Thursday, May 30, 2019

Here’s what historic building owners should know about the rehabilitation tax credit

Organizations around the country continue to promote historic buildings and other important heritage sites as May is National Historic Preservation Month. As part of this month, anyone who owns a historic building should remember that the rehabilitation tax credit offers an incentive to renovate and restore old or historic buildings. Tax reform legislation passed in December 2017 changed when the credit is claimed and provides a transition rule.
Here are some things that building owners should know about this credit:
  • The credit is 20 percent of the taxpayer’s qualifying costs for rehabilitating a building.
  • The credit doesn’t apply to the money spent on buying the structure.
  • The legislation now requires taxpayers take the 20 percent credit spread out over five years beginning in the year they placed the building into service.
  • The law eliminates the 10 percent rehabilitation credit for pre-1936 buildings.
  • A transition rule provides relief to owners of either a certified historic structure or a pre-1936 building by allowing owners to use the prior law if the project meets these conditions:
  • The taxpayer owned or leased the building on January 1, 2018, and the taxpayer continues to own or lease the building after that date.
  • The 24- or 60-month period selected by the taxpayer for the substantial rehabilitation test begins by June 20, 2018.
  • Taxpayers use Form 3468, Investment Credit, to claim the rehabilitation tax credit and a variety of other investment credits. Form 3468 instructions have detailed requirements for completing the form.

It’s not too late to check IRS payment options

IRS offers taxpayers convenient, secure ways to pay their taxes throughout the year. Taxpayers can pay:
  • Online
  • By phone
  • With their mobile device using the IRS2Go app
Additionally, some taxpayers must make quarterly estimated tax payments throughout the year. These taxpayers may include sole proprietors, partners, and S-corporation shareholders who expect to owe $1,000 or more when they file. Individuals who participate in the sharing economy might also have to make estimated payments.
 
There are several options for taxpayers who need to pay their taxes. They can:
  • Pay using their bank account when they e-file their return. Taxpayers can do this for free using electronic funds withdrawal.
  • Use IRS Direct Pay to pay their taxes, including estimated taxes. Direct Pay allows taxpayers to pay electronically directly from their checking or savings account for free. Taxpayers can also choose to receive email notifications about their payments. Taxpayers should remember to watch out for email scams. IRS Direct Pay sends emails only to users who requested the service.
  • Pay by credit or debit card through a card processor. There is a fee to pay this way. Taxpayers can make these payments online, by phone, or using their mobile device with the IRS2Go app.
  • Make a cash payment at a participating 7-Eleven store. Taxpayers can do this at more than 7,000 store locations nationwide. To pay with cash, taxpayers can visit IRS.gov/paywithcash and follow the instructions.
  • Spread out their payments over time by applying for an online payment agreement. Once the IRS accepts an agreement, the taxpayers can make their payment in monthly installments.

Home office deduction benefits eligible small business owners

Small business owners may qualify for a home office deduction that will help them save money on their taxes, and benefit their bottom line. Taxpayers can take this deduction if they use a portion of their home exclusively, and on a regular basis, for any of the following:
  • As the taxpayer’s main place of business.
  • As a place of business where the taxpayer meets patients, clients or customers. The taxpayer must meet these people in the normal course of business.
  • If it is a separate structure that is not attached to the taxpayer’s home. The taxpayer must use this structure in connection with their business
  • A place where the taxpayer stores inventory or samples. This place must be the sole, fixed location of their business.
  • Under certain circumstances, the structure where the taxpayer provides day care services.
Deductible expenses for business use of a home include:
  • Real estate taxes
  • Mortgage interest
  • Rent
  • Casualty losses
  • Utilities
  • Insurance
  • Depreciation
  • Repairs and Maintenance
Certain expenses are limited to the net income of the business. These are known as allocable expenses. They include things such as utilities, insurance, and depreciation.  While allocable expenses cannot create a business loss, they can be carried forward to the next year. If the taxpayer carries them forward, the expenses are subject to the same limitation rules.
There are two options for figuring and claiming the home office deduction.

Regular method

This method requires dividing the above expenses of operating the home between personal and business use. Self-employed taxpayers file Form 1040, Schedule C, and compute this deduction on Form 8829.

Simplified method

The simplified method reduces the paperwork and recordkeeping for small businesses. The simplified method has a set rate of $5 a square foot for business use of the home. The maximum deduction allowed is based on up to 300 square feet.
There are special rules for certain business owners:
  • Daycare providers complete a special worksheet, which is found in Publication 587.
  • Self-employed individuals use Form 1040, Schedule C, Line 30 to claim deduction.
  • Farmers claim the home office deduction on Schedule F, Line 32.

All taxpayers should plan ahead for natural disasters

Floods, wildfires, hurricanes, tornados and other natural disasters happen quickly and often with little warning.  No one can prevent these disasters from happening, but people can prepare for them.
Here are some things taxpayers can do to help protect their financial safety should a disaster occur. Taxpayers should:
Update emergency plans. A disaster can strike any time. Personal and business situations are constantly evolving, so taxpayers should review their emergency plans annually.
Create electronic copies of documents. Taxpayers should keep documents in a safe place. This includes bank statements, tax returns and insurance policies. This is especially easy now since many financial institutions provide statements and documents electronically. If original documents are available only on paper, taxpayers should scan them. They should save them on a DVD or CD, or store them in the cloud.
Document valuables. It’s a good idea to photograph or videotape the contents of any home. This is especially true when it comes to items of value. Documenting these items ahead of time makes it easier to claim insurance and tax benefits if a disaster strikes. The IRS has a disaster loss workbook. Using this can help taxpayers compile a room-by-room list of belongings.
Remember the IRS is ready to help. In the case of a federally declared disaster, affected taxpayers can call the IRS at 866-562-5227. The taxpayer can speak with an IRS specialist trained to handle disaster-related issues. Taxpayers can request copies of previously filed tax returns and attachments by filing Form 4506. They can also order transcripts showing most line items through Get Transcript on IRS.gov. They can also call 800-908-9946 for transcripts.

Know what tax relief is available in disaster situations

Taxpayers should be aware that the Tax Cuts and Jobs Act modified the itemized deduction for casualty and theft losses. After Dec. 31, 2017, net personal casualty and theft losses are deductible only to the extent they’re attributable to a federally declared disaster. Claims must include the FEMA code assigned to the disaster.

Taxpayers should include tax plans in their wedding plans

Couples getting married this year know there are a lot of details in planning a wedding. Along with the cake and gift registry, their first tax return as a married couple should be on their checklist. The IRS has tips and tools to help newlyweds consider how marriage may affect their taxes.
Here are five simple steps that can make filing their first tax return as newlyweds less stressful.
Step 1: Taxpayers should check their withholding at the beginning of each year, or when their personal circumstances change — like after getting married. Using the IRS Withholding Calculator is a good way for taxpayers to check their withholding. Taxpayers who need to change their withholding should complete and submit a new Form W-4, Employee's Withholding Allowance Certificate to their employer.
Step 2: Marriage may mean a change in name. If either – or both – of the newlyweds legally change their name, it’s important to report that change to the Social Security Administration. The names on the taxpayers’ tax return must match the names on file at the SSA. If it doesn’t, it could delay any refund.
Step 3: If a marriage means a change in address, the IRS and the U.S. Postal Service need to know. Newlyweds can file Form 8822, Change of Address, to update their mailing address with the IRS. They should notify the postal service to forward their mail by going online at USPS.com or by visiting their local post office.
Step 4: Taxpayers who receive advance payments of the premium tax credit should report changes in circumstances to their Health Insurance Marketplace as they happen. Certain changes to household, income or family size may affect the amount of the premium tax credit. This can affect a tax refund or the amount of tax owed. Taxpayers should also notify the Marketplace when they move out of the area covered by their current Marketplace plan.
Step 5: Newlyweds should consider their filing status. A taxpayer’s marital status on December 31 determines whether they’re considered married for that full year. Generally, the tax law allows married couples to file their federal income tax return either jointly or separately in any given year. Taxpayers can use the Interactive Tax Assistant to determine which status is best for them.

Tuesday, April 30, 2019

IRS.gov is the first place to go for answers to tax questions

Taxpayers who received an extension to file their 2018 tax return might have questions. They should remember that help is just a few clicks away on IRS.gov. Here are some of the tools and resources they may find useful.

Researching a tax question

Finding forms and publications

Making a payment

Taxpayers who need to make a payment can:
  • Use IRS Direct Pay. It is a free, secure way to pay online directly from a checking or savings account.
  • Pay their taxes by credit or debit card. Fees apply when using this option.
  • Use the Electronic Federal Tax Payment System. It has online and phone options. Registration is required to use this system.
  • Use the IRS2Go app, which allows taxpayers with a mobile device to get instant payment confirmation. 
  • View their federal tax information at IRS.gov/account. It’s a secure way for them to review the amount they owe, access their tax records online, and see their payment history. 
  • Learn what to do if they can’t pay what they owe.

Using IRS Free File to file tax returns through October 15

  • IRS Free File can be used to prepare and e-file taxes online for free through the October 15 deadline. Taxpayers who earned less than $66,000 in 2018 can use free tax preparation software online. All taxpayers, regardless of income, can use free file fillable forms.

Checking on the status of a refund

  • After filing their 2018 tax return, taxpayers can easily find the most up-to-date information about their tax refund using "Where’s My Refund?" tool on IRS.gov. Where’s My Refund is also available on the IRS2Go app. It’s updated once every 24 hours, usually overnight. So, there’s no need for a taxpayer to check the status of their refund more often.

Here’s what people should know about reporting cash payments

Federal law requires a person to report cash transactions of more than $10,000 to the IRS. Here are some facts about reporting these payments.

Who’s covered

For purposes of cash payments, a “person” is defined as an individual, company, corporation, partnership, association, trust or estate. For example:
  • Dealers of jewelry, furniture, boats, aircraft, automobiles, art, rugs and antiques
  • Pawnbrokers
  • Attorneys
  • Real estate brokers
  • Insurance companies
  • Travel agencies 

How to report

A person can file Form 8300 electronically using the Financial Crimes Enforcement Network’s BSA E-Filing System. E-filing is free, quick and secure. Filers will receive an electronic acknowledgement of each form they file. Those who prefer to mail Form 8300 can send it to the IRS at the address listed on the form.

What’s cash

Cash includes coins and currency of the United States or any foreign country. For some transactions (PDF), it’s also a cashier’s check, bank draft, traveler’s check or money order with a face amount of $10,000 or less.
A person must report cash of more than $10,000 they received:
  • In one lump sum
  • In two or more related payments within 24 hours
  • As part of a single transaction within 12 months
  • As part of two or more related transactions within 12 months

When to file

A person must file Form 8300 within 15 days after the date they received the cash. If they receive payments toward a single transaction or two or more related transactions, they file when the total amount paid exceeds $10,000.