BEST PRACTICES: HOW TO GET STARTED WITH

2018 INDIVIDUALTAX RETURN PREPARATION

Mary Ford, CPAJanuary 29, 2019mary.ford@sobelcollc.com(973)-994-9494

Agenda

We will discuss:

• How and when to get started

• The key forms needed

• Essential information you will provide

• An sample overview of the deductions and credits

• The work flow process at SobelCo

• Your responsibilities in the tax preparation process

Start Early!

• You avoid the stress of last minute filing

• You leave the appropriate time to gather documents to make sure you claim all credits and deductions

• You have an opportunity to claim your tax refund sooner

Filing Deadlines

The filing deadline for 2018 individual returns is April 15, 2019 unless you live in Maine or Massachusetts where you have until April 17th

Filing for an extension?

Automated six month extension if you send in your extension request on time

This is not an extension of time to PAY!

Gather Your Information

• BEST PRACTICE: Use a Tax Organizer provided by SobelCo

1. Efficiency – excellent guide and jogs you memory

2. Effectiveness – we can prepare the return faster if we don’t have to follow up with you for missing information

• GOOD PRACTICES:

1. Use a Generic Checklist (see webinar attachment)

2. Use prior year tax return as a guide

Key Forms Typically Required

• Wages Form W-2

• Interest and Dividends Form 1099 INT or 1099-DIV

• Sales of Investment Property Form 1099-B

• Gambling or Lottery Winnings Form W-2G

• Pension/IRA/Annuity Income Form 1099-R

• Social Security Form SSA-1099

• Unemployment Compensation Form 1099-G

• Miscellaneous Income Form 1099-MISC

Other Key Forms

• Schedule K-1s from Investments: S Corps, Partnerships, Trusts Estates, or (may not be available until after March 15th)

• HSA Distributions Form 1099-SA

• Various forms 1098s and more

Student Loan Interest Form 1098-E

Tuition Payments Form 1098-T

Mortgage Interest Form 1098

HSA Contributions Form 5498-SA

Essential Information

Business Owners:

Summarize Your Self-Employment Business Income and Expenses:

Total income (include all income received reported on 1099-misc and other receipts.)

List of expense categories

Rental Income and Expenses by Property

Total rents received by property

List of expenses incurred by line item

Standard Deduction

• $24,000 for married individuals filing a joint return

• $18,000 for head-of-household filers

• $12,000 for all other taxpayers

• Taxpayers age 65 and older or blind or both get an additional deduction:

$1,300 for married individuals

$1,600 for single individuals

Tip: Many taxpayers will benefit from higher standard deduction. However you will still need to track the itemized deductions for State Income Tax purposes. For example, medical expenses and real estate taxes still deductible for the state of NJ!

Medical Expenses

• Medical Expenses – Summarize Receipts as follows:

Out of Pocket Insurance Premiums

Health, Dental, Prescription Plan

Long Term Care Insurance

Doctors and Dentist costs after reimbursement

Prescriptions costs after reimbursement

Other: Eye glasses, contact lenses, medical equipment, and other medical supplies

Medical related mileage x 18 cents per mile

• Subject to 7.5% limitation for Federal and only 2% for State of NJ. (Other states differ.)

State and Local Taxes

• Total State and Local Tax Deduction is now limited to $10,000 ($5,000 for married filing separate returns)!

State and local property taxes paid in 2018

Make a list of date and amount paid

State and local income taxes (or sales taxes in lieu of income, etc. taxes)

Make a list of date and amount paid

FYI….State of New Jersey has increased the limitation on the property tax deduction from $10,000 to $15,000

Mortgage Interest

• Home Equity Interest – Suspended!

Tip: If proceeds can be traced to qualifying uses such as home improvements, business loans or investment loans, then the interest may still be deductible

• Home Mortgage Interest Still deductible for primary residence and one

other residenceNew debt limit of $750,000 if debt was incurred

after 12/15/17

• Important! Please provide for 1098 for each loan

Charitable Contributions

Charitable Contributions

• Cash-written acknowledgement of over $250• Non-cash of $500 or more, but less than $5,000,

must provide detail of value (i.e. thrift shop value)

• Non-cash over $5,000 needs qualified appraisal

• Donation of cars requires special reporting

Miscellaneous Itemized Deductions

All miscellaneous itemized deductions are suspended

Union dues

Unreimbursed employee business expenses

Financial advisor fees

Tax prep fees

May still be deductible for state purposes !

Tax Credits

• Child Tax Credit – $2,000 per qualifying child (in lieu of exemption) subject to phase-out

• Other Dependent Credit – for all other dependents (in lieu of exemption) subject to phase-out

• Dependent Care Credit – Request a statement from the provider. Make sure it includes:

Tax Identification number

Total dependent care expenses paid

• Adoption Credit – for qualified adoption expenses paid. Up to $13,810 subject to phase-out

Other Information Needed

• Photocopy of your Driver’s License

• NJ Resident Veterans Honorable Discharge Form DD-214

Other Information Needed

Tell us how you want us to deliver your 2018 Tax Return:

• Email returns via the ShareFile App

• Via “snail” mail – two choices

o Thumb drive [password protected!]

o Paper copy

• Your original documents are always mailed back to you via “snail” mail

Work Flow Process at SobelCo

1. Once we “receive your information” it is checked into our “Work Flow System.” This program allows us to know where you return is in the prep process at all times

2. All documents are “scanned” into Client Folder

3. Eligible forms are “Autoflowed” and Validated

4. Your return is assigned to a preparer to be “prepared”

5. The preparer passes your return to a manager or partner to be “reviewed”

Work Flow Process at SobelCo…Continued

• Preparer will receive review notes; all notes must be cleared by the preparer

• Partner ensures review notes have been cleared and signs off

• Returns are sent to processing and is assembled

• Returns are delivered to you per your instructions

What’s Included in Your Electronic Tax Return Package?

You will receive four PDF files:

• 1st File contains: Cover letter, tax return instruction sheet, payment vouchers if applicable, and your quarterly estimated tax vouchers with instructions

• 2nd File contains: E-Filing checklist

• 3rd File contains: Your Form 8879

• 4th File contains: Your 2018 Federal and State Income Tax Return

Sample E-Filing Checklist

What Do I Have To Do When I Receive My Completed Tax Return?

• Review Your Tax Return – REMEMBER: You are ultimately responsible for the information!

• Let’s take a look at the NEW Form 1040 “Postcard”

FORM 1040 POSTCARDPAGE 1

FORM 1040 POSTCARDPAGE 2

Form 1040 Schedule 1

Form 1040 Schedule 3

Form 1040 Schedule 4

Work Flow Process at SobelCo….Final Steps

• NOTE: YOUR RETURN IS NOT COMPLETE UNTIL FORM 8879 IS RECEIVED! Please send it back within seven days of receiving your tax package.

• We will wait for you to return the Authorization Form 8879

• Once we receive your Form 8879 your return is “electronically filed”

• Your return is complete!

Contact Information

Mary Ford, CPASenior Tax Manager, SobelComary.ford@sobelcollc.comMary brings a diverse professional background to the firm enabling her to add significant value to our team and our clients. Starting her career more than 30 years ago as a Senior Tax Accountant at a Big Four firm, Mary went on to specialize in international tax in the corporate world, first honing her skills at Amerada Hess Corporation and then moving on to global giant, Johnson & Johnson. Leveraging her depth of knowledge in addressing both business challenges and tax concerns, she opened her own firm focused on delivering extraordinary client service to individuals, small businesses, and nonprofit organizations. Most recently Mary merged her practice into a boutique accounting firm where she was a partner before joining SobelCo.

Mary’s diverse tax and accounting experience provides a strong basis for her well-regarded reputation but it is her business acumen and her distinctive ability to relate well to clients that is the core of Mary’s mission as a professional, as a CPA, and as a trusted advisor. In addition, Mary is appreciated for her excellent customer service in helping her clients understand complex tax related matters and the effects on them and their businesses.

Tax Preparation ChecklistBefore you begin to prepare your income tax return, go through the following checklist. Highlight the areas that apply to you, and make sure you have that information available. Better yet, attach the list to a folder of your tax documents, and check items off as you add them to the folder.

Personal information

Social Security numbers and dates of birth for you, your spouse, your dependents

Information about your income

W-2 forms for you and your spouse

1099-MISC forms for you and your spouse (for any independent contractor work)

1099-G forms for unemployment income, or state or local tax refunds

SSA-1099 for Social Security benefits received

1099-R, Form 8606 for payments/distributions from IRAs or retirement plans

1099-INT, -DIV, -B, or K-1s for investment or interest income

Most people will need:

1099-S forms for income from sale of a property

Miscellaneous income: jury duty, gambling winnings, Medical Savings Account, scholarships, etc.

Copies of last year’s tax return for you and your spouse (helpful, but not required)

Bank account number and routing number, if depositing your refund directly into your account

This information tells the IRS exactly who’s filing, who is covered in your tax return, and where to deposit your tax refund.

Alimony received

Business or farming income - profit/loss statement, capital equipment information

Rental property income and expenses: profit/loss statement, suspended loss information

Prior year installment sale information - Forms 6252, principal and interest collected during the year, SSN and address for payer

.

1099-C forms for cancellation of debt

Adjustments to your income

Form 1098-E for student loan interest paid (or loan statements for student loans)

Form 1098-T for tuition paid (or receipts/canceled checks for tuition paid for post-high school)

For teachers: Canceled checks or receipts for expenses paid for classroom supplies, etc.

This following items can help reduce the amount of your income that is taxed, which can increase your tax refund, or lower the amount you owe.

Records of IRA contributions made during the year

Receipts for any qualifying energy-efficient home improvements (solar, windows, etc.)

Records of Medical Savings Account (MSA) contributions

Self-employed health insurance payment records

Records of moving expenses

Alimony paid

Keogh, SEP, SIMPLE, and other self-employed pension plans

Deductions and creditsThe government offers a number of deductions and credits to help lower the tax burden on individuals, which means more money in your pocket. You’ll need the following documentation to make sure you get all the deductions and credits you deserve:

If you itemize your deductions:

Child care costs: provider’s name, address, tax ID, and amount paid

Education costs: Form 1098-T, education expenses

Adoption costs: SSN of child; records of legal, medical and transportation costs

Forms 1098: Mortgage interest, private mortgage insurance (PMI), and points you paid

Investment interest expenses

Charitable donations: cash amounts, official charity receipts, canceled checks; value of donated property; miles driven and out-of-pocket expenses

Medical and dental expense records: [includes: Health Insurance, Dental, & LTC premiums paid]

Casualty losses if in a Federal Disaster Area: amount of damage, insurance reimbursements

.

Deductions and credits (continued)

Records/amounts of other miscellaneous tax deductions: union dues; unreimbursed employee expenses (uniforms, supplies, seminars, continuing education, publications, travel, etc.) [TCJA Suspends deduction until 2025 however may be deductible for State Purposes]

Records of home business expenses, home size/office size, home expenses

Rental property income/expenses: profit/loss statement, rental property suspended loss information

Taxes you’ve paid

State and local income taxes paid

Real estate taxes paid

Personal property taxes

Vehicle license fees based on value of vehicle

Other information

Estimated tax payments made during the year (self-employed)

Prior-year refund applied to current year and/or any amount paid with an extension to file

Foreign bank account information: location, name of bank, account number, peak value of account during the year