Getting married or divorced?

Things you need to know when changing your name or address People change their names for any number of reasons. You might be taking your spouse’s surname after getting married, or you might be going back to your maiden name after getting divorced.

If you change your name, you must notify the Social Security Administration (SSA) and get a new Social Security card.

Do this before filing your next tax return with the IRS. Their computers check your name and Social Security number against SSA’s records. If your name doesn’t match exactly, that could cause e-file rejections or delays in processing your tax return.

Reporting your name change to SSA cannot be done online. Instead, you’ll need to fill out Form SS-5 to change information on your Social Security record. You’ll also need documents proving your legal name change, such as a court order, marriage document, or divorce decree. You can either mail in your name change request or visit a local SSA office.

After receiving your new Social Security card, use your new name on your tax returns. Be sure to tell us, too, so we can update our records with your new name.

And let us know if you are moving. By filing Form 8822, Change of Address, we can notify the IRS of your new address so any important letters or notices will reach you without getting lost in the mail.

Illinois Tax Amnesty Program Begins 10/1/2019

Have you heard about the Illinois Tax Amnesty Program? Illinois residents can enjoy a forgiveness of penalties and interest by paying outstanding eligible income tax liabilities. The forgiveness only covers taxes due from periods ending after June 30th, 2011, and prior to July 1st, 2018. Payments must be made in full between October 1st, 2019 and November 15th, 2019. You can find out more information here.

Working in the gig economy

Tax tips for ride-sharing drivers Working in shared economy marketplaces like DoorDash, Lyft, or Uber has certain advantages for earning extra income. Some people even make a decent living at it.

If you are working in a gig economy, it’s important to remember that these companies don’t withhold taxes from the money you earn, but that doesn’t mean you’re off the hook from paying them. To avoid owing tax at the end of the year, we recommend you pay estimated taxes throughout the year. Alternatively, you could have additional tax deducted from your salary at your day job. The estimated tax calculation can get a little tricky, so just give us a call and we’ll help you out.

It’s also important that you track how many miles you drive. For 2019, you can deduct 58 cents for every mile you drive your car for business purposes. Every 1,000 miles you drive for Uber or DoorDash amounts to a $580 deduction.

The only way you’ll know how many miles you drive is if you keep track of them using a mileage log, either on paper or via a smartphone app. Also, take a picture of your odometer reading on January 1 and December 31. This helps you track how many total miles you drive for the year.

Also track your out-of-pocket expenses. You might offer bottles of water to your passengers, or gift baskets to your Airbnb guests. You can deduct these out-of-pocket expenses on your tax return. Examples of other deductible business-related expenses include:

• Hands-free smartphone mounts for the car

• Smart phone and monthly service

• Parking, bridge tolls, and road tolls

• Linens and soaps utilized by Airbnb guests

• Security cameras and home protection services

• Commissions and fees paid to Uber, Lyft, Airbnb and other networks

If you’ve purchased any big-ticket items, remember to tell us about them. Maybe you replaced the roof or installed a solar panel in your Airbnb home. Or perhaps you installed a video security system in your Uber car. We can help you decide if these are expenses that need to be spread out over several years through depreciation, or if you can deduct some or all of them right away.

In addition to mileage logs and expense records, keep your 1099 forms and other tax documents. Gig economy companies report income paid to you on a Form 1099. Some companies will send you Form 1099-MISC, while others will send you a Form 1099-K. Some might even send you both, or none at all. The important thing is to keep copies of any tax documents and all the income you earn.

Send us copies of the year-end reports and statements you receive. Uber and Lyft, for example, detail their fees and provide an estimate of your mileage on their year-end reports.

Tax-free reimbursements of business expenses

Accountable plan basics Businesses can reimburse owners and employees for out-of-pocket expenses under an accountable plan, a set of rules and processes that allow tax-free reimbursements of certain business expenses. To qualify, an accountable plan must contain the following three terms and conditions:

1. Employees must substantiate their expenses by providing the business with a written statement of expenses they paid, along with receipts and any other documents needed to prove the expense is legitimate. The documentation must show the amount paid and the business purpose for the expense. Employees also need to document the time and place of any travel or meal. For gifts given to clients or vendors, employees should also describe what was given and how the recipient of a gift is related to the business.

2. The company can only reimburse employees for tax-deductible expenses related to the business. Expenses should be approved for reimbursement only if the expense relates to the business.

3. The company must require employees to return any excess advances in a timely manner.

Your accountable plan should detail when employees need to provide you with substantiating documents and to return any funds paid out in advance that were not spent on legitimate business expenses.

The IRS provides two safe-harbor methods for preserving the advance as a tax-free reimbursement. We highlight just one method—the fixed date method—to illustrate what we mean by the time constraint. Using this method:

• The business advances funds only within 30 days of when the expense is paid;

• The employee requests reimbursement and provides substantiating documents within 60 days of paying the expense; and

• The employee returns any excess advances within 120 days after the expense is paid.

The best time to set up an accountable plan is now. We can advise you on how to set up expense reports and reimbursement processes that will pass IRS muster.

Choosing the right retirement plan

Ask yourself three simple questions Entrepreneurs who want to set up a retirement plan for their business have three options: SIMPLE IRA, SEP IRA, and solo 401(k) plans.

Each of these retirement plans enables business owners to save money for retirement. The earnings on the investments are tax-deferred until retirement, and contributions can be tax deductible.

Each plan has slightly different features, and you’ll need to choose one that meets your specific needs.

Consider these three questions when choosing your plan:

1. What is your age? If you’re at least age 50, consider a SIMPLE IRA or solo 401(k). Both offer catch-up contributions, allowing you to contribute an additional $3,000 (SIMPLE) or $6,000 [401(k)].

2. Do you want to make after-tax Roth contributions? Only solo 401(k) plans can be set up to receive designated Roth contributions that are not limited by income level. This makes solo 401(k) plans a uniquely compelling fit for entrepreneurs who want to save taxes on their retirement contributions. For 2019, entrepreneurs can contribute up to $19,000 of after-tax elective deferrals to their Roth 401(k), or $25,000 if age 50 or older.

3. Do you want to catch up on the previous year’s contribution? A SEP IRA can be set up retro-actively. Sometimes we have a situation where a sole proprietor or business owner doesn’t have a retirement plan, and they want to put some of their earnings towards retirement. The solution is to file an extension and set up a SEP IRA. You have until the extended due date of your tax return to set up and contribute to a SEP IRA to deduct the contributions on that year’s tax return. This means that entrepreneurs with a valid extension who set up a SEP account by the October 15 deadline can deduct any contributions on that year’s tax return.