Some Guidance – File by 4/15 pay by 7/14

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Here’s what we know so far.
“Mnuchin, on Tuesday, also announced that the Treasury Department would not extend the deadline to file taxes by the April 15 deadline, as much of the tax filing can be done online.

“We encourage Americans who can file taxes to continue to file taxes on April 15 because for many Americans, you will get tax refunds and we don’t want you to lose out on those tax refunds,” Mnuchin said.

Mnuchin added that if individuals or corporations owe money to the Internal Revenue Service after filing their taxes, those payments now are able to be deferred for up to 90 days interest-free.

“If you owe a payment to the IRS, you can defer up to $1 million as an individual, and $10 million to corporations, interest-free and penalty-free for 90 days,” Mnuchin continued. “File your taxes, you’ll automatically not get charged interests or penalties.”

No Tax Holiday’s Yet

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The IRS has NOT issued any guidance allowing for late filing or payment. We are waiting to see if there was anything in the newly passed COVAD relief bill once it is passed. Neither Virginia nor DC have allowed extensions for any taxes as yet. That means despite pledges to assist small businesses, Sales Tax filings, Withholding tax filings, and payments will all be due as usual. Remember that intentional failure to pay withholding tax liabilities or sales tax liabilities creates personal liabilities to those making that decision be they owners, or employees. It does not matter if the business is a limited liability company or a corporation, the liability attaches if you prefer other creditors to the tax authorities. So, don’t ignore or put off those obligations.

Year End – What do I do now?

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As usual taxes vest on December 31. The question is what should you do? Each person gets $12,200 standard deduction and if you’re over sixty-five or blind you get another $1650. So, to itemize, you need to have deductions that exceed $24,400 for a married couple or $12,200 for an individual. So what does all that mean. It means that you might not be able to use your local and state tax deductions, or use your medical deductions or use your charitable deductions. So, you need to do some math before rushing off to get some extra deductions to ensure that they do you some good. Second of all, for now Capital gains are at 23.8% (if you’re subject to the Obamacare surtax) or 20% if you’re not. Couples don’t go above the 19% rate until they exceed $78,971 in taxable income. That means that unless your gross income is over $100,000, you don’t need to try and sell those stocks. Even then, you don’t go above 23.8% until you exceed gross income of over $190,000. So, you don’t need to lock in those capital gains rates.

If you have a business, check to see that you’ve been paid all of your reimbursements for the year. That’s tax free money to you and if you are a single member, LLC or sole proprietorship that you deduct your health insurance and pick up all those expenses you paid as part of your business, but forgot to run through your business.

If you are an employee, remember to get reimbursed, if you can, because unreimbursed employee business expenses are not deductible anymore.

Lastly, Merry Christmas.

Democrats control Virginia Government

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What does that mean for your taxes? Will they try and roll back the 2017 Federal Tax cuts by decoupling from the Federal Income tax? Or will they simply raise rates on sales, income and gasoline taxes? Budget desires include increased Medicaid funding, infrastructure, and schools. Because the Virginia Constitution requires a balanced budget, the only solution will be to raise taxes. There are really no other states to flee to from Virginia if you work here. Perhaps Tennessee and Kentucky. West Virginia, Maryland and DC all have higher tax rates than Virginia. Retirees may start spending 184 days in Florida. And for high wage earners most of these tax increases will not be deductible on your Federal income taxes. So, if you live in Virginia be prepared.

Asset Forfeitures and Balancing the Budget

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One little known source of revenue to the Federal Government is the ability to forfeit assets used in a crime. Let’s take the current defendant du jour, Jeffrey Epstein, a billionaire, who has been accused of sex trafficking and sexual abuse of minors. He allegedly used his plane to transport underaged women to various properties owned by her for illicit purposes. On that basis, if proven, the plane and the properties where these young women were taken could be forfeited. There are allegations that he paid people not to testify against him, that would open up his vast portfolio for potential forfeiture, if proven. In other words, a billionaire, may lose everything to asset forfeiture. In truth his fortune pays about 3 minutes of interest of U.S. Government debt, but if a few more billionaires are snagged, you could start to get some real money.