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Things to Know for the Current Tax Year


Hurricane Tax Relief
The Disaster Tax Relief and Airport and Airway Extension Act of 2017 that was signed into law on September 29 included the following tax provisions that provide relief for taxpayers affected by Hurricanes Harvey, Irma and Maria for 2017 federal tax returns.

Deduction for Personal Casualty Losses
Uncompensated losses in an applicable hurricane disaster area:

  • Must exceed $500 in order to take a deduction
  • Do not have to exceed 10 percent of Adjusted Gross Income to qualify for deduction.
  • May be taken as an itemized deduction or as an increase in a taxpayer’s standard deduction.

Special Rule for Determining 2017 Earned Income for the Earned Income Tax Credit and Child Tax Credit
Qualified individuals may use their earned income from 2016 to determine their earned income tax credit and their child tax credit for their 2017 federal income tax return.

Qualified individuals are those whose principal place of abode was located in the Hurricane Harvey, Irma or Maria disaster zone on the date of each applicable hurricane and the individual was displaced from their home because of the hurricane.

Penalty-Free Access to Retirement Funds

  • For qualified hurricane relief an individual can withdrawal funds from a retirement account free of the 10 percent early withdrawal penalty and can spread the taxable portion on that distribution over a three year period.
  • Allows for any qualified hurricane relief withdrawal will not be taxable if it is recontributed within three years of the date of distribution.
  • Increases the maximum loan amount for qualified hurricane relief to $100,000.
  • Allows for re-contribution of retirement plan withdrawals for cancelled home purchases or construction of a principal residence due to eligible disasters.

Charitable Contributions for Hurricane Relief
Suspends the limitation on charitable contributions associated with hurricane relief that are made between August 23, 2017 and December 31, 2017.

Employment Relief
Provides qualifying businesses a tax credit for 40 percent of wages (up to $6,000 per employee) paid by a disaster affected employer to an employee from a core disaster area.

PATH Act Reminders for 2018 Filing Season

Federal Refunds will not be Issued Until February 15 for Taxpayers who claim EITC or Additional Child Tax Credit
This is a reminder that as with last year any refund related to a federal return that claims the Earned Income Tax Credit or the Additional Child Tax Credit will not be issued to the taxpayer until February 15.

Expansion of Preparer Due Diligence Requirements
This is a reminder that the PATH Act expanded the EITC due diligence requirements under Code Section 6695 (including the $500 penalty) to include the child tax credit and the American Opportunity Education credit last year.

Therefore the Form 8867 (Paid Preparer’s Due Diligence Checklist) now includes questions for the child tax credit and the American Opportunity Education Credit as well as for the Earned Income Tax Credit.

Also for this year the IRS has made changes to the Form 8867 that should make it easier for preparers to understand and answer the due diligence questions.

See the draft of the 2017 Form 8867 to see what changes the IRS has made to the Paid Preparer’s Due Diligence Checklist.

Tax Year 2017 Annual Changes and Reminders (for returns filed during the 2018 filing season)

Schedule A – Medical Expense Threshold Percentage (Reminder)
Deductible when medical expenses exceed 10% of AGI for everyone

Exemption Amount: $4,000 per exemption

Standard Deduction:
Basic:

  • Single/MFS: $6,350
  • MFJ/Qualifying Widow(er): $12,700
  • Head of Household: $9,350

Additional Amount for Aged and Blind:

  • $1,250 for each
  • $1,550 for each if individual is unmarried and a surviving spouse

Standard Mileage Rates

  • Business purposes (up to four vehicles): 53.5 cents per mile
  • Medical/Moving purposes: 17 cents per mile
  • Charitable purposes: 14 cents per mile

Recent Tax Updates

Reminder of the Federal Refund Delay for Upcoming 2018 Filing Season
Dec 13, 2017

Preparer Due Diligence Requirement Expansion Reminder
Nov 30, 2017

PTIN Renewal and Last Day to File a Return Electronically
Nov 13, 2017

Hurricane Relief Tax Law Changes
Nov 1, 2017

Important Upcoming IRS Update to e-Services Accounts
Oct 10, 2017

Tax and Financial Relief Options for Flood Victims
Sept 5, 2017

Warning to Tax Preparers of New Phishing Scam that is Attempt to Steal Passwords
Aug 8, 2017

IRS Security Summit Launches “Don’t Take the Bait” Education Campaign Aimed at Tax Preparers
Aug 1, 2017

IRS Announces Which ITINs Will Be Expiring at End of 2017 and That They Are Now Accepting Renewal Applications
July 27, 2017

IRS Use of Private Debt Collection Agencies
June 20, 2017

Additional Updates
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