Have you ever received an IRS CP2000 letter in the mail? Did you start breathing faster and you don’t know what to do? Before you panic, I will share with you some tips on how to handle IRS CP2000 notices.

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

You usually get the CP2000 letter when your tax return does not match with the information the IRS has (like Forms W-2 and 1099). The letter basically proposes taxes and penalties for missing income on your return. The letter is not considered an audit but it’s very important that you respond in a timely manner.

Here are six tips that you can use when you receive the CP2000:

1. Review and determine if you correctly reported the income in question on your tax return by gathering all the forms under your social security number.
2. Determine whether you agree, partially agree or disagree with the notice.
3. If you agree with the notice, send the response form back to the IRS together with your payment. If you can’t pay the entire amount, you can request an installment agreement with your response.
4. If you partially agree or disagree with the notice, you will need to mail a response to the IRS together with your tax support to prove your case. You can attach a corrected return to help simplify your position, but you don’t need to file an amended return. If the IRS accepts your explanation, the IRS will correct your return.
5. You can also address any proposed penalties in your response by providing a reasonable cause or explanation on why they need to waive the penalties
6. If the IRS rejects your response, you can consider appealing the decision.

Now, to prevent this in the future, gather all your information before filing. You can also request your wage and income tax transcripts from the IRS so you can compare what information they received from third parties. However, please be aware that the wage and income transcripts don’t contain all your Forms W-2 and 1099 until late May.

So those are six tips that you can use when you receive the CP2000 letter.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Are you planning to tie the knot this summer? If you already did, then my warmest congratulations to both of you! To make sure that there are no surprises come tax time, I will share with you three summer tax tips that you can do right now.

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

So here are the three summer tax tips:

1. Report any name change to the Social Security Administration before filing your next year’s tax return. It would cause delayed refund if you changed your name without informing the Social Security office.
2. Report any address change to the United States Postal Service, your employers and the IRS to ensure your receive tax-related items.
3. Finally, use the withholding calculator by going to https://www.irs.gov/individuals/irs-withholding-calculator to make sure you adjust your withholding appropriately. This is important for families with more than one wage earner, for taxpayers who have more than one job at a time, or for those with children.

So those are the three summer tax tips that you can do right now if you just got married to avoid any tax issues during tax time. Congratulations!

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Did your kid get a part-time job during the summer? And now you were you wondering if your kid needs to file taxes for next year.

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

If your kid has only a W-2, your kid needs to file a return if the total is more than the standard deduction. Starting in 2018, the standard deduction for a dependent child is up to $12,000. That means your kid can make up to $12,000 without paying taxes. That’s almost double from the 2017 numbers.

Here are two other things that you need to consider:

2. Have your kid claim “exempt” on the W-4 withholding allowance form so that he does not have to file a tax return if he makes less than $12,000.
3. Your kid should still file a return if he or she qualifies for the other credits like earned income credit, additional child tax credit, or refundable American opportunity education credit.

There you have it. That’s the new tax filing requirement for 2018.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Did you own a home with your spouse when she was still living? And were you planning to sell your home but you were wondering if you can claim the capital gain exemption?

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

In order to claim the $500,000 capital gain exemption on the sale of your home, the sale needs to happen within two years from your spouse’s date of death. You also need to meet the three requirements below:

1. Either you or your deceased spouse must have owned the property for at least two years before your spouse‘s death.
2. The couple must have lived in the home for at least two years prior to the death of the spouse.
3. The capital gain exemption must not have been claimed by either spouse in the two years before death.

Example: Joe and Jackie are married and have owned and used their home since January 1, 2000. On January 1, 2018, Jackie passed away. If Joe sells the home before January 1, 2020, he will qualify for the $500,000 capital gain exemption.

Here’s one tax trap that you need to be aware of – this rule will not apply if you decide to remarry before the sale of your home within the two-year period. So watch out!

That’s all I have for today. So make sure that you meet all the tax requirements so you can claim the exemption when you sell your home after your spouse’s death.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Did you get hit with alternative minimum tax (AMT) in prior years? And did you wish that Congress at least reduce its impact or get rid of AMT entirely? If you answered “yes” to both questions, then I got great news for you.

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

AMT is a different way to calculate income tax. It was enacted in 1969 to make sure that high-income taxpayers paid their fair share of taxes, regardless of how many deductions they took. However, the exemptions were not increased for inflation purposes. So over time, as the wages went up, the AMT started to impact more middle class taxpayers. However, with the recently passed new tax law, you might be able to take advantage of the new and friendlier 2018 AMT by reducing its impact.

Here are three things you need to know about the new 2018 AMT:

1. Higher AMT exemptions

To make sure that the AMT primarily affects the high-income taxpayers, the 2018 AMT exemptions went up significantly. The change represents 29.5% increase for each filing status:

Single or head of the household – $70,300 ($54,300 in 2017)

Married filing jointly – $109,400 ($84,500 in 2017)

Married filing separately – $54,700 ($42,250 in 2017)

2. Huge increase in AMT exemption phase-out thresholds

Also, the 2018 AMT exemption phase-out thresholds went up considerably:

Single or head of the household – $500,000 ($120,700 in 2017)

Married filing jointly – $1,000,000 ($160,900 in 2017)

Married filing separately – $500,000 ($80,450 in 2017)

That means a lot of taxpayers making between $80,000 up to $1 million can now take advantage of the higher exemption phase-out thresholds.

3. Limited and disallowed tax deductions

The AMT usually happens when a taxpayer have a lot of deductions and credits that are not allowed for AMT purposes. But with the passing of the new tax law, some of the disallowed deductions were either limited or completely eliminated. The state and local tax deduction were limited to $10,000 while the personal exemptions and miscellaneous deductions subject to the 2% floor were eliminated.

With the increase in AMT exemptions and dramatic increase in the exemption phase-out ranges, far fewer taxpayers will be paying AMT. According to estimates, 98% of the taxpayers subject to AMT have either the state & local taxes & miscellaneous itemized deductions subject to the 2% income threshold. With the significant changes on these two items and the increase in AMT exemptions and phase-out thresholds, many taxpayers will no longer be subject to AMT.

To recap, those are the three things you need to know about the new 2018 AMT.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Are you planning to take out money from your home to start a business, buy a rental, or fund other investments? If you answered “yes”, do you know that you cannot deduct the interest portion as part of your home mortgage interest? So, what do you do then?

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

With the complete loss of the home equity line of credit debt (HELOC) and the reduction in mortgage debt for tax year 2018, you have to structure your loan by using the “interest tracing” rule. Interest tracing will allow you to deduct the interest portion of the loan proceeds that you used from your home mortgage debt to start your business or fund other investments.

Here are three things you need to know about “interest tracing”:

• Open a separate account – make sure you deposit the loan proceeds directly to a new business or investment account to avoid commingling the funds with the money on an existing account.
• Allocate the interest – if you are using the loan for more than one type of business or investment, make an allocation to determine the interest for each proceeds that you use.
• Making the election – you need to make the election by April 15 or October 15 extension date of next year, in which the election is effective, by deducting the interest on the applicable line of your tax return. An election statement is not required. However, I would recommend attaching a statement to your tax return anyways.

There you have it. Those are the three things you need to know about the new mortgage interest deduction.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Do you have an existing 401-K loan? Are you planning to change jobs in the future? Do you want to know the repayment tax rules regarding 401-K loans? If you answered yes to all these questions, then it’s important that you understand the new 2018 tax law regarding 401-K loan default rules.

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

Here are three things you need to know about the new 401-K loans default rules:

• Effective date– any 401-K loans after 12/31/17.
• Previous tax law – you had 60 days to payback and roll over the 401-K loan to an IRA.
• New 2018 tax law – you are given more time to roll over the loan balance to an IRA. The new law allows you to pay back your loan by the tax filing due date (April 15^th) including extension date (October 15^th) of the following year in order to avoid the loan being taxed as a distribution and possibly subject to the 10% early withdrawal penalty if you are under 59 ½ years old.

Example – On January 1, 2018, Dylan resigned from his job. At that time, he had an outstanding $50,000 401-K loan. He is under 59 ½ years old. Under the old tax rule, he must pay back and contribute $50,000 within 60 days to an IRA to avoid the loan being taxed as a distribution with a possible 10% early withdrawal penalty. Under the new tax law, Dylan has until April 15, 2019 (October 15, 2019, if he files an extension). That will give you as long as 21 ½ months from the date you separated from your employer to make the contribution and avoid recognizing the $50,000 as income with 10% penalty, if applicable.

To recap, make sure you remember these three things in case you separated from your employer and have an existing 401-K loan.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Do you have children or dependents? Do you make above average income and cannot take the tax credit from prior years? If you answered “yes” to both questions, then I got great news for you. With the recently passed new tax law, you might be able to take advantage of the new and improved 2018 child tax credit.

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

Here are three things you need to know about the new 2018 child tax credit:

Tax credit is doubled

• Credit went up from $1,000 to $2,000 per kid.
• Your kid must be under 17 at the end of the year to claim the credit.

Income range huge increase

• This credit will now be available to more taxpayers, because of the massive increase in the income range. Here’s a quick guide:

Married filing jointly – $400K – $440K

Other filers – $200K – $240K

• So if your income is below the limit, you can take the full credit. But if it falls between the income range, then you can only make claim a partial credit. But if your income exceeded the limit, you cannot take the credit.

Other dependents’ credit

• They also passed a nonrefundable $500 “family credit” for other dependents. Examples are your aging parent or your kid who is 17 years or older.

One thing I want to point out is that – this is a credit, not a tax deduction. While a deduction reduces your income, a credit reduces your tax dollar-for-dollar. So, for example, if you have a tax due of $2,000 for the year, and have a $2,000 child tax credit, your tax bill drops to zero.

To recap, here are the three things you need to know about the 2018 child tax credit: 1. The tax credit doubled, 2. Income range huge increase & 3. Other dependents’ $500 credit.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Are you thinking of getting a divorce? Before you jump and do anything, I would recommend that you read this blog to know the eight important things about the 2018 alimony tax changes.

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

Here are eight things you need to know about the 2018 alimony tax changes:

• Effective date  – any divorce agreement executed after 12/31/18.
• New 2018 tax law – alimony payments are no longer deductible and alimony income is no longer included as income.
• Grandfathered payments – any alimony paid based on a divorce agreement in place on or before 12/31/18 remains deductible by the payor spouse and included as income for the recipient spouse
• Modified agreements – the old tax rule still applies unless the agreement expressly states that the new 2018 tax law applies. That means, that the modified agreement will lose its grandfathered payments and status.
• Timing – if you are thinking of filing for a divorce in 2018, it is very important to time the divorce/alimony settlement before 12/31/18.
• State conformity – determine if your resident state agrees with the federal law. For example, in California, they still allow the alimony deduction and inclusion in income.
• Tax strategy – make sure that you account for the federal and state tax effect of the alimony payments or receipts when you are working with your attorney.
• Reason for change – Congress called the alimony deduction a “divorce subsidy”. They argued that divorced couples can benefit more compared to a married couple. So they want to treat alimony as a non-deductible child support. The Joint Committee on Taxation estimates that this tax change will add almost $7 billion in tax revenues over ten years. Wow!

To recap, make sure you remember these eight important things in case you are getting a divorce.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.

Are you planning to buy a new home? Are you thinking of refinancing your mortgage? Or taking out a home equity line of credit? If you answered “yes” to all the questions, then it’s important for you to know the new tax law regarding mortgage interest deduction.

Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.

Here are seven things you need to know about the new mortgage interest deduction:

• Effective date  – any loan started after 12/15/17.
• New 2018 tax law – you can deduct interest for up to $750,000 in new mortgage debt for your first and second home. Under prior law, you can deduct mortgage interest on $1 million of home debt and $100,000 of home equity debt.
• Couples filing separately – each spouse can claim $375,000 in mortgage interest deductions.
• Grandfathered debt – any mortgage loan you entered before 12/15/17 will allow you to claim interest up to the $1 million ($500K for married couples filing separately) for your first and second home.
• Mortgage refinancing – you can deduct your mortgage interest if you refinance your mortgage debt up to $1 million on or before 12/15/17. But the new loan can’t exceed the amount of the current mortgage being refinanced. Example – If you have a $1 million mortgage and you paid it down to $700,000, then you can refinance it up to $700,000 of debt and continue to deduct interest on it. If you refinance it for $900,000 and you use $200,000 of cash to upgrade your home, then you could also deduct the interest on $900,000. But if you refinance for $900,000 and simply pockets $200,000 of cash, then you could deduct interest only on the $700,000 of refinancing.
• Home equity line of credit (HELOC) debt – interest on a HELOC is only deductible if the loan proceeds are used to make substantial improvements to your home, and the combined total of the first mortgage and home-equity line of credit or second mortgage does not exceed $750,000.
• State conformity – determine if your resident state agrees with the federal law. For example, in California, you can still deduct mortgage interest on $1 million of home debt and $100,000 of home equity line of credit (HELOC) debt.

There you have it. Those are the seven things you need to know about the new mortgage interest deduction.

If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.

Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.