If you receive a letter from the IRS, here are some tips to guide you.

• Don’t ignore it. Read the letter carefully to understand why they are reaching out and how they want you to proceed. If you don’t understand the notice, contact us immediately. Our team at Innovative Tax & Accounting is here to help you.
• Take action quickly! Don’t delay as time is of the essence.
• Reasons you may receive a letter from the IRS
  • A change in your refund amount
  • Proposed changes were made to your tax return
  • Your tax return may be delayed
  • You owe money
  • A payment is due
• If the letter states the IRS made a change to your tax return, then review it and compare the changes to your original return.
• If you agree with the change, you typically don’t need to reply, unless you owe money. If you owe money, instructions will be included on how to send in a payment.
• If you don’t agree with the notice
  • Read the notice for instructions on how to respond
  • Don’t sign the notice
  • You may have to write a letter that explains why you are disputing the request and include all documents/forms you want the IRS to consider
  • Include your phone number
  • Sign your letter and mail it in with the unsigned response form
  • Mail the documents to the IRS
  • It can take up to 30 days to receive a response
• Keep copies of all notices you receive, as well as all documents you send.

If you owe money, there are payment options available, such as paying online or establishing a payment plan. Don’t panic and ignore the letter. Ignoring it can lead to a “payment of Intent to Levy”.

Should you have any questions, you can call the phone number in the upper right corner of the letter. When you call, be sure to have a copy of your tax return and the letter you received.

Also, be aware of tax scams. The IRS will never contact you via social media, nor will they ask for your personal information or request payment with pre-paid debit cards.

For additional information on what to do when you receive a letter from IRS, you can visit their website.

All of us at Innovative Tax & Accounting are here to help you. If you receive a letter that you’re not sure about, bring it by or mail/email a copy.  We’ll take a look and guide you in resolving the issue.

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On May 31, 2018, Governor Malloy signed Public Act 18-49, which has a direct impact on how Connecticut taxes partnerships and S corporations (known as pass-through entities). The new law, approved unanimously by both chambers of the General Assembly, was enacted in response to the Federal Tax Cuts and Jobs Act (known as TCJA enacted in December 2017).

The Federal TCJA passed on December 2017, sets a limit of $10,000 on deductions for property, state and local income taxes (known as SALT). As a result, Act 18-49 was designed to counteract the effects of the federal tax changes on Connecticut owners/partners of pass through entity businesses.

The change in law now requires pass-through entities to make timely estimated tax payments on the partners/owners, behalf, rather than the partners/owners themselves.

This ensures the pass through entity is not taxed twice, partners will receive a tax credit on their personal Connecticut returns.

Pass-Through Entity Terms
The changes are in place for the 2018 tax year, beginning January 1st, 2018. Estimated payments for entities filing for the calendar year are due on April 15, 2018, June 15, 2018, September 15, 2018, and January 15, 2019.

Realizing the pass-through entity tax was passed after April 15th; entities may submit their 2018 payment requirements by:
• Making a “catch-up” payment
• Making estimated payments that equal the amount due, or
• Annualizing their estimated payments for the taxable year

The Department of Revenue Services will also permit pass-through entities to re-characterize all, or some, of estimated payments made by individual partners, with the partners consent. The payments will then be applied to the entity’s 2018 estimated payment requirements. The re-characterization of the estimated payments must be completed by December 31, 2018.

What Should I Do Now?

A. Call Innovative Tax & Accounting for guidance, or
B. Calculate your estimated payment due, and mail a check and coupon to the DRS. To get a coupon, visit the DRS website here

For more information on the pass-through entity tax from the State of Connecticut DRS, visit www.ct.gov/drs

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If you experienced damage from the storms that occurred in Connecticut on May 15, 2018, you may be eligible to deduct the casualty losses on your 2018 tax return. Per the Tax Cuts and Jobs Act (TCJA), effective for 2018, casualty losses can only be claimed due to an official disaster declared by the President.

On August 20, 2018, President Trump declared the State of CT a disaster relief area. This will allow taxpayers to deduct their unreimbursed expenses on their 2018 tax return.

What is a Casualty Loss?
Per the irs.gov, “a casualty loss can result from the damage, destruction, or loss of your property from any sudden, unexpected, or unusual event such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption. A casualty doesn’t include normal wear and tear or progressive deterioration”.

When making a casualty loss claim, you must deduct any insurance or reimbursement you receive, or expect to receive. Once you have the amount paid out of pocket, then subtract $100 and subtract 10% of your adjusted gross income from that total to calculate your allowable casualty and theft losses for the year.

For any questions relating to casualty loss deductions, contact us at Innovative Tax & Accounting Group, Inc. or visit irs.gov.

(photo credit NBC CT News)

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When filing a late tax return (past the April 15th deadline), there’s no penalty if you’re receiving a refund. However, if you owe tax, you will have to pay interest and penalties on the amount you owe. This applies even if you file an extension! It is important to note an extension does not waive you from penalties and interest. The extension only applies to the paperwork filing, not paying any tax due.

The IRS determines the amount of the penalty and interest on a case-by-case basis. As a result, we can’t advise the exact amount you’ll be charged, however the information below (sourced from irs.gov) gives you a general idea.

• No Penalty – when you pay/file by April 15th OR file an extension and submit your return by October 15th and paid the tax owed by April 15th, you will not receive a penalty.
• Interest – begins to accrue on any unpaid tax beginning on the due date of the return, until the amount is fully paid off.
• Failure-to-File Penalty – if you owe taxes and didn’t file your return by April 15th, there’s a penalty for not filing on time.
  • The penalty is usually 5% of the tax owed for each month your return is late, up to a maximum of 25%.
  • If your return is more than 60 days late, there’s also a minimum penalty for late filing.
    • The penalty for late filing is $210 OR 100% of the tax owed (whichever is less).
• Failure-to-Pay Penalty – If you file a return but don’t pay all tax owed on time, you’ll most likely pay a late payment penalty.
  • The amount is .5% for each month, or part of a month, up to a maximum of 25%, of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full.
  • The .5% rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy property.
  • If you file your return by its due date and request an installment agreement, the one-half of one percent rate decreases to one-quarter of one percent for any month in which an installment agreement is in effect.
  • Be aware that the IRS applies payments to the tax first, then any penalty, then to interest. Any penalty amount that appears on your bill is generally the total amount of the penalty up to the date of the notice, not the penalty amount charged each month.

Your best option is to file your return and pay your tax owed by April 15th to avoid interest and penalty charges. For additional info, visit www.irs.gov/taxtopics/tc65.

If you have any questions, reach out to Innovative Tax & Accounting Group, Inc.

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The post 2018 TCJA Federal Tax Changes appeared first on Innovative Tax & Accounting Group, Inc..

A certificate of existence form is not required in the state of Connecticut. However, the form can be requested online from the Secretary of the State.

To view a copy of the letter, and for additional information on the scam, refer to “Officials warning local business owners of fraudulent mailing.”

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(Per Department of Revenue Services)

• Tobacco 21. – The legal age for purchasing cigarettes, tobacco products, and vaping products has been raised to 21. Starting October 1, 2019, there is a new tax on vaping products: 40¢ per milliliter for closed products, like Juul, and 10% of the wholesale price on the “juice” and vaporizer for open products. The cigarette dealer annual licensing fee also increases to $200 on October 1, 2019.
• Plastic bag fee. – Beginning on August 1, 2019, retailers are required to charge 10¢ for each single-use plastic bag provided at checkout. These plastic bags will be banned on June 30, 2021.
• Sales tax changes – The economic nexus threshold for requiring remote sellers to collect and remit sales tax will be reduced on July 1, 2019, to $100,000 of sales and 200 or more transactions. On October 1, 2019, the rate on digital goods will increase to 6.35%, the rate on meals will increase by 1%, and the marine dock dyed diesel rate will be reduced to 2.99%. On January 1, 2020, safety apparel, metered and other previously exempt parking, dry cleaning and laundry (other than coin operated) will be taxable. On that date interior design services for individuals will also become taxable.
• Short-term rental facilitators – As of October 1, 2019, facilitators of short term home rentals will be required to collect and remit the room occupancy tax on behalf of the operators renting their homes.
• Admissions tax changes – The tax for several venues has been reduced as of July 1, 2019. Events at Dunkin’ Donuts Parks will be taxable at 5% and events at the XL Center, Dillon Stadium, Webster Bank Arena, Harbor Yard Amphitheater, Dodd Stadium, and Oakdale Theatre will be taxable at 7.5%. The 7.5% rate will also apply to minor league baseball games at New Britain Stadium and non-sporting events at Rentschler Field. There will be additional reductions next year.
• Real estate conveyance tax – Beginning on July 1, 2019, there is a new exemption from the real estate conveyance tax for certain homes with crumbling foundations.
• Transportation network company fee – The per ride fee for rides with transportation network companies increases from 25¢ to 30¢ on July 1, 2019.
• Alcoholic beverages – For all alcoholic beverages other than beer, there is a rate increase of 10% for sales on or after October 1, 2019. Because of the rate increase, alcoholic beverage retailers will need to pay a floor tax by November 15, 2019, based on their inventory as of October 1, 2019.
• Craft breweries – On October 1, 2019, the alcoholic beverages tax on beer sold to-go at craft breweries will be reduced by 50%, and starting January 1, 2020, the exemption for beer served at a brewery taproom will be limited to the first 15 barrels a year.
• Angel investor credit expanded – The Connecticut Innovations angel investor tax credit program has been extended through June 30, 2024, and effective starting in the current tax year, the annual cap on the angel investor credit has been increased from $250,000 to $500,000.
• Pass-through entity tax changes – DRS is authorized to waive penalty and interest for the 2018 taxable year that was imposed as a result of the passage of the pass-through entity tax. Guaranteed payments are now included in the calculation of the pass-through entity tax. Pass-through entities with liability of less than $1,000 are no longer required to make estimated payments. The pass-through entity tax credit claimed by individuals and corporations has been reduced to 87.5%.
• Corporation business tax changes – The 10% surcharge is extended for two more years. The research and development, research and experimental expenditures, and urban and industrial site reinvestment tax credits are now limited to 50.01% of the company’s tax liability.
• Income tax changes – For two more years, the income tax exemption for teacher’s retirement payments remains at 25%, and the property tax credit remains available only to Connecticut residents who attain the age of 65 before the end of the year or who validly claim one or more dependents on their federal income tax return.
• Estate tax loophole – Closes the loophole that allowed nonresidents to place Connecticut property into a pass-through entity in order to avoid the Connecticut estate tax.
• Payroll tax – DRS is required to participate in the study of a payroll tax. The report is due on January 15, 2020.

NOTE: This communication is for general information purposes and is not to be considered complete or authoritative.

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