Tax

Starting January 1, 2019, the standard mileage rates for the use of a car, van, pickup or panel truck are as follows:

• 58 cents per mile driven for business use, up 3.5 cents from the rate for 2018
• 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018.
• 14 cents per mile driven in service of charitable organizations.

The business mileage rate increased 3.5 cents for business travel miles driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate is set by statute and remains unchanged.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas, and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

Prior to tax reform, these optional standard mileage rates were used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. However, it is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for mileage related to moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. Please call if you need additional information about these and other special rules.

If you have any questions about standard mileage rates or which driving activities you should keep track of as the new tax year begins, do not hesitate to contact the office.

Need to Create Estimates? QuickBooks Can Help.

You don’t need to be a car repair shop or an HVAC technician to present prospects and customers with estima tes. In fact, there may be many times when an unexpected estimate–or bid, or proposal–will land you a job you didn’t necessarily expect.

Of course, the bottom line is the meat of your estimate, the price you’re willing to accept for your work performed. It’s your job to determine that. But let QuickBooks do what it does best: provide intuitive, efficient tools for creating and modifying estimates.

First Steps

Before you start creating estimates, you’ll need to make sure they’re turned on in QuickBooks. Open the Edit menu and select Preferences, then Jobs & Estimates | Company Preferences. If the Yes button below DO YOU CREATE ESTIMATES? is not filled in, click inside of it to turn on this feature. Also, the Warn about duplicate estimate numbers check box should be activated.

There are actually three ways to open an estimate form. You can click the Estimates icon on the home page or open the Customers menu and select Create Estimates. You can also open the Customer Center (Customers | Customer Center) and click on the Transactions tab. Click the New Transactions button in the toolbar and choose Estimates.

As you can see, you can create multiple types of sales forms from here. You can also see lists of existing and historical transactions.

Making It Yours

Before you create your first estimate, you should make sure that the form’s header, footer, and columns contain the fields you want. Use one of the three methods we just outlined to open a blank form. Then, with the Formatting tab at the top of the window active, click Customize Data Layout in the toolbar that opens to launch the Additional Customization window.

Take your time working with the options in this window. QuickBooks gives you an incredible amount of control over how your estimates will look, but don’t get ahead of yourself. Start with the most important content: the text you want to have appear. By default, the software opens a template called Custom Estimate that contains commonly-used fields, like Cost, Description, and Markup. You can easily change these by checking and unchecking their corresponding boxes.

You’ll notice that you can have specific fields appear on the screen and/or on printed copies of your estimates. You can also change the field names (use Bid or Proposal instead of Estimate, for example), and for columns only, the order in which they appear.

Warning: Be careful with the Markup field of your estimates. You wouldn’t want your customers to see this, so be sure that it is NOT checked in the Print column.

As you make changes to this template, you’ll see the graphical Previewover to the right change to reflect your modifications. Click Print Preview to see a larger, finished version of your template. When you’re satisfied with it, click OK. This will replace your Custom Estimatetemplate.

Adding Templates

You probably noticed other links and icons related to the formatting of estimates. These open advanced tools (if you need help understanding these, don’t hesitate to call). Once you’ve mastered them, you can save multiple versions of your estimate templates to use in different situations. These features include:

• Customize Design. This opens a multi-step wizard that helps you select a background, font, and grid style.
• Download Templates. You can choose from multiple pre-designed templates.
• Basic Customization. This window supplies tools for adding a logo and changing colors and fonts.
• Layout Designer. This tool is only recommended if you already have freeform design skills.

Just Like Invoices

Creating an estimate in QuickBooks is just like filling out an invoice. You enter data where appropriate, and select options from drop-down lists. If you don’t have any experience with sales forms and need some guidance, please call and set up a time to go over the entire process, as well as answer any other questions you might have about QuickBooks.

• By Leon Clinton
• January 27, 2019

The Tax Cuts and Jobs Act, passed in December 2017, made tax law changes that will affect virtually every business and individual in 2018 and the years ahead. One tax provision that taxpayers should be aware of is that like-kind exchanges are now generally limited to exchanges of real property. Here’s what you need to know:

Effective January 1, 2018, exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property generally do not qualify for nonrecognition of gain or loss as like-kind exchanges. However, certain exchanges of mutual ditch, reservoir or irrigation stock are still eligible.

Like-kind exchange treatment now applies only to exchanges of real property that is held for use in a trade or business or investment. Real property, also called real estate, includes land and generally anything built on or attached to it. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange.

A transition rule in the new law allows like-kind treatment for some exchanges of personal or intangible property. If the taxpayer disposed of the personal or intangible property on or before December 31, 2017, or received replacement property on or before that date, the exchange may qualify for like-kind exchange treatment.

Properties are of like-kind if they’re of the same nature or character, even if they differ in grade or quality. Improved real property is generally of like-kind to unimproved real property. For example, an apartment building would generally be of like-kind to unimproved land. However, real property in the United States is not of like-kind to real property outside the U.S.

A like-kind exchange is reported on Form 8824, Like-Kind Exchanges, which taxpayers must file with their tax return for the year the taxpayer transfers property as part of a like-kind exchange. This form helps a taxpayer figure the amount of gain deferred as a result of the like-kind exchange, as well as the basis of the like-kind property received if cash or property that isn’t of like kind is involved in the exchange. Form 8824 helps taxpayers compute the amount of gain you must report.

For more information about this and other tax reform changes, please contact the office.

• By Leon Clinton
• January 23, 2019

The 2019 tax season is quickly approaching and with it an increase in identity theft and W-2 scams. Small business identity theft is big business for identity thieves. Just like individuals, businesses may have their identities stolen, and their sensitive information used to open credit card accounts or used to file fraudulent tax returns for bogus refunds.

Furthermore, employers also hold sensitive tax data on employees, such as Form W-2 data, which also is highly valued by identity thieves and often used to file fake tax returns. Therefore, it is important for small businesses to take some important steps to protect themselves and their employees.

Stolen Employer Identification Numbers (EINs) have long been used by identity thieves to create fake Forms W-2 that they would file with fraudulent individual tax returns. Fraudsters also use EINs to open new lines of credit or obtain credit cards and are now using company names and EINs to file fraudulent returns.

The fraudulent filings apply to partnerships as well as estate and trust forms and the IRS has identified an increase in the number of fraudulent Forms 1120, 1120S and 1041 as well as Schedules K-1.

Signs of Potential Identity Theft

Businesses, partnerships and estate and trust filers should contact the IRS if they experience any of the following:

• Extension to file requests are rejected because a return with the Employer Identification Number or Social Security number is already on file.
• An e-filed return is rejected because a duplicate EIN/SSN is already on file with the IRS.
• An unexpected receipt of a tax transcript or IRS notice that doesn’t correspond to anything submitted by the filer.
• Failure to receive expected and routine correspondence from the IRS because the thief has changed the address.

Be on Guard against W-2 scams

Both public and private sector employers are targets for these W-2 scams, which in recent years have become one of the more dangerous email scams for tax administration. These emails appear to be from an executive or organization leader to a payroll or human resources employee. It may start with a simple, “Hey, you in today?” and, by the end of the exchange, all of an organization’s Forms W-2 for their employees may be in the hands of cybercriminals—putting workers at risk for tax-related identity theft.

Because payroll officials believe they are corresponding with an executive, it may take weeks for someone to realize a data theft has occurred. Generally, the criminals are trying to quickly take advantage of their theft, sometimes filing fraudulent tax returns within a day or two.

This scam is such a threat to taxpayers that the IRS has established a special reporting process.

Reporting Fraud Schemes:

1. Email dataloss@irs.gov to notify the IRS of a W-2 data loss and provide contact information. In the subject line, type “W2 Data Loss” so that the email can be routed properly. Do not attach any employee personally identifiable information data.

2. Email the Federation of Tax Administrators at StateAlert@taxadmin.org to get information on how to report victim information to the states.

3. Businesses/payroll service providers should file a complaint with the FBI’s Internet Crime Complaint Center (IC3.gov). Businesses/payroll service providers may be asked to file a report with their local law enforcement agency.

4. Notify employees so they may take steps to protect themselves from identity theft. The Federal Trade Commission’s www.identitytheft.gov provides guidance on general steps employees should take.

5. Forward the scam email to phishing@irs.gov.

Steps Employers can take to Protect Sensitive Information

Employers are urged to put steps and protocols in place for the sharing of sensitive employee information such as Forms W-2. One example would be to have two people review any distribution of sensitive W-2 data or wire transfers. Another example would be to require a verbal confirmation before emailing W-2 data. Employers also are urged to educate their payroll or human resources departments about these scams.

Don’t hesitate to contact the office if you believe you were a victim of identity theft or any other tax scam. Help is just a phone call away.

• By Leon Clinton
• January 18, 2019