DETROIT - Experts from the Michigan Association of Certified Public Accountants are gearing up for another season of taxes.
To help Metro Detroiters, Help Me Hank held a “Tax Help 4 You” Phone Bank, answering viewers tax-related questions.
CPAs sat for hours taking your calls about any questions you had regarding filing your taxes.
Help Me Hank and the Consumer team would like to thank the following CPAs for their help:
• Robyn Fuller - J&F Advisors
• Jamie Lopiccolo - Capocore Professional Advisors
• Bryan Bays - RSM
• Audrey Victor - Rehmann
• William Barnes - Groen, Kluka & Company
• Jonathan Satterfield - Lansat CPA Group PC
• Michael Taylor - Heemer Klein
• Matt Kidd - Blunden & Kidd Accounting & Consulting PC
Thank you to the Michigan Association of Certified Public Accountants and Siren PR for helping assemble our team of CPAs!
Tax Tips to Prepare You
Bankrate.com has some great ways to make sure you take all advantage of what you can this season.
1. Consider “bunching” deductions
The Tax Cuts and Jobs Act (also what people are calling “the new tax laws”) which took effect for the 2018 tax year, increased the amount of the standard deduction. For individuals: $6,500 to $12,000. For heads of households: $9,550 to $18,000. For married couple filing jointly: $13,000 to $24,000. Those who don’t have enough deductions to exceed that threshold take the standard deduction instead.
Experts recommend using the bunching method to surpass the thresholds, if possible. Bunching is a method where you time expenses by pushing deductible expenses into one calendar year. This can be achieved by moving forward certain deductions this year, like charitable contributions or prepaying January’s mortgage payment.
2. Max out your retirement plan contributions
Some experts say maxing out your retirement plan reduces your taxable income, which will reduce your tax bill. In 2018, the maximum 401(k) contribution is $18,500, or $24,500 if you are age 50 or over.
If you can’t afford the maximum amounts, you should try to contribute at least the amount that will be matched by employer contributions. Think of the employer match as an immediate return on your money — all of the funds are tax-deferred and grow tax-free.
3. Take your Required Minimum Distributions (RMDs)
Individuals who are age 70 and a half or older with retirement accounts need to take the required minimum distributions by the end of this year. If not, they might face a heavy tax penalty of 50 percent of the required amount. This applies to both 401(k)s and IRAs. RMDs are based on age and year-end values in eligible accounts. Combining RMDs with qualified charitable contributions can help lower your tax bill. By sending RMDs directly to a qualifying charity, your adjusted gross income won’t increase and you may be able to take a charitable tax deduction.
4. Engage in tax-loss harvesting
Under IRS rules, you have to pay taxes on any investment gain you realize in the year. Tax-loss harvesting is a strategy that involves selling poor performers in your portfolio to offset gains. Under current law, you can claim up to $3,000 in capital losses against non-investment income (or $1,500 if married and filing separately.) You can carry forward into future tax years any losses over $3,000.
5. Take advantage of annual exclusion gifts
This year, the maximum amount of gift tax exemption increased from $14,000 to $15,000. This means you can give up to that amount to a family member without having to pay a gift tax. Parents can take advantage of this by gifting their children $15,000 into a trust or a 529 plan, which is a tax-sheltered plan for college expenses.
6. Do some charitable giving
Charitable giving isn’t just about cash contributions; you can also donate items to charities and write their market values off as an itemized deduction on your taxes. Depending on the charity, you can donate things like clothing, furniture, electronics, etc.
According to the IRS, charitable contributions to private organizations are limited to 30 percent of your adjusted gross income; public charity gifts are limited to 50 percent of AGI.
To get the 2018 tax break on your charitable gifts, they must be donated by the close of the tax year and you must have a receipt stating you donated them. Keep in mind the bunching method described above because unless you can exceed the new standard deduction thresholds, there’s no deduction for charitable contributions.
7. Get your health care coverage in order
Tax experts are warning consumers that although the Tax Cuts and Jobs Act of 2017 eliminated the individual penalty for not having health insurance, it doesn’t go into effect until 2020; the penalty for not being insured will continue to be enforced this year.
The penalty for not having insurance this year is $695 per adult or 2.5 percent of household income, whichever is greater. Sending in proof of insurance is not required, but it’s an important piece of documentation to keep in your records.
8. Defer your income
Those who get a year-end bonus might want to consider waiting to take it until the following year, if their employer allows this. By delaying the income, you postpone additional taxes for 2018.
But this strategy only makes sense if you think you will be in the same or a lower tax bracket next year.
9. Update your beneficiary designations
While this doesn’t affect your taxes now, it could affect the taxes of your loved ones in the future. The end of the year is a great time to review your beneficiaries and think about any big life changes that may make you want to consider updating your beneficiaries. Down the road, it will help minimize any taxes your beneficiaries pay on your assets when you pass.
10. Protect yourself from fraud
Whenever you’re filing documents with sensitive information like your Social Security number, it’s imperative to take the necessary precautions to prevent your data from being compromised. Filing taxes should be done directly on the IRS website or that of a trusted tax preparer.
Additionally, be cautious about giving your personal information to a third-party platform. Setting up direct deposit with the IRS for your refund is wise, and if you owe money, be sure to send it through IRS Direct Pay.
We’ve got more tips from Leon LaBrecque, the chief growth officer at Sequoia Financial Group.
The new standard deduction
Things will be different for small business owners
How can I get my return fast?
Tips from the Help Me Hank Tax phone bank:
Copyright 2019 by WDIV ClickOnDetroit - All rights reserved.