IRS Announces 2020 Mileage Rates

IRS Announces 2020 Mileage Rates

The Internal Revenue Service (IRS) issued the 2020 optional standard mileage rates used to calculate the deductible costs of operating an automobile (including vans, pickups and panel trucks) for business, charitable, medical or moving purposes.

Beginning January 1, 2020, the standard mileage rates are:

57.5 cents per mile driven for business use, down one half of a cent from the rate for 2019,
17 cents per mile driven for medical or moving purposes, down three cents from the rate for 2019, and
14 cents per mile driven in service of charitable organizations.
It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than five vehicles used simultaneously.

 

Tax Tips for 2020 and Beyond

Tax Tips for 2020 and Beyond

Tax season is just around the corner. It’s not something most of us enjoy thinking about or dealing with — indeed,  16% of respondents to an AARP survey said they’d rather spend a night at the airport than prepare their taxes, while 36% would just as soon visit the DMV.

If you approach tax season prepared, though, and you’re able to shrink your tax bill via some savvy moves, then maybe it won’t be so bad. Here are five valuable tax tips you can use in 2020 and in the years ahead.

Tip No. 1: Be organized

It’s a little late to do a great job with this tip, but it’s not too late. Ideally, have a folder or box where you place tax-related receipts and documents throughout the year. (After all, you might spend some money on a tax-deductible medical expense in May — and you don’t want to forget about it.) Once you’re sitting down to prepare your return, all the papers you need will be in one place. Even if you’re using a tax professional to prepare your tax return, it will be very helpful to be able to hand over all your necessary documentation instead of having to hunt for it.

Tip No. 2: Take advantage of IRAs and 401(k)s

It’s vital for most of us to be saving and investing for retirement, and it’s very helpful to do so using tax-advantaged accounts such as IRAs and 401(k)s.

There are two main kinds of IRAs and 401(k)s: traditional and Roth. Traditional accounts offer an up-front tax break: You contribute money on a pre-tax basis, thereby reducing your taxable income for the year of the contribution. If you contribute, say, $5,000, you deduct that from your taxable income and avoid paying taxes on it. With a 24% tax bracket, you could shrink your tax bill by $1,200.

Roth accounts offer a back-end tax break: You contribute money on an after-tax basis, so your taxable income isn’t reduced and your tax bill for the year of contribution doesn’t shrink. But, if you follow the rules, when you withdraw money from the account in retirement, it will be tax-free income.

Tip No. 3: Keep up with changes to tax laws

Next, it’s important to keep up with developments in tax law. Otherwise, you might not realize that the amount you can contribute to various accounts has changed or that certain deductions are no longer allowed. Some years offer more changes than others — the Tax Cuts and Jobs Act of 2017 ushered in lots of change, such as doubling the standard deduction and reducing various tax rates — rules that are in effect now, for your 2019 tax return that you’ll prepare in 2020 and for future years.

Tip No. 4: Be thorough and report all your income

It can be tempting or easy to omit some income when preparing your taxes — if only because you forgot some income. That can be a costly blunder, however, and one that can be prevented if you’re organized and keep good records of all your earnings. You might have a small job on the side, for example, or you may be earning a little extra income making and selling things online.

Many sources of income will send you end-of-year documents, such as the W-2 form from your employer or 1099 forms from your bank and/or brokerage detailing income from sources such as dividends or interest. That information also makes its way to the Internal Revenue Service, which is expecting you to report it. Failure to do so will likely be noticed.

Tip No. 5: Consider hiring a tax pro

Finally, because tax laws are so complicated and subject to change, consider not preparing your tax return on your own. If your situation is very simple, such as if you’re single, with no dependents, no investments, and no income other than a salary, you could do well to use a tax preparation software package.

But those with more complicated financial lives should consider using a good tax pro’s services. After all, he or she spends a lot of time keeping up with tax laws and knows about available strategies that can minimize your taxes. But don’t just sign up with a stranger at a kiosk you run across — ask for strong recommendations from friends or family or look into nearby enrolled agents (those who are authorized to represent you before the IRS) and interview a few before selecting who to hire.

Need more info or need a question answered? Feel free to contact us and give us a call.

Federal Tax Deadline Oct 15, 2019

Federal Tax Deadline Oct 15, 2019

Tomorrow is the federal tax extension deadline! Get your affairs in order today!

Call us for more info.

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President Trump Signs Taxpayer First Act to Reform the IRS

President Trump Signs Taxpayer First Act to Reform the IRS

On July 1, President Trump signed the Taxpayer First Act (H.R. 3151). This bipartisan legislation aims to modernize and improve the IRS by creating an independent office of appeals, requiring the IRS to submit to Congress a plan to redesign and restructure the agency, enhancing cybersecurity efforts, and implementing other changes to better serve taxpayers. Several provisions were supported by APA’s Government Relations Task Force through meetings with congressional staff.

Payroll Provisions

Here are some of the payroll provisions in the Taxpayer First Act.

·Lowered electronic filing threshold. The IRS currently requires electronic filing when a business files at least 250 information returns (e.g., Forms W-2 or 1099-MISC). The legislation lowers the threshold to 100 in calendar year 2021 and then to 10 thereafter.

·Internet platform for Form 1099 filing. The legislation requires the creation of an online platform for businesses to prepare and file Forms 1099. The legislation directs the IRS to develop the platform with a user interface and functionality similar to SSA’s Business Services Online and to implement it by January 1, 2023.

·Authentication of e-Services users. The legislation requires the IRS to verify individuals who apply to open an e-Services account before they can use its tools.

·Independent Office of Appeals. The law creates a new position, Chief of Appeals, who will report directly to the IRS Commissioner and oversee the Independent Office of Appeals to resolve tax controversies without litigation.

·Cybersecurity and identity protection. Referred to as “21st Century IRS,” the legislation requires the IRS to collaborate with the private sector to protect taxpayers from identity theft refund fraud.

To learn more about federal and state laws, regulations, and information to keep your company’s payroll operations in compliance, give us call at 714-400-9201 or visit our website at www.Alvareztaxinc.com

 

California to have highest gas prices in nation when new gas tax kicks in July 1

California to have highest gas prices in nation when new gas tax kicks in July 1

When the new gas tax kicks in July 1, California will have the highest gas tax in the country.

The new gas tax will add an additional 5.6 cents per gallon of gas.

Consumer Watchdog President Jaime Court argues even though the new gas tax is expected to generate more than $50 billion over the next decade for much-needed road repairs, road infrastructure and transit upgrades, consumers shouldn’t be stuck with the bill.

“I had an issue with the tax increase when it went into effect because I felt that it should be paid for by the oil refineries excessive profits,” he said.

With the state average at over $4 a gallon, motorists pay close to $1.20 more per gallon at the pump than the national average. The state energy commission reports 70 cents of that difference is attributed to tougher gas standards and environmental regulations. Court claims otherwise.

“The state of California is investigating now the high cost of gas in this state… I know what it is because I look at the oil refineries profit reports. It’s gouging. When the oil refineries are making more off California gasoline than they make anywhere in the rest of the nation, we know that that profit is gouging,” Court added.

Court said he’s working with the governor’s office to rein in oil companies providing relief for consumers at the pump.

“We are an isolated market, and we have five oil refineries that control 90% of the gasoline in this state in terms of making it, and also in Southern California, control 80% of the retail gasoline stations,” he added.

Hire Your Children This Summer: Everyone Wins

Hire Your Children This Summer: Everyone Wins

If you’re a business owner with children, hiring them for the summer can provide many benefits. One is tax savings. By shifting business income to a child as wages for services performed, you can turn your high-taxed income into tax-free or low-taxed income. You may also be able to realize payroll tax savings (depending on the child’s age and how your business is organized) and enable retirement plan contributions for the children. Everybody wins! Many rules apply. Contact us to learn more.

You may be able to:

Shift your high-taxed income into tax-free or low-taxed income,
Realize payroll tax savings (depending on the child’s age and how your business is organized), and
Enable retirement plan contributions for the children.

It must be a real job

When you hire your child, you get a business tax deduction for employee wage expenses. In turn, the deduction reduces your federal income tax bill, your self-employment tax bill (if applicable), and your state income tax bill (if applicable). However, in order for your business to deduct the wages as a business expense, the work performed by the child must be legitimate and the child’s salary must be reasonable.

For example, let’s say a business owner operates as a sole proprietor and is in the 37% tax bracket. He hires his 16-year-old son to help with office work on a full-time basis during the summer and part-time into the fall. The son earns $10,000 during 2019 and doesn’t have any other earnings.

The business owner saves $3,700 (37% of $10,000) in income taxes at no tax cost to his son, who can use his 2019 $12,200 standard deduction to completely shelter his earnings.

The family’s taxes are cut even if the son’s earnings exceed his or her standard deduction. The reason is that the unsheltered earnings will be taxed to the son beginning at a rate of 10%, instead of being taxed at his father’s higher rate.

How payroll taxes might be saved

If your business isn’t incorporated, your child’s wages are exempt from Social Security, Medicare and FUTA taxes if certain conditions are met. Your child must be under age 18 for this to apply (or under age 21 in the case of the FUTA tax exemption).

Be aware that there’s no FICA or FUTA exemption for employing a child if your business is incorporated or a partnership that includes non-parent partners.

Start saving for retirement early

Your business also may be able to provide your child with retirement benefits, depending on the type of plan you have and how it defines qualifying employees. And because your child has earnings from his or her job, he can contribute to a traditional IRA or Roth IRA. For the 2018 tax year, a working child can contribute the lesser of his or her earned income, or $6,000 to an IRA or a Roth.

Raising tax-smart children

As you can see, hiring your child can be a tax-smart idea. Be sure to keep the same records as you would for other employees to substantiate the hours worked and duties performed (such as time-sheets and job descriptions). Issue your child a Form W-2.