2018 YEAR-END TAX PLANNING

Tax planning you may wish to do by 12-31-18

Most taxpayers file on a "cash basis" & any tax planning must be done prior to year-end, typically before December 31st. Making changes next January won't affect most 2018 tax issues.

please note: some of the following tax planning ideas assume (require) that you can itemize deductions! Many taxpayers (me included!) cannot itemize this year due to the new 2018 tax law... and if so, those planning ideas will have NO effect - please see my (IF) footnote throughout this blog. (ie. the planning idea works only IF you can itemize deductions)

(a few also may have no effect, if you are subject to the alternative minimum tax, AMT)

* Review the two - 2018 Tax Planning Brochures provided to you

  (in last years blue tax file or provided at our initial meeting)

* Review all "blogs" regarding tax issues - archived at www.garlandtaylor.com

Here's 2 basic tax planning questions

"will your income in 2019 be the same or higher?"

"do you believe tax rates will increase in 2019?"

* Most taxpayers want to reduce taxes in the current year. If that is your goal, that can be accomplished by deferring taxable income - examples: waiting until 2019 to bill clients & sell stocks with gains or by accelerating expenses - example: making donations (IF), paying taxes (IF), or buying supplies/equip now

  * However, if you believe tax rates or your income will be higher in 2019 - you may choose to do the reverse - and accelerate taxable income into 2018 & defer deductible expenses until 2019.

The White House’s new 2018 tax law includes changes that could remove your ability to itemize deductions (if less than $24,000 if married filing jointly… you will just take a “standard deduction”).

Even if you can itemize, some deductions may now be limited – mortgage interest, state taxes, miscellaneous, etc. AMT tax & Estate tax laws are changed too. Tax rates are different & may be reduced for flow-through entities (some s corporations & LLC's) and corporations. Some regulations are still not final as of this date, but be sure to consider such possibilities when you tax plan...

Here’s a link to a summary of changes in the “new law”. see also prior blog articles!

https://www.irs.gov/pub/irs-pdf/p5307.pdf

* Here's a link to online tax planning topics & tools from the AICPA, of which I am a member. American Institute of Certified Public Accountants (aicpa) is the national organization.

Note: If web links don't work, please just copy & paste the link into your browser (sorry!)

just click on "life stages",  topics, tax reform, or calculators

https://www.360financialliteracy.org 

* IRS Tips https://www.irs.gov/uac/Tax-Tip-Archive

* IRS Affordable Care Act provisions 

  https://www.irs.gov/Affordable-Care-Act/Affordable-Care-Act-Tax-Provisions

* Recent IRS news->  https://www.irs.gov/newsroom

* New Tax Law changes -> https://www.irs.gov/tax-reform

* Federal Energy Tax Credits -> https://www.energystar.gov

* Oregon Residential Energy Credits -> http://www.oregon.gov/ENERGY/

(remember that some energy tax credits need to be applied for NOW, to obtain a certificate in the mail, before you can file your 2018 taxes)

A g a i n -  d o   i t   b e f o r e   1 2 - 3 1 - 1 8

     (IF) footnote - these planning ideas will work, but only IF you can itemize (over $24,000 MFJ or $12,000 MFS/single $18k HOH).

* determine if you need to adjust your payroll tax withholding (see “new law” link above for a calculator) or if you need to make estimated tax payments to avoid/stop underpayment penalties.

* Pay any Oregon state taxes that you know will be owed (using Form 40-V). (IF) + you haven’t reached the $10,000 limitation (new).

* Pay all real estate taxes (that are due 11-15-18), if only a partial payment was made. (IF) + you haven’t reached the $10k limit.

* Pay your mortgage payment before 12/31, if it is due early in January 2019. (IF)

* Talk with your pension advisor regarding retirement planning and contributions.

* Talk to your investment advisor regarding benefits in selling and/or keeping investments.

* Talk with your attorney regarding modifications in personal wills & business agreements.

  (Please note that I am not licensed & do not provide investment, pension, or legal advice)

* Go through your closets & garage & consider contributing items to a qualified charity. Be sure to keep a detail of values (cost & used value) & take pictures. AND, you must get a receipt from the charity. (You can find Goodwill & St Vincents valuation guides online or document the value yourself). The usual (IF)

* Make charitable contributions by check or credit card & get written letters of acknowledgement. (IF)

* Defer income to 2019 & accelerate expenses into 2018, if that makes sense (see above & tax planner) But, if you believe your 2019 taxable income will be higher or tax rates will increase next year - just reverse that basic tax plan)

* Paying college tuition now might increase the tax credits for higher ed (see planner & articles. there are income & other limitations)

* Bunch deductions - There are "floor" limits for medical (7.5% of adjusted gross income/AGI) so, either pay expenses now in 2018 or later in 2019 (>10% AGI) - to "bunch" & exceed limits. (IF)

* Take any required distributions (if you are age 70.5 or older, you must take minimum distributions) from your retirement plan, or face a 50% penalty. Talk with your bank or financial advisor. Please note that my firms standard income tax services do not include calculating these required minimums for you. 

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-req...

* Use annual gift tax exclusion. No gift tax on gifts up to $15,000 per recipient

* Use your credit card to pay tax deductible expenses, if you need to

* Get health insurance, or face possible penalties

  https://www.irs.gov/uac/Newsroom/Tax-Facts-about-the-Affordable-Care-Act...

* BIZ - Buy equipment, IF you need it (must be received & placed into service by 12/31)

  (careful - see the luxury auto & SUV rules... Which may limit the amount deductible)

* BIZ - C corporations - pay bonus? or pay dividends? (fyi, some complex tax issues)

* BIZ - S & C corporations - make sure you have paid reasonable wages for your services during the year & have support for that. 

* BIZ - If you sell inventoriable items, you must physically count at year-end (at your cost)

* BIZ - S corporations. Make sure you have sufficient stock basis to claim any losses.

* BIZ - If officers have incurred/paid expenses personally - reimburse officers from the corporation under an accountable plan (mileage rates are 54.5 cents per mile, for 2018)

* BIZ - If there are officer loans on the books, get rid of them if possible (to reduce audit risk).

OK - Here's also a few things to do AFTER the year ends...

* BIZ - File 2018 Forms 1096/1099's by 1/31/19 (order them NOW at 1-800-829-3676)

  (for rent, dividends, interest, services, etc that you paid in 2018. Order free forms by phone or online NOW at https://www.irs.gov/Forms-&-Pubs It will take a few weeks to get them!

* BIZ - File Personal Property Tax Reports with County assessors office by 3/15/19 (every Oregon business must file - check with your assessors office for forms) If you filed last year, you should receive a 2018 form in the mail. Or call your Assessors office. (Here's a link to information & the online form, when it becomes available) https://multco.us/assessment-taxation/business-personal-property-assessment just click on "confidential personal property return"

Foreign bank & financial accounts - you may be required to file with the FBAR by APRIL 15, 2019. This is a new change (prior years were due June 30th) https://www.irs.gov/businesses/small-businesses-self-employed/report-of-... 

Here's a summary of what I am doing for year-end tax planning before December 31st

P E R S O N A L

* Itemized deductions – I’m not doing  much… since my mortgage interest is very small & state taxes are limited to $10,000 – I’m not able to itemize this year. So I’m not worried about making last minute charitable deductions or paying added taxes since I can’t deduct them this year at all. i.e. -> (IF) Ugh…

* Doing a 2018 income tax projection – to see if my payroll tax withholding is adequate. I’ll make additional estimated tax payments if it is not (or pay penalties!)

* Setting up a bright red folder marked "TAXES" and will place all 2018 tax documents there as they come in. Form W-2's, 1099's & Form 1098, pension data

B U S I N E S S

* Locate and copy purchase invoices & support for any tax credit items (1099-T, for tuition, etc)

* Order new Quickbooks software & download the software by 12/31. The Scanner I bought a few years ago & paperless workflow is going well! The software cost is small, so I'll expense it this year (using the IRS "deminimis" election), reducing my taxable income.

Be sure to categorize any/all 2018 equipment or software purchases under $2,500ea as EXPENSES (not fixed assets) in your accounting software, to achieve that deminimis expensing tax election. Make a written accounting principle declaration to that effect, in your files on or before January 1st each year.

* Reimbursing myself (from my s corp) for all 2018 biz mileage & business expenses purchased on a personal card. note: sole proprietors & single member LLC's don't need to reimburse, just keep good detailed records

* Purchasing business supplies, paper, and postage. Reviewing equipment & software needs

* Paying my corporate payroll taxes due 1-15-19, early & by Dec 31st (I am a cash basis biz).

* Paying my office rent that is due January 1st (I'd pay business insurance too, if due Jan/Feb)

* Entering all my accounting data into Quickbooks and reconciling my bank balance now

12/31 statement can be gotten online so I don't have to wait for bank. I know my data in QB is accurate.

* Order tax forms NOW (1099's, 1096, W-2, etc) from the IRS. This will take several weeks, so do it now.

* Complete my personal property tax report (County Assessor should mail those out, later in December. If you filed last year)

Tax Records - how long to keep?

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Recordke...

Keep forever - all tax returns, real estate basis & improvement records. stock records too

Keep for 7+ years - all evidence to support taxable income & deductions

(W-2's, 1099's, receipts, cancelled checks, logs, retirement plans, donations, etc.)

If your 2018 taxable income, deductions, withholding, or estimates paid have changed significantly, it is recommended you engage my firms services to perform a formal 2018 income tax projection. (to anticipate taxes due, make changes in payroll withholding & determine if additional estimates are required to avoid or stop penalties)

For my corporate & LLC tax clients - If you haven't asked me to look at your 2018 Quickbooks or other accounting data yet - that's strongly recommended & now's the time, so I can still be able to peruse the file & comment before 2019. If you are cash basis - NO changes can be made after 12/31/18. 

If you need help with filing form 1099's, sales or personal property tax reports, or reporting foreign accounts - please request that in writing (as these are not part of the income tax services provided. please see your engagement letter, if you're a client).

For my individual income tax clients... I look forward to working with you again!

Your Tax Organizer & appointment will be mailed to you in late December or early January (or I can email you a pdf copy instead, please just ask!). If you have a request for a specific time range or day of the week, let me know soon as I'll preschedule many clients based on last years meeting.

Please email if you have any questions.   

Thanks again for your business & have a great Holiday season!

GARLAND

Garland Taylor CPA, Pres.

Garland R Taylor CPA, PC

205 SE Spokane St Ste 300

Portland, Oregon 97202
(503) 287-5584 tel 287-6370 fax 
cpa@garlandtaylor.com
www.garlandtaylor.com