SCOTLAND YARD TAX SERVICE   
61 Scotland Road
Canandaigua, NY 14424
585-394-4467
Circa 1992
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        Donna Scott, Owner

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The Tax Cuts and Jobs Act overhauls the Internal Revenue Code and provides broad tax relief to many workers, families and businesses.
 
The law lowers tax rates for individual tax payers and businesses, increases tax deductions and credits, and eliminates or reduces various tax deductions and credits.

Standard deduction amount increased.

 

For 2018, the standard deduction amount has been increased for all filers, and the amounts are as follows.

·    Single or Married Filing Separately—$12,000.

·    Married Filing Jointly or Qualifying Widow(er)—$24,000.

·    Head of Household—$18,000.

 

Due to the increase in the standard deduction and reduced usage of itemized deductions, you may want to consider filing a new Form W-4. 

 

Deduction for personal exemptions suspended. For 2018, you can’t claim a personal exemption deduction for yourself, your spouse, or your dependents.

Changes to itemized deductions. For 2018, the following changes have been made to itemized deductions that can be claimed on Schedule A.

·    Your itemized deductions are no longer limited if your adjusted gross income is over a certain amount.

·    You can deduct the part of your medical and dental expenses that is more than 7.5 percent of your adjusted gross income.

·    Your deduction of state and local income, sales, and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately).

·    You can no longer deduct job-related expenses or other miscellaneous itemized deductions that were subject to the 2 percent of AGI floor. You may still deduct certain other items on Schedule A, such as gambling losses.

·    For indebtedness incurred after December 15, 2017, the deduction for home mortgage interest is limited to interest on up to $750,000 of home acquisition indebtedness. This new limit doesn’t apply if you had a binding contract to close on a home after December 15, 2017, and closed on or before April 1, 2018, and the prior limit would apply.

·    You can no longer deduct interest on home equity indebtedness, which means indebtedness not incurred for the purpose of buying, building, or substantially improving the qualified residence secured by the indebtedness.

The limit on charitable contributions of cash has increased from 50 percent to 60 percent of your adjusted gross income.

Income tax rates and brackets have been reduced to 10%,12%,22%,24%,32%,35% and #37%.  There have been changes to the child tax credit, the new law doubles the amount of the credit From $1000 to $2000 per child.  The new law also has created a new $500 nonrefundable tax credit for dependents who do not qualify for the regular child tax credit.

Changes have been made to the Alternative Minimum Tax, the Kiddie Tax and to Alimony as well.  

Taxpayers are still required to have health insurance for 2018 but beginning in 2019 the shared responsibility payment will be eliminated.  

Small Business owners are in luck, Congress passes a 100% first year deduction for property placed in service after 9/27/17 and before 1/1/2023, this will be for new and used qualifying property.
 

Keeping Good Records Reduces Stress at Tax Time

 Here are a few things the IRS wants you to know about recordkeeping.

Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you receive an IRS notice. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal or state tax return.

Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:

  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged or substitute checks or any other proof of payment
  • Any other records to support deductions or credits you claim on your return

You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

  • A home purchase or improvement
  • Stocks and other investments
  • Individual Retirement Arrangement transactions
  • Rental property records

If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:

  • Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
  • Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
  • Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
  • Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks

For more information about record keeping, check out IRS Publications 552, Record keeping for Individuals, Pub 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

 

 

Nine Tips for Taxpayers Who Owe Money to the IRS

Did you end up owing taxes this year? The vast majority of Americans get a tax refund from the IRS each spring, but those who receive a bill may not know that the IRS has a number of ways for people to pay. Here are nine tips for taxpayers who owe money to the IRS.

  1. If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.
  2. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. 
  3. You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. 
  4. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.
  5. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.
  6. You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS.  The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.
  7. You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.
  8. If an agreement is approved, a one-time user fee will be charged.   For eligible individuals with incomes at or below certain levels, a reduced fee will be charged.
  9. Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.

For more information about installment agreements and other payment options visit IRS.gov.  IRS Publications 594, The IRS Collection Process and PUB 966, Electronic Choices to Pay All Your Federal Taxes also provide additional information regarding your payment options.  These publications and Form 9465 can be obtained from IRS.gov or by calling 800-TAX-FORM (800-829-3676).


 

Hobbies have special rules:

The most draconian of all taxes relate to hobbies. If you have a hobby or are thinking of a hobby, read this article before you take step one.

Here is what current tax law does to hobbies:

  • A hobby loss is not deductible under the general rule that deductible hobby expenses may not exceed hobby income.

  • Your gross hobby income goes above the line on your Form 1040.

  • Your hobby expenses are deducted as miscellaneous itemized deductions where they can suffer a reduction equal to 2 percent of adjusted gross income which includes your gross hobby income.

 Solution. Try to make all income-generating activities businesses.

The IRS looks at nine business factors. We turned those nine factors into nine questions to which your correct answer should be either "yes" or "not applicable." Here are the nine questions:

  • Do you carry on this activity in a businesslike manner with complete and accurate books and records?

  • Do you have expertise in this activity? If not, do you use outside experts or otherwise study the activity in a manner that indicates a profit motive?

  • Do you spend time on this activity? The more time you spend, the more this activity looks like a for-profit activity.

  • Do you expect appreciation in property values to produce the ultimate profits?

  • Have you had success doing this type of thing in the past?

  • Does your history of profits and losses with this activity show that you engaged in this activity for profit?

  • Does the profit you realize or hope to realize justify the losses incurred or expected?

  • Considering your other sources of income, do you need this activity to work for your well-being? (If you work at this full time and need this work to pay for your household, you pass the business test on this answer alone.)

  • Is your personal pleasure or recreation absent from this activity? (In other words, you are not golfing, fishing, horseback riding, woodworking, etc.)

Remember, "yes" answers increase your chances that the IRS will consider your activity a business. You don't need nine "yes" answers. You might only need one. But you need to consider the tax ramifications of a hobby versus those of a business. The ultimate answer depends on your facts and circumstances.

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