Tax Season is here!

Opening Gate:  TAX SEASON is upon us! It officially opened at the end of January and it definitely feels like it is in full swing at our office. While it can certainly be stressful – it also comes with a great sense of production, team-work, accomplishment and client service – and while I won’t try and convince you that I like it, I don’t mind it as much you think.
In keeping with our theme, within this post I’ll try and interject a little personal reflection – and not have it so technically dominant – but rather, hopefully, a human experience. My goal is to put one of these out the 15th of each month. The intent is to hit areas that are interesting to me, and thereby, my clients, friends, and community by association.

Buoy 1:  Quote that pertains: “The avoidance of taxes is the only intellectual pursuit that carries any reward.” said by John Maynard Keynes, a British economist of the early 1900’s. His ideas became the foundations for many of today’s macroeconomic theories, and he is considered one of the most influential economists of the 20th century.
Now our friend John was talking about “tax avoidance” (legal) not “tax evasion” (illegal). Tax avoidance is the arrangement of one’s financial affairs to minimize tax liability within the law. Through proper tax planning, we aim to partner with our clients on how to save more of their money in the future, legally. It’s all about how well you know the complex rules of this taxation game – and how well you keep up, since the government makes ongoing changes to tax legislation – did we mention there was recently a significant tax reform?

Buoy 2:  On the heels of the longest government shutdown in U.S. history, the Congressional Budget Office released an analysis stating that it cost the US economy  $11 billion! With federal workers returning to their jobs much of that will be reversed but $3 billion of economic activity is permanently lost.

Buoy 3: reported that it now takes $478,000 in annual income to make it into the top 1 percent of U.S. earners.

Buoy 4: reported that the average home buyer now needs 7.2 years to save a 20 percent down payment for a home – this is a year and half long than it took a generation ago. Massachusetts does have some programs aimed at first time home buyers, and the VA has a home loan program as well aimed at lowering the down payment. My friends Ed at GMH, Pablo at Nauset Mortgage, and Adam at Derby Street Mortgage can help steer you through the mortgage process.

Buoy 5:  Tax Reform update:  We finally have guidance in the form of a safe-harbor policy in regards to whether or not your Schedule E rental income is eligible for the 20% pass through deduction – the IRS issued Notice 2019-07 in mid January. Notably the safe harbor qualifications call for:
– The taxpayer/property owner to devote at least 250 hours to the rental activity – notably the taxpayer doesn’t have to perform the hours themselves, but instead can be performed by an agent, employee or independent contractor;
– “Rental Services” include time spent on repairs, collecting, rent, negotiating leases and providing tenant services.
– Separate books and records must be maintained;
– Contemporaneous records must be kept that detail the hours, dates and descriptions of the services, and who performed them.
Of particular importance: “to aggregate, or not to aggregate” is the question that taxpayers and advisors will have to ponder and decide upon.

Buoy 6:  Tax season actions that need to be taken by March 15th (for calendar year operations):
– Filing partnership and S-Corporation returns – for those needing extra time, or it’s part of the plan, or want to defer payment into retirement plan arrangements can file Form 7004 with the IRS to request and automatic 6 month extension.
– Making contributions for 2018 to their pension and profit sharing plans. (Note, as alluded to above, companies that file an extension can get an extra 6 months to fund their plans.
– Companies electing for S corporation status for of 2019 must do so by 3/15 by filing Form 2553 with the IRS.

Closing Gate:  I would love any feedback you have to offer – good, bad or ugly – use the comments, the contact form or simply shoot me an email. Hope everyone has a great month!