Month: October 2018

For tax years prior to 2018, employees could exclude from income moving expenses reimbursed or paid by an employer. However, due to the passage of the Tax Cuts and Jobs Act (TCJA) last year, this tax provision has been suspended starting this year. This means, that going forward, these amounts are considered taxable income with one exception: amounts reimbursed to active-duty members of the U.S. Armed Forces whose moves relate to a military-ordered permanent change of station.

However, the IRS recently clarified that payments or reimbursements made by employers in 2018 for employees’ moving expenses incurred in 2017 (or prior years) will be excluded from the employee’s wages for income and employment tax purposes. This holds true if the employer pays a moving company in 2018 for qualified moving services provided to an employee prior to 2018 as well.

To qualify, reimbursements or payments must be for work-related moving expenses that would have been deductible by the employee if the employee had directly paid them prior to January 1, 2018. That is, the employee must not have deducted them in 2017. Employers that have already treated reimbursements or payments as taxable should follow the normal employment tax adjustment and refund procedures.

Please call the office if you have any questions about this topic.

• By Leon Clinton
• October 23, 2018

The IRS is offering tax relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, this only includes parts of North Carolina, but taxpayers in additional localities (and states) may be added to the disaster area later and will automatically receive the same filing and payment relief. Taxpayers may call the office or visit the disaster relief page on the IRS website to check the current list of eligible localities.

The tax relief postpones various tax filing and payment deadlines that occurred starting on September 7, 2018, in North Carolina. Businesses and individual taxpayers affected by Hurricane Florence in North Carolina and elsewhere have until January 31, 2019, to file certain individual and business tax returns and make certain tax payments that were originally due during this period. These tax payments include quarterly estimated income tax payments due on September 17, 2018, and the quarterly payroll and excise tax returns that are normally due on September 30, 2018.

Taxpayers who had a valid extension to file their 2017 return due to run out on October 15, 2018, will also have more time to file. Businesses with extensions also qualify for the additional time including those who were expected to file calendar-year partnerships (i.e., those whose 2017 extensions run out on September 17, 2018). Penalties on payroll and excise tax deposits due on or after September 7, 2018, and before September 24, 2018, will also be abated as long as the deposits are made by September. 24, 2018.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

Tax relief is part of a coordinated federal response to the damage caused by severe storms and flooding and is based on local damage assessments by FEMA. If you have any questions or need assistance, don’t hesitate to call.

• By Leon Clinton
• October 21, 2018

Many people find themselves in situations where they need to withdraw money from their retirement plan earlier than planned. Doing so, however, can trigger an additional tax on top of any income tax taxpayers may have to pay. Here are five things taxpayers should know about early withdrawals from retirement plans:

1. Early Withdrawal.

An early withdrawal normally is taking cash out of a retirement plan before the taxpayer is 59 1/2 years old.

2. Paying Additional Tax.

If a taxpayer took an early withdrawal from a plan last year, they must report it to the IRS. They may have to pay income tax on the amount taken out. If it was an early withdrawal, they might have to pay an additional 10 percent tax.

3. Nontaxable Withdrawals.

The additional 10 percent tax does not apply to nontaxable withdrawals. These include withdrawals of contributions that taxpayers paid tax on before they put them into the plan. A rollover is a form of nontaxable withdrawal. A rollover occurs when people take cash or other assets from one plan and put the money in another plan. They normally have 60 days to complete a rollover to make it tax-free.

4. Exceptions.

There are many exceptions to the additional 10 percent tax. Some of the rules for retirement plans are different from the rules for IRAs.

5. Form 5329.

If someone took an early withdrawal last year, they may have to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with their federal tax return.

Please call if you have any questions about early withdrawals or filing Form 5329.

• By Leon Clinton
• October 19, 2018