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Government Shutdown Might Mean Refund Delay, Let Your Accountant File It Quickly

When the government shutdown occurred earlier this year, the IRS was one of the main areas where funding stopped. As a result, the tax return process was in jeopardy. The question, at the time, was how quickly would tax refunds be processed, if at all, and how long would people have to wait to receive them.

But because of a few loopholes in the policy about government offices operating during a shutdown, the IRS has been able to stay the course, with some minor delays, in processing returns.

Prior Shutdowns and the Antideficiency Act

If a government shutdown occurs, some government areas still remain in operation. One of those areas is, of course, the IRS. In the past, the only contingency was while returns would be processed, refunds might be delayed until the government was again funded.

Your local Tax Accountant, however, is probably going to continue doing the work of helping people prepare their returns as most tax filers like to complete them as soon as the tax season starts.

Last year, 18.3 million people claimed around $12.6 billion in early refunds. This year, the IRS stated that tax filing season would begin on January 28th, despite the Antideficiency Act that states what type of work can be done during a government shutdown.

IRS Employees Still Worked

In spite of the shutdown, the Trump Administration vowed that the processing of returns and refunds would not be interrupted. This meant the IRS had to keep-on around 46,000 employees (57% of its workforce).

But those employees did their work without pay with the promise of back-pay as soon as the government was funded and operational again.

In the interim, the IRS assigned staffing to functions it deemed a necessity, such as processing electronic returns, processing returns with payments, mailing tax forms, appeals, criminal law enforcement and investigations, and technical work to maintain computer systems. Other job functions like audits, returns, non-automated collections, and legal counsel, etc., were all temporarily stopped.

The IRS Tried to Serve Taxpayers

Despite the fact it only had half its workforce in place during the shutdown, the IRS still tried to help taxpayers with any concerns they might have. 38% of calls to its Automated Collection System were answered with callers waiting close to 50 minutes. As far as the IRS’s Installment Agreement/ Balance Due line, only seven percent of calls were answered with an over 80 minute wait time.

The IRS also had five million pieces of mail that needed to be processed. And it had over 80,000 responses to the fiscal year 2018’s Earned Income Tax Credit audits that went unanswered. Add to that the 87,000 amended returns that no one addressed.

The IRS’s Old Computer System

Although it is probably one of the most important areas of the government, the IRS is highly underfunded, and this point goes beyond normal funding the agency receives when the government is fully operational. One of the areas where it is behind the times is in its computer systems, which haven’t been updated since the 1960s.
Currently, taxpayer information is stored in 60 different case management systems that aren’t linked together and the agency lacks a central database. The problem is IRS employees are unsure if they are servicing the right taxpayer accounts or not. These antiquated systems also make the audit process highly imprecise and ineffective.

Tax Reform Questions Unanswered

In 2014, the IRS instituted a policy of answering tax law related questions in a specific fashion and only during the tax season months of January through April. But the Trump Administration’s tax reform changed that policy, especially in regard to questions about the Tax Cuts and Job Acts reform.

But callers were told those questions couldn’t be answered due to budget restrictions and instead were directed to an automated answering system where they were promptly disconnected. Those taxpayers who actually got a live person were told that IRS employees had not been trained on the reforms and apologized for not being able to answer their questions.

Tax Returns and Refunds Were Still Processed

With all the problems the IRS faces with old computer systems and insufficient training on new tax laws in addition to being short of staff during the shutdown, the agency was still able to process returns and refunds, although not at the same level as the prior year. In the first week of the tax season, the IRS was still able to process 13, 306, 000 returns with 4,672,000 refunds paid out. The average refund, however, went down from the prior year from $2,035 to $1,865.00.

Conclusion

The government shutdown finally did end, although President Trump threatened another one might follow. Thankfully, that didn’t happen. All IRS employees are most likely back at work, but the fact remains they are plagued with old systems and not enough training about tax reforms to answer taxpayer questions.

Have you done your 2018 taxes yet? Are you worried the tax reforms of last year might make doing your tax return difficult and negatively impact your refund? It’s not too late to contact your Cedar City Accountant to help you through your federal as well as with your Cedar City taxes.

Tax Code Updates: Will St George Business’ See Tax Cuts In The Near Future?

The Tax Cuts and Jobs Act, sometimes called the Trump Tax Reform, passed several tax reforms that will impact businesses in St. George. To see how the tax reform will affect our local businesses, our accountant has brought together a basic overview so you can clearly see the changes.

Tax Changes For Pass-Through Businesses In St George

The majority of American businesses qualify as pass-through businesses. Because of this, the tax changes which affect pass-through businesses have been some of the most heavily scrutinized. On the surface, the changes seem fairly straightforward. A 20% tax deduction is now applied to all pass-through business entities. But there are several different business aspects which may affect that 20% tax deduction.

  • Service-based business – If your business relies on you providing a service such as medical, accounting, consulting, or other services (except architect and engineering services) your business will only receive the 20% deduction if you make less than $157,500 a year as a single taxpayer. Married couples who own service-based businesses will receive the 20% deduction if they make less than $315,000.
  • Qualified business income – The base of a qualified business income is the net income your business generates. Under the new tax reform, say your income is $60,000 and qualified business income is $50,000. With the 20% tax deduction, you can deduct $10,000 from your taxable income. As all this is below the deduction threshold, you will not need to make any more adjustments to your qualified business income.

This formula is also affected by qualified properties, W-2 employee wages, business equipment purchases and more. Our accountant is well versed in business accounting and can help you understand how these changes will affect your particular business.

Be Aware Of These Corporate Tax Changes

One of the more dramatic changes in the tax laws was the change of corporate tax rate from 35% to 21%. Lawmakers said this was to attract corporations bring work to the United States. Another large change was the elimination of the corporate alternative minimum tax.

As more financial analysts dig into the new tax laws, more changes become apparent. Some things such as business entertainment expenses and employee benefits, which have been previously 100% deductible have changed. These changes apply to both pass-through business and corporations. There are many other such changes which may or may not apply to your specific business venture.

To receive advice on the new Tax Cuts and Jobs Act, set up an appointment with our accountant. He can help you determine your eligible tax deductions and help you decide how to best utilize your business so you will receive the biggest benefits from the new tax laws.

Tax News: Trump’s New Tax Reform

Tax Changes Via The Trump Admin

Many people are concerned how the new tax reform will affect their taxes. Yet, for the uninitiated, reading through legal documents to understand the new tax laws can be difficult. To help you better understand, AA Tax and Accounting Services has sorted through the tax reform and compiled it in a way to make it more understandable.

Tax Changes For Individual Filers

The majority of the tax changes were directed at individual filers, though they will only last until 2025. The first major change was the individual filers rates as shown below.

Income Bracket

Single Filers

Married, Filing Jointly

10% (remained the same)

$0 – $9,525

$0 – $19,050

12% (down from 15%)

$9,526 – $38,700

$19,051 – $77,400

22% (down from 25%)

$38,701 – $82,500

$77,401 – $165,000

24% (down from 28%)

$82,501 – $157,500

$165,001 – $315,000

32% (down from 33%)

$157,501 – $200,000

$315,001 – $400,000

35% (remained the same)

$200,001 – $500,000

$400,001 – $600,000

37% (down from 39.6%)

$500,001 or more

$600,001 or more

You should also be aware of many other important tax law changes:

  • Personal exemption – There is no more personal exemption for single filers or married joint filers.
  • Standard deduction – The standard deduction has almost doubled, going from $6,350 to the now $12,000 for single filers. Married couples who file jointly have had their standard deduction go from $12,700 to the present $24,000.
  • Child tax credit – Credit now gives filers $2,000 per child under 17 years old.
  • Non-child dependent credit – Parent can temporarily take a $500 credit for each and every non-child dependent they are financially supporting.
  • Cap on local and state tax deduction – The new deduction cap is now $10,000. The deduction will remain the same if you want to itemize.
  • Estate tax – Almost all estates are now exempted from the estate tax. Those who will still have to pay are those who inherit $5.49 million for individuals and $10.98 million for couples.
  • Alternative minimum tax – The income exemption rates for the alternative minimum tax has been raised and now single filers can exempt $70,300 and married filers can exempt $109,400.
  • Health insurance penalty – There is now no penalty for not having health insurance.
  • Mortgage interest deduction – With a new mortgage on your first or second home, you can only deduct the interest up to $750,000.
  • Inflation adjustments – Inflation will be measured more slowly, which will make your deductions worth somewhat less.

Tax Changes For Businesses And Corporations

The new tax reform has also changed things when it comes to business and corporate taxes. Below is a short overview of what has been changed.

  • Corporate tax rate – The corporate rate has gone from multiple income brackets to just one. All corporations will be taxed 21% of their taxable corporate income.
  • Pass-through business tax lowered – Will now require owners, partners, shareholders of LLCs, S-corporations, and partnerships to pay taxes on 20% of their income.
  • Pass-through business tax break – If the partner or owner of a business also draws a salary from their business, that income will be subject to task.
  • U.S. multinational taxes – U.S. companies who earn overseas will now be required to pay taxes on their taxable corporate income whether they bring the profits home or not. The tax reform requires corporate businesses pay 15.5% on their cash assets and 8% on their non-cash assets.

These changes can be complicated. If you want to be sure you have everything in order when it comes to your taxes, feel free to contact us today and set an appointment. Our accountant can walk you through the tax changes which apply to you so that you can feel comfortable when filing your taxes.

Tax Planning And Preparation Can Save You In The Long Run

Tax_Planning_and_Preparation_Can_Save_You_in_the_Long_Run

With today’s ever-changing economic climate, it’s imperative to have an expert in tax planning and preparation on your side. As everyone knows, tax laws are already complicated. But to make things worse, they still undergo frequent changes that could affect the way you do business, pay taxes, and file your year-end returns.

Many individuals and business owners believe they are well-equipped to handle their own tax planning and preparation. While some of them have the education and experience to handle it, the changing nature of tax codes makes it difficult to stay on top of it all.

That’s why professional and tax planning services are so helpful. Accounting firms and CPAs make it their full-time job to stay on top of the tax code and keep you out of trouble. They understand the laws and loopholes, and can take away the headache – and inherent risk – involved in doing your own taxes. A professional tax preparer can help you:

  • Relax — Doing their taxes is one of those things everyone dreads. At its best, it’s a tedious process – especially for businesses. At its worst, it can lead to audits, deficits, and legal nightmares. When you let the professionals handle your taxes, you know they’re done right. And that’s peace of mind.
  • Prepare — A professional accounting firm can keep your tax liability in mind as you do business throughout the year, so you don’t face unnecessary and unpleasant surprises on April 15th.
  • Save money — A lot of people and businesses hesitate to hire an accountant due to the expense. The truth is, it may cost less than you think to hire a qualified professional. If you’re receiving a return, many people will actually pay nothing “out of pocket” for the service. And most importantly, a certified tax preparer knows how to reduce your tax liability so you never pay more than you have to.
  • Save time — April 15th does’t have to loom large over your psyche like a clown with a chainsaw. People who hire a tax professional simply don’t have to worry. Just provide the necessary information and let them take care of the rest. No perusing tax manuals, searching for answers online, or waiting in line at the post office.

Filling your tax returns doesn’t have to cause indigestion. Hiring a professional accountant can not only take the worry off your shoulders, but could end up saving you fines, audits, and legal ramifications over the long run. It’s an investment that always pays off.

 

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