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What Taxpayers Should Know about Penalty Relief

Meredith L. Anderson, CPA, MST, EA

July 23, 2018

The following article was published by the IRS.

Taxpayers who make an effort to comply with the law, but are unable to meet their tax obligations due to circumstances beyond their control, may qualify for relief from penalties.

After receiving a notice stating the IRS assessed a penalty, taxpayers should check that the information in the notice is correct. Those who can resolve an issue in their notice may get relief from certain penalties, which include failing to:

  • File a tax return
  • Pay on time
  • Deposit certain taxes as required

The IRS offers the following types of penalty relief:

Reasonable cause
This relief is based on all the facts and circumstances in a taxpayer’s situation. The IRS will consider this relief when the taxpayer can show they tried to meet their obligations, but were unable to do so. Situations when this could happen include a house fire, natural disaster and a death in the immediate family.

Administrative Waiver and First-Time Penalty Abatement
A taxpayer may qualify for relief from certain penalties if he or she:

  • Didn’t previously have to file a return or had no penalties for the three tax years prior to the tax year in which the IRS assessed a penalty.
  • Filed all currently required returns or filed an extension of time to file.
  • Paid, or arranged to pay, any tax due.

Before asking for First Time Abatement relief, taxpayers can request that the IRS first consider the reasonable cause relief provision. This preserves access to the First Time Abatement, which taxpayers may only use every three years.

Statutory Exception
In certain situations, legislation may provide an exception to a penalty. Taxpayers who received incorrect written advice from the IRS may qualify for a statutory exception.

Taxpayers who received a notice or letter saying the IRS didn’t grant the request for penalty relief may use the Penalty Appeal Online Self-help Tool.

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personal income taxes

How Your Personal Income Taxes Will Change in 2018

Personal income taxes are changing with the passage of the December 2017 tax bill. It’s time to decode the new tax law, and the following guide will help you determine how tax rate, bracket and deduction changes will affect your finances in 2018 and beyond.


When Does Everything Take Effect?

First, you should understand that unless otherwise noted, the recent tax bill changes will go into effect for the 2018 tax year, which means from January 1, 2018, to December 31, 2018. It will not affect 2017’s personal tax filing, but it will affect take-home pay for many workers, depending on your tax bracket and withholdings.


Tax Brackets

Tax brackets have seen significant changes, particularly the top bracket, which has been reduced from 39.6% to 37% and will affect most high-income earners. There are still seven federal income brackets, but the tax rates and income ranges have been amended to the following:


For Single Filers


10% $0 – $9,525
12% $9,526 – $38,700
22% $38,701 – $82,500
24% $82,501 – $157,500
32% $157,501 – $200,000
35% $200,001 – $500,000
37% More than $500,001


For Joint Filers


10% $0 – $19,050
12% $19,051 – $77,400
22% $77,401 – $165,000
24% $165,001 – $315,000
32% $315,001 – $400,000
35% $400,001 – $600,000
37% More than $600,000


Changes in Deductions

Instead of having a personal exemption and the standard deduction, the new bill simplifies matters by creating a higher standard deduction – up from $6,350 to $12,000 for single filers – and eliminating the personal exemption. When filing jointly, the standard deduction is $24,000.

There are several deductions that have been eliminated for the 2018 tax year. These include:

  • Tax preparation expenses
  • Moving expenses (except for military)
  • Casualty and theft losses unrelated to a federally declared disaster
  • Entertainment expenses
  • Unreimbursed employee expenses

Talk to our team at Robert L. Coval, CPA to determine if you will be affected by any other eliminated deductions.


Parental Tax Breaks

The Child Tax Credit has been expanded – up from $1,000 to $2,000 – and the eligibility threshold has increased significantly. For married filing jointly, the new limit is $400,000, while individuals jump to $200,000. These changes should result in a similar tax balance from 2017 to 2018 for most families.


Education Tax Breaks

If you’ve been investing in a 529 college savings plan, there’s good news. You’ll now be able to use those funds to help pay for private schooling and tutoring for K-12 grade levels instead of just college. If you decide to exercise this option, it would be wise to speak with a financial planner and make sure you’re still saving enough for your child’s college.


Medical Expense Deductions

The current deduction for medical expenses has dropped from 10% of your adjusted gross income to just 7.5%. The primary thing to note here is that this is one of the few provisions that is retroactive to the 2017 tax year, which means it will affect you this April.


Charitable Contributions

Taxpayers can now deduct donations of up to 60% of their income, which is up from the previous 50% cap. Ensure you keep diligent records of your charitable giving.


Still Confused by Taxes?

It’s okay. Taxes will always be complicated, and the more you grow your income, investments, business and family, the more involved it will get. Thankfully, you have allies at Robert L. Coval, CPA. Our mission is twofold: help you understand the tax code and how it affects you, and make sure you get the most out of each year’s tax return. Stop worrying about your taxes and contact us today!

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new tax bill small business

What the New Tax Bill Means for Your Small Business in 2018

Whenever new tax laws are passed, news outlets struggle to accurately report how the changes will affect small businesses. Don’t get lost in the misinformation – come to us.

At Robert L. Coval, CPA, we will help you understand how the sweeping tax reform will directly affect your small business, both for this immediate tax filing in 2018 and beyond. While we can offer a more complete picture during a free consultation, here is a quick list of the changes you’re going to see in the coming months and years:


Boons for Pass-Through Businesses

Sole proprietorships, limited liability companies, partnerships, S corporations, and other pass-through businesses are going to see a boost in their deductions in 2018. The standard deduction for these businesses is now 20 percent, as long as their income stays below $157,500 for single filers and $315,000 for joint filers.


Go for the Big Purchase

If you’ve been holding off on making an expensive purchase for your business, now is the time. Any assets purchased after September 27, 2017 through December 31, 2022 are eligible for a 100 percent deduction. This write-off now extends to used equipment as well as new.


Fewer Client Entertainment Deductions

You can still claim a 50 percent deduction for taking your client out to lunch, but a round of golf will no longer deliver the same tax benefit. The sweeping tax bill has eliminated the 50 percent deduction on client entertainment expenses, restaurants not included.


Slashed C Corporation Tax Rates

C corporations’ tax rates won’t be amended at all in time for your 2017 filling, but you’re getting a major tax cut effective January 1, 2018. C corp tax rates plummeted from 35% to 21%, applicable to both small and large businesses. This could have a positive effect on your cash flow this year. Game plan with our team about how changes to next year’s filing can free up funds to put towards immediate business initiatives.


Don’t Go It Alone

The new tax bill has left many business owners confused as they struggle to clearly understand how the new changes directly affect their finances. Our advice? Get some professional help from an accounting team that knows business taxes: the team at Robert L. Coval, CPA. It’s our job to understand these developments and we’re good at explaining it in a way that makes sense. Let’s analyze how to maximize the new tax bill changes to your small business’ benefit. Get in touch today.

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