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02/13/2017

EITC Refunds Slow

Big-tax-refundChanges in tax law may cause a delay in receiving tax refunds for early tax filers.  New in 2017, the 2015 Protecting Americans from Tax Hikes (PATH) Act has moved up the Forms W-2 filing deadline for employers and small businesses to January 31st from the previous end-of-February deadline.  The new deadline also applies to certain Forms 1099.  The new January 31st deadline is designed to help the IRS spot errors in early returns filed by taxpayers.  Having the Forms W-2 and 1099 sooner makes it easier to verify legitimate tax returns and send out refunds.

However, the changes will mean that early tax filers who apply for certain tax credits should expect that their refunds will arrive later than in past years.  If you claim the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC), the law prevents the issuing of the refund(s) until February 15th.

The way the calendar dates occur this tax season, even if a qualifying taxpayer has a refund issued on the first available day, February 15th, the money may not arrive even through a direct deposit until the week of February 27th.  Financial institutions need a few days to process the deposits and many do not process payments on weekends or holidays.  The President’s Day holiday on February 20th will also delay processing.  If a taxpayer has requested their refund to be paid by check, the delay in receiving payment could be several days or weeks longer, even into March.

02/10/2017

W-2 Scam Targets Small Business

Question-yikA5pBiEThe IRS has issued a new tax-related identity-theft scam warning to small businesses and human resources professionals.  The email phishing scam uses a business owner’s, corporate officer’s or human resource professional’s name in what looks like company or even official tax agency emails. The emails request copies of employee Forms W-2 from company payroll, internal accounting or human resources departments.

This is the second time the email scam has been identified as attacking businesses nationwide. The IRS urges business owners, internal accountants and company payroll officials to double check any executive-level requests for lists of Forms W-2 or Social Security Numbers.

The W-2 scam first appeared in early 2016. The IRS reports that cybercriminals tricked payroll and human resource officials into disclosing employee names, SSNs and income information. The thieves then attempted to file fraudulent tax returns to create fraudulent income tax refunds in a tax-related identity theft scheme.

This phishing variation is known as a “spoofing” e-mail.  It will contain, for example, the actual company chief executive officer’s name.  In this variation, the “CEO” sends an email to a company payroll office or human resource employee requesting a list of employees and information including their SSNs.

Crime investigators say some of the wording used in actual scam emails included:

  • “Kindly send me the individual 2016 Forms W-2 (PDF) and earnings summaries of our company staff for a quick review.”
  • “Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary).”
  • “I want you to send me the list of Form W-2 copies of employees’ wage and tax statement for 2016.  I need them in PDF file type, and please send it as an attachment.  Kindly prepare the lists and email them to me asap.”

Working together in the Security Summit, the IRS, states and tax industry representatives have made progress fighting against tax-related identity theft.  However, cybercriminals continue developing more sophisticated tactics to impersonate taxpayers in their effort to steal even more data.

For more information about tax-related identity theft and other tax scams, click here to link to The Security Summit’s national taxpayer awareness campaign called “Taxes. Security. Together.

01/09/2017

2017 Mileage Rates for Business Use of a Vehicle

As reported by the Journal of Accountancy: The IRS has announced  the optional standard mileage rates for business use of a vehicle will drop slightly in 2017, the second consecutive annual decline. For business use of a car, van, pickup truck, or panel truck, the rate for 2017 will be 53.5 cents per mile, down from 54 cents per mile in 2016. Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile.

Driving for medical or moving purposes may be deducted at 17 cents per mile, which is two cents lower than for 2016. The rate for service to a charitable organization is unchanged, set by statute at 14 cents per mile (Sec. 170(i)).

The portion of the business standard mileage rate that is treated as depreciation will be 25 cents per mile for 2017, one cent higher than for 2016.

To compute the allowance under a fixed and variable rate (FAVR) plan, the maximum standard automobile cost is $27,900 for 2017 (down from $28,000 for 2016) for automobiles (not including trucks and vans) and $31,300 for trucks and vans (an increase of $300 from 2016). Under a FAVR plan, a standard amount is deemed substantiated for an employer’s reimbursement to employees for expenses they incur in driving their vehicle in performing services as an employee for the employer.

See more at: http://www.journalofaccountancy.com/news/2016/dec/irs-2017-mileage-rates-201615701.html#sthash.sxZ6OHvw.dpuf

01/06/2017

2017 Tax Rates (If Nothing Changes)

Income tax graphicPending any immediate changes under a new administration, tax officials say low inflation rates will ensure that current tax brackets and most other tax system features will change only slightly in 2017 with the exception of effects of health coverage mandates.

The standard deduction will rise $50 for individuals to $6,350 from $6,300.  The personal exemption increased $4,050 in 2016 and will remain the same in 2017. The standard deduction for married filing jointly rises $100 to $12,700.

The personal exemption for tax year 2017 remains at $4,050.  However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly).

But for those taxpayers who do not maintain the minimum essential health coverage in 2017, the penalty which is collected by the IRS will increase significantly. The charge for failing to have qualified health insurance coverage will be $695 or 2.5% of income for individuals and $2,085 or 2.5% of income for families.  The penalty was $325 for individuals and $975 for families in 2015. That was an increase from the penalty of $95 for individuals or $285 for families in 2014.

The 2017 top individual tax rate of 39.6% will apply to income above $470,000 for married couples, up
from $466,950.  The Affordable Care Act (ACA) or ‘Obamacare’ mandates that high-income taxpayers pay another 3.8% surtax on net investment income, so the top federal income tax rate for individuals is actually 43.4% and will remain at that level pending a possible ACA repeal.

Qualified dividends and long-term capital gains are also taxed an additional 15% or 20% depending upon income and are subject to another 3.8% net investment income tax.

Estates of decedents who die during 2017 have a basic exclusion amount of $5,490,000, up from a total of $5,450,000 for estates of decedents who died in 2016.

These rates are set to apply to 2017 taxes which will be filed in early 2018.

Call us at McRuer CPAs if you have any questions: 816.741.7882 or contact us online by clicking here.

01/03/2017

2016 Individual Income Tax Filing Season Launches January 23

Taxtime graphicThe tax season for processing 2016 federal income tax returns begins Monday, January 23, 2017.  The tax day deadline will be April 18th this season, to adapt to the Easter holiday weekend.

The IRS says it would start accepting electronic tax returns on January 23rd and it anticipates more than 153 million individual tax returns to be filed.  This, as Congress is expected to continue tight budget constraints on the agency under a new administration.  Taxpayer advocates warn taxpayers to expect delays in processing, more computer-driven automatic correspondence audits (letters that are sent by computers to taxpayers when a tax return issue raises a flag without a preliminary review by human eyes), and extremely long wait times should a taxpayer need to connect with the agency to ask a question or respond to a correspondence audit.

Taxpayers may also be affected by a new law that requires the IRS to hold tax refunds claiming the Earned Income Tax Credit and the Additional Child Tax Credit until February 15th.  The IRS says the delays are due to the additional time needed for these tax refunds to be released and processed through financial institutions.  Factoring in weekends and the President’s Day holiday, the IRS is warning many affected taxpayers may not have actual access to their tax refunds until the week of February 27th, if they have filed a completed tax return by the end of January.  

For more information on the status of a refund, a taxpayer may use the online resource called "Where's My Refund?".

11/30/2016

Trump's Take on Taxes

President-Elect Donald Trump’s tax plan promises to take a hatchet to the current tax code affecting individuals and businesses alike.  Experts and analysts have varied views about what his administration will do and how soon, but they agree that the Republican control of both the House and Senate will enable faster action and more radical moves.

Trump speakingComprehensive tax plans which would reduce tax rates for individuals and businesses while eliminating many deductions and tax breaks have been in the works, but politics prevented their introduction.  Because most of this legislation has already been written, pulling together the plans into a Trump-approved tax bill for debate could happen at lightning speed.

Considering ordinary income taxes only, the current tax code charges individuals complicated graduated tax rates from 10% to 39.6%.  Trump’s proposal includes only three individual income tax brackets: 12%, 25% and 33%.  Itemized deductions would be capped or no longer allowed and personal exemptions would be eliminated.

Under the Trump tax plan business taxes would be slashed and corporations would pay 15% instead of 35% on earnings.  A more simplified tax structure would eliminate most business deductions including interest on debt.  Depreciation of assets would also be calculated differently through a more limited and simplified tax code.

Trump plans to eliminate estate taxes which currently charge 40% tax on assets above $5.45 million.  His plan would still allow an income tax on the appreciation inherent in the assets for larger estates that would be paid when the assets are sold by the beneficiary.

America’s new President is set to be sworn in January 20th.  In the footsteps of two former Presidents, John F. Kennedy and Herbert Hoover, as billionaire real estate mogul Trump has opted to forego the annual Presidential salary of $400,000.  He is quickly putting together a team of lawmakers who will fulfill his campaign promises to slash taxes and repeal major provisions of the Affordable Care Act (see more below in “2017 Tax Rates (If Nothing Changes)”) among his first days in office.

This is a good time to review and understand your options. Contact us now to confirm your year-end tax planning session and we’ll help you determine the best tax strategy during changing times.

11/29/2016

Military Service and Taxes

Military-veteran 2Here's a quick update on tax issues affecting active duty military and veterans:

The IRS has updated its tax guide with information on the special tax benefits available to active duty military personnel and disabled veterans. Click here for more.

11/28/2016

2017 Tax ID Theft Guards in Place

Taxpayer id theftLaw enforcement officials designate identity theft as the fastest growing crime in the world.  New tax-related fraud prevention steps are set to kick in for the 2017 tax season. 

New or expanded tax-related identity theft features protecting taxpayers in 2017 include:

*37 new data elements that authenticate electronically transmitted individual tax returns

*32 new data elements that authenticate electronically transmitted business tax returns

*designation of what’s called “ultimate bank accounts” to ensure the refunds are deposited into a taxpayer’s real bank account

*the 16-digit Form W-2 Verification Code that will now be added to 50 millionW-2 forms to validate the information

*additional and more elaborate password requirements for software used by individuals and tax preparation experts that will both protect personal information and prevent multiple filings under the same Social Security number

More information resources will also be shared between federal, state and local tax authorities regarding identity-theft tax fraud. This is expected to not only help with early fraud detection, but also uncover trends that can more quickly uncover more complicated schemes that may affect a large number of taxpayers all at once.

Click here to find out more about the tax-related identity theft fraud prevention campaign called “Taxes. Security. Together.”

11/15/2016

Tax-Related ID Theft Drops

The IRS and its Security Summit partners say collective efforts to stop tax-related identity theft appear to be working.  New statistics show that the number of new people filing affidavits with the IRS claiming they have been victims of identity theft regarding their federal tax returns has dropped more than 50 percent compared to 2015.

Identity thieves typically file fake tax returns seeking refunds.  A taxpayer doesn’t know their personal information has been stolen until they file a tax return and are alerted that a refund was already issued.  So far in 2016, nearly 238,000 claims of tax-related identity theft have been filed compared to more than 512,000 in the same time period of 2015.  Overall, more than 74.5 million individual tax returns were filed in the 2015 tax year. 2016 totals are not yet available.

Identity theftThe IRS credits new systems checks with catching fraudulent returns before they are processed.  Through September of this year, the IRS stopped 787,000 confirmed identity theft returns, preventing more than $4 billion in losses from fake refunds.

More banks are also joining the tax fraud fight by using internet-related signals to stop suspect refunds from being auto-deposited, especially refunds with an unusually high dollar amounts.  Shared information between state and regional tax offices has improved fraud filters and alerts.  New hidden data elements on tax returns filed by professional preparers has also helped detect suspicious returns.

11/01/2016

New IRS Installment Payment Fees in 2017

The IRS is proposing a substantial increase in the user fee it charges taxpayers who seek to pay the taxes they owe through the agency’s installment agreement program.  But, as a means of balance, if the taxpayer chooses more online and automatic deduction options, the fee will be greatly reduced compared to 2016 rates.

Currently, it costs $120 to apply for the payment agreement which sets the taxpayer up to pay off the tax amount owed month-by-month.  The application fee can be lowered to $52 for a taxpayer who agrees to have the payment automatically deducted as direct debits (auto-debits) from their bank account.

Pvc-incremento-estados-unidos-gUnder proposed changes, the new application fee would be $225 or may be lowered to $107 if the taxpayer agrees to auto-debits.  Taxpayers who apply online, but pay by check or through the online EFTPS system would pay a $149 fee.  The fee would lower considerably to $31 if the taxpayer chooses an all-digital option by applying online and agreeing to auto-debits.

Taxpayers have the option of contacting the IRS online, in person, by phone or by mail to set up an installment agreement.  As the tax collection agency continues to update software and systems, it is finding new ways to utilize the internet to speed up the time it takes to file and process a return, collect tax payments and administer tax refunds.

Click here to find out more.

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