David M.Green Bookkeeping and Tax Service -
RSS

Recent Posts

IRS Announces 2018 Pension Plan Limitations; 401(k) Contribution Limit Increases to $18,500 for 2018
Like Harvey, Retirement Plans Can Make Loans, Hardship Distributions to Victims of Hurricane Irma
IRS Has Refunds Totaling $1 Billion for People Who Have Not Filed a 2013 Federal Income Tax Return
File Without 1095-B or 1095-C
6-Month Extension Period for Calendar Year C Corporations
powered by

My Blog

IRS Announces 2018 Pension Plan Limitations; 401(k) Contribution Limit Increases to $18,500 for 2018

Highlights of Changes for 2018
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,000 to $18,500.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver’s credit all increased for 2018.
Taxpayers can deduct contributions to a Traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) 

                        Here are the phase-out ranges for 2018:
  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $63,000 to $73,000, up from $62,000 to $72,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $101,000 to $121,000, up from $99,000 to $119,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $189,000 and $199,000, up from $186,000 and $196,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $120,000 to $135,000 for singles and heads of household, up from $118,000 to $133,000. For married couples filing jointly, the income phase-out range is $189,000 to $199,000, up from $186,000 to $196,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $63,000 for married couples filing jointly, up from $62,000; $47,250 for heads of household, up from $46,500; and $31,500 for singles and married individuals filing separately, up from $31,000.

Like Harvey, Retirement Plans Can Make Loans, Hardship Distributions to Victims of Hurricane Irma

The Internal Revenue Service announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Irma and members of their families. This is similar to relief provided last month to victims of Hurricane Harvey.

Participants in 401(k) plans, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans may be eligible to take advantage of these streamlined loan procedures and liberalized hardship distribution rules. Though IRA participants are barred from taking out loans, they may be eligible to receive distributions under liberalized procedures.
Retirement plans can provide this relief to employees and certain members of their families who live or work in disaster areas affected by Hurricane Irma and designated for individual assistance by the Federal Emergency Management Agency (FEMA). For a complete list of eligible localities, visit https://www.fema.gov/disasters. To qualify for this relief, hardship withdrawals must be made by Jan. 31, 2018.

The IRS is also relaxing procedural and administrative rules that normally apply to retirement plan loans and hardship distributions. As a result, eligible retirement plan participants will be able to access their money more quickly with a minimum of red tape. In addition, the six-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply.
This broad-based relief means that a retirement plan can allow a victim of Hurricane Irma to take a hardship distribution or borrow up to the specified statutory limits from the victim’s retirement plan. It also means that a person who lives outside the disaster area can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or other dependent who lived or worked in the disaster area.

IRS Has Refunds Totaling $1 Billion for People Who Have Not Filed a 2013 Federal Income Tax Return

The Internal Revenue Service announced today that unclaimed federal income tax refunds totaling more than $1 billion may be waiting for an estimated 1 million taxpayers who did not file a 2013 federal income tax return.To collect the money, taxpayers must file a 2013 tax return with the IRS no later than this year's tax deadline, Tuesday, April 18.

File Without 1095-B or 1095-C

According to Question 14 on the IRS Health Care Information Forms FAQ, you do not have to wait for either Form 1095-B or 1095-C from your client’s coverage provider or employer to file the individual income tax return. You can use other forms of documentation in lieu of the Form 1095 information returns to prepare the tax return. Other forms of documentation that would provide proof of a taxpayer’s insurance coverage include:
  Insurance cards
  Explanation of benefits statements from the insurer.
  W-2 or payroll statements reflecting health insurance deductions.
  Records of advance payments of the premium tax credit.
  Other statements indicating that the family had health care coverage.

6-Month Extension Period for Calendar Year C Corporations

The IRS revised the Instructions for Form 7004 allowing calendar year C corporations an automatic 6-month extension.

Previously §6081(b) granted a five-month extension for corporate returns. Section 6081(a) has been updated to allow a 6-month automatic extension. The extended due date will move to October 15 instead of the original September 15 due date.



Early Withdrawals from Retirement Plans

Many people find it necessary to take out money early from their IRA or retirement plan. Doing so, however, can trigger an additional tax on top of income tax taxpayers may have to pay. Here are a few key points to know about taking an early distribution:

  1. Early Withdrawals. An early withdrawal normally is taking cash out of a retirement plan before the taxpayer is 59½ years old.

  2. Additional Tax. If a taxpayer took an early withdrawal from a plan last year, they must report it to the IRS. They may have to pay income tax on the amount taken out. If it was an early withdrawal, they may have to pay an additional 10 percent tax.

  3. Nontaxable Withdrawals. The additional 10 percent tax does not apply to nontaxable withdrawals. These include withdrawals of contributions that taxpayers paid tax on before they put them into the plan. A rollover is a form of nontaxable withdrawal. A rollover occurs when people take cash or other assets from one plan and put the money in another plan. They normally have 60 days to complete a rollover to make it tax-free.

  4. Check Exceptions. There are many exceptions to the additional 10 percent tax. Some of the rules for retirement plans are different from the rules for IRAs.

  5. File Form 5329. If someone took an early withdrawal last year, they may have to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with their federal tax return. Form 5329 has more details.

The State of Pennsylvania has released their 2017 tax due date reference guide.

Warning: QuickBooks Phishing Scam


The Better Business Bureau has issued a warning about a new phishing scam targeting small businesses. The message looks like an email alert from accounting software QuickBooks with the subject line “QuickBooks Support: Change Request.”
The email is worded to “confirm” that you have changed your business name with Intuit, QuickBooks’ manufacturer. Though you haven’t made such a request, the email contains a link to cancel. Do not click this “cancel” link. It is used as bait. When clicked, the link will download malware onto your device, which scammers use to capture passwords or hunt for sensitive information on your machine. This can ultimately open you up to identity theft.

PENNSYLVANIANS CAN NOW SEND STATE TAX REFUNDS DIRECTLY TO A PA 529 COLLEGE SAVINGS ACCOUNT

PA Treasurer Joe Torsella announced that, for the first time, Pennsylvanians can deposit their state income tax refund directly into an existing, tax-exempt Pennsylvania 529 College Savings Program account. With the new option, all or a portion of a refund can be sent to one or multiple accounts. The process is simple. When completing your PA-40, Personal Income Tax Return, enter code H and the amount in the donation section between lines 32-36. Additionally, submit a PA-Schedule P with your return when donating to one or more Pennsylvania 529 College Savings Program accounts.

Refund Transfers

As Tax Season has officially started we are excited to offer once again refund transfers through Santa Barbara Bank. Our fees are the lowest in the region.