jump to navigation

Ohio Income Tax Updates January 29, 2020

Posted by bradstreetblogger in : 2019 Taxes, General, tax changes, Tax Planning Tips, Tax Tip, Taxes, Taxes , add a comment

A filing season approaches, we are often focused on the federal changes to tax law, but one shouldn’t fail to keep their eyes and ears open to the state changes.  For those of us in Ohio, the 2019 tax law changes were fairly mild.  Below are a few of the key changes to Ohio tax law for the 2019 tax year.

Change in Tax Brackets:

Following the example of the Federal government, Ohio has decreased the number of tax brackets and overall tax rates which are applicable to the 2019 tax year.  The change in rates are displayed below:

Ohio Earned Income Credit:

The Ohio Earned Income Credit (EIC) was also expanded and simplified for 2019.  Historically, the credit was calculated utilizing 10% of the Federal EIC, and possibly subject to limitations based on income.  For the 2019 tax year, the credit is simply 30% of the Federal EIC.

Modified Adjusted Gross Income (MAGI):

The 2019 tax law introduces a new term for purposes of means testing.  Means testing is applied to determine exemption amounts and qualifications for certain credits.  Historically, Ohio Adjusted Gross Income (OAGI) was used in means testing.  The primary difference with this new metric is that income which would have been excluded under Ohio’s generous Business Income Deduction is now included for means testing.  Note, that this doesn’t mean that the business income is now taxable.  It simply means that this income will be considered when determining exemptions and credit qualifications.

In the ever-changing world of taxes, the changes take place not only on the Federal level, but on the state, and even local as well.  We strive to stay abreast of these changes, and help you make the best tax-conscious decisions. 

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.  

This week’s author – Josh Campbell

Tax Tip of the Week | 12 Essential Pieces of Small Business Advice January 22, 2020

Posted by bradstreetblogger in : Business consulting, General, Tax Planning Tips, Tax Preparation, Taxes , add a comment

Seems like a great time to reflect on some business pointers from some very wise people. Always fun to ponder on where we have been, where we are, where we are going, how will we get there and who will be on the bus with us. Rarely, do I get out of the pounding surf long enough to think through these questions. Regardless, this line of thinking should drive the events of 2020 and beyond.

Some brief gems of business advice follow – just maybe one of them will open a new door for you and your company.

                                -Mark Bradstreet 

At Dreamforce 2018, the Salesforce small business team asked attendees to share their most essential advice for small business owners. Over the course of four days, we collected more than 1,000 pearls of wisdom.

To celebrate National Small Business Week, we’ve distilled those 1,000+ suggestions down to 12 bits of small biz advice. And for fun, we’ve included some runner-ups that expressed similar ideas in different words.

Here we go:

1. “Every journey starts with one step – make sure you have the right shoes to go far.”

Launching a small business involves many important decisions, both big and small. The choices you make today can affect your business for years to come, so it’s critical to get off to a strong start and put your business on the path to success.

Runner-ups:

2. “Don’t boil the ocean — think small and fast.” 

Don’t let yourself get overwhelmed by complexity or paralyzed by the quest for perfection — keep things simple when and where you can.

Runner-ups:

3. “Trust your instinct — you may just know the next industry trend!”

Running a small business is daunting, but you’ve got this. You’re the captain of the ship, so trust yourself to steer the right course.

Runner-up:

4. “Dream big, but remember to scale for the future. Planning is your best tool to ensure continued success!”

It’s great to have a vision of where you want your company to go. But it’s even more important to plan ahead so that the decisions you make today don’t box you in tomorrow.

Runner-ups:

5. “Be open to the journey without being too rigid on the outcome.” 

Running a small business is an unpredictable adventure. Flexibility is one of the entrepreneur’s best tools for overcoming unexpected adversity.

Runner-ups:

6. “One great employee is better than 10 bad employees.”

Employees are your biggest asset. Hiring (and then listening to and trusting) the right people is one of the most important steps to success.

Runner-ups:

7. “Listen. Listen. Listen. You have two ears and one mouth. Use them in that ratio.”

Details (and good communication) matter.

Runner-ups:

8. “Know your numbers, but know your customers better!”

Customers are the lifeblood of any business, but especially for small businesses. Treating them right and giving them a reason to come back is critical.

Runner-ups:

9. “Whether you think it’s possible or not, you are right!”

Elvis sang it best – “Only the strong survive.” When the going gets tough, successful small business entrepreneurs get going.

Runner-ups:

10. “Work for a company you’re proud of.”

Once you’ve hired great employees you need to treat them right so they stick around. The churn and expense of replacing good workers can debilitate even the strongest small business.

Runner-ups:

11. “Do what you say you’ll do!”

What does your company stand for? If it doesn’t stand for much it likely won’t be around for long.

Runner-ups:

12. “You have one life. What is important to you?”

There’s only one you! It’s impossible to create and run a successful company if you aren’t functioning at 100%. Be good to yourself, so that you’re around to enjoy the fruits of your labor.

Runner-ups:

Many thanks to our great Dreamforce attendees for taking the time to pass along so many thoughtful and helpful suggestions.

Credit Given to:  Daniel Krewson. 

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.  

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | Great News from the IRS for Retirement Savers January 15, 2020

Posted by bradstreetblogger in : General, tax changes, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes , add a comment

The Internal Revenue Service (IRS) gave retirement savers an early holiday gift this year in the form of higher contribution limits for 2020. According to its November 6th announcement, workplace retirement plan contribution limits would be increased in 2020. Likewise, the income limits for Traditional IRAs and ROTH IRAs will also rise in 2020.

Larger contributions to retirement accounts will allow you to further minimize your current tax bills. Additionally, higher retirement account contribution limits can be great for those who are playing catch up for retirement and/or who are making good incomes.

2020 Contribution Limits for Workplace Retirement Plans

The employee contribution limit will be increasing from $19,000 to $19,500 for the following types of retirement accounts in 2020:
•    401(k) plans
•    403(b) plans
•    Most 457 plans
•    Thrift Savings Plans
•    Profit-Sharing Plans
•    Cash Balance Pension Plans

For those of you with a SIMPLE IRA at work, the contribution limit will be increasing from $13,000 to $13,500. If your employer offers a SIMPLE IRA it may be time to ask them to upgrade your retirement plan to a 401(k), or something similar, that offers larger contribution limits.

Larger Catch-Up Contributions for Workers Who are 50+

Workers, at least 50 years old, are allowed to contribute even more to workplace retirement accounts. In 2019, the maximum catch-up contribution to a 401(k) was $6,000. For 2020, that amount will increase to $6,500.

That means workers who are at least 50-years-old will be allowed to contribute a combined total of $1,000 more than they could have in 2019. For example, a worker who is 55 years old in 2020, with a workplace retirement plan, will be able to contribute up to $19,500 to his 401(k) plus a maximum catch-up contribution of $6,500. If he makes the maximum contributions, they will equate to an investment of $26,000 into his retirement account. That’s $1,000 more than the maximum amount he could have invested in 2019.

Catch-Up Contributions are Typically Allowed on the Following Retirement Plans
•    401(k)
•    403(b)
•    Most 457 plans
•    Thrift Savings Plan

Sadly, catch-up contributions are not allowed on SEP IRAs.

Solo 401(k) Contribution Limits for 2020

With a Solo 401(k), small business owners can contribute as both the employee and the employer. That could lead to some pretty nice tax savings for those who max out the plans. As the employee, you can contribute the aforementioned $19,500 for 2020, plus the catch-up contribution if you are at least 50 years old. Total contribution limits as both the employee and employer have increased by $1,000 to $57,000 for 2020. That number does not include the potential $6,500 catch-up contribution. That means small business owners who are at least 50 years old have the option to contribute the maximum contribution limit of $65,500 for a Solo 401(k) plan.

Defined Benefit Pension Plan Benefits Increase In 2020

Small business owners who are maxing out their 401(k) or profit-sharing plan, and who want to save more on taxes, should check out a Cash Balance Pension. This defined benefit plan will allow even larger pre-tax retirement plan contributions when combined with a 401(k) profit-sharing plan. 

Effective January 1, 2020, the limitation on the annual benefit of a Pension plan will be increasing from $225,000 to $230,000. While this may not seem like a big deal, it will allow for a larger contribution, each year, to the pension plan. Your potential contributions will depend on how the plan is designed, your age, and your income. I work with many business owners who are stashing away hundreds of thousands of dollars each, pre-tax, into a Defined Benefit Pension Plan every year.

No Increase to IRA Contribution Limits

Bad news plus some good news for IRA or ROTH IRA lovers. The maximum contribution limits for individual retirement accounts are remaining the same. Also remaining the same are catch-up contributions for individual retirement accounts. For 2020, the catch-up contribution will be just $1,000 for an IRA and ROTH IRA. It should be noted that cost-of-living adjustments (COLA) for IRAs are not indexed to inflation. 

The good news is that the income limits to fully contribute to a ROTH IRA, or to fully deduct contributions to a Traditional IRA, have increased for 2020.

The income limits for both types of IRAs, ROTH or Traditional, will vary depending on your federal income tax-filing status and, of course, your income. For specifics, check out the IRS announcement. Knowing those thresholds will help making the choice of going with a ROTH IRA or Traditional IRA easier.

What Should You Do Now?

Whether you are maxing out your contributions, or not, take them up a notch for 2020. If you already maximize your tax-saving by contributing the maximum amount allowed for your retirement plan, adjust your contributions in 2020 so that you stay at the maximum. 

If you are unsure about your investment choices or about how much to save for retirement, talk with an independent fee-only financial planner who can help make the process smoother and easier for you. While it is never too late to improve your retirement outlook, the more you procrastinate, the harder it will be to reach financial freedom.

Credit given to: David Rae, a Certified Financial Planner and Accredited Investment Fiduciary. This article was published by Forbes on Nov 20, 2019.

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.  

–until next week.

Tax Tip of the Week | Rental Property Deduction Checklist for Landlords January 8, 2020

Posted by bradstreetblogger in : Business Consulting, Deductions, Depreciation options, General, tax changes, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes , 1 comment so far

A business tax deduction is typically of more value than a personal tax deduction. Personal tax deductions are commonly in the form of itemized deductions. These may be of no value though if the standard deduction exceeds the so-called long form (itemized) deductions.

The following article by G. Brian Davis discusses business tax deductions specific to rentals. As an addition to his article, I will add that rental losses, if deductible on your federal income tax return, are also deductible on the State of Ohio and School District income tax returns. Within income limitations, rental income is not taxed to Ohio but is taxed by municipalities and school districts.

One lofty goal in the tax world is converting what otherwise was a nondeductible personal expense into a tax deduction. The world of rentals provides such opportunities.

                                            -Mark Bradstreet

The billionaires of the world are not doctors or lawyers, they’re entrepreneurs. Specifically, they are people who started their own businesses, whether those businesses are online, brick and mortar, or real estate empires.

Starting and owning a business provides a long list of tax advantages, and real estate investments provide all the usual tax advantages plus some extras unique to real property. Every expense associated with rental properties – plus some just-on-paper expenses – are tax deductible.

However, tax laws change fast and that means it is imperative for all those who invest in real estate must educate themselves. So, before you jump into the rental property deductions checklist, make sure you’re up to speed on how the new tax law affects landlords’ tax returns.

The changes in the Tax Cuts and Jobs Act of 2017 (TCJA) impacted homeowners, real estate investors and landlords alike. Here’s an outline of what you need to know as a real estate owner, and when in doubt, hire a professional who knows accounting with a real estate investing focus. Ideally one who invests in real estate themselves.

Lower Income Tax Rates

From 2018 through 2025, rental property investors will benefit from generally lower income tax rates and other favorable changes to the tax brackets. The TCJA retains seven tax rate brackets, although six of the brackets’ rates are lower than before. In addition, the new tax law retains the existing tax rates for long-term capital gains.

No Self-Employment Taxes for Landlords

In many ways, landlords get the best of both worlds: the tax benefits of owning a business, without the downside of self-employment taxes.

Real estate flippers can sometimes fall under the “dealer” category, and find themselves subject to double FICA taxes. FICA taxes fund Social Security and Medicare, and cost both employees and employers 7.65% of all income paid. Self-employed people end up having to pay both sides of FICA taxes, at 15.3% of total income.

But the Tax Cuts and Jobs Act of 2017 ended up leaving landlords and their rental income free from any FICA taxes.

New Passive Income Loss Rule

If you have losses from “passive activities” such as owning rental properties, typically you can only deduct those losses to offset other passive income sources, such as other rental properties. For example, if you earn $10,000 from one rental property and have an $8,000 loss on another, you can offset your $10,000 income with the $8,000 loss, for a net taxable rental income of $2,000.

But if you have a net loss, that can’t be used as a deduction against your active income from your 9-5 job. You can carry it forward however, to offset future passive income earnings and rents.

Here’s how the TCJA changes matters: there’s a new $250,000 cap for single filers, $500,000 cap for married filers, for passive losses. Any passive losses that you’re allowed, in excess of those caps, must be carried forward to the next tax year.

It won’t affect most landlords, but it’s something to be aware of.

20 Tax Deductions for Landlords

Here are 20 rental property expenses you can deduct on your tax return, to keep more of your money in your pocket where it belongs. It’s not 100% exhaustive, as there are a few obscure tax deductions that only apply to a few landlords, but think of this as a rental property deductions checklist for the average landlord.

IMPORTANT: These rental property tax deductions are “above the line” deductions, meaning they come directly off your taxable income for rental properties. That means you can deduct these expenses, and still take the standard deduction.

1. Losses from Theft or Casualty
The TCJA suspended the itemized deduction for personal casualty and theft losses for 2018 through 2025. Before 2018 deductions of this kind were permitted when they exceeded $100. But landlords can still deduct losses from theft or damage to their rental properties, as business expenses.

2. Property Depreciation
This is a handy “paper expense.” Much of the cost of buying your property can be written off as a tax deduction, although it must be spread over 27.5 years (don’t ask me where that number came from). Buildings lose value as they age (at least theoretically), so the IRS lets you deduct 1/27.5 of the property’s cost each year.

Major property upgrades and “capital improvements” must be depreciated as well, rather than deducted in the year you make them. For example, a new roof is a capital improvement that must be depreciated, rather than deducted all at once.

But the patching of a roof leak? That’s a repair.

3. Repairs & Maintenance
Basic repairs and maintenance such as new paint and new carpets are deductible for your rental properties. That’s not the case for your primary residence, in which repairs are not deductible. Remember, if it’s a large improvement or replacement (like the roof example), it may count as a “capital improvement,” in which case you’ll have to spread the deduction over multiple years, in the form of depreciation.

The line isn’t always crystal clear however, like the roof example above. Here’s an example of how it gets blurry: if you replace all your windows to modernize and improve your energy efficiency, it’s a capital improvement. If a baseball goes through one window, which you replace, it’s a repair. But what if you replaced a few windows last year, but not all? Talk to an accountant, and build a defensible argument for any repairs you deduct.

4. Segmented Depreciation
Some improvements, such as landscaping and “personal property” inside the rental/investment property (e.g. refrigerators) can be depreciated faster than the building itself. It’s more paperwork, to segment the depreciation of certain improvements as separate from the building’s depreciation, but it means a lower tax bill right now, not in the far distant, unknowable future.

5. Utilities
Do you pay for gas, heating, trash removal, sewer or any other utility for your rental? They are tax deductible.

Take heed however, if your tenant reimburses you for a utility, that would be considered income. So, you have to declare both the income and the expense, even though they offset each other.

6. Home Office
This is a popular deduction, but it’s also one you need to be careful about, as it can trigger audits. You have to set aside a percentage of your home for only doing work/business/real estate investing-related activities, and that percentage of your housing bill can be deducted. And 2018 may see this deduction scrutinized even more.

One new downer: no more home office deduction for those who work for others in the comfort of their home. But as a real estate investor, you’re a business owner, so you can still claim it if you use the space exclusively for “business.”

Make sure and talk to an accountant about this, and keep the percentage realistic.

7. Real Estate-Related Travel
Another popular-but-dangerous deduction, you can deduct travel expenses if your travel was for your real estate investing business… and you can prove it. Many people get cute with this one, and when they go on vacation, they’ll go see one or two “potential investment” properties and then write the entire trip off as a business expense.

Whenever you plan on deducting travel expenses, put together as much documentation as you possibly can so that you can make a strong case that it was an actual business trip. For example, meet with a real estate agent in the area, and keep all of your email correspondence with them. Keep all listing information and investment calculations for any properties you visit. Track your mileage for all driving done to and from rental properties.

C-Y-A!

8. Closing Costs
Many closing costs are tax deductible, and others can be depreciated over time as part of your acquisition cost. Use an accountant with a deep knowledge of real estate investments, and send them the HUD-1 (settlement statement) for each property you bought last year.

9. Mortgage Insurance (PMI/MIP)
No one likes mortgage insurance (other than banks). At least you can deduct the cost from your taxable rental property income.

10. Property Management Fees
Paid a property manager to handle the headaches for you and field those dreaded 3 AM phone calls from tenants? You can write off their management fees, including both monthly fees and tenant placement fees.

11. Rental Property Insurance/Landlord Insurance
Like homeowner’s insurance for your primary residence, your landlord insurance premium for each property is also tax deductible.

12. Mortgage Interest
All interest you pay to your mortgage lender on rental property loans remains tax deductible. As mentioned above, it’s an “above the line” deduction that simply comes off of your taxable rental property income.

But for your primary residence, 2018 limits the deductibility of mortgage interest only up to $750,000 of home mortgage debt.

13. Accounting, Legal & Other Professional Fees
All professional fees associated with your rental properties are tax deductible. Bookkeeping, accounting, attorney, real estate agent and any other fees you pay out for professional services can be deducted from your taxable income. Don’t forget the cost of any bookkeeping or landlord software (ahem!) you use.

One wrinkle introduced by the TCJA however is that personal tax preparation expenses are no longer deductible from 2018 onward. But business accounting – such as for your real estate LLC or S-corp – is still deductible as a rental business expense for landlords. Talk to your accountant about shifting as many of your tax preparation expenses as possible to the “business” side of the books!

14. Tenant Screening
If you paid for tenant credit reports, criminal background checks, identity verifications, eviction history reports, employment and income verification or housing history verification, those fees are deductible.

Even better, have the applicant pay directly for tenant screening report costs. Which, I might add, our landlord software allows you to do!

15. Legal Forms
Bought a state-specific lease agreement this year? Eviction notices? Property management contracts? The cost of legal forms is also deductible.

16. Property Taxes
Under the Tax Cuts and Jobs Act of 2017, landlords can still deduct rental property taxes as an expense.

But it’s a little more complicated for homeowners, and even though this is a list of landlord tax deductions, let’s take a moment to review the changes for homeowners, shall we?

In 2018, you can no longer deduct for state and local taxes in excess of $10,000. These state taxes include things like: state and local income tax, sales taxes, personal property tax, and… property taxes.

What does this mean for high-tax states like New York, New Jersey or Connecticut? Well, it could mean that more people may relocate to lower-tax states like Florida, and may even spark lower property values in states such as New Jersey. Only time will tell.

17. Phones, Tablets, Computers, Phone Service, Internet
Bought a new phone this year? Maybe a new laptop or tablet? If you use it for work, you can probably persuade your accountant (and the IRS) that the costs should be deducted from your taxable income. Likewise, for internet bills, phone service charges and the like, with the caveat that you need to be able to document that it was for business purposes. Printer toner, computer paper, pens, and the like; keep those receipts.

18. Licensing Fees
Licensing and registration fees are sometimes a local requirement for rental properties. For instance, in the city of Philadelphia, a rental license fee is required along with an inspection of the property.

So, if you’ve had to purchase or renew a landlord or rental license for the property, that cost is deductible.

Furthermore, some localities will require a vacation rental license for short term rentals such as seasonal, AirBnB and the like. These licensing costs are deductible as well.

19. Occupancy Tax
There are states that assess an occupancy tax on collected rental amounts, comparable to paying sales tax. This is more of a common practice in states where short-term rentals are common. Florida, Arizona and New Jersey are examples of states that charge an occupancy or tourist tax.

If you own rental property in an area that charges an occupancy-like tax, then the amount is tax deductible. Remember, however, that the tax will not only differ from state to state but also from local jurisdictions like cities and counties.

20. Business Entity Pass-Through Deduction
There are significant changes in 2018 tax regulations on how legal entities (e.g. LLCs) and pass-throughs and the like are going to be treated. Sole Proprietorship, Partnership, and Corporate Entities are now entitled to a “pass-through” deduction as long as the rental activities meet the requirements for business tax purposes.

The short version is that landlords can deduct 20% of their rental business income from their taxable business income amount. For example, if you own a rental property that netted you $10,000 last year, the pass-through deduction reduces your taxable rental business income from $10,000 to $8,000. Pretty sweet, eh?

There are restrictions, of course. The deduction phases out for single tax payers with adjusted gross incomes over $157,500, and married taxpayers earning over $315,000. Although under some conditions, higher-earning landlords can still take advantage of the pass-through deduction – definitely discuss with your accountant.

One more reason, beyond asset protection, to own rental properties under a legal entity!

Final Word

It’s hard to get ahead if 50% of your income is going to taxes (which it probably is, if you add up everything you pay in sales tax, property tax, federal income tax, state income tax, local income tax and FICA taxes). But by being savvier with your documentation and deductions, landlords and real estate investors can pay less in taxes than other people, and truly realize the advantages of entrepreneurship.

Remember to always document every expense you plan to deduct. That means keeping receipts, invoices and bills throughout the year as expenses pop up; to help with this, keep a separate checking account for your real estate expenses if you don’t already. Never swipe that debit card or write a check from that account without first getting documentation!

Credit Given to:  G. Brian Davis

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.  

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | The Most Common Tax Forms for the New Year January 1, 2020

Posted by bradstreetblogger in : Business consulting, Business Consulting, Deductions, General, Tax Planning Tips, Tax Preparation, Uncategorized , add a comment

Happy New Year!

Now it’s time to get ready for the tax filing season.

Hopefully, you followed some of the suggestions outlined in Publication 552 to organize your records. If you did, great! This will make filing your tax returns a lot easier this year. It also means that you and your tax advisor can spend more time on tax and financial planning issues for 2020 vs. looking back to 2019. 

This week we will look at some of the more common forms that you should be watching for in the coming weeks and months:

W-2:    Employers should mail these by 1/31/20. If you have moved during the year, make sure former employers are aware of your new address. Some employers provide W-2’s to their employees via a website. Be sure to login and print out your W-2 after it is available.

W-2G:    Casinos, Lottery Commissions and other gambling entities should mail these by 1/31/20 if you have gambling winnings above a certain threshold. Note:  Some casinos will issue you a W-2G at the time you win a jackpot. Make sure you have saved those throughout the year.

1098-C:    You might receive this form if you made contributions of motor vehicles, boats, or airplanes to a qualified charitable organization. A donee organization must file a separate Form 1098-C with the IRS for each contribution of a qualified vehicle that has a claimed value of more than $500. All filers of this form may truncate a donor’s identification number (social security number, individual taxpayer identification number, adoption taxpayer identification number, or employer identification number), on written acknowledgements. Truncation is not allowed, however, on any documents the filer files with the IRS.

1099-MISC:   This form reports the total paid during the year to a single person or entity for services provided. Certain Medicaid waiver payments may be excludable from the income as difficulty of care payments.  A new check box was added to this form to identify a foreign financial institution filing this form to satisfy its Chapter 4 reporting requirement.

1099-INT:    This form is used to report interest income paid by banks and other financial institutions. Box 13 was added to report bond premium on tax-exempt bonds. All later boxes were renumbered. A new check box was added to this form to identify a foreign financial institution filing this form to satisfy its Chapter 4 reporting requirement.

1099-DIV:    This form is issued to those who have received dividends from stocks. A new check box was added to this form to identify a foreign financial institution filing this form to satisfy its Chapter 4 reporting requirement.

1099-B:     This form is issued by a broker or barter exchange that summarizes the proceeds of sales transactions. For a sale of a debt instrument that is a wash sale and has accrued market discount, a code “W” should be displayed in box 1f and the amount of the wash sale loss disallowed in box 1g.

1099-K:    This form is given to those merchants accepting payment card transactions. Completion of box 1b (Card Not Present transactions) is now mandatory.

K-1s:    If you are a partner, member or shareholder in a partnership or S corporation, your income and expenses will be reported to you on a K-1. The tax returns for these entities are not due until 3/16/20 (if they have a calendar-year accounting). Sometimes, you may not receive a K-1 until shortly after the entity’s tax return is filed in March.

If you are a beneficiary of an estate or trust, your share of the income and expenses for the year will also be reported on a K-1. These returns will be due 4/15/20 so you might not receive your K-1 before the due date of your Form 1040.

NOTE:  Many times corporations, partnerships, estates and trusts will put their tax returns on extension. If they do, the due date of the return is not until 9/15/20 or later. We often see clients receiving K-1s in the third week of September.

If you receive, or expect to receive, a K-1 it is best if you place your personal return on extension. It is a lot easier to extend your return than it is to amend your return after receiving a K-1 later in the year.

1098:    This form is sent by banks or other lenders to provide the amount of mortgage interest paid on mortgage loans. The form might also show real estate taxes paid and other useful information related to the loan.

1098-T:    This form is provided by educational institutions and shows the amounts paid or billed for tuition, scholarships received, and other educational information. These amounts are needed to calculate educational credits that may be taken on your returns.

So start watching your mailbox and put all of these statements you receive in that new file you created!

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.

–until next week