The IRS published a notice, today, that provides some very helpful information regarding how to apply the new Section 199A Deduction (Qualified Business Income Deduction") to rental properties.Read More
This article is a brief explanation of why it is necessary for you to make estimated tax payments and the applicable rules for paying the minimum amount of estimated tax without triggering the penalty for underpayment of estimated tax.
Individuals must pay 25% of a “required annual payment” by each of Apr. 15, June 15, Sept. 15, and Jan. 15, to avoid an underpayment penalty. (When that date falls on a weekend or holiday, the payment is due on the next business day.) The required annual payment for most individuals is the lower of 90% of the tax shown on the current year's return or 100% of the tax shown on the return for the previous year. Certain high-income individuals must meet a more rigorous requirement. If the adjusted gross income on your previous year's return is over $150,000 (over $75,000 if you are married filing separately), you must pay the lower of 90% of the tax shown on the current year's return or 110% of the tax shown on the return for the previous year.
Most people who receive the bulk of their income in the form of wages satisfy these payment requirements through the tax withheld by their employer from their paycheck.
If you fail to make the required payments, you may be subject to an underpayment penalty. The penalty equals the product of the interest rate charged by IRS on deficiencies, times the amount of the underpayment for the period of the underpayment. The penalty is avoided if you meet certain specified exceptions or waivers, described below.
Most individuals make estimated tax payments in four installments. In other words, we determine the required annual payment, then divide that number by four and make four equal payments by the due dates. But you may be able to make smaller payments under the annualized income method. This method is useful to people whose income flow is not uniform over the year, perhaps because of a seasonal business. For example, if your income comes exclusively from a business that you operate in a resort area during June, July, and Aug., no estimated payment is required before Sept. 15. You may also want to use the annualized income method if a significant portion of your income comes from capital gains on the sale of securities which you sell at various times during the year.
The underpayment penalty doesn't apply to you:
(1) if the total tax shown on your return is less than $1,000 after subtracting withholding tax paid;
(2) if you were a U.S. citizen or resident for the entire preceding year, that year was 12 months, and you had no tax liability for that year;
(3) if you are a farmer or fisherman and pay your entire estimated tax by Jan. 15 of the following year, or pay your entire estimated tax by Mar. 1 of the following year and also file your tax return by that date; or
(4) for the fourth (Jan. 15) installment, if you aren't a farmer or fisherman, file your return by Jan. 31 of the following year, and pay your tax in full.
In addition, IRS may waive the penalty if the failure was due to casualty, disaster, or other unusual circumstances and it would be inequitable or against good conscience to impose the penalty. The penalty can also be waived for reasonable cause during the first two years after you retire (after reaching age 62) or become disabled.
If you think you may be eligible to determine your estimated tax payments under the annualized income method, or you have any other specific questions about how the estimated tax rules apply to you, please call your CPA!
Tax deduction cuts. For tax years 2018 through 2025, the Act limits deductions for taxes paid by individual taxpayers in the following ways:
. . . It limits the aggregate deduction for state and local real property taxes; state and local personal property taxes; state and local, and foreign, income, war profits, and excess profits taxes; and general sales taxes (if elected) for any tax year to $10,000Read More
The rules for deducting home mortgage interest have changed for 2018. The limit for qualifying acquisition debt has been reduced to $750,000. The deduction for home equity debt has been eliminated. Follow the link for a more detailed analysis.Read More
If you are a Washington resident, use tax is due if you purchased goods without paying sales tax.
Under the Marketplace Fairness legislation (HB 2163), certain marketplace facilitators and remote sellers that do not collect Washington’s sales tax must provide an annual report to both Washington consumers and the Department of Revenue. The report showsRead More
The Internal Revenue Service issued guidance on the business expense deduction for meals and entertainment following law changes in the Tax Cuts and Jobs ActRead More
An employee at Oregon's tax collection agency copied the data of 36,000 people, including social security numbers, and stored the files to a personal account.Read More
On March 19, 2018, the Washington State Dept. of Revenue will launch My DOR as the secure portal for all online services. Businesses will be able to access all their tax and business licensing accounts using their SecureAccess Washington (SAW) login.Read More
Here is a brief summary of the provisions of the tax bill that is being debated in congress this week that affect individual taxpayers. We will post the business related provisions separately. We have tried to mention the most common items:
The Washington Department of Revenue is warning businesses to be aware of a new telephone scam. The scammers fraudulently claim to be from Revenue and request over-the-phone payment to renew expired business licenses. Revenue will never ask for or take payment for license renewals over the phone.Read More
The City of Vancouver requires businesses to pay a license fee plus an additional amount per employee. Beginning in 2019 there will be an additional charge based on the square footage of indoor space used by the business. Read more details in the Vancouver Business Journal. See the City of Vancouver web site for rules and a link to the application.
The Washington State Department of Revenue is warning about a scam related to business license renewals. Here is the information from the DOR:
A number of Washington state businesses have been targeted by an email phishing scam that appears to be from the Department of Revenue. These emails remind the businesses that endorsements must be renewed and encourages them to do so by following a provided link.
These emails are NOT from the Department of Revenue. Any official message regarding a business’ license endorsement renewal will be from firstname.lastname@example.org and only alert the business that they have a new message in their My DOR inbox.
What to do if you receive a suspicious email:
- Do not click any links, reply, or provide any information.
- Check the expiration date on your business license document.
- If your business license renewal is coming due, go directly to http://secure.dor.wa.gov and log in to your account.
If you have any questions or are unsure if a correspondence is genuine, please call us at 1-800-451-7985.
All taxpayers should file on time, even if you can’t pay what you owe.... Here are four tips if you can’t pay your taxes in full by the April 18 due dateRead More
All businesses should adopt a written policy regarding the threshold for capitalizing fixed assets. Follow the link for an explanation and sample policy.Read More
You are required to issue 1099s for payments you made in the course of your trade or business. Penalties have recently increased. This article describes the requirements.Read More
Congress has passed, and the President has signed, a bill that extends many tax provisions that expired on December 31, 2014. The extensions are retroactive to January 1, 2015. Some of the provisions are made permanent; others are extended until December 31, 2016. Follow the link to see the extended provisions that most commonly affect our clients.Read More
Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 54 cents per mile for business miles driven, down from 57.5 cents for 2015
- 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
- 14 cents per mile driven in service of charitable organizations
Did you donate your services to charity this summer? Did you travel as part of your service? If so, some travel expenses may help lower your taxesRead More