If you haven’t contributed funds to an Individual Retirement Account (IRA) for tax year 2019, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 15th due date, not including extensions.
New Rules for Depreciation and Expensing
As part of final guidance issued that pertains to the Tax Cuts and Jobs Act of 2017, new rules and limitations are in effect for taxpayers who deduct depreciation for qualified property acquired and placed in service after September 27, 2017, and, as a business owner, they could affect your tax situation. Let’s take a closer look:
Tax Treatment of State and Local Tax Refunds
The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, limited the itemized deduction for state and local taxes to $5,000 for a married person filing a separate return and $10,000 for all other tax filers. The limit applies to tax years 2018 to 2025.
As in prior years, if a taxpayer chose the standard deduction then state and local tax refunds are not subject to tax. However, if a taxpayer itemizes deductions for that year on Schedule A, Itemized Deductions, part or all of the refund may be subject to tax – but only to the extent that the taxpayer received a tax benefit from the deduction.
Taxpayers who are impacted by the SALT limit may not be required to include the entire state or local tax refund in income in the following year. As a reminder, state or local tax refunds received in 2018 that were reported on 2018 tax returns are not affected.Continue reading
Home Equity Loan Interest Still Deductible
The Tax Cuts and Jobs Act has resulted in questions from taxpayers about many tax provisions including whether interest paid on home equity loans is still deductible. The good news is that despite newly enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labeled.Continue reading
Tax Extenders, Retirement Plan Changes, and Repeals
The Further Consolidated Appropriations Act, 2020, signed into law on December 20, 2019, extended a number of expired tax provisions for business and individuals through 2020. It also included several retirement plan changes and repealed three health care taxes. Here’s what you need to know:
2020 Tax Withholding: the new Form W-4
Form W-4, Employee’s Withholding Certificate, has been redesigned for 2020. Previously, income tax withholding was based on an employee’s marital status and withholding allowances or tied to the value of the personal exemption. With the revised Form W-4, however, income tax withholding is generally based on the worker’s expected filing status and standard deduction for the year. Furthermore, workers can also choose to have itemized deductions, the Child Tax Credit, and other tax benefits reflected in their withholding for the year.
The redesigned Form W-4 makes it easier for withholding to match tax liability. While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees.
Here’s what taxpayers should know about the new Form W-4 for 2020:
Claiming an Elderly Parent or Relative as a Dependent
Are you taking care of an elderly parent or relative? Whether it’s driving to doctor appointments, paying for nursing home care or medical expenses, or handling their personal finances, dealing with an elderly parent or relative can be emotionally and financially draining, especially when you are taking care of your own family as well.
Fortunately, there is some good news. You may be able to claim your elderly relative as a dependent at tax time, as long as you meet certain criteria.
Here’s what you should know about claiming an elderly parent or relative as a dependent:
Tips for Taxpayers Who Make Money From a Hobby
Many people enjoy hobbies that are also a source of income. From soap making and pottery to calligraphy and designing jewelry, these activities can be sources of both fun and finances. However, taxpayers who make money from a hobby should know that they must report that income on their tax return.
Generally, if someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, and not to make a profit.
Taxpayers should consider the following nine factors when determining whether their activity is a business or a hobby and base their determination on all the facts and circumstances of their activity. No one factor alone is decisive, however, and it is important to consider all of these factors when deciding whether an activity is a business engaged in making a profit.
- Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
- Whether the time and effort you put into the activity indicate you intend to make it profitable.
- Whether you depend on income from the activity for your livelihood.
- Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
- Whether you change your methods of operation in an attempt to improve profitability.
- Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
- Whether you were successful in making a profit in similar activities in the past.
- Whether the activity makes a profit in some years and how much profit it makes.
- Whether you can expect to make a future profit from the appreciation of the assets used in the activity.
If a taxpayer receives income for an activity that they don’t carry out to make a profit, the expenses they pay for the activity are considered miscellaneous itemized deductions and cannot be deducted for tax years 2018 through 2025. The taxpayer, however, must still report income they receive on Schedule 1, Form 1040, line 21.
If you have any questions about whether your hobby is actually a business in the eyes of the IRS, don’t hesitate to call us at:
San Jose: (408)-252-1800
Watsonville: (831)-726-8500
Employee Spotlight – Michael Chase
Wheeler is proud to announce Michael Chase as our employee of the quarter. Michael joined Wheeler back in July and has become an invaluable asset to the Watsonville office and admin team as a whole. Michael is always willing to take on any task he is presented and he never shies away from learning a new skill or procedure. He always has a positive attitude and has already begun to build a great rapport with many Watsonville clients. Congratulations to Michael!
Watsonville Office is Moving Effective January 27, 2020
It is with great excitement that we announce as of Monday, January 27th Wheeler will open its doors in a new location. Our new address will be 17 Aspen Way, Watsonville, CA 95076. Our phone and fax numbers will remain the same as well as our email address.
The new building is a larger and newer space and aligns with our goals to not only continue to provide great service to existing clients, but to expand our clientele and have the opportunity to accommodate even more of Watsonville and the surrounding communities.
If you have questions regarding the new location, please reach out and we would be happy to help. We look forward to seeing you in our new building and as always thank you for giving us the opportunity to serve you.