Crypto, Extensions and more – April 4, 2019

April 4, 2019


What You Need to Know About Cryptocurrency and Taxes

CryptocurrencyThe IRS determines cryptocurrencies to be property, like stocks or real estate, you’ll need to pay taxes if you’ve realized a capital gain and you can lower your tax bill if you’ve taken a loss.

Do I need to pay taxes on Bitcoin?
That gain can be taxed at different rates. If you held a virtual currency for over a year before selling or paying for something with it, you pay a capital gains tax, which can range from 0 percent to 20 percent

How is Bitcoin taxed?
Any bitcoin gained through mining is taxed as ordinary income, based on the “fair market value” of the bitcoin at the date it was received. Depending on your income bracket, the federal tax rate can be anywhere from 10 percent to 39.6 percent. The bitcoin will also be subject to state income tax.

Can I write off Cryptocurrency losses?
Taxpayers can write off losses on investments, up to $3,000 for any given year. This includes stocks, bonds, or property, which is how the government views cryptocurrencies

Can Bitcoin make you rich?
This means that “investing” in it is like investing in a currency. You’re essentially hoping the value of Bitcoin relative to your native currency goes up. The easiest way to invest in Bitcoin is to simply get a Bitcoin wallet and buy Bitcoins. … Remember, you could also invest in Litecoin or invest in Ethereum as well.

Extension of Time to File Your Tax Return

Filing an extension will allow you to push your deadline back six months to October 15, 2019. It’s important to keep in mind an extension only pushes back the due date for the filing of your tax documents. It does not give you extra time to pay on any taxes you may owe. If you have a refund coming from the IRS—as about three out of four taxpayers do every year—then there is no penalty for failing to file your tax return by the deadline, even if you don’t ask for an extension.

If you don’t send your return to the IRS by the April 15 deadline, you’ll get hit with a failure-to-file penalty, which starts at 5% of however much you owe, maxing out at 25% of your tax bill. If you wait more than 60 days to file, you’re charged a $135 fee or 100% of the taxes you owe (whichever is less).

Late filing penalties are much higher than late payment penalties. The IRS will not put you in jail for not being able to pay your taxes if you file your return. TaxEvasion: Any action taken to evade the assessment of a tax, such as filing a fraudulent return, can land you in prison for 5 years.

If you are an individual that still needs to file your federal or state tax return or extension, Jeffrey is available to make sure your returns are prepared correctly the first time.

We are still accepting new clients, so if you know anyone that is seeking tax help our local phone number is 772-337-1040.

Seniors Who Turned 70 1/2 in 2018 Must Take Retirement Plan Distributions by April 1, 2019

For most senior taxpayers, Monday, April 1, 2019, is the date by which persons who turned age 70½ during 2018 must begin receiving payments from Individual Retirement Accounts (IRAs) and workplace retirement plans.

Two payments in the same year:

The payments, called required minimum distributions (RMDs), are generally made by the end of the year. Individuals who reached age 70½ during 2018 are covered by a special rule, however, that allows first-year recipients of these payments to wait until as late as April 1, 2019, to get the first of their RMDs. The April 1 RMD deadline only applies to the required distribution for the first year. For all following years, including the year in which recipients were paid the first RMD by April 1, the RMD must be made by Dec. 31.

A taxpayer who turned 70½ in 2018 (born July 1, 1947, to June 30, 1948) and receives the first required distribution (for 2018) on April 1, 2019, for example, must still receive the second RMD by Dec. 31, 2019. To avoid having both amounts included in their income for the same year, the taxpayer can make their first withdrawal by Dec. 31 of the year they turn 70½ instead of waiting until April 1 of the following year.

Types of retirement plans requiring RMDs:

The required distribution rules apply to owners of traditional, Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs but not Roth IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2018 RMD, this amount is on the 2017 Form 5498 customarily issued to the owner during January 2018.

Some can delay RMDs:

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Employees who are still working generally can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions.

Taxpayers can find answers to questions, forms and instructions, and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed, at home, at work or on the go.

A Five Star Review

We have been using SFS Tax & Accounting Services since 2012 and he also prepared my father’s taxes.

We find Jeffrey Schneider, EA to be very knowledgeable and makes the entire process very simple. He made our life very easy after my father’s passing and took a big burden off of our shoulders.

I highly recommend Jeff for all aspects of tax work.

Don & Georgia Musante

Should You File Taxes Jointly or Separately

Married couples have the option to file jointly or separately on their federal income tax returns. The IRS encourages most couples to file joint tax returns by extending several tax breaks to those who file together.

Advantages of filing jointly:

  • Earned Income Tax Credit
  • American Opportunity and Lifetime Learning Education Tax Credits
  • Exclusion or credit for adoption expenses
  • Child and Dependent Care Tax Credit

Joint filers mostly receive higher income thresholds for certain taxes and deductions—this means they can earn a more significant amount of income and potentially qualify for certain tax breaks.

Consequences of filing your tax returns separately:

On the other hand, couples who file separately receive few tax considerations. Separate tax returns may give you a higher tax with a higher tax rate. The standard deduction for separate filers is far lower than that offered to joint filers.

  • In 2018, married filing separately taxpayers only receive a standard deduction of $12,000 compared to the $24,000 provided to those who filed jointly.
  • If you file a separate return from your spouse, you are automatically disqualified from several of the tax deductions and credits mentioned earlier.
  • Also, separate filers are usually limited to a smaller IRA contribution deduction.
  • They also cannot take the deduction for student loan interest.
  • The capital loss deduction limit is $1,500 each when filing separately, instead of $3,000 on a joint return.

When you might file separately:

In rare situations, filing separately may help you save on your tax return.

For example, if you or your spouse has a large amount of out-of-pocket medical expenses to claim and since the IRS only allows you to deduct the amount of these costs that exceed 7.5% of your adjusted gross income (AGI) in 2017 and 2018, it can be difficult to claim most of your expenses if you and your spouse have a high AGI.

Filing separate returns in such a situation may be beneficial if it allows you to claim more of your available medical deductions by applying the threshold to only one of your incomes.

Beginning Jan. 1 2019, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of their adjusted gross income.

Deciding which status to use:

The best way to find out if you should file jointly or separately with your spouse is to have your tax professional (EA) prepare the tax return both ways.

Tax Quotes

“Income tax returns are the most imaginative fiction being written today.”
― Herman Wouk