A draft of Publication 535 Business Expenses, was released on January 7th to include instructions and worksheets for the Qualified Business Income Deduction. The preamble includes the following: “For tax years beginning after 2017, individual taxpayers and some trusts and estates may be entitled to a deduction of up to 20% of their QBI from a trade or business, including income from a pass-through entity, but not from a C corporation, plus 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. The deduction is subject to multiple limitations, such as the type of trade or business, the taxpayer’s taxable income, the amount of W-2 wages paid by the trade or business, and the unadjusted basis immediately after acquisition (UBIA) of qualified property held by the trade or business. The deduction can be taken in addition to the standard or itemized deductions. For more information, see section 199A, Notice 2018-64, and Regulations sections 1.199A-1 through 1.199A-6.” On the question regarding the treatment of rental properties the following appears on Page 2 of the draft publication: “Determining your qualified trades or businesses. Your qualified trades and businesses include your section 162 trades or businesses, other … Read More
Publication 17, Your Federal Income Tax, for use in preparing 2016 tax returns features details on taking advantage of a wide range of tax-saving opportunities. This includes tax credits such as the American Opportunity Tax Credit for parents and college students, the Additional Child Tax Credit and Earned Income Tax Credit for low- and moderate-income workers. Publication 17 also features a rundown on tax changes for 2016. These changes include one-on-one service at local IRS offices by appointment, Individual Taxpayer Identification Number (ITIN) renewal, revised tax rates and limits on various tax benefits for some taxpayers. This 293-page guide also provides thousands of interactive links to help taxpayers quickly get answers to their questions. The IRS has published Publication 17 annually since the 1940s. It has been available on the IRS web site since 1996. As in prior years, this publication is packed with basic tax-filing information and tips on what income to report and how to report it, figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions and using IRAs to save for retirement.
Lately, the NSTP Hotline has been receiving numerous calls on the appropriate filing status and who is a dependent. It is important to be aware of the regulations as the due diligence penalties can be assessed for multiple credits on the tax return. Be sure you start with Publication 501, Exemptions, Standard Deduction, and Filing Information for flow charts, worksheets and explanations of who is a qualifying child or a qualifying relative. We are receiving many questions regarding who qualifies as a dependent. Can a child be a qualifying dependent for more than one person? The answer is yes – and Pub 501 has examples to help you make this determination. Your due diligence requirements are outlined in the instructions for the Form 8867, Paid Preparer’s Due Diligence Checklist for the Earned Income Credit (EIC), the Child Tax Credit (CTC)/Additional Child Tax Credit (ACTC), and/or the American Opportunity Tax Credit (AOTC). If you still have questions, check out the IRS EITC Central website for information regarding due diligence compliance. There are worksheets, toolkits and videos to help you understand the regulations and your due diligence requirements. If you have not attended the NSTP Federal Tax Updates Seminars then be sure … Read More
Taxes must be paid as income is earned or received during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from payroll or pension is not enough, or if income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards is received, taxpayers may have to make estimated tax payments. Self-employed individuals generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax. The next estimated payment, for calendar year taxpayers, is due on or before Thursday, September 15, 2016. If not enough tax is paid through withholding and estimated tax payments, taxpayers may be charged a penalty. They may also be charged a penalty if estimated tax payments are late, even if the taxpayer is due a refund when the tax return is filed. Estimated tax requirements are different for farmers and fishermen. Publication 505, Tax Withholding and Estimated Tax, provides more information about these special estimated tax rules. Penalty for Underpayment of Estimated Tax If not enough tax is paid throughout the year, either through withholding or by making estimated tax payments, … Read More