Mariner Tax Preparation

You might want to file a 2019 return to receive your stimulus check

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The IRS’s website currently does not have information available regarding how the stimulus checks will be distributed. I will make updates as more information is made available to us.

Who is eligible for a stimulus payment

  • Single taxpayers who have an adjusted gross income of $75,000 or less
  • Head of household who earns $112,500 or less
  • Married taxpayers who earn $150,000 or less
  • The credit is $1,200 per adult, and 500 per child

As income increases over these thresholds, the amount of credit received will diminish.

I didn’t file a 2019 tax return

You should be okay. If the IRS doesn’t have 2019 on file, they will base it on the 2018 return.

Who should consider filing a 2019 return

There are some instances where it may be in your best interest to file a 2019 return.

  • Your income was abnormally high in 2018. Maybe you unloaded stocks, sold property, or cashed in retirement to buy a house. If your income was over the threshold you won’t receive a payment.
  • You don’t normally file a tax return. This doesn’t apply to people receiving veterans benefits or social security. There are some taxpayers who don’t file a return. Maybe you graduated college and didn’t have income yet. The way I’m reading it, you won’t get a stimulus payment if they don’t have a return on record.
  • You closed your bank account that was used on your 2018 return. So far they’re saying if you provided direct deposit information on your return the stimulus payment will go into that account. When a direct deposit is rejected the IRS cuts a check and mails it to you. This usually takes months.
  • You moved after 2018 and didn’t have direct deposit. If the IRS mails a check to the wrong address a couple of things could happen. It might get forwarded if you still have a forward on your mail (might want to renew that if your in this situation). The check might also get returned. Again, there will probably be a lengthy process to have it reissued.

I’m currently prioritizing any clients who meet the above criteria. This process will probably change as the IRS provides more information.

What if I was underpaid or overpaid?

So far if your advance payment is LESS than what you’re owed when you compute your 2020 return, you’ll get the excess as a credit on that return. But if your advance credit is GREATER than what you’re actually owed when you file your 2020 return, there currently is no mechanism to 1) repay the excess payment, or 2) recognize the excess amount as income.

Remote preparation recommended. IRS Pushes Tax Deadline To July 15

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All filings can be delayed until July 15. I’m also hearing from clients in emergency positions that a shelter and place order is going to be announced.

If there is a shelter in place order and it’s similar to New York I should be able to go back and forth to the office. I’d ask clients to utilize Intuit Link when possible. It’s safest and quickest.

I shifted to preparing returns from home. My wife is working at her job remotely and the kiddos can be a handful 🙂 All in all, we’re doing quite well. I hope you are as well.

Let’s work together for the best possible outcome.

Jim

Mailing in or Dropping off return materials

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EDIT: I recommend working through Intuit Link. It’s fast and secure. The IRS and State has extended the deadline to July 15.

Covid 19 is quickly changing the way everyone does business. I am not having face to face appointments. 10-20 clients are submitting paper documents daily. So I’m observing social distancing, but is that enough?

I’ve asked several people who specialize in the field. I’ve received several different answers. Here’s what I’m doing. –

  • When documents come in they are quarantined for three days.
  • My work space (desk, keyboard, mouse) is sanitized between files.
  • I am changing disposable gloves between client files.

I’d like to wear a mask, but they are not available. I hope I’m over reacting, but I’m 44, and I have asthma. I also have a lot of clients who are high risk. I want to be proactive. I hope you do as well. Here’s a couple of ways you can help…

Submit your documents online

This is the safest way to do it. We have a secure system through intuit link. All you need is a phone camera or a scanner. Mike is working from home and will be happy to walk you through it. This also avoids us surcharging you for shipping.

Only send paper

Please, no plastic, staples, or paperclips. The virus lasts longer on those surfaces.

I’ll be updating as this progresses. So far, it’s going quite well. Thank you for your support in these matters.

Jim

Social Distancing Update

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Out of concern for all I stopped having in office appointments last week. Clients can –

  • (Our Preference) Share documents online via Intuit Link. This is the safest way to do it.
  • Drop their materials through our mail slot
  • Mail their materials to my home office at 4 Alma Rd in Millis

How we’re handling returns

Documents received are processed 2-3 days after they arrive. They are returned to clients via priority mail with signature forms and an invoice.

How much will it cost for preparation

Except for unique circumstances where someones return changed you will be billed the same as last year plus $10 for shipping.

Can I just come in and sign?

No. That defeats the purpose of social distancing. We’re handling all documents individually and keeping things as sterile as possible. It’s our sincere hope that we are over reacting. But we’ve decided to be proactive in uncertain times.

There’s changes from last year. I need to talk to Jim about them.

No problem. Let us know what is going on and we will be happy to help.

Thank you for supporting this effort. We need to take measures to contain the virus. I’ve spoken to many healthcare workers, and they are concerned. Let’s do all we can to make their jobs manageable in these challenging times.

Mariners – Unemployment and State Income Tax

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  • I am a client of yours and would like to ask if you can tell me where I can find the IRS decision that allows Merchant Mariners to receive unemployment when not permanently employed with a company?

Unemployment is governed by the individual states. Hence it is not an IRS related activity. It also isn’t specific to mariners.

Temporary Employment and Maritime Rotary Positions

mariner unemployment and state taxesA good industry for comparison would be the trade unions (electricians, plumbers, etc…) They receive a rotary position from the union. When the position is no longer available they are eligible for unemployment benefits (State specific). Mariners are also given a rotary position. When they are relieved the position is no longer available.

Most unemployment programs require the applicant to be “actively seeking work”. The contention can be made to deny a claim when a mariner has been relieved if they are not actively seeking new employment. Most programs provide a derivative of the following –

    • If your usual occupation is seasonal, you must look for other types of work in the off season. If you are on temporary layoff, you may seek temporary work until recalled.
  • If you belong to a “hiring hall”, a union that does not allow you to look for work on your own, you do not have to personally seek work. However, you must be in good standing with the union and on their work referral list.

Accordingly, mariners who are union members do not have to seek alternate employment if the Union forbids it.

Mariners identifying Tax Home vs. Unemployment Home?

One of the issues encountered in recent years has been with receiving unemployment benefits from a Mariner’s state of residence. For example, if the mariner resides in Massachusetts, but works for a California based company, Massachusetts will generally deny the claim requiring the Mariner to apply for benefits directly in California.

This presents some interesting issues. While 46 USC 11108 only directly identifies limitations on tax jurisdiction specifying a mariner on interstate or foreign articles “is not subject to the income tax laws of a State or political subdivision of a State, other than the State and political subdivision in which the individual resides, with respect to compensation for the performance of duties”, it does set specific guidelines.

The purpose of this legislation was to limit the imposition of taxes to mariners from states outside of their tax home. Like other protective acts, it prevents companies (and States) from assessing taxes from mariners who very well may have never been physically present in the State in question. It seems that the intent of congress was to establish that mariners are not tax transients and to treat all income as sourced to their tax home.

Confusion Setting In

If a mariner living in Massachusetts working for a company based in another state cannot have income in any other state besides their state of residence, how can they be required to apply for unemployment in another state? By law, they have no earned income in the other State.

Simply stated – All of the mariners’ wages are required to be reported as sourced to their state of residency. Accordingly, unemployment claims should be processed and sourced via the Mariners tax home.

Medical Deduction

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What types of expenses qualify as medical deductions?

  • Payments of fees to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners
  • Payments for in-patient hospital care or nursing home services, including the cost of meals and lodging charged by the hospital or nursing home
  • Payments for acupuncture treatments or inpatient treatment at a center for alcohol or drug addiction, for participation in a smoking-cessation program and for drugs to alleviate nicotine withdrawal that require a prescription
  • Payments to participate in a weight-loss program for a specific disease or diseases, including obesity, diagnosed by a physician but not ordinarily, payments for diet food items or the payment of health club dues
  • Payments for insulin and payments for drugs that require a prescription
  • Payments for admission and transportation to a medical conference relating to a chronic disease that you, your spouse, or your dependents have (if the costs are primarily for and essential to medical care necessitated medical care). However, you may not deduct the costs for meals and lodging while attending the medical conference
  • Payments for false teeth, reading or prescription eyeglasses or contact lenses, hearing aids, crutches, wheelchairs, and for guide dogs for the blind or deaf
  • Payments for transportation primarily for and essential to medical care that qualify as medical expenses, such as, payments of the actual fare for a taxi, bus, train, or ambulance or for medical transportation by personal car, the amount of your actual out-of-pocket expenses such as for gas and oil, or the amount of the standard mileage rate for medical expenses, plus the cost of tolls and parking fees

Don’t forget that medical deductions have to exceed 7.5% of your AGI and you need to meed itemization thresholds. In practice, medical deductions are not beneficial to the average taxpayer because of this. Another good reason to opt for the medical FSA.

Rental Deductions

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What deductions can I take if I have a rental?

Costs you incur to place the property in service, manage it and maintain it generally are deductible. Even if your rental property is temporarily vacant, the expenses are still deductible while the property is vacant and held out for rent.

Deductible expenses include, but are not limited to:

  • Advertising
  • Auto Expenses
  • Travel (including air fare, car rental etc…)
  • Cleaning and maintenance
  • Commissions
  • Depreciation
  • Mortgage Interest
  • Other Interest
  • Homeowner association dues and condo fees
  • Insurance premiums
  • Real Estate taxes
  • Other Taxes
  • Management fees
  • Pest control
  • Professional fees
  • Rental of equipment
  • Rents you paid to others
  • Repairs
  • Supplies
  • Trash removal fees
  • Travel expenses
  • Utilities
  • Yard maintenance

All expenses you deduct must be ordinary and necessary, and not extravagant.

You can deduct the cost of travel to your rental property, if the primary purpose of the trip is to check on the property or perform tasks related to renting the property. If you mix business with pleasure, though, you’re required to allocate the travel costs between deductible business expenses and nondeductible personal costs. Be careful not to cheat yourself on the breakdown.

Flexible Spending Account vs. Dependent-Care Credit

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flexible spending taxesA couple of tax breaks are available for working parents who pay for child care, but you’ll have to choose one or the other.  Is it better to pay for child-care expenses using a flexible spending account or to claim the dependent-care credit on my tax return?

Many people will have that question over the next few months, as they make decisions about their employee benefits for 2014. You may be allowed to set aside up to $5,000 in pretax money for the year in a flexiblespending account for dependent-care expenses. Or you could claim those expenses for the dependent-care credit when you file your 2012 tax return. But you can’t use the same expenses for both tax breaks. Most familieswho have access to a dependent-care flexible spending account at work would be better off running their child-care expenses through the FSA.

Money you set aside in a flexible spending account is not only subtracted from your paycheck before income taxes are calculated, but it also avoids the 7.65% Social Security and Medicare tax. So if you’re in the 15% income-tax bracket, you won’t have to pay the 15% federal tax or the 7.65% Social Security tax, which means that you’ll avoid paying a total of 22.65% in taxes on that money. In that case, contributing the maximum $5,000 to your dependent-care flex plan cuts your tax bill by $1,133. The benefits get even better as your tax bracket rises. If you’re in the 25% bracket, for example, you’ll end up saving 32.65% in taxes on the money you contribute to the FSA — and lowering your tax bill by $1,633. You’ll save even more if your FSA contribution escapes state income taxes.