NEW MA Family & Medical Leave

In 2018, Massachusetts signed into law a statute that provides paid family and medical leave (PFML) benefits to workers. Employers and employees must begin making contributions in July of 2019 to a new state fund which will administer and distribute the benefits beginning in 2021.

We held a special webinar to discuss the program and how to be compliant:

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We’ve got additional resources for you as well:

For more info, please visit the department’s website at



Are You Eligible for a Refund of Underpayment Penalties Assessed?

Most taxpayers saw their federal income taxes decrease thanks to the new tax rules issues at the end of December 2017. Many taxpayers also saw their refunds fall or their balance due increase for their 2018 taxes as compared with prior years.

That’s because the 2018 withholding tables were adjusted to reduce people’s withholding by more than the amount of taxes they would save under the new tax rules. (Whether or not this was intentional or accidental is a whole other issue.)

The IRS knew that many taxpayers who normally don’t get refunds each would end up owing more taxes than usual when filing their 2018 returns. In most years, one of the safe harbors to avoid paying any underpayment penalties is 90% of your total federal tax. In other words, if the taxes you pay in during the year through withholdings and estimates exceed 90% of your total federal taxes for the year, you would not generally be hit with the Form 2210 underpayment penalty.

Going into the filing season for 2018 tax returns, this safe harbor was reduced to 85%. Even at this reduced safe harbor threshold, however, too many taxpayers were paying underpayment penalties, so on March 22nd, the IRS announced that the safe harbor would be reduced to just 80%.

The problem is that many people already filed their tax returns prior to 3/22/19 and those returns based the underpayment penalty at a safe harbor rate of 85%. If you paid an underpayment penalty (reflected on the Form 1040, Line 23) because your total tax bill was more than 15% of your total tax liability, please check your 2018 Form 1040 to see if your tax bill was less than 20% of your total tax (Form 1040 Line 22 divided by Line 15), and then follow these IRS issued instructions to get that penalty refunded:

Taxpayers who have already filed for tax year 2018 prior to March 22, 2019 but qualify for this expanded relief may claim a refund by filing Form 843, Claim for Refund and Request for Abatement and include the statement “80% Waiver of estimated tax penalty” on Line 7. This form cannot be filed electronically.

While you’re at it, please also read a recent news feed issued by the IRS called: Done with taxes this year? Use 2018 return to get the 2019 withholding right

Family Loans

By Andrew Schwartz, CPA

family loansHere is a question I recently received from one of my clients:

My parents would like to give me a loan of $150k. How can we structure this loan so that we are in compliance with any rules from the IRS?

To structure a loan in compliance with the IRS rules, you need to take the following steps:

? Prepare a written loan document . This can be drafted by a lawyer or created by one of those legal websites.
? Include a stated interest rate with the rate being no lower than the IRS published Applicable Federal Rate (AFR) listed at:
? Also include an amortization schedule showing the dates that payments are due and reflecting the interest that will be accruing and due with each payment. has a great online loan amortization tool.
? Stick to the payment schedule.

One strategy is for your parents to forgive the interest that you need to pay each year by making a Gift to you. In that case, the person lending the money won’t pick up the interest earned on their tax returns as income. And the borrower won’t deduct the interest paid.

A portion of the loan balance can be Gifted too. The total amount of the interest and principal that can be Gifted each year is limited to the $15k per person per year Gift limit. That means your parents can Gift you and your spouse $60k per year, assuming they are both still living and married. The amount that can go towards the principal and interest would be $60k less any other gifts made to you during the year. (Gifts in excess of the $15k per person per year need to be reported on a Form 709 Gift Tax return and reduce the total wealth a person can shield form Estate Taxes when they die.)

On the other hand, if you use the money to purchase or improve your primary residence or second home, or to refinance an existing mortgage, you can deduct the interest paid during the year that does not exceed a total of $750k of mortgage debt (or up to $1 million if refinancing a mortgage in existence prior to 12/2017). To claim the mortgage interest deduciton you would need a lawyer to record this loan at your state’s Registry of Deeds as a mortgage and attach it to your deed

Interest rates are still quite low. And your parents or other relatives might be looking to get a little higher interest rate on a portion of their savings than they can currently earn on bank CDs and Money Market accounts. In situations like that, a family loan might end up being a Win-Win for both parties involved.


This Year’s Most Interesting Tax-Season Observation

Andrew Schwartz, CPA

Andrew Schwartz, CPA

By Andrew Schwartz, CPA

This year’s most interesting observation has nothing to do with taxes or personal finances but instead deals with civility and kindness.

The world we live in has really become quite nasty:

  • Our political leaders on both sides of the aisle have become extremely partisan and uncivil in recent years.? Unfortunately, these are the people setting the tone and tenor for the whole country.
  • Social media allows a level of anonymity that provides anyone with internet access the opportunity for unabated nastiness without any repercussions.

Based on interactions I’ve had with quite a few of my clients this past tax season, I think the general public is fed up with all the nastiness we are dealing with in our culture today.? Never had I had so many clients take a few minutes during the tax meeting to say something to me along these lines:

Andrew, I don’t think I have told you this before but I really appreciate working with you over all these years and just wanted to sincerely thank you for helping me out with my taxes and other basic financial planning issues for the past xx years.

Hopefully what I observed this past tax season is actually an unofficial and unorganized movement from those of us who want to live in a more civil society.? In response to the kind words I received from more than a few of my clients this past winter, I have personally tried to take a few extra seconds during an interaction with another person to give genuine thanks and appreciation to that person.?A little kindness to maybe counteract someone else’s nastiness.

With that being said, thank you for taking a few minutes out of your busy schedule each month to read the short articles that I post. I sincerely appreciate it.

Prior Years Trends and Observations

Here are the most interesting trends that I observed during the prior tax seasons along with links to those articles:

2018:? That tax season I noticed that high income couples earning between $300k and $500k stand to make out the best under the new tax rules

2017:? That tax season I noticed that more of my clients installed solar panels on their homes during 2016 than all of the prior years combined.

2016: The number of clients who instructed me to allocate $3 of their tax liability to the Presidential Election Campaign Fund, due primarily to the craziness brought on?by the Trump/Clinton Presidential Election.

2015: The year of the energy efficient tax credit with lots of my clients purchasing solar panels, electric cars, and even re-charging stations for those electric cars, including my long-time Dr. Jim who purchased all three.

2014: With a variety of tax hikes taking hold in 2013, the trend that tax season was higher taxes on lower income for high-income taxpayers, with many clients getting stuck paying obscenely high balances due.

2013: This was the first tax season that I noticed a sizable uptick in the number of individuals taking advantage of Health Savings Accounts.

2012: Record low interest rates meant that many homeowners refinanced their home mortgages at least once during 2011, including all but one or two of my clients who had a mortgage.

Mortgage Financing Today: The Value of Working with a Local Lender

By Bob Cahill, Leader BankBob Cahill, Leader Bank

Nowadays, you can find almost anything on line.??? It is hard to beat the convenience and ease of shopping at the push of a button.? In most cases, if you do not like what you have bought or if it does not fit, you can simply return it.? That may work well when you are purchasing a new pair of pants or shoes, but how about a home?

A home purchase is likely the single largest investment a person will make in their lifetime.??While the number of ?online only? mortgage companies has continued to grow in recent years, do they provide the best home financing solution for you?

Financing a home is about finding the right mortgage product for you among the many options.??It is also about building a trusted relationship with your lender and developing a home financing plan.

Online only mortgage companies often include slick marketing and promises of speed, but they can lack expertise, the lowest rates, and a good understanding of the local housing market. That is why working with a reputable, seasoned, and smart local lender is essential.? This becomes even more important if your situation or the property you are considering involves complications or competition.? Keep in mind that good local lenders act as hybrids with a web presence and time saving online applications to help expedite and simplify their custom service.

Do not rush into the process of home buying, especially if you are a first time buyer.? Take time to reflect and ask yourself some important questions:

  • What is your budget and down payment plan?
  • What type of home are you considering (single family, condominium, or multi-family)?
  • What towns are you considering?
  • How long do you expect to stay in the home?
  • What are your long-term financial goals, including further education, family, and retirement?
  • Do you expect your income or expenses to change in the future?
  • Is a second home or renting out your current home a possibility when you buy up in the future?
  • Do you know what options you have and the pros and cons of such options?

Have a budget in mind.? Remember that mortgage affordability and loan approval limits can be very different.? Compare your monthly net income to your total monthly expenses and saving goals.? What is the maximum amount that you want to spend toward a housing payment each month?? Have you factored in the cash needed to close plus the cost of renovations, furnishings, insurance, and emergency reserves? A good lender can help with strategies to secure the cash needed to purchase.

Before you go house shopping, you should have a discussion with your loan officer about what type of loan (fixed rate, adjustable rate, conventional, first time buyer, or government backed loan, etc.) is right for you.? Review your goals, thoughts, and questions to confirm that you have factored in all personal concerns and expected future financial plans.

Know your credit score.? It is one of the factors affecting your approval for a loan, and it affects the rate you will receive.? A good loan officer should be able to offer suggestions on how to raise your credit score to help put you in the best possible position when you are ready to buy.

Select a reputable local lender with whom you can talk easily and clearly communicate.? Choose to work with someone who has wide access to various loan products. All lenders should be able to provide you with a written pre-approval letter. Once you have found your dream home, your lender will submit your loan application and lock your rate when the time is right.? A good local lender will meet with you personally or over the phone to walk you through the process and any potential loan changes, confirm the loan product, find you the best rate, and help you provide the documentation in a timely manner to prove your income, assets, and debts.

What sets reputable loan officers apart is their ability to see your home purchase as part of your overall financial plan, and to help you customize a home purchase plan to best suit your individual needs and situation.? An exceptional loan officer will help you plan and strategize, to tailor your mortgage to you. ?It is not only about securing ?a mortgage? or a ?30-year fixed,? but also about developing a sound home financing plan that is in keeping with your overall financial goals.

A trusted local mortgage banker can help you buy or refinance today, and also help you keep your goals on track for the future while providing consistent communication, value, and service over time that an ?online only? mortgage company cannot match. The most important things in life require thoughtful planning and the best fit possible?your mortgage financing is one of them.

Schwartz & Schwartz, P.C. highly recommends Bob Cahill, Senior Mortgage Banker, Broker & Planner, of Leader Bank. Reach out to Bob at (781) 589-8756 or by email at to discuss your home financing options. All consultations are free and without obligation.


Newly enacted MA tax law to impact Airbnb, HomeAway and other short-term rentals

By Richard Schwartz, CPA

If you are one of the numerous short-term ?Hosts? or ?Operators? providing your home to vacationers, business professionals and other short-term renters, be aware of the new tax law that will impact short-term rentals in the Commonwealth of MA. The newly passed legislation will expand the Massachusetts hotel tax to include short-term rentals.

Prior to the new law, Airbnb, HomeAway and other short-term rentals avoided the Massachusetts hotel tax. However, recent legislation in Massachusetts has now leveled the playing field within the Massachusetts hospitality industry. Beginning July 1, 2019 short-term rentals in Massachusetts will now be subject to the 5.7% hotel tax (for any booking done beginning January 1, 2019 and later).?? The new law will also allow cities to assess an additional tax not to exceed 6% on such rental income. Properties will qualify under the expanded law and will be subject to the 5.7% hotel tax if the rental period will regularly be 31 days or less.?? However, if the total rental days in the calendar year is 14 days or fewer, the rental property will be exempt and will not be subject to this tax.

To comply with the expanded tax law, beginning in July, 2019 operators will be required to register their property with MassTaxConnect whether or not the property will meet the 14-day exemption or not. If the property meets the 14-day exemption, no tax will be due each year. Otherwise, taxes are due and required to be paid by the 20th day of the following month (for example hotel tax fees collected in July will be required to be submitted by August 20th).?? The filing of monthly hotel tax returns and tax payments will be through MassTaxConnect.

The link below is from and answers Frequently Asked Questions pertaining to the recently expanded tax law for Massachusetts short-term rentals.