2019 PRE TAX SEASON CHECKLIST

1. 2019 PRE TAX 2019 PRE TAX SEASON CHECKLIST SEASON CHECKLIST ebook

2. WHAT'S INSIDE INTRODUCTION WHAT TO INCLUDE IN YOUR CHECKLIST AVOID: TAX RETURN PREPARATION ERRORS FEW UPDATES ACCORDING TO TAX CUTS & JOBS ACT OPPORTUNITIES & CHALLENGES OF TAX PLANNING POST TCJA ARE YOU SUFFICIENTLY STAFFED?

3. INTRODUCTION Tax practitioners, as they rightly say, wear many hats; from document sorting to being a government form translator, and from being a deadline timekeeper to being a counselor for their clients, they have to do everything during the months from January through April. Developing a detailed practice and procedure manual is very important for tax firms that employs more than a handful of employees, and is essential for operating more than one office effectively. However, having a checklist established before the onset of the Tax Season is something every tax pro should also mark in the checklist of their annual list of tasks. This comes as a savior compared to handling cumbersome organizers that very often keep majority of clients in oblivion, and are left unfilled. Imagine what could happen if you discovered that a number of required information fields are left blank, and there’s barely any time to have them filled in.

4. WHAT TO INCLUDE IN YOUR CHECKLIST With Tax Season 2019 just around the corner, there is a list of few things that every tax preparer must have at their disposal to make the most of it when required. Every accountant needs to have a perfectly planned, scheduled, and target timelines for collating all necessary documents, reports, books of accounts, and so on, of all his clients and business entities well ahead of the yearly deadline. This following checklist is prepared as reference for accounting professionals and colleagues who will bear the burden of organizing all such documents as required to be filled in, and filed with the IRS during the Tax Season. 1 5 6 7 8 Make schedules, and lead sheets tie into amounts on the tax return sure that all worksheets, Compare from the last year’s return and ensure there are no significant dissimilarities. 2 3 4 For a more involved tax return comparison feature review an Excel tax comparison worksheet Complete all checklists after reading each question or comment prepare and Compare output with any projection that was done and reconcile large or illogical differences Check into the completed return if there are no glaring omissions errors or Follow uniform procedures and use worksheets documenting what you did wherever possible Respond to all questions and/or comments raised on submitted data by clients To begin with, every accounting professional must stay abreast with any and all updates or amendments to the Tax Laws for every year, at the very beginning of that accounting year. This will simply make their life easier, burden-free, and more managed when it comes to handling their client’s documents. When you are well versed with all such laws, provisions, and requirements, you can easily get your clients to organize and manage their necessary documents well beforehand instead of running around at the last moment.

5. Moreover, if required on your part, you should also impart any such notices or follow-ups to your clients with respect to any requirements or changes as introduced by accounting or tax law changes, to eliminate any delays or errors on their part when they provide you with all necessary documents and information. Consequently, you must ensure that you are well aware of all past history of your clients’ accounts and tax records for managing (if any) dues, fines, penalties, etc. to be paid in this fiscal year. It also helps to adjust for any tax credits received, or even any tax returns receivable. To ensure that you have all the correct and relevant information of your clients’ accounts, try to make time and personally scrutinize & verify every document thoroughly. Ensure you mark off all valid and (if) missing information from your client, and fill-in wherever necessary with relevant details. As a reference, the following points will guide you in having a set of completed tax documents from your clients beforehand

6. AVOID: TAX RETURN PREPARATION ERRORS 01 Number transposition and spelling errors. This includes income and deduction amounts and client Social Security numbers, addresses and zip codes. Spelling errors should also be avoided – they indicate a lack of attention to what you are doing 02 Unreported 1099 income. Clients frequently leave out 1099s, but the preparer should make sure all 1099 items from last year are accounted for. Missing 1099s that were not fnal for last year should be accounted for 03 Tax payments. Entering incorrect and unpaid amounts can be avoided by requiring the client to provide “proof” of the payments. Entering “incorrect” amounts provided by the client is a major cause of tax notices 04 Keeping review notes after the return is completed. This can create liability issues if there is ever a controversy over the return. Review notes usually deal with errors and omissions and the type and quantity of them can indicate a lack of training or adherence to processes or care, or improper procedures. Retaining these notes cannot ever help you 05 Not correcting reason for tax notices for prior year on this year’s return. This is a no brainer, but for many preparers there is a disconnect between a notice for last year’s return and the preparing of this year’s return 06 Not questioning numbers that stretch the imagination. My imagination is likely to be difer- ent from yours, but a client with high debt indicated by mortgage and home equity loan interest usually won’t be making cash charitable contributions equal to 8 percent of their gross income. Likewise for maximum allowable IRA contributions. Explain the requirements for substantiating these deductions and ask client if they have it

7. 07 Not following up enough with clients to get missing information. This could create last minute rushes and unhappy clients, even though it was because of client’s lack of response 08 Not specifcally asking clients if they have, can sign or control a foreign bank account 09 Not informing client(s) about items that aren’t on return such as traditional and Roth IRAs, SEPs, making charitable contributions with appreciated stock, claiming a grown child with minimal income who lives with client as a dependent, or signing up for an employer’s 401k plan and/or fexible spending account, partial exercising of ISOs to avoid AMT or potential for a Section 83(b) election for restricted stock or ISO awards 10 High mortgage interest deductions. Excessive amounts (usually over $50,000) are a red fag for the IRS. Make sure the interest is not from excessive mortgages, that the funds were used for proper purposes or that the interest tracking rules have been complied with, and if mortgage proceeds were used for investment purposes, it is properly refected on the return 11 Alternative minimum tax. Watch for unapplied AMT credits and AMT NOLs, and state tax refunds reported as income even though not deducted in prior year because of AMT 12 Not calling a client to relay unexpected (and especially bad) fnal results

8. OPPORTUNITIES AND CHALLENGES OF TAX PLANNING POST-TCJA The recently passed 2017 Tax Reform Act (“TCJA”) significantly changes the scope for Taxpayers beginning on January 1, 2018. With substantial changes to the individual income tax, the estate and gift tax and the taxation of business entities, such changes implemented through the TCJA present a host of tax planning challenges and opportunities for many Taxpayers across the country. The TCJA is the first major overhaul of the U.S. tax system in 30 years. The TCJA is effective immediately, and influences many aspects of your financial standing. Consequently, it is important to opportunities, challenges, provisions in the Act. Here is a summary of who you would plan or execute filing tax returns after TCJA takes effect: understand the and

9. HERE ARE A FEW UPDATES ACCORDING TO TAX CUTS & JOBS ACT CHECKLIST OF CHANGES: CHECKLIST OF CHANGES: STANDARD VS. ITEMIZED DEDUCTIONS THE INCREASE IN THE STANDARD DEDUCTION LIKELY MEANS THAT MANY MORE TAXPAYERS WILL BE BETTER OFF WITH THE STANDARD DEDUCTION IN 2018. THAT WILL MEAN SIMPLIFI- CATION FOR MANY MORE TAXPAYERS, BUT THEY STILL MAY NOT BE HAPPY IF THEY DID NOT KNOW ABOUT IT AND DID NOT PREPARE FOR THE LOSS OF ITEMIZED DEDUCTIONS DURING 2018. MEDICAL EXPENSE DEDUCTION THE THRESHOLD FOR THE MEDICAL EXPENSE DEDUCTION IS LOWERED TO 7.5 PERCENT OF ADJUSTED GROSS INCOME FOR REGULAR TAX AND ALTERNATIVE MINIMUM TAX PURPOSES. IT REVERTS BACK TO 10 PERCENT IN 2019. THE SALT CAP THE STATE AND LOCAL TAX DEDUCTION IS CAPPED AT $10,000. THIS INCLUDES BOTH STATE INCOME OR SALES TAXES AND PROPERTY TAXES. STATE EFFORTS TO DO WORKAROUNDS FOR THE LIMIT THROUGH STATE CHARITABLE CONTRIBUTIONS WITH STATE INCOME TAX CREDITS MAY NOT WORK DUE TO IRS PROPOSED REGULATIONS LIMITING THE CHARITABLE DEDUCTION TO THE EXTENT OF ANY STATE OR LOCAL TAX CREDITS. THIS ALSO IMPACTS PRE-EXISTING STATE CHARITABLE CONTRIBUTION PROGRAMS. IF THE TAXPAYER CAN ALLO- CATE PART OF THE SALT TO A BUSINESS, THAT PORTION ESCAPES THE CAP. CASUALTY LOSS THERE IS NO CASUALTY LOSS DEDUCTION UNLESS FOR A FEDERALLY DECLARED DISASTER. THE TAXPAYER IS REQUIRED TO INCLUDE THE FEMA NUMBER AND THE LOCATION OF PROP- ERTY WHEN THE CLAIMING LOSS DEDUCTION. CHARITABLE CONTRIBUTIONS THE DEDUCTION LIMIT IS INCREASED TO 60 PERCENT OF AGI. THERE IS NO DEDUCTION IF THE CONTRIBUTION SECURES ATHLETIC EVENT SEATING RIGHTS. TAXPAYERS WILL NEED CON- TEMPORANEOUS SUBSTANTIATION FOR ANY CONTRIBUTION OF $250 OR MORE, EVEN IF THE CHARITY HAS REPORTED CONTRIBUTION TO IRS

10. MORTGAGE INTEREST DEDUCTION BE CAREFUL OF ANY MORTGAGE MODIFICATION THAT INCLUDED CASH OUT, EVEN IF JUST FOR CLOSING COSTS – IT MAY RESULT IN LOSS OF THE GRANDFATHERED $1 MILLION DEBT LIMIT AND BECOME A $750,000 DEBT LIMIT. NO HOME EQUITY INTEREST DEDUCTION CAN BE CLAIMED UNLESS THE TAXPAYER CAN DOCUMENT THE EXPENSES TO BUY, BUILD OR IMPROVE THE HOME. MISCELLANEOUS ITEMIZED DEDUCTIONS THE DEDUCTION FOR MISCELLANEOUS ITEMIZED DEDUCTIONS SUBJECT TO THE 2 PERCENT OF AGI FLOOR WAS REPEALED THROUGH 2025, INCLUDING UNREIMBURSED EMPLOYEE BUSINESS EXPENSES, INVESTMENT EXPENSES, TAX PREPARATION FEES, AND HOBBY EXPENSES. FOR OWNERS OF PASS-THROUGH BUSINESSES THE DEDUCTION IS CLAIMED ON THE NEW LINE 9 ON THE DRAFT FORM 1040. THERE IS A NEED TO DETERMINE QUALIFIED BUSINESS INCOME, AND TAXPAYERS MAY ALSO NEED TO DETERMINE IF THEIRS IS A SPECIFIED SERVICE TRADE OR BUSINESS, IF THERE ARE W-2 WAGES, AND THE UNADJUSTED BASIS OF QUALIFIED PROPERTY IMMEDIATELY AFTER ACQUI- SITION. FOR OWNERS OF PARTNERSHIPS AND S CORPORATIONS, BUSINESS INFORMATION SHOULD BE PROVIDED IN BOX 20 OF FORM K-1. THE CHILD TAX CREDIT TO CLAIM THE INCREASED CHILD TAX CREDIT IN 2018, TAXPAYERS WILL NEED SOCIAL SECURI- TY NUMBERS FOR EVERY QUALIFYING CHILD. QUALIFYING RELATIVE CREDIT THERE IS A NEW $500 DEDUCTION FOR A QUALIFYING RELATIVE. THE TAXPAYER ID NUMBER IS SUFFICIENT FOR THIS CREDIT, WHICH CAN APPLY TO A CHILD THAT DOES NOT QUALIFY FOR THE CTC. THE CHILD TAX CREDIT TO CLAIM THE INCREASED CHILD TAX CREDIT IN 2018, TAXPAYERS WILL NEED SOCIAL SECURI- TY NUMBERS FOR EVERY QUALIFYING CHILD.

11. THE CHILD TAX CREDIT QUALIFYING RELATIVE CREDIT THERE IS A NEW $500 DEDUCTION FOR A QUALIFYING RELATIVE. THE TAXPAYER ID NUMBER IS SUFFICIENT FOR THIS CREDIT, WHICH CAN APPLY TO A CHILD THAT DOES NOT QUALIFY FOR THE CTC. MOVING EXPENSES THE DEDUCTION AND EXCLUSION ARE GONE FOR EVERYONE -- EXCEPT MEMBERS OF THE ARMED FORCES THE KIDDIE TAX THE KIDDIE TAX IS NOW TAXED AT THE ESTATE AND TRUST TAX RATES, RATHER THAN THE PARENTS’ TAX RATE. THE ALTERNATIVE MINIMUM TAX THE INCREASE IN THE AMT EXCLUSION AMOUNTS AND LOWER REGULAR TAX RATES WILL LIKELY MEAN THAT FEWER MIDDLE-INCOME TAXPAYERS WILL BE CAUGHT BY THE AMT, BUT MORE HIGHER-INCOME TAXPAYERS WILL BE CAUGHT. CARRIED INTERESTS THE INDIVIDUAL MANDATE IS STILL REQUIRED FOR 2018 -- IT EXPIRES FOR 2019 BUSINESS CHANGES THERE ARE HIGHER EXPENSING LIMITS FOR CAPITAL PURCHASES UNDER CODE SEC. 179 AND BONUS DEPRECIATION (CURRENTLY 100 PERCENT). BE CAREFUL, HOWEVER – HIGHER EXPENSING IS LIKELY TO REDUCE THE 20 PERCENT DEDUCTION FOR OWNERS OF PASS-THROUGH BUSINESSES. BUSINESS INTEREST THERE ARE NEW LIMITS ON DEDUCTING BUSINESS INTEREST BASED ON A 30 PERCENT OF AGI LIMIT, UNLESS THE BUSINESS IS UNDER $25 MILLION IN AVERAGE GROSS RECEIPTS

12. UNDER $25 MILLION IN AVERAGE GROSS RECEIPTS ALSO, IF THE BUSINESS IS UNDER $25 MILLION IN AVERAGE GROSS RECEIPTS, IT CAN USE THE CASH METHOD OF ACCOUNTING, HAS NO REQUIREMENT FOR INVENTORIES, AND IS EXEMPT FROM THE UNICAP RULES. THE TAXPAYER MAY NEED TO FILE A FORM 3115 FOR A CHANGE OF ACCOUNTING METHOD NET OPERATION LOSS THERE IS NO CARRYBACK OF NET OPERATING LOSSES TO PRIOR YEARS UNLESS FOR FARM- ING AND CERTAIN INSURANCE COMPANIES ENTERTAINMENT AND MEAL EXPENSES THERE IS NO DEDUCTION FOR ENTERTAINMENT EXPENSES. THE 50 PERCENT DEDUCTION FOR MEAL EXPENSES SURVIVES IF THE TAXPAYER CAN IDENTIFY THE MEAL EXPENSE SEPA- RATELY FROM THE ENTERTAINMENT EXPENSE. HARASSMENT SETTLEMENTS THERE IS NO DEDUCTION FOR SEXUAL HARASSMENT OR ABUSE SETTLEMENTS IF THE SET- TLEMENT INCLUDES A NON-DISCLOSURE AGREEMENT. PAID FAMILY AND MEDICAL LEAVE THERE IS A NEW CREDIT FOR PAID FAMILY AND MEDICAL LEAVE. TRANSPORTATION EXCLUSIONS MANY TRANSPORTATION FRINGE BENEFIT EXCLUSIONS HAVE BEEN ELIMINATED. SALE OF PARTNERSHIP INTERESTS IF THERE HAS BEEN A SALE OF A PARTNERSHIP INTEREST, PARTNERS AND PARTNERSHIPS SHOULD CHECK CERTIFICATION REQUIREMENTS THAT THERE IS NO FOREIGN INTEREST INVOLVED IN THE SALE TO AVOID A 10 PERCENT WITHHOLDING REQUIREMENT.

13. ATTORNEY ADVANCED LITIGATION COSTS THERE IS NO LONGER A CURRENT DEDUCTION FOR LITIGATION COSTS ADVANCED BY AN ATTORNEY. OUT-OF-STATE SELLERS MANY STATES HAVE IMPLEMENTED THE SUPREME COURT’S WAYFAIR DECISION REQUIRING OUT-OF-STATE SELLERS TO COLLECT SALES TAX FOR TAX PREPARERS: HEAD OF HOUSEHOLD FILING STATUS RETURN PREPARER DUE DILIGENCE HAS BEEN EXPANDED TO INCLUDE HEAD OF HOUSE- HOLD FILING STATUS ON FORM 8867. BLOOMBERG NEWS THE MISCELLANEOUS ITEMIZED DEDUCTION FOR TAX RETURN PREPARATION FEES IS NO LONGER AVAILABLE THROUGH 2025

14. OPPORTUNITIES AND CHALLENGES OF TAX PLANNING POST-TCJA If you own a pass-through business, it would be important to review how your business is structured to ensure you are taking full advantage of the pass-through business tax deduction. Depending on the size and structure of your business, it might be advantageous to create several pass-through businesses or incorporate as a C corporation 01 02 If you are an employee, it is worth reviewing your situation to see if it would be more benefcial and possible for you to be an independent contractor or owner rather than an employee. If you are an independent contractor or owner, you might qualify for the pass-through business deduction 03 It will remain important for you to keep track of your medical expenses, mortgage interest, property and state income or sales tax payments and charitable contributions made during 2018 due to new restrictions on itemized deductions 04 If you have a home equity line, you may want to consider refnancing your home equity line into a single mortgage on your principal or second home in 2018, assuming that your combined mortgage interest and other permitted itemized deductions exceed the standard deduction

15. Employees who incur signifcant unreimbursed business expenses may want to ask their employer about adjusting their compensation or establishing an accountable expense reimbursement plan that would allow the employer to reimburse the employee tax-free while also entitling them to a deduction against their business income 05 06 If you are currently contemplating divorce or separation, you should carefully review the efects of the new law to determine the economic efects on your tax situation and the timing of any agreements Due to the elimination or limitation on itemized deductions, and the elimination of personal exemptions, a key consideration in planning for 2018 is to frst look at ways to lower your taxable income. You should, there forth, consider maximizing all pre-tax contribution opportunities, such as your 401(k) and deductible IRA contributions, as well as consider investing in state and municipal bonds (its interest is exempt from federal tax) 07 08 If your children are enrolled in and/or are going to be enrolled in private schools, there is a greater incentive to contribute to 529 Plans

16. ARE YOU SUFFICIENTLY STAFFED? With the onset of a very hectic and busy tax computation and filing season, it may so happen that understaffed or overloaded with so much work that your existing staff may not be able to put up with that kind of workload. Moreover, you wouldn’t want to risk the chances of any errors or omissions entering your clients’ records for filing by overworked staff. It is pretty much important to have enough workforce to deal with calculated, expected workloads for the tax season. you might be For this very reason, you can either hire more local staff before the beginning of your tax season conquest. Or, you can have a flexible option of hiring remote staff for meeting the requirements as the quantity of work starts pouring in. With the former option, you need ample time for shortlisting probable candidates, pass them through thorough training and practices within your organization, and have tons of stringent legalities to conform to. With the latter, you have readily available trained staff with loads of experience, relevant training in most popular accounting software applications, flexible timings, and superior flexibility to scale up or trim down at a moment’s notice, depending on the workload flowing into your organization.

17. ABOUT ENTIGRITY Entigrity is a Remote Staffing company headquartered in New York. Entigrity provides remote staffing solu- tions in the areas of Accounting, Finance, Back Office, Admin, Tax etc. Through the unique remote staff hiring models, Entigrity has helped accounting firms save over 70% cost involved in hiring staff. Today Entigrity is serving 300+ small and mid-size accounting firms across North America. Entigrity con- forms to high standards of data management and security guidelines as established by ISO 9001 and 27001 respectively. Flexible Hiring Options: Temporary | Permanent | Temp to Permanent |Project Based | Full-Time | Part-Time | ?+1-646-827-4348 | ?www.entigrity.com | ?info@entigrity.com