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03/09/2016

State-Managed Retirement Savings Accounts Now in 27 States

Retirement jar 1Several states are working on plans to help workers save for retirement. The Bureau of Labor Statistics shows that only about half of full-time workers employed by small businesses or organizations have access to an employer-based retirement plan. By comparison, the numbers show 85 percent of Americans who work for employers with 100 or more employees do have access to an employer-provided retirement plan or benefits program.

To help close the gap, some states are providing access for eligible workers to state-managed individual retirement accounts funded by automatic deductions from the worker’s paychecks.  For example, in 2017 Illinois will launch the Secure Choice Retirement Savings Program, which gives workers a retirement plan option. Full-time employees working for qualified businesses (who do not already provide retirement benefits) will be automatically enrolled into a direct deduction retirement savings plan with a minimum three percent deduction each paycheck.  The employee can choose to have more withheld or to opt out of the program entirely. The money is deposited into a Roth IRA.

The Pension Rights Center in Washington, DC has been monitoring the development of state-administered retirement plans for private-sector workers. It shows that currently 27 states have already approved or are debating proposals to launch state-based retirement plans including: Arizona, California, Colorado, Connecticut, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin.

Last September, the Government Accountability Office (GAO) published a report detailing how “half of private sector workers, especially those who are low-income or employed by small firms, lack coverage from a workplace retirement savings program primarily because they do not have access.” The GAO is recommending ways that the federal government can make it easier for states to manage such plans, while not placing a financial or administrative burden on small business.

01/25/2016

Tips to Keep Tax Records Safe

Imagine a burglar breaks into your home while you’re at work. The thief doesn’t steal jewelry, your TV or your favorite collectible. Instead, the thief heads directly to the home office files and steals your tax documents and bills where you’ve organized your records alphabetically to make them easier to find. The thief checks out your basement, closet and upstairs attic for boxes that look like they contain financial records. The thief walks out with paper. Tax_related_identity_theft

All in all, the paper value of the loss is negligible, but the thief has stolen all of your and your family members’ personal information and private financial data. The end result is that you and your loved ones could suffer hundreds of thousands of dollars or more in identity-theft related damages that may follow you the rest of your lives. It could also affect your taxes.

Tax documents in particular contain your and your dependent’s tax and personal information including receipts, old W-2 forms and bank account information. Experts point out that all documents containing your financial, health and tax information, especially records with your Social Security number on them, should be kept securely.

Most of us are being more diligent about using passwords and keeping digital connections and information about our personal data secure online. However, many taxpayers may have forgotten about the old paper copies that remain unprotected and vulnerable. Almost daily the IRS uncovers new scams using stolen identities. These scammers file fake tax returns under legitimate taxpayer Social Security numbers seeking refunds. The stolen IDs come from online and paper copy sources.

The issue is that taxpayers are supposed to keep records but doing so may provide an opportunity for someone else to take advantage. Regulations mandate that we keep a record of our tax returns and their supporting documents (receipts, statements, etc.) for a minimum of three years to a maximum of seven years. Additionally, we are to keep records related to a property we own for three to seven years after disposing of it.

To keep things safe, if you keep paper tax records, make certain they are stored in a locked and secure area such as a locked desk drawer, locked file or safe. Consider scanning your records instead and saving them electronically in encrypted files, both on your computer and your hard drive back-up. This also applies to all financial and health records that contain your personal and account information.

Converting paper files to digital files takes time and may require a scanner and a small investment in software to accept scanned documents (though many printers today serve that function). Remember that you’ll need encryption software. Make certain you keep your passwords in a secure place as well. You may also request electronic versions of your tax documents from your tax preparer, who should already be submitting your records in an electronic version to the IRS.

Dispose of paper tax records by shredding them first. If you are disposing of an old computer or any other product with a hard drive, remember that just “deleting” a file does not erase it completely from the computer. Electronic products that can hold data should be “wiped” to ensure all data is wiped out. This will require specialized disk utility software. Your computer, your mobile phones and tablets, most printers, copiers and all other electronic devices that can save files should be wiped before disposal.

To keep your computer files secure from an online thief, experts recommend you use reputable security software that updates automatically with essential tools including a firewall, virus and malware protection and file encryption options for sensitive data. Use strong passwords, protect them and back up your files regularly.

An IRS publication sums it up this way, “Treat your personal information like cash, don’t leave it lying around.”

01/15/2016

Tax Extenders & The Deficit Dilemma

Though Congress has received some applause for reviving a set of more than 50 tax breaks, called “tax extenders,” there is as much dismay-driven head shaking over the fact that the bipartisan agreement and the now signed budget bill dig the federal deficit hole even deeper.

The new tax law, entitled the Protecting Americans from Tax Hikes (PATH) Act of 2015, and the newly signed funding bill provide $1.1 trillion to cover spending for most government agencies to the end of fiscal year 2016, perhaps coincidentally past the upcoming presidential election. The defense sector, NASA, the Food and Drug Administration and the National Institutes of Health received a bit of a boost with most other agency funding remaining flat. ENews 2016 pic tax-credit3

IRS funding restrictions remain, so it’s expected that taxpayers will continue experiencing communication and customer service problems and an increase in computer-generated correspondence audits throughout 2016 and 2017. The new National Taxpayer Advocate Annual Report to Congress blasts the IRS for planning to “substantially reduce telephone and face-to-face interaction with taxpayers,” turning that job over to tax return preparers and tax software companies.

Meanwhile, the good news for taxpayers is that the PATH Act makes permanent several charitable tax provisions, indicating that lawmakers support using tax incentives to encourage charitable giving. For example, those 70 ½ or older may contribute up to $100,000 from an IRA directly to a charity with the contribution qualifying for their required minimum distribution (also known as Qualified Charitable Distribution (QCD) rules).

Other permanently renewed tax provisions include the American Opportunity Tax Credit for college expenses and the deduction for state and local sales taxes. The schoolteacher expense deduction has been enhanced and made permanent, as has the child tax credit.

The mortgage insurance premiums and qualified residence interest deductions have been extended for another year. Taxpayers who suffered losses from selling their home for less than the outstanding mortgage will also be able to avoid the tax consequences from debt cancellation under the Mortgage Debt Relief Act for another year.

Companies that utilize bonus depreciation like those involved in the telecommunications industry or who invest in capital-intensive projects will continue enjoying this helpful tax provision for a few more years. The tax law also makes permanent the research and development tax credit, which encourages important business R&D like that in the pharmaceutical and defense sectors.

The solar investment tax credit (ITC) and the wind production tax credit (PTC) are being phased out but will remain active through 2019 and 2021 respectively. The energy industry overall has received both tax incentives and funding resources, adding a boost of confidence to alternative energy producers.

Tax increases levied on individuals and businesses to pay for the Affordable Care Act (Obamacare) continue to be unpopular, and some were not enacted. Now it’s possible the two most controversial taxes may be repealed. These are the proposed tax on medical devices and the 40% excise “Cadillac” taxes on higher-priced employer-sponsored health plans that compete with government-sponsored plans.

The 2015 year-end budget battle, which starts our new tax year without delays, was a fistfight compared to the combative, destructive delay-causing 2014 debate. Yet, even as lawmakers are cooling to budget debates, the looming budget deficit has not disappeared and continues to grow. Our 2016 budget will add to the deficit, rather than reduce it. The Congressional Budget Office reports that overall US Treasury debt has grown to 74% of GDP that “could have serious negative consequences for the nation, including restraining economic growth in the long term ... and eventually increasing the risk of financial crisis.”

Overall, the bipartisan tax bill was passed with the understanding that Congress is committed to comprehensive tax reform that will simplify the tax code, eliminate temporary provisions and lower tax rates by broadening the tax base. Lawmakers who supported the PATH Act stated in a news release, “Americans deserve a simpler, fairer and flatter tax code that’s built for growth, and this bill will help make that possible.” The 2016 election year will likely determine how far that ship will sail.

If you have any questions about how the current tax law affects your individual and/or business tax obligation, please contact us now at McRuer CPAs for a tax planning session.

01/14/2016

IRS Mistake On New PIN Letters About Identity Theft

Pic identity-theft11_11576849The IRS has issued a statement admitting it made a mistake regarding a recent letter mailed to millions of taxpayers.  The letter has to do with requesting taxpayers who participate in the IRS' income tax electronic filing and information exchange system online.  The letters are notifying taxpayers that they have been assigned a new PIN number as part of the implementation of the new 2016 IRS identity theft prevention program.  The problem is the letter states the PIN applies to the tax year 2014 when it should have said the PIN applies to the 2015 tax year.  

Here is part of the admission of error from the IRS:

"The IRS IP PIN is a 6-digit number assigned to eligible taxpayers to help prevent the misuse of their Social Security number on fraudulent federal income tax returns. The IP PIN helps us verify a taxpayer’s identity and accept their electronic or paper tax return.

Due to an error, taxpayers are receiving Identity Protection PIN letters with an incorrect year listed. Taxpayers and tax professionals should be advised the IP PIN listed on the CP01A Notice dated January 4, 2016 is valid for use on all individual tax returns filed in 2016.

The notice incorrectly indicates the IP PIN issued is to be used for filing the 2014 tax return when the number is actually to be used for the 2015 tax return.  The IRS emphasizes the IP PIN listed on the CP 01A notice is valid for the 2015 returns. Taxpayers and their tax professionals should use this PIN number for 2015 tax returns, which the IRS will begin accepting from taxpayers starting Jan. 19, 2016.

The IRS apologizes for the confusion and any inconvenience."

For more information, click here for a link to the entire news release.

If you have any questions, please don't hesitate to contact one of our tax experts at McRuer CPAs.

12/18/2015

2015 Tax Extenders Summary

After months of uncertainty and speculation, it appears Congress has finally sufficiently collaborated to propose the “Tax Extenders” legislation in which a large number of expired tax provisions will be extended, some permanently.  Some tax credits that would be made permanent include the Child Tax Credit, the American Opportunity Tax Credit and the Earned Income Tax Credit

Of particular interest, it appears Section 179 will be permanently fixed at $500,000 of qualified assets for years in which taxpayers place in service up to $2,000,000 of assets.  For amounts above $2,000,000, the Section 179 deduction is reduced dollar for dollar until $2,500,000, at which time no asset additions are eligible.  Bonus depreciation is temporarily extended at 50% for 2015, 2016 and 2017, then stepped down to 40% in 2018 and 30% in 2019, after which time it is scheduled to be completely phased out.

To find out more information about the specifics of the legislation, here are some online resources:

If you have any questions about how these tax extenders may affect you or your business bottom line, please contact us at McRuer CPAs by calling 816.741.7882 or click here to connect with us online.

12/15/2015

Standard Mileage Rates Go Down in 2016

Standard mileage rateThe IRS has released the standard mileage rate allowances for the 2016 tax year. The deductible amounts will be less per mile than in 2015. 

The business mileage rate decreased 3.5 cents per mile and the medical, and moving expense rates decrease 4 cents per mile from the 2015 rates.

Click here to read the complete IRS release on the 2016 rates.

If you need more information or have a question, contact us at McRuer CPAs.

03/02/2015

Defining Taxable Income in Today’s Marketplace

It’s no secret that most income is taxable and must be reported on your federal income tax return.  However, did you know that even your state income tax refund may be taxable as income?  At the peak of individual income tax preparation season, let’s review what income is taxable and what is not to help you file an accurate tax return.

Accountant1Most taxpayers realize taxable income includes money they earn, like wages, tips, business income, interest and dividends.  But taxes may also be due on various other payments taxpayers receive.  Among the most commonly overlooked sources of taxable income include bartering, tax refunds and scholarships.

Bartering income: In today’s online marketplace the popularity of bartering is booming. Bartering is an exchange of property and services.  In fact, it's so popular that the primary business of some businesses is facilitating and documenting bartering between businessess.  As far as income tax is concerned, the fair market value of property or services made through bartering is taxable as income whether or not that bartering occurred online.

State income tax refund: Many taxpayers don’t realize that even a state or local income tax refund may be taxable depending upon whether you itemized your deductions.  If you did not itemize your deductions on your federal tax return for the same year to which your state or local tax refund applies, you do not have to report the refund as income.  But, if you received a state or local income tax refund this year relating to an itemized deduction you filed in an earlier year, you may have to include all or part of the refund as income on your tax return.  You may have received a Form 1099-G detailing this income.  Whether or not you owe taxes on it, you must report the refund on your federal tax return.

Scholarships:  Many taxpayers who receive scholarships helping them pay their education costs don’t realize that the scholarship payment is tax free only if it is used to pay for certain costs, like tuition and required books.  But, the portion of the scholarship money that is used for room and board is taxable income.

Other income may or may not be taxable depending upon a variety of circumstances.  Here is a review of some other common income sources that raise the most questions.

Life and Disability Insurance: Life insurance proceeds received upon the insured person’s death are usually not taxable.  However, if you redeem your own life insurance policy for its cash value, the amount you receive exceeding what you paid for the policy is taxable.  Disability Insurance payments may also be taxable in many instances.  Businesses often overlook that they must also report this income paid to employees.

Court awards: Court awards or settlements for personal injury or sickness are usually tax free, but punitive damages or compensation for lost wages are usually taxable.

IRAs: Money you take out of an IRA may or may not be taxable depending upon the kind of IRA.  Money taken out of a traditional IRA is generally taxable, but money withdrawn from a Roth IRA is usually tax-free.

Some income is only partially taxable or is not subject to any income tax.  For example, child support payments, gifts, inheritances, and welfare benefits are usually tax-free.  Unemployment benefits are taxable income.  Social security benefits below certain income levels are usually tax-free.  However, once the taxpayer’s income exceeds a certain level, taxes are due on the benefit exceeding the income limits.

Today, the tendrils of taxation twist through and attach to a wide range of income sources.  If you need more information about how taxes may affect income you have received, please contact McRuer CPAs for more information.

02/27/2015

Have a Complicated Tax Return? Here's What to Do

Is preparing your own income tax return becoming more complicated every year? How do you know when it's time to hire a professional?

Taxpayer with stack of papersConsider these questions as you determine whether you should turn to an accountant to help you file your tax return:  

Are you confident you know enough about new laws that apply to your income tax filing?  

Have you had a major life event that will affect how you file your return such as; the change or loss of a job, buying or selling a home, addition or loss of a dependent, education expenses, borrowing money from an IRA, buying or selling a business, experiencing a major illness, or going through a divorce?

Are you certain you know what forms to use? Are you confident you are calculating deductions and credits properly?  Are you stressing out over what you're finding out about your income and what you don't know about your income taxes?  Have you received a letter from the IRS about an income tax issue?

If any of the above questions apply to you, it's time to talk to an accountant who is experienced and qualified to handle even the most complicated tax return.

What to Do About Complicated Income Taxes

When you realize that you can no longer prepare your income taxes on your own, don't panic. Instead, do your best to get organized to present your income tax "story" to a professional.  This means get your documents in order.  Collect any documents that report income you have earned in the past year as well as any proof of any federal, state and local taxes you may have already paid.

Gather up receipts and statements that will document your expenses that may qualify as tax deductions or result in a tax credit.  Categorize the documents by subject and date to help the tax professional you select better understand your financial picture and how it applies to your tax obligation.

Find copies of your tax returns from the past two years to show your chosen tax professional so that a thorough review of your tax filing history can be made.  There may be something that was missed that could save you tax dollars or cost you in the long-run.  The sooner the issues are identifed, the better.

Note: Complicated tax issues and questions do not go away if you simply ignore them.  Bring any tax-related question or issue you have with you to your appointment with a tax preparation expert. They will help you understand the significance and meaning of IRS letters or other documents. Sometimes taxpayers ignore important notices because they are hard to understand or feel that the information is wrong or doesn't apply to them, but that can be a costly mistake. 

Graphic with ad infoWith tax laws and regulations changing on a regular basis, it is essential that you use a tax professional who fully understands these changes and how to apply them to your unique situation.

Without expert tax preparation assistance, many taxpayers who fill out their own returns make unnecessary errors either through miscalculation of numbers or through not knowing the proper forms to file.  All of this can cost plenty in fees, penalties and interest payments.  So, the cost of making mistakes and omissions should be carefully considered against the cost of bringing a professional on board to help you with tax preparation.

When you decide that it's time you find a tax expert, we hope you'll choose McRuer CPAs.  No matter the tax problem, we can help you make the best choices efficiently and effectively while helping you put together a long-term plan to make certain you pay no more than the taxes you owe. That will give you peace of mind.

Contact us online by clicking here or all us at 816.741.7882.

02/24/2015

Forms 1099 - Delayed Delivery to Taxpayers

Many taxpayers who must report investment income from information they receive on Forms 1099 and Schedules K-1 are learning their investment companies and investment account custodians will be sending them these forms later than usual.

Important-notice-hi1A major investment company has issued an information update warning investors they may not
receive their final 2014 IRS Forms 1099 (B, DIV, INT, OID and MISC) until mid-March. 

Not long ago, these forms were due in taxpayers’ hands by January 31st, with fines for issuers who sent them late.  Now, investment advisors may send a “Pending 1099 Notice” as a temporary substitute to meet the IRS deadlines for sending Forms 1099.

These Pending 1099 Notices inform investors that more information may be coming, but do not provide investors the information necessary to file their returns. The notices instead provide a date when a final tax Form 1099 is supposed to be mailed.  This year, IRS regulations state Forms 1099 must be mailed no later than March 16, 2015 for the 2014 income tax year.

All of this means taxpayers who need information from Forms 1099 to properly complete their income tax return may face several weeks of delays.  Nevertheless, as our clients’ tax advisor, we are encouraging our clients to gather and send us their personal income tax information as soon as they can.

We will begin preparing their returns, then update their information to reflect information from Forms 1099 and other tax documents once they arrive.  This way we may sooner identify and inform clients about any remaining tax-saving opportunities, or notify them about any additional tax payments due.

This approach may reduce a client’s overall tax obligation, and will reduce exposure to late filing penalties and/or tax underpayment penalties associated with not meeting the April 15th tax filing deadline.

Should you have any questions about this issue or possible delays, please call us at 816.741.7882 or contact us online at McRuer CPAs.  

02/21/2015

How to Know When You Need a CPA

The DIY (Do It Yourself) industry is flourishing these days.  This trend also extends to accounting and income tax services.  The availability of affordable computing power, improved entry-level accounting and income tax software, and cloud-based applications and storage options are attractive because they may help you save money by doing it yourself.  Added to that is some very effective advertising claiming that at the push of a button your business accounting and income tax filings will be worry free.  However, be warned; our clients often turn to us when their experience with DIY solutions show the ease and efficiency of using these products has been oversold.

In today’s highly regulated environment, innocent omissions and mistakes from simply not knowing An-accountant-helping-clientshow transactions should be recorded, or how to properly comply with new federal, state or local tax
law, can be costly, and sometimes devastating.  Instead of spending time increasing sales, improving processes and growing their businesses, some business owners say they grow frustrated and waste time trying to learn to use and update the latest software as well as keep up with filing deadlines and regulations by themselves.  That’s when they call us.

Let’s consider how engaging professional help with your business accounting and finances can pay big benefits that will help your bottom line both short-term and long-term. 

For those business owners who have a solid accounting or bookkeeping background and a good understanding of business finances, with McRuer CPAs’ MyMcRuer/BackOffice service offering you may benefit by a combination of some DIY and some professional on-demand services.

MyMcRuer/BackOffice helps business owners control costs by personally managing their business’s books.  In addition, when a difficult issue or a question arises, they have access to a local experienced accounting professional who will view the issue real time to identify the problem and quickly provide a solution.  Then as the business grows and its operations need more of an owner's or manager’s time, a smooth transition can be made to full-time professional accountants and bookkeepers who already know the business.

If you intend to grow your business, the benefits of professional accounting services cannot be overestimated.  Is it time that you utilized a professional for your combined personal and business tax preparation?  When is it cost effective to hire an accounting firm’s experts to help with your business accounting and bookkeeping needs?

Consider the following as a mental checklist to help you find an answer to the question: 

How Do I Know When I Need a Professional Accountant or CPA?

You know you need a professional accountant or CPA when…

(circle the sentence numbers that apply to you and when finished add up the total number of sentences that describe your financial situation)

  1. You are considering investing significant time, money and passion into a business idea. Before you “take the leap” you want input about your business plan from an independent professional who will review the numbers and help you analyze your idea’s future growth potential.
  2. You are starting a new business and want to select the best business structure that fits the marketplace, your proficiency and your goals.  You have been told there are different types of business entities that may limit your personal liability for your business activities, but you don’t understand the tax consequences of this decision.
  3. Your income and deductions have changed and you no longer file a simple tax return, or you suspect you must make quarterly estimated tax payments.
  4. You need new or additional business financing, and your lender or insuror is requesting financial information that must be provided by a third party.
  5. You want to better understand your business’s financial information, and use it to improve profitability, inventory management, and cash flow.
  6. You need more information in order to prepare to sell your business.
  7. You are shutting down your business.
  8. You hire other people to help you, and you need information about employees versus independent contractors.
  9. You have become responsible for another person’s affairs, either during their life or after their passing.
  10. The IRS or another regulatory agency has contacted you about an upcoming audit or other collection actions.
  11. You wish to develop and act on a plan to provide for your financial future, including saving for retirement, your childrens’ education, and/or other obligations.
  12. You want to ensure you have the best estate plan in place by understanding the tax, financial and time-based consequences of that plan.
  13. You want to create a succession plan for passing your business on to the next person when you’re ready to retire or sell.
  14. You want to take responsibility for your business and personal financial affairs, and want a trusted advisor to help you succeed.
  15. You must prepare and file Forms W2 and 1099 annually.
  16. You need to understand your best choices on property purchase versus equipment leasing.

How many of the above statements apply to you?

These are just a few of the practical reasons that you need a professional accountant on your business’ financial team.  If you circled 3 to 5 of the above business and personal accounting points, it’s probably time you considered using an upgraded business accounting tool that provides a live accountant when you need one.  If you circled more than 5, it’s time you connect with a professional accountant long-term with comprehensive services and experience to ensure business success.

Accountant over shoulderConsider using a CPA (Certified Professional Accountant) that is experienced and trained specifically to be your business and personal financial planner, management consultant, management information specialist, business consultant and more. 

Yet, don’t forget to consider whether the professional you bring on board is someone you get along with personally.  Financial decisions are a reflection of the production and goals of real people like you who are working to make profits in order to enjoy the life you love.  It’s important to find an accountant who will work well with your business team and shares your concerns about accuracy, reliability, efficiency, and long-term effectiveness.

When you know you need an accountant, we’re here.

At McRuer CPAs, we know business “numbers” are personal and we make the extra effort to match the personalities of our professional accountants with you and your business team.  You may discover the latest online tools with the on-demand help of a CPA are the best choice for you and your business.  Maybe it's time to have a full-time accounting professional join your team?  How do you what to do?

Let’s find out what will work best for you.  Contact us for a strategic planning session by calling 816.741.7882 or contact us through our confidential online resource.  We’ll review your goals and help you make the best choice.

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