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Alimony Under New Tax Cuts and Jobs Act (TCJA)

Posted by Patricia Jones Posted on Aug 01 2018

Alimony Under New Tax Cuts and Jobs Act (TCJA)

By Patricia Jones CPA/ABV/CFF CFE

 

There is a new tax law regarding alimony effective December 31, 2018.  For couples presently in a divorce proceeding they should plan to meet with their tax advisor to discuss the new divorce tax laws. 

 

Under a divorce agreement, a spouse may be legally obligated to make alimony payments to the other party.  Before the new Tax Cuts and Jobs Act(TCJA) payments that met the requirements  could be deducted by the payer on his/her tax return for federal income tax and the recipient spouse was required to include the payments on his/her tax return as taxable income. As long as the divorce is finalized on or before December 31, 2018 alimony is deductible in future years if the requirements are met listed below:

 

  1. Payment is to or for a spouse or a former spouse made under a written divorce or separation agreement.
  2. Payments in an agreement cannot state the payment in question is not alimony and not deductible by payer nor includable in the recipient’s gross income.
  3. Spouses or ex-spouses cannot live in same household or file a joint tax return.
  4. The payment is in cash (including checks or money orders).
  5. Cannot be child support.
  6. Must include the payee’s social security number on the payer tax return.
  7. There is no obligation to make payments after death of recipient spouse.

 

The old tax law is in effect until December 31, 2018. For payments under a divorce or separation agreement executed after that date the new law eliminates the deduction for alimony payments and the recipient no longer has to include payments as taxable income. 

 

Individuals presently in a divorce proceeding should meet with their tax advisor to discuss the new divorce tax laws or contact our office for a consultation at (727)845-4166.

IRS Audit Issues - Vehicle Expenses

Posted by Patricia Jones Posted on Mar 15 2018

IRS AUDIT ISSUES – Vehicles Expense
By Patricia Jones CPA/ABV/CFF CFE
 
IRS is known to audit small business owners for automobile expenses.  A business owner is usually extremely busy running the business and not paying attention to the recordkeeping requirement needed for the automobile deduction.  If you are self-employed, the deduction can save you thousands of dollars in taxes.  You can choose to either take the actual expenses of the vehicle or standard mileage allowance.  Whether you use the actual expenses of the vehicle or the standard mileage rate, you need to keep mileage records to claim the deduction. 

In order to audit proof yourself for this deduction you need to be tracking your mileage.  IRS will allow a Mileage Sampling.  The mileage log should indicate date, destination, business purpose, odometer start and stop, total miles. 
If you have not kept track of your business mileage, you might consider mileage sampling.  It involves maintaining a log for three (3) consecutive months.  IRS says you may use a three month selection if it is representative of the entire tax year and could be substantiated with your appointment calendar..   If you decide to use the mileage sampling, you will need the following four odometer readings -   beginning of year January 1,  beginning of three month log, ending of three month log, and reading on December 31 year end.   Remember in an audit situation, if you don’t have the substantiation to support your business deduction, the IRS will disallow them.  Always better to be prepared in an audit situation

 

2017 Hurricane Irma Employee Retention Tax Credit

Posted by Patricia Jones Posted on Jan 23 2018

The Hurricane Relief – Employee Retention Tax Credit was part of the Disaster Tax Relief and Airport Extension Act of 2017 which was signed into law on September 29, 2017.  Many taxpayers are unaware of the tax credit available to business owners that were affected in a federally declared disaster zones by Hurricane Harvey (August 23, 2017), Hurricane Irma (September 4, 2017) or Hurricane Maria (September 16, 2017).  

Florida was hit hard by Hurricane Irma and many businesses were affected by the storm.  Every county in Florida was listed in the disaster zones.    

There is a credit equal to 40% of the “qualified” wages paid up to $6,000 per employee when the wages were paid during a time the business was inoperable as a result of damage sustained by the hurricane.  The maximum credit per employee is $2,400. Qualified wages include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed.

Illustration:  Employer X is an eligible employer in Florida.  There was a power outage at the business location for 10 days as a result of Hurricane Irma.  The business operation had to close due to the power outage.  The employer has 7 employees and the total wages paid to the employees for the 10 days the business closed were as follows:

Total wages $11,340 x 40% credit = $4,536

The owner is able to claim a tax credit of $4,536 on Form 5884-A filed with the employer’s tax return.  

Wages paid to owners, shareholders and partners are not considered “Qualified” wages and are not eligible.  However, shareholders of an S Corporation and Partners in a Partnership are entitled to the employee retention credit based on their respective share for the tax credit.

Many of our clients and friends were affected by Hurricanes and had to close operations for a period of time in preparation, during and after the storm.   If you are a qualified employer, you may be entitled to the employee retention credit.  Please contact us at Jones & Company CPAs P.A. 727.845.4166 if you have any questions regarding the credit.