Tax filing reminders

  • October 17 – Deadline for filing your 2015 individual tax return if you requested an automatic six-month extension of the April deadline.
  • October 17 – If you converted a regular IRA to a Roth in 2015 and now want to switch back to a regular IRA, this is the deadline to do so without penalty.
  • October 17 – This is the last day to fund your Keogh or SEP plans if you requested an extension of time to file your tax return.

Consider these financial tips in troubling economic times

Reacting badly to bad national economic events can turn a challenging situation into a devastating one. When troubling headline news comes your way, consider these tips before making financial moves. [Read more…]

Could you qualify for a partial home-sale exclusion?

Generally, when you’re single, you can exclude up to $250,000 of gain from the sale of a home ($500,000 if you’re married filing jointly) when the home is used as a primary residence for two years in a five-year period that ends on the date of sale. Tax law also provides for a partial exclusion when the time and ownership requirements are not met, if the primary reason for the sale is unforeseen circumstances. “Unforeseen” means events you could not have reasonably anticipated before buying the home and moving in. How flexible is the definition? Recently, the IRS allowed a partial exclusion when a family living in a two-bedroom, two-bath condominium gave birth to another child and needed a larger residence before the two-year rule was met.

FSA or HSA? Choosing between health accounts

Are you confused about your choices for paying medical expenses under your employer’s benefit plan? Here are differences between two types of commonly offered accounts: a health savings account (HSA) and a health care flexible spending account (FSA).

Overview. An FSA is generally established under an employer’s benefit plan. You can set aside a portion of your salary on a pretax basis to pay out-of-pocket medical expenses. An HSA is a combination of a high-deductible health plan and a savings account in which you save pretax dollars to pay medical expenses not covered by the insurance.

Contributions. For 2016, you can contribute up to a maximum of $2,550 to an FSA. Typically, you have to use the funds by the end of the year. Why? Unused amounts are forfeited under what’s commonly called the “use it or lose it” rule. However, your employer can adopt one of two exceptions to the rule. [Read more…]

IRS sets 2017 HSA limits

The IRS announced inflation-adjusted limits for deductible contributions to health savings accounts (HSAs) for 2017. For family coverage, the contribution limit will be $6,750, and for individual coverage, the limit will be $3,400. If you’re age 55 or older, you can contribute an additional $1,000 during 2017. HSAs combine high-deductible health insurance plans with pretax contributions to a healthcare savings account. The savings account funds can be withdrawn tax-free to pay unreimbursed medical expenses.

Tax filing reminders

  • September 15 – Third quarter installment of 2016 individual estimated income tax is due.
  • September 15 – Filing deadline for 2015 tax returns for calendar-year corporations that received an automatic extension of the March filing deadline.
  • September 15 – Filing deadline for 2015 tax returns for partnerships that received an extension of the April filing deadline.
  • October 1 – Generally, the deadline for businesses to adopt a SIMPLE retirement plan for 2016.
  • October 17 – Deadline for filing 2015 individual tax returns on extension.
  • October 17 – Deadline for reconverting a Roth IRA to a regular IRA.

Plan for the fate of your digital assets

An important step in estate planning is creating an inventory of your assets. Your executor – the person you designate in your will to carry out your last wishes – uses the inventory to make sure all of your property passes to your heirs. That includes your digital assets. Documenting these along with more traditional effects can help ensure your final wishes are honored and your estate is administered correctly. Here’s what to keep in mind as you compile a list of your digital assets.

Passwords. In order to review financial accounts with banks, brokerages, or other businesses, your executor will need your current password. If you protect passwords with an encrypted program, include the master access key. Most importantly, keep your list updated when you change passwords. [Read more…]

Avoid penalties by keeping accurate information return records

Did you file all required information returns for 2015 and earlier years? Information returns include Forms 1099, the forms you complete when you pay for certain business expenses such as rent or services performed by an independent contractor. August is a good time to review your filing compliance because this is the time of year the IRS typically begins sending notices for prior year information returns with missing and incorrect taxpayer identification numbers, and the penalties for errors continue to rise. [Read more…]

Get organized and improve your business

The art of placing information in a logical order, more prosaically called organization, is key to the efficiency of your business, which can in turn increase productivity. Fortunately, you can master the art of organization by making habits out of simple techniques. Here are suggestions. [Read more…]

The part-year withholding method can increase your paycheck

If you’re starting your first job this fall, you probably want to avoid overpaying your federal income tax. Consider asking your employer to use a special formula known as the part-year withholding method to calculate the amount of federal income tax withheld from your wages. To be eligible, you have to use the calendar year as your tax year, and you must not expect to be employed for more than 245 days during the year.

IRS grants more time to benefit from this tax credit

When you hire workers from specified groups that typically experience high unemployment, you may qualify for a tax break known as the Work Opportunity Tax Credit. You typically have 28 days after the worker’s first day to complete paperwork for this federal income tax credit. However, for certain workers hired between January 1, 2015, and August 31, 2016, the 28-day rule has been extended until September 28, 2016. The extended date gives you an opportunity to review personnel files for credit-eligible employees. Contact us to learn how the credit can help save tax dollars.

Form 5500 filing reminder – and changes to note

August 1, 2016, is the deadline for filing retirement or employee benefit returns (5500 series) for plans on a calendar year. (The usual due date of July 31, 2016, is a Sunday.)

You’ll also want to note two IRS updates regarding Form 5500. First, the compliance questions are optional. Form 5500 includes new compliance questions for 2015 tax years (returns with a due date of August 1, 2016, for calendar year filers). Because the questions were not approved by the Office of Management and Budget, the instructions for Form 5500 say plan sponsors should skip them when completing the form. [Read more…]

Are you at risk of an audit?

According to recent statistics, budget cuts, staff attrition, and a heavy workload for IRS employees mean your chances of undergoing a tax audit are less than 1%. Does that sound like a non-event to you? Don’t be lured into a false sense of security. The statistic is a blended rate covering many types of incomes and taxpayers. Here are some of the reasons returns were audited. [Read more…]

Follow these steps to a comfortable retirement

Planning can help you achieve a comfortable retirement. Here are five suggestions to consider. [Read more…]

Will you be ready for the new overtime pay rules?

In May, the Department of Labor updated the rules for paying overtime. Under the new rules, salaried employees who earn less than $913 per week ($47,476 per year) will be eligible for overtime pay. That’s double the annual exempt amount of $23,660 from previous rules. In addition, the total annual pay for an exempt highly compensated employee is $134,004 (up from $100,000 previously). These amounts will be updated automatically every three years beginning in 2020.

The changes take effect December 1, 2016, which means you need to begin reviewing your payroll now, as penalties and fines can be assessed for noncompliance. One important step is to begin tracking hours for your salaried employees. You’ll also want to review your payroll practices so you can determine the best options for your business as you get ready to implement the new rules.

Your business may qualify for this extended tax break

The Work Opportunity Tax Credit gives employers a tax credit for hiring veterans and others who are members of “target” groups. Normally, you have 28 days after an eligible worker’s first day to complete the necessary paperwork for the credit.

But the 28-day rule has been extended for some new workers that you hired between January 1, 2015, and May 31, 2016. For certain employees hired within that time period, the deadline for filing the required form is June 29, 2016. If you’re a business owner, the extended date provides an opportunity to review last year’s personnel files for credit-eligible employees. Contact us for details.

How to respond to an IRS notice

If you find yourself on the IRS mailing list, here’s what to do.

  • Scan the heading. The first line, generally printed in bold type and centered beneath your name and address, will tell you why the IRS is contacting you. Questions about missing information, additional taxes owed, or payments due mean you’ll want to take prompt action to avoid more notices or assessments of interest and penalties.
  • Review the discrepancy. You’ll find the tax form and the year to which the notice applies printed in the upper right corner. Pull out your copy of the corresponding tax return, along with the supporting documents, and compare what you filed with what the IRS is questioning.
  • Prepare your explanation. Are the proposed changes correct? Did the IRS misapply a payment? Whatever the issue, there’s usually no need to file an amended return. However, the IRS typically wants a response, either by phone or mail, in order to clear the notice from your account.
  • Do not delay. Ignoring IRS correspondence will not make it go away. Reply to the IRS in a timely manner even if you don’t have all the information being requested.

Please contact us if you receive a notice from the IRS, or your state or local taxing authority. We’re here to set your mind at ease by helping you resolve the matter as quickly as possible.

Report your foreign financial accounts by June 30

June 30, 2016, is the deadline for filing the 2015 Form 114, Report of Foreign Bank and Financial Accounts, known as the FBAR. Not sure if you need to file? The general rule is that a return is due when you have a financial interest in, or signature authority over, foreign financial accounts if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year. The requirement applies to both individuals and entities such as trusts and businesses, and you may need to file even if your foreign account produces no income.

Be aware that June 30, 2016, is a “hard” deadline. Your 2015 Form 114 must be filed electronically with the Treasury Department no later than that date. No filing extension is available for 2015 forms – even if you filed an extension for your federal income tax return.

Contact us for assistance.

Did you get your new “chip” card?

The latest credit cards have a new feature: a half-inch square on the card’s face that looks like a mini circuit board. The square is a small computer chip called an EMV. The acronym stands for Europay, MasterCard, and VISA, the developers of the technology. Over the next several years, these chip-embedded cards are expected to replace the familiar magnetic strip technology on cards that you now swipe at point-of-sale devices. When you use your EMV card, you’ll need to “dip,” or insert, it into a new type of reader.

Why the change? The new chips are expected to improve credit and debit card security. Data on cards with the older technology is much easier for crooks to steal because the information on the magnetic strip is static and can be copied. As a result, a thief can use your card for multiple fraudulent transactions. Cards with the new chip are different. Every time you use an EMV card, the chip creates a unique transaction code. As a result, the newer cards aren’t as useful to counterfeiters and card thieves.

Make June business tax planning time

Looking for suggestions to reduce your 2016 business tax liability? Here are three tips to consider as summer gets underway.

  1. Business trips. When you travel on business this summer, you can write off your expenses – including airfare, lodging, and 50% of the cost of meals – if the primary motive of the trip is business-related. Costs attributable to personal side trips are nondeductible. If you travel by car, deduct actual business-related auto costs or a flat rate of 54 cents per mile (plus tolls and parking fees).
  2. Hire your child. Does your teenaged child need a summer job? If you hire your child, the wages paid for actual services rendered are deductible, the same as wages of other employees. The wages will be taxable to your child at your child’s tax rate, which may be lower than your rate or that of your business.
  3. Job credits. When your business hires workers from certain “target groups,” such as veterans and food stamp recipients, you may be able to claim the Work Opportunity Tax Credit. The maximum credit is generally $2,400 per qualified worker. A special summertime credit is available for hiring youths residing in empowerment zones or enterprise communities who work for you between May 1 and September 15.

We have more summertime tax planning suggestions for your business. Contact us today.

June 15 is the deadline for your second estimated tax payment

June 15, 2016, is the due date for making your second installment of 2016 individual estimated tax. You can pay online, by phone, with a credit or debit card, or by check. June 15 is also the due date for calendar-year corporations to make second quarter 2016 estimated tax payments.

Are bad business debts a tax deduction?

If you’re in business long enough, you’ll run into a customer who doesn’t pay you. Despite your best efforts, you may conclude that you’ll never receive the money. Do you have a tax-deductible bad debt? The answer depends in part on whether you operate your business using the cash or accrual method of accounting.

Cash. When you use the cash method, you report taxable income when you receive it and deduct expenses when they are actually paid. While this makes your bookkeeping simple, you get no direct deduction for a bad debt. Since the income was never received, it was never reported or taxed. However, you will still be able to indirectly deduct the labor, merchandise, and overhead used to provide for the goods or services that were delivered but not paid for. [Read more…]

Keep up with section 179 depreciation changes

Did you know that a recent law made changes to the section 179 expensing election for 2016? These modifications took effect as of January 1. Here’s what to consider as you make asset purchasing decisions this year.

[Read more…]

Easy ways to ruin your credit score

Investor Warren Buffet once said, “It takes 20 years to build a reputation and five minutes to ruin it.” The same maxim applies to good credit. Stellar credit scores don’t happen overnight or by accident. Instead, you have to exercise financial discipline, sometimes for years. The reward: lenders who are willing to offer mortgages and car loans at favorable interest rates.

Unfortunately, like a good reputation, a strong credit score can easily be ruined. Here are three simple ways to devastate your credit score.

[Read more…]

Is your business using social media tools?

According to a recent survey by a technology company, email, websites, and social media are the top three digital marketing tools used by businesses. Lack of an online presence means your company may be missing opportunities to connect with customers. If you’re neglecting your internet marketing, consider outsourcing the task to a virtual assistant, or assigning an employee to handle website maintenance and social media accounts. Still feeling overwhelmed by the idea? Remember that online marketing is a complement to traditional methods of reaching customers. Start small. Even a basic website will help you engage, network, and interact. Let us know if we can help.

Start your midyear planning with these tax savers

As you get ready for midyear tax planning, keep these lesser-known tax breaks in mind.

Residential energy credit. You can claim a 10% energy credit for qualified improvements (up to a lifetime maximum of $500) when you improve your home with insulation, windows, and certain types of roofing. This credit is presently set to expire after 2016.

Commercial building energy deduction. The above-the-line deduction for energy efficiency improvements to lighting, heating, cooling, ventilation, and hot water systems in your commercial building is currently available through December 31, 2016. [Read more…]

Are you missing a refund?

Did you forget to file your 2012 federal income tax return? You’re not alone. The IRS says an estimated one million taxpayers did not file a return for that year, leaving refunds totaling $950 million unclaimed. If you’re one of those taxpayers, you must file a 2012 federal income tax return no later than this year’s April tax deadline.

There is no penalty for failure to file if you are due a refund. Contact us for an appointment today.

Simple steps can lead to growing savings

You’ve probably heard the expression, “a penny saved is a penny earned.” Ben Franklin’s simple guidance has provided the foundation for savings plans for generations of Americans. His advice remains sound today, but economic conditions and financial demands may cause your savings to get off track.

Getting back on track – and sooner rather than later – is important. Why? You can reap benefits thanks to the effects of time. The earlier you put cash into a prudent savings plan, the more time can help increase its value. If you’re having problems getting started, Ben Franklin is credited with another saying that applies: “Be honest with yourself.” Have recent economic events slowed or stopped your savings efforts? Have constant changes to tax laws and the magnitude of investment choices added to your confusion? If your answer to either question is yes, it is time for both an attitude and a strategy change. Here are suggestions. [Read more…]

A tax return is required to claim an insurance premium credit

If you or a family member enrolled in a qualified health plan offered through a government insurance marketplace, such as HealthCare.gov, you may be eligible for a federal tax credit. The amount of the credit varies depending on your household income and can be claimed on your tax return. Alternatively, you have the option to receive all or part of the credit in advance in the form of payments to your insurer that reduce your health insurance premiums.

Either way, you need to file a federal income tax return. That’s the case even if you’re usually not required to file. In the case of advance payments, failing to file your tax return can prevent you from receiving the credit in future years. [Read more…]

Tax-exempt organizations have an upcoming filing requirement

Tax-exempt organizations are required to file annual reports with the IRS. Those with gross receipts below $50,000 can file an e-Postcard (Form 990-N) rather than a longer version of Form 990.

The deadline for nonprofit filings is the 15th day of the fifth month after the year-end. For calendar-year organizations, the filing deadline for 2015 reports is May 16, 2016.

April is a busy month for taxes

Is your tax return finished? If not, this year you have an extra day – or two – to file. April 18, 2016, is the due date to file your 2015 individual federal income tax return and pay any balance due. If you live in Maine or Massachusetts, you have until Tuesday, April 19, to file and pay.

Here’s why. The normal due date – Friday, April 15 – is Emancipation Day. That’s a holiday in the District of Columbia, so the tax filing deadline shifts to Monday, April 18. However, Monday, April 18, is also a holiday (Patriots Day) in Maine and Massachusetts. That means if you live in either of those states, your deadline moves to April 19. The extended due dates apply whether you file electronically or on paper. [Read more…]

Will rising interest rates affect you?

For almost the entire past decade, interest rates held steady at near-zero levels. Then, in mid-December 2015, the Federal Reserve raised rates by one-quarter percentage point. Market watchers and economists expect further rate increases in the coming months. How will you be affected?

Technically speaking, only the federal funds rate was adjusted in December. That’s the short-term rate that credit-worthy banks and credit unions use to lend each other money. But any interest rate revisions can cause a ripple effect throughout the economy. Accordingly, the Federal Reserve’s actions probably will exert at least a moderate influence over financial choices you make at home and in your business in 2016 and beyond. [Read more…]

Update your tangible property expensing policy

In 2013, the IRS issued regulations clarifying when tangible real and personal business property can be expensed. The regulations provided safe harbors that let you deduct certain costs you’d otherwise have to capitalize. For example, using a de minimis safe harbor, you could elect to deduct individual capital expenditures of $500 or less if your business did not have an “applicable financial statement.” (In general, an applicable financial statement is a financial statement based on a certified audit by an accounting firm.) Effective beginning with 2016 taxable years, this safe harbor has increased to $2,500 per invoice or item. In addition, the IRS says it will not contest similar treatment in audits of earlier years.

Plan for changes to social security

The Bipartisan Budget Act of 2015 made two changes to social security benefit strategies. “File and suspend” was a way for married couples to allow the higher earning spouse to claim benefits at full retirement age but suspend the benefits until a later date. Under the Act, this strategy will no longer be available after April 30, 2016. [Read more…]

The myRA: A new simplified Roth IRA is the latest retirement plan

If you haven’t yet begun saving for retirement, a myRA may be a reason to start. “myRA” is an acronym for “my Retirement Account.” myRAs cost nothing to open, have no fees, and let you start saving with any amount that fits your budget. You can open a myRA even if you have other retirement accounts. Your myRA belongs entirely to you and can be moved to any new employer that offers direct deposit capability. [Read more…]

Major tax deadlines for March

  • March 1 – Due date for farmers and fishermen who chose not to make 2015 estimated tax payments to file 2015 tax returns and pay taxes in full to avoid underpayment penalties.
  • March 15 – 2015 calendar-year corporation income tax returns are due.
  • March 15 – Deadline for calendar-year corporations to elect S corporation status for 2016.
  • March 31 – Payers who file electronically must submit 2015 information returns (such as 1099s) to the IRS.
  • March 31 – Employers who file electronically must submit 2015 W-2 copies to the Social Security Administration.

New rules may limit foreclosures

In the last few years, Fannie Mae and Freddie Mac have been selling many distressed mortgages to private investors instead of going through the process of foreclosure themselves. A number of people have complained that these investors have treated some homeowners roughly.

Now, new government rules have been issued that are designed to restrain investors and give homeowners more of a chance of staying put. [Read more…]

Get the right paperwork to claim charitable deductions

What supporting documentation do you need to claim charitable deductions on your federal income tax return?

In general, you can support monetary contributions of any amount with a cancelled check, credit card statement, proof of payroll deduction, or a receipt from the charity. The paperwork must show the organization’s name and the amount and date of your contribution.

When you contribute cash of $250 or more, get a written acknowledgement from the charity. The receipt must show the name of the charity, the date of your donation, and the amount donated, as well as a description and the estimated value of any nondeductible item (such as a book or dinner) provided to you. [Read more…]

Make time for a conversation with your parents about finances

Discussing finances with your parents may be a talk none of you are eager to tackle. But addressing the topic can benefit your entire family by clarifying your parents’ wishes and enabling you to help establish a joint plan for carrying those wishes to fruition. Here are questions that can start the dialogue. [Read more…]

Be aware of inflation-adjusted 2016 tax numbers

Certain tax numbers are adjusted for inflation each year. This year, many of the numbers are unchanged or change only slightly from 2015 amounts. Here are some of the tax numbers to use in your 2016 tax planning. [Read more…]

Note upcoming tax deadlines

  • February 29 – Payers must file information returns, such as Forms 1099, with the IRS. This deadline is extended to March 31 when the forms are filed electronically.
  • February 29 – Employers must send W-2 copies to the Social Security Administration. This deadline is extended to March 31 for electronic filing.
  • March 1 – Farmers and fishermen who did not make 2015 estimated tax payments must file 2015 tax returns and pay taxes in full to avoid a penalty.
  • March 15 – 2015 calendar-year corporation income tax returns are due.
  • March 15 – Deadline for calendar-year corporations to elect S corporation status for 2016.
  • March 31 – Large employers must furnish Forms 1095-C to employees.

Be aware of these tax deadlines

A new year means tax return filing season has arrived once again. Among the tax deadlines you may be required to meet in the next few months are the following: [Read more…]

Keys to effective cash management

Add cash management to your list of business goals for 2016. Commitment to effective practices and techniques can be the key to keeping your business operating on a sound footing. Some tips:

Reduce lag time. Reducing the time between sending out invoices and receiving payment may take the form of giving incentive discounts to customers who pay early. On the expense side, aim for just-in-time inventory to reduce holding costs. [Read more…]

Standard mileage rates reduced for 2016

  • Business. Starting January 1, the standard mileage rate for driving a vehicle for business purposes is set at 54 cents per mile. That’s down from 57.5 cents in 2015.
  • Medical and moving. The rate for medical and moving mileage decreases from last year’s 23 cents a mile to 19 cents a mile.
  • Charity. The general rate for charitable driving remains at 14 cents a mile.

Tax extender act renews tax breaks

In mid-December, Congress renewed a long list of tax breaks known as “extenders” that have been expiring on an annual basis. This year many of the rules are retroactive to the beginning of 2015, and you can benefit from them as you prepare your 2015 federal income tax return.

In addition, the Protecting Americans from Tax Hikes Act of 2015, which was signed into law on December 18, 2015, makes some of the rules effective through December 31, 2016. Others are effective through 2019, and some are effective permanently. Provisions in the Act also make changes to existing tax rules that were not part of the extenders. All of these changes will affect your tax planning for 2016 and future years. Here’s an overview of selected provisions. [Read more…]

Give financial gifts this holiday season

When planning gifts for children on your holiday list, you might want to think beyond the traditional retail offerings. Consider financial gifts that can bestow benefits for many years to come.

Some financial gift options you might consider: [Read more…]

Customer service: Do your employees walk the talk?

Good customer service leads to repeat sales and referrals, which lead to higher revenues and profits. The result is a stronger, more secure business.

Your sales staff knows this well. Their results are directly affected by customer perceptions. Other em­ployees, such as those in support and back office functions, may not think of themselves as serving the customer. But every employee has an impact, direct or indirect, on customer experience. An incorrect shipment, a late delivery, or a mistake on an invoice, all result in poor service. Make it a goal of your business to meet, and preferably exceed, customer expectations as often as possible. [Read more…]

Make time for some last-minute tax savers

That ticking you hear is the tax clock winding down – quickly. There is only a very short time left to cut your taxes for 2015. Here are moves you can still make before year-end. [Read more…]

Wife shares in pension cost-of-living adjustments

A woman who received part of her ex-husband’s civil service pension at divorce was also entitled to share in his later cost-of-living adjustments, the Kentucky Court of Appeals recently decided.

When the couple divorced, the pension was divided equally between the husband and wife. [Read more…]

Going to jail doesn’t end father’s parental rights

The fact that a father was given a lengthy prison sentence for drug offenses doesn’t automatically mean he should lose his parental rights, says the Kentucky Court of Appeals.

The state had argued that the father’s rights should be terminated due to “abandonment and neglect.” [Read more…]