DICKLER & MATUSOW, LLC
Your Taxmen
Tax Outline

Dickler & Matusow, aka Your Taxmen and the Diva, wish everyone a happy and healthy holiday season. The New Year is around the corner and the IRS has been busy writing the regulations that will guide the preparation of your 2018 income tax returns.

The good news is that the tax rates have been lowered, the standard deduction has increased substantially and the AMT (alternative minimum tax) has been almost eliminated. For many taxpayers this will result in lower federal income taxes.

When it comes to income taxes one size does not fit all. Prior to 2018 approximately 70% of American households used the standard deduction. With the new tax laws that number is expected to reach 90%!

The largest group of taxpayers (perhaps 90%) is the W-2 employee and this group has been targeted by the new laws. This is the only group of taxpayer that will no longer be able to deduct the cost of doing business in 2018. For federal tax purposes employee business expenses – ALL OF THEM – are not deductible!

We celebrate the fact that unemployment is at or near an all-time low. However, if you needed to relocate to nab a new job your moving expenses will not be deductible. Any reimbursement or company payments for your move are fully taxable.

 One thing that has not changed is that THE IRS DOES NOT MAKE THREATENING PHONE CALLS. THEY DON’T SEND EMAILS OR TEXTS EITHER!!! They do things the old-fashioned way, snail mail. Never give information by phone or text without guidance from your attorney or accountant!

As in the past you only itemize your deductions if they are greater than the standard deduction.* (*$12,000 single, $24,000 married $18,000 head of household)

Medical expenses that exceed 7.5% of your adjusted gross income are deductible.*

The deduction for all types of non-business taxes (state and local income, real estate, personal property, etc.) is limited to $10,000.

The deduction for non-business interest expense is for mortgages only. The limitations have changed based on when the mortgage was taken out. New home equity loans that are not used for home improvements will not be deductible. 

Charitable contributions, cash and non-cash, are still deductible.* Documentation is extremely important as cancelled checks alone are not sufficient for contributions of $250 or more. Written appraisals are required for non-cash contributions of $5,000 or more. In our opinion IRS will be paying a lot of attention in this area.

Gambling losses, to the extent of gambling winnings, will continue to be deductible.*

Casualty and theft losses are no longer deductible unless it relates to a presidentially declared disaster area!

Individuals will NOT be allowed to deduct the cost of tax preparation, legal advice, investment advice and fees or financial planning. They’ve also eliminated deductions for union dues, uniforms and maintenance, small tools, safe deposit boxes, required education and job search expenses.

We urge all of you to seek reimbursements whenever possible. Direct reimbursements are not taxable to you and are deductible to your employer. Keep in mind that in most instances your employer received a much more significant tax reduction than you. 

Taxpayers that receive an expense allowance rather than a direct reimbursement should be aware that those amounts will be fully taxable because the offsetting deductions are NO LONGER DEDUCTIBLE. 

You still have homework to do even if you wind up using the standard deduction. The following lays out the steps to follow in order to get ready to have your tax returns prepared.

Let’s start with most categories of income:

    1. Wages/Payroll (W-2’s)
    2. Self-Employment Income (1099’s and summary. Total of bank deposits for calendar year)
    3. Interest (1099’s. Rarely issued if under $10. Include tax exempt interest).
    4. Dividends (1099’s. Include tax exempt income)
    5. Capital Gains J (and Losses L) (1099's. 2439's. Broker's schedule of realized gains and losses. This can be a royal pain but the IRS must have. Provide all information that the broker is missing.) (Sale of your residence goes here. Bring Settlement Sheets)
      • When you sell something you need to report the cost and the date acquired. The cost of selling – like commissions – belongs in this section.
    6. Rental income (1099. Management Statement Summary. Let’s discuss security deposits) (Personal days used/Total days rented)
      • Summarize by property (settlement sheets for new acquisitions)
      • Rental expenses should be summarized by category – interest, taxes, insurance, utilities, advertising, travel, etc.
      • Improvements should be segregated from repairs and maintenance.
      • List new furniture, fixtures, appliances, etc.
    7. Refunds of state and local taxes (1099-G)
    8. Alimony Received (Should jive with the “X”)
    9. Distributions and Rollovers from IRA’s (Regular and Roth) Pension and Profit Sharing plans, 401(k) plans and Annuities (1099R’)
    10. Royalties (1099’s)
    11. Partnership and S Corporation Information (Schedule K-1’s. Waiting for K-1’s is the single biggest holdup in completing tax returns. It’s out of your control and ours.)
    12. Estate and Trust Income (Schedule K-1’s. Please make sure you have an up to date will!
    13. Unemployment compensation (1099-G. Give us an updated copy of your resume. You never know…..)
    14. Social Security Benefits (SSA-1099. We won’t just use last year’s numbers. Bring the form!)
    15. Gambling and Lottery Winnings (W-2G’s. Keep your losing tickets to deduct to the extent of your winnings)
    16. Stock Options (Bring the information – there might be tax consequences)
    17. HSA Distributions (1099-SA. Omission of this will hold up your refund. 

***** To liven up their office parties, accountants invite funeral directors ***** 

Expenses should be separated, by category, for each venture. Use only items dated 2018. January credit card invoices will contain information for the prior year.

Please read the following sentence slowly since many people mess up in this regard. ALWAYS TRY TO GET REIMBURSED FOR YOUR EXPENSES!

Business Expenses:

    1. Automobile (Summary of Auto Mileage log by vehicle) (You must provide a written log in the event of an audit)
      • Odometer Readings (Helpful but not mandatory)
      • Business Mileage (Commuting is not business miles)
      • Commuting Mileage (Home to first business stop of the day and last business stop of the day back to home)
      • Totals for gas, oil, repairs, insurance, wash and wax, auto club etc. (Self- employed people should include interest expense)
      • Registration Expense/Property Tax
      • Parking and Tolls
      • Purchase or Lease Information
    2. Travel
      • Your diary or calendar must show where you went, the date and the business purpose of the trip
      • Separate Totals by category: Lodging, airfare, car rental, taxis/limos/uber, tips, valet, etc.
        • Meals must NOT be included!
    3. Business Meals
      • Diary should contain names, the business relationship, the business discussed and the amount including tip.
      • Unreimbursed travel meals belong here
        • Expenditures of $75 or more require a receipt
    4. Dues – Club dues are not deductible
    5. Telephone – Business lines, Cellular lines and Answering services
      • Basic service for your primary line is NOT deductible. If your only phone is your cell – NO DEDUCTION FOR YOU
    6. Newspapers, Magazines and Books – Business related
    7. Commissions, Talent Fees, Professional Fees (Did you send out the required 1099’s?)
    8. Business gifts and flowers – Still limited to $25 per person per year – hasn’t changed in 50 years!
    9. Office supplies, computer supplies, recording supplies, postage, etc.
    10. Equipment – Electronic, Technical, Office (include furniture) etc.
    11. Home Office Deduction (square footage of residence and office)
      • Interest, Taxes, Rent, Utilities, Insurance, Repairs, Cleaning, etc.

***** Accountants are note boring, they just get excited about boring things *****

Other Deductions and Miscellaneous:

    1. IRA, Keogh, SEP and other retirement contributions
    2. Alimony Paid – This should agree with your EX
    3. Self-employed Health Insurance
    4. Student Loan Interest
    5. Social Security Numbers are required for all dependents regardless of age.
    6. Dependents – If they have income it must be reported somewhe Their returns should be coordinated with yours for the best overall tax savings.
    7. State and Local Income Tax Returns – The laws are not always the same as the Federal.
      • Part-year and non-resident returns have different rules.
      • Dates in and out of each state are helpful.
    8. Casualty and Theft Losses for Declared Disasters Only
      • Usually must exceed 10% of AGI plus $100.
      • Date and nature of loss (police report)
      • Description and Original Cost
      • Pre and post loss appraisal
      • Insurance report and reimbursement

Tax Credits:
Credits tend to change from year to year.

    1. Child Care
      • Amount spent per provider and by dependent 
      • Provider’s name, address and SSN or EIN
      • In-home care – You MUST issue a W-2
    2. Higher Education –(1099-T) If you don’t have the form your dependent probably does.
    3. Solar Energy Credit – Bring the contract
    4. Home Energy Credits – Bring the information and we will talk.

 Estimated Tax Payments (date and amount paid)

There is already WAY too much to digest and there’s still more that we are required to tell you. With so much being done electronically (banking, bill paying, etc.) it is easy to forget about paperwork. We strongly recommend that you download and save every monthly bank statement and credit card statements. You will need these in the event of an audit of your tax return.

ENGAGEMENT LETTER

We require a signed (both spouses) engagement letter prior to the completion of your tax return. The questions about automobile records and health insurance must be answered. This is for our protection as well as yours.

FORM 8879

Once a return has been completed and reviewed it will be securely emailed to you with instructions. In order to release your tax return to the taxing authorities we must have your authorization. After carefully looking over your returns you (and your spouse) must sign the 8879 (federal and state) and return it to us. 

SCHEDULING

We will continue to visit 18 markets across the country but most of you can ignore our travel schedule and take advantage of technology to save time and money. We enjoy sitting across the table from our clients but video technology (Skype, FaceTime, and iChat) will work just as well for clients that no longer have the complexities of employee business expenses.

We have modified our appointment request form to give you the option of meeting face-to-face or handling it remotely. When you complete the appointment request form we ask you to choose between the two options. To meet in person please select the city (travel schedule is shown below) as well as several choices for date and time.

To schedule a remote meeting complete the appointment request form and return it with your retainer. Email us your W-2’s and 1099’s from your broker. We will contact you a day or two prior to your appointment. We will initiate the call for the meeting as well.

CITY FROM TO
Austin 04.02.19 04.04.19
Boston 03.21.19 03.22.19
Chicago 03.23.19 03.25.19
Dallas 03.31.19 04.02.19
Denver 03.08.19 03.10.19
Ft Lauderdale 02.06.19 02.07.19
Houston 04.06.19 04.10.19
Las Vegas 02.25.19 02.26.19
Los Angeles 02.20.19 02.25.19
Nashville 03.04.19 03.05.19
New York 03.13.19 03.15.19
Orlando 02.10.19 02.12.19
Phoenix 03.06.19 03.08.19
San Antonio 04.05.19 04.06.19
San Francisco 02.19.18 02.20.19
Seattle 02.18.19 02.18.19
Tampa 02.08.19 02.10.19
Washington, DC 03.26.19 03.28.19

INDIVIDUAL OFFICE AUDIT FEE PROTECTION PROGRAM

We are going to continue this program but will restrict it to clients that are itemizing their deductions. We will not accept your money under false pretenses. They rarely audit returns without deductions. The cost for participation is $400.

NEW FOR 2018: CORRESPONDENCE/QUESTION PROTECTION 

While there will be fewer audits the IRS will continue to issue letters for a myriad of reasons. Responding to these letters, as well as answering your questions, takes time and that is what we sell. You will now have the option of buying this protection for $200 per year. It is not mandatory but be advised that we will be billing you at our normal hourly rates for the time it takes to answer your questions and respond to your notices. 

We appreciate how much most of our clients adore Cindy. We adore her as well. Cindy does NOT prepare income tax returns and will not answer questions about your returns. Please send your questions to either art@yourtaxmen.com or drew@yourtaxmen.com and cc Cindy (cindy@yourtaxmen.com) for your edification. It makes things a bit less complicated on our end. 

We extend our best wishes for a Happy, Healthy Holiday Season.

Peace and Love

Art, Drew and Cindy
Your Taxmen and the Diva