Tax Penalty Waived

There is good news for anyone who fell short on their 2018 federal income tax payments.  The IRS recently announced that it is waiving the tax penalty for taxpayers who have paid at least 85% of their tax bill.  This is in contrast to the normal 90% payment requirement. The change is allowed because of the far reaching impacts of the TCJA which was enacted in December 2017.  

In its first year, many taxpayers were caught unaware of the impact the TCJA would have to their bottom line. Tips to avoid the same pitfall in future years include adjusting your paycheck withholding.  Various guides are available to help assist with W4 witholdings. On our blog “W-4s & You: How Much to Withhold and the IRS website can help you plan for future years.  

Two of the TCJA changes that have had the greatest impact on taxpayers are the elimination of exemptions for dependents and of most itemized deductions.  For taxpayers who have depended greatly on these types of claims in the past, there is a greater risk of having not enough tax withheld from pay. The IRS is finding that other high risk categories include two wage earner families, employees with non-wage sources of income, and anyone with complexities to their tax situation.  For more information from the IRS on this decision and how it may impact you, their website provides good details.  If you would like more information on changes brought about by the TCJA, our blog shares lots of information.  For assistance budgeting and planning for future tax season, ITP Taxes is happy to help!


Home Improvements and Enhancing Value

Home Improvement Tax Benefits

With the passing of the Tax Cuts and Jobs Act in December 2017, itemizing deductions just doesn’t add up. Unless of course you have had a year with very high expenses.  But don’t stop reading yet. There are still some ways you may be able to gain some rewards for making your home a better place.

The first area of consideration is home improvements, as opposed to repairs.  Repairs, such as fixing a leaky roof or broken garage door do not qualify as deductions.  However, improvements to your home such as installing central air conditioning can be helpful when you sell your home.  Home improvements are considered capital improvements. The dollar amount for these enhancements can be added to the price you originally paid for your home.  This new total is then subtracted from how much your house sells for to determine your total profit. In this way, home improvements help to reduce your profit amount and decrease the amount of taxes paid on the sale.  Just like anything else you wish to claim, keep excellent records and receipts of the cost for the work done. You will need them.

If you make home improvements for medical purposes, such as building a wheelchair ramp, it can be deducted as a medical expense.  Additionally, if you work from home and use a home office, strictly for business purposes, improvements to the office can be deducted as business expenses.

In Tax Credits for Solar Improvements last January, we discussed the tax credits available to homeowners who go solar or geothermal.  These credits are additional ways improving your home can yield tax benefits. Solar credits are still available for a short time.  If energy efficient improvements are a consideration for your home, you can learn more about the credits on the IRS website or contact ITP Taxes LLC with questions.


Sharpen Your Business Brand with Soul Creative

For anyone looking to freshen up their business image, Soul Creative brings a unique skill set to branding your company.  Owner Aimee McGrath has an excellent eye for seeing an organization’s passion and showcasing it to your clients.  She does this through the services of brand development, website development, digital marketing, writing & editing.  

Aimee enjoys working in Lancaster because it is an area rich in storytelling heritage.  Relationships are meaningful and important in our growing city. These stories and relationships are what Soul Creative brings to the forefront of their brands.  Having consistency throughout all areas of your business brand are also critical and something that Aimee prides her organization on providing.

Her first client, and one that she is incredibly proud of is Your Language Connection.  This client is an excellent example of how Aimee can work to incorporate logo design and website development to most authentically portray your business to your desired audience.

Aimee has been in the business marketing world for 20 years.  She brings a depth of experience and a fresh new look to clients’ written content and branding style.  Soul Creative works throughout all stages of the business branding cycle including editing website content and social media posts. Aimee enjoys staying current in the industry by attending conferences such as PubCon.  You can find a sample of her writings on her website at The Writing.  

Aimee and Soul Creative can be found at the Candy Factory or by phone at 864-321-4314.  Her website shares testimonials from happy clients. She can also be reached via email at aimeemmcgrath@gmail.com.

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“ITP, LLC is supporting local small business owners through this post.  The experiences described are personal to particular users, and may not necessarily be representative of all users of the products and/or services.  We do not claim, and you should not assume, that all users will have the same experiences. Your individual results may vary. We are not affiliated with the organization referenced and are not paid or compensated for this publication.”


Tax Season is Coming…

Will the government shutdown impact my tax return?  The answer to this is still largely undetermined. The shutdown includes the Treasury Department, of which the IRS is a part.  During the shutdown, the vast majority of IRS employees are on furlough . However, the IRS has said they will bring back some workers to process returns.  This is in response to the government promising that taxpayers receive their refunds on time. But when those workers will be brought back and how many is not yet known.  

On Wednesday night, the House voted to reopen the Treasury Department.  Unfortunately, that vote is already threatened to be vetoed as the climate of uncertainty continues.  One thing seems certain. Getting in contact with the IRS with any questions this tax season will be challenging.  The limited staff is not expected to be enough for the influx of returns sent and inquiries received at the beginning of tax time.

Complicating matters further, this is the first tax filing season with the many and various law changes under the new Tax Cuts and Jobs Act (TCJA).  We’ve shared many of these changes in posts over the course of the past year. The intricacies are many and questions and confusion will be higher than normal this year, impacting a reduced staff even more so.

For the many taxpayers who depend on their returns each year, hopefully a quick end to the shutdown will alleviate many possible issues.  Until that time, our office is always open for tax questions and concerns.


Cars and Taxes

How having an electric vehicle affects your taxes.

In 2017 we looked at savings offered for purchases of hybrid and electric plug in cars in our article “Hot Wheels, Big Savings”.  What are some other considerations to be made at tax season when it comes to vehicles and your deductions?  Here we look at the increase in mileage rates for 2019, changes to depreciation, and how taxes can impact the sale or purchase of a vehicle.

2019 Mileage Rates

The IRS has shared the 2019 mileage rates for vehicles used for business, charitable, medical, or moving purposes.  However, due to the changes brought forth under the Tax Cuts and Jobs Act (TCJA), many taxpayers are not able to claim mileage.  For example, the TCJA has suspended itemized deductions for unreimbursed employee travel expenses through December 31, 2025. Therefore, standard mileage rate provided cannot be used to claim an itemized deduction.

The rates for business use have increased 3.5 cents to 58 cents per mile.  For medical or moving purposes the rate increases 2 cents to 20 cents per mile.  Medical purposes include driving for medical care that is essential for yourself or dependents.   Another change of the TCJA states moving expenses can only be claimed by members of the Armed Forces on active duty moving under orders to a permanent change of station.   

There is no change in the rate for charitable organization mileage.  That rate remains at 14 cents per mile. All rate changes are determined based on an analysis of fixed and variable costs for operating a vehicle based on annual studies.  Details can be found under Notice-2019-02 and the IRS also provides greater detail under Deducting Business Use of a Car.  

Unless you incur very high vehicle expenses during the tax year, the higher standard deduction provided by the TCJA is generally the more advantageous choice at tax time.  Fortunately this requires less cumbersome record keeping throughout the tax year.

Actual Expenses: Depreciation

The TCJA brought bigger depreciation allowances for vehicles used for business purposes.  This includes new or used vehicles acquired in 2018 and used more than 50% for business purposes.  If the vehicle is not solely used for business purposes, allowances are reduced in proportion. Maximum allowances are $10,000 for Year 1 or $18,000 if you claim first-year bonus depreciation, $16,000 for Year 2, $9,600 for Year 3, $5,760 for Year 4 and thereafter until the vehicle is fully depreciated.  in order to be eligible for depreciation used vehicles cannot have previously been utilized by the business.

Vehicle Sales and Taxes

If you sell your automobile privately and receive less than what you originally paid for the car, you do not need to pay sales tax.  This is considered a capital loss by the IRS. However, if you make improvements to your vehicle which allow you to sell it for more than you paid for it, you are realizing capital gains.  This will need to be reported to the IRS in detail – outlining the amount that you paid to improve the car. Taxes will be paid on the amount of gain realized above what you spent on improvements.  As always, good receipts and records of these improvement costs will be needed.

When you purchase a vehicle, you will need to pay sales tax on the car if the state in which you register the car charges sales tax.  This tax is paid to the state’s DMV when you register the vehicle.

There are pros and cons to a private sale of vehicle and to using a dealership.  Typically you will receive more money selling privately. Going to a dealership to sell your car, especially if you plan to do a trade in, can be advantageous for tax purposes.  The dealer will subtract the cost of your trade in from the sale price of your new car – lowering the taxable price you pay.