April 2020

Welcome to tax month 2019!  Last year’s tax season was new and different as sweeping changes in our federal income tax laws took effect. We had a major change in the tax code late in 2017, known as the Tax Cut and Jobs Act, that changed the tax code as we knew it. This year we will be living in real time with the ramifications of those new laws. The biggest surprise relating to filing your tax return this here happened last month. On March 17, the U.S. government announced they will postpone the April 15 tax-payment deadline for millions of individuals, giving Americans an additional 90 days to pay their 2019 income-tax bills in an unprecedented move intended to ease the economic pain inflicted by the Coronavirus.  In light of all the changes, and with the tax filing deadline just days away, I want to share some last minute, but not-too-late, tax planning/tax reducing actions you can still do. Also, secondly, I will shed light on five key issues to be aware of this tax season.

Here are some beneficial moves you can still make before filing:

1. Increase Your 401(k) Contribution

For 2019, there’s been a $500 increase in the maximum employee contribution amount to 401(k) plans and other employer sponsored retirement plans. That raises the maximum contribution from $18,500 to $19,000 for 2019. The $6,000 catch up contribution for taxpayers 50 an older remains unchanged. So, for us over 50, we can reduce taxable income by $25,000 by maxing out our 401K.

2. Increase Your IRA Contribution

This year’s $500 retirement plan increase also applies to IRA accounts. The IRA contribution maximum is increasing from $5,500 in 2018, to $6,000 for 2019. The $1,000 catch up contribution for taxpayers age 50 allows a maximum $7,000.

3. Set Up an HSA

The higher standard deduction means it will be more difficult to write off medical expenses. But you may be able to work around that by establishing a Health Savings Account (HSA). Under an HSA, you can make a tax-deductible contribution up to $3,500 for a single person, or up to $7,000 for a family for 2019. There’s also a catch-up contribution of $1,000 if you’re 55 or older. Last month’s Investor’s Edge column was titled, “One Account – Three Tax Benefits.”  It was all about HSA’s. (Let me know if you would like a copy).

Five Tax Return Items to Be on Alert For This Year

Expect delays due to new forms. It’s estimated that 450 forms were revised in order to take all the tax law changes into account, including the 1040 itself. This is now completely revised for all of us as a short form. But shorter doesn’t mean simpler—it just means different. And because so many forms have been redesigned but not actually put into play yet, taxpayers be testing them in real time. Delays and glitches are highly likely.

Don’t be shocked if your typical results are vastly different this year. That refund you looked forward to may now be a tax bill you owe the IRS. Because the withholding tables changed in early 2018, many taxpayers may find themselves owing taxes. If you made changes to your withholdings, it will make filing this year easier. If not, be prepared for possible changes and expect the unexpected.

Consider your state or city income tax changes. For example, California did not conform to Federal tax law changes. That means that taxpayers are basically experiencing two unique and non-integrated taxation systems. If you haven’t already, work with your tax professional to determine the best way to maximize what’s afforded within both systems. There may be disadvantages for one compared to the other.

Planning for 2019 taxes should have started last year. Still, you can still review your 2018 return to look for opportunities to benefit from the tax law changes or to mitigate any negative impacts regarding laws that didn’t pan out in your favor. One example would be for retirees over the age of 70 ½ who are able to direct up to $100,000 of their annual Required Minimum Distributions (RMD) to charity, tax free, and still have it count toward their RMD each year.

You know it makes sense to work on your taxes as early as possible, even if you decide to wait to file, so that you can get a sense of whether you will owe or receive a refund. As noted above, there are still some helpful things you can do. And remember, if you owe, you have 90 days to pay – interest and penalty free.

With the impacts of the Tax Cuts and Jobs Act taking full effect this tax season, 2019 may become the most talked about tax filing time in a generation. If ever there was a tax year for “eyes wide open” planning, this is it! Collaborate with a tax professional and your Certified Financial Planner™ to be sure you are taking the new laws into account as you move forward this year and next. Doing so will allow you to file your taxes in confidence and with peace of mind.

Q. We have a six-year-old Coral Bark Japanese Maple. Last year, a few of the smaller branches turned black, and we pruned them off. Now one of the three main branches is doing the same thing, and the leaves are withering. The shape of the plant will be ruined if we remove it. What should we be doing?                       

A. It’s never good news when the stems of a Japanese Maple turn black. The black coloration is a primary indicator of a vascular disease called Verticillium Wilt. Verticillium Wilt is a soil-borne fungus disease that’s common in our Bay Area soils. When the infected stems are cut, you’ll find black streaking through the tissue. It attacks a wide range of ornamental and herbaceous plants including, tomatoes, peppers, roses, Pistache and Camphor trees. The fungus works its way up the plant from the roots disrupting the vascular tissue that is responsible for transporting water and nutrients throughout the plant. Unfortunately, we have no controls for this problem. The disease does attack without warning. Our poorly draining, heavy clay soil, and excessive summer watering doesn’t help. It’s particularly frustrating when Verticillium Wilt attacks established and thriving ornamentals. With tomatoes and other vegetables, we can plant resistant varieties, but that’s not the case with Japanese Maples. I’d removed the infected limb because it is not going to recover and encourage the new growth by feeding it an organic fertilizer. A replacement branch can be selected from the new growth. Leaf blight can also cause dark, deadened shoots and curled, darkened leaves on the tree. Airborne bacteria, such as Pseudomona is also responsible for leaf and branch dieback on a Japanese maple. But Verticillium Wilt is by far the primary suspect. 

Q. How would I know if the hybrid vegetable seed I’ve planted has been genetically engineered? I’ve planted several hybrid crosses along with some heirloom tomatoes, and now I’m concerned that they may be unhealthy. 

A. This shouldn’t be an issue, nor would I pull the plants and discard them. For generations, plant breeders have been cross-breeding the genes of compatible plants. Their goal is to create a new plant with the best traits from both parents such as early maturity, early flowering, disease-resistant, etc. The new plants are called F-1 Hybrids or just Hybrids. Seedless Watermelons and Pluots are recent examples of popular hybrids along with a countless number of tomatoes, other vegetables, and seasonal color plants. If you’re a seed saver, hybrids have a significant drawback and that they’re very unpredictable in the next generation, so it’s generally recommended not to waste your time saving the hybrid seed. Instead, you want to save open-pollinated varieties. Open Pollinated varieties are simply those varieties that are capable of producing seeds that will produce seedlings just like the parent plants. They breed exact traits year after year because of natural selection. Any variety that has been around a minimum of fifty years, an arbitrary number, are then called an Heirloom variety. These terms are often used interchangeably. F-1 Hybrids and Open-Pollinated varieties should not be confused with the modern-day gene splicing or genetically engineered plants. To be technical, USDA considers any plant, animal, or microorganism produced through any type of genetic modification as to be a genetically modified organism (GMO’s). While a hybrid plant is a GMO, it’s not genetically engineered. Genetically engineered varieties combine atypical genes that are not found in nature. The only way for them to occur is by human intervention and manipulation. Plants like corn that has the pesticide Bt engineered into its genetic makeup to make it resistant to certain pests is an example. Bt is a natural pesticide, but it would never naturally find its way into corn seed, they’re created using molecular genetics techniques such as gene cloning, slicing, and protein engineering. Another example, is herbicide-resistant soybean, cotton, canola, and alfalfa, so you control broad spectrum grasses and broadleaf weeds without damaging the original plant. These varieties have no application in home gardens. Hence, you will not encounter any packets of genetically engineered seed in home and garden catalogs or in the seed rack at their favorite garden centers. 

Q. Can Epson Salt be applied at the same time you are adding a systemic fertilizer to roses? I don’t think there is a problem, but I’m just double-checking.

A. There is no problem applying Epson Salt with any other type of fertilizer. Epson Salt or Magnesium Sulfate is added as a supplement to traditional fertilizers. Magnesium is a secondary element necessary for plant growth that helps keep leaves green. With roses, it also stimulates the formation of basal canes or shoots. With old roses, this is an important method to rejuvenate the foundation canes.

The first TV shows were experiments in the new technology. The 1936 Summer Olympics and 1939 World’s Fair demonstrated the possibilities of the medium. The 1947 World Series inspired many Americans to buy their first television. In 1948 Milton Berle moved from radio to TV and family gatherings around the small black-and-white box took off. Here are some questions from those early TV days.

1)  The first national color broadcast happened January 1^st, 1954.  What was the event (don’t overthink this one)?

2)  Who was the first U.S. President to give a live national television broadcast?  It was for a Peace Treaty Conference in San Francisco.

3)  The first cover of TV Guide, from April 3^rd, 1953, featured Lucille Ball, and who else?

4) “These Are My Children” was the first of its kind, airing in 1949. The first what? 

5)  The first sitcom to show a toilet on TV was from 1957, when a baby alligator was kept in a toilet tank. Name the classic sitcom.

6)  Who was the first TV cowboy star? His show debuted in 1949, as he transitioned from movies to television.