2019 Standard Mileage Rates

Beginning 1/1/19, the standard mileage rates for cars, vans, pickups, and panel trucks will be 58 cents per mile for business miles, 20 cents per mile for medical or moving purposes, and 14 cents per mile for charitable purposes. However, the rates cannot be used to claim an itemized deduction for unreimbursed employee travel expense or for moving expenses (except for certain members of the U.S. Armed Forces) because these deductions were suspended for 2018-2025 by the Tax Cuts and Jobs Act. The portion of the business standard mileage rate treated as depreciation is 24 cents per mile for 2015 and 2016, 25 cents per mile for 2017 and 2018, and 26 cents per mile for 2019. When computing the allowance under a Fixed and Variable Rate (FAVR) plan, the standard vehicle cost cannot exceed $50,400 for autos, trucks, or vans. Notice 2019-2; News Release IR-2018-251 

IRS Warns Taxpayers about New Refund Scam

The IRS has alerted taxpayers of a new scam in which criminals deposit fraudulent tax refunds into an individual's bank account and then attempt to reclaim the funds. They accomplish this by (1) hacking tax practitioners' computers to steal taxpayer data; (2) using the stolen information to file fraudulent tax returns; (3) having the refunds deposited into the taxpayers' bank accounts; and (4) telling the victims the money was mistakenly deposited into their accounts and asking them to return it. Criminals may pose as debt collection agency officials acting on behalf of the IRS, or the taxpayer may receive an automated call purportedly from the IRS. The IRS encourages victims of this scam to follow the procedures outlined in Tax Topic Number 161— Returning an Erroneous Refund. Also, taxpayers should immediately discuss the issue with their financial institutions and tax preparers. IRS Tax Tip 2018-32.

Updated Withholding Calculator, Form W-4 Released; Calculator Helps Taxpayers Review Withholding Following New Tax Law

The Internal Revenue Service today released an updated Withholding Calculator on IRS.gov and a new version of Form W-4 to help taxpayers check their 2018 tax withholding following passage of the Tax Cuts and Jobs Act in December.

The IRS urges taxpayers to use these tools to make sure they have the right amount of tax taken out of their paychecks.

“Following the major changes in the tax law, the IRS encourages employees to check their paychecks to help ensure they’re having the right amount of tax withheld for their personal situation,” said Acting IRS Commissioner David Kautter.

The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets.

If changes to withholding should be made, the Withholding Calculator gives employees the information they need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate. Employees will submit the completed W-4 to their employer.

“Withholding issues can be complicated, and the calculator is designed to help employees make changes based on their personal financial situation,” Kautter said. “Taking a few minutes can help taxpayers ensure they don’t have too little – or too much – withheld from their paycheck.”

The withholding changes do not affect 2017 tax returns due this April. However, having a completed 2017 tax return can help taxpayers work with the Withholding Calculator to determine their proper withholding for 2018 and avoid issues when they file next year.

Steps to Help Taxpayers: Do a “Paycheck Checkup” 

The IRS encourages employees to use the Withholding Calculator to perform a quick “paycheck checkup.”  An employee checking their withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time in 2019. It can also prevent employees from having too much tax withheld; with the average refund topping $2,800, some taxpayers might prefer to have less tax withheld up front and receive more in their paychecks.

The Withholding Calculator can be used by taxpayers who want to update their withholding in response to the new law or who start a new job or have other changes in their personal circumstances in 2018.

As a first step to reflect the tax law changes, the IRS released new withholding tables in January. These tables were designed to produce the correct amount of tax withholding -- avoiding under- and over-withholding of tax -- for those with simple tax situations. This means that people with simple situations might not need to make any changes. Simple situations include singles and married couples with only one job, who have no dependents, and who have not claimed itemized deductions, adjustments to income or tax credits.

People with more complicated financial situations might need to revise their W-4.  With the new tax law changes, it’s especially important for these people to use the Withholding Calculator on IRS.gov to make sure they have the right amount of withholding.

Among the groups who should check their withholding are:

• Two-income families.
• People with two or more jobs at the same time or who only work for part of the year.
• People with children who claim credits such as the Child Tax Credit.
• People who itemized deductions in 2017.
• People with high incomes and more complex tax returns.

Taxpayers with more complex situations might need to use Publication 505, Tax Withholding and Estimated Tax, expected to be available on IRS.gov in early spring, instead of the Withholding Calculator.  This includes those who owe self-employment tax, the alternative minimum tax, or tax on unearned income from dependents, and people who have capital gains and dividends.

Plan Ahead: Tips for Using the Withholding Calculator

The Withholding Calculator asks taxpayers to estimate their 2018 income and other items that affect their taxes, including the number of children claimed for the Child Tax Credit, Earned Income Tax Credit and other items.

Take a few minutes and plan ahead to make using the calculator on IRS.gov as easy as possible. Here are some tips:

• Gather your most recent pay stub from work. Check to make sure it reflects the amount of Federal income tax that you have had withheld so far in 2018.
• Have a completed copy of your 2017 (or possibly 2016) tax return handy. Information on that return can help you estimate income and other items for 2018.  However, note that the new tax law made significant changes to itemized deductions.
• Keep in mind the Withholding Calculator results are only as accurate as the information entered. If your circumstances change during the year, come back to the calculator to make sure your withholding is still correct.
• The Withholding Calculator does not request personally-identifiable information such as name, Social Security number, address or bank account numbers. The IRS does not save or record the information entered on the calculator. As always, watch out for tax scams, especially via email or phone calls and be especially alert to cybercriminals impersonating the IRS. The IRS does not send emails related to the calculator or the information entered.
• Use the results from the Withholding Calculator to determine if you should complete a new Form W-4 and, if so, what information to put on a new Form W-4. There is no need to complete the worksheets that accompany Form W-4 if the calculator is used.
• As a general rule, the fewer withholding allowances you enter on the Form W-4 the higher your tax withholding will be. Entering “0” or “1” on line 5 of the W-4 means more tax will be withheld. Entering a bigger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.
• If you complete a new Form W-4, you should submit it to your employer as soon as possible. With withholding occurring throughout the year, it’s better to take this step early on.

More information

This spring and throughout the year, the IRS will be working closely with businesses as well as the tax and payroll communities to help educate the public about the new withholding guidelines and the Withholding Calculator.

For 2019, the IRS plans to make further changes involving withholding. The agency will work with businesses and the tax and payroll communities to explain and implement these additional changes.

More information is available in the special Withholding Calculator Frequently Asked Questions.

A New Twist on an Old Scam - Watch for Erroneous Refunds!

The Internal Revenue Service warned taxpayers Tuesday to beware of a quickly proliferating scam involving erroneous tax refunds being deposited in their bank accounts, after a data breach on their tax preparers' computers gives them access to sensitive client information.

The IRS also provided taxpayers with a step-by-step explanation for how they can return the funds and avoid falling prey to the scammers.

The new alert follows up on a Security Summit alert that came out earlier this month warning tax professionals about phishing emails that can download malware onto computers if they are clicked (see IRS sees new filing season scam hitting tax pros). The IRS released the extra warning Tuesday about the new scheme after learning that more tax practitioners’ computer files have been breached. On top of that, the number of potential taxpayer victims jumped from a few hundred to several thousand in only a few days. The IRS’s Criminal Investigation division is continuing to investigate the expanding scope and breadth of this scheme.

Basically this is a new twist on an old scam, the IRS noted. After the cybercriminals steal client data from tax professionals and file fraudulent tax returns, they use the taxpayers' real bank accounts for the deposit. Thieves then employ various tactics to reclaim the refund from taxpayers.

The scam is continuing to evolve in new versions. In one version, the criminals impersonate debt collection agency officials acting on behalf of the IRS. They contact taxpayers to tell them a tax refund was deposited in error and ask taxpayers to send the money to their collection agency.

In another version, the taxpayer who received the erroneous refund receive an automated phone call with a recorded voice saying he is from the IRS and threatens the taxpayer with criminal fraud charges, an arrest warrant and a “blacklisting” of their Social Security Number. The recorded voice provides the taxpayer with a case number and a phone number to call to give back the mistaken refund.

The IRS repeated its warning from last week for tax professionals to increase the security of their sensitive client tax and financial files. The IRS is also asking taxpayers to follow the established procedures for returning an erroneous refund to the Service. The IRS wants taxpayers to discuss the issue with their financial institutions because there may be a need to close bank accounts. Taxpayers who get erroneous refunds also should contact their tax preparers immediately.

As this is now peak season for filing returns, taxpayers who file electronically could find their tax return has been rejected because another return with their Social Security number is already on file. If that happens, taxpayers should follow the steps detailed in the Taxpayer Guide to Identity Theft. Taxpayers who can’t file electronically should mail a paper tax return along with Form 14039, Identity Theft Affidavit, telling the IRS they were victims of a tax preparer data breach. Taxpayers who receive the refunds should follow the steps in Tax Topic Number 161 - Returning an Erroneous Refund. It includes the mailing addresses in case they to return paper checks to return paper checks to the IRS. By law, the IRS noted, interest may accrue on erroneous refunds.

 

IRS to Reject 2017 Returns without Health Care Information Reported

The IRS has said it will not accept electronically filed 2017 tax returns that do not report on the taxpayer's compliance with the individual mandate provisions of the Affordable Care Act (ACA). The IRS did not reject such returns for 2016 after President Trump issued an executive order that directed federal agencies to waive, defer, or delay the implementation of ACA provisions that imposed penalties or fees. The Tax Cuts and Jobs Act reduces the amount of the penalty, or Shared Responsibility Payment (SRP), to zero for months beginning after 12/31/18, but for 2017, the IRS says that it won't consider an electronically filed tax return complete and accurate if the taxpayer does not report full-year coverage, claim an exemption, or report an SRP on the return. The IRS's statement can be found at www.irs.gov/tax-professionals/aca-information-center-for-tax-professionals .

Short-term Funding Bill Delays Several ACA Taxes

On 1/22/18, President Trump signed into law H.R. 195, which funds the federal government through February 8. Among other things, the bill delays the 40% excise tax on high cost employer-sponsored health coverage under IRC Sec. 4980I (commonly referred to as the "Cadillac" tax) for an additional two years. The Cadillac tax is now scheduled to apply for tax years beginning after 12/31/21. In addition, the bill further delays the 2.3% medical device excise tax under IRC Sec. 4191. The delay, which is retroactive to the beginning of 2018, is for an additional two years, meaning that the tax is scheduled to apply to sales after 12/31/19. The annual fee on health insurance providers has been suspended for one year; it is effective for 2018, but suspended for 2019. H.R. 195.

New Guidance on Passports of Taxpayers with Delinquent Debt

IRC Sec. 7345 authorizes the IRS to certify “seriously delinquent tax debt” and notify the State Department of such certification. A seriously delinquent tax debt is generally an assessed tax debt that exceeds $50,000 (adjusted for inflation) and for which a notice of lien has been filed. The State Department generally will not issue or renew a passport to, and may revoke or limit a previously issued passport of, a delinquent taxpayer after receiving the certification from the IRS. Under new guidance issued in a Notice, the State Department generally will provide 90 days to a certified taxpayer who applies for a passport to resolve their tax delinquency by allowing them to: (1) resolve any erroneous certification issues, (2) make full payment of the tax debt, or (3) enter into a payment alternative with the IRS. If a taxpayer needs to travel within those 90 days, the taxpayer must contact the IRS and resolve the matter within 45 days from the date of passport application. Notice 2018-1, 2018-3 IRB 299.

Taxpayer was liable for million dollar FBAR penalty

The Ninth Circuit found that a taxpayer willfully failed to file a Report of Foreign Bank and Foreign Accounts (FBAR) where IRS assessed a penalty of approximately $1.2 million penalty against the taxpayer for failing to disclose her financial interests in an overseas account. The Court rejected a variety of the taxpayer's arguments, ranging from the contention that the imposition of the penalty violated the U.S. Constitution's excessive fines, due process, and ex post facto clauses, to assertions that it was barred by statute of limitations or treaty provisions.
U. S. v. Bussell, (CA 9 10/25/2017)

IRS Releases Updated 2018 Withholding Tables

The IRS has released updated withholding tables for 2018. The tables reflect major changes made by the Tax Cuts and Jobs Act (TCJA), including an increase in the standard deduction, elimination of personal exemptions, and modification of tax rates and brackets. Employers should begin using the updated tables as soon as possible, but no later than 2/15/18. 

In addition, the IRS is now revising, for a late February release, the “withholding tax calculator” on IRS.gov . IRS has not published a 2018 Form W-4, which notifies an employer of an employee’s withholding requirement. 

Employees are not required to do anything at this time. However, employees are encouraged to use 2017 Form W-4 to update Payroll records on file with their employer, check their actual withholding against the IRS.gov withholding tax calculator when available,  and adjustment withholding early this year to avoid any surprises when filing their 2018 income tax returns.

2018 Tax Filing Season to Begin January 29

In a recent News Release, the IRS announced that the 2018 tax filing season will begin on Monday, 1/29/18, which means that electronic and paper returns will be accepted beginning on that day. However, the IRS will begin processing paper returns in mid-February as its systems continue to update. Also, by operation of law, refunds on returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) cannot be issued before mid-February [ IRC Sec. 6402(m) ]. The IRS expects the earliest EITC/ACTC related refunds to be available starting on 2/27/18 (if direct deposit is chosen and there are no other issues with the return). Tax returns are due on April 17 because of a weekend and the Emancipation Day holiday. News Release IR 2018-1.

Masters Degree Expenses Determined Not Deductible

The taxpayer was an uncredentialed speech pathologist who was hired by the school district under a temporary waiver. As a condition of the waiver, she was required to complete her master's degree within seven years to be qualified as a medical speech pathologist. The taxpayer enrolled in a master's degree program and claimed deductions for her tuition, books, and supplies as unreimbursed employee business expenses that were disallowed by the IRS. The Tax Court agreed, concluding that the expenses were not deductible because they qualified the taxpayer to meet the minimum education requirement for employment and also qualified her for a new trade or business. Under IRC Sec. 162(a) , education expenses are deductible by the taxpayer when incurred to maintain or improve skills required in business or employment, or to meet the requirements of the employer or the law. However, they are not deductible if incurred to meet the minimum requirements for the taxpayer's present employment. Mary A. Colliver, TC Summ. Op. 2017-93 (Tax Ct.)