BBS Office Procedure Updates April 2020

  • We want to confirm that we are receiving your e-mails and voicemails, and are doing our best to respond as quickly as possible. Under current circumstances, however, it could be up to a week before we are able to get back to you, and we greatly appreciate your patience!
  • While observing state guidance, one or two of us are periodically in the office for limited timeframes. 
  • As a best practice, and particularly during this time of limited access, please be sure to make and keep copies of all of your original tax documents. 
  • With the extension of the tax deadline to July 15, if you have not yet sent us your information, we would still encourage you to scan and upload your documents to the portal, or alternatively, send them to our PO Box:

Business Bookkeeping Services
P. O.  Box 249
South Weymouth, MA  02190

  • We continue to urge everyone to stay home, but If you must come to the office:
    • You will need to call or e-mail in advance to make sure we wil be there.
    • When you arrive, call us from your car to let us know you are dropping off or picking up documents.
    • ​We will then come to the main door to retrieve or deliver envelopes, packages, or checks, and/or wait for you to sign your returns. 

As guidance changes and/or restrictions are lifted, we will issue additional communication for your benefit.​

COVID-Related Scams: What to Look Out For

Cybercriminals see the pandemic as an opportunity

Criminals are relentless in finding new ways to prey on people’s fears during this pandemic. We urge you to be vigilant in questioning any texts, emails or offers that require you to click on links, fill out surveys, or give any personal information to unknown sources. You can Google the subject line of any email to see if there are reports of it being spam or phishing.The FBI is warning people about a new stimulus check scam where people receive a text message, supposedly from Costco, offering “$110 goodies,” and other hooks, to entice people to fill out bogus surveys. The information from these surveys can be used to steal your identity, commit financial fraud, or install malware into your computer. Here is the press release from the FBI for more information.

At this time, you should be particularly wary of any emails or texts from unknown senders concerning:

  • The CDC and other organizations offering links to new info about coronavirus
  • Charities asking for donations
  • Airline relief funds
  • COVID-19 Cures and vaccines
  • Financial relief and stimulus checks
  • CornonavirusTesting kits 

The IRS released a similar warning, as well as instructions for reporting phishing, online, and other scams. Read their message here:
content.govdelivery.com/accounts/USIRS/bulletins/284881a​

The Federal Trade Commission’s consumer information page offers additional tips to avoid scams. You can access it here:
https://www.consumer.ftc.gov/articles/how-recognize-and-avoid-phishing-scams

Stimulus Checks for Social Security Recipients

At a press conference on Wednesday, April 1, 2020 the Treasury and IRS has a bit of good news regarding economic the economic impact checks being issued to US citizens under the CARES Act. In short, those receiving Social Security benefits who don’t typically file a tax return will not need to file an abbreviated (simple) tax return to receive their stimulus payment.  The IRS will use information from Forms SSA-1099 and RRB-1099 to generate payments for these individuals.

From the news release:

“We want to ensure that our senior citizens, individuals with disabilities, and low-income Americans receive Economic Impact Payments quickly and without undue burden,” said Secretary Steven T. Mnuchin. “Social Security recipients who are not typically required to file a tax return need to take no action.”

The payment will be sent via the same method that the individual ordinarily receives their benefits, either as a direct deposit or check.

It is good to know that some of the people who are struggling the most will have one less thing to worry about during these especially difficult times.

Answers & Resources for COVID Tax Season

Magnified illustration with the word Answers on white background.

Tax rules continue to change due to the pandemic—both for this tax season, and for 2020. Below are some quick answers to some of the most frequently asked questions we have heard in recent weeks, as well as trusted links for resources related to coronavirus:

  • Required minimum distributions (RMDs) from retirement accounts are waived for 2020.
  • The deadline for 2019 tax returns and payments has been extended to July 15, 2020. If you owe money, you can file anytime now and still delay payment until July 15th.
  • If you make quarterly estimated tax payments, June 15th estimated taxes are still due on June 15th, 2020.
  • If you receive Social Security benefits and don’t typically file a tax return, you do not need to file an abbreviated (simple) tax return to receive your stimulus payment.  
  • Rules regarding unemployment benefits, particularly for contractors and self-employed workers, are still evolving under the CARES Act. You can find general, and state-specific information through the Department of Labor (DOL) website. 
  • The Massachusetts Attorney General’s website has an excellent and comprehensive listing of COVID-related resources available to residents of the Commonwealth.
  • The single most accurate source for information regarding coronavirus can be found at coronavirus.gov, an official website with the most up-to-date information from The Center for Disease Control (CDC), The Federal Emergency management Association (FEMA), and The White House. ​

Our Office is Closed until Further Notice

In the past two days, there have been siginificant changes that affect our business. On Saturday, March 21, the IRS announced an automatic three-month extension for filing income taxes, to July 15, 2020. And just today, Governor Baker issued a statewide Stay-at-Home Advisory that requires us to close our office until the order is lifted.

In light of these recent events, we want to share with you some updated information regarding our operations. Specifically:

  • Our physical office will be closed until further notice in compliance with the state-mandated stay-at-home order.
  • We will continue to work on your taxes remotely, with limited email access.
  • The office is alarmed and secure.
  • As they are completed, we will be placing as many returns on the portal as possible.
  • If you haven’t yet sent us your documents and cannot access the portal, please do not mail or bring anything to our physical address. You can mail your information to us at our official mailing address, below.

Business Bookkeeping Services
P. O.  Box 249
South Weymouth, MA  02190

  • If you have mailed us your documents and they are sitting in our office, our hands are tied for now as far as being able to get them back to you. 

We greatly appreciate your understanding and patience during this unprecedented and rapidly changing situation!

Significant Changes for Retirement Savings in 2020

The New Rules in The SECURE Act that May Affect You

Retirement

Passed by Congress last spring, The SECURE Act (an acronym for the “Setting Every Community Up for Retirement Enhancement”) was finally signed into law as part of the massive spending bill approved at year end. The entire bill is nearly 1,200 pages long, but the Act regarding to changes in rules for your retirement savings is examined below.

Key Takeaways

  • Change to Required Minimum Distribution (RMD) age
    The new law raises the age at which individuals must begin taking RMDs from their retirement accounts from 70½ to 72. 
    Please Note: The new law only applies to people who turned 70½ after December 31, 2019. If an individual turned 70½ in 2019, the law does not apply—that person must take an RMD in 2019, 2020, and beyond.
  • Contributions to traditional IRAs after age 70½
    The updated law now allows for contributions to an individual retirement account (IRA) after 70½. Individuals may continue contributing to an IRA at any age, with the caveat that they have earned income in the year of the contribution.
  • Rules for inherited retirement accounts (“Stretch IRAs”) Previously, inherited retirement accounts were able to distribute those assets over the beneficiary’s lifetime. Under the new rules, those assets must be distributed within 10 years. This has potentially significant implications for estate planning. Exceptions are in place for spouses, minor children, disabled individuals and people less than 10 years younger than the decedent. The bill only applies to accounts that are inherited in 2020 and beyond, and does not affect existing inherited accounts.
  • Withdrawals for birth/adoption expenses penalty-free
    Through the first year after the birth or adoptionNew parents can withdraw up to $5,000 from an IRA or an employer-sponsored retirement plan to pay for birth and/or adoption expenses, . Taxes still need to be paid on pre-tax contributions, but no penalties apply to the withdrawal.
  • Participation in a 401(k) plan for part-time workers
    This new rule allows for part-time employees to participate in a company’s 401(K) plan. They become eligible once they have worked for the company at least 500 hours a year for three consecutive years .
  • Retirement plan projected income disclosure
    The law requires the Department of Labor to propose rules for a new disclosure to retirement plan participants that will show the participant’s projected monthly income in retirement based on current retirement assets. It’s designed as a kind a “progress report” to show employees how they are doing on saving. The rule-making process for this is likely to take more than a year, followed by an implementation period, so it is unlikely we will see this standard in place in 2020 before this becomes standard.
  • Easier access for annuities to be offered in 401(k) plans
    Though plans are not required to do so, the new law lowers restrictions on offering annuities in employer-sponsored plans.
  • 529 plan rule changes can help repay student loans
    The law allows for more flexibility when in comes to assets in these college-savings plans, now allowing for them to be used to repay up to $10,000 in qualifying student loans.
  • Provisions to help small businesses
    Several provisions in the bill are designed to make it easier for small businesses to offer retirement plans to their employees, including one that will allow unrelated small businesses to group themselves in “multiple employers plans” to offer a plan to employees.

Statistics show that most individuals don’t—or can’t—save enough for retirement early on to live comfortable in their golden years. And it’s hard to say if these changes will help the average taxpayer reach their retirement goals with a greater degree of ease. But it’s a start.

Tax Extenders Q & A: An overview of the 2019 Law

A number of significant tax provisions—many already expired—have been extended or reinstated through the end of Tax Year 2019. This is good news for millions of taxpayers, but as always, there are restrictions, caps, and qualifying factors that determine eligibility. Below we have culled the points in the newly passed law that are the most likely to be of interest to our clients.

Mortgages, Education, and Medical Expenses

Mortgage Debt Exclusion

Though it’s hard to imagine any upside to a personal financial crisis resulting in a foreclosure, short sale, or loan modification on your home, under the Tax Extender you may still be allowed to exclude the amount of debt forgiven on your principal residence this year, up to $2,000,000.

Mortgage Insurance Premiums Deduction

If you were required to purchase mortgage insurance as a requirement of your home loan, you may be able to deduct the amount you paid for the insurance, since it is considered “interest” for mortgage interest deduction purposes.

To claim the deduction, though, joint taxpayers must have an adjusted gross income (AGI) under $100,000 ($50,000 if married filing separately).

Tuition and Fees Deduction

With the extension of the Tuition and Fees Deduction you may be able to take advantage of another education tax benefit option if you, your spouse, or your dependent child have college expenses. The is for qualified expenses for higher education like tuition, books, and other supplies, even if you took only one class.

The deduction is capped at $4,000 for individuals with AGI up to $65,000 ($130,000 for joint filers) and $2,000 for individuals with AGI over $65,001 but below to $80,000 (and $130,001 to $160,000 for joint filers).

Medical Expense Deduction

We all know that medical expenses can be a substantial drain on a family’s finances. The medical expense deduction threshold was scheduled to go back up to 10% in 2019, but the new provision extends the current 7.5% threshold established in 2017. As a result, you may be able to claim your unreimbursed medical expenses provided that they are more than 7.5% of your AGI and you can claim itemized tax deductions.

For example:

If your AGI is $50,000, you can claim your medical expenses that are more than $3,750 ($50,000 x 7.5%) if you can claim itemized deductions.
At the 10% threshold they would need to be more than $5,000.

Energy Efficiency Incentives

 Nonbusiness Energy Property Credit

If you made energy efficient improvements to your home like energy-saving roofs, windows, skylights, and doors, you’ll still be able to claim the Nonbusiness Energy Property credit for 10% of amounts paid for qualified energy efficiency improvements up to a lifetime cap of $500 or in fixed dollar amounts ranging from $50 to $300 for energy efficient property, including furnaces, boilers, biomass stoves, heat pumps, water heaters, central air conditioners, and circulating fans.

New qualified fuel cell motor vehicles

If you purchased a new qualified fuel cell vehicle in 2019, you may be eligible to receive a credit between $4,000 and $40,000,

Special Tax Relief Rules for Disaster Victims

Special tax relief is available under the Tax Extender law for individuals and businesses in Presidentially-declared disaster areas occurring between January 1, 2018 and 30 days following the date of enactment of the law. Provisions of the law specific to disaster victims are listed below.

 Qualified disaster-related personal casualty losses

If you were a disaster victim, the provision eliminates the current law requirement that personal losses have to exceed 10% of adjusted gross income and eliminates the requirement that you have to itemize your tax deductions in order to claim your casualty loss.

Early access to retirement funds

For hurricane victims, the 10% early plan withdrawal penalty will be waived for qualified disaster relief distributions from retirement funds up to $100,000. If you had to cancel your home purchase as a result of an eligible disaster, you can also re-contribute your retirement plan withdrawal for home purchases or construction and avoid the tax on the plan withdrawal.

Determining Earned Income Tax Credit and Child Tax Credit

If you were in a designated disaster area in 2019, you can use your income from 2018, if it’s lower, to qualify for the Earned Income Tax Credit and the Child Tax Credit.

Automatic extension filing deadline

You will be automatically granted a 60-day tax filing extension if your principal place of residence or business is located in a disaster area.

Tax Questions to Consider Now

It’s easy to forget that what happens in your working and personal life can affect your tax returns in any given year. Before tax season deadlines sneak up on you, now is a good time to take a moment and consider what changes may have occurred in the past year that will affect your tax return.

  1. Has your address or phone number changed since the prior year? 
    Please provide your current information so we can be sure your return is filed accurately.
  2. Did you welcome a new child in 2019? 
    If the answer is yes: First, congratulations! We’ll need to update your organizer with their full name, date of birth, and SSN.
  3. Did you collect unemployment for all or part of the year? 
    If so, we’ll need your 1099-G form. Like all official tax document, these are required to be sent to you before the end of January.
  4. Is your health insurance through the Mass Health Connector? 
    You’ll to wait for your form 1095A from the state before filing. These forms are sent out by the state before the end of January. Remember: We cannot process your return without this form!
  5. Did you pay any rent last year? 
    Please let us know how much you paid, as well as the name of your landlord.
  6. Do you believe your medical expenses may be deductible? 
    Most taxpayers do not have enough qualifying medical deductions to itemize under current rules, but if you think you do, please provide us with ONLY THE TOTALS of these expenses. DO NOT bring or send us your medical and dental receipts. This will both maintain the privacy of your medical information, and allow us to process your return more quickly. See our more detailed posts about medical deductions here and here.
  7. Are you paid by direct deposit?  
    Even if you are not, we recommend making a habit of checking your pay stubs every month to verify the withholdings are per your instructions. Since most employees are paid via direct deposit, and paystubs usually issued by email, most go unchecked. This can result in errors being discovered in the following year when it is too late to make any corrections. See our additional post about this here.

You can probably think of additional happenings in your life that might make a difference on your Federal or State returns. Give us a call soon if you have further questions we can help answer for you.

Why Checking Your Paycheck Can Pay Off

One item to be aware of as we move into the new decade is the importance of checking your paystubs on a regular basis to ensure accuracy, particularly with regard to your withholding. A recent study has shown that most people receive their payroll check through direct deposit and their paystubs are usually issued by e-mail. As a result of this, most paystubs go unchecked, and unfortunately errors may be discovered in the following year—when it is too late to make any corrections.

To avoid this, we recommend making a habit of checking your pay stubs every month to verify the withholdings are per your instructions—even if you are not not paid via direct deposit.

See our earlier post about the IRS’s online withholding calculator here.

Itemized Medical Deductions? Probably Not.

With the astronomical costs for prescription drugs, it’s not unusual for us to hear from clients that the believe they should itemize their taxes based on their medical expenses. The truth is, even for a couple with multiple prescriptions from more than one pharmacy, most taxpayers do not have enough qualifying medical deductions to itemize under current rules.

The current threshold for standardized deductions is what helps us decide whether it makes sense for you to itemize. The best and fastest way to determine this is to have the total amounts of your categorized expenses.

There are cases, of course, where itemization may be warranted—for instance if you have experienced a catastrophic event where your out-of-pocket costs represent a significant portion of your income. Either way, We DO NOT need to see your receipts! Nor should we. ONLY THE TOTALS of these expenses are required, and in the interest of both protecting privacy of your medical information, and processing your return more quickly, we ask that you do not bring or send us your receipts. If the deduction for medical expenses is ever questioned, we would need to see the receipts at that time, but that would be the rare exception.