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Your tax returns are prepared for your approval. Once approved, they are e-filed to the appropriated agencies.
We will begin preparation and live transmission of income tax returns on January 15, 2019. Once the IRS and applicable states begin processing tax returns, we will post the date.
Income tax organizers are available to assist taxpayers in gathering their information prior to filing their taxes Just email us. There are no obligation on your part.
😃Once again this season, we will be offering tax preparation and e-filing at NO CHARGE to the following:
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Each year clients have questions regarding their taxes. We take pride in getting those questions answered.
Due to reoccurring check cashing issues and to maintain security; Townsend Tax Service will only be accepting Debit / Credit card payments. An auto invoice will be emailed from SQUARE. INC once preparation is completed with a link for payment.
The Auto Invoice will look like the attached sample
1. Your tax preparer will need copies of everyone's drivers license.
2. Your current cell phone number for texting
3. Your current email address
4. Your current mailing address
5. Everyone's social security number
6. Everyone's date of birth
7. Your banking info if direct deposit is desired: (name of bank, routing number, account number, saving or checking)
8. Partnership and Corporate returns are due no later than MARCH 15.
TOWNSEND TAX SERVICE
We keep track of all the tax law changes so you don't have to.
Your Complete Guide to the 2018 Tax Changes
1. THE MARRIAGE PENALTY IS (MOSTLY GONE)
One thing to notice from these brackets is that the so-called marriage penalty, which many Republican leaders (including President Trump) wanted to eliminate, is almost absent.
If you're not familiar, here's a simplified version of how the marriage penalty works. Let's say that two single individuals each earned a taxable income of $90,000 per year. Under the old 2018 tax brackets, both of these individuals would fall into the 25% bracket for singles. However, if they were to get married, their combined income of $180,000 would catapult them into the 28% bracket. Under the new brackets, they would fall into the 24% marginal tax bracket, regardless of whether they got married or not.
In fact, the married filing jointly income thresholds are exactly double the single thresholds for all but the two highest tax brackets in the new tax law. In other words, the marriage penalty has been effectively eliminated for everyone except married couples earning more than $400,000.
2. STANDARD DEDUCTION AND PERSONAL EXEMPTION
While it's being sold as a tax cut, the higher standard deduction really falls more under the category of a simplification.
Yes, the standard deduction has roughly doubled for all filers, but the valuable personal exemption has been eliminated. For example, a single filer would have been entitled to a $6,500 standard deduction and a $4,150 personal exemption in 2018, for a total of $10,650 in income exclusions. Under the new tax plan, they would just get a $12,000 standard deduction. Is it better? Yes. But it's not really "doubled."
3. CAPITAL GAINS TAXES
The general structure of the capital gains tax system, which applies to things like stock sales and sales of other appreciated assets, isn't changing. However, there are still a few important points to know.
For starters, short-term capital gains are still taxed as ordinary income. Since the tax brackets applied to ordinary income have changed significantly, as you can see from the charts above, your short-term gains are likely taxed at a different rate than they formerly were.
Also, under the new tax law, the three capital gains income thresholds don't match up perfectly with the tax brackets. Under previous tax law, a 0% long-term capital gains tax rate applied to individuals in the two lowest marginal tax brackets, a 15% rate applied to the next four, and a 20% capital gains tax rate applied to the top tax bracket.
Instead of this type of structure, the long-term capital gains tax rate income thresholds are similar to where they would have been under the old tax law.
4. TAX BREAKS FOR PARENTS
I mentioned earlier that the personal exemption is going away, which could disproportionally affect larger families.
However, this loss and more should be made up for by the expanded Child Tax Credit, which is available for qualified children under age 17. Specifically, the bill doubles the credit from $1,000 to $2,000, and also increases the amount of the credit that is refundable to $1,400.
In addition, the phaseout threshold for the credit is dramatically increasing.
If your children are 17 or older or you take care of elderly relatives, you can claim a nonrefundable $500 credit, subject to the same income thresholds.
Furthermore, the Child and Dependent Care Credit, which allows parents to deduct qualified child care expenses, has been kept in place. This can be worth as much as $1,050 for one child under 13 or $2,100 for two children. Plus, up to $5,000 of income can still be sheltered in a dependent care flexible spending account on a pre-tax basis to help make child care more affordable. You can't use both of these breaks to cover the same child care costs, but with the annual cost of child care well over $20,000 per year for two children in many areas, it's safe to say that many parents can take advantage of the FSA and credit, both of which remain in place.
5. EDUCATION TAX BREAKS
Earlier versions of the tax bill called for reducing or eliminating some education tax breaks, but the final version does not. Specifically, the Lifetime Learning Credit and Student Loan Interest Deduction are still in place, and the exclusion for graduate school tuition waivers survives as well.
One significant change is that the bill expands the available use of funds saved in a 529 college savings plan to include levels of education other than college. In other words, if you have children in private school, or you pay for tutoring for your child in the K-12 grade levels, you can use the money in your account for these expenses.
6. MORTGAGE INTEREST, CHARITABLE CONTRIBUTIONS, AND MEDICAL EXPENSES
These three deductions remain, but there have been slight tweaks made to each.
First, the mortgage interest deduction can only be taken on mortgage debt of up to $750,000, down from $1 million currently. This only applies to mortgages taken after Dec. 15, 2017; pre-existing mortgages are grandfathered in. And the interest on home equity debt can no longer be deducted at all, whereas up to $100,000 in home equity debt could be considered.
Next, the charitable contribution deduction is almost the same, but with two notable changes. First, taxpayers can deduct donations of as much as 60% of their income, up from a 50% cap. And donations made to a college in exchange for the right to purchase athletic tickets will no longer be deductible.
Finally, the threshold for the medical expenses deduction has been reduced from 10% of adjusted gross income (AGI) to 7.5% of AGI. In other words, if your adjusted gross income is $50,000, you can now deduct any unreimbursed medical expenses over $3,750, not $5,000 as set by prior tax law. Unlike most other provisions in the bill, this is retroactive to the 2017 tax year.
7. THE SALT DEDUCTION
Perhaps the most controversial aspect of tax reform on the individual side was the fate of the SALT deduction. Early versions of the bill proposed eliminating the deduction (which stands for "state and local taxes"), which didn't sit well with some key Republicans in high-tax states.
The final version of the bill keeps the deduction, but limits the total deductible amount to $10,000, including income, sales, and property taxes.
8. DEDUCTIONS THAT RE DISAPPEARING
While many deductions are remaining under the new tax law, there are several that didn't survive, in addition to those already mentioned elsewhere in this guide. Gone for the 2018 tax year are the deductions for:
A. Casualty and theft losses (except those attributable to a federally declared disaster)
B. Unreimbursed employee expenses
C. Tax preparation expenses
D. Other miscellaneous deductions previously subject to the 2% E. AGI cap
F. Moving expenses
G. Employer-subsidized parking and transportation reimbursement
9. ITEMIZING WON'T BE WORTHWHILE ANYMORE FOR MILLIONS OF HOUSEHOLDS
While we're on the topic of deductions, many of these may now be a moot point, even to taxpayers who have been using them for years. Even though most major deductions are being kept in place, the higher standard deductions will make itemizing not worthwhile for millions of households.
For example, let's say that a married couple pays $8,000 in mortgage interest, makes $4,000 in charitable contributions, and pays $5,000 in state and local taxes. This adds up to $17,000 in deductions, which when compared with the previous $13,000 standard deduction makes itemizing look like a smart idea.
However, with the new $24,000 standard deduction for married couples, it would no longer be worth it to itemize.
In fact, the Joint Committee on Taxation estimates that 94% of households will claim the standard deduction in 2018, up from about 70% now.
10. OBAMACARE PENALTIES WILL BE GOING AWAY
Republicans were unsuccessful in their efforts to repeal the Affordable Care Act, otherwise known as Obamacare, in 2017. However, the tax reform bill repeals the individual mandate, meaning that people who don't buy health insurance will no longer have to pay a tax penalty.
It's worth noting that this change doesn't go into effect until 2019, so for 2018, the "Obamacare penalty" can still be assessed.
11. THE PASS-THROUGH DEDUCTION -- DOES IT APPLY TO YOU?
The new tax code makes a big change to the way pass-through business income is taxed. This includes income earned by sole proprietorships, LLCs, partnerships, and S corporations.
Under the new law, taxpayers with pass-through businesses like these will be able to deduct 20% of their pass-through income. In other words, if you own a small business and it generates $100,000 in profit in 2018, you'll be able to deduct $20,000 of it before the ordinary income tax rates are applied.
There are phaseout income limits that apply to "professional services" business owners such as lawyers, doctors, and consultants, which are set at $157,500 for single filers and $315,000 for pass-through business owners who file a joint return.
12. ALTERNATIVE MINIMUM TAX
The alternative minimum tax (AMT) was implemented to ensure that high-income Americans paid their fair share of taxes, regardless of how many deductions they could claim. Essentially, higher-income households need to calculate their taxes twice -- once under the standard tax system and once under the AMT -- and pay whichever is higher.
The problem is that the AMT exemptions weren't initially indexed for inflation, so over time, the AMT started to apply to more and more people, including the middle class, which it was never intended to affect.
So, the tax reform bill permanently adjusts the AMT exemption amounts for inflation in order to address this problem, and makes them significantly higher initially in 2018. Here's how the AMT exemptions are changing for 2018.
In addition, the income thresholds at which the exemption amounts begin to phase out are dramatically increased. Currently, these are set at $160,900 for joint filers and $120,700 for individuals, but the new law raises these to $1 million and $500,000, respectively.
13. A DIFFERENT WAY TO CALCULATE INFLATION
Perhaps one of the most significant, but least talked-about, provisions in the new tax bill is the switch in the way inflation is calculated.
Under the previous tax law, inflation is measured by the consumer price index for all urban consumers (CPI-U), which essentially tracks the cost of goods and services that affect the typical household.
The new law adopts a metric called the Chained CPI. My colleague Sean Williams does a great job of explaining the Chained CPI, but essentially the key difference is that the Chained CPI assumes that if a particular good or service gets too expensive, consumers will trade down to a cheaper alternative.
The effect is that the Chained CPI grows slower than the traditionally used CPI-U. This means that tax bracket thresholds will rise slower, as will other IRS inflation-sensitive numbers, such as eligibility limits for certain deductions and credits.
14. THE ESTATE TAX EXEMPTION
The estate tax already applied to a small percentage of households. Essentially, the 40% estate tax rate applied only to the portion of an estate that was valued at $5.59 million or more per individual, or $11.18 million per married couple.
The new tax law doubles these exemptions. Now, for 2018, individuals get a $11.18 million lifetime exemption and married couples get to exclude $22.4 million. As you can probably imagine, this won't leave too many families paying the estate tax.
15. MOST OF THE INDIVIDUAL TAX BREAKS ARE TEMPORARY
So far, we've discussed the tax changes that will affect individuals. It's also important to point out that most of the changes to individual taxes made by the bill are temporary -- they're set to expire after the 2025 tax year.
The notable exception is the change to the Chained CPI as a means to calculate inflation. In simple terms, this means that the income thresholds for each marginal tax bracket will rise more slowly than they previously would, which will presumably make a greater portion of each worker's income subject to higher marginal tax rates over time.
The combination of the temporary nature of the tax cuts and the permanent switch to the Chained CPI is expected to have the eventual effect of higher taxes on the middle class as compared to current tax law.
16. CORPORATE TAX RATES
So far, we've discussed individual tax reform, but the most dramatic changes made by the bill are on the corporate side.
For starters, the bill lowers the corporate tax rate to a flat 21% on all profits. This is not only a massive tax cut, but is a major simplification as compared to the 2017 corporate tax structure.
The global average corporate tax rate is about 25%, so this move is designed to make the U.S. more globally competitive, which should in turn help keep more corporate profits (and jobs) in the United States.
In addition to these changes, the corporate AMT of 20% has been repealed.
17. A TERRITORIAL TAX SYSTEM
The tax reform bill also changes the U.S. corporate tax system from a worldwide one to a territorial system. Currently, U.S. corporations have to pay U.S. taxes on their profits earned abroad, and the new system will end this effective double-taxing of foreign profits.
18. REPATRIATION OF FOREIGN CAS AND ASSETS
As a result of the worldwide tax system, which makes foreign profits subject to the 35% top corporate tax rate, there is about $2.6 trillion in U.S. corporations' foreign profits held overseas.
In order to bring this money back to the United States, the new tax law sets a one-time repatriation rate of 15.5% on cash and equivalent foreign-held assets and 8% on illiquid assets like equipment, payable over an eight-year period.
This could be big news for companies like Apple, which has more than $200 billion parked overseas.
19. WHEN ALL OF THIS GOES INTO EFFECT, AND WHEN YOU'LL NOTICE THE CHANGES
Unless noted otherwise, the changes made by the tax reform bill go into effect for the 2018 tax year, which means you'll first notice them on your tax return that you file in 2019.
However, you can expect to see a change in your paychecks after Jan. 1, as employers will modify their withholdings to adapt to the newly passed 2018 tax brackets.
The IRS released the newly redesigned 2018 Form 1040 and associated schedules on June 29, 2018. The redesigned Form 1040, about half the size of the 2017 (current) version, will also replace the Form 1040A and 1040EZ for the upcoming 2019 filing season.
The 2018 Form 1040 has been streamlined to only include the five most common types of income, federal withholding, EITC, Additional Child Tax Credit and the Education Credit. The detail for all other types of income, adjustments to income, nonrefundable, refundable credits, other payments and other taxes that exist on the current Form 1040 have been moved to one of six new schedules:
Schedule 1 (Additional Income and Adjustments to Income)
Includes the remaining income types such as from Schedule C, D, E and F, unemployment compensation, etc. that were shown on the current Form 1040.
All adjustments to income such as Educator expenses, IRA contributions, student loan interest, etc.
Schedule 2 (Tax)
Includes all lines that are used to calculate total tax such as the regular tax, tax on child’s unearned income, alternative minimum tax, etc.
Schedule 3 (Nonrefundable Credits)
Includes all nonrefundable credits such as credit for child and dependent care expenses, education credits, child tax credit and the new credit for other dependents, etc.
Schedule 4 (Other Taxes)
Includes all other taxes such as self-employment tax, household employment tax, etc.
Schedule 5 (Other Payments and Refundable Credits)
Includes the lines for other payments and refundable credits such as extension payment, credit for federal tax on fuels, etc.
Schedule 6 (Foreign Address and Third Party Designee)
Where foreign address and third party designee information is shown if they are applicable.
The IRS has explained that the version of the newly redesigned form released on June 29 is a pre-release draft and the IRS will be working with the tax community to finalize the Form 1040 over the summer. The final version of the form will be released towards the end of this year.
The draft of the 2018 Form 1040 also includes changes that are a result of the Tax Cuts and Jobs Act such as:
Removal of exemption amount boxes and the total exemptions line.
Addition of check box for the new credit for other dependents for each dependent.
New line 9 for the new qualified business income deduction (20% deduction for pass-through business income – Sec 199A).
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