Form 4070.

15

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in April.

15

Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in April.

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IRS Warns Taxpayers About New Social Security Number Scam

Con artists continue to come up with new ways to impersonate the IRS and scam taxpayers out or their money and/or private information. Recently, the IRS issued a warning about a new scam in which callers use intimidation tactics to extort money from taxpayers.

The scammer claims that the call recipient has overdue taxes, and threatens to suspend or cancel the person’s social security number (SSN) unless payment is submitted immediately. Because a valid SSN is needed to obtain employment, open bank and credit accounts, and much more, these calls can be very frightening. However, if you receive such a call, you should not disclose any of your personal information—instead, hang up immediately.

Remember that neither the IRS nor any private collection agency working on the IRS’s behalf will ever:

  • Request payment via wire transfer, prepaid debit card, or gift card. The IRS does not accept any of these forms of payments for tax bills.
  • Ask you to make a payment to any organization other than the US Treasury.
  • Demand immediate payment without giving you the opportunity to appeal the tax bill and/or seek professional representation.
  • Threaten to immediately call in the FBI, local police or any other legal authorities to have you arrested if you do not pay at once.

If you receive any phone call that you believe to be an IRS impersonation scam, you can help your fellow taxpayers by reporting the incident in one of the following ways:

Even if you know that you owe back taxes to the IRS, do not let scammers bully you via email or over the phone. If you have any doubts about the legitimacy of a collection call you receive, hang up. Then call the number on your IRS billing notice or 1-800-829-1040 to talk to an actual IRS representative.

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Teachers and Other School Professionals Can Deduct Unreimbursed Educator Expenses

If you are a teacher and paid for classroom supplies during 2019 out of your own pocket, you may be able to claim the Educator Expense Deduction. Qualifying educators may deduct up to $250 in unreimbursed expenses on their 2019 tax returns.

For joint filers who are both educators, the deduction limit is $500, as long as both filers have at least $250 in unreimbursed expenses. For example, if you had $350 in unreimbursed educator expenses in 2019, while your spouse had only $160 in qualifying expenses, your maximum joint deduction would be $410 ($250 for you, plus $160 for your spouse).

You are an eligible educator if you:

  • Are a teacher, counselor, principal or classroom aide at an elementary or secondary school (grades K through 12).
  • Work at least 900 hours at the school during the school year.
  • Do not receive reimbursement from your school for the educator expenses you wish to deduct.

Examples of qualifying unreimbursed expenses include:

  • Books and classroom supplies (folders, notebooks, crayons, paper, etc.)
  • Sports and athletic equipment and supplies if you teach health or physical education
  • Computer equipment, including software and peripherals like flash drives or a printer
  • Professional development workshops and courses

 Note, however, that your deduction may be limited if any of the following apply to you:

  • You exclude interest from certain U.S. savings bonds on your tax forms because you paid qualified higher education expenses.
  • You received a distribution from a qualified state tuition program that you exclude from your income.
  • You made a tax-free withdrawal from a Coverdell education savings account.
  • You received expense reimbursements from your school that are not shown in Box 1 of your form W-2.

In these cases, you can usually only deduct unreimbursed expenses to the extent that they exceed the interest, distribution, withdrawal or reimbursement that you received

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IRS Provides Important Clarifications of Tax Rules for Cryptocurrency

If you use or hold cryptocurrency, also called virtual currency, you need to exercise special care. Challenges arise from the fact that the IRS classifies all virtual currencies as property, not as currency in the usual sense. As a result, any transaction involving cryptocurrency might involve a capital gain or loss that must be reported to the IRS.

Potentially taxable cryptocurrency transactions include:

  • Exchanging virtual currency for real currency (for example, trading Bitcoin for US dollars)
  • Receiving cryptocurrency as payment for work or services performed
  • Selling property and accepting cryptocurrency as payment
  • Using cryptocurrency to purchase goods or property
  • Any transaction in which you use cryptocurrency that you originally received as a gift

In order to calculate the amount of your gain or loss in a virtual currency transaction, you need to know your basis in the virtual currency. If the value you receive when you dispose of the virtual currency is higher than your basis, you must report a capital gain; if the value you receive is lower than your basis, you may be able to claim a deductible capital loss.

The IRS recently issued a number of clarifications on how to determine your basis, including:

  • If you use real currency to purchase cryptocurrency (for example, using U.S. dollars to purchase Bitcoin), your basis is usually the amount you paid.
  • If you receive cryptocurrency in exchange for goods or services, your basis is usually the fair-market value (FMV) of the cryptocurrency at the time you received it.
  • If the FMV of virtual currency you receive is not known (for example, if the virtual currency is not publicly traded), then your basis is usually the FMV of whatever property or work you traded for the cryptocurrency.
  • If you receive virtual currency as a gift and later dispose of it at a gain, then your basis is equal to the gift donor’s basis, plus any tax the donor paid on the gift.
  • If you receive virtual currency as a gift and later dispose of it as a loss, then your basis is the lesser of the donor’s basis and the FMV of the virtual currency when you received it.

Failure to keep detailed records of your cryptocurrency transactions can be costly. For example, if you receive virtual currency as a gift but cannot document the donor’s basis, your basis is zero. Therefore, the full value of any transaction involving that virtual currency may be taxable.

Remember also that short-term capital gains (those that occur within a year of your receipt of the cryptocurrency) are taxed as ordinary income, whereas long-term capital gains are taxed at lower rates. Therefore, it is often advantageous to hold virtual currency for more than a year before disposing of it in any fashion.

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IRS Withholding Calculator Helps Retirees, Self-Employed, and Others with Multiple Income Sources

The IRS Withholding Estimator webpage helps taxpayers with employee wages make sure that the correct amount of tax is being withheld from their paychecks. Ordinarily, tax withholding only takes into account the tax implications of income from a particular job. If you have multiple jobs or receive other taxable income, the amount withheld might be too low. Insufficient withholding throughout the year can mean an unexpectedly large spring tax bill, perhaps even one that includes IRS penalties.

Getting your withholding right to avoid such surprises can be particularly tricky if you receive non-employee income. The Withholding Estimator tool is therefore especially useful if you:

Receive Social Security retirement benefits but also work part-time or have a pension.
Earn any self-employment income, which includes “side hustles” and “gig economy” income, such as driving for Uber or Lyft.
Have unearned income such as stock dividends, interest, alimony, or distributions from a traditional (not Roth) IRA.
Use scholarship or grant funds for expenses other than tuition and school fees (such as incidental living expenses).
In order to get the most accurate results from the Tax Withholding Estimator, you will need to know your income amounts from these sources, as well as the wages and tax withholding shown on your paychecks. The tool will also ask for your filing status and number of dependents.

If you find that not enough tax has been withheld from your 2019 paychecks, it is not too late to take action. Here are three ways to lower your spring tax bill and reduce or eliminate any IRS penalties:

Fill out a new W-4 Form (Employee’s Withholding Allowance Certificate) and submit it to your employer, requesting that an additional amount be withheld from your paychecks.
Complete Form W-4V (Voluntary Withholding Request) to request that tax be withheld from your Social Security checks; submit the form to the Social Security Administration.
Make a fourth-quarter Estimated Tax Payment for 2019. The due date for such a payment is January 15, 2020.

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Upcoming Tax Deadlines | December 2019

Day


10

Employees Who Work for Tips – If you received $20 or more in tips during November, report them to your employer. You can use Form 4070.

10

Corporations – Deposit the fourth installment of estimated income tax for 2019. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.

16

Employers – Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments made in November.

16

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments made in November.

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