On January 15, 2019 the government invoked the Lapsed Appropriations Contingency Plan (Tax Year 2018 Filing Season).?? This is a plan that is updated annually and which outlines procedures for the IRS to follow when there is a temporary lapse in appropriations.? As the government shutdown continues, this plan allows for the IRS to recall workers for the coming tax season.? Prior to the shutdown the IRS employed 80,200 employees.? Approximately 10,000 (12%) of the IRS employees have been retained during the current shutdown.? The plan allows for a return to work of an additional 45% of its work force, to bring the total number of employees to 46,100.?? ?
Although the IRS will not be fully staffed, the recall of staff will allow the IRS to process both tax returns for and tax refunds to taxpayers.? The opening of tax filing season is January 28, 2019.? Additionally, although there are currently no IRS employees available to answer phone calls in the IRS call centers, it is anticipated that the recall of employees will allow the IRS to allocate a small number of staff to man IRS call center phone lines.? However, the wait to get through to a live person on customer service phone lines is expected to be long due to the heavy call volume typical of this time of year coupled with a smaller than normal amount of staff available to answer the customer service phone lines.? ?
Additionally, no new audits will be initiated during the partial reopening of the IRS.? Audits currently in process will continue to be on hold until the IRS fully reopens.
Although most Americans have not felt the impact of the recent government shutdown, now closing in on three weeks in length and making it the second longest shutdown in US history, this impact may soon change as tax filing season is less than a month away.?? With the recent partial shutdown ?non-essential government workers? have been told to not come into work.?? This ?stay home? request includes employees at the IRS ? as many as 85% of the employees of that government agency!? ?If you have tried to reach a live person at any of the IRS customer service lines, you will be greeted with a message informing you that ?live telephone assistance is not available at this time and normal operations will resume as soon as possible.?? Additionally, if you have been scheduled for an IRS audit, it is temporarily on hold as well.
In response to the situation, the House recently passed an appropriations bill that would enable the IRS to operate again with funding through September 2019.? However, the bill is not expected to pass the Senate.
The good news is that on January 10, 2019, the IRS announced that the tax filing season will begin on January 28, 2019 and refunds will be paid out to taxpayers owed refunds with the filing of their tax return, even if the government remains partially shutdown.? The IRS plans to recall numerous workers back to work without pay.
The bad news is that, according to various new sources, the IRS may not have the authority to call back non-essential workers and demand that they work without pay.? Additionally, according to Barron?s news outlets, ?the federal government can pay for certain services during the shutdown if they are deemed ?essential,? meaning that they are important to ?protect life and property.? But Steve Rosenthal, a senior staff member at the Tax Policy Center, told Barron?s that ?historically, the government has not viewed tax refunds as essential.?? In short: It?s one thing to say that the government needs to process some tax returns, as the IRS already planned on doing, to keep funds going for other services deemed essential. ?But it?s harder to argue that tax refunds are truly essential to taxpayers under the definition that the federal government has used.? So whether the government, which is literally running out of money, can really pay for tax refunds remains legally murky.?
With no end to the shutdown in sight and just two and a half weeks to the planned start of tax-filing season, it will be interesting to keep a close watch on US taxpayers looking to get a quick turnaround on their anticipated 2018 tax refund checks.
? For 2018, the standard deduction for a single individual is $12,000 and for a married couple is $24,000. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes (or sales taxes) AND real estate taxes limited to $10k per year, mortgage interest, charitable contributions, and medical expenses in excess of 7.5% of income in 2018 and 10% of income after that.
? Starting in 2018, personal exemptions are no longer deductible.
? The maximum earnings subject to social security taxes is $132,900 for 2019, up from $128,400 in 2018.
? The standard mileage rate is $.58 per business mile as of January 1, 2019, up from $.545 for 2018.
? The maximum annual salary deferral into a 401(k) plan or a 403(b) plan is $19,000 in 2019, up from $18,500 in 2018. And if you’ll be 50 or older by December 31st, you can contribute an extra $6,000 into your 401(k) or 403(b) account this year.
? The maximum annual contribution to your IRA is $6,000 in 2019, up from $5,500 for 2015 through 2018. And if you turn 50 by December 31st, you can contribute an extra $1,000 that year. You have until April 15, 2019 to make your 2018 IRA contributions
WASHINGTON – The Internal Revenue Service today issued the 2019 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
? 58 cents per mile driven for business use, up 3.5 cents from the rate for 2018,
? 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018, and
? 14 cents per mile driven in service of charitable organizations.
The business mileage rate increased 3.5 cents for business travel driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate is set by statute and remains unchanged.
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. For more details see Notice-2019-02.
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 four vehicles used simultaneously. These and other limitations are described in section 4.05 of Rev. Proc. 2010-51.
Notice 2019-02, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.
||Saving and Investing
- 4th quarter 2018 estimates due 1/15/19
- Expect to receive W-2s and 1099s by January 31, 2019
- Review your withholdings for 2019, and, if necessary, file a new W-4 Form with your employer to adjust your withholding
- Establish a savings and debt reduction goals for the year
- Try to increase your monthly contributions to your 401(k) or 403(b) plans.? The maximum annual contribution for 2019 is $19,000.? Anyone 50 or older can contribute an extra $6,000
- Automatically transfer $500 per month from your checking account into a Roth or Traditional IRA, and $1,250 per month into a 529 Account for each of your children
Personal financial planning is an ongoing process. The good news is that financially speaking, most of 2018 was another really good year. The stock markets once again hit an all time high before giving back all of those gains at the end of the year . Real estate prices around the country continue to increase. And interest rates, while increasing slightly this year, still remain near historic lows.
Hello 2019. Who knows how financially friendly this year will be – especially with Trump entering the third year of his Presidency and the Democrats taking over the House of Representatives. For that reason, here are some prudent steps you can take to keep your personal finances moving on the right track:
? REset your retirement savings: Most people find it easier to max out their retirement contributions by budgeting a set amount each month. Instruct your employer to withhold $1,583.33 per month for your 401(k) or 403(b) plan to ensure that you hit the max of $19,000 in 2018. Are you self-employed? If so, you can sock away up to $56,000 next year into a SEP, Keogh or Solo 401(k), which equals $4,666.67 per month. And if you’ll be 50 or older by December 31st, the maximum 2019 contribution jumps to $25,000 for 401(k) and 403(b) salary deferrals and $62.000 for Solo 401(k)’s.
? REfinance your home mortgage: Back in 2012, my wife and I locked in a fifteen-year fixed-rate mortgage at 2.875% with no points. While mortgage rates may no longer be quite that low, according to our go to mortgage guru Bob Cahill of Leader Bank, there are still a variety of mortgage products currently available to people looking to purchase a new home or perhaps even refinance an existing mortgage.
? REduce your personal debt: Over time, people and businesses seem to have forgotten that any money borrowed needs to be repaid. Remember, leverage equals risk. Make 2019 a year to pay down some of your personal debt. Perhaps you can delay the purchase of a new car, scale down your awesome vacation, or settle for a 60 inch flat screen TV. (You should still take a vacation with family and friends though.)
? REvise your savings and debt reduction goals: Take a few minutes to set (and also write down) new savings goals including how much you’d like to put away towards your retirement, a child’s education, and/or the down payment on a home, and also to reset how much you plan to pay down your student loans, personal debt, and home mortgage.
? REbalance your investment portfolio: Warren Buffet said it best by stating, “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.” During 2018, the stock market once again hit another all time high before giving back all of those gains at the end of the year. By rebalancing your portfolio to its original or updated asset allocation, you lock in gains from the sectors that performed the best and move money into sectors that underperformed and soon enough might be poised to catch up.
? REcalculate how much your retirement savings will be worth when you retire: With the market indexes still near all time highs, now’s a great time to take a look at how much buying power you can expect to have upon retiring.
? REvisit your life and disability insurance needs: As you move through your career and your life, your life and disability needs change. Give some thought to how much of these insurances you need versus how much you currently get through your employer’s benefit package and how much coverage you’ve already purchased for your personal policies.
? REsolve errors on your credit report: Each year, you’re entitled to three free credit reports, so there’s no excuse to not look at this important financial report annually, especially since errors are not uncommon. Order your free report at www.annualcreditreport.com.
You can also listen to a radio interview I had with Boston radio personality George Knight a few years back on this topic