Teaser to Year-End Tax Planning 2019 Update

When there is noise in Washington, and in some State Houses, it is the perfect cover and distraction!

When politics is noisy, it is easy to get fooled. Fooled into “not knowing what to do” in varying scenarios and outcomes. The Rooney Slant is here to help guide you with things that you can do to save money on taxes.

But as to year-end 2019 tax planning, there are unlikely to be big tax law movements between now and the end of 2019. So, the rules for this year are largely set, and planning can be done, to get control of income tax exposures for the year to a good degree.

The following items serve as a summary of known “tried and true” steps that can help control income tax exposure for 2019 and possibly into year 2020 and beyond:

  • Tax-advantaged use of retirement plans: including maximizing employer 401(k) plan elective deferrals, need be done in 2019
  • Funding Health Savings Accounts (via payroll deduction by 12/31/2019), other funding due 4/15/20
  • Employing younger family members in your business on a part-time basis
  • Consider a rental property holding (perhaps selling) if operating losses are suspended due to your income level… revisit reason for owning it
  • Restructuring “form vs. substance” of financial obligations in your business (a big difference in treatment for tax purposes and tax “basis” on LLC’s taxed as partnerships, vs. electing “S” corporations)
  • Business asset purchases/timing, (size/weight in GVW terms for business vehicles)
Other asset types
  • Both asset types can yield major front-side 2019 shelter from income tax
Items that are new, but not as exciting
  • Income tax brackets have been adjusted for inflation – reduces exposure to tax on inflated dollars
  • Capital gains tax rates are affected by “ordinary income” tax rates… So indexing for inflation is new for tax on net capital gains as well
  • Moderate amounts of interstate sales tax and filing are now the rule, as was expected, after the “Wayfair” tax decision. Be aware that there may be personal liability to business owners who do not comply when sales exceed a threshold. Some states have no minimum filing thresholds, so a zero return is due for some, even if no taxable sales in the state (e.g. wholesale sales, may be exempt, have to be reported
  • Did you forget / miss paying estimated tax payment vouchers (for tax on income with no withholding occurring)?
    For business owners, and others with direct influence on payroll / HR, Adjust withholding upward to help cover this. Income tax withheld such as from W-2 pay and 1099 retirement plan distributions… is considered ratably withheld evenly throughout a year, regardless of when withheld. May reduce estimated tax payment penalties, if you are exposed in that area on your 1040 or state returns.
  • Standard Deduction (in lieu of itemizing on Schedule “A”)
    These levels also indexed with inflation – detailed in upcoming year end newsletter.
  • Miscellaneous itemized deductions were largely ended last year, other issues apply too.
  • Changes in 2018 and forward for 2019 – changes happened with energy conservation cost, with credits restricted mostly to renewable sources (solar panels and the like). Be careful.
  • Office in the home costs – for either self-employed or entity business owners to be reimbursed for these in current tax year – use form 8829 as sample worksheet. Can add up to very substantial deductions, reducing income tax and perhaps SE tax
  • If you owed Arizona taxes last year, you may want to look into the large selection of Arizona state tax credits available on a dollar-for-dollar basis for 2019, many with limits higher than in recent previous years. Call our office if you have questions.
  • For retired clients taking plan distributions, remember the option to make charitable contributions directly from the plan to your favorite 501 (c) (3) charity… especially handy if you do not itemize deductions.
  • In general, be tax smart ahead of year end 2019.

We are here for you to run customized calculations … for your unique situation.