Tax Deadline Update

The US Treasury has announced that all tax returns and income tax payments due on April 15, 2020 are now due on July 15, 2020 without incurring any interest or penalties.  This deferral includes any income tax due with the 2019 tax return and the 2020 first-quarter estimate up to an aggregate amount of $1 Million dollars for individuals and $10 Million for C Corporations.   The 2020 second-quarter estimate is still currently due on June 15, 2020.

 

Most states have not yet issued any 2019 tax relief provisions in relation to COVID-19.  We will provide additional updates as new information from the states becomes available.

 

For the health and safety of our clients and employees, we are asking that all tax information be sent to us electronically, via one of our secure online file exchanges, or through the mail.  All completed tax returns will be delivered either electronically or through the mail.  We are currently not offering in-person pick up of any tax returns.

 

Our online tax organizer allows you to answer the questions in the tax organizer and upload your paperwork.  If you have not already requested an online organizer, please email the request to taxdepartment@tss-cpa.com.

 

We frequently use SafeSend to send tax returns securely to our clients.  Step by step instructions will be sent prior to us sending your return.  If you have not yet opted to use SafeSend, please email us at taxdepartment@tss-cpa.com.

 

If you need technical assistance with either program, please email taxdepartment@tss-cpa.com or call our office at 603.653.0044.

 

If it is essential to come to our office, we respectfully ask that you deposit your paperwork into the bin provided in the front lobby.

 

If you are feeling under the weather, we ask that you refrain from coming into the office.

 

Thank you, we appreciate your patience during this time.

Is your nonprofit ready for a raffle?

Raffles are popular fundraisers for not-for-profits. But they’re subject to strict tax rules. State laws on nonprofit-sponsored raffles can vary significantly, but nonprofits must comply with federal income tax requirements linked to unrelated business income, reporting and withholding.

Unrelated business income tax

Nonprofits are required to pay income tax on unrelated business income (UBI), and funds raised by raffles often qualify as such. This is particularly true if you routinely hold raffles and they aren’t related to your exempt purpose.

But raffle income can be exempted from UBI tax if the raffle is conducted with “substantially all” volunteer labor. The IRS’s unofficial guideline is that 85% or more of the labor should be volunteer. If relying on this exemption, make sure you keep records to demonstrate your level of volunteer support.

Reporting obligations

Raffle winnings must be reported when the amount is $600 or more and at least 300 times the raffle ticket price. You can deduct the amount of the ticket when determining if the $600 threshold is met. For example, you sell $2 tickets, and your winner receives $1,000. Because the winnings ($998) are more than $600 and more than 300 times $2, you’re required to report them to the IRS.

File Form W-2G, “Certain Gambling Winnings,” with the IRS and provide it to the winner to show reportable winnings along with the related income tax withheld, if any. The winner should provide you with his or her name, address and Social Security number to include on the filing.

Withholding requirements

You should withhold income tax from the winnings if the proceeds (the difference between the amount of the winnings and the amount of the wager) are more than $5,000. If the winnings are in the form of a noncash payment (for example, an automobile or artwork), proceeds are the difference between the fair market value of the item won and the wager amount. When the value of a noncash prize isn’t obvious, obtain a valuation before the drawing.

For a noncash prize with a fair market value of more than $5,000 after deducting the wager, you have two options: The winner could reimburse you for the amount of withholding tax or you could pay the withholding tax on behalf of the winner.

Handle with care

Raffles can pay off for nonprofits — as long as your organization satisfies the tax and filing requirements. Contact us for more information and assistance.

© 2019

Does Prepaying Property Taxes Make Sense Anymore?

Prepaying property taxes related to the current year but due the following year has long been one of the most popular and effective year-end tax-planning strategies. But does it still make sense in 2018?

The answer, for some people, is yes — accelerating this expense will increase their itemized deductions, reducing their tax bills. But for many, particularly those in high-tax states, changes made by the Tax Cuts and Jobs Act (TCJA) eliminate the benefits.

What’s changed?

The TCJA made two changes that affect the viability of this strategy. First, it nearly doubled the standard deduction to $24,000 for married couples filing jointly, $18,000 for heads of household, and $12,000 for singles and married couples filing separately, so fewer taxpayers will itemize. Second, it placed a $10,000 cap on state and local tax (SALT) deductions, including property taxes plus income or sales taxes.

For property tax prepayment to make sense, two things must happen:

1. You must itemize (that is, your itemized deductions must exceed the standard deduction), and

2. Your other SALT expenses for the year must be less than $10,000.

If you don’t itemize, or you’ve already used up your $10,000 limit (on income or sales taxes or on previous property tax installments), accelerating your next property tax installment will provide no benefit.

Example

Joe and Mary, a married couple filing jointly, have incurred $5,000 in state income taxes, $5,000 in property taxes, $18,000 in qualified mortgage interest, and $4,000 in charitable donations, for itemized deductions totaling $32,000. Their next installment of 2018 property taxes, $5,000, is due in the spring of 2019. They’ve already reached the $10,000 SALT limit, so prepaying property taxes won’t reduce their tax bill.

Now suppose they live in a state with no income tax. In that case, prepayment would potentially make sense because it would be within the SALT limit and would increase their 2018 itemized deductions.

Look before you leap

Before you prepay property taxes, review your situation carefully to be sure it will provide a tax benefit. And keep in mind that, just because prepayment will increase your 2018 itemized deductions, it doesn’t necessarily mean that’s the best strategy. For example, if you expect to be in a higher tax bracket in 2019, paying property taxes when due will likely produce a greater benefit over the two-year period.

For help determining whether prepaying property taxes makes sense for you this year, contact us. We can also suggest other year-end tips for reducing your taxes.

© 2018