The Internal Revenue Service website on Thursday updated tax-withholding tables for 2018 to reflect the new Tax Cuts and Jobs Act, but they may be refined before tax season begins. So check the IRS website for updates (www.irs.gov).
Meanwhile, we spoke with John D. "Don" Fort, the new IRS chief of the criminal investigation division, appointed in June 2017. Fort's division investigates crimes such as hacking, ID theft, and criminal violations of the tax code. He told us that IRS criminal investigators will be focusing on employment taxes to detect fraud.
"Employment tax is one of the areas where we've increased investigations. We made a concerted effort to do that because that's where 70 percent of all taxes are collected," said Fort, who briefly served as the special agent in charge of the Philadelphia IRS field office. "There's significant areas of noncompliance."
His office is using data-mining tools such as Palantir, fraud referrals, and revenue offices to comb through hundreds of millions of tax returns, bank filings, and other databases, including one involving the Foreign Account Tax Compliance Act. The division has the same number of agents as it did 50 years ago, Fort added, so they're leaning heavily on the data mining.
Yet another entrant has joined the fast-paced, growing robo-adviser community: Finhabits.com, which aims to enroll more Hispanic/Latino investors and encourage savings among this community in Philadelphia and other large metropolitan areas. Finhabits uses an automated platform, accessible by computer or phone, to set up a savings account and an investment portfolio tailored to your goals. It charges $1 a month for new accounts under $2,500. For accounts above $2,500, the fee rises to 0.50 percent annually.
Finhabits' registered investment adviser invests in Vanguard and Blackrock index funds and exchange-traded funds, according to founder Carlos Armando Garcia Portillo, 37, who previously worked at Merrill Lynch Investment Management and a hedge fund, Madison Quant Labs. Finhabits is aiming for grassroots organic growth.
"We met recently with Philly small banks and other organizations that deal with small business owners, and we want to create awareness at the community level. More than 15,000 people have come through our pipeline since we launched, and our goal is to make sure that people with no retirement accounts create a long-term habit of saving," Portillo said.
If you are age 701/2 or older and forget to take your RMD (required minimum distribution) from your retirement plan, you are generally subject to a 50 percent penalty, said Eric Bronnenkant, Betterment.com's head of tax. And the IRS ain't so forgiving.
"The IRS does provide a waiver for this penalty if you can make an argument that the failure was due to reasonable error and you are taking corrective action by withdrawing the missed distribution," he said. "While the IRS does not define reasonable error, 'I forgot' or 'I did not know' will likely not pass muster. 'I was incapacitated in a nursing home' is a potentially more persuasive argument."
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