Mid-Year Tax Planning

Each year, many taxpayers get a larger refund than expected. Some find they owe a lot more tax than they thought they would. If this happened to you, we can review your situation to prevent another tax surprise.

Did you marry? Have a child? Have a change in income? Some life events can have a major effect on your taxes. It’s possible to bring the tax you pay closer to the amount you owe, especially if you let me know before tax season rolls around.

New Job. When you start a new job, you must complete a Form W-4, Employee’s Withholding Allowance Certificate. Your employer uses it to calculate the amount of federal income tax to withhold from your pay. If you start a new job, let me know and I can help you complete this form.

Estimated Tax. If you earn income that is not subject to withholding, you may need to make estimated tax payments. This type of income may include self-employment income, interest, dividends, gambling or rental income. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay it before the end of the year.

Life Events. When certain life events occur, check with me to see if you need to change your Form W-4 or change the amount of estimated tax you pay. A change in your marital status, your family size or your home ownership status can change the amount of taxes you owe.

Changes in Circumstances. If you are receiving advance payments of the premium tax credit, it’s important that you report changes in your income or family size to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advanced premium tax credits.

Selling Your Home This Summer?

In most cases, gains from sales are taxable. However, if you sell your home, your gain may be tax free. Some considerations include:

Exclusion of Gain. You may be able to exclude part or all of the gain from the sale of your home if you owned and used the home as your main residence for at least two out of the five years before the date of sale.

Exceptions May Apply. There are exceptions to the owner­ship and use tests. One exception applies to persons with a disability. Another applies to certain members of the military.

Exclusion Limit. The maximum gain you can exclude from your income is $250,000. This limit is $500,000 for married taxpayers filing a joint return.

May Not Need to Report Sale. If the gain is not taxable, you are not required to report the sale to the IRS on your tax return.

Home Sold at a Loss. If you sell your main home at a loss, you can’t deduct the loss on your tax return.

When You Must Report the Sale. You must report the sale on your tax return if you can’t exclude all or part of the gain. I will determine this for you.

Only a Main Home Qualifies. If you own more than one home, you may only exclude the gain on the sale of your main residence. Your main home usually is the house that you live in most of the time.

First-time Homebuyer Credit. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale.

Report Your Address Change. After you sell your home and move, update your address with USPS and the IRS. To update it with the IRS, file Form 8822, Change of Address. If applicable, you should also notify the Health Insurance Marketplace when you move out of the area covered by your current Marketplace plan.

Keep Your Computer Safe and Protect Personal Information

Security Tips

There is no shortage of scams out there targeting the gullible and infirm. Do not fall prey to their shameful tactics!

Here are some tips for keeping your tax records and personal identity safe.

Keep Your Computer Secure

Use security software, and make sure it updates automatically. Essential tools include:

  • Firewall
  • Virus/malware protection
  • Strong passwords
  • File backups
    • via Local Removable Backup Drives
    • or Online Back Up such as Carbonite or iDrive

Avoid Phishing and Malware

  • Avoid phishing emails, texts, or calls that appear to be from the IRS or companies you know and trust
    • Instead always go directly to their official website
  • Don’t open attachments in emails unless you know who sent it, and were expecting it or know what it is.
  • Download and install software only from websites you know and trust.
  • Use a pop-up blocker.

Protect Personal Information

  • Do not carry your social security card or documents containing your SSN. Keep it in a safe secure place unless absolutely necessary.
  • Do not overshare personal information on social media.
    • Information about past addresses, a new car, a new home, and your children help identity thieves pose as you.
  • Keep old tax returns and tax records under lock and key (password protected or encrypted if electronic copies).
    • Shred tax documents before throwing them out.
  • Avoid IRS impersonators.
    • The IRS will not call you with threats of jail or lawsuits.
    • The IRS will not send you an unsolicited email suggesting you have a refund or that you need to update your account.
    • The IRS will not request any sensitive information online.
    • These are all scams, and they are persistent. Don’t fall for them.
  • Change your passwords periodically, do not reuse passwords, and don’t share them with anyone.

How to Spot an IRS Scam

The IRS regularly warns the public about telephone scams and provides tell-tale warning signs to tip you off if you get such a call. These callers claim to be with the IRS. Scammers usually demand you send money to pay your taxes immediately. Some may try to con you by saying that you’re due a refund. The refund is a fake lure so you’ll give them your banking or other private financial information.

These con artists can sound convincing when they call. They may even know quote a bit about you. The are able to alter the caller ID so it looks like the IRS is calling. They use fake names and bogus IRS badge numbers. If you don’t answer, they often leave an “urgent” callback requests.

The IRS respects taxpayer rights when working out payment of your taxes. So, it’s pretty easy to tell when a supposed IRS caller is bogus. Any one of these things is a tell-tale sign of a scam. The IRS does not: [Read more…]

Set up your own ssa.gov “my Social Security” account!

Setting up a my Social Security account is quick, easy and secure; plus it’s a great way to do business with the Social Security Administration. You can use this account to do many things, including:

  • Request a new social security card
  • Get a replacement SSA-1099 or SSA-1042S
  • Replace your Medicare Card
  • Change your address or phone number
  • Check your earnings and get your benefit estimates
  • Receive a benefit verification letter

By using these services, you can avoid a trip to your local social security office and waiting in line. There is no fee to create a my Social Security account, but you must have an email address. [Read more…]

Where’s My Amended Return? (Tracking the 1040X)

You can now track the status of your 1040X (Amended Tax Return) for up to 4 tax years! Use the IRS’ Where’s My Amended Return? tool or call toll-free 1-866-464-2050 to check the status of your amended return.

Amended returns you cannot check using this system…

  • Form 843 claims
  • Injured Spouse claims
  • Business amended returns
  • Carrybacks (applications and claims)
  • Amended returns with foreign addresses
  • Form 1040 marked as an amended or corrected returns
  • Amended returns routed/received outside of the processing operations in a specialized function

Your amended return is usually processed within 16 weeks from the date the IRS received it. It can take up to 3 weeks from the mailing date to show up in their system.

Gathering Health Coverage Documents to File With Your Taxes

The health care law has brought some changes to the 2015 federal income tax return that you’ll file this year. This is the first time that you may receive multiple information forms needed to complete your tax return.

  • Form 1095-A, Health Insurance Marketplace Statement: If you enrolled in coverage through the Marketplace, you’ll receive this form showing coverage details, such as the effective date, amount of the premium, and the advance payments of the premium tax credit or subsidy.
  • Form 1095-B, Health Coverage: Health insurance providers will send this form to you with information about who was covered and when. I’ll use the information on this form to determine whether you and your family members had health coverage that satisfies the individual shared responsibility provision of the Affordable Care Act.
  • Form 1095-C, Employer-Provided Health Insurance Offer and Coverage: Certain employers send this form to certain employees, with information about what coverage the employer offered. Employers that offer health coverage referred to as “self-insured coverage” send this form to individuals it covers, with information about who was covered and when.

I’ll use Form 1095-C to help determine your eligibility for the premium tax credit. In addition, I’ll use Form 1095-C for information on whether you or any family members enrolled in certain kinds of coverage offered by your employer.


Important Tax Dates

  • First quarter individual estimated tax payments are due April 18.
  • The deadline for filing Form 1040 or an extension and paying any tax due is April 18.

Social Security Retirement Age

Traditionally, the full retirement benefit age was 65. While early retirement was available at 62 (80% of full benefit amount). Currently, the full benefit age is 66 for people born in 1943-1954, and will gradually rise to 67 for those born in 1960 or later.

Early retirement benefits will continue to be available at age 62, but will be reduced more. When the full-benefit age reaches 67, benefits taken at age 62 will be reduced to 70% of the full benefit and Social Security Retirement Benefits first taken at age 65 will be reduced to 86.7% of the full benefit.

IRS Raises Threshold for Tangible Property Expensing

The IRS has simplified record-keeping/paperwork requirements for small businesses by raising the threshold for deducting certain capital items from $500 to $2,500. This change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as capital items.

The new threshold takes effect starting with the 2016 tax year. As a result, small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions. The new $2,500 threshold applies to any such item substantiated by an invoice. In addition, the IRS will provide audit protection to eligible businesses by not challenging use of the new threshold in tax years prior to 2016.

For taxpayers with an applicable financial statement, the small-dollar threshold is still $5,000.

New Bill Modifies Tax Code to Allow Passport Revocation

The IRS may be able revoke, deny or limit the use of your passport if they consider you as having a seriously delinquent tax debt of $50,000 or more.

Think of it like a federal parking ticket… failure to pay might result in suspension, requiring you to pay the debt for reinstatement/renewal.

Unlike bills which have yet to pass Congress, this one is about to become law as part of H.R.22 (Page 418; Section 32101), which has already passed the House and Senate. If it passes Congress (as expected), it will add section 7345 “Revocation or Denial of Passport in Case of Certain Tax Delinquencies” to the tax code.