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Audit and Scam Tips

Quick Observations thus far as we work through this Tax Season.  Trends in Audits We are seeing a decline in audits. This is mainly due to budget cuts at the IRS offices.  However there is a modest increase in audits for taxpayers making over $200,000 and a greater increase for incomes greater than $1,000,000. Tax Scams  Be on the look out for fake emails and phone calls from the IRS. This is a huge scam. The IRS does not communicate in this way.  Speaking of fraud, more false tax returns are being filed at both the federal and state level.  If this happens to you, be patient. It can take some time to unwind.  

By |March 2nd, 2015|Taxes|0 Comments

Tax: 2014 Tidbits, Healthcare…

HEALTHCARE: Preparers needed and received IRS guidance on the individual healthcare mandate to verify whether their clients have coverage or qualify for an exemption to the penalty. This filing season will be difficult for taxpayers and Preparers due to the individual healthcare mandate and the health premium tax credit.  Please note that penalties will increase in 2015. EDUCATION: 529 college savings plans will remain the same. You may have heard that President Obama wanted to make changes but the idea has been tabled for the moment. REAL ESTATE: Real estate agents can claim a special tax break on their rental losses. Their rental real estate losses are exempt from the passive loss rules if they spend more than one-half of their time and at least 750 hours per year materially involved in real estate, IRS says privately.  Mortgage brokers are not eligible. ALIMONY: Child support has priority over alimony for tax purposes, according to the Tax Court. If an ex-spouse doesn’t pay the full amount of child support and alimony due, the partial payment is treated first as nondeductible child support, and any excess is alimony.

By |February 9th, 2015|Taxes|0 Comments

TAX RULES: 2014

The Tax Rules for 2014 are Set.   Breaks that expired after 2013 were revived… But the extension is just for 2014. An effort was made to extend the majority of the provisions through 2015,while making several others permanent,this effort fell apart after President Obama said he’d veto the package.   Below are the Tax Breaks that were preserved: The itemized deduction for state sales tax in lieu of income tax. The above-the-line deduction for up to $250 of educators’ classroom supplies. Exclusion for up to $2 million of forgiven debt on primary homes. The ability of individuals age 70½ and older to make direct payouts of up to $100,000 from IRAs to charity. Businesses can claim 50% bonus depreciation and the R&D tax credit. Businesses can expense up to $500,000 of assets that are put in use in 2014. Contact us with questions and concerns. Nick DiBartolomeo,Tax Partner

By |January 4th, 2015|Taxes|0 Comments

Happenings with Taxation due to Congress musings!

With tax reform not a priority for 2014,  Congress will start looking at expired tax breaks. A host of tax credits and write-offs lapsed after 2013, ones effecting individuals and businesses. Some key breaks are certain to be revived, retroactive to Jan. 1, 2014. For individuals, this includes allowing taxpayers 70½ and older to make direct distributions of up to $100,000 annually from their IRAs to charity. Letting debtors exclude up to $2 million of forgiven debt on their primary homes. Deductions for teachers’ class supplies, private mortgage insurance and college tuition. And the election to write off state and local sales taxes instead of state income taxes. For businesses, 50% bonus depreciation, the ability to expense up to $500,000 of assets and the R&D credit. Retirement plans get guidance on same-sex marriage from the Service: They must recognize same-sex spouses of participants as of June 26, 2013,for purposes of applying the federal tax rules to qualified plans. Bitcoins Bitcoins are treated as property for tax purposes, according to the Service. Bitcoins act as a substitute for real currency. So anyone accepting bitcoins as payment for goods or services must include in income the value in U.S. dollars. Those who sell or exchange virtual currency will realize gain or loss on the transaction. The profit or loss will be capital gain or loss if the bitcoins were held for investment,similar to stocks or bonds. The IRS can go after heirs for unpaid estate taxes, a district court says. Under federal law, the IRS can recoup the tax from what the heir receives. IRS will be contacting firms on worker classification determinations. The IRS will target contractors vs. employee status. Continued noncompliance by businesses will lead […]

By |April 23rd, 2014|Taxes|Comments Off on Happenings with Taxation due to Congress musings!

IRS 2014 Tax Season

The IRS is struggling on the enforcement front. They are auditing less then 1% 1040s. A majority of audits are for incomes greater then $1,000,000,. BUT incomes between $200,000 and $1,000,000 are part of the target area too. Here are some red flags that can draw extra IRS attention:       Claiming 100% business use of a vehicle. This is red meat for IRS agents.       Deducting business meals, travel and entertainment on Schedule C.       Writing off a hobby loss.      Deducting rental losses. IRS is actively scrutinizing rental real estate losses, especially those written off by taxpayers who claim to be real estate professionals.      Small businesses are tempting audit targets, especially cash businesses.      Failing to report a foreign bank account. This is a top IRS priority. Don’t be in a hurry to file your 2013 personal income tax return with IRS. The Service won’t begin processing returns until Jan. 31…10 days later than it had originally planned. Last year’s 16-day government shutdown is the culprit. Don’t expect much in the way of service from IRS this filing season. Budget cuts and a heavy workload have forced the agency to pare back on important services that filers and preparers have historically relied upon. Need help with complicated tax law questions? You’re out of luck. The IRS will answer only basic questions. Please have patience this Tax Season. Our Government is struggling and we all need to practice  tolerance; continue cooperating through the transition. We are here to assist you in any way we can. Nick DiBartolomeo,Tax Partner  

By |January 20th, 2014|Taxes|Comments Off on IRS 2014 Tax Season

A Mix of IMPORTANT TAX Tips

There are proposed curbs on depreciation and other write-offs: Straight-line depreciation for real estate would be lengthened to 43 years, up from the current 39-year  maximum. Other assets would be put in one of four depreciation pools based on useful lives, and a set percentage of the costs of assets in each pool would be deducted each year. Intangible assets would be amortized over 20 years…up from 15 years now. The ability to defer tax via a like-kind exchange could be repealed. Advertising expenses would have to be written off over five years. 60% of them could be taken in the first year, and the other 40% would be amortized over four years.  Planning to put an asset in service by Dec. 31 to get 50% bonus depreciation? Keep this in mind because bonus depreciation is set to end after 2013, unless lawmakers decide they will retroactively reinstate this tax break next year. Now let’s turn to more 2013 tax reminders to help avoid last-minute errors: Check the balance in your flexible spending account. You must clean it out by Dec. 31 if your employer has not implemented either the 2½-month grace period or the new $500 carryover rule. Otherwise, you forfeit any money left in your account. Make sure you know the tax rules if you are charging deductible items. For charges that you make with a retail store credit card, you are allowed to claim the deduction for the item only in the tax year in which you pay the bill. For transactions made with a bank credit card, you take the write-off in the tax year that you charged the goods, even if you pay the bill next year. And tax-related identity theft continues to plague IRS. Treasury inspectors estimate that for 2011 alone, […]

By |December 23rd, 2013|Uncategorized|Comments Off on A Mix of IMPORTANT TAX Tips

Quick Tax Updates and Reminders

For the first time in more than a decade the personal tax rate tops corporate rates. The maximum tax rate on individuals is now 39.6% for joint filers with taxable income over $450,000 and single filers above $400,000. The highest rate on corporations remains at 35%.   Health Care Information: The treasury Department has decided that larger firms won’t have to provide health coverage to workers next year. It has decided to delay the employer mandate until 2015 to give businesses more time to comply with the new regulations. The new health care law requires firms with 50 or more full-time employees to provide affordable medical insurance to their workers or pay a stiff penalty. But there’s no delay of the rule that individuals who go without health coverage must pay a fine. That requirement will take effect on Jan. 1, 2014, as scheduled.   Remember that summer day camp costs qualify for the dependent care credit. So if you send your school-age child to math camp or any other special day camps this summer, such as those for computers, theater or soccer, don’t forget the write-off. The same goes for camps that focus on improving reading, writing or study skills. But the costs of summer school and tutoring programs aren’t eligible for the credit. They are treated as education, not care. The other rules for the credit aren’t affected. The child must be under 13, and expenses must be incurred so the parents can work.   Married same-sex couples scored a victory when the Supreme Court struck down a U.S. statute that defined marriage as between a man and a woman for federal law purposes. They notched another win with the resumption of same-sex marriages in […]

By |July 17th, 2013|Uncategorized|Comments Off on Quick Tax Updates and Reminders

The New Tax Law

The New Tax Law and the Latest Update from Washington  The new tax law enacted last month raised the top income tax rate to 39.6%, increased the maximum rate on dividends and long-term capital gains to 20%, and reinstated cutbacks in itemized deductions and personal exemptions. The phaseout of tax benefits will push your marginal rate above the 39.6% bracket in the new law. The rate applies to taxable income over $400,000 for singles and $450,000 for joint filers. The cutback in itemized deductions can add an additional 1.0% to your marginal rate.  Starting in 2013, these write-offs are reduced if your adjusted gross income is over $250,000 for singles;  $300,000 for joint filers. The loss of personal exemptions can also cause an addition of 1.0% per exemption to your true rate.  Exemptions disappear once AGI exceeds $372,500 for singles and $422,500 for joint filers. Marginal rates on long-term gains and dividends can be higher than expected. The 3.8% surtax raises the effective rate on gains and dividends to 18.8% for filers below the 39.6% tax bracket and to 23.8% for those above. The marginal rate can be higher if you owe  AMT. Unfortunately, Washington is not done with changing the tax code. Senate Democrats want more tax hikes, on top of the ones above. They want to cap the value of itemized deductions at 28%.  As a result, taxpayers in 33%, 35% and 39.6% brackets would lose some of the value of their itemization…home mortgage interest, state and local taxes, charitable contributions and the like. Filers in the 39.6% bracket would see their taxes rise by 11.6% of their itemization. This limitation would apply to other tax breaks such as, write-offs for IRAs, self-employed’ […]

By |February 14th, 2013|Taxes|Comments Off on The New Tax Law