For 2019, IRS announces Inflation adjusted limits for various tax provisions

For 2019, IRS announces Inflation adjusted limits for various tax benefits, deductions, adjustments, exemptions, etc

The Internal Revenue Service has recently announced the tax year 2019 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes.

Tax Cuts and Jobs Act signed by President Trump last year had made major changes in various tax provisions including tax rates, deductions, benefits and adjustments. The current announcement applies the annual inflation adjustments to those tax changes for the year 2019. Revenue Procedure 2018-57 provides details about these annual adjustments.

The tax year 2019 adjustments generally are used on tax returns filed in 2020. The tax items for tax year 2019 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married filing jointly rises to $24,400 for tax year 2019, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,200 for 2019, up $200, and for heads of households, the standard deduction will be $18,350 for tax year 2019, up $350.
  • The personal exemption for tax year 2019 remains at 0, as it was for 2018, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
  • For tax year 2019, the top rate is 37 percent for individual single taxpayers with incomes greater than $510,300 ($612,350 for married couples filing jointly). The other rates are:
    • 35 percent, for incomes over $204,100 ($408,200 for married couples filing jointly);
    • 32 percent for incomes over $160,725 ($321,450 for married couples filing jointly);
    • 24 percent for incomes over $84,200 ($168,400 for married couples filing jointly);
    • 22 percent for incomes over $39,475 ($78,950 for married couples filing jointly);
    • 12 percent for incomes over $9,700 ($19,400 for married couples filing jointly).
    • The lowest rate is 10 percent for incomes of single individuals with incomes of $9,700 or less ($19,400 for married couples filing jointly).
  • For 2019, as in 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
  • The Alternative Minimum Tax exemption amount for tax year 2019 is $71,700 and begins to phase out at $510,300 ($111,700, for married couples filing jointly for whom the exemption begins to phase out at $1,020,600). The 2018 exemption amount was $70,300 and began to phase out at $500,000 ($109,400 for married couples filing jointly and began to phase out at $1 million).
  • The tax year 2019 maximum Earned Income Credit amount is $6,557 for taxpayers filing jointly who have three or more qualifying children, up from a total of $6,431 for tax year 2018. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
  • For tax year 2019, the monthly limitation for the qualified transportation fringe benefit is $265, as is the monthly limitation for qualified parking, up from $260 for tax year 2018.
  • For calendar year 2019, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is 0, per the Tax Cuts and Jobs act; for 2018 the amount was $695.
  • For the taxable years beginning in 2019, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,700, up $50 from the limit for 2018.
  • For tax year 2019, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,350, an increase of $50 from tax year 2018; but not more than $3,500, an increase of $50 from tax year 2018. For self-only coverage, the maximum out-of-pocket expense amount is $4,650, up $100 from 2018. For tax year 2019, participants with family coverage, the floor for the annual deductible is $4,650, up from $4,550 in 2018; however, the deductible cannot be more than $7,000, up $150 from the limit for tax year 2018. For family coverage, the out-of-pocket expense limit is $8,550 for tax year 2019, an increase of $150 from tax year 2018.
  • For tax year 2019, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $116,000, up from $114,000 for tax year 2018.
  • For tax year 2019, the foreign earned income exclusion is $105,900 up from $103,900 for tax year 2018.
  • Estates of decedents who die during 2019 have a basic exclusion amount of $11,400,000, up from a total of $11,180,000 for estates of decedents who died in 2018.
  • The annual exclusion for gifts is $15,000 for calendar year 2019, as it was for calendar year 2018.
  • The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $14,080, up from $13,810 for 2018.

Link for full details of Revenue Procedure 2018-57 are given in link below:

https://www.irs.gov/pub/irs-drop/rp-18-57.pdf

 

 

Advertisements

IRS reminds Taxpayers with expiring ITINs to submit renewal applications

IRS reminds Taxpayers with expiring ITINs to submit renewal applications

Individuals who are in the US on dependent visa, like H4, L2, F2, etc, may have an expiring Individual Taxpayer Identification Numbers (ITINs) for which they need to submit their renewal applications as soon as possible if they will have filing requirement in 2019, otherwise  processing of returns and refunds may be delayed in 2019.

ITINs are used by people who have tax filing requirements under U.S. law but are not eligible for a Social Security number. These include Spouses who file Joint returns as well as individual residents in the US who are claimed as dependents in the Tax returns should renew their ITINs. These individuals are mostly on H4, L2, F2 or other dependent visa status. But those who live outside the US need not renew them unless they anticipate being claimed for a tax benefit or if they file their own tax return. That’s because the tax reform law suspended the deduction for personal exemptions for tax years 2018 through 2025. Consequently, spouses or dependents outside the United States who would have been claimed for this personal exemption benefit and no other benefit do not need to renew their ITINs this year.

According to the IRS, Taxpayers with ITINs set to expire at the end of the year and who need to file a tax return in 2019 must submit a renewal application. These include ITINs with middle digits 73, 74, 75, 76, 77, 81 or 82 (for example: 9NN-73-NNNN) need to be renewed if the taxpayer will have a filing requirement in 2019. Likewise, ITINs with expired middle digits 71, 72, 78, 79 and 80 also need to be renewed if the taxpayer will have a filing requirement in 2019.

IRS requires such individuals with expiring ITINs to complete a Form W-7 and submit all required documentation. Although a tax return is normally attached to the Form W-7, a taxpayer is not required to attach a return to ITIN renewal applications. They may either mail the Form W-7, along with original identification documents or copies certified by the issuing agency, to the IRS or work with Certifying Acceptance Agents (CAAs) authorized by the IRS to help them apply for an ITIN.

Full details of IRS announcement are given in the link below:

https://www.irs.gov/newsroom/get-ready-for-taxes-renew-expiring-itins-now-to-file-a-return-next-year

IRS increases 401(k) limit to $19,000 and IRA limit to $6,000

Based on cost of living adjustments, for 2019 the IRS has announced increase in contribution limits for those who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan from $18,500 to $19,000. The catch-up contribution limit for employees aged 50 and over who participate in such plans remains unchanged at $6,000.

The limit on annual contributions to an IRA has been increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 remains $1,000.

The phase-out ranges for 2019, which applies when the taxpayer or, if married, either of the spouse is covered by a retirement plan at work will be as follows:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range has been raised to $64,000 to $74,000, up from $63,000 to $73,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range has been raised to $103,000 to $123,000, up from $101,000 to $121,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out has been raised to if the couple’s income between $193,000 and $203,000, up from $189,000 and $199,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

In respect of Roth IRA contributions, the income phase-out range has been increased to $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly (MFJ), the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return (MFS) who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

 

Full details of IRS Notice 2018-83 announcing 2019 Limitations are provided in the link below:

https://www.irs.gov/pub/irs-drop/n-18-83.pdf

 

Back taxes over $51,000 may now lead to denial or revocation of passport by IRS through State Department

IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015 require the IRS to notify the State Department of taxpayers seriously delinquent tax debt.  The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport or to even revoke their passport.

Taxpayers with a seriously delinquent tax debt are generally those who owe the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien or issued a levy.

Taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt by paying the tax debt in full, paying under an approved installment agreement, accepted offer in compromise or under an approved settlement with the Justice department or by having a pending collection due process appeal with levy. A passport will not be revoked after a request has been filed with the IRS for an installment agreement or if there is a pending offer in compromise with the IRS

A passport won’t be at risk under this program for any taxpayer who is in bankruptcy, or who is identified by the IRS as a victim of tax-related identity theft, or whose account the IRS has determined to be currently not collectible due to hardship or who is located within a federally declared disaster area.

IRS will postpone notifying the State Department and the individual’s passport will not be not subject to denial during the time such a delinquent taxpayer is serving in a combat zone.

 

Text of IRS bulletin 2018-3 – https://www.irs.gov/irb/2018-03_IRB

Startups can now claim R & D Tax credit by offsetting against Payroll Tax liability

Startups with qualifying research expenses have for the first time an additional option whereby they can choose to apply up to $250,000 of its research credit against its payroll tax liability. This new option is available to any eligible small business filing its 2016 federal income tax return this tax season. If, somehow, such a small business failed to choose this option while filing their 2016 Tax return, and still wishes to do so, it can still make the election by filing an amended return by Dec. 31, 2017. This new option was introduced through the PATH Act enacted in 2015

The option to elect the new payroll tax credit is especially beneficial for any eligible startup that has little or no income tax liability.

Key provisions of this new option are:

  • To qualify for the new option for the current tax-year, a business must have gross receipts of less than $5 million and must not have had gross receipts prior to 2012.
  • Such businesses can chose to apply upto $250,000 of its Research credit against the employer portion of Social Security Tax (FICA) for any calendar quarter.
  • Any amount of the payroll tax credit that exceeds the limitation for any calendar quarter could be carried to the succeeding calendar quarter and allowed as a payroll tax credit for such quarter.
  • Tax exempt organizations (Sec 501 entities) are not eligible for this benefit as they as are not qualified small businesses for the purpose.
  • The aggregate gross receipts of all members of a controlled group for a taxable year must be taken into account in determining whether the Gross Receipt rules of this notice are satisfied or not.
  • This payroll tax credit election cannot be made by taxpayer who has made such an election for 5 or more preceding taxable years.

To take advantage of this option, the qualified small business makes a payroll tax credit election in Form 6765 – Credit for Increasing Research Activities, in the portion relating to the payroll tax credit election, and attaching it to its timely filed (including extension) Tax  return  for the taxable year to which the election applies.

A qualified small business that elects to claim the payroll tax credit and files quarterly employment tax returns claims the payroll tax credit on its employment tax return for the first quarter that begins after it files the return reflecting the Tax credit election. This is done by filing Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities, and attaching the completed form to that employment tax return.

IRS Notice 2017-23 providing Interim guidance regarding this option is available at –

https://www.irs.gov/pub/irs-drop/n-17-23.pdf

 

 

USCIS announces significant reliefs For H1B/L-1 and other Nonimmigrant Workers

USCIS has announced major changes to employment based non immigrant and  immigrant visa programs for E-1, E-2, E-3, H-1B, H-1B1, L-1, O-1 or TN classification workers, aimed at improving the ability of U.S. employers to hire and retain high-skilled workers who are beneficiaries of approved employment-based immigrant visa petitions and are waiting to become lawful permanent residents, while increasing the ability of those workers to seek promotions, change employers, or pursue other employment options. In its Final Rule published on November 18, 2016, which will be effective from January 17, 2017, USCIS  made several changes, significant amongst these are as follows:

Retention of priority dates: Workers with approved Form I-140 petitions, will generally be allowed to retain their priority date as  long as the approval of the initial Form I-140 petition was not revoked  for fraud, willful misrepresentation of a material fact, the  invalidation or revocation of a labor certification, or material error.  The final rule provides that Form I-140 petitions that have been approved for 180 days or more would no longer  be subject to automatic revocation based solely on withdrawal by the  petitioner or the termination of the petitioner’s business.

60-day nonimmigrant grace periods: To further enhance job portability, the final rule establishes a grace period of up to 60 consecutive days for the E-1, E-2, E-3, H-1B, H-1B1, L-1, O-1 or TN classification workers, which will allow these high-skilled workers, including those whose employment ceases prior to the end of the petition validity period, to have their visa transferred to a new employer in the same visa classification.

10-day nonimmigrant grace periods: To promote stability and flexibility for the E-1, E-2, E-3, L-1, and TN classifications workers, the final rule provides two grace periods of up to 10 days, to allow an initial grace period of up to 10 days prior to the start of an authorized validity period, which provides nonimmigrants in the above classifications a reasonable amount of time to enter the United States and prepare to begin employment in the country. The rule also allows a second grace period of up to 10 days after the end of an authorized validity period, which provides a reasonable amount of time for such nonimmigrants to depart the United States or take other actions to extend, change, or otherwise maintain lawful status.

H-1B based on licensing: Where licensure is required to fully perform the duties of the relevant specialty occupation, the final regulations codify current DHS policy regarding exceptions to the requirement that makes the approval of an H-1B petition contingent upon the beneficiary’s licensure The final rule will generally allow for the temporary approval of an H-1B petition for an otherwise eligible unlicensed worker, if the petitioner can demonstrate that the worker is unable for certain technical reasons to obtain the required license before obtaining H-1B status. The final rule also clarifies the types of evidence that would need to be submitted to support approval of an H-1B petition on behalf of an unlicensed worker who will work in a state that allows the individual to be employed in the relevant occupation under the supervision of licensed senior or supervisory personnel

EAD – Employment Authorization Document : The rule automatically extends the employment authorization and validity of existing EADs issued to certain employment-eligible individuals for up to 180 days from the date of expiration, as long as a renewal application is filed before the expiry of previous EAD based on the same employment authorization category as the previously issued EAD (or the renewal application is for an individual approved for Temporary Protected Status -TPS) and the individual continues to be eligible for EAD beyond the expiration of the EAD.

Simultaneously the Federal Rule has eliminated the regulatory provision that requires USCIS to adjudicate the Form I-765, Application for Employment Authorization, within 90 days of filing and that authorizes interim EADs in cases where such adjudications are not conducted within the 90-day timeframe.

The final rule also clarifies method for determining which H-1B nonimmigrant workers are “cap-exempt” as a result of previously being counted against the cap  and the way in which H-1B nonimmigrant workers are counted against the annual H-1B numerical cap, including the method for calculating when these workers may access so-called remainder time (i.e., time when they were physically outside the United States), thus allowing them to use their full period of H-1B admission.

Full text of the USCIS announcement  in Federal Register  is available at

https://www.gpo.gov/fdsys/pkg/FR-2016-11-18/html/2016-27540.htm 

USCIS proposes new alternative to attract International Entrepreneurs to stay in the US

International entrepreneurs, who find find it difficult to satisy the EB5 criteria as they are unable to raise overseas investment, may soon be provided an alternative route. US Citizenship and Immigration Services (USCIS) is proposing a new rule which is aimed at expanding immigration options for foreign entrepreneurs who meet certain criteria for creating jobs, attracting investment and generating revenue in the U.S. This rule would allow certain international entrepreneurs to be considered for parole (temporary permission to be in the United States) so that they may start or scale their businesses here in the United States.

The proposed rule would allow the Department of Homeland Security (DHS) to use its existing discretionary statutory parole authority for entrepreneurs of startup entities whose stay in the United States would provide a significant public benefit through the substantial and demonstrated potential for rapid business growth and job creation.

Initial Approval: As per the proposed rule, an entrepreneur may be granted an initial stay of upto two years to oversee and grow their startup in the US. To establish that the enterpreneur qualifies for this rule, it must be established that the enterpreneur created a new entity within the last 3 years and is well-positioned to advance the entity’s business, by providing evidence that he or she possesses a significant (at least 15 percent) ownership interest in the entity at the time of adjudication of the initial grant of parole and  has an active and central role in the operations and future growth of the entity, such that his or her knowledge, skills, or experience would substantially assist the entity in conducting and growing its business in the United States.

To validate the entity’s substantial potential for rapid growth and job creation, the applicant may show that the entity has received significant investment of capital ($345,000 or more) from certain qualified U.S. investors with established records of successful investments, or that the start-up entity has received significant awards  or grants ($4100,000 or more) from Federal, State or local government entities with expertise in economic development, research and development, and/or job creation. Alternatively, an applicant who partially meets one or more of the above sub-criteria related to capital investment or government funding may be considered for parole under this rule if he or she provides additional evidence that his or her entry would provide a significant public benefit to the United States.

Extension: USCIS may grant a subsequent request for extension of parole (for up to three additional years) only if the entrepreneur and the startup entity continue to provide a significant public benefit as evidenced by substantial increases in capital investment, revenue or job creation. To establish this, the applicant would need to demonstrate that the entity continues to lawfully operate business in the United States and have substantial potential for rapid growth and job creation. Moreover, the applicant should continue to be an entrepreneur of the start-up entity who is well-positioned to advance the entity’s business by continuing to possess at least 10 percent ownership interest in the entity and continue to have an active and central role in the operations and future growth of the entity. For parole extension, the applicant needs to satisfy though evidence that the start-up entity received additional substantial investments of capital ($500,000 or more)  through qualified investments from U.S. investors or through significant awards or grants from government entities that regularly provide such funding to start-up entities; or a combination of both. Alternatively, the applicant may show that the start-up entity has generated substantial and rapidly increasing revenue in the United States  (At least $500,000 in annual revenue with average growth at leat 20 % annually), or by creating at least 10 full-time jobs for U.S. workers during the initial parole period.

As with initial parole, an applicant who partially meets one or more of the above sub-criteria related to capital investment or government funding may be considered for parole extension under this rule if he or she provides additional evidence that his or her entry would provide a significant public benefit to the United States.

 

The text of the proposed rule that was announced by US Department of Homeland Security on August 24, 2016 can be read on the link below:

https://www.uscis.gov/sites/default/files/USCIS/Laws/Articles/FR_2016-20663_793250_OFR.pdf

 

 

USCIS announces 36 months OPT and other changes for STEM students and their employers

USCIS announces 36 months OPT and other changes for STEM students and their employers

The Department of Homeland Security has published a final rule allowing certain F-1 students who receive science, technology, engineering, and mathematics (STEM) degrees, and who meet other specified requirements, to apply for a 24-month extension of their 12 months post-completion OPT instead of  the 17-month STEM OPT extension previously available eligible students. Students may begin applying for a 24-month STEM OPT extension on May 10, 2016.

The employers who want to provide a practical training opportunity to a STEM OPT student during his or her extension must:

  • Be enrolled in E-Verifyand remain in good standing.
  • Report material changes to the STEM OPT student’s employment to the DSO within 5 business days.
  • Implement a formal training program to augment the student’s academic learning through practical experience.
  • Provide an OPT opportunity that is commensurate with those of similarly situated U.S. workers in duties, hours, and compensation.
  • Complete the Form I-983, Training Plan for STEM OPT Students. In this form,  the employer must attest that:
  • They have enough resources and trained personnel available to appropriately train the student;
  • The student will not replace a full- or part-time, temporary or permanent U.S. worker; and
  • Working for the employer will help the student attain his or her training objectives.

U.S. Immigration and Customs Enforcement may visit employer’s worksite(s) to verify whether they are meeting the STEM OPT program requirements, including whether they are maintaining the ability and resources to provide structured and guided work-based learning experiences for the STEM OPT student.

The law allows OPT students to be unemployed during their OPT period for upto 90 days, and during the 24 months extension upto an additional 60 days (Upto a total of 150 days during the 3 years OPT).

The rule permits an F-1 student participating in a 12-month period of post-completion OPT based on a non-STEM degree to use a prior eligible STEM degree from a U.S. institution of higher education as a basis to apply for a STEM OPT extension, as long as both degrees were received from currently accredited educational institutions.

If a STEM student currently has a 17-month STEM OPT extension, such individual may apply to add 7 months to your STEM OPT period on or after May 10, 2016 as long as the individual has at least 150 days of valid employment authorization remaining.

The rule also includes a number of requirements intended to help DHS track STEM OPT students and further enhance the integrity of the STEM OPT extension. Most prominent among these are reporting requirements, which the rule imposes primarily upon students and designated school officials (DSOs). The rule includes four main  reporting requirements, as follows.

  1. The rule imposes a six-month validation requirement, under which a STEM OPT student and his or her school must work together to confirm the validity of certain biographical, residential, and employment information concerning the student, including the student’s legal name, the student’s address, the employer’s name and address, and current employment status.
  2. The rule imposes an annual self-evaluation requirement, under which the student must report to the DSO on his or her progress with the practical training. The student’s employer must sign the self-evaluation prior to its submission to the DSO.
  3. The rule requires that the student and employer report changes in employment status, including the student’s termination or departure from the employer.
  4. Both the student and the employer are obligated to report to the DSO material changes to, or material deviations from, the student’s formal training plan.

FinCEN proposes important changes in FBAR reporting

FinCEN proposes few important changes in FBAR reporting FinCEN (Financial Crimes Enforcement Network) intends to make certain important amendments in FBAR reporting by eliminating reporting requi…

Source: FinCEN proposes important changes in FBAR reporting

FinCEN proposes important changes in FBAR reporting

 

FinCEN proposes few important changes in FBAR reporting

FinCEN (Financial Crimes Enforcement Network) intends to make certain important amendments in FBAR reporting by eliminating reporting requirement individually by officers with signature authority due to their employment responsibilities, but with no financial interests in foreign financial accounts. FinCEN also proposes to require filers with 25 or more foreign financial accounts also to report, like other reporters, detailed account information on all foreign financial accounts for which they are required to file an FBAR.

In a Notice of Proposed Rulemaking (NPRM), FinCEN intends to revise and clarify certain provisions in the FBAR reporting rules regarding the filing of Reports of Foreign Bank and Financial Accounts (FBAR). The revisions would mainly apply to financial professionals who file FBARs due to their employment responsibilities.

The NPRM proposes to:

  • Remove the provisions that limit the information reported with respect to situations when a filer has 25 or more foreign financial accounts, and instead require all U.S. persons obligated to file an FBAR to report detailed account information on all foreign financial accounts for which they are required to file an FBAR.
  • Amend the FBAR regulation by eliminating the requirement for officers and employees of institutions to report on institutional accounts for which they have signature authority, but no financial interest, due solely to their employment, so long as their employer has an FBAR filing obligation. This exemption will be available only if such accounts are required to be reported under by the entity or any other entity within the same corporate or other business structure. This exemption would not be available to a U.S. person who is employed by a foreign entity and has signature authority over the foreign financial accounts of the foreign entity in which case the foreign entity/employer has no obligation to report its financial interest to FinCEN under the FBAR regulations.
  • Require institutions to maintain a list of all officers and employees with signature authority over those same accounts; this list would be made available to FinCEN and law enforcement upon request.

FinCEN has previously issued temporary notices of exemptions concerning those filers covered by this NPRM, and those temporary exemptions remain unaffected.

The FBAR is a calendar year report ending December 31 of the reportable year which is due to be filed by June 30, 2016 for 2015 tax year. However, beginning with the 2016 tax year, as changed by recent legislation, the due date for FBAR reporting will be April 15 of the year following the December 31 report ending date.

FinCEN announcement link – https://www.fincen.gov/whatsnew/html/20160301.html