January 29, 2020 - General Tax Update

Time for another important tax update. Filing season opened 2 days ago!

• Two updates to state 529 college plans! First of all, funds can be used to pay for fees/books/supplies for apprenticeship programs. Secondly, up to $10,00 can be withdrawn annually to pay for student loans.
• Good news for people with medical expenses – the AGI threshold remains at 7.5% versus risign to 10%.
• If you file your return more than 60 days late – the penalty is the LESSER of $435 or the amount due as shown on the return.
• Remember – if you own an S corp – you can only deduct losses UP TO your stock basis – so please keep track of your BASIS. The IRS is cracking down on this.
• Remember the rule on start up expenses, you can deduct a maximum of $10,000 and the remainer must be amortized over 180 months.
• Did you know – if your school was closed or made mis-representations to its students – you can get your educational debt discharge and the discharge is not considered cancelled debt.
• Remember that W-2s and 1099-MISC must be issued by January 31st. The IRS can charge a penalty of $50 if your returns were filed within 30 days, and $270 if the filing was more than 30 days late. In 2020, form 1099-MISC will be called “1099-NEC”.
• Did you know that if you hired your children – you don’t need to pay SS and MCR tax if they are under 18? If they are under 21, you also don’t need to pay unemployment taxes. However, if you hire your spouse or parents, they need to pay SS and MCR taxes but NOT unemployment taxes.