Author: Suzanne Watson

MORTGAGE INSURANCE

If you qualify by income, you may be able to deduct mortgage insurance premiums for your principal residence on your tax return.

DEBT TREATMENT

Homeowners who met eligibility requirements were allowed to exclude mortgage debt cancellation from income on their tax returns from 2007-2017, and Congress now allows this type of debt cancellation to remain tax-free from 2018 through 2020.

HEALTH COSTS

Scheduled to rise from 7.5% of adjusted gross income to 10% in 2020, Congress moved to keep the itemized medical expense deduction threshold at the lower percentage for costs that were not reimbursed. Most medical costs that are not cosmetic, including prescription drugs, dental work and vision, qualify for the deduction.

DISASTER RELIEF

Congress gave some taxpayers who experienced federally declared disasters as far back as 2018 the ability to take penalty-free withdrawals from their retirement plans. Employers who continue paying employees during a disaster will also receive favored tax treatment on the amount of wages paid during this period.

COLLEGE DEDUCTION

Remember when Congress ditched the tax deduction for qualified college expenses? Never mind, it’s back at least through tax year 2020, with the repeal retroactive to 2018. To qualify, your adjusted gross income needs to fall under certain thresholds.

FOR THE ENVIRONMENT

Energy-efficient taxpayers are winners with a handful of extensions giving them continued favorable tax treatment. Alternative fuel refueling equipment, fuel cell vehicles and electric motorcycles will have their tax credits extended through 2020, retroactive to 2018 for some of them. Also, take a tax credit up to $500 for making energy-saving improvements to a principal residence through 2020, retroactive to 2018.

Business Security – Details on the Setting Every Community Up for Retirement Enhancement (SECURE) Act

Insights & Tips – The SECURE Act pushed required minimum distributions (RMDs) to age 72, up from age 70 1/2.

They’re Back! – Tax breaks that have been brought back to life.

Client Profile – Do compliance and tax filing become a burden when starting a foundation.

Steps to a Successful Company Audit – All public and some closely held companies should undergo periodic company audits to stay on top of their businesses.

How to Correct Tax Filing Mistakes – You’ll have to file another tax return if you made an error.

Questions and Answers

Short Bits

COMP BREAKDOWN

In September 2019 compensation costs for private industry workers averaged $34.77 per hour worked. Wages and salaries averaged $24.38 per hour worked while benefit costs comprised the rest. The cost of benefits was nearly 30% of total compensation, with health insurance comprising 7.5% and paid leave 7.2% of total comp. The average cost for life and disability insurance, though, was less than one-half of 1%.

BONUS TIME

If you are a private industry worker who received a bonus, you’re among the minority. About one of every 10 employees surveyed had access to end-of-year bonuses (generally performance-based) in 2019, while 6% had access to holiday bonuses (typically equal for all staff). Workers in natural resources, construction and maintenance fared better with year-end and holiday bonuses coming in at 15% and 12%, respectively. Service workers fared the worst.

EMPLOYERS SQUEEZED

Some employers are still finding rough going trying to fill job openings. According to the Bureau of Labor statistics, there were 7.3 million job openings on the last business day of October 2019 and about 5.9 million unemployed people during October, a ratio of 0.8 unemployed people to job openings. Since January 2018, that ratio has ranged between 0.8 and 1.0.

UNPAID CARE

Some 40 million Americans age 15 and over provide unpaid eldercare, and 58% of these providers are women. About one in four of the caregivers were between ages 55 to 64, 21% were ages 45 to 54 and nearly 18% were age 65 and older. More than 8 million eldercare providers also had children living at home.

Question:

My company has problems keeping employees, a problem that has escalated this year. What can I do?

Answer:

Record low unemployment has made this a job seeker’s market, but a history of problems retaining employees might suggest that you take a new look at your company’s practices. Start by comparing your salaries, benefits and advancement opportunities to what your competitors offer. Poll your employees anonymously to ask how they view their work environment and work-life balance. Look at your benefits to find gaps you may be able to fill. Throughout the process and after, communicate frequently and effectively.

Question:

I hired a person to do my housekeeping. Do I have to pay or deduct employment and other taxes for this person?

Answer:

This will depend on a number of factors. According to the IRS, housekeepers and other household workers like babysitters and gardeners are your employees if you control their work and how they do it. If you have a household worker you expect to pay more than $2,200 in 2020, you’ll typically have to pay 7.65% of cash wages for Medicare and Social Security taxes, and withhold the same amount (plus income taxes if they ask you to) from the employee’s pay. Talk to your tax professional to learn more.