Tax Deductions lost in Tax Law Highlights (for 2018 changes see page 4)

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1 Income Tax Preparation Services E 40 Hwy, Suite 170 Independence MO Phone: Fax: DLPENCE@GMAIL.COM Website: Tax Law Highlights (for 2018 changes see page 4) The health insurance mandate is still in effect for 2017 AND 2018! If you did not have insurance for more than 2 months throughout the year you will have a penalty assessed on your return. Please bring form 1095-A if you have coverage through Healthcare.gov., or a 1095-B if you have an employer plan. Education Credit: The American Opportunity is 100% of the first $2,000 of expenses, plus 25% of the next $2,000, for a maximum credit of $2,500 per student, per year. The credit applies to the first 4 years of postsecondary education. Qualified expenses are tuition, fees, and course materials (including books). Student must be enrolled at least half-time in a degree program. The deduction is limited for single taxpayers with incomes over $80,000 and for married taxpayers with incomes over $160,000. A second credit is available for part-time students and graduate students. You must bring form 1098-T from the school to take this credit. Estate Tax and Gift Giving. The annual gift exclusion for 2017 is $14,000 ($28,000 if a married couple each gives) and $15,000 for The estate tax exclusion for 2017 is $5,490,000. This increases to $11,200,000 for Medical Expenses. Medical expenses that exceed 7.5% of your income are deductible for 2017 and This will increase to 10% in Student Loan Interest. Taxpayers can deduct student loan interest up to $2,500. The deduction is phased out at income levels between $135,000 and $165,000 for joint filers, and between $65,000 and $80,000 for individual taxpayers. Foreign Bank Accounts. If you have a bank account in a foreign country with an account balance over $10,000 at any time during the year, you must file a separate form reporting this information. The penalty for failure to file the form starts at $10,000! This report must be filed by April 15, Please let me know if this applies, and I can file this form for you. Partnerships. The deadline for filing a Form 1065 tax return for your partnership (including LLC s taxed as partnerships) is March 15, Educator Expenses: Whether or not they itemize, teachers may deduct up to $250 of personal money spent on classroom expenses and professional development. Sales Tax Deduction: Taxpayers have the option to deduct sales tax in lieu of state income taxes. This may benefit you if you ve paid sales tax on a vehicle,boat or large ticket item in Tax Deductions lost in 2017 A number of tax breaks that had been continuously extended over the past several years have ended. These include: Tution and fees deduction Mortgage Insurance Premium (MIP) deduction Mortgage debt forgiveness tax break Energy credits for home improvements

2 Deborah L. Pence, LLC Page 2 Charitable Donations If you are able to itemize, you can deduct the fair market value (FMV) of the property you donate to charity. The requirements for recordkeeping and reporting vary by the value of your donation. For used household items and clothing, always get and save a receipt. Attach a list showing what you donated, and check inside the shop, or one like it, for the prices of similar items. I have links on my website that may help you in this regard. Missouri Charitable Donation Credits. There are several extra Missouri credits available to those who donate to certain charitable organizations. Extra documentation must be obtained from the Missouri government agency associated with the credit. Go to: dor.mo.gov/taxcredit for more information. Retirement Savings Tax Strategies Traditional IRA and Roth IRA Contributions: The maximum contribution is $5,500, plus an additional $1,000 for each taxpayer age 50 and over. There are also income limitations, so ask me if you qualify. You have until April 18, 2018 to make this contribution. Elective Salary Deferrals (401k, 403b, 457 plans): Put more into your employer s retirement accounts. The maximum amount you can defer under all plans is generally limited to $18,500 ($12,500 for SIMPLE plans plus $3,000 if 50 or over). Tax-favored retirement plan for businesses: If your business doesn t already have a retirement plan, now might be the time to take the plunge. Even if your business is only part-time, or something you do on the side, contributing to a SEP IRA or SIMPLE IRA can enable you to reduce your current taxes while increasing your retirement savings. Child and Dependent Care If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses. For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income Many taxpayers can get reimbursed for as much as $5000 in child care expenses through their employers, but often forget they can offset an additional $1000 in qualified childcare expenses as an additional credit on their tax returns Standard Mileage Rates: Business: 53.5 cents per mile Relocation: 17 cents per mile Medical: 17 cents per mile Charitable: 14 cents per mile 2018 Standard Mileage Rates: Business: 54.5 cents per mile Relocation: no longer deductible Medical: 18 cents per mile Charitable: 14 cents per mile

3 Page 3 IRS Scams! They use very official looking and tell you that your tax payment was rejected or that you owe back taxes, often threatening legal action. If you receive an like this, PLEASE do not click on any of the links and immediately delete it. Telephone: Callers claiming to be from the IRS contact you saying you owe money, which must be immediately paid via wire-transfer or with a prepaid debit card. If the caller refuses, they often threaten arrest or suspension of the victim s business or driver license. In many cases they have been able to manipulate the caller ID to look as if it really is the IRS calling. If you receive such a phone call the best thing to do is just hang up. Mail: Scammers send letters claiming there has been a discrepancy on your return or that you owe a balance in connection to your Affordable Care Act credit. While the IRS does send out discrepancy notices, official notices with amounts due will be payable to US Treasury NOT IRS. IRS WILL NEVER MAKE INTIAL CONTACT WITH YOU BY WAY OF OR PHONE CALLS! They will always first attempt to reach you with a letter in the mail. In addition you will never be asked to pay immediately without being given the opportunity to appeal the amount you owe, and you will never be asked to pay with a debit or credit card over the phone. You can report these incidents to the Treasury Inspector General for Tax Administration at or online at You can also a report to phishing@irs.gov. Identity Theft and your Tax Return In the past several years tax-related identity theft has been on the rise. This is when someone uses your social security number and other personal information to file a tax return and claim a fraudulent refund. Thieves will usually file these returns early in the tax season, so that when you file your legitimate return it prompts the IRS to send out a notice that multiple returns have been submitted with your SSN number. You will still be able to file your return, but there are extra steps we will have to take, and if you are due a refund be aware that it will take much longer than normal (usually around 6 months). According to you should be alert to any letters or notices that state: More than one tax return was filed using your SSN; You owe additional tax, refund offset or have had collection actions taken against you for a year you did not file a tax return. IRS records indicate you received wages from an employer unknown to you If you get a letter in the mail indicating you were a victim of such fraud, contact me asap. Following new IRS security recommendations I will no longer be able to send your tax return or related documents to any third party, either by , fax, or USPS. If you are needing a copy of your tax return I will be happy to upload your return to your secure online portal. Please call me if you have any questions.

4 Page 4 Tax Law Changes for 2018 Individuals New Tax Brackets / Tax Rates: There are now seven tax rates: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Increased Standard Deduction: Married Filing Jointly $24,000, Married Filing Separately $12,000, Single $12,000, Head of Household $18,000 Personal & dependent exemptions have been eliminated. Child Tax Credit: The child tax credit will increase to $2,000 per qualifying child under age 17 and will be refundable up to $1,400. Also included is a $500 nonrefundable credit for other qualifying dependents who are not qualifying children. These credits will be phased out beginning with adjusted gross income of more than $400,000 for married taxpayers filing jointly and more than $200,000 for all other taxpayers. Tuition/Student Loans: There are no changes to the current tax law in regard to tuition credits or the student loan deduction (see page 1). Section 529 Plans: Distributions of up to $10,000 per beneficiary can be used for tuition expenses for public, private or religious elementary or secondary school. The limitation applies on a per student basis. State and Local Taxes: Taxpayers can claim a deduction for a combination of state and local income tax, sales tax, or real property tax. The deduction is capped at $10,000. Medical Expenses: For 2017 through 2018, expenses exceeding 7.5% of income are deductible; that percentage increases to 10% in Charitable Contributions: Taxpayers who are able to itemize deductions can still include charitable contributions. Mortgage Interest: The deduction for mortgage interest is capped at $750,000 of debt. The interest deduction is allowed on a first or second home. The interest on home equity loans will no longer be deductible. Interest on up to $1 million of acquisition debt for loans prior to December 15, 2017 is grandfathered. Casualty Losses: Deductions for unexpected losses to personal property are no longer deductible unless covered by specific federal disaster declarations. Employee Business Expenses including Mileage, Meals/Entertainment, Travel, Union Dues, Work-related Expenses, Professional Fees, Licenses, Memberships, Dues, Uniforms, Investment Expenses, etc. are no longer deductible. Moving Expenses (except for active military) are no longer deductible. Alimony: Beginning with new divorces in 2019, alimony payments to an ex-spouse are no longer deductible and not taxable to the recipient. Business Office in Home: This has been completely eliminated from the personal returns, but can still be deducted on the business side using the safe harbor method. Meals and Entertainment Expenses: Entertainment expenses (sporting events, golf outings, etc.) have been eliminated as a business deduction. Travel meals and business meals are still deductible, including meals for employee holiday events. Pass through Businesses: Partnership, S corporation, and sole proprietorships are allowed to deduct 20% of business related income. The remaining income is subject to normal individual rates. The 20% deduction is not allowed in computing adjusted gross income, but rather as a deduction reducing taxable income. It does not reduce income subject to Self- Employment tax. This tax deduction is phased out for owners of professional service businesses whose taxable income exceeds $315,000 for married individuals filing jointly or $157,500 for individuals.

5 Page 5 Appointments Tax season Office Hours (Jan to mid-apr) Monday through Thursday 9:00 am to 7:00 pm Friday 9:00 am to 5:00 pm Saturday 9:00 am to 2:00 pm Closed on Sunday *Please note that I do not take appointments on Wednesdays I see clients by appointment only for your convenience. If you prefer to drop off your information with the receptionist instead of making an appointment, I will need to call you at a later time to discuss your return with you. This policy will help keep the waiting time for those with appointments to a minimum. The turn around time for drop-offs can be up to three weeks (or longer if there is missing information) so you may want to consider that when deciding to do so. Also, it is very helpful if you will let the receptionist know when scheduling appointments if you will be bringing in more than one return, i.e. a child s return, or a parent s return, so that we will have enough time to complete those returns during the allotted appointment time. Please call my receptionist to schedule your appointment at extension 0#. PHONE: FAX: DEBBIE: dlpence@gmail.com MEGAN: assistant.dlpence@gmail.com Tax Organizers, Deduction Checklists I have tax organizers available for those who prefer to organize their information prior to their appointment. If you have a business or rental property, the organizers are very helpful, as they are personalized and list all of your income and deductions from last years return. If you are planning on dropping off or mailing in your return, tax organizers are a good idea as well to help prepare your documents to submit to me. I also have deduction worksheets on my website for various industries. Please call my receptionist or visit my website ( if you would like any of these items. Last year I started using a secure online portal to upload your tax return instead of printing out a hard copy. Your personal portal will remain available to you as long as you are an active client of mine. Besides your tax return, the portal can also be used to send and receive documents with sensitive information. I can no longer use for this for security reasons. If you need your portal to be reset, please call my assistant Megan at ext. 4#. During tax season getting ahold of me can sometimes be difficult. The fastest way to reach me is to leave a voic on my phone extension (2#), but know that at times it may be several hours (or the next day if you call in the evening) before I am able get back to you. I appreciate the opportunity to assist with all of your accounting needs and am grateful for the many referrals of new clients I receive each year. I look forward to meeting with each of you again this year! -Debbie