Recent Changes

NEW FILE DATES  DEADLINES:

W-2’S AND MOST 1099-MSC ARE NOW REQUIRED TO BE FILED WITH FEDERAL AUTHORITIES BY THE END OFJANUARY EACH YEAR.

EXPECT K-1’S FROM PARTNERSHIPS EARLIER.  ANNUAL DUE DATE MOVED FROM APRIL 15TH TO MARCH 15TH.

ANNUAL FOREIGN ACCOUNT REPORTING IS NOW REQUIRED ON OR BEFORE APRIL 15TH MOVED UP FROM JUNE 30TH.

FILING DATE CHANGES BEGINNING IN 2016

Form 1065 – Small businesses and FLP’s organized as partnerships or limited liability companies filing form 1065 must file their tax return on or before March 15, 2017.  This moves the required filing date up one month versus last year.

C Corporations – Year-end C Corporations filing date is a month later.  The old filing date of March 15th is now moved to April 15th.   Note:  If your C Corporation is a non-calendar year filer, your deadlines may change over the next few years so please be alert to this.

Foreign Accounts  Annual reporting of foreign bank accounts moves from June 30 to April 15th beginning in 2017 for the 2016 tax year.. This is FBAR Form 114.

There will be Tax Refund Delays on your personal tax returns beginning 2017 for 2016 returns.

Tax returns with Earned Income Tax Credits or the Additional Child Tax Credit, your refund will be held by IRS until February 15th.  This is mandated because of the proliferation of identity theft and fraudulent tax returns being filed using stolen identity.

If you typically file early, DO NOT DELAY filing your tax return. The return will be processed by the IRS. Only the refund, if any, will be delayed.

 Look for Your Identity PIN – If you are among those who have been impacted  by IRS identity theft, you will receive a PIN from the IRS. It will be sent to you through the mail in early January. It is a one-time use number that is needed on your Form 1040 when you file your tax return.  It is an added security to ensure that would-be thieves cannot successfully process a tax return using your private information.

THE LAST YEAR IS 2016 for some TAX BREAKS:

O Tuition and Fees Deduction.  This deduction for up to $4,000 of qualified tuition and fees.

O Mortgage Insurance Premium Deductions.

O No income on cancellation of debt.

O Business Credits for small businesses also expire between  2016 and 2018. If thsi concerns you, contact your tax accountant for a review.

Congress could act to extend these tax breaks for 2017 and beyond.  Never count on it!

Estate Taxes – In 2016, the maximum estate tax is 40%. Up to $5,450,000 in assets are sheltered from this tax.  If you want to know how to make this “zero” contact Sandra Jones for a consultation.

Temporary Law Extensions – Not permanently part of the tax code, but the following tax benefits are extended into 2016 and beyond:

O First Year Bonus Depreciation for assets placed in service during the tax year:

50% for 2015 – 2017;

40% for 2018;

30% for 2019.

Permanent Tax Laws now Extended or made Permanent:

O The $250 “above the line” deduction for un-reimbursed classroom expenses for qualified elementary and secondary school teachers.  Beginning in 2016 professional development expenses also qualify for this deduction.

O Option to use general sales tax as an itemized deduction option in lieu of taking a state income tax deduction on Schedule A.

O Tax beneficial treatment of direct charitable contributions from a qualifying senior’s IRA.

2016 INDIVIDUAL INCOME TAX RATES:  Income Brackets that apply to these rates have been increased approximately 1 to 2%:

O 10% – 15% – 25% – 28% – 35% – 39.6%

LONG TERM CAPITAL GAIN TAX RATE IS IN...

O 10% to 15% bracket = ZERO

O 25% to 35% bracket = 15%

O 39.6% bracket = 23.8%

The higher bracket 39.6% tax rate applies to anyone who has income above $415,050 single; $441,000 head of household; and $466,950 Married Filing Jointly.

Deduction and Exemption Phase-out:  For 2016 80% of your itemized deductions and all of your personal exemptions could be phased out. This will impact you if your income is over $259,400 Single; $285,350 Head of Household or $311,300 Married Filing Jointly.

Child Tax Credit stays at $1,000 in 2016 with some of the credit being refundable.

American Opportunity Tax Credit (AOTC) formerly named Hope Education Credit, is now permanent part of the tax code.  It allows for up to $2,500 in qualified secondary educational expense to be deducted for qualified students.  The AOTC covers Four (4) (formerly 2) years and has expanded income limitations ($80,000 Single, $160,000 Married Filing Jointly.  If your tax bill is zero, up to 40% of the credit is refundable meaning you still could get some cash back.

Health Care Savings Accounts (HSA) annual contribution limits for those in qualified high deductible health insurance plans is $3,350 for a single taxpayer and $6,750 for a family. If you are age 55 or over the amount increases by $1,000.

Review your Business’ Affordable Medical Plan. It should be written to be a far better plan than using an HSA .

SEC. 179 LIMITS:

Maximum deduction for property placed in service in 2016 is $500,000.  This limit is reduced by total purchases of qualified property in excess of $2M.  These amounts may be adjusted slightly for inflation.  Remember, business depreciation related provisions only impact the timing of when your expense your depreciation and not the total amount of depreciation you may expense over the life of tht assets purchased.

Maximum deduction placed in service in 2017 is $510,000.  The total purchases of qualified property in excess of $2.03M.

R&E Tax Credit is now permanent.

15 Year straight line depreciation for qualified leasehold improvements, restaurant and  retail improvements now permanent.

New Markets tax credit extended through 2019.

Empowerment Zone incentives through 2016.

Work Opportunity Tax Credit through 2019.

Special charitable deduction rules for food inventory now permanent.

Mileage Rates went down again:

Business = 54.0 Cents for 2016

Medical and Moving = 19.0 Cents for 2016

Charitable = 14.0 Cents for 2016 remained the same

Lower Your Taxes  for Year 2016…

  1. Defer Income to next year by strategically timing your invoicing whether you are on the Cash Method of Accounting or the Accrual Method.  Delay YOUR bonus checks until after January 1st, which delays reporting until 2017.
  2. If your goal is to  accelerate income into 2016, you can do so with the timing of invoicing your clients or customers.
  3. Expenditures can be delayed or accelerated in a similar fashion. If you are on the accrual basis of accounting, you can deduct any expense that is entered into by contract, by credit card charge or by a timely dated check.  Conversely, such expenses can be timely dated or contracted as of the next year’s date.   Assets purchased for depreciation over a period of years are considered as of the date they are placed into service rather than the date of actual purchase or contract.
  4. Avoid Penalties and Interest charges by filing your returns and paying any taxes due before the due date of the returns and payments.   Money saved is indeed money earned.
  5. Pre-Tax monies used on expenditures that are tax deductible is the best way to save money. This might include participation in company sponsored programs. If you have not met the limit, pay the Corporate Allowance directly to the university of any qualified employee or dependent in advance of the due date of the next requirement for the student. Health Savings Accounts (HSA) and Flex Benefits accounts that allow using pre-tax earnings for childcare and out-of-pocket medical costs. Be sure to use up any funds in these accounts and dependent care accounts prior to the end of the plan year or the monies may be forfeited.
  6. Review your contributions for the year and use this expenditure to help reduce income for the year for the C Corporation and also for the personal Schedule A deductions either personally or through the Sub S Corporation.
  7. Donate appreciated stock that is held for more than one year to a charitable organization. You not only get to deduct the appreciated value of the stock, you also avoid paying capital gains tax on the increased value of the shares.
  8. Personally, you can make an extra house payment and benefit from the extra interest payment.  Also, be sure you turn in all your receipts that require reimbursement  before the year ends.
  9. Estate Planning is always a good place to look for annual tax planning. The use of Gifting, trusts, life insurance, Family Limited Partnerships (FLPs) and other estate tools are not just for reducing estate taxes. They are also  beneficial currently when  shifting income and expenses and don’t forget placing assets under protection from lawsuits and other threats.
  10. If gambling is an entertaining element for you. Don’t forget to gather up the proof of losses to help reduce the amount of the winnings reported to the tax agencies.l
  11. Employer sponsored plans such as 401(k)’s, IRA’s, tax free municipal bonds and Roth Accounts need to be examined and considered this time of the year.  The higher your tax bracket the more tax savings you’ll likely realize.

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How Identity Theft Can Affect Your Taxes

Tax-related identity theft normally occurs when someone uses your stolen Social Security Number to file a ax returning claiming a fraudulent refund.   Most people don’t find out about it until they file a tax return.

  1. Protect your Social Security Number and those of your family members.  Keep your card at home and not in your wallet or purse.  Only provide your number if it is absolutely necessary.  Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change your passwords for internet accounts.
  2. Your business entity Federal Identification Number (FEIN) is your entity’s social security number.  Take the same caution with this number as you would with your social security number.
  3. NEVER print your social security number or FEIN on checks or other printed items.
  4. NEVER give out these numbers to anyone for any reason other than Legal or Legal Business purposes.  Anyone else who might insist on having it for identity purposes, deserve to receive a wrong number or not do business with you.  Social Media often attempt to get this valuable information from you.  Be sure your children are not giving their numbers out over social media or other internet sources of contact.
  5. Don’t fall for Scams.  Criminals often try to impersonate your bank, your credit card company, even the IRS in order to steal your personal data. Learn to recognize and avoid those fake emails and texts.
  6. Remember, the Internal Revenue Service (IRS) will NEVER call you threatening a lawsuit, arrest or to demand an immediate tax payment from you.  They will not email you either. Beware of any threatening phone calls from anyone claiming to be with any tax agency.  Immediately hang up and tell them nothing that they want to know.
  7. E-Filing tax returns has proven to be easy for the thief.  If you should attempt to e-file your return and it will not go through because someone else has already filed a return in your name or number, take the following steps: File your taxes by paper and pay any taxes owed on the return; File an IRS FORM 14039 Identity Theft Affidavit; Print the form and mail or fax it according to the instructions on the form;  You may include it with your paper tax return;  File a report with the Federal Trade Commission using the FTC Complaint Assistant; Contact one of the three credit bureaus so they can place a fraud alert or credit freeze on your account.
  8. IRS Letters.  If the IRS identifies a suspicious tax return with your SSN, it may send you a letter asking you to verify your identity by calling a special number or visiting a Taxpayer Assistance Center.  This is to protect you from tax-related identity theft.
  9. IP PIN.  If you are a confirmed ID theft victim, the IRS may issue an IP PIN.  The IP PIN is a unique six digit number that you will use to e-file your tax return.  Each year, you will receive an IRS letter with a new IP PIN.
  10. Report Suspicious Activity. If you suspect or know of any individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.
  11. Combating ID Theft.  In 2015, the IRS stopped 1.4 million confirmed ID theft returns.  In the past couple of years, more than 2,000 people have been convicted of filing fraudulent ID theft return.
  12. Publication 5027, Identity Theft Information for Taxpayers is available at IRS.gov.