Note that this is not a roadmap to how to prepare your taxes (except for the upper left corner, where it lists various methods for having a return prepared) – It’s a roadmap that follows your tax return through the process once it gets to the IRS.
This is a MUST READ for anyone who is “downsizing,” and especially to parents who are thinking about estate planning and a move to a smaller home or independent living facility.
Some of the hardest conversations I have with my clients (both the parents who are engaged in estate planning and the children who are administrating the estate of a deceased parent) is what to do with the “stuff.”
This article is completely in line with the sentiments of the surviving children – they don’t want your (pardon the directness) OLD STUFF. They do not have the sentimental attachment to your china or your mother’s costume jewelry, or your collection of Precious Moments figurines, and certainly not to the furniture.
If you have a lifetime of accumulated STUFF and are ready to downsize, use this Forbes Article to help you decide how to dispose of it.
Even if you are NOT ready to downsize, it’s a Very Good Idea to KonMari your “stuff” every so often to give you some breathing room and take a substantial burden off your children who will be left to deal with your stuff after you are gone. If it is taking up room, and it if doesn’t “spark joy,” please dispose of it.
If you think that this is a little harsh, please note that I speak from experience, having provided “storage space” over the years to both sets of grandparents and my own parents’ lifetime accumulation of “this-and-that,” so I have a personal taste for the burden of sifting through decades of furniture, collectibles, and the like. I have also watched my aunt agonize over whether to keep or dispose of her mother’s lovely collectible items, knowing that her children and her nieces had little interest in the items, as lovely as they are.
Now, to step back from the rant – seriously consider whether your keepsakes will be considered as keepsakes by your children. I am completely charmed by my grandmother’s diary, which dates back to the 1930s, but am completely indifferent to every single Christmas, birthday, and greeting card that she also saved. I pulled out the letters I wrote to her when in college and put them in a binder and I kept the letters my grandparents wrote to each other when courting because those things have sentimental meaning for me. However, I don’t expect my kids to get the same “joy” out of these “keepsakes” as I do.
New telephone scams come along faster than word can get out about old ones. The newest is a caller claiming to be from the IRS Taxpayer Advocate Services (which is a real thing), offering a large refund in exchange for a bank account number. If you decline, the offer turns into a threat to suspend your driver’s license or to arrest you.
Remember – the IRS will never ask you for a credit card number, will never ask you for payment over the phone, and will never ask for personal information.
WHAT TO DO: If you are unsure, the best way to handle the caller is to say, “I’m sorry, but I do not give out information over the phone. Please send me a letter, and I will call you if I have any questions.”
IRS Scams have been in the news, lately, and the IRS has posted several helpful tips on its website. See: IRS Scams.
This day and age, taxpayers should be aware of both PHONE and USPS (Mail) scams which aggressively demand payment “or else.” Personally, I have received phone calls with an IRS caller-ID, where the pre-recorded message informed me that there was a warrant for my arrest and I needed to call a number, immediately, to make a credit-card payment of my taxes. A number of my clients have called me in a panic with similar stories.
Additionally, the IRS uses automated systems to mail taxpayers notices of payment due, and the IRS has stepped up their enforcement of penalties and interest for late filing of returns.
Most taxpayers are unusually fearful of the IRS and any correspondence from the IRS. Unfortunately, many people choose to ignore those letters – some of which may be legitimate.
I encourage my clients to contact me and provide copies of ANY correspondence they receive from the IRS (even – or especially – if they think it’s a scam). I can tell, immediately, if there is an issue that needs to be addressed and can usually help the taxpayer resolve the matter quickly.
On the other hand, sometimes the IRS catches its own mistakes. Recently, a client provided me with a letter assessing penalties for the late filing of a zero-due return (no taxes were due with the return). By the time they got the letter to me and I determined that they had – in fact – NOT filed the return late, they called me and let me know they received a follow-up letter from the IRS confirming that their tax account was not delinquent.
What is the moral of this story (and post)?
If you receive any PHONE CALLS from the IRS, assume that they are a scam.
If you receive any LETTERS from the IRS, contact your friendly tax or legal professional for more information, and to confirm whether there is any action you need to take. Better safe than sorry, and sometimes there is an easy and quick fix.
Credit to Accounting Today, at their slideshow: Tax Reforms and 2019 Returns, where you can find more detail. If you need further information, please talk to your friendly accounting professional. The purpose of this post is to get you started and to provide a quick resource for 2018 planning.
1. Individual Rates
7 new brackets – 10% to 37%
2. Standard Deduction
$24K MFJ – $18K HOH – $12K S
3. SALT – State & Local Taxes
Capped at $10K deduction
NON-deductible to payer/tax-free to the recipient (N/A in Indiana)
5. Moving Expenses
ENDED – except for active-duty military
6. Individual AMT
$109,400 MFJ – $70,300 S – $54,700 MFS – PO/$1M
7. Child Tax Credit
$2,000 each qualifying child
8. Kiddie Tax
Taxed at Trust and Estate rates
9. Affordable Care Act
Mandate repealed effective 2019
10. Roth Conversions
Prohibited if previously from Roth
11. Pass-Through Income
Section 199A – OWNER can deduct 20% (restrictions apply)
12. Itemized Deduction PO
13. Medical Expenses
Floor lowered to 7.5% (from 10%)
14. Charitable Contributions
Max at 60% of AGI – acknowledgements required
15. COLA (Cost of Living Adjust)
Reduced – converting indexing to CPI indexing
16. Like-Kind Exchanges
Real Estate ONLY
17. Employee Awards
LIMITED tax free
18. Student Loans
Discharges excluded from income @ death or disability
19. Mortgage Interest Deduction
MAX $750K – Acquisition financing + improvements only
20. Theft & Casualty Losses
Eliminated, except for Presidential disaster areas
21. Misc. Sched A Deductions
22. Gambling Losses
Limited to extent of winnings
23. Self-created Works
Removed from definition of Capital Assets
Key to abbreviations: PO = Phase-out, MFJ = Married filing jointly, MFS = Married filing separately, S = Single
NOTE – Most tax law changes are set to expire in 2025. As usual, Congress can or extend these provisions at any time.