Taxpayers do not always know when their software is not enough to do the job, especially in view of all the new tax laws. Just as we mentioned in our most recent blog, the tax squad at Gavrilov & Co now brings you a few more real-life case examples. These cases will show times when it’s wisest and safest to reach out to a tax professional. In our previous blog, we examined some pretty basic slices of fiscal life situations that suggested the taxpayers needed to see a professional. These were daily life situations, seen through the lens of the new tax laws.
The Backstory to This Blog: A Review
We explained why there are certain times in life we felt you should bring your tax situations to pros like our Gavrilov Tax Squad. Two of these are when you get married or when you and you spouse plan to divorce. Likewise, we explained a few of the complexities that deserve a professional touch if you bought or sold a your home. Starting a business or maintaining a foreign bank account were also scenarios we covered in the previous blog. So you might want to read or review the previous blog before continuing with this one, to get all the back-story.
Now we bring you four more scenarios in which we believe taxpayers should justify the expense and time of hiring a professional. Remember, think outside the software box! Plus, don’t miss this week’s Red Hot Tax Alert. So, read on, for happy filing!
More Taxpayer Scenarios that Need Pro Attention
Let’s check out the 5 more situations that might change your life, and most certainly will change your tax strategies.
Taxpayer Special Situation Number 1: Adoption.
Did you adopt a child? First, if you are a taxpayer who has added to your family via adoption, we applaud you and congratulate you.
Secondly, we must let you know this is a situation with has a great deal of unfamiliar tax benefits, credits and qualifications.
For example, you earn “both a tax credit for qualified adoption expenses paid to adopt an eligible child and an exclusion from income for employer-provided adoption assistance.” Your tax credit will be limited. It will only cover your tax liability for the year.
Taxpayers should also know the “credit is nonrefundable. This means it’s limited to your tax liability for the year.” On the other hand, your tax pro will show you how to carry forward any credit in excess of liability, for up to 5 years.
You probably already know the maximum amount for adoption 2017 tax credit is $13,570. However, did you know this is also subject to limits dictated by your income? If you do not know this, you could end up paying extra tax, or losing deductions you should have taken. (See the linked resource for more information, and then call Gavrilov & Co. We invite you to make an appointment and remind you that you should not rely on the Internet to replace consultation.)
The IRS states, “The income limit on the adoption credit or exclusion is based on your modified adjusted gross income (MAGI)… To put it briefly, “If your MAGI amount is below $203,540 for 2017, your credit or exclusion won’t be affected by the MAGI phaseout… The bad news is that if “your MAGI amount for 2017 is $243,540 or more, your credit or exclusion will be zero.” See examples and more explanations at this reliable online resource.
Taxpayer Special Situation Number 2: Inheritance.
We’re very sorry for your loss, but you must pay tax on the inheritance.
Even if your inheritance is less than the federal estate tax exemption, the Gavrilov & Co Tax Squad advises you to consult with a tax professional. For example, are you aware of how to pay tax on it, if you inherit shares of stock from great Uncle Louis?
Do you know how to use figure a step-up value at the time of inheritance, not what Uncle Louis paid for it?
Well, on the other hand, without the steady guidance of a tax professional in the matter, you could just pay Uncle Sam a huge capital gain. (Please don’t do that.)
Taxpayer Special Situation Number 3: Tax Residency.
To how many states will you pay state income tax? What happens if you don’t work in the state in which you reside?
This concept can be very confusing. What if you move across the state border in the middle of the year? Even worse, what if you are bi-coastal or you work in one state, but live in another?
Did you know some states have a reciprocal agreement? Residents of one state can request an exemption from another state’s tax withholding. Amazingly, the advice of your tax pro can save you massive problems of residency as well as allocation.
“Say you live in New Jersey and you work in New York. That’s a time when you need a professional to help you with your allocation of income. Say you’re a salesperson, but you also travel to other states. Not all of the income is taxed in New York because you’re not in New York a hundred percent of the time. There could be income allocation issues and also residency issues…”
Taxpayer Special Situation Number 4. Death of a spouse.
If you have an established accountant working with you, then you will not be relying on a stranger if a tragedy completely changes all aspects of your life.
There is no doubt that the death of your spouse would significantly shadow every part of your fiscal life. Your tax accountant can help you discover how to plan your tax strategies in the future, even when you are uncertain. Gavrilov & Co tax professionals are specially trained to give you tax guidance throughout every part of your life cycle.
By the way, we will tell you right now, just since you started thinking about it while you were reading this blog: spouses are exempt from federal estate taxes on assets from a deceased partner.
Taxpayer Situation Number 5: Caring for Your Elderly Parents.
Gavrilov & Co wants you to know that the 2017 Tax Cuts and Job Act has terminated personal and dependent deductions.
To put it simply, the law no longer permits you to claim a dependent parent on your income tax. There is a possibility you may be able to claim a $500 tax credit for any non-child dependents.
Likewise, the law might allow you to claim medical expenses for a parent on your tax return. The caveat in this scenario is that you must make payments directly to the medical provider, not to the parent.
Only a tax professional can keep up with all the fast-changing details of every facet of tax law. This is one area where you really should have professional tax help—for your sake, and of course for your parent’s peace of mind.
Red Hot Alert: When Should a Taxpayer Call the IRS Concerning a Refund?
You can find the answer to this question at the online resource of the IRS. But, we thought we’d note it here also, for your convenience. We know you’re anxious to get your tax refunds, so we have summarized the rules about calling them, below:
1. Give the IRS 21 days, but don’t worry (and don’t call) if it takes a few additional days.
2. Although most taxpayers get their refunds in 21 days, your papers might require some extra time.
3. Only call under these conditions:
It’s been 21 days or more since you e-filed.
It’s been 6 weeks or more since you mailed your return.
You received a message from the online resource, “Where’s My Refund,” and it directs you to contact the IRS.
A Very Special Note: If you filed early, and you claimed the EITC or the Additional Child Tax Credit, your refund might be on hold.
The IRS will send out the earliest EITC/ACTC related refunds directly into taxpayer bank accounts or debit cards starting February 27, 2018, provided the taxpayers chose direct deposit, and the IRS has no other issues with the taxpayer’s return.
We thank you for reading the Gavrilov & Co Accounting and Tax Services blog. Once again we remind you that we do not consider these blogs to be in any way a substitute for consultation with a tax professional.