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To Our Clients,

This year our letter is designed to give you the guidance needed for understanding some of the big new tax law changes that may personally affect you; to dispel some myths that are floating around; and to provide some basic ideas for tax planning.

2018 Tax Changes for Individuals

Everyone seems to think that the new “postcard” return will make income tax preparation easier! Not true. The recurring theme this year has been to expect a 20% increase in time to properly complete your return. Here are some of the major changes that have occurred.

The new Federal withholding tables were designed to lower your total tax bill for the year by giving you a bigger paycheck throughout the year. Unfortunately, they were not designed to give you a refund at year end, and for those of you that did not heed our warnings to change your withholding, your refund will be very small (if any) because you already received it in bits and pieces through larger paychecks throughout the year. One of our simple recommendations for 2019 is that all married individuals fill out a W-4 with zero exemptions and reflecting withholdings at the higher single rate.

The ability to itemize deductions has been dramatically decreased because the new law provides a much, much larger standard deduction. (You are allowed to deduct the greater of the two). However, many states, including New York, have decoupled from the federal returns on this, so we still need to accumulate the information on your medical, tax, mortgage interest, charity and other deductions in order to apply the new rules, and to complete your state tax returns.

A major change has occurred on home equity lines and 2nd mortgages, most of which are now not deductible. In order to get your largest deduction, we will need to know much more information on these amounts than in the past such as amounts borrowed and how those funds were used.

Employee work related business expenses are no longer deductible on the Federal return, but we may still need the information for your state return, and if you incur a lot of these types of expenses, you need to discuss the use of an accountable plan with your employer.

If you are retired, over age 70 ½, have an IRA, and plan to make charitable contributions, look into utilizing the direct IRA to charity transfer tool to make those contributions. This simple trick can save you hundreds of dollars in income tax.

With over 50% of working Americans now covered by high deductible health insurance policies, it is of absolute importance that you start a health savings account (HSA) to help cover out of pocket expenses.  And yes, you were still required to maintain health insurance for every member of your family for 2018 or face a potential penalty.

Due diligence requirements will result in our asking many questions that may seem to border on intrusive in order to qualify you for many credits and filing status.  If you expect to file as Head of Household, or plan to claim education credits, child tax credits, or Earned Income credits, plan on providing information to substantiate your eligibility.

Finally, in order to prepare your return this year we are required to obtain all of your W-2’s, 1099’s from financial institutions, forms 1095 for health insurance, bank forms 1098 and any other official IRS documents.

We are happy to meet with you throughout the year for tax planning, retirement and similar income tax related issues, and sincerely appreciate your continued business each year.

We will be holding our annual client brunch on January 12, 2019 where we will be reviewing these and many other tax issues.  Please check out the tab on our website for details and reservations.

We appreciate your continued trust in our services and look forward to seeing you soon.

The Staff at,

Dunn, Pedro & Butler CPA’s

While it was made clear that entertainment expenses would no longer be deductible by the Tax Cuts and Jobs Act of 2017, the act lacked clarification related to the deductibility of business meals, until now.

Expenses for Business Meals under § 274 of the Internal Revenue Code: Notice 2018-76

Under this notice, taxpayers may deduct 50 percent of an otherwise allowable business meal expense if:

  1. The expense is an ordinary and necessary expense under § 162(a) paid or incurred during the taxable year in carrying on any trade or business;
  2. The expense is not lavish or extravagant under the circumstances;
  3. The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages;
  4. The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  5. In the case of food and beverages provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts. The entertainment disallowance rule may not be circumvented through inflating the amount charged for food and beverages.

If you would like further clarification on this or other deductions or how they pertain to your business, please feel free to contact our office.

1099’s

If we prepare your 1099 informational returns, all data needs to be to our office by January 25th, 2019 to ensure timely filing.

Partnership (1065) & S-Corp (1120s) Tax Filers

All information must be in our office at least 1 month prior to the filing deadline of March 15th, 2019

Corporate (1120) Tax Filers

All information must be in our office at least 1 month prior to the filing deadline of April 15th, 2019

Individual (1040) Tax Filers

If you want your personal return filed by: Call to Schedule an Interview no later than: Have ALL Tax Documents to our office no later than:
April 15th, 2019 March 1st, 2019 March 15th, 2019
On Extension: October 15th, 2019 September 1st, 2019 September 15th, 2019

If you have an LLC or Corporation the Department of State now “desires” that you pay the Biennial $9.00 fee through their website. We have the link to the left,  you will need your DOS  ID number and Exact entity name, which they will send to you by mail on your next registration date  (save it in your corporate book you will need it every 2 years). The  link below will take you to their page which includes their email and phone number along with the online form.

Please note the following:

1) Per their instructions ” Please be aware that business entities that do not file online will not automatically receive their future Biennial State forms or notices from the Department of State.  Business entities that wish to paper file in the future will need to contact the Department of State, Division of Corporations, State Records and Uniform Commercial Code to obtain a form.”

2)  and now….”A “Delinquent” corporation will be subject to a $250.00 fine and may be prohibited from filing other certificates with the Department of State.”