Reminder: Tax-exempts have filing requirement coming soon

Tax-exempt organizations are required to file annual reports with the IRS. Those with gross receipts of $50,000 or less can file an E-postcard rather than a longer version of Form 990.

The deadline for nonprofit filings is the 15th day of the fifth month after their year-end. For calendar-year organizations, the filing deadline for 2014 reports is May 15, 2015. Contact us if you need details or filing assistance.

Now is the time to check your 2015 tax payments

If you got a big tax refund or owed the IRS a lot of money when you filed your 2014 tax return, it may be time to adjust your income tax withholding.

Many people like to receive a refund from the IRS, thinking of it as a form of forced saving. If you’re of this opinion, that’s fine. But too big a refund means you’re wasting your money, giving an interest-free loan to the government.

On the other side, if you underpay your taxes by more than $1,000 and don’t meet certain exceptions, you could be hit with a penalty.

Adjusting your withholding is as simple as filing a new Form W-4 with your employer. The form comes with a worksheet to figure out how many allowances you should claim. Or you can increase withholding by specifying an extra dollar amount to be withheld from every paycheck. [Read more…]

IRS releases 2015 business vehicle deduction limits

The IRS has published depreciation limits for business vehicles first placed in service this year. The limits for passenger autos remain the same as the 2014 limits, but the second year limit for light trucks and vans is $100 higher.

50% bonus depreciation is no longer allowed for most business equipment purchases, including vehicles.

Here’s a quick review of the limits for 2015. For business cars first placed in service this year, the first-year depreciation limit is $3,160. After year one, the limits are $5,100 in year two, $3,050 in year three, and $1,875 in all following years. [Read more…]

Certain disabled get a new tax break

The “tax extenders” legislation that became law in December 2014 included the “Achieving a Better Life Experience Act” (also called the ABLE Act). This law provides for tax-exempt accounts that can help you or a family member with disabilities pay for qualified expenses related to the disability. These “ABLE accounts” are exempt from income tax although contributions to an account are not deductible on your federal income tax return. ABLE accounts are generally not means tested and some can provide limited bankruptcy protection.

You or a family member are eligible to open an ABLE account if:

  1. You’re entitled to social security disability benefits due to blindness or other disability, and that blindness or disability occurred before age 26; or
  2. You file a disability certification with the IRS for the tax year.

[Read more…]

U.S. announces plans to loosen mortgage lending

Federal regulators recently announced a number of initiatives to loosen mortgage lending. Their view is that the current standards, adopted years ago in response to the financial crisis, were an overreaction, and the current tighter rules are choking off a housing recovery.

Here’s the background: After the housing bust six years ago, the government wanted to prevent another round of risky loans that led to foreclosures. So it required that lenders insist on higher down payments if they want to have Fannie Mae or Freddie Mac buy or guarantee their loans. And if lender wants to sell a loan to someone other than Fannie or Freddie, it has to require a 20% down payment or else keep part of the risk itself. [Read more…]

More homeowners want to combine two units into one

What can you do if you live in a condo, townhouse or multifamily home, and you need more space but don’t want to move?

For a growing number of people, the solution is to buy the unit next door, tear down a wall, and create a single, larger unit. Recently there’s been an uptick in the number of people combining two small condos into one larger one, or converting a two- or three-family home into a single-family home.

If you’re considering such a move, there’s a lot to keep in mind.

First of all, you’ll need to make sure such a project is allowed. In a condo, you’ll probably need permission from the board or homeowners association. If you’re turning a multi-family home into a single-family home, you’ll need to make sure this is okay under the local zoning rules. [Read more…]

How to keep out competitors if you lease retail space

Most stores that lease space in a mall or other commercial area would like a guarantee of “exclusive use,” meaning that the landlord won’t also rent space to a competing business.

Here are some things to consider if you’re negotiating over such a right in a lease:

What’s the use? The “use” you have in mind should be described in detail, to avoid problems later. For instance, if an ice-cream-cone shop also sells some ice-cream cakes, does that mean that the landlord can’t also rent space to a bakery? If a coffee retailer has “exclusive use,” does that mean that a sandwich shop can’t also sell coffee? [Read more…]

New problem when getting a loan to remodel a home

Some homeowners are running into a big problem when the take out a mortgage (or refinance a mortgage) to pay for a remodeling project. The problem occurs if the remodeling is so extensive that the owners temporarily move out while the work is being done.

Generally, lenders give better terms and rates to homebuyers who plan to stay in a home as their primary residence, as opposed to investors who plan to quickly remodel a home and “flip” it to a new owner. Investor loans are riskier, so lenders typically require a larger down payment and a higher interest rate. To qualify for better terms, buyers who plan to stay put often have to prove that they’re actually living in the home – which they can’t do if they’ve moved out during remodeling. [Read more…]

New rules for credit scores may help many people get a better mortgage

The company behind the most widely-used credit score in America has announced three major changes to how it calculates consumers’ scores – and they could potentially help millions of people to get a better rate on a mortgage.

The so-called FICO score is used throughout the lending industry. A new version – called FICO 9 – has now been introduced, and it includes these changes:

(1) A limited credit history is less of a problem. Currently, if people don’t have much of a history of borrowing money – because they’re young and just starting out in life, or because they have simply chosen not to rely heavily on credit cards, auto loans, etc. – this is treated as a negative. Such people usually get lower credit scores because they haven’t established a track record of handling credit wisely. [Read more…]

To grow or not to grow? That’s a business question

To grow or not to grow is a decision most successful small businesses face at some point. There can be opportunity and profit in growth, but there can be perils and risks as well. What should you as a business owner consider when you are faced with this important decision?

► BENEFITS. First, analyze the potential benefits of expanding your business.

  • The business can often achieve attractive economies of scale from increased buying power and operational efficiency. This can often reduce your cost structure and improve your margins. Growing your margins at a faster rate than your sales growth can achieve remarkable financial results.
  • Growing organizations can often attract more skilled employees who prefer larger organizations with more opportunities for promotion and development.
  • Growing organizations generally have a greater opportunity to go public.

[Read more…]

Check the tax issues in family loans

Lending to family members probably dates back to the invention of money. The IRS entered the mix a great deal later, but it now looms large in the equation. Tax problems can arise when you first lend money, as you’re being repaid, or if you’re not repaid. The issues usually involve imputed income, gift tax, or bad debts.

  • Imputed income. Imputed income is revenue presumed earned but neither recognized nor received by the alleged recipient. The IRS may impute interest on a loan at the “applicable federal rate” (AFR) when a lower rate (or no interest) is charged. The agency then assesses tax on the excess of the imputed interest over the amount required by the terms of the loan.
  • Gift tax issue. When the IRS imputes phantom interest, it also creates phantom taxable gifts. The imputed interest is treated as though the borrower actually paid it to the lender, whereupon the lender returned it to the borrower as a gift. Since the lender “constructively received” the additional interest, he or she owes income tax on it. Since the lender then presumably gave the interest back to the borrower, he or she also owes gift tax on it, unless an exclusion or credit applies.
  • Bad debt deduction. Normally, a loan that goes bad is deductible, either against ordinary income (if made for a business purpose) or as a short-term capital loss. However, when the defaulting party is related, the IRS may demand clear and convincing evidence that the original loan was not actually a gift. Once a loan is recharacterized as a gift, no bad debt deduction will be allowed if the loan isn’t repaid, and the lender also may owe gift tax on the principal unless an exclusion or credit applies.

[Read more…]

April is tax filing time

Wednesday, April 15, is the deadline for filing certain returns and taking certain tax-related actions. Here are the major deadlines.

  • Filing 2014 income tax returns for individuals. If you cannot file your return by this deadline, be sure to file an extension request by April 15. The automatic extension (you don’t need to explain to the IRS why you need more time) gives you until October 15, 2015, to file your return. An extension does not, generally, give you more time to pay taxes you still owe. To avoid penalty and interest charges, taxes must be paid by April 15.
  • Filing 2014 partnership returns for calendar-year partnerships.
  • Filing 2014 income tax returns for calendar-year trusts and estates.
  • Filing 2014 annual gift tax returns.
  • Making 2014 IRA contributions.
  • Paying the first quarterly installment of 2015 individual estimated tax.
  • Amending 2011 individual tax returns (unless the 2011 return had a filing extension).
  • Original filing of 2011 individual income tax return to claim a refund of taxes. Some taxpayers have tax refunds due them for prior years, and unless a return is filed to claim the refund by the three-year statute of limitations, the refund is lost forever.