We saw the first year for tax filing under the new tax laws that brought major adjustments and for most a reduction in taxes. We also as a firm had changes. We are now Sterling Hawthorne Group LLC and our office in NRH is one door to the right in Suite 119.
2019 Summary and Looking Forward to 2020 and Beyond
Services offered in addition to Tax Preparation
We also offer more consulting services such as data analytics using different business intelligence (BI) tools to solve more complex business problems for our clients. This side of the business has been expanding recently and we foresee BI services growing more in the future.
Sterling Hawthorne Group currently offers business consulting and tax planning for clients. Beginning in 2020 we will begin offering Financial Advisory Services both personal and business clients. The services provide expertise for clients’ decisions around their money matters, personal finances, and investments as well as tax planning and tax filings. More information will follow during the coming year.
Changes for 2019 and 2020
The IRS has made additional changes to forms in 2019. New Forms are Form 1040SR for those who are over 65. It is no different than the 1040 except for larger font size and a standard deduction chart. We are using the larger font on the regular 1040. So, this begs the question, is the IRS implementing age discrimination? You decide!
Other new Forms are 8895 and 8895A dealing with qualified business income (QBI). Form 1099-NEC (Non-employee Compensation) returns after a 37-year hiatus for 2020. Schedules A-D have revisions. The SCH A medical deduction floor has been raised from 7.5% to 10%. Schedules A-D have revisions dealing mostly with aggregation of QBI. Obsolete forms are Schedules 4-6 (merged with other Forms), Sch C-EZ (Sch C must be used), Form 2555-EZ (Form 2555 must be used), Form 8965 (Health Coverage Exemptions), and Form 1099-H (Health Coverage Tax Credit).
The W-4 has been revised for 2020 and a final version has not been released as of this writing. It requires much of the information on your tax return to complete so if you give your employer the worksheets they will have all your income data. There have already been numerous complaints about possible unintended consequences such as your employer deciding your spouse makes plenty of money and therefore you do not need a raise. If you already have a W-4 on record with your employer you will not need to submit the new form. With the new forms the withholding for the Single Zero is now the equivalent of Single Two and Married Zero is now like the old Married Three so under withholding could be a problem if you do not make some adjustments.
The IRS is also adding questions on virtual currency (i.e. Bitcoin). If you had any transactions with virtual currency we will need to know. Spending a bitcoin triggers a taxable event.
Alimony Payments Changes. Beginning Jan. 1, 2019, alimony or separate maintenance payments are not deductible from the income of the payer spouse, or includable in the income of the receiving spouse, if made under a divorce or separation agreement executed after Dec. 31, 2018.
This also applies to a divorce or separation agreement executed on or before Dec. 31, 2018, and modified after December 31, 2018, as long as the modification:
- changes the terms of the alimony or separate maintenance payments; and
- states that the alimony or separate maintenance payments are not deductible by the payer spouse or includable in the income of the receiving spouse.
On the other hand, generally alimony or separate maintenance payments are deductible from the income of the payer spouse and includable in the income of the receiving spouse, if made under a divorce or separation agreement executed on or before Dec. 31, 2018, even if the agreement was modified after December 31, 2018, so long as the modification is not one described in the preceding paragraph. You must have the social security number of both parties. Failure to provide the number results in a $50 penalty on both parties and the tax return cannot be e-filed without the numbers.
Mileage rates for 2019 are $0.58/mile for business, $0.20/mile for medical purposes and $0.14/mile for charitable purposes.
The IP PIN program has been expanded to Texas this year. This is for those who have had identity theft problems. You will get a special pin mailed to you every year to enable you to e-file your return. Once in the program you cannot get out. You now can request the PIN if you so desire. Having Texas join the expansion list is not a good thing because the IRS expands to the states that have the most issues. The prior states were CA, DE, DC, GA, FL, IL, MI, NV, and RI. Joining this year are AZ, CO, CT, NJ, NM, NY, NC, PA, TX, and WA. Eventually all states will be added.
For those who have dependents on your return we are required to ask for documentation to show that your dependent lived with you and the proper relationship exists. If the dependent is not your son or daughter then we will need to have the Social Security card on file and documents to show the dependent lived with you such as school, medical, or court documents.
Affordable Care Act (ACA) Penalty
Although the requirement for everyone to have health insurance is still in effect the penalty for not having coverage is no longer in effect for 2019 and after. If you bought your health insurance from the government exchange and receive a subsidy
you may have to pay it back if your income was too high or receive a credit if your income was lower. We will need the 1095A form for exchange purchasers. An alternative for health insurance is enrolling in a health sharing ministry program. It is exempt from the Obamacare requirements and is generally less expensive than ACA compliant health insurance.
Tax return due dates are as follows. Partnership and S Corporation tax returns are due on March 15th. The deadline for C-Corporations is April 15th. Individual filing deadlines are also due April 15th as are Form 1041, and the FinCEN 114 (FBAR). Form 990 is due May 15th.
The IRS requires Both IRS and employee copies of W2 AND 1099 Misc be sent out by January 31 and there are increased penalties for missing the January 31 deadline. Anyone needing help with 1099’s, 1096’s, W2’s, W3’s or any other forms, please get these to us in early January because the forms need to be sent out to individuals by January 31st. Also, anyone having a Partnership or S-Corporation, please get us the information to us in early February or we may have to file an extension for you.
The standard deduction for married filing jointly in 2019 has been changed with the Tax Cuts and Jobs Act of 2017. The personal exemption for tax years 2018 and later has been eliminated. The following table displays the standard deductions for 2019.
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