The home office deduction can help small business owners save money on their taxes. Taxpayers can take this deduction when they file their taxes if they use a portion of their home exclusively, and on a regular basis, for any of the following:

• As the taxpayer’s main place of business.
• As a place of business where the taxpayer meets patients, clients or customers. The taxpayer must meet these people in the normal course of business.
• If it is a separate structure that is not attached to the taxpayer’s home. The taxpayer must use this structure in connection with their business
• A place where the taxpayer stores inventory or samples. This place must be the sole, fixed location of their business.
• Under certain circumstances, the structure where the taxpayer provides day care services.

Deductible expenses for business use of a home include:

• Real estate taxes
• Mortgage interest
• Rent
• Casualty losses
• Utilities
• Insurance
• Depreciation
• Repairs and Maintenance

Certain expenses are limited to the net income of the business. These are known as allocable expenses. They include things such as utilities, insurance, and depreciation.  While allocable expenses cannot create a business loss, they can be carried forward to the next year. If the taxpayer carries them forward, the expenses are subject to the same limitation rules.
There are two options for figuring and claiming the home office deduction.

• Regular method: This method requires dividing the above expenses of operating the home between personal and business use. Self-employed taxpayers file Form 1040, Schedule C, and compute this deduction on Form 8829.
• Simplified method: The simplified method reduces the paperwork and recordkeeping for small businesses. The simplified method has a set rate that is capped at $1,500 per year, based on $5 a square foot for up to 300 square feet.

There are special rules for certain business owners:

• Daycare providers complete a special worksheet, which is found in Publication 587.
• Self-employed individuals use Form 1040, Schedule C, Line 30 to claim deduction.
• Farmers claim the home office deduction on Schedule F, Line 32.

​Taxpayers may discover an error after filing their tax return. They shouldn’t panic, they just need to correct it by filing an amended tax return.
Here are some common reasons to file an amended return:

• Using the wrong filing status
• Entering income incorrectly
• Not claiming credits for which they’re eligible
• Claiming deductions incorrectly

The IRS may correct math or clerical errors on a return and may accept returns without certain required forms or schedules. In these instances, there's no need for taxpayers to amend the return.
Taxpayers who do need to amend their tax return might have questions about how to do so. Here are some things they should know. The taxpayer should:

• Complete paper Form 1040-X, Amended U.S. Individual Income Tax Return. Taxpayers must file an amended return on paper even if they filed the original return electronically.
  
  
• Mail the Form 1040-X to the IRS address listed in the form’s instructions under Where To File. Taxpayers filing Form 1040-X in response to an IRS notice should mail it to the IRS address indicated on the notice.
  
  
• Attach copies of any forms or schedules affected by the change.
  
  
• File a separate Form 1040-X for each tax year. Mail each tax year in a separate envelope and enter the year of the original return being amended at the top of Form 1040-X.
  
  
• Wait – if expecting a refund – for the original tax return to be processed before filing an amended return.
  
  
• Pay additional tax owed as soon as possible to limit interest and penalty charges.
  
  
• File Form 1040-X to claim a refund within three years from the date they timely filed their original tax return or within two years from the date the person pays the tax – usually April 15 – whichever is later.
  
  
• Track the status of an amended return three weeks after mailing using Where’s My Amended Return? It can take up to 16 weeks for the IRS to process an amended tax return.

​Why is my refund smaller, or why do I owe money this year?
Due to the tax reform changes included in the Tax Cuts and Jobs Act (TCJA), the most significant revision of the U.S. tax code in more than 30 years, withholding tables changed for tax year 2018. This could mean less money was taken out of each paycheck and applied to your total tax, so there is less to refund. If you are used to receiving a small refund, you may even owe tax this year.
Other tax reform changes include an increase in the standard deduction, suspension of personal exemptions, an increase in the child tax credit, a limit or discontinuance on certain deductions and a new credit for other dependents. Any or all of these changes could have a significant impact on your total tax, especially in comparison to previous years.
To compare your total tax to last year, look at your 2017 Form 1040, Line 63 and your 2018 Form 1040, Line 15. These amounts represent your total tax liability for each year.
Should I adjust my withholding?
If your refund is smaller than in previous years, or you owe a balance, you can change the amount withheld from your paycheck going forward if you wish. File form W-4 to adjust the amount taken out of each paycheck.
What do I do if I owe money this year?
If you owe money on your federal return, you have until April 15th, 2019 to pay the IRS. Keep in mind, you do not have to pay at the same time you file. You can file your return anytime and wait to pay until April 15th.
If you are unable to pay the money you owe, you can contact the IRS to set up a payment plan. Failing to file your return and pay any tax liability by April 15th may result in penalties, interest charges, tax liens and/or levi

Written by TaxConnections Admin
The Tax Cuts and Jobs Act (TCJA) made changes that impact the depreciation and expensing of vehicles.

2018 Depreciation Limitations On Luxury Automobiles And Personal Use Property
For passenger automobiles placed into service after December 31, 2017, SECTION 13202 of the Tax Cuts And Jobs Act increases the dollar limitations on depreciation and expensing for passenger automobiles. For 2018, the amount of the depreciation and expensing deduction for a passenger car, light duty truck or van shall not exceed--

• $10,000 for the 1st taxable year in the recovery period,
• $16,000 for the 2nd taxable year in the recovery period,
• $9,600 for the 3rd taxable year in the recovery period, and
• $5,760 for each succeeding taxable year in the recovery period.

These numbers shall be adjusted for inflation after 2018. As such, for 2018, the limits for light-duty trucks, vans, and passenger cars are the same.
The TCJA retained the $8,000 limit for additional first-year depreciation for passenger automobiles. So in 2018, the maximum amount a taxpayer can deduct for a passenger automobile in the first year is $18,000.

Larger Vehicles
The TCJA increased bonus depreciation to 100 percent for qualifying property acquired and placed into service after September 27, 2017, and before January 1, 2023. It also extended bonus depreciation to used property acquired and placed into service after September 27, 2017.
SUVs with a gross vehicle weight rating above 6,000 lbs. are not subject to depreciation limits. They are, however, limited to a $25,000 IRC §179 deduction. IRC § 179(b)(5)(A). No depreciation or §179 limits apply to SUVs with a GVW more than 14,000 lbs. Trucks and vans with a GVW rating above 6,000 lbs. but not more than 14,000 lbs. generally have the same limits: no depreciation limitation, but a $25,000 IRC §179 deduction. These vehicles, however, are not subject to the §179 $25,000 limit if any of the following exceptions apply:

• -The vehicle is designed to have a seating capacity of more than nine persons behind the driver’s seat;
• -The vehicle is equipped with a cargo area at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment; or
• -The vehicle has an integral enclosure, fully enclosing the driver compartment and load-carrying device, does not have seating behind the driver’s seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.

Although SUVs purchased after September 27, 2017, remain subject to the $25,000 IRC § 179 limit, they are eligible for 100% bonus depreciation if they are above 6,000 lbs. This is true for both new and used vehicles. For a taxpayer’s first taxable year ending after Sept. 27, 2017, taxpayers may elect to apply a 50 percent allowance instead of the 100 percent allowance. To make the election, they must attach a statement to a timely filed return (including extensions) indicating they are electing to claim a 50% special depreciation allowance for all qualified property. Once made, the election cannot be revoked without IRS consent. As noted above, taxpayers may also elect out of bonus entirely for any class of property by filing an election on a timely filed return. Once filed, that election can also not be revoked without IRS consent.

Business Use Of Car
If you use your car in your job or business and you use it only for that purpose, you may deduct its entire cost of operation (subject to limits). However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use.
You can generally figure the amount of your deductible car expense by using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, you may want to figure your deduction both ways before choosing a method to see which one gives you a larger deduction.
Standard Mileage Rate – The Internal Revenue Service issued the 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2018, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 54.5 cents for every mile of business travel driven, up 1 cent from the rate for 2017.
• 18 cents per mile driven for medical or moving purposes, up 1 cent from the rate for 2017.
• 14 cents per mile driven in service of charitable organizations.

The business mileage rate and the medical and moving expense rates each increased 1 cent per mile from the rates for 2017. The charitable rate is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
Use of Standard Mileage Rates
To use the standard mileage rate, you must own or lease the car and:

• You must not operate five or more cars at the same time, as in a fleet operation,
• You must not have claimed a depreciation deduction for the car using any method other than straight-line,
• You must not have claimed a Section 179 deduction on the car,
• You must not have claimed the special depreciation allowance on the car,
• You must not have claimed actual expenses after 1997 for a car you lease, and
• You can’t be a rural mail carrier who received a “qualified reimbursement.”

To use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use the standard mileage rate or actual expenses.
For a car you lease, you must use the standard mileage rate method for the entire lease period (including renewals) if 
you choose the standard mileage rate.
Actual Expenses – To use the actual expense method, you must determine what it actually costs to operate the car for the portion of the overall use of the car that’s business use. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to the portion of the total miles driven that are business miles.
Note: Other car expenses for parking fees and tolls attributable to business use are separately deductible, whether you use the standard mileage rate or actual expenses.
Depreciation                 
Generally, the Modified Accelerated Cost Recovery System (MACRS) is the only depreciation method that can be used by car owners to depreciate any car placed in service after 1986. However, if you used the standard mileage rate in the year you place the car in service and change to the actual expense method in a later year and before your car is fully depreciated, you must use straight-line depreciation over the estimated remaining useful life of the car.
Recordkeeping
The law requires that you substantiate your expenses by adequate records or by sufficient evidence to support your own statement.

​Lower Tax Rates and Changed Income Ranges
The bill retains the seven tax brackets found in current law but lowers a number of the tax rates. It also changes the income thresholds at which the rates apply.
The current brackets are: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%
The new brackets will be: 10%, 12%, 22%, 24%, 32%, 35% and 37%
The income thresholds at which these brackets kick in have changed, as well.
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​For single filers:
Alternative Minimum Tax Exemptions Increased
The bill also eases the burden of the individual alternative minimum tax (AMT) by raising the income exempted from $84,500 (adjusted for inflation) to $109,400 married filing jointly and from $54,300 (adjusted for inflation) to $70,300 for single taxpayers, so fewer taxpayers will pay it.
Tax Relief for Individuals and Families
Increased standard deduction:
The new tax law nearly doubles the standard deduction amount. Single taxpayers will see their standard deductions jump from $6,350 for 2017 taxes to $12,000 for 2018 taxes (the ones you file in 2019).
Married couples filing jointly see an increase from $12,700 to $24,000. These increases mean that fewer people will have to itemize. Today, roughly 30% of taxpayers itemize. Under the new law, this percentage is expected to decrease.
Increased Child Tax Credit:
For, families with children the Child Tax Credit is doubled from $1,000 per child to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The bill also adds a new, non-refundable credit of $500 for dependents other than children. Finally, it raises the income threshold at which these benefits phase out from $110,000 for a married couple to $400,000.
 
Eliminations or Reductions in Deductions
Personal and dependent exemptions:
The bill eliminates the personal and dependent exemptions which are currently $4,050 for 2017 and were expected to increase to $4,150 in 2018.
State and local taxes/Home mortgages:
The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible.
The bill also caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.
Health care:
The bill eliminates the tax penalty for not having health insurance after December 31, 2018. It also temporarily lowers the floor above which out-of-pocket medical expenses can be deducted from the current law floor of 10% to 7.5% for 2017 and 2018
So for 2017 and 2018, you can deduct medical expenses that are more than 7.5% of your adjusted gross income as opposed to the higher 10%.
Self-employed (contractors, freelancers, sole proprietors) and small businesses:
The bill has a myriad of changes for business. The biggest includes a reduction in the top corporate rate to 21%, a new 20% deduction for incomes from certain type of “pass-through” entities (partnerships, S Corps, sole proprietorships), limits on expensing of interest from borrowing, almost doubling of the amount small businesses can expense from the 2017 Section 179 amount of $510,000 to $1,000,000, and eliminates the corporate alternative minimum tax (AMT).

The Tax Cuts and Jobs Act gave breaks to many, but those that itemized deductions will be surprised to find out that a lot of things they have been used to deducting are no longer allowed in 2018 and that might result in a tax sticker shock when their returns are prepared.
Here are a few of the gone but not forgotten:

• Moving expenses – this used to be able to be deducted even if you did not itemize.
• Personal exemptions – in the past you could deduct $4,050 per family member.
• Home equity loan interest – this is not longer allowed for new home equity loans and the total amount of home debt now cannot exceed $750,000.
• Casualty and theft losses – this is now limited to property damaged in disaster areas declared by the President.
• Charitable contributions – this has been tightened to eliminate the value of athletic tickets received for your donation, In the past this was not required.
•  Job expenses – unreimbursed work expenses are no longer allowed.
• Tax preparation fees –  these have been eliminated as well as tax software and preparation subscriptions and books.
• Investment advisory fees – many taxpayers who were previously able to deduct these as well as IRA fees and investment books and subscriptions are no longer able to deduct these costs.

Congress recently extended a number of tax breaks for 2017 that include the extension of a few previously expired deductions and credits. Here’s a look at three of the key provisions that impact individuals and families.

• Qualified mortgage insurance premiums – Qualified homeowners with mortgage insurance can deduct 100 percent of their premium costs.
• Tuition and fees deduction – College students or parents can deduct up to $4,000 in college tuition and other education-related fees and expenses, like books and supplies, paid during 2017.
•  Cancellation of mortgage debt – Individual borrowers who had their mortgage debt forgiven in 2017 do not have to pay income tax on the forgiven amount as long as the debt qualifies for the exclusion.

Coming soon: Congress also extended The Residential Energy Credit.

Up until the end of 2016, taxpayers could deduct the cost of college tuition and other education-related fees and expenses for their spouses, their dependents, and themselves. The tuition and fees deduction was an adjustment to income that could be taken directly on the first page of Form 1040 or the shorter Form 1040A.
These "above the line" deductions are particularly advantageous because you don't have to itemize to claim them and they help to determine your adjusted gross income or AGI.
Several other tax breaks can depend on your AGI because they're phased out or even eliminated entirely for taxpayers whose AGIs are too high.
Alas, you'll have to depend on other above-the-line deductions if you want to try to whittle away at your AGI going forward. The tuition and fees deduction was scheduled to sunset or expire at the end of 2016 unless Congress acted to breathe new life into it, and Congress did not. 

 
The Internal Revenue Service released updated tax withholding tables for 2018 Thursday to reflect changes for the Tax Cuts and Jobs Act, amid warnings that the tables may not be accurate and will need further refinements.
Notice 1036 is only the first in a number of steps the IRS intends to take to improve the accuracy of withholding after the major changes in the new tax law, the service cautioned.
Among other things, the new tables reflect the increase in the standard deduction, the repeal of personal exemptions, and changes in tax rates and brackets.
 “With this guidance, most American workers will begin to see bigger paychecks. We estimate that 90 percent of wage earners will experience an increase in their take home pay,” said U.S. Treasury Secretary Steven Mnuchin in a statement. “The administration’s monumental tax reform legislation continues to provide economic benefits for hard-working Americans. These tax cuts will ensure that American workers are able to keep more of their hard-earned income and decide how to spend, invest or save it.”
The updated withholding information shows the new rates for employers to use this year. Employers should begin using the new withholding tables as soon as possible, the IRS and the Treasury Department stressed, but no later than Feb. 15, 2018. They should continue using the 2017 withholding tables until they implement the 2018 withholding tables.
How long it will take for the changes to surface will vary, depending on how quickly the new tables are implemented by employers and how often employees are paid, whether it’s on a weekly, biweekly or monthly basis. The new withholding tables are designed to work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances. That's supposed to minimize the burden on taxpayers and employers, so employees don't have to do anything at this time with their W-4.
“The IRS appreciates the help from the payroll community working with us on these important changes,” said Acting IRS Commissioner David Kautter in a statement. “Payroll withholding can be complicated, and the needs of taxpayers vary based on their personal financial situation. In the weeks ahead, the IRS will be providing more information to help people understand and review these changes."
One of the goals of the new tables is to produce the correct amount of tax withholding for people with simpler tax situations, helping them avoid over- and under-withholding of tax as much as possible.
To help taxpayers determine their withholding, the IRS is revising the withholding tax calculator on IRS.gov. It expects the calculator will be available by the end of February, and is recommending that taxpayers to use it to adjust their withholding once it’s released.
The IRS is also working on revising the Form W-4, the employee withholding allowance certificate, which has been rendered outdated by the new tax law. The form and the revised calculator will reflect additional changes in the new law, including changes in available itemized deductions, increases in the child tax credit, the new dependent credit and the repeal of dependent exemptions.
The calculator and the new Form W-4 can be used by employees who want to update their withholding in response to the new law or changes in their personal circumstances in 2018, and by taxpayers who starting a new job. Until a new Form W-4 is issued, both employees and employers should continue to use the 2017 W-4.
For 2019, the IRS anticipates making further changes involving withholding. The IRS will work with the business and payroll community to encourage workers to file new Forms W-4 next year and share information on changes in the new tax law that impact withholding.
Democrats have warned the withholding tables may be inaccurate. Senate Finance Committee ranking member Ron Wyden, D-Ore., released a statement Thursday on the IRS’s release of their 2018 withholding tables: “Republicans are using brute force and speed to implement a law that will deliver a financial blow to hardworking Americans all across the country,” he said. “I look forward to GAO’s independent review of these tables, which will expose whether the Trump administration is tampering with Americans’ paychecks, resulting in a whopping tax bill next year.”
Earlier this week, he and House Ways and Means Ranking Member Rep. Richard Neal, D-Mass., raised concerns that the Trump administration was politically interfering with the development of the 2018 withholding tables (see Democrats raise concerns about IRS withholding tables). They asked the Government Accountability Office to independently analyze the new tables and determine whether they might result in the systematic underwithholding of federal taxes from employee paychecks. Trump has promised his tax cuts would produce an average savings of $4,000 for taxpayers.
House Ways and Means Committee Chairman Kevin Brady, R-Texas, promised taxpayers would start to see a boost in their paychecks thanks to the new tax law he shepherded through Congress. “This is outstanding for families in Texas and taxpayers across the country,” he said in a statement. “With the new tax code provided by the Tax Cuts and Jobs Act, nine out of 10 taxpayers will see a boost in their take-home pay within the coming weeks. That comes on top of all the bonuses, wage increases, and expanded benefits that so many businesses have already provided American workers as a result of tax reform. The American people work hard to earn their paychecks and support their families. Finally, they have a tax code that allows them to keep more of their money to use as they see fit.”
Michael Cohn
Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.