Victoria C. Brush Tax



Victoria C. Brush, Inc.

100 Eighth Avenue

Brooklyn, NY 11215-1554

(718) 638-3338

office@

2019 Tax Highlights

Federal

The following are some highlights of the 2019 tax provisions and changes. This list is by no means comprehensive.

Filing Deadline: The filing deadline for your 2018 tax returns is April 15, 2020. Extended returns are due on October 15, 2020.

IP PIN: The IRS is now making the Identity Protection PIN available to all taxpayers. The program is being phased in, so only taxpayers in the following 20 states are currently eligible: Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Florida, Illinois, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, Texas and Washington. Please refer to the following IRS document for information on obtaining an IP PIN:

IRS Direct Pay: As an alternative to writing a check with a payment voucher, use the IRS’ electronic payment system that allows taxpayers to pay their individual tax bills or estimated tax payments online via the following link

Alimony: Starting for divorce agreements executed in 2019, alimony is no longer deductible to the person paying it and no longer taxable to the recipient. If you modify a pre-2019 agreement, the new rules do not automatically apply, and the new agreement must expressly provide that the TCJA rules will apply.

Medical Expense Deduction: The income limitation threshold for itemizing and deducting medical expenses remains at 7.50% of adjusted gross income. If your medical expenses exceed this amount, you may be able to use the excess amount as an itemized deduction.

Residential Energy Efficient Property Credit: The residential energy efficient property credit is being phased out. For 2019 the credit remains at a maximum of 30%. For 2020 it is 26% and for 2021 it will be 22%. Unless the credit is extended, it will not be available after 2021.

Tax Credits Due Diligence: There has been a tremendous amount of fraud with various tax credits when taxpayers are eligible to receive “new money” in refunds, in excess of any withholdings and estimates reported on their tax returns. Be prepared to provide extensive identity and qualification verification to your tax preparer if you are claiming the Earned Income Tax Credit, the Child Tax Credit, the Additional Child Tax Credit or the American Opportunity Tax Credit. If you are self-employed, you will need to provide substantiation for how you record your business income and expenses.

Health Insurance Shared Responsibility Payment:

For New York area residents, you no longer need to prove you have health insurance, unless you live in New Jersey (in which case you will still need your 1095 form.) However, if you bought your insurance through the ACA marketplace, you will need to report data from your 1095-A form.

Standard Mileage Rates: The standard mileage rates for 2019 and 2020 are:

|Year |Business |Medical/Moving |Charitable |

|2019 |$0.580 |$0.20 |$0.14 |

|2020 |$0.575 |$0.17 |$0.14 |

Retirement Plans: Maximum contributions to retirement plans are as follows:

|Tax year/ |2019 |2020 |

|Type of plan | | |

|401(k), 403(b) elective deferrals |$19,000 |$19,500 |

| 50 or older |$25,000 |$26,000 |

|SIMPLE IRA |$13,000 |$13,500 |

| 50 or older |$16,000 |$16,500 |

|SEP-IRA |25% of compensation (contribution capped at $56,000) |25% of compensation (contribution capped at $57,000) |

|Traditional/Roth IRA |$6,000 |$6,000 |

| 50 or older |$7,000 |$7,000 |

Unmarried Parents: If you are the noncustodial parent and intend to claim your child on your tax return, you must have a written declaration (IRS Form 8332) from your child’s custodial parent that she or he will not claim your child as a dependent for the tax year. That declaration must be signed by the custodial parent and attached to your return. Only the custodial parent is eligible to claim Head of Household, Dependent Care Credit and the Earned Income Tax Credit. The noncustodial parent, if claiming the child, will get the child tax credit and the educational tuition and fees deduction, if applicable.

Qualified Business Income Deduction: There is a new deduction available for qualified businesses that started in 2018, and many of you may have noticed the Qualified Business Income Deduction on your tax return last year. The rules for the deduction can be complicated, so be sure to ask about it if you are unsure whether you are qualified to take it. Rental activities can also qualify, but in order to meet the tests, you must treat your rental activity as a trade or business. In brief, this means you must have a profit motive (not merely providing housing to family members or helping to cover the mortgage, you must be charging a Fair Market rent, and you must be keeping clear records of the rental income and expenses (it’s best if you have a separate bank account.) Additionally, if you have paid any contractors $600 or more during the year, you must now issue them a 1099-MISC form for the year. This would include cleaning and handyman services. In other words, you must treat the activity as if it were a business.

IRA/Retirement Account Changes: There were several last-minute changes made to the rues governing IRAs. The principle ones are:

• Fellowships & stipends now qualify as earned income for the purpose of making an IRA contribution. Beginning in Tax Year 2020.

• There is no longer an age limit for making an IRA contribution, as long as you have earned income. Beginning in Tax year 2020.

• 401(k) plans will now be open to long-term, part-time employees. Beginning in Tax Year 2021.

• There is new 10% penalty exception for IRA withdrawals up to $5,000 per person for a birth or adoption. You must still pay the tax, but there is no early withdrawal penalty. The rules on this are a bit complicated, so let’s discuss it if you think it might be applicable to you. Beginning in Tax year 2020.

• RMD will not be required until you turn 72 for any taxpayer turning 70½ after December 31, 2019. If you turned 70½ before January 1, 2020, the old RMD rules still apply to you.

• Inherited IRAs and defined contribution plans must now be distributed in full to individual beneficiaries by the end of the 10th calendar year following the year of the IRA owner’s death. This applies to IRA owners who die after December 31, 2019.

529 Plans: Up to $10,000 lifetime may now be distributed from a 529 plan to pay principal or interest for any qualified education loan of the account beneficiary or his or her sibling. This starts for Tax Year 2019. If you also qualify for the student loan interest deduction, you cannot take both. We don’t yet know if New York will also allow this use of 529 funds tax and penalty free.

New York State

New York State Correspondence Audits: New York State has been taking the lead on audits for several years now, no longer waiting for the IRS to conduct audits and then coat-tailing on those results. Many taxpayers are getting correspondence requesting documentation directly from the NYS Tax Department, often regarding personal itemized deductions such as medical expenses, employee-related expenses and charitable donations.

There is usually a 30-day window from the date of the letter to respond to these audits, meaning the NYS must be in receipt of your reply and substantiating documents within the 30-day window. Do not wait until the last minute to respond. If you miss the 30-day window, the State may disallow your deductions without recourse.

Be prepared to substantiate the deductions you are claiming. You are supposed to have your paperwork in order when you prepare your tax returns, but the reality is that many people assume they will be able to collect their documents down the road, if necessary. Please do not make this assumption. It can be very difficult to get copies of cancelled checks and receipts after the fact. Please make sure you have all your back-up documentation organized and stored in a secure place now.

Online Tax Center: New York State has an online tax center where taxpayers can file some of their tax returns and pay taxes due. If you also link your account to us as your tax preparer, we can also look up information about your tax payments, which will help us in preparing more accurate returns for you. It is an easy way to pay your estimated income taxes. If you would like to register with the Online Tax Center, please go to: .

Residency: The New York State Department of Taxation & Finance has issued guidelines for determining whether or not someone is a New York State resident. The determination is based on several factors, but the bottom line is that if you have a home available to live in within New York State, and you have spent any part of 183 days in the state, New York may consider you a New York resident. If this is a concern, please speak with us.

MCTMT: The Metropolitan Commuter Transportation Mobility Tax is imposed on net self-employment income of $50,000 or more, as reported on your federal Form SE. The estimated tax payments for this tax are now included on your estimated income tax vouchers and do not need to be paid separately.

Occupancy Tax on Rental of 30 days or Less: If you have short term rentals, whether it is renting out your apartment while you are out of town, a vacation home rental or if you run a Bed & Breakfast out of your home, you may need to collect the local occupancy tax on your rental income. This tax is administered at the county level, and you should contact your local tax department for instructions on how to register and pay this tax. Please contact us if you need assistance. If your rental property is in another state, we can help you research the occupancy tax requirements in that state. Occupancy tax does not need to be collected on rental income from year-round or long term (more than 30 days) tenants in New York State.

529 College Savings Plans: For any New York resident who is in college, has child in college or would like to save for their children’s future college education, the New York 529 plan is a great deal. As long as the funds in a 529 plan are used for qualified tuition expenses, room and board and certain supplies, the earnings in the accounts will not be taxed. In addition, as long as your 529 plan is a New York State sponsored plan, you can get an immediate deduction on your New York taxable income for the amount of your current year contribution up to $5,000 ($10,000 on a joint return.) To receive the tax credit, the account you contribute to must be in your name; you cannot contribute to a plan established by someone else. The contribution must be made by December 31st to count for that tax year.

Pension Income Exclusion: New York allows a taxpayer to exclude $20,000 of pension income per year, provided the income is received after the taxpayer has turned 59½ years old. But you must be careful. If you begin to receive retirement income in the year you turn 59½, you will qualify for the exclusion for only the part of the year in which you were 59½. For example, if you turned 59½ on November 1, 2008, and started to receive payment from an IRA in that year, only the portion of your distribution that you received after October 31st would qualify. Also, any annuity you have purchased for yourself does not qualify as pension income.

A beneficiary of an inherited IRA may also qualify for an exclusion if the decedent would have qualified, but the decedent’s exclusion must be prorated for all qualifying pension distributions and for all beneficiaries. The beneficiaries’ exclusions will also be reduced by the amount of exclusion claimed by the decedent on his or her final return. Please be prepared to proof you are entitled to this benefit, i.e. have the death certificate of the IRA account holder, the beneficiary form for their IRA/retirement accounts, and a list of the accounts and all beneficiary distributions made.

Estate Tax Return: New York State’s estate tax exclusion is now indexed for inflation each year. The exclusion amounts, based on the date of death, are:

2018 - $5,250,000

| 2019 - $5,490,000 | |

|2020 - $5,850,000 | |

|Since the federal estate tax exclusion is higher than New York’s, you may need to file a New York estate tax return even though you don’t need to file a federal one. | |

|However, in order to file your New York return, you will have to prepare a federal return, because a copy of the federal return and calculations must be attached to | |

|your New York return. | |

LLC fee filing deadline: The LLC fee filing deadline for New York State is March 15, 2020.

2020 Corporation Estimated Tax: The first mandatory payment of New York State and New York City estimated tax is March 15, 2020, even though the filing date for C corporations is April 15, 2020.

New York City

New York City Unincorporated Business Tax: New York City UBT returns must be filed by all unincorporated businesses once your gross revenue reaches $95,000, even if you don’t owe any tax. If you do owe tax, you will get a partial credit for it on your New York State individual tax return.

You may also deduct charitable donations made through your business bank account on your UBT return, up to 5% of your federal net business income.

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