Happy St. Pattys Day!

Refund Delays

With filing season upon us, millions of taxpayers are anxiously awaiting their refund. Some will be coming in the mailbox while the faster route is to receive it directly deposited into your bank account. That lump of cash has to be the best part about filing your taxes!

After filings, taxpayers anxiously watch the clock: When will it get here?! I have a new television I want to get or a trip to book! Unfortunately, there are some factors that contribute to the delayed payment of refunds.

First, state tax security delays can trip up the process. These can be chalked up to safety and identity concerns. Many states often publish any anticipated refund delays informing taxpayers about refund fraud. Because of that, the new standard procedure is that some states don’t begin processing refunds until March. This is because states can’t afford to lose millions of dollars by sending refunds to fraudsters and to the taxpayer who deserves it.

There also may be an issue with your federal return. Sometimes the IRS identifies an inconsistency and has to get in touch with you to reconcile the problem. Remember, though, the IRS will not call you over the phone and threaten to send you to prison. These issues are addressed by regular U.S. mail. In order to minimize any opportunity for inconsistencies, we recommend that you use a qualified tax return preparer. Because the IRS cannot send our your refund until the issue is resolved, it is always better to address them sooner rather than later.

Finally, there may be a matter of refundable credits. A taxpayer with refundable credits may still receive a refund even if they didn’t overpay in taxes. These are based on many financial or social factors such as earned income or family size.

Unfortunately, these credits are a target for fraudsters, especially in the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) areas. Because of this, these credits on a return draw closer scrutiny.

To cut down on fraudulent returns, the PATH Act was passed in 2015 to require those returns claiming suspect credits be held an extra few weeks for additional review.

Christine Schulze Event

Tax Time!

Happy Valentines Day

2019 Deferred Compensation Limit

With final rush of 2018 year-end planning, many taxpayers are making a New Year’s resolution to not go through that again. Fortunately, the IRS announced the 2019 deferred compensation contribution limits in it Notice 2018-83. That Notice contained higher limits for the coming year, which would be wise to take advantage of. Briefly, the limits identified in the Notice include:

·         The salary deferral limit for 401(k), 403(b) and 457 plans increases to $19,000.

·         The SIMPLE deferral limit increases to $13,000.

·         The annual additions limit for defined contribution plans increases to $56,000.

·         The annual additions limit for defined benefit plans increases to $225,000.

·         The annual compensation limit increases to $280,000.

·         The Social Security Wage Base increases to $132,900.

·         The compensation limit for determining who is a highly compensated employee increased for the first time in five years, and is now $125,000.

These are specifically outlined in the Notice

https://www.irs.gov/pub/irs-drop/n-18-83.pdf

IRS Guidance on Tax Withholding for 2019

The beginning of the year is always a good opportunity to review w-4 withholdings for employees. On Tuesday, November 27, 2018, the IRS issued guidance on withholding questions for 2019 in Notice 2018-92. It states that the rules will mostly continue to be in effect from 2018 through 2019, including a similar Form w-4. Minor adjustments incorporate the changes to tax liability and withholding resulting from the Tax Cuts and Jobs Act (TCJA), P.L. 115-97. A new Form w-4 is expected to be released in 2020.

The Notice also announced that the IRS intends to develop further regulations for the TCA, specifically under Secs. 3401 and 3402, as amended by Section 11041 of the TCJA. These include:

Withholding allowances: This term has replaced the previously used “withholding exemptions.” This is due to the elimination of personal exemptions by the TCJA (at least until 2025).

Change in status: Any time that an employee’s circumstances result in a change in their withholding allowance (e.g., birth, death, marriage, etc.), that employee is required to notify the employer within ten (10) days. The Notice eliminates any requirement for the employee to notify the employer only if that change is the result of the TCJA. The requirement in such an event is that the employee provide a new Form w-4 to the employer on or before May 10, 2019.

Failure to provide Form w-4: Employees must provide a Form w-4 to their employer. In the event that they fail to do so, the Notice states that the employee may be treated as single, but entitled to the number of allowances computed pursuant to the Commissioner’s IRS Publication 15 (Circular E), Employer’s Tax Guide.

Estimates of Sec. 199A deduction: Much has been made of this significant component of the TCJA. With regard to employees, the Notice does allow a taxpayer to estimate the allowable Section 199A deduction in conjunction with calculating any additional Sec. 3402(m) allowance.

Withholding calculator: The IRS has provided an online withholding calculator and published further guidance in Publication 505, Tax Withholding and Estimated Tax. The Notice advises that the IRS will be working to enact regulations permitting the use of the calculator rather than relying on the tables provided with the Form w-4.

Combined withholding tables: The Notice states that these are marked for elimination for Federal Insurance Contributions Act (FICA) withholdings under Reg. Secs. 31.3402(h)(4)-1(b) due to complexity.

Written notice: Previously, an employer was required to send written notice to the IRS where an employee for whom the IRS had previously issued a letter locking in his or her maximum number of allowances left the employment (either voluntarily or involuntarily). That requirement has been suspended.

While the comment period remains open through January 25, 2019, the guidance affords employees and employers alike an opportunity for an annual review.