jump to navigation

Tax Tip of the Week | No. 465 | IRS Penalties – DON’T PAY Just Out of Frustration June 20, 2018

Posted by bradstreetblogger in : General, Tax Preparation, Tax Tip, Taxes, Uncategorized , add a comment

Tax Tip of the Week | June 20, 2018 | No. 465 | IRS Penalties – DON’T PAY Just Out of Frustration

Is it a big-time hassle to deal with the IRS in any fashion? That is a big Y E S! In fact, it has never been more difficult. Maybe that is the IRS’s fault and perhaps it is the inevitable result of their budget being slashed. Regardless, attempting to communicate with them can make you crazy!

To give you some idea of the amount of civil penalties (via notices) assessed; in 2016, the IRS assessed 39.6 million taxpayers and abated 5.2 million of these. Considering the number of taxpayers in the USA, thusly, you have a relatively high chance of receiving a tax notice.

It is not uncommon for IRS notices to show balances due in the tens of thousands of dollars and to be very threatening. If you receive IRS correspondence – try not to overreact. Many people upon receiving IRS tax correspondence have a tendency to simply write them a check; they assume the IRS is always right. In fact, more than half of their notices are incorrect and only computer generated. Writing them a check without any further research probably makes sense if the IRS only wants a few bucks. Aside, from a few bucks being due, a quick telephone call to the IRS by your tax professional (not that the call hold time is quick) may be all that is necessary. Other times, a one-page letter to the IRS may be all that is needed to save the day and have the tax, interest and/or penalty abated. Other times, three or four letters, over an extended period of time, may be needed to receive a “yea” or “nay” to your request from the IRS. To avoid digging a deeper hole I would prefer that you do not call or correspond with the IRS on your own. A power of attorney is needed for your tax professional to have meaningful conversations and correspondence with the IRS.

One of the methods available for abatement includes the use of “administrative relief” under the “first-time penalty abatement policy.” The name “first time” is a misnomer, it doesn’t mean first time ever, just means you have been “clean” in the last three years… and yes, they do verify that.

Many other methods are available for potential abatement. But, remember, if your notice demands big dollars – get help.

Credit to… Tom Herman, Wall Street Journal “It May Pay to Fight IRS Penalties,” Monday, March 26, 2018

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

This week’s author – Mark Bradstreet, CPA

–until next week.

 

Tax Tip of the Week | No. 458 | Beware of the New Cap on Business Losses May 2, 2018

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

Tax Tip of the Week | May 2, 2018 | No. 458 | Beware of the New Cap on Business Losses

Making money in the business world is not easy. Not many business owners would contest that statement. In spite of the best-laid plans and intentions, business losses can and do occur. I suspicion the IRS and/or Congress became concerned that someone might “create” a business loss only for tax saving purposes using some of the newly enacted faster write-offs for certain fixed assets. For that reason, I believe the IRS and/or Congress developed some of their own self-serving parameters to limit what they deemed as potential abuse. Thusly, the cap on “excess” business losses was apparently born.

This new tax law provision seems to have flown in under the radar. For the most part the press has chosen to write about other more popular topics. This limitation on “excess” business losses applies to individuals. However, remember that the income taxes on profits for many “flow-through” businesses are paid by the individuals on their own individual income tax returns. This new loss provision has been nicknamed the “anti-tax-shelter” measure. In certain instances, it treats taxpayers as though their business losses were from a tax shelter. This loss limitation was created to limit the ability of taxpayers (other than C Corporations) to use business losses to offset other sources of income, such as investment income. Limitations on business losses are not new. The ones already in place include passive activity loss limitations (PAL) and the at-risk basis limitations. Both of these are complicated and may have far-reaching consequences. The new loss limitation adds yet another hurdle to a loss deduction in addition to the ones already in place.

“Excess business loss” is essentially defined as the excess of aggregate business deductions over the taxpayer’s aggregate business income as defined in Internal Revenue Code Section 461(l), plus a floor amount. For 2018, the floor is $500,000 for married filing jointly taxpayers and $250,000 for all other taxpayers. The “excess business loss” that exists for the tax year is disallowed and becomes a net operating loss that will be carried forward for possible use in the future.

Thusly, the new law limits a taxpayer’s net business loss deduction to the threshold amount in the tax year incurred. The limitation also forces taxpayers to wait at least one year before these losses may be used. (Ouch!) In some instances one could draw some parallels between this business loss limitation and the Alternative Minimum Tax (AMT) – both are sneaky behind the curtain calculations that may result in an unpleasant tax surprise.

For illustration purposes:

A married taxpayer filing jointly has investment income from various sources of $875,000. She also has aggregate business losses of $1.2 million. The taxpayer’s excess business loss is $700,000 ($1.2 million aggregate loss – $500,000 threshold). This excess business loss may not be deducted in the year created. It will instead be treated as part of a net operating loss carryforward to later years. As a result, the taxpayer’s gross income for 2018 is $375,000 ($875,000 investment income – $500,000 limited business loss.)

This illustration demonstrates how the new law could limit a taxpayer’s ability to offset his other income with his business losses and result in a tax liability. Under prior law, the taxpayer’s business losses would have been deducted in full. For taxpayers that anticipate aggregate business losses above the threshold amount, they may need to engage in further tax planning.

As with other aspects of the new tax law, we await further IRS guidance and explanations about some of the technical aspects of this provision. We also are aware that further guidance may never be received.

Credit given for some ideas, concepts and excerpts from Tax Reform – The New Overall Loss Limitation February 20, 2018 – Aimee Reaving

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

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 452 | New Tax Law – The Common Misconceptions (That Can Get You Into Big Trouble) March 21, 2018

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

Tax Tip of the Week | March 21, 2018 | No. 452 | New Tax Law – The Common Misconceptions (That Can Get You Into Big Trouble)

Too often I am guilty of just reading the “headlines” and believing I have the whole story. If it were only that easy! If I had only read the “headlines” on this new tax law I would have been significantly mislead.

Some of my misconceptions follow:

MISCONCEPTION #1 – EVERYONE SAVES TAX DOLLARS UNDER THE NEW TAX LAW.

Not so. For a multitude of reasons, including the loss of personal exemptions and the ceiling on state and local income taxes, the new tax law will cost some taxpayers extra tax dollars. Some a significant amount!

MISCONCEPTION #2 – ALL BUSINESSES SHOULD BE A “C” CORPORATION.

We are led to believe that the new flat 21% tax rate for “C” Corporations is a silver bullet and will cause a mass exodus from S Corporations, LLCs, partnerships and sole proprietorships. That is not going to happen. Sure, the 21% “C” Corporation rate is well less than the 37% top bracket on individuals, but SO many other even more important considerations exist.

MISCONCEPTION #3 – No need for IRC Section 179 deductions any longer since both new AND used property now qualify for the IRC Section 168 (bonus depreciation) deduction.

Section 179 and Section 168 are not treated the same in many states. In many states, the Section 179 is a faster write-off than Section 168; therefore of a greater value.

Also, please note that Section 179 has never been allowed to create a net operating loss (NOL). Section 168 may do so. However, under the new tax law – NOLs may not be carried back, only forward. So don’t fall into the trap of believing you may “catch-up” on your equipment purchases, create a large NOL with Section 168 depreciation expense, and carry that loss back for a tax refund.

MISCONCEPTION #4 – THE PENALTY FOR NOT HAVING HEALTH INSURANCE HAS BEEN ELIMINATED FOR 2018.

It is true the health insurance penalty is gone, BUT not until 2019.

MISCONCEPTION #5 – ALL PASS-THROUGH ENTITIES AUTOMATICALLY RECEIVE A 20% DEDUCTION.

Many S Corporations, partnership, and LLCs will receive the 20% deduction. Some will not. The 20% deduction is not necessarily an all or nothing proposition. If a business qualifies (and not all do) the actual deduction, if any, is all formula driven.

MISCONCEPTION # 6 – BIG TAX INCREASES WILL RESULT FROM THE ELIMINATION OF MISCELLANEOUS EXPENSES AS ITEMIZED DEDUCTIONS.

Very few people received any benefit from miscellaneous itemized deductions, anyway. You may have observed them as a part of your itemized deductions on Form A. However, they are often blocked from being deducted since they must exceed 2% of adjusted gross income.

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

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 449 | New Tax Law (TCJA) Restricts Like-Kind Exchange Rules for Non-Real Estate Property (Ouch!) February 28, 2018

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

Tax Tip of the Week | Feb 28, 2018 | No. 449 | New Tax Law (TCJA) Restricts Like-Kind Exchange Rules for Non-Real Estate Property (Ouch!)

In a like-kind exchange, a taxpayer generally does not recognize a taxable gain or loss on an exchange of like-kind properties provided both the relinquished property and the replacement property are held for productive use in a business or for investment purposes, and no cash(boot) is received in the exchange. For those exchanges completed after Dec. 31, 2017, the TCJA limits tax-free exchanges to exchanges of real property that is not held primarily for sale. Therefore, as previously allowed, exchanges of personal property and intangible property can no longer qualify as tax-free like-kind exchanges.

On the surface, you may think losing like-kind exchanges for personal and intangible property is not a big deal since we can instead use IRC Sections 168 and/or 179 to write-off the new or used equipment placed in service. This reasoning may be valid. BUT, what about those situations where some equipment or machinery is sold without buying a replacement? Under the new tax law, this scenario will cost you tax dollars since you most likely will have a gain on the sale. This is especially true if Sections 168 and/or 179 had been used on the asset sold.  In fact, the entire gain may all be taxable in the year of sale since your tax basis is zero.

Make your CPA aware of any significant asset sales during the year, especially the sale of any equipment or machinery for which a replacement won’t be purchased in the same tax year (of an equal or greater value). Otherwise, you may be in for an unpleasant surprise.

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

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 447 | New Tax Law (TCJA) – Rules Significantly Eased for Code Section 168 & 179 February 14, 2018

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

Tax Tip of the Week | Feb 14, 2018 | No. 447 | New Tax Law (TCJA) – Rules Significantly Eased for Code Section 168 & 179

Good news for business owners!

The Tax Cuts and Jobs Act (TCJA) has very favorably changed the tax rules for “accelerated” tax depreciation expense under IRC Sections 168 and 179.

Prior Law:  Section 168 (bonus depreciation) – taxpayers were allowed to deduct 50% of the cost of most new tangible property other than buildings (with a few exceptions). This “50% bonus depreciation” was scheduled to be reduced to 40% for property placed in service in calendar year 2018, 40% in 2019 and 0% in 2020 and thereafter.

New Law:  For property placed in service and acquired after Sept. 27, 2017, the TCJA has raised the 50% rate to 100%.

Also, perhaps, even more importantly, under the TCJA the post-Sept. 27, 2017 property eligible for bonus depreciation may be new or used.

Prior Law:  Section 179 expensing – taxpayers could elect to deduct the entire cost of Section 179 property up to an annual limit of $510,000. For qualifying assets placed in service in tax years that begin in 2018, the adjusted limit was $520,000. This annual limit was reduced by one dollar for every dollar that the cost of all Section 179 property placed in service during the tax year exceeded a $2,030,000 threshold. For those assets placed in service in tax years that begin in 2018, the threshold was to be $2,070,000.

New Law:  The TCJA ratcheted up the annual dollar limit for expensing to $1 million and $2,500,000 as the new phase down threshold.

The new definition of qualifying property has been expanded for both Sections 168 and 179. More favorable depreciation lives were also made available, meaning faster tax write-offs.

Vehicles.  The TCJA triples the annual dollar caps on depreciation (and the Code Sec. 179 vehicle expensing) of passenger automobiles and small vans and trucks. Also, because of the extension in bonus depreciation, the increase for vehicles allowed bonus depreciation of $8,000 in the other-wise-applicable first year cap is extended through 2026 (with no phase-down).

Farm property.  More good news!  For items placed in service after 2017, the TCJA reduces the depreciation period for most farm equipment from seven years to five. It also allows many types of farm property to be depreciated under the 200% (instead of 150%) declining balance method.

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

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 445 | Tax Cuts and Jobs Act – Estate and Gift Tax Changes January 31, 2018

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

Tax Tip of the Week | Jan 31, 2018 | No. 445 | Tax Cuts and Jobs Act – Estate and Gift Tax Changes

Congress debated at length as to whether the estate and gift taxes would survive. And, if they did – what new look might they have. In the final version of the Tax Cuts and Jobs Act as signed into law by the President on December 22, 2017, the estate and gift taxes did survive but with significant increases to their exclusion amounts.

Pre-act law – The lifetime estate exclusion amount was originally $5,000,000 and adjusted for inflation after the year 2011. This exclusion amount was $5,490,000 for the 2017 year and scheduled to be $5,600,000 for 2018 or $11,200,000 for a married couple if portability was elected. The annual gifting exclusion is $14,000 for 2017. This exclusion is adjusted for inflation but our low inflation rates and the fact that it is adjusted only in increments of $1,000 has left it unchanged since 2013.

New law – After December 31, 2017 and before January 1, 2026 (a sunset provision), the Tax Cuts and Jobs Act has effectively doubled the previous lifetime exclusion amount. The new amount is expected to be about $11,200,000 in 2018 or $22,400,000 for a married couple.

Note: Although the Act is silent on generation skipping transfers one may expect to see an increased exclusion amount here as well.

The annual gifting exclusion is now $15,000 for gifts made in 2018. This change from $14,000 to $15,000 is not a result of the new tax law but a result of inflation adjustments.

We enjoy your questions, comments and suggestions for future topics. You may contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 444 | New Tax Law – 20% Pass-through Business Deduction January 24, 2018

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

Tax Tip of the Week | Jan 24, 2018 | No. 444 | New Tax Law – 20% Pass-through Business Deduction

For tax years beginning in 2018 and before 2026, the new 20% deduction is generally allowed by individuals, estates and trusts that have interests in pass-through business entities. These entities are sole proprietorships, partnerships, S corporations and limited liability companies (LLCs) and their income passes through and is taxed by another entity (generally taxed on your personal income tax return – Form 1040). This deduction will typically equal 20% of the qualified business income (QBI) provided personal taxable income is less than a threshold of $157,500 or, if married filing jointly, $315,000. Further limitations apply provided personal taxable income is in excess of these thresholds. Please note the QBI deduction isn’t allowed in calculating adjusted gross income (AGI), but it does reduce your overall taxable income. For all intents and purposes, QBI is treated as an itemized deduction.

QBI is income, gains, deductions and losses that are connected with a U.S. business. Some investment items, reasonable compensation to an owner or any guaranteed payments to a partner or LLC member are not considered QBI.

Limitations

For pass-through entities aside from sole proprietorships that exceed the above thresholds, the QBI deduction generally can’t exceed the greater of the owner’s share of:

•    50% of W-2 wages paid to employees by the qualified business during the tax year; or
•    The sum of 25% of W-2 wages plus 2.5% of the cost of qualified property.

Qualified property is the depreciable tangible property (including real estate) owned as of year-end and used by the business during the year for the production of qualified business income.

Another limitation is that the QBI deduction usually isn’t applicable for income from certain service businesses. These include businesses that involve investment-type services and most professional practices (exceptions are engineering and architecture).

Please note that other rules and limitations are applicable to the QBI deduction.

These rules are complex and will require careful planning to optimize any benefits.

We enjoy your questions, comments and suggestions for future topics. You may contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 443 | New Tax Law Changes – Businesses January 17, 2018

Posted by bradstreetblogger in : Deductions, General, tax changes, Tax Preparation, Tax Tip, Taxes, Uncategorized , 1 comment so far

Tax Tip of the Week | Jan 17, 2018 | No. 443 | New Tax Law Changes – Businesses

A short recap of the new tax law changes that most commonly affect many businesses (for 2018) follows:

1)    C Corporations are now taxed at a flat rate of 21%.  No more brackets based on taxable income.
2)    Corporate Alternative Minimum Tax (AMT) is now history.
3)    New 20% deduction of qualified business income for pass-through businesses (this calculation is complex and far-reaching).
4)    Excess business losses are limited (aside from a corporation).
5)    Cash basis method of accounting has been extended to taxpayers with less than $25 million in average gross receipts. A change in accounting for inventory has also occurred.
6)    Completed contract method of accounting has been extended to businesses under $25 million in gross receipts.
7)    Like-kind exchanges are no longer allowed for any transactions aside from real property.  Ouch!!!
8)    Deductions for entertainment are gone.
9)    Depreciation amounts for luxury vehicles have increased.
10)  Businesses with sales in excess of $25 million will now have limited interest expense deductions. Excess may be carried forward.
11)  Section 179 expensing up from $510,000 to $1,000,000; but, phase out begins at $2,500,000.
12)  Definition of Section 179 property has been expanded. That is a good thing.
13)  Section 168 bonus property no longer has to be new property. The 50% has been increased to 100% on property placed in service after 9/27/17.
14)  Net operating losses (NOLs) can no longer be carried back (other than two years allowed for farming operations). They may now be carried forward indefinitely and are subject to an 80% income limitation.
15)  Domestic Production Activity Deduction (DPAD) is no longer allowed. Many businesses will be adversely affected by the loss of this provision.

We enjoy your questions, comments and suggestions for future topics. You may contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 442 | New Tax Law Changes – Individuals January 10, 2018

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

Tax Tip of the Week | Jan 10, 2018 | No. 442 | New Tax Law Changes – Individuals

We have attempted to recap some of the tax law changes that affect many individuals as below:

1)   We still have the seven–bracket individual tax structure but now with mostly lower tax rates.
2)    The marriage tax penalty has been effectively eliminated for all except for married couples with taxable income north of $400,000.
3)    Although, the higher standard deduction was billed as a tax cut, it really falls more into the realm of tax simplification. However, one must keep in mind that the personal exemption deduction was eliminated. So, for most people, what the government gives with one hand, they taketh away with the other.
4)    If your children are 17 or older or you take care of elderly relatives, you can claim a nonrefundable $500 credit, subject to income thresholds.
5)    Funds saved in a 529 savings plan may now be used for private school and tutoring (K – 12).
6)    Income thresholds for capital gains no longer match the tax brackets as before.
7)    People who don’t buy health insurance will no longer pay a tax penalty (effective in 2019).
8)    The net investment income tax of 3.8% remains the same.
9)    Interest on home equity debt may no longer be deducted.
10)  The Child and Dependent Care Credit remains in place.
11)  Some charitable donations may now be deducted up to 60% of income (up from 50%).
12)  Alternative Minimum Tax (AMT) is now adjusted for inflation and the AMT exemption amounts have increased.  Both are good.
13)  Estate tax exemption has effectively doubled to $11.2 million lifetime exclusion.
14)  Deductions that didn’t survive:
A.    Casualty and theft losses (other than a federally declared disaster).
B.    Unreimbursed employee expenses.
C.    Tax preparation expenses (still okay for businesses, rentals, and various investments, etc.).
D.    Moving expenses.

We enjoy your questions, comments and suggestions for future topics. You may contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

Tax Tip of the Week | No. 440 | Happy New Year! December 27, 2017

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

Tax Tip of the Week | Dec 27, 2017 | No. 440 | Happy New Year!

And get ready for the tax filing season.

Hopefully, you followed some of the suggestions we outlined earlier in TTW #21 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 2018 vs. looking back to 2017.

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 1/31/18.  If you have moved during the year, make sure former employers are aware of your new address.

W-2G:    Casinos, Lottery Commissions and other gambling entities should mail these by 1/31/18 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.

1096:    Compilation sheet that shows the totals of the information returns that you are physically mailing to the IRS. The check box for Form 1099-H was removed from line 6, while a check box for Form 1098-Q was added to line 6. The spacing for all check boxes on line 6 was expanded. The amounts reported in Box 13 of Form 1099-INT should now be included in box 5 of Form 1096 when filing Form 1099-INT to the IRS.

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 3/15/18 (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 4/17/18 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 9/15/18 or later. We often see client’s receiving K-1s in the third week of September.

If you receive, or expect to receive, a K-1 close to or after the due date of Form 1040,  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!

Wishing you all great things,

The Staff at Bradstreet & Company

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

…until next week.