Despite Challenges, IRS Gets a Positive Rating for Tax-Filing Season

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If you were to give the IRS a rating, how would they do? On a scale of one to ten most taxpayers would have the tax agency on the lower end of the spectrum. But that’s not the case from the Government Accountability Office (GAO).  

Despite a limited budget and fewer employees, the IRS still received a positive review for its work during the tax season of 2018. “Overall, despite multiple challenges including mid-filing season changes to tax law and a computer system failure, IRS met its processing targets for individual tax returns,” GAO wrote in a report Monday. 

Some of the highlights included: 

  • Having 130.48 million returns processed by April 20 compared to 128.85 million last year. 
  • Despite an outage on April 17 to the agency’s Direct Pay System, taxpayers were still able to prepare and file their taxes online. 
  • For the third consecutive year, the agency improved its customer service on the phone. The IRS answered 80 percent of calls for tax help and still reduced waiting times to about five minutes. In 2015, they only answered 37.5 percent of all calls, with an average waiting time of 23 minutes. 

Meantime, Charles Rettig is now the permanent IRS Commissioner, after president Trump made his appointment official in September.

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Are You Making These Common Leadership Mistakes?

How are you doing as a leader? If you’re a true leader then chances are you possess many of the important qualities that make effective leaders successful. However, even the best leaders have room for improvement. In fact, there are several common leadership mistakes that can prevent good leaders from getting better. Are you making any of them? 

Mistake: Believing You Know Everything There Is to Know 

The fact is, no one knows everything. Leaders who think they know more than everyone else are fooling themselves. In reality, to be the best leader possible you need to be asking a lot more questions. You don’t know all the answers already, and that’s ok. Be willing to learn. 

Mistake: Putting the Company Over Your personal Life 

Company loyalty is great, but that doesn’t mean you should give up your personal life for the sake of the company. You will be much more effective as a worker and a leader by taking care of yourself and tending to your personal responsibilities. 

Mistake: Afraid to Take Risk 

Risk is always scary. That’s why they call it a risk. But you can’t always play it safe. In fact, sometimes, playing it safe is a bigger risk than going out on a limb and trying something new.  

Becoming a great leader requires continued effort to get better. Watch for these mistakes in your own leadership and if you need to correct any of them don’t be afraid to start now. 

 

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New Administration Makes Avoiding Obamacare Tax Easier

Remember when the Affordable Heath Care Act became a law? One of the biggest complaints about the law, more commonly known as Obamacare, is that it forced people to sign up for healthcare. Those who didn’t had to pay a tax penalty. It was a sticking point for a lot of lawmakers and taxpayers alike. 

Well, with the new administration now in place, things are changing. There’s some good news for those who don’t have health insurance and want to avoid being hit with extra taxes. That’s because the Centers for Medicare & Medicaid Services recently announced a new way for those without health insurance this year to avoid being hit with a tax penalty. 

Under Obamacare, there was a provision that helped certain individuals facing difficult circumstances avoid the tax penalty. But it only covered people facing certain hardships. Additionally, those taxpayers had to have documentation to prove their circumstances. 

Under the new policy announced by the Centers for Medicare & Medicaid Services, people can now claim hardship exemptions for more general financial struggles. In addition, taxpayers no longer have to provide “the documentary evidence or written explanation generally required.” 

To be safe, however, the Centers for Medicare & Medicaid Services recommends keeping all paperwork related to claiming the hardship. 

One more thing: the “Tax Cut and Jobs Act” completely eliminates the tax penalty for not having health care starting in 2019. 

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Why Is This Top Hedge-Fund Manager Cutting His Holdings?

The bull market has been going strong for years. But could it be possible that this “running of the bulls” is about to end? The stock market is always fluctuating so a bear market is always a possibility. But according to the manager of one of the largest hedge funds on Wall Street the time for the Bull’s run to end is likely close. 

Billionaire David Tepper is less than excited about this bull market continuing. He said the battles with China, plus the simple fact that the bull market has already been going for about 10 years has led him to his forecast. 

Recently, Tepper had a much better outlook. However, with so many concerns about global trade, especially with China, and the belief by many forecasters that the economy and the market have very little room to grow, Tepper’s enthusiasm has curbed. 

In a recent interview, Tepper told CNBC, “I’ve taken down my exposure. Our whole book, we probably took down 30% at some point, the equity part.” Tepper says this current Bull Run, in his opinion is in its final innings. However, he did the leave the door open to a continuing run. “But you know what happens with baseball sometimes?” he said. “It goes into extra innings.”

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Republican Lawmakers Release Additional Tax Cut Proposals

While Americans’ reception of the Tax Cut and Jobs Act (TCJA) remains mixed – depending on which media outlet you believe – republicans are still convinced they didn’t do enough. To that end, House Republicans, last week, announced a new proposal that would add to the TCJA. 

Calling it “Tax Reform 2.0,” the new proposals would actually make small-business income deductions, individual tax cuts and a larger child tax credit permanent instead of allowing those tax cuts to expire after 2025. 

The package also contains some new proposals that would increase retirement savings and saving accounts for families. The proposed legislation would also make it easier for startup companies to write off their expenses and costs. 

While the Tax Cut and Jobs Act was supposed be a tax break for all, many Americans reportedly aren’t seeing much of a difference in their paychecks. Thus, the TCJA has become less popular with taxpayers since it passed. But that hasn’t stopped republican lawmakers from pushing for more. 

However, whether or not the new proposals become law might still be an uphill battle. Some republicans are concerned it could hurt their party in the midterm elections. Additionally, so far, the TCJA hasn’t helped boost the economy as much as anticipated. Plus, although the House is pushing for more cuts, the Senate is not expected to consider the bill during 2018. 

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Are You Hurting Your Own Leadership Potential?

Are you on the path to leadership? Perhaps you’ve already received a promotion and you’re well on your way? So what’s next? Do you continue down the same path that got you where you are today? Or, do you look for new ways to improve so you can get to the next step?  

It’s easy to stick with what’s working. But what got you one promotion might not be enough to get you the next one. In order to continue on your path to leadership, you have to look beyond the past. After all, you don’t want to get in your own way and impede your development and growth. So if you want to keep moving forward make sure you’re not making these mistakes and sabotaging your own potential. 

  1. Focus on a direction instead of a task. No one likes working for micromanagers. Instead of staying ultra focused on the task at hand, set a focus for yourself and for those you lead toward a specific direction. 
  1. Don’t say yes to everything. While it’s great to be a doer and get involved in as much as you can, there might be someone else that can do it better. Additionally, if you say yes to too many things, you might not be able to accomplish them all, and every task will suffer. 
  1. Ask questions. Always ask why. Don’t just do things blindly. Ask yourself is there is a better way. Additionally, if something isn’t working then ask questions to find out why and more importantly how to do it better.
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Tax Changes That Could Be Better Over the Long Haul

Thanks to the Tax Cut and Jobs Act (TCJA) there have already been many changes to the country’s tax law. Americans will really see many of those changes come tax season in early 2019. Whether you like the changes or not, there are some tax breaks that could end up being better in the long run. Here are three to consider.  

Capital Gains Tax – the Trump administration has openly discussed the idea of indexing the basis of an investment to inflation, which would lower the amount of a capital gain that could be taxed. Whether or not this happens, it does make some sense. 

Indexing an investment’s purchase price to inflation could lower the loss amount a person could claim as a deduction. Investments that lose money could then be carried forward to future tax returns when future gains absorb the losses. Additionally, as the market keeps ticking up, the idea of increasing that basis might help encourage investors to hold onto highly appreciated stocks longer. 

Estate Tax – thanks to the estate tax threshold being raised to $11 million per person, wealthy individuals must decide whether to donate to heirs now or wait till they pass on. By giving it away now, the money can grow in the heir’s estate. And it would only be subject to capital gains. 

The downside is gifts given through an estate are subject to a step-up basis. That means the assets are valued on the date the giver dies. However, if you were worth $25 million and you made a $10 million gift now, and you lived another 10 years, you could save as much as $4 million dollars at 5 percent growth rate. 

Charitable Giving – because the standard deduction has been raised most people will no longer do itemized deductions. That could be an issue for many wealthy taxpayers. Numerous wealthy individuals are prone to donate, but unless they donate enough to surpass the $12,000 threshold they no longer get a tax break for their donation. 

One option to overcome this would be to donate five years worth of donations into a donor-advised fund. If you donated $5,000 for each year you would easily surpass the $12,000 threshold. You would also be able to claim a deduction and give out the money over the five-year period.

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You Can No longer Claim These Tax Deductions in 2018

Believe it or not, 2018 is already two-thirds of the way over. That means before you know it, it will be time to start thinking about taxes again. The fact is it’s always a good time to think about taxes, because the more you know the better prepared you will be.  

The 2019 tax season (for the 2018 tax year) stands to be a busy one. With so many changes from the Tax Cut and Jobs Act, taxpayers need to be ready. For example, there are numerous tax deductions that you might have enjoyed in the past that will no longer be available come tax time next year. Here are a few big ones to be aware of. 

  • Personal exemptions will no longer exist, which means taxpayers will lose $4,050 for every dependent they claim. 
  • The laws governing the mortgage interest deduction from a home equity loan have changed. Most current homeowners will not be affected. But anyone purchasing a home going forward will only be able to deduct mortgage interest on debt up to $750,000. 
  • Taxpayers can no longer claim moving expenses starting in 2018, nor can they claim job expenses. 
  • Getting your taxes prepared professionally is a good idea, but starting this year you can no longer claim those expenses as a deduction. 
  • The casualty and theft loss deduction is now only available to people living in areas that are under a presidential declaration as a disaster area. 

These are just a few of the deductions that will no longer exist in 2018. For more info on how the Tax Cut and Jobs Act might affect your tax return, contact GROCO. 

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Will New Alimony Tax Rules Affect Your Retirement?

One of the lesser talked about changes from the Tax Cut and Jobs Act is how it will affect alimony. Starting in 2019, the big difference is that the person who makes the alimony payments will no longer get to claim that money as a deduction. On the other side, the person receiving the payment does not have to pay taxes on that money. That is exactly the opposite of how it used to work. 

But there is another change that could offset that new rule. That’s because there are now rules on how divorced people on both sides may or may not use their retirement accounts. 

Under the new law, you can now make alimony payments by transferring funds from your retirement account to the payee. Doing this means you could still get the same benefit as before. By paying through an IRA you don’t pay tax on the money you use for your alimony payments. In addition, the receiving spouse would be taxed once they receive the money from the IRA. 

However, the receiving spouse must be 59½ to take money from the IRA. If not they will also pay a 10 percent penalty on the withdrawals. Using a retirement account to pay alimony would have to be set up in the divorce agreement. And the payee should make sure that using funds directly form his or her retirement account makes sense.  

There is another thing to consider. If you go this route, you can no longer invest money from retirement funds in an individual retirement account because those assets are no longer considered taxable income. 

 

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Top Tax Planning Tips for Self-Employed

People who work for themselves enjoy several perks and benefits. However, a nice tax break is not necessarily one of those perks. Because self-employed taxpayers have to pay their own payroll tax – the entire 15.3 percent Social Security and Medicare tax – they often get taxed heavily. 

There is some relief starting this year thanks to the Tax Cut and Job Acts and a new 20% “pass-through deduction.” That means self-employed workers can now deduct 20 percent from their self-employment income before taxes. That will definitely help, but there are some other steps you can take to help you reduce your tax bill. 

Start by estimating your business income. If you’re going to earn a lot and qualify for a higher tax bracket, then start looking for deductions. Taking as many deductions as possible is a good idea if you’re going to end up in a higher bracket. 

It’s also a good idea to time your income. In other words, you can do your billing towards the end of the year and use it to your advantage. You can also sell assets before or after the end of the year, based on your estimated income and tax bill. 

It’s also a good idea to time your expenditures. You can even purchase items on December 31 and still get the benefit of depreciation for the entire year. Lastly, make sure you count your medical insurance premiums as a deduction. This can help save you big. 

These are just a few of the things you can do to help reduce your tax bill when you’re self-employed. For more valuable tips to save on taxes contact GROCO. 

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