ManagementNewsletterSmall BusinessTaxtax planning

The IRS & Credit Card Transactions, Save More in 2018, & Five tax tips for job changers in this Dec. 2018 Newsletter #smallbiz #profit #tax

 December 2017

  • New Year, New Job
    • Five tax tips for job changers
  • Save More in 2018
    • Retirement contribution and Social Security limits on the rise.
  • A Happy Holiday Traditions Quiz
  • Credit Card Transactions Could Pose Audit Risk
    • What small businesses need to know

After an eventful year, we all deserve a happy holiday season and hopefully some well-needed relaxation. While tax reform will continue to be debated, many preliminary figures for 2018 are set. Check out the details inside. The economy and job market have continued to improve, which means you may be considering a new job. If you are planning on a change, look at the tax checklist for job changers. Or, if you work for yourself and take credit cards as payment, learn about the new IRS focus on those small business payments.

Looking for something to talk about at the next family gathering? Consider sharing the quiz regarding the sometimes strange origins of popular holiday traditions.

As always, should you know of someone who may benefit from this information please feel free to forward this newsletter to them.

New Year, New Job

Five tax tips for job changers
There are a lot of new things to get used to when you change jobs, from new responsibilities to adjusting to a new company culture. One thing you may not have considered are the tax issues created when you change jobs. Here are tips to reduce any potential tax problems related to making a job change this coming year.

OneDon’t forget about in-between pay.

It is easy to forget to account for pay received while you’re between jobs. This includes severance and accrued vacation or sick pay from your former employer. It may also include unemployment benefits. All are taxable but may not have had taxes withheld, causing a surprise at tax time.

TwoAdjust your withholdings.

A new job requires you to fill out a new Form W-4, which directs your employer how much to withhold from each paycheck. It may not be best to go with the default withholding schedule, which assumes you have been making the salary of your new job all year. You may need to make special adjustments to avoid having too much or too little taken from your paycheck. This is especially true if there is a significant salary change or you have a period of low-or-no income. Luckily, the IRS provides a withholding calculator on its website (IRS Withholding Calculator). Keep in mind you’ll have to fill out a new W-4 in the next year to rebalance your withholding for a full year of your new salary.

Year-End Tax Checklist
ThreeRoll over your 401(k). 

While you can leave your 401(k) in your old employer’s plan, you may wish to roll it over into your new employer’s 401(k) or into an IRA. The best way is to get your retirement funds rolled over directly between investment companies. If you take a direct check, you’ll have to deposit it into the new account within 60 days, or you may be assessed a 10 percent penalty and pay income tax on the withdrawal.

FourDeduct job-hunting expenses.

Tally up your job-seeking expenses. If they and other miscellaneous deductible expenses total more than 2 percent of your adjusted gross income for the year, you can deduct them on an itemized return. This includes things like costs for job-search tools, placement agencies and recruiters, and printing, mailing and travel costs. A couple caveats: you can only use these deductions if your expenses were to search for a job in the same industry as your previous job and you were not reimbursed for them by your new employer.

FiveDeduct moving and home sale expenses.

If you moved to take a new job that is at least 50 miles farther from your previous home than your old job was, you can also deduct your moving expenses. There’s another benefit for movers, too. Typically, you can only use the $250,000 capital gain exclusion for home sales if you lived in your primary residence for two of the last five years before you sold it. But there is an exception to the rule if you sold your home to take a new job.

Finding a new job can be an exciting experience, and one that can create tax consequences if not handled correctly. Feel free to call for a discussion of your situation.

Save More in 2018

Retirement contribution and Social Security limits on the rise
The maximum contribution to 401(k) accounts rises by $500 in 2018, the first increase in three years. If you have not already done so, now is the time to plan for contributions into your retirement accounts in 2018.

Retirement Contribution Limits
Retirement Program20182017ChangeAge 50 or
over catch up
401(k), 403(b), 457 plans
+$500add: $6,000
IRA: Roth
noneadd: $1,000
noneadd: $3,000
IRA: Traditional
noneadd: $1,000
Social Security
Wages subject to Social Security
+$1,500Annual Social Security employee tax: $7,979.40
Average estimated monthly retirement benefit

Don’t forget to account for any matching programs offered by your employer as you determine your various funding levels for next year.

A Happy Holiday Traditions Quiz

While there are many holiday traditions, some of the most popular ones have strange and surprising origins. Get into the festive spirit with a smile by guessing the origins of these traditions:
QuestionThe Christmas tree originated in 16th century Germany, but didn’t become a popular tradition until it was decorated by a certain royal family. Who was the queen who made Christmas trees famous?
AnswerQueen Victoria, of the United Kingdom. In 1848, an illustration of Queen Victoria’s decorated Christmas tree was published in a London newspaper. The tradition was quickly emulated throughout the United Kingdom and spread to the United States.

QuestionWhich holiday tradition representing love and romance comes from the Anglo Saxon words meaning “poo on a stick?”
Holiday Traditions
AnswerMistletoe. This holiday plant is actually a parasite that relies on birds to eat the seeds and dispose of them on other trees. The plant then steals its nourishment from its host tree. To think it now creates the opportunity to steal a kiss from a loved one…

QuestionThis traditional holiday game has its own league, abbreviated as the MLD. Can you name it?
AnswerDreidel. This popular game played by spinning a wooden top is part of the Jewish tradition of Hanukkah. A Major League Dreidel (MLD) organization was founded in New York City in 2007.

QuestionAccording to folklore, what 250-year-old sweet has its humble beginnings as a way to keep children quiet during church services?
AnswerThe candy cane. According to legend, a choirmaster in Germany purchased candy sticks to keep children quiet during holiday services. In the 1800’s a curved stick with red stripes quickly made its lasting mark during the holidays representing a shepards staff and handy tree decoration.

QuestionThis holiday tradition was created to promote use of a public service. Can you name it?
AnswerThe holiday card. The Christmas card was created in England in 1843 as a way to increase public use of the country’s new Penny Post mail service. With the increased use of the printing press, holiday cards soon became popular.

Credit Card Transactions Could Pose Audit Risk

What small businesses need to know
Small business owners beware: the IRS may more closely scrutinize reporting of credit card transactions after it was criticized for lax enforcement.

The IRS’ overseer, the Treasury Inspector General for Tax Administration (TIGTA), recently said the IRS had been missing opportunities to audit tax returns that had large discrepancies between income and the card payments reported on Forms 1099-K.

This means small businesses that accept credit, debit or gift card payments can expect to draw the attention of IRS auditors if there are material differences between what is reported on their tax returns and what is on their 1099-Ks.

Tax gap concern driving the scrutiny

TIGTA has estimated an underpayment of more than $450 billion in income taxes every year. In an effort to close this “tax gap,” it recommended the IRS focus on some of the larger or more obvious sources of underpayment.

One area TIGTA identified was on Forms 1099-K, where more than 20,000 taxpayers who received them had discrepancies of more than $10,000 on their returns. Calculating from this small sample size, there was at least a $200 million underpayment.

Credit Card Transactions

Who is impacted

If you have a business that accepts payment cards like debit cards or credit cards, you will probably receive a Form 1099-K from your payment processor. The form is also required for anyone who has $20,000 in card payments and 200 transactions or more per year. Examples of those who would receive Forms 1099-K include users of PayPal, sellers on Ebay and Etsy, cab drivers and any small business that accepts card transactions as a form of payment.

Here’s how you can prepare

Receiving a Form 1099-K and reporting it in such a way that the IRS is satisfied can be complicated. You could easily double-report your revenue from 1099-Ks out of an excess of caution. Or, you may not be disclosing your correct reporting of card income in a way that IRS audit programs are able to identify. It’s often best to get professional guidance to ensure your return does not stick out when the IRS tries to comply with the TIGTA request for more oversight.

As always, should you have any questions or concerns regarding your situation please feel free to call.