Tax Talk

UPDATE – 12.1.2021


UPDATE – 4.2.2021

SCAM ALERT – University students and staff should be aware of IRS impersonation emails (DOC)

UPDATE – 1/28/2021

2020 Newsletter (PDF)

UPDATE- 5/3/2019

IRS Tax Planning Doc. (DOC)


Taking the required minimum distribution (RMD) from a tax deferred plan?

Making estimated tax payments?

Tired of paying penalties and interest if you owe too much at the end of the year?

Consider this strategy….

Many retirees are surprised at how much tax they owe during their retirement years. Tax deferred accounts and pensions are taxable when withdrawn, and up to 85% of social security benefits can be taxable.  The federal tax system is a pay-as-you-earn system, so retiree’s often find themselves making estimated tax payments (due dates are 4/15, 6/15, 9/15 and 1/15 for the previous tax year) to ensure compliance and avoid failure to pay penalties.

Estimated tax payments are considered paid when remitted throughout the year, and required to be paid as you receive income during the year.

Consider this: If you have an IRA or other tax deferred plan, have an RMD, (required minimum distribution) and are able to budget to take the distribution on a yearly basis, you could wait until December to take the RMD and have all your projected taxes withheld from that December distribution.

Benefit? Amounts withheld from IRA/tax deferred plans are considered paid evenly throughout the year, even if made in total from a yearly distribution at year end. If your RMD is large enough to cover your tax bill, you can keep your cash within the IRA for most of the year, allowing more growth than a monthly withdrawal of assets. You may be able to avoid withholding on other sources of retirement income, avoid making estimated payments, and still avoid underpayment penalties.

The best time to be thinking about this is before retirement, when you can plan and budget, but even if you’re already taking a monthly RMD, you could re-adjust your system. Waiting to take an RMD until the end of the year may seem daunting as your monthly income might decrease but being able to free up cash by NOT making estimated tax payments or having tax withheld from other taxable retirement income may even things out.

If you choose this method of income distribution, be sure to check with your IRA sponsor to see if they will withhold state tax as well if needed. If not, any state tax estimates would still have to be made.


Can you believe another year has come and gone? I wish you a healthy & prosperous 2019. It’s time to talk taxes, especially with the changes affecting nearly every 2018 return being filed in 2019. For some, taxes may be simpler since the standard deduction is increased. Your tax return will surely LOOK different; the two page 1040 is replaced with two half page forms and 6 worksheets. There are 12 additional pages of instructions to go along with the new format, so simplification… NOT!

In 2018 I completed 162 hours of continuing education in tax law, ethics and representation. Taxpayer representation is an area I’ve worked in over the years, but I’m now working toward a specialized certification to be completed in 2019. To represent a taxpayer in front of IRS, a tax professional must be a CPA, an attorney, (both licensed through their state governing board) or an Enrolled Agent, licensed through IRS. I am an EA, already licensed, now actively earning specific certification to better represent taxpayers in tax crises situations. Dealing with IRS is hard and taxpayers with critical situations such as non-filer, tax debt, garnishment, and levy/lien issues need help.

TAX LAW CHANGES- You’ve probably been hearing about tax law changes due to the Tax Cuts and Jobs Act. For the sake of keeping this newsletter brief, go to my secure website and click newsletter for recent and archived information. The engagement letter can be printed out from there, you can make a tax appointment, and find a checklist to help you gather information as well. I’ll be adding information in the coming days, so check it out!

The hardest thing to understand in the world is the income tax.

Albert Einstein

THINGS TO BE AWARE OF: Areas of IRS focus-

  • Rentals- make sure you keep a log of the hours, dates, times you work involving the rental. Office time, repairs, managing/decision activity, any hours spent in connection with the rental activity need to be in a log that can be produced in case of audit. No activity log, IRS can disallow any rental losses.
  • Business Mileage- Keep a mileage log of business miles! If audited, IRS will want 2 contemporaneous records to prove miles- for example, receipts for repair/maintenance with a date and odometer reading to verify the log. I keep log books in my office, they’re free, stop by if you want one. Prefer to use an app? Mile IQ is the best I’ve seen, and usually accepted by IRS. Still need the contemporaneous proof though!
  • Use Quick Books or other software to manage your business? It’s a good idea to make a separate copy of the file for each year on a separate media. In an audit, you can be asked for an electronic copy, so to prevent an auditor form looking at information for years NOT under audit, have a copy for each specific year.
  • Business or Rental? You’re required to get a W-9 filled out by any individual who performs services for you. W-9 is similar to a W-4 and will tell you the type of entity and tax ID of the individual/business. If they earn $600.00 or more in the year, you must issue a 1099-MISC and file the 1096 with IRS by January 31. Failure to get a W-9 or file as required can result in stiff penalties. Let me know if you need help with filing 1099/1096 forms or want more information.

The best way to teach your kids about taxes is by eating 30% of their ice cream.     Bill Murray

IRS is having problems with implementing tax law changes! Direction and guidance on how the changes are implemented and their effect has been slow and expected to not be complete before filing season. In my professional circles, consensus is that taxpayers with business income should file later rather than early to allow IRS time to iron out wrinkles in the system. It’s expected to take a few years to have specific guidance in place for some tax changes.

Extensions can allow up to October 15, 2019, to file. An extension does NOT give more time to pay! If you expect to owe, and file an extension, please make an estimated tax payment by April 15. If you don’t, you may be assessed a failure to pay penalty. If an extension is not filed, and you owe tax, you will be assessed a failure to pay penalty AND a failure to file penalty, up to 100% of the tax owed!

PLEASE BRING all issued tax forms and documentation for credits! If you claim a credit, bring documentation to prove you’re entitled to that credit. Child Tax Credit, Earned Income Tax Credit, Education Credits, and Head of Household filing status all have additional documentation requirements. If these apply, check with me for what is needed.

Taxes, after all, are dues that we pay for the privileges of membership in an organized society.     Franklin D Roosevelt

SECURITY- Please, folks, protect your information! Be vigilant and aware! Best practices include avoiding the use of public WI-FI, using passwords that are strong, long and unique, using multi-factor identification when possible, encrypt and password-protect sensitive data, and keeping a “clean machine” by using current security software. Learn to recognize and avoid phishing emails and shop online at trusted retailers. If you are the victim of identity theft, search the IRS website for helpful information, Publications 5027 & 4524 specifically.


UPDATE- 12/27/2017

As the TAX CUTS AND JOBS ACT gets closer to be signed in to law, the major components can be looked at but are, of course, subject to change. The first thing to know is any changes will be in effect starting in 2018 so really no change to existing tax law for the coming filing season. Most of the changes will expire at the end of 2025, at which time tax law will revert to current tax law unless Congress acts to preserve or change aspects of the law.

TAX RATES for individuals are being consolidated and lowered from rates of 10% to 39.6% under current law to 10% to 37%. For example, a taxpayer filing as Head of Household with 2 children and a taxable income of $45,000 would see their taxes lowered by $958.

STANDARD DEDUCTION amounts are set to increase, almost doubling from previous levels. Married Filing Jointly would increase from $12,700 to $24,000, Single from $6,350 to $12,000 and Head of Household from $9,350 to $18,000.

However, what you don’t hear in the news is that personal exemptions are eliminated. Currently, $4,050 is deducted from taxable income for every individual on a tax return. Married filing joint taxpayers with 3 children will see their standard deduction go up to $24,000 which is great but will lose the personal exemption amount of $20,250 ($4,050 per individual) resulting in a higher taxable income.

CHILD TAX CREDIT amounts will increase from $1,000 currently to $2,000 for 2018 which will help offset the hurt from losing the personal exemption amount, but the child tax credit only applies to children under 17 so will not apply to older children unless the final version of the Act increases the age limit. Remember that nothing is final yet, we can look at what’s there and make educated guesses but the final version of the TCJA has not been finalized.

EDUCATION credits are not changing as far as the American Opportunity Credit or the Lifetime Learning Credit goes but I do expect to see an increase in auditing by IRS for these credits, especially in light of the fact that schools don’t seem to understand how and what must be reported on the 1098-T tuition form. To claim education credits, keep receipts for books and supplies, and print a charge/payment schedule from the student account.

529 PLAN rule changes allow distributions of up to $10,000 to be used for elementary and secondary school tuition. Previously 529 plan funds could only be used for higher education. Also, 529 plan amounts can be rolled in to an ABLE account, which is a tax advantaged investment account for individuals with disabilities that prevent them from providing for themselves.

ITEMIZED DEDUCTIONS are still available for taxpayers whose itemized deductions are higher than the standard. Keep in mind that the term “itemized deductions” references personal deductions. I recently heard a tax professional on social media telling people they would no longer be able to use business expenses because tax reform was eliminating itemized deductions and they would pay tax on their gross business income. Not true! Please, make sure your tax professional is educated and credentialed!

The term itemized deductions always refers to personal items, like medical expenses, mortgage interest, property taxes, charitable contributions and the like. Increasing the standard deduction will indeed cause fewer people to “itemize” but if itemizing is advantageous, you can still use it. State and local income tax or sales tax will still be allowed as well as real estate taxes. Mortgage interest is allowed, but home equity interest will no longer be allowed. Medical expenses are allowed to the extent the out of pocket expense exceeds 7.5% of AGI in 2018 and 10% of AGI in 2019. Very few people are able to use medical expense, so I won’t go into it here, shoot me an email or call if you need specifics. Charitable contributions are still allowed as well as disaster losses and miscellaneous deductions not subject to the 2% limitation.

Itemized deductions that are no longer allowed include foreign property taxes, unreimbursed employee expenses, tax preparation fees, and “other expenses”, again, so few people use them that I won’t go into detail here.

MISCELLANEOUS ITEMS – Teacher expenses remain a deduction of up to $250 of out of pocket expense. Moving expenses will no longer be allowed as a deduction except for Armed Forces. Alimony will no longer be taxable to the recipient or deductible to the one who pays. ROTH IRA’s cannot be recharacterized as traditional IRA’s but traditional IRA’s can still be converted to ROTH’s, which is normally a taxable event.

AFFORDABLE CARE ACT – If you’ve paid the Individual Mandate Penalty because you did not have health insurance, that penalty is repealed starting in 2019. So for 2017 and 2018, the requirement to have health insurance is still in effect and the penalty, if applicable, will be assessed.

FINAL THOUGHTS – It’s interesting to me as a tax professional to watch “tax reform” unfold. I see no major simplification with the exception of the increase in the standard deduction, which could make some taxpayers taxes simpler. But since most taxpayers already use the standard deduction, I do not see this as simplification of tax code and the idea of filing on a postcard is as far away as ever.

Changes proposed for business taxes appear, in these early stages, to actually have complications added due to changes in how pass through business taxes will be computed. Again, nothing is law until it’s is actually signed in to law and then interpreted to a final state which is then applied.

As always, feel free to call, text or email your questions. I’ll do my best to keep you informed as final changes happen. I hope everyone had a Merry Christmas and may the New Year be your best ever!

Neala Burnett


TAX CUTS AND JOBS ACT – What’s really going on?

The House and Senate Republicans have released tax reform proposals with many similarities and some significant differences. The House has released their final version while the Senate has not. After each chamber agrees to and votes on its final plan, the differences will be hashed out through the Joint Committee on Taxation.

The Senate Tax Proposal retains the 7 tax brackets ranging from 10% to 38.5% while the House version has 4 brackets ranging from 12% to 39.6%. Will a reduction in the number of brackets simplify the tax code? Not to my way of thinking, unfortunately, and in the 4 bracket version, the lowest tax rate is 12% compared to the current lowest tax rate of 10%.

You have probably heard that the standard deduction will double, and both the Senate and House plans do call for virtually a doubling of the current standard deduction. This is a simplification for really, an already simple tax situation. If a taxpayer has wage/pension income and itemizes, they will probably be able to file a standard deduction return which is a simplification. If a business is involved, investments, property sold or inherited, etc., not so much; let’s face it, tax code is crazy complicated, and the simplifications the heads in Washington are touting apply to already pretty simple tax situations.

What you’re not hearing much about is the elimination of personal exemptions. After gathering income information, the standard or itemized deduction is subtracted, then the personal exemption amount is subtracted to arrive at a taxable income figure, after which applicable credits are figured and taxes are added. Let’s look at a family of 5, 2 parents, and 3 kiddos.

Currently                               Income                      Proposed                  Income
less standard                        -12,600                     less standard            -24,000
less exemptions                   -12,150                      no exemption            -0

Under the proposed plans, the family of 5 will have $750 MORE income to be taxed and for each additional dependent, that goes up.

It a taxpayer does itemize, they are no longer allowed to take state and local taxes in the senate plan, the House plan allows property tax paid on real property only. Both plans eliminate the state, local and sales taxes. Taxpayers who live in states with state income tax or high property taxes will be hurt the most by this. Both plans retain mortgage interest deductions and charitable contribution deductions and eliminate other itemized deductions, for example, employee business expense and investment expense.

The House plan eliminates the deduction for alimony paid which should change how divorce settlements are negotiated. I’m sure alimony received will continue to be taxable. The House plan combines the different higher education credits in to one program and eliminates the student loan interest deduction while the senate plan makes no change to the current education credit programs and retains the student loan interest deduction. Both plans retain the adoption credit and repeal the AMT tax.

AMT tax – what is it? Alternative Minimum Tax was implemented in the 1960’s to prevent high income taxpayers from not paying taxes because their income afforded them deductions or preference items that other taxpayers didn’t have. AMT targeted taxpayers whose incomes were above $200,000. The issue with AMT is that it has never been indexed for inflation so AMT has been increasingly levied against middle class taxpayers in recent years.

Retirement plan options are relatively unchanged and similar in the House and Senate plans. Estate Tax exemption is increased to $10 million under both plans, increased each year for inflation under the Senate plan and repealed altogether after 2023 in the House plan. Not something that will affect most taxpayers any more than it does now since the Estate Tax exemption is currently $5.6 million for individuals and $11.2 million for a married couple. Both plans reduce corporate tax rates to 20% which I personally like since corporate taxes in America are among the highest in the world. Whether that will translate into businesses choosing to stay in this country and provide jobs for people will remain to be seen, but certainly high corporate tax rates would no longer work as an excuse for shipping jobs out of the country. Unfortunately, lower corporate tax rates don’t cure greed and the resistance to paying a wage that provides what is considered to be the American standard of living.

When you get into business taxes that apply to S-Corporations, Partnerships and Sole Proprietorships, the proposals from the House and Senate are complicated and involve tax rates against the income at set rates that could be different from the regular tax rate. Trust me, no simplification of the tax code here!

I wrote this because people keep asking me what I think about what the heads in Washington are doing with tax reform. I don’t see much that will benefit the common person in America, I see a lot that benefits the wealthy. So overall, I’m not impressed. Will the changes save you money? It depends. If they do, it probably won’t be enough that you’ll notice. Is the tax code being simplified? NO! A thousand times no! Will it be easier for some people to file their return if they don’t itemize? Sure, but 70% of people use the standard deduction now, will that make a substantial difference? There are too many other factors that go into most people’s tax returns to be able to call that a major simplification.

As a plan is formally approved and set in to law, I’ll keep the updates coming. Until then, have a wonderful Thanksgiving!


Can you believe it’s August already? I usually send tax updates at the beginning of the year but there’s information I think people need to know – hence, a mid-year update. You may not even be a client, but if you’ve ever been on my mailing list, you’re getting this newsletter. I will  prune my mailing list, so if you don’t get an update in January, and you want one, just call, text or email and I’ll send one to you, whether you’re a client or not. Information is good for everyone!

My not-so-favorite topic but one of critical importance- there are new scams every day that defraud by filing bogus tax returns, stealing identities, or causing victims to pay money to the scammer. Remember, IRS will never make initial contact with a taxpayer by telephone! IRS contacts by mail first. A scam active right now is:

Fraudsters call to demand an immediate tax payment through a prepaid debit card. The scammer claims to be an IRS agent and tells the victim about two certified letters purportedly sent through the mail but returned as undeliverable. The scam artist threatens arrest or seizure of property if payment is not made immediately through a prepaid card or through an EFTPS account which is then controlled by the scammer. The victim may be warned not to contact their tax preparer, attorney or IRS until after payment is made. This type of scam is also done by people pretending to be from a utility company saying they have not received a payment and the utility will be shut off if a prepaid debit card number is not supplied. Don’t take the bait! Call the number on the actual utility bill to see if there’s a problem.

I’ve had success getting these types of calls stopped by reporting them promptly. Write down the phone number the call came from and the phone number you were told to call back if available. Also make a note of when the call came in and any name given as well as what was said. You can report these calls at 1-800-366-4484 or contact your preparer and ask them to report it for you.

NEW MEDICARE CARDS ARE ON THE WAY! Within the next 2 years, Medicare cards will be replaced. They will be automatically sent to enrollees at the address of record. You do NOT need to do anything to get a new card, which are being issued to replace the social security number with another individual specific number. This is part of security initiatives to combat identity theft and fraud. Watch Out- this could be a potential area for new scam attempts – I believe there will be scams developed targeting individuals, especially elderly and disabled, by tricking them into paying a fee or provide personal information to get the new card. The issuing of the new cards will be totally automatic and require no action or payment on the part of Medicare/Medicaid enrollees.

Be sure your tax preparer is qualified! Yes, there are unscrupulous preparers out there who file false returns. Criminal minded preparers may increase deductions or dependents in order to increase a refund and may divert a portion of a refund into an account they set up. Make sure your preparer has basic competency levels and is Circular 230 (ethical & procedural standards) compliant by looking for the following:

The Annual Filing Season Program is a voluntary program that establishes minimum competency with an annual continuing education requirement of 18 hours including a 6 hour refresher course and passing the corresponding exam. AFSP allows a preparer to represent only their client before IRS in a limited capacity for returns they prepared and signed IF they have a valid Record of Completion for the year in which the representation occurs. AFSP does not allow a preparer to represent any taxpayer before appeals officers, revenue officers or the Office of Chief Counsel. AFSP preparers must agree to abide by the standards of Circular 230 before they are issued the Record of Completion.

The Enrolled Agent license is granted to preparers who are able to pass the 3 part Special Enrollment Examination (SEE) which tests in the areas of 1. Individual Taxation, 2. Business Taxation and 3. Representation, Practice & Procedures. Enrolled Agents (EA’s) are the only federally licensed tax preparers who have unlimited rights to represent taxpayers before IRS. EA’s may represent taxpayers before all areas of IRS and may represent any taxpayer, not just their clients.  EA’s must pass a suitability check, agree to adhere to Circular 230, and complete 72 hours of continuing education every three years with a minimum of 16 hours per year 2 of which must be in ethics. Attorneys and CPA’s are also allowed to represent taxpayers before IRS. You can check to see if a preparer is qualified or find a preparer at . You can learn about the types of qualifications and search the directory by name, qualification or zip code. If your preparer is not listed in the directory, they would be considered an unenrolled preparer and would not be allowed to represent a taxpayer, even if they prepare the return.

Don’t hold your breath if you’re hoping for tax reform, news in the industry is that very little will change for the 2017 filing year. I will, of course, send an update at the end of the year to cover any changes that do happen. What may change and have an immediate impact is the government tinkering with health care – sigh – who knows what’s going on with that! I would love to see them at least repeal the penalty for those who don’t have health insurance. Of course, most tax law changes come in at the last minute, so we’ll see. One change being pushed is to double the standard deduction for taxpayers which means a lot of people would no longer itemize and that would actually be a major simplification of the tax code.

In the meantime, taxpayer service at IRS has probably never been worse. Their budget has been set at a level comparable to 2008 and the buzz is that even meeting payroll is difficult. What that means for taxpayers is longer resolution times for issues they may be dealing with. IRS is developing programs to allow taxpayers to do more online to interact with IRS. For example, taxpayers who need transcripts of their returns can use the “Get Transcript” tool available on A shift towards self-service is coming, but for issues that require a subjective decision, it’s getting worse.

Neala Burnett

There’s tax news on the following pages and please call if you have questions. I look forward to seeing you soon, appreciate your business and thank you for your referrals.

Call, text or email if you’d like an organizer mailed to you!


Internal Revenue Service recently warned taxpayers to watch out for websites or emails designed to steal personal information. These schemes are known as “phishing” and are typically carried out with the help of unsolicited email or a fake website that poses as legitimate. Potential victims are lured in and prompted to provide valuable personal and financial information which can then be used to commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from IRS, report it by sending it to Remember, IRS in general never initiates contact with a taxpayer by email or any other type of electronic communication to request personal or financial information.

IRS Commissioner John Koskinen says “The IRS won’t send you an email about a bill or refund out of the blue. I urge taxpayers to be wary of clicking on strange emails and websites. They may be scams to steal your personal information.”


UPDATE- 1/19/2018

As promised, more updated detail on the coming tax reform which will impact many taxpayers’ paychecks in the near future and be in place for the 2018 tax year to be filed in 2019.

Simplification? Overall, I’m not seeing it, the main item that simplifies taxes is the increased standard deduction causing fewer taxpayers to itemize. Taxpayers can still itemize if their itemized deductions are higher than the standard, but many items that are itemized (Schedule A) are restricted or lost completely.

State & Local Taxes – previously, you could deduct state income tax OR state sales tax, whichever was higher, and property tax on vehicles, campers, cycles, etc. and real estate tax for personal residences. You can still deduct those items, but are limited to 10K total. Taxpayers living in states with high income and/or property taxes are the losers here.

Deductions subject to 2% limitations – this entire category of deductions has been eliminated. Included were items such as tax preparation fees, financial management fees, and the biggie – unreimbursed employee expenses. If you are an employee, and have unreimbursed expenses like travel, supplies, or pay union dues, that deduction is no longer available. This can make a huge difference to Journeyman Linemen, Sales People, and Traveling Nurses, just to name a few, basically any employee who spends money to earn money. If you are paid a per diem, the effect will be minimized. This is an opportunity for discussion with your union or your employer when negotiating employment contracts. For example, a sales employee earns $100,000 base pay plus commissions, but has $20,400 of out of pocket expense. Losing this deduction can cost thousands per year in taxes. But the employee could ask for a $1,700 monthly stipend for expenses, keep a log of expenses to be turned in to the employer (accountable plan) and take a $20,000 per year salary reduction. The stipend is not taxable to the sales employee if expenses are at least $1,700 a month, the employer deducts the stipend as a business expense, and the employee has less taxable income in salary and no out of pocket expense to earn that salary.

Home equity interest – no longer deductible unless used to buy, build or improve your home.

Tax planning can help! If a taxpayer has been itemizing, the standard deduction increase may eliminate that opportunity for them. However, on items the taxpayer has some control over, planning can make a difference. I know several people who paid their real estate taxes in full this past December instead of waiting to pay the second half in May so they could deduct the tax in full on 2017 tax returns. The same concept can be applied to future years. For example, a taxpayer could plan to use the higher standard deduction for 2018 taxes, would only pay the December real estate tax, and plan to itemize for 2019, paying the May 2019 tax when due then in December 2019 paying the full year. Basically, ½ of the taxes paid in 2018, the other half and the full taxes paid in 2019.

Will this require discipline and foresight? YES!

Charitable contributions – Again, planning is key here. Many people make larger donations at the end of the year. A taxpayer can plan to use the higher standard deduction in 2018, like the previous discussion, hold on to the normal 2018 planned donation until January 2019. Make the donation in January 2019 with the saved up funds, and make the customary donations in 2019, maximizing the charitable deduction into the planned itemizing year. The donation funds can be placed in a savings fund so interest is earned and they are readily available when time to donate.

Will this require discipline and foresight? YES!

Many people will just use the increased standard deduction and not worry about itemizing anymore, but I can look at your situation and tell you if taking actions like this would benefit you.

The new withholding rates are coming out now, so you may see changes in your withholding on your paychecks. This is something that needs to be watched to prevent owing for 2018. There’s much more going on with tax law, so stay tuned and I’ll do my best to keep you informed as changes are finalized and written in to law. As always, feel free to call, text or email your questions.

Neala Burnett