Tax Partners Northwest LLC
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Recent News Updates

Frequently Asked Questions about the CARES Act
3/28/20, 9:19PM

 

On March 27 the President signed the CARES Act with lots of provisions to help workers, business owners and the economy.  Here’s the part everyone wants to know about.  Stimulus checks!  IRS will begin to send out up to $1200 apiece to many taxpayers over the next few months.  Here’s what you need to know.

 

How do I know if I’ll get a check?

 

Adjusted gross income must be below $75,000 for individuals, $112,500 for head of household filing status, and $150,000 for married filing joint to qualify for the full amount.  People with incomes above these amounts will see reduced or no payments.  To see your adjusted gross income, look at line 8b on your 2019 1040 form.

 

I haven’t filed my 2019 return yet!

 

Did you file in 2018?  IRS will look at that return if you haven’t filed 2019 yet.  Check your adjusted gross income on line 7 of your 2018 return.

 

I was told I don’t have to file because I only get social security.  Do I have to file a return now?

 

If you haven’t filed a return for 2018 or 2019, IRS will look at their records to see who received social security and will still send you a check.

 

How much will it be?

 

If your income was under the limits, you will receive $1200, $2400 if you are filing a married filing joint return. If you claim dependent children under the age of 17 on your return, you will receive $500 for each of them.

 

What if my income is over $75,000 or $150,000?  Am I entirely out of luck?

 

The checks will phase out between $75,000 and $100,000 of income, double that for married couples.  If your income is in the phase out range, you will still receive a reduced check.  If your income is over the phase out range, you will not receive a payment at this time.

 

That’s not fair!  I retired at the end of 2019, so my income now is way lower!

 

If you don’t qualify for a payment now, you still have another chance.  There will be a place on your 2020 tax return to indicate that you didn’t receive a payment.  If you qualify in 2020 with lower income, you’ll receive it then.

 

My ex and I switch off claiming our child.  This was his year to claim her, does that mean he gets the payment and I’m out of luck?

 

Your ex will get the payment this year.  Next year you will file your tax return and claim your child, and you will get the extra money in your refund.

 

My parents claimed me as a dependent.  Will I get a check?

 

No.  Dependents don’t qualify to receive this payment.

 

What if my 2019 income is very low and my 2020 income is much higher?  Will I have to pay back the money I receive?

 

No.  Even if you no longer qualify when you file your return, the money does not have to be paid back.

 

I owe the IRS for back taxes and they take my refund every year.  Will they take this money too?

 

No.  The purpose of these payments is to get money into your hands immediately.  This money will not be seized to pay back taxes.

 

What about child support? 

 

IRS has indicated that delinquent child support is the one thing that will cause your payment to be taken.

 

What about other garnishments?

 

No.  The purpose of these payments is to get money into your hands immediately. 

 

I don’t have a valid social security number.  Will I still get a payment?

 

No.  Only people with valid social security numbers will receive this payment.

 

When will it come and how will I get it?

 

Treasury Secretary Mnuchin has directed IRS to send the payments out immediately.  Of course, this is the federal government, and these things take time.  Last time the government sent out stimulus payments, it took several months to send them all.  They went out in order of the last two digits of social security numbers.  IRS has indicated, that if you set up direct deposit for a refund on your 2018 or 2019 return, it will use that same account to get the money to you faster.  If you have not set up direct deposit in the last two years, your check will be mailed to the address the IRS has on file for you. If you have moved, file a change of address form as soon as possible.

 

What if I have closed my bank account since I last filed my return?

 

IRS will attempt to deposit money into the account that is closed.  When it doesn’t work, they will mail the check to your last known address.

 

Scam alert:  Already we’re hearing about phone calls pretending to be from the IRS wanting to know bank account information for direct deposit.  We’ve said it before and we’ll say it again.  THE IRS WILL NOT CALL YOU AND COLLECT INFORMATION OVER THE PHONE!  The only communication you will have from them is a letter, about 15 days after you receive your payment, letting you know that it’s been sent. 

 

 

 

 


What do we do?
8/25/19, 5:39AM

It's easy to look at our company and assume we just do tax returns during tax season.  But we do so much more than that!

 

Just this week we filed tax returns for someone who hasn't filed in six years.  We're helping someone who owes the IRS a large amount and can't afford to pay it all.  Our clients get a free half hour of tax planning every year, and many of them have been coming in to take advantage of that.  Small businesses need checkups to make sure they're on track for the year.  Individual taxpayers want to make sure they're having enough withheld, especially after last year!

 

Millions of people have problems with the IRS, and aren't sure where to turn.  We always appreciate your referrals if you know anyone who could use our help!


All About Gifts
2/3/19, 6:09AM

Thinking about giving a gift?  Or wondering if that check from Grandma is taxable?

 

One of the most common questions we get asked is whether a gift is taxable to the giver or the recipient.  Most gifts are not subject to the gift tax. Here are some things to consider.

 

1. Nontaxable Gifts.  The majority of gifts that we see are not taxable.  They include

  • Gifts that do not exceed the annual exclusion for the calendar year, $15,000 this year.
  • Tuition or medical expenses you paid directly to a medical or educational institution for someone,
  • Gifts to your spouse
  • Gifts to a political organization for its use, and
  • Gifts to charities.

 

2. Annual Exclusion. For 2019, the annual exclusion is $15,000.  If you give a gift of more than this amount to one person, you will need to file a gift tax return, but even then it’s unlikely you’ll need to pay any tax.  You are allowed to give a total of $11.4 million in gifts over your lifetime before any of it becomes taxable.  The gift tax return just keeps track of how close you are to that $11.4 million.

 

3. No Tax on Recipient. Generally, the person who receives your gift will not have to pay taxes on it.

 

4. Gifts Not Deductible. Making a gift does not ordinarily affect your taxes. You cannot deduct the value of gifts you make (other than deductible charitable contributions).  Gifts to Go Fund Me and similar fundraisers are usually not deductible.

 

5. Forgiven Debt and Certain Loans. The gift tax rules may also apply when you forgive a debt or give a loan that is interest-free or below the market interest rate.

 

6. Spouses can plan together.  You and your spouse can each give any individual up to $15,000.  So if you wanted to transfer $60,000 to a married child, you could give your child and their spouse $15,000 each, and your spouse can do the same.  No gift tax return required.

 

The topic of gifts is a tricky one with lots of considerations.  Give us a call or stop in to tell us about your specific situation, we’re always happy to help you do some planning!


Changes to GET program
6/3/18, 2:52AM

Do you have money invested in a Washington state GET account for college tuition?  There are big changes coming soon!

 

Here’s an article from the Seattle Times about the changes.   https://www.seattletimes.com/seattle-news/education/got-get-your-account-could-be-worth-38-percent-more-if-you-switch/?utm_source=marketingcloud&utm_medium=email&utm_campaign=Morning+Brief+5-30-18_5_30_2018

Basically it works like this.  If you have money in a GET account, it’s like an insurance plan.  It is guaranteed to pay out based on tuition at the most expensive state university.  So if you own 100 GET units, you can exchange them for one full year tuition at the University of Washington.  Western Washington University tuition is lower, so 100 units will actually go farther there.

 

The state is now going to open a 529 plan.  This is an investment account.  You can invest the money in stocks, or a money market account, or any other option they offer.  What you take out will no longer be tied to tuition, it will just be whatever the investment money has grown to.  The state wants to encourage people who have invested in GET to move over to the new 529 plan, and they’re going to give you a 38% bonus to do it.

 

If you choose to stay in the GET, there MAY be up to a 15% bonus, depending how much money the state pays out to people who switch to a 529.  Right now there is more money than needed in the GET program, which is where the bonus money will come from.

 

Here are my thoughts on what to do.  My last child is in college now, so this is a short-term investment picture for us.  To me, it makes sense to take the 38% bonus and roll into the 529 plan, since we’ll be spending the last of it in the near term anyway.  My niece is in sixth grade, and her father is thinking he doesn’t want to risk the stock market.  For them, it may make more sense to keep the money in the GET plan and take advantage of the guaranteed tuition, regardless of what happens in the stock market between now and when she starts college.

 

It’s impossible to know what tuition at Washington state universities will do in the future, but it hasn’t increased since 2012/2013.  Both UW and WSU tuition have actually decreased by over 10% over the last few years. 

 

It’s also impossible to know what the stock market will do.  The current government debt load combined with the large new tax breaks are likely to depress the stock market in the medium term unless significant changes are made.  Most experts expect lower-than-average return from the stock market over the next 5 years or so. 

 

If you have several years before the GET will be used and you think tuition will go up faster than the market, or you think the stock market won’t be a good investment, then staying in GET will provide tuition insurance and possibly an up to 15% bonus.  If you’re going to use the money sooner and/or think the stock market is where you want your money to be, then taking the bonus and moving to the 529 plan may be best for you. 

 

Everyone has their own schedule, circumstances, expectations, and risk tolerance.  Hopefully this will give you some things to think about as you make your decision.  And whatever you decide, good for you for saving for college!

 

 


Planning for now and for later
12/13/17, 9:41PM

It’s hard to believe that we’re coming to the end of another year!  As we get ready to wrap up 2017, we’re getting lots of questions about the new tax law working its way through Congress, and how it will affect our clients.

 

As I write this, the bill is in a joint committee, which means a group of members of the House and Senate are sitting down to combine the House and Senate versions.  Once they’ve completed their work, the joint bill must be passed by both the House and the Senate, and then signed by the President, before it becomes law.  There are many differences between the two bills being reconciled, but we can guess at some of the things that will emerge.

 

So how can you position yourself to take best advantage of what is likely to become law?  We have a few suggestions.

 

Consider deferring income into 2018

 

It is possible that you will be in a lower tax bracket in 2018 than you were in 2017.  If you can control when you receive income, you might want to wait to receive it until January.  For instance, if you’re in business for yourself, you could send out your invoices late in December, so you wouldn’t receive the income until January.  If you haven’t put money into a tax-deferred retirement account yet this year, or if you haven’t maxed out your contribution, this would be an excellent time to do that.

 

Push deductions into 2017

 

It seems likely that the standard deduction will be raised high enough that many people who currently itemize won’t be able to anymore.  If you are able to itemize your medical deductions, you could make sure to pay all your bills in 2017.  Track your mileage and parking for doctor appointments.  If you donate to charity, you could make your January payment in December.  A donation charged to a credit card in 2017 is deductible in 2017, even if you don’t pay the bill until 2018. 

 

Do you have stock that’s worth less than you paid for it?

 

Consider selling it in 2017.  You’ll be able to use that loss to offset gains, and can take a loss of up to $3000 over the amount of gains for the year, reducing your other income.

 

Are you going to purchase a vehicle or construction materials?

 

You will want to do that in 2017.  The sales tax on both will be deductible on your 2017 tax return, but it’s on the chopping block for 2018.

 

Do you deduct expenses associated with your job?

 

If you have unreimbursed expenses for your job, like union dues, mileage, small tools, uniforms, and so forth, pay for them in 2017 and keep the receipts. 

 

As the process moves forward, I encourage you to contact your representatives to share your opinions on what is important to you.  You can find and email your Senators here:  https://tinyurl.com/7jw9qov  And here is the site to find and email your Congressional Representative:  https://tinyurl.com/y9xgqgkg

 

As we learn more about what is likely to be passed we’ll share that too.  In the meantime, let us know if you have any questions, we’re always happy to help with tax planning.  Enjoy the holidays, and we’ll see you in the spring!

 

 


End of Year Donations
12/4/17, 11:25PM

As we approach the end of the year, our mailbox fills up with requests for money from all the charities we’ve ever supported and some we’ve never even heard of.  As you evaluate your charitable giving for the year and figure out how much you want to donate, keep these tax tips in mind.

 

1. Qualified Charities. You must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible.  Make sure that you are giving to a 501(c)3 organization.  If you’re not sure, ask.

 

2. Itemize Deductions. To deduct your contributions, you must file Form 1040 and itemize deductions. If you don’t itemize, you can still donate to charity, but it won’t affect your tax return.

 

3. Benefit in Return. If you get something in return for your donation, you may have to reduce your deduction. You can only deduct the amount of your gift that is more than the value of what you got in return. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.

 

4. Type of Donation. If you give property instead of cash, your deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market. If you donate used clothing and household items, they generally must be in good condition, or better, to be deductible. Special rules apply to cars, boats and other types of property donations.

 

5. Form to File and Records to Keep. You must file form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year.  If you need help setting a value for your donations of used items, google Donation Value Guide.

 

6. Donations of $250 or More. If you donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether you received any goods or services in exchange for the gift.

 

You must get this acknowledgement on or before the date you file your tax return.  Remember, having a cancelled check isn’t enough proof, you have to have the letter of acknowledgement as well.  If the IRS decides to audit you and you get a letter dated after the date you filed your return, the IRS will disallow your deduction, even if you can prove you made it.

 

Questions?  Call us!  We are always happy to talk taxes!


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