IRS Operations Affected by Recent (and Future) Shutdowns

The most recent government shutdown has come to an end, but there is a very good chance another shutdown could begin in less than three weeks,? Below is information provided by the IRS about which of their services are impacted during a shutdown.

Please plan ahead accordingly during the next few weeks in the event that another shutdown begin later this month.? According to the IRS:

Due to the lapse in appropriations, most IRS operations are closed during the shutdown. An IRS-wide furlough began on December 22, 2018, that affects many operations.

During this period, the IRS reminds taxpayers that the underlying tax laws remain in effect, and all taxpayers should continue to meet their tax obligations as normal. Individuals and businesses should keep filing their tax returns and making payments and deposits with the IRS, as they are required to do by law.

Limited Operations During the Appropriations Lapse

Automated applications. and many automated applications remain available, including such things as Where’s My Refund, the IRS2go phone app and online payment agreements.

Telephones. Limited live telephone customer service assistance is available. Due to the heavier call volume, taxpayers should be prepared for longer wait times. Automated toll-free telephone applications will remain operational. The IRS encourages people to use for information.

In-person service. IRS walk-in taxpayer assistance centers (TACs) are closed. That means those offices are unable to handle large cash payments or assist identity theft victims required to visit an IRS office to establish their identity. In-person assistance will not be available for taxpayers experiencing a hardship.

Taxpayer appointments. While the government is closed, people with appointments related to examinations (audits), collection, Appeals or Taxpayer Advocate cases should assume their meetings are cancelled. IRS personnel will reschedule those meetings at a later date, when the IRS reopens.

Taxpayer correspondence. While able to receive mail, the IRS will be responding to paper correspondence to only a very limited degree during this lapse period. Taxpayers who mail in correspondence to the IRS? during this period should expect a lengthy delay for a response after the IRS reopens due to a growing correspondence backlog.

Tax-exempt groups. The IRS will not be processing applications or determinations for tax-exempt status or pension plans.

Enforcement activity. During this period, the IRS will not be conducting audits, but automated initial contact letters will continue to be mailed. No collection activity will generally occur except for automated collection activity. For example, automated IRS collection notices will continue to be mailed. Criminal Investigation work, however, continues during this period.

Passports. The IRS will not be certifying for the State Department any individuals for passport eligibility.

Tax Court.?Important?updated information?for taxpayers and tax professionals with Tax Court cases, including mail being returned and issues with court petitions not being processed.

For tax professionals and others interested in a more detailed view of IRS operations during the shutdown, there is an extensive listing available in the?filing season lapse plan

New Recorded Webinar on Maximizing Social Security

You have been paying into Social Security for all of your working life, and now it’s time to get your money back. However, the Social Security system is full of arcane rules, secrets, and claiming surprises. This webinar will help you learn the basics to help evaluate the best claiming strategy for you and ensure you maximize this lifetime annuity.

Target Audience: Those that would like an introduction as to how social security claiming strategies work

In this recently recorded webinar, Alex Oliver CFP discusses various strategies to maximize your social security benefit over your lifetime base on the current rules.

Here are other upcoming LIVE Webinars that you can register to?listen to live:

Economic and Investment Overview for 2019

Thursday, Feb. 7, 12 noon – 1 pm, Online – Presented by Alex Oliver, First National Corporation

What is going on with trade? Who is Jay Powell and what do the interest rates actually mean? Are markets currently overvalued or are there still opportunities in 2019? We will provide a general overview covering the global economy and provide you talking points for your next cocktail party.

Target Audience: Those looking to gain an understanding of the market headlines

Why Do Stocks Go Up and Down: A Stock Market Introduction

Thursday, Feb. 21, 12 noon – 1 pm, Online – Presented by Alex Oliver, First National Corporation

We don’t want you watching CNBC to learn about the stock markets: their ratings depend on exaggerating the bad news! Tune in for an investing 101 course so that you may have a general understanding of what happens when stocks boom and bust..

Target Audience: Those who would like to understand how their investments work in plain English

Generational Wealth Transfer: 10 Best Practices

Thursday, March 21, 12 noon – 1 pm, Online – Presented by Alex Oliver, First National Corporation

You may read this and think that this is only for “those multi-millionaires.” However, even small retirement accounts, houses, or cars can create discord within families without a well thought out plan. Hear our thoughts on how to gradually allow your children to take over your estate and avoid senseless conflict.

Target Audience: Those with children of any age


Clock Is Ticking For The Tesla Tax Credit

Is one of your New Year’s resolutions trading in your current automobile for a new environmentally friendly vehicle? One of the more popular “green” vehicles available for purchase has been a Tesla. The purchase of a qualifying Tesla made prior to 2019 qualified a taxpayer to claim a plug-in electric motor vehicles tax credit in the amount of $7,500.

However, once a manufacturer sells 200,000 vehicles that qualify for the tax credit, the credit begins to phase out. Tesla reached that cap in late 2018. Tesla vehicles qualifying for the tax credit are the models S, X, and 3. As a result, in 2019 the plug-in tax credit for Tesla purchases will be limited as follows:

  • A qualifying Tesla purchase (including delivery) made between January 1, 2019 – June 30, 2019 will qualify for a plug-in electric motor vehicle tax credit in the amount of $3,750.
  • A qualifying Tesla purchase (including delivery) made between July 1, 2019 – December 31, 2019 will qualify for a plug-in electric motor vehicle tax credit in the amount of $1,875.
  • A qualifying Tesla purchase (including delivery) made after December 31, 2019 will no longer qualify for the plug-in electric motor vehicle tax credit.

More interested in the tax credit than a Tesla?? Check out the information provided by the IRS at:

TCJA provides new rules for taxpayers’ home mortgage interest deduction

The newly enacted Tax Cuts and Jobs Act of 2017 (TCJA) both simplified and complicated many of the tax rules beginning with the 2018 tax filing season. One of these changes, new rules with regard to taxpayers’ mortgage interest deduction, on the surface seems simple but in reality is quite the opposite.

The new rule with regard to home residence mortgages allows a deduction for interest on a taxpayer’s mortgage and equity debt, where the combined debt is capped at $750,000 ($375,000 if married filing separate status). This cap is for residences purchased after December 15, 2017. However, for taxpayers that have an existing mortgage on their residence obtained prior to December 16, 2017, the debt limit remains $1,000,000 ($500,000 if MFS). This older mortgage debt is considered “Grandfathered Debt” and is not impacted by the new $750,000 cap. Additionally, just to confuse taxpayers a bit more, the TCJA made an exception to the new rule where a taxpayer who enters into a written binding contract before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchases such residence before April 1, 2018, will be considered to have incurred the home acquisition debt prior to December 16, 2017; thus, making the cap on this debt $1,000,000.

Prior to 2018, interest on up to $100,000 of home equity debt was allowed as a tax deduction and taxpayers were not restricted in their use of the home equity loan. Personal use of home equity debt was allowed to qualify for a mortgage interest deduction. The TCJA only allows a deduction for home equity interest if the proceeds of a home equity loan are used for renovating or improving the home. If the proceeds of the debt are used for personal items, the interest paid on the debt will no longer be deductible. For mortgages taken out after 2017, the combined total of mortgage debt plus additional home equity debt (used to improve or renovate a house) is capped at the new $750,000 threshold.

Are you thinking of purchasing a second home? Assuming your total debt combined on both homes will be under the new $750,000 cap, be sure the new mortgage will be secured by the new home. If you take out an equity loan on your primary residence which is then used to purchase the second home, the interest on the home equity loan will not qualify to be deductible mortgage interest even if the combined loans on the primary residence are less than $750,000. Only interest on mortgage and home equity debt used to purchase, improve, renovate or construct the home being mortgaged will qualify for the mortgage deduction. Taking a loan out that is collateralized by one home in order to purchase a second home will not qualify as deductible mortgage debt.

Refinancing also poses numerous complexities depending on the amount of debt to be refinanced and when the original loan was taken out. Refinancing a mortgage is considered acquisition debt to the extent that the new debt does not exceed the outstanding principal on the old debt immediately before refinancing. Taxpayers that refinance grandfathered debt, are allowed to deduct mortgage interest on the new debt in full, up to the amount of grandfathered debt outstanding just prior to the refinance. For example, if your current mortgage outstanding is $950,000 and this mortgage was in place prior to December 16, 2017, after refinancing you can deduct mortgage interest on the refinanced debt of $950,000. Your refinanced debt will not be capped to the new $750,000 threshold, even if the refinance occurs in 2018.

If a taxpayer does a cash out refinance (even if the cash out is solely for closing costs), the amount of new debt in excess of the old debt outstanding just prior to refinancing will not qualify as mortgage debt even if the total new debt is less than the $750,000 threshold. For example, if a taxpayer refinances their existing debt in the amount of $400,000 with a new debt in the amount of $450,000 and does not use the additional $50,000 cash out for a home renovation or improvement, then only interest paid on $400,000 will qualify for the mortgage interest deduction..

With the new rules for mortgage debt and home equity debt fully in place as of December 15, 2017, taxpayers will need to pay close attention to the tax ramifications of refinancing existing home mortgages and of using home equity loans, prior to making their financial decisions.