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Tax Planning and Advocacy

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.

04/15/2016

Filing For a Tax Extension to Meet Deadline Time

Paying-taxesAlthough taxpayers have an extra weekend to prepare and file individual income tax returns due to the Friday April 15th federal holiday, the Monday April 18th deadline arrives with the same rules.  You must file your 2015 individual income tax return by the deadline or face penalties as well as additional penalties and interest charges on any unpaid taxes owed.

Even if you’re filing an extension allowing up to six months more time to complete and file your final return, you are still required to pay the estimated taxes you owe by the April 18th deadline.

Filing an Extension

At this point, there are only a few more days to complete your tax return on or before the deadline.  If you have a complicated return and have not yet submitted tax information to your tax preparation professional, requesting an extension of time to file may be your best option.

Form 4868 is the application you need for an automatic extension of time to file your federal individual income taxes.  The IRS will give you up to October 17, 2016 to file your 2015 individual income tax return before new late filing penalties will be assessed. You may file it any time before the extension expires.  Qualifying taxpayers who are out of the country are allowed two extra months to file and pay taxes owed without facing a penalty.  Those taxpayers include citizens who are in the military serving outside the country or live and/or work outside the United States and Puerto Rico. (Read more about military service tax benefits by clicking here.)

If you request an extension, you will still owe interest on any tax that was not paid by the regular due date, even if you qualify for the two-month extension to file your return. (Find out more about the penalties you may face by clicking here to read The Price of Missed Tax Deadlines.)

One way to escape having to file the extension request tax form is to pay the taxes you owe through an IRS venue such as Direct Pay, EFTPS or using your own credit card on irs.gov.  When you pay all that you owe online by the deadline through these venues you will receive a confirmation number for your records and do not have to file the Form 4868.  However, you will need to file your tax return as soon as you can.  On that return you will be asked to share your confirmation of paying your taxes by the deadline.  You still face a late filing penalty, but will not have to pay penalty and interest on the taxes owed. (For information about ways to pay the tax you owe, click here to read Tax Payment Options to Meet Deadline Date.)

Businesses may also apply for an extension of time to file tax returns under certain circumstances, such as being in the middle of declaring bankruptcy. Form 7004 provides a tool to request a 5-month or 6-month extension of time without paying a late filing penalty. Form 1138 allows certain corporations an extension of time to file if the entity is expecting a net operating loss carryback that cannot be calculated by the designated tax deadline date.

If you have any questions about filing an extension or meeting your tax deadline obligation, please contact us at McRuer CPAs for more information.

04/08/2016

Tax Payment Options to Meet Deadline Date

The IRS says more than 70 percent of taxpayers will receive tax refunds this year due to tax credits and having too much of their income withheld.  Last year’s average tax refund was $2,797 and it’s expected to be close to the same average for this year’s tax season.

Meanwhile, for the rest of taxpayers who owe taxes there are new and faster ways to pay.  The IRS offers several online or direct-call opportunities to pay taxes even without filing on time. 

Paying-moneyThe Direct Pay option allows individuals to pay their outstanding taxes or estimated taxes directly from a checking or savings account.  A taxpayer receives an immediate confirmation of payment if making an instant payment or can schedule a payment to be made at a later time or at future intervals.  The IRS system does not store the payment information after the transaction to avoid online hackers.  See a previous ReSource article Another Cyberattack on Taxpayer Information for more information about tax-related identity theft occurring through IRS systems.

For the first time there’s a new cash payment option for taxpayers in partnership with two online payment processing companies including OfficialPayments.com and PayNearMe.  Individuals may now use up to $1,000 cash per day to pay outstanding taxes if they do not have or do not want to use a bank account or credit card.  Payments can be made at more than 7,000 participating 7-Eleven convenience stores across the country.

The IRS still promotes that the easiest way to pay individual and business taxes is through the Department of Treasury’s Electronic Federal Tax Payment System or EFTPS.  A relatively new feature to this online registration payment method is the EFTPS Voice Response System.  Both services are offered for free with no extra fees charged for processing and scheduling regular payments.

Through EFTPS a taxpayer can use the internet, phone or mobile device to make, schedule and review tax payments any time of day.  Businesses and individuals can schedule payments up to a year in advance. Payments can be changed or cancelled up to two days before the scheduled transaction date. This method provides a way to pay all types of federal taxes from individual to business federal income taxes, employment taxes, estimated taxes and excise taxes.

Should a taxpayer prefer to use a credit or debit card to pay taxes, the IRS accepts payments from Visa, MasterCard, American Express and other card vendors.  The taxpayer must submit the payment information through IRS-approved secure credit card processing companies.  Each processing company charges a fee for the transaction.  The system is not designed to accept high balance tax payments nor federal tax deposits. Generally, the payments are limited to 2 per year for individuals and 2 per quarter for estimated tax payments.  The providers are Pay1040.com, PayUSATax.com and OfficialPayments. You can review the the IRS-approved options by clicking here.

We’ve explained a lot about federal income taxes, but don’t forget that you also have state and local tax obligations and deadlines.  Each state, county and municipality has different ways of accepting tax filings and payments.  Most have online payment programs in place.  Check with your state and local tax collector’s office online or by phone if you have questions about how, when and where to file your tax return and make tax payments as needed.

If you continually receive tax refunds, it may be a sign that you’re having too much withheld.  The money could be put to better use than loaning it to the government for free.  On the other hand, if you owe taxes every year that you did not expect, you may benefit from strategic tax planning that could lessen your tax burden or provide a more consistent tax payment structure that could ease tax deadline pressures. 

At McRuer CPAs it is our goal to make certain you pay only the taxes you owe. Contact us to set up a tax review session with one of our tax preparation experts.

04/04/2016

Tax Freedom Day Federal and State

The Tax Foundation has released its summary on Tax Freedom Day. It reveals that April 24th is the day this year that marks theoretically how long all Americans must work to earn enough income to pay the nation’s total tax bill.

A Wikipedia entry describes how Tax Freedom Day is calculated; “Every dollar that is officially considered income by the government is counted, and every payment to the government that is officially considered a tax is counted.” The specific date is determined by adding up all federal, state, and local taxes and then dividing that number by the nation’s income.

The Tax Foundation summary reports Americans will pay $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes. That’s a total tax bill of nearly $5 trillion adding up to 31% of the nation’s income. The reports says, "Americans will collectively spend more on taxes in 2016 than they will on food, clothing, and housing combined.”

This year’s April 24th Tax Freedom Day is 114 days into the year (excluding Leap Day). It is one day earlier than last year, due to slightly lower federal tax collections.

If you add annual federal borrowing into the mix, that is, future taxes owed, Tax Freedom Day would occur 16 days later on May 10.

FreedomStates have different State Tax Freedom Days because they each have different tax policies. The taxation and income variances translate into higher-income and higher-tax states celebrating the date later while lower-income and lower-tax states hit the mark sooner. For example, Mississippi has the lowest average tax burden and the tax freedom day for its residents is April 5th this year. Connecticut and New Jersey’s tax freedom days are much later on May 21 and May 12, respectively.

McRuer CPAs clients in the central Midwest see the following State Tax Freedom Days: April 12 for Missouri, April 14 for Iowa and Nebraska, April 13 for Arkansas, and April 19 for Kansas.

To find out more about Tax Freedom Day click here to read the Tax Foundation’s Summary Report.

03/07/2016

Money Fights and Millennials

A new survey of Millennial couples says choices about finances are among the top reasons they argue. There are 80 million Millennials in the U.S. alone, and they are expected to be spending up to $200 billion annually by 2017. This is the reason business, political and social experts are keeping a close eye on their habits and lifestyle choices.

Millennials are the generation generally born in the mid 1980s and up to the early 2000s.  In a joint effort, the American Institute of CPAs (AICPA) and the Ad Council surveyed couples who were between 25 to 34 years of age, employed, and married or living with a partner.  The results revealed 88% say financial decisions cause tension. Of that number, 31% say they argue about money weekly, and 20% say they argue about finances daily.

Couple fight over moneyExperts define Millennials as racially diverse, sociable (especially active on social networks), community-minded, health conscious and more liberal politically. They are apt to spend money on higher-priced goods if the products or services are connected to a “good cause” or a “healthy standard.” The problem, the survey shows, is that while Millennials seem to enjoy discussing and supporting important issues with their dollars, they fail to share their feelings and habits about money with the person they are closest to and who would be the most affected. When asked, less than 50% said they had discussed finances in detail with their loved one before marriage.

Many Millennials today enter into long-term relationships already burdened with high monthly expenses connected to credit card bills and higher education loans. Even though the survey results showed nearly half of the couples paid an equal share of household expenses, the couples said their partner had different financial habits and debt issues that made saving difficult.

The National CPA Financial Literacy Commission warns Millennials that greater spending power comes with a greater responsibility to understand a potential partner’s financial values and beliefs. A news release emphasizes, “We encourage couples to have a serious conversation about their financial hopes and dreams and the steps they need to take to get there.”

The AICPA features a “Feed the Pig” website that provides tips for Millennial couples to help them think beyond the honeymoon phase to daily money matters. If you are thinking about getting married or want to confirm financial choices to build a better financial future as a couple, contact us at McRuer CPAs.

01/20/2016

IRS Releases ID Theft Videos

ENews 2016 pic tax theif graphicA series of new videos titled “Taxes. Security. Together.” is being released on YouTube to provide more information about how to protect your identity online. The information includes tips for properly handling the online exchange of tax and financial data.

The videos are a joint effort between the IRS, state revenue departments and tax preparation professionals. The information campaign follows last year’s “Security Summit” where experts gathered to exchange ideas and tactics to fight online tax-related identity theft and tax refund fraud.

IRS Commissioner John Koskinen says, “We are jointly implementing major new procedures to protect taxpayers on our end, but people can help by taking some precautionary steps themselves to help us work to prevent identity theft.”

Many new IRS identity-theft protection steps may be invisible to taxpayers, but you may notice updates for the 2016 tax season that include new password standards for tax software admissions, faster information sharing about tax fraud and tax-related identity theft schemes, and updated verification standards.

The number one tip to prevent your identity from being stolen in a tax-related fraud scheme is to remember the IRS NEVER contacts you by email or telephone. The IRS communicates by letter through the US Postal Service. The department already knows your social security number and an authentic letter will not request you to submit that information.

To review the six new videos released by the IRS, click here.

To read more about online tax-related identity theft, click here.

If you need more information or feel you may have been a victim of tax-related identity theft, contact one of our tax planning and preparation experts at McRuer CPAs.

01/18/2016

Deductible Per-Mile Auto Rates Decrease

The standard mileage rates used to calculate allowable auto expense tax deductions have decreased for the first time in six years, reflecting the lower price of gasoline. The new rates apply to federal and state individual income tax calculations for 2016.

The new 2016 rates have dropped from 57.5 to 54 cents per mile for business purposes and from 23 to 19 cents per mile for miles driven for medical or moving purposes. The deductible rate for miles driven in service of charitable organizations remains at 14 cents per mile.

ENews pic auto mileage 4The ability to deduct a qualifying portion of automobile operating costs for business, charitable and medical or moving purposes has been helping individual taxpayers, especially the self-employed, for nearly two decades. The new rate for the 2016 tax year is the first time in six years that the deductible rate per mile has been reduced.

Since 1997, when the current allowable standard mileage deduction methodology was enacted, the rate allowed per mile has been increased 17 times and decreased five times. The allowable deduction rate per mile was at its lowest in 1999 at 31 cents and at its highest rate in the second half of 2008, providing for a deduction of 58.5 cents per mile for the business use of a personal vehicle.

If you have any questions or need more information, please don't hesitate to contact us at McRuer CPAs.

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.

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.

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