Retirement plan contribution limits are indexed for inflation, but with inflation remaining low, most of the limits remain unchanged for 2018. But one piece of good news for taxpayers who’re already maxing out their contributions is that the 401(k) limit has gone up by $500. The only other limit that has increased from the 2017 level is for contributions to defined contribution plans, which has gone up by $1,000.

If you’re not already maxing out your contributions to other plans, you still have an opportunity to save more in 2018. And if you turn age 50 in 2018, you can begin to take advantage of catch-up contributions.

Higher-income taxpayers should also be pleased that some limits on their retirement plan contributions that had been discussed as part of tax reform didn’t make it into the final legislation.

However, keep in mind that there are still additional factors that may affect how much you’re allowed to contribute (or how much your employer can contribute on your behalf). For example, income-based limits may reduce or eliminate your ability to make Roth IRA contributions or to make deductible traditional IRA contributions.

If you have questions about how much you can contribute to tax-advantaged retirement plans in 2018, check with us.

Last year, nearly 10 million taxpayers fell victim to tax-related identity theft in which someone uses a stolen Social Security number to file a tax return claiming a fraudulent refund. Most taxpayers don’t even know this has occurred until their return is rejected, or the IRS sends a letter that they have identified a suspicious return using your Social Security number.  Sandy Furuya, Senior Accounting Manager at [Wamhoff Accounting Services], outlines new measures for this filing season, and what you need to know.

What new measures will be in place for 2016?

• If you prepare your own tax return with a tax software package, there will be new log-on standards.
• Many states will be delaying refunds. Illinois, for example, which processes over 6 million returns (4.9 million electronically), will delay refunds until March 1, 2016. While they won’t disclose their new security measures, the delay is designed to allow more time for verification that the return is legitimate and the refund is going to the right party.
• The Criminal Investigation division of the IRS has assisted in convicting close to 2000 identity thieves in the last three years, and is currently pursuing 1700 open investigations.

What should I do if I were a victim of tax-related identity theft last year?

• Be sure you have completed Form 14039, which is the IRS’ identify theft affidavit
• If you have already completed the form, you may still be waiting for your refund. The ID verification services division of the IRS is working diligently to complete the processing of all 2014 returns, but must do a thorough check of these returns as they typically have two returns for the same Social Security number – one legitimate and one fraudulent return.
• You may have received a PTIN number to use for your 2015 income tax return. This PTIN number must be used in order to file electronically.

How can I ensure my records are safe with my tax professional?

• Secure files are a must! Ensure that all files with any type of account numbers or identification numbers are sent secured.
• All documentation should be shredded using a micro-cut shredder.
• Ask your tax professional about their firewalls and other computer system security protocols to help ensure they’re operating in a safe and protected environment.
• Look for neatness in general. A cluttered desk is not a good sign, and could lead to your personal information being mixed up in someone else’s file!

After much deliberation, Congress passed the Protecting Americans from Tax Hikes (PATH) Act on December 18, 2015, which includes many permanent extensions taxpayers are very happy about.  Sandy Furuya, Senior Accounting Manager at [Wamhoff Accounting Services], reviews the highlights.

Child tax credit

• The child tax credit of $1000 was made permanent. This was previously set to expire in 2017.
• This credit is available for each “qualifying child” in the household.

American opportunity tax credit

• The credit of up to $2500 for four years of post-secondary education was made permanent.
• Phase outs begin at $80,000 for Single taxpayers and $160,000 for Married taxpayers. This is very important for college families.

Elementary and secondary school teacher deductions

• The maximum $250 deduction for certain expenses of elementary and secondary school teachers was made permanent.
• Starting in 2016, the expenses will also include professional development expenses.

State and local sales tax deduction is back

• Taxpayers may continue to claim an itemized deduction for either the payments to state and local governments, or payments for state sales tax.
• The sales tax deduction is beneficial to taxpayers who do not pay state and local taxes such as retired individuals who are on a fixed level of income.
• It is also beneficial for those taxpayers residing in states who do not have a state income tax.

Tax-free individual retirement plan distributions for charitable purposes

• The PATH act also extended tax-free distributions from individual retirement plans for charitable purposes.
• If a taxpayer is at least 70-1/2 years of age, they can exclude from gross income qualified charitable distributions from IRAs.
• This exclusion may not exceed $100,000 per taxpayer in any tax year.