What If You Owe the IRS for 2018?

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You’ve probably heard in the news. Some taxpayers who usually get a refund are paying more taxes when they file for 2018. That nasty surprise is due to the IRS lowering tax withholding amounts and other changes from the 2017 Tax Cuts and Jobs Act.

So what do you do if you owe the IRS? Here are your options:

Electronic Debit With Your Return

The quickest and easiest method for paying taxes due when you file is to set up an electronic debit/withdrawal from your checking or savings account. The IRS (and some states) will even let you file now and post-date the payment up until the due date. You can set up the debit through your tax software, or ask your paid tax preparer to set it up for you.

Mail Payment Voucher with a Check

Snail mail is still available to pay your taxes, at least for now. When you electronically file your taxes (which is highly recommended to tamp down on identity theft and human error), indicate that you are paying by check using a payment voucher, or IRS 1040-V. Use your tax software (or ask your paid preparer) to prepare the coupon with the mailing address and your Social Security Number pre-printed on it. Mail the coupon and a check with your Social Security Number, “1040” and the tax year in the memo line.

Direct Pay at the IRS Website

The IRS is great at using technology to make it easy to pay your taxes. Go to https://www.irs.gov/payments/direct-pay and follow the instructions for the payment option that works best for your situation. Best of all, it’s free.

Installment Plan

Not enough money to pay of your taxes now? The IRS offers an installment payment plan. A short-term plan for up to 120 days has no set-up fee. Longer term plans are available for a fee. It just takes a few minutes to apply at this link https://www.irs.gov/payments/online-payment-agreement-application. You’ll get an immediate notification of whether your application is approved.

Owing more when you file your 2018 taxes is bad news. Some good news that will help soften the blow – the number of options that the IRS (and some states) offers for you to pay up. Whether you can pay it all now or need some more time, there’s an option that will meet your situation.

Nonprofit Financial Oversight

Nonprofit leaders have a big job. On top of overseeing the delivery of programs and services, they are responsible for overseeing the organization’s financial health. It’s called fiduciary responsibility — ensuring that funds are effectively used, and reporting finances in a transparent and reliable way to donors and other stakeholders.

All of that responsibility can be daunting, especially for smaller organizations. Nonprofits sometimes need help navigating through the steps to perform effective financial stewardship over funds that donors have entrusted them with.

Help is coming soon at my April 18th free Lunch and Learn at the Foundation Center (recently merged with GuideStar). This one-hour session includes topics to promote effective financial stewardship and oversight, and tips on how to make it work at your nonprofit organization.

Believe it or not, we plan to touch on these five topics in only one hour:

  • Fiduciary Roles and Responsibilities – The duty to act in the best interest of the organization, including Duty of Care, Duty of Loyalty and Duty of Good Faith, as well as avoiding conflicts of interest.
  • Financial Policies and Procedures – Defines the framework for accepting, managing and spending the funds entrusted by donors, and delineates between Board and management roles and responsibilities.
  • Budgeting – Plans for the appropriate use of funds to deliver programs and services, and to operate and sustain the organization; as well as to define the amount of funds required from diversified sources.
  • Financial Reporting and Monitoring – Stewardship and oversight necessary to fulfill fiduciary responsibility to use funds effectively and plan appropriately, including monthly reports that should be reviewed.
  • Annual Financial Statement Audit and IRS Form 990 Information Return – Annual reporting requirements to comply with IRS laws and regulations, and to report how funds are used to donors and other stakeholders.

Can you tell that it’s going to be a jam-packed hour? Interested?  Register now at this link –

Hope to see you there!

Donations are Not Always Deductible

picture of someone in white sweather holding out crumbled euro dollars
Photo by Christian Dubovan on Unsplash

Under the new tax law, donations to a qualified charity are still deductible for taxpayers who itemize their deductions using IRS Schedule A. Taxpayers who take the standard deduction because it is higher than itemizing don’t get a tax benefit from their giving.

Based on the tax returns I’ve prepared so far this season, taxpayers have not changed their level of generosity, but they don’t always know when their giving could be deductible. There’s a lot of confusion about the meaning of terms like “qualified charity” and “donation”. To help clarify, this week’s blog is dedicated to charitable donations and when they are – or are not – deductible.

What is a Qualified Charity?

Qualified charities include humanitarian, religious, educational, scientific, and cruelty-prevention organizations. Crowd funding, political contributions and association dues are not included. Except for religious organizations, qualified charities must apply for and be granted Tax Exempt Status by the IRS. Tax Exempt organizations have annual IRS reporting requirements. A list of qualified charities is posted in the IRS’ “Tax Exempt Organizations Search” tool at https://www.irs.gov/charities-non-profits/tax-exempt-organization-search.

What is a Donation?

Donations can be financial or non-financial items such as clothing, household goods, vehicles, stock, or real estate. Financial donations to a qualified charity are a deductible, reduced by the value or anything received in exchange, such as a meal. In general, clothing and household items can only be deducted if they are in good usable condition. The deduction amount is based on the “thrift shop” value. Donated vehicles, art work and other non-financial donations valued at more than $500 are subject to more rules and limits.

What Donations are Deductible?

Financial and non-financial donations must be acknowledged contemporaneously in writing by the charity. Acknowledgements reflect which organization received the donation and when to support any deduction taken. Donations of $250 or more must be supported by a letter from the charity stating the date and amount of the donation, the charity’s reduced by the value of anything in received by the donor in return, such as a fundraising dinner.

Many taxpayers continue to donate to charity, whether it’s deductible or not. Knowing what donations qualify for a deduction helps maximize those tax benefits that are still eligible under the new tax law.

Arlington Library Helps Businesses Learn About Tax Changes

Picture of a MacBook Pro displaying a pink screen on a desk. A silver cup of coffee on the left side with a pile of papers and a silver pen on the right. The background is a clutered desk with a wall full of notes.

Picture of a MacBook Pro displaying a pink screen on a desk. A silver cup of coffee on the left side with a pile of papers and a silver pen on the right. The background is a clutered desk with a wall full of notes.

Photo by rawpixel on Unsplash

The Arlington County Public Library showed its love and support for local business last week by hosting my workshop, “Your Business and the 2017 Tax Cuts and Jobs Act”. They really packed the house with business owners who had lots of fantastic questions. My job – provide equally fantastic answers.

The new tax law is jammed with changes that businesses need to be aware of. We only covered a few changes that impact “pass-through” businesses – sole proprietorships, partnerships, or Subchapter S corporations. We had to be pretty general. Based on the evening’s discussion, attendees left armed with even more detailed questions to ask their own tax preparers.

I can’t replicate the energy in that library conference room here, but I can share a few facts from the workshop that you can use for your business:

  • Qualified Business Income Deduction – Qualifying pass-through businesses may be eligible for a deduction of 20% of qualifying net business income (i.e., excluding interest and other income not derived from sales or fee revenue). For owner/employees with income over $315K (married filing joint) or $157.5K (all other filers), the deduction could be limited.
  • Higher Asset Depreciation Limits – For assets placed in service after 2017, businesses can elect to expense any section 179 property in the year the property is placed in service.  The maximum deduction is increased from $500K to $1 million, and the phase-out threshold is increased from $2 million to $2.5 million.
  • Employer Deduction for Fringe Benefits – A number of employer deductions are disallowed, including activities generally considered to be entertainment, amusement, or recreation; membership dues for clubs organized for business, pleasure, recreation, or other social purposes; and expenses associated with transportation fringe benefits or for commuting.
  • Pass-through Loss Limits – For some taxpayers, losses from pass-through businesses after 2017 cannot be used to offset other income, such as investments, Starting in 2018, the net operating loss deduction is limited to 80 percent of taxable income.

My evening at the Arlington County Public Library was a lot of fun for me. I hope that everyone else also had fun and felt more aware of business tax law changes. Thanks to the Library Staff and incredible Research Librarian for making this event happen for the community!