By: Sandra Block, Senior Editor
From Kiplinger’s Personal Finance, December 2017
The outlook for tax reform is still uncertain, but this much seems clear: Tax rates are unlikely to go up in 2018, and there’s a good chance that they’ll go down for most taxpayers. That makes some year-end tax strategies even more attractive this year than they’ve been in the past.
For example, many taxpayers make the bulk of their charitable contributions at the end of the year. But you may want to disburse some of next year’s generosity in 2017 because those deductions will be less valuable if you find yourself in a lower tax bracket next year. And even if rates remain flat, you’ll still get the benefit of taking a deduction sooner rather than later.
Don’t limit yourself to cash gifts. Many large charities accept donations of appreciated securities. If you’ve owned a stock or other security for more than a year, you can deduct its value on the day you make the donation. You won’t pay tax on the gain, and the charity won’t either. Another option is to donate appreciated securities to a donor-advised fund, which allows you to take the deduction on your 2017 tax return and distribute the funds later.
Don’t have enough deductions to itemize? If you’re 70½ or older, you can donate up to $100,000 from your IRA directly to charity. The contribution counts toward your required minimum distribution and isn’t included in your adjusted gross income. That could qualify you for tax breaks tied to your AGI and reduce or eliminate taxes on Social Security benefits.
Speed up deductions, defer income. If possible, paying your mortgage and state income taxes due in January by December 31 is another way to beef up your 2017 deductions. And there’s another reason you should pay your 2018 state income tax bill early: The deduction for state and local taxes—particularly valuable to people who live in high-tax states—is in jeopardy. Key Republican lawmakers would like to eliminate or reduce the deduction to offset the cost of lowering income tax rates. One caveat here: If you’re subject to the alternative minimum tax, you can’t deduct state and local taxes, so there’s no benefit to paying those bills early, says Tim Steffen, director of advanced planning for Baird’s private wealth management business.
One final incentive for beefing up your 2017 itemized deductions: If the proposal by Republican leaders to double the size of the standard deduction comes to fruition, this could be the last year that millions of taxpayers benefit from itemizing.
Parents of college students may want to pay tuition bills due in January before December 31 so they can take full advantage of the American Opportunity tax credit. The credit is worth up to 100% of the first $2,000 spent on qualifying expenses and 25% on the next $2,000, up to a maximum of $2,500 for each qualifying student. Married couples filing jointly with modified adjusted gross income of up to $160,000 can claim the full credit; those with MAGI of up to $180,000 can claim a partial amount.
Deferring income until next year is another smart strategy because the income may be taxed at a lower rate then. Self-employed taxpayers can send invoices to customers in late December to defer payments until next year. If you expect to receive a bonus, ask your employer to hold off on paying it until January. Keep in mind, though, that if your employer has already announced that it will pay bonuses in December, it’s taxable income for 2017, even if you wait until next year to cash the check.
Strategies for retirees. With a possible tax cut on the horizon, retirees who are 70½ or older should look at the most tax-efficient way to take their required minimum distributions from retirement accounts. If you turned 70½ this year, for example, you have the option of postponing your first RMD until April 1, 2018. That may make sense. If rates decline in 2018, you’ll pay lower taxes on the distribution, Steffen says. The downside to this strategy is that you’ll have to take two RMDs next year—one for 2017 and one for 2018—and pay taxes on both distributions in the same year.
If you’re older than 70½, you must take your RMD by December 31 to avoid a hefty 50% penalty on the amount you should have withdrawn. But if you’re thinking of taking more money out of your traditional IRA than you’re required to withdraw, postponing that extra withdrawal until January could save you money if your tax rate declines in 2018.
Tax moves for investors. Want to cash in some of your stock market gains in your taxable portfolio? If you’re in the 10% or 15% tax bracket, you can take advantage of the 0% capital gains rate to harvest those profits tax-free. In 2017, married couples filing jointly with taxable income of up to $75,900 are eligible for the 0% rate, and singles with taxable income of up to $37,950 can cash in tax-free. (Remember, taxable income is after subtracting deductions and exemptions.) Retirees who have been living off income from their cash reserves are good candidates for this maneuver because their income may be low enough to fall into the 10% or 15% bracket. Be mindful that the 0% capital gains rate applies only to the extent that your gains don’t push you into the 25% bracket; profit that falls into that bracket is taxed at 15%. Also, your state may still tax your profits, even if the feds give you a pass.
If you don’t qualify for the 0% rate but own stocks or mutual funds that have declined in value, consider selling before year-end. You can use the losses to offset gains from the sale of other investments or capital gain distributions from your mutual funds. If your losses exceed your gains (or you don’t have any gains), you can use your losses to offset up to $3,000 in ordinary income. Unused losses can be carried over to future years.
Another strategy for taxpayers who don’t qualify for the 0% capital gains rate is to give appreciated securities to someone who does qualify, such as an adult child or elderly parent. The recipient can sell the securities tax-free. In 2017, you can give up to $14,000 in cash or other assets per person to as many individuals as you would like without filing a gift tax return.
More ways to save
Contributing to a tax-favored account before year-end is another way to lower your federal or state taxes.
Retirement plans. Contributions to a 401(k), 403(b), 457 or federal Thrift Savings Plan won’t be included in your 2017 taxable income. You can contribute up to $18,000 in your workplace plan, or $24,000 if you’re 50 or older. If you want to boost contributions from your last paychecks of the year, visit your payroll office ASAP. You have until April 17, 2018, to contribute to a traditional or Roth IRA for 2017.
529 college-savings plans. You can’t deduct contributions to these state-sponsored plans on your federal tax return, but 34 states allow write-offs on state returns. For example, a married couple in New York—which has a maximum state income tax rate of 8.8%—can deduct up to $10,000 in contributions annually to the state’s 529 plan. Earnings on your savings are tax-free as long as the money is used for qualified college expenses.
ABLE accounts. These plans, created in 2014, allow parents and others to save for a disabled young person’s future needs, such as assisted living and special wheelchairs. Beneficiaries must have developed a qualifying disability before age 26. You can contribute up to $14,000 to an ABLE plan in 2017. As with 529 plans, there’s no federal tax deduction, but some states allow you to deduct part of your contribution. Michigan, for example, allows married couples to deduct up to $10,000 from their state taxes; singles can deduct up to $5,000. Twenty-seven states and the District of Columbia offer these programs.
How to write off disaster losses
If your home was damaged by a hurricane this year, there’s a good chance you’ll be able to write off losses that aren’t covered by your homeowners insurance on your 2017 return.
Ordinarily, you have to subtract $100 from your total loss and then subtract 10% of your adjusted gross income. But in late September, Congress approved legislation that waives the 10% AGI requirement for victims of Harvey, Irma and Maria. They’ll be allowed to deduct all of their unreimbursed losses after subtracting $500. The bill also allows hurricane victims who don’t itemize to claim the deduction.
Because the Federal Emergency Management Agency designated counties affected by the hurricanes as federally declared disaster areas, you may deduct the loss for 2016 or 2017. Choose the year that saves you the most money. If you decide to claim it for 2016, you’ll need to file an amended return and get a refund from the IRS.
By: The Kiplinger Editors | The Kiplinger Tax Letter
On November 04, 2016
It’s time to review your year-end tax plans. There are many opportunities to save taxes. And there are tax traps you’ll want to avoid. With two months left before 2016 comes to a close, this Letter focuses on actions that you can take between now and Dec. 31 to cut your tax bill.
Let’s start with individual tax planning. Look at the overall impact on 2016 and 2017. The end game is to cut your tax bill over both years.
Most will benefit by accelerating write-offs from 2017 into 2016 while deferring taxable income. But if you expect to be in a higher tax bracket next year, consider the opposite.
Filers who claim itemized deductions have flexibility in shifting write-offs.
State and local income taxes are one of the easiest write-offs to manipulate. Mailing your estimate due in Jan. by year-end lets you claim the deduction in 2016.
Interest. If you make the Jan. 2017 mortgage payment on your residence before the end of the year, you’re able to deduct the interest portion in 2016.
Contributions. You can accelerate donations planned for 2017 into 2016, but you must charge them or mail the checks by Dec. 31 to ensure a 2016 write-off.
Medicals. If your 2016 medical costs have topped the 10%-of-AGI threshold (7.5% for folks age 65 or older) or are close to it, think about getting elective procedures this year and paying for them by Dec. 31. Seniors should carefully consider this tax tip because, as we’ve told you before, beginning with 2017 tax returns due in 2018, the threshold for deducting medical costs jumps to 10% of AGI for people age 65 or up.
Some filers can work the standard deduction. If your 2016 itemizations won’t quite hit the standard deduction amount, you can delay taking some of them so you can itemize in 2017. If your itemizations are just over the standard deduction for this year, accelerate some others to 2016 and take the standard deduction in 2017.
There are some special situations that may affect your tax planning:
A quirk in the way Medicare Parts B and D premiums are figured is one.
Married couples with AGIs exceeding $170,000 and singles with over $85,000 of AGI pay higher premiums for coverage. Premiums for 2018 will be based on 2016 income. Consider whether tax moves you make now could push up or down premiums in 2018.
Watch out for the bite of the cutback in itemizations for upper-incomers.
The alternative minimum tax can throw a monkey wrench into your plans,too. The AMT is owed to the extent it exceeds your regular tax liability. It has two rates: 26% on the first $186,300 of alternative minimum taxable income, and then 28%.
Deductions for many items are not allowed for the AMT: Personal exemptions. The standard deduction. If you itemize, you must add back state and local taxes, some medicals if you are age 65 or older, and most of your miscellaneous write-offs.
Paying the Jan. 2017 state income tax estimate in 2016 won’t work for AMT.Ditto for a real estate tax bill due in early 2017. You get no tax benefit from interest on home equity loans unless you use the proceeds to buy, build or renovate a home.
Your investment portfolio provides plenty of tax saving opportunities. Knowing the tax rules inside and out will help you avoid making a blunder that costs you extra tax. Don’t let the tax impact alone dictate the moves you make with your investments. Your decisions should always make economic sense, too.
If you have capital loss carryforwards, search your portfolio for gains.That’s because your net gains…up to the carryover amount…won’t be taxed at all.
See if you can benefit from the 0% rate on long-term gains and dividends. If your taxable income other than gains or dividends is in the 10% or 15% tax bracket, then dividends and profits on the sales of assets owned more than a year are tax-free until they push you into the 25% bracket. That bracket starts at $37,651 for singles and $75,301 for married couples. But be careful. Zero-percent gains and dividends are included in AGI, which can cause more of your Social Security benefits to be taxable and can squeeze some itemized deductions such as medical expenses. Also, your state income tax bill may rise, as most states tax gains as ordinary income.
Keep the 3.8% Medicare surtax at bay. It applies to net investment income of single filers and heads of household who have modified AGIs above $200,000… $250,000 for couples and $125,000 for marrieds filing separately. The tax is due on the lesser of net investment income or the excess of modified AGI over the thresholds. Investment income includes taxable interest, dividends, annuities, gains, royalties and passive rental income, but not retirement plan payouts or tax-exempt interest.
Among the ways to minimize the sting of the surtax: Buy municipal bonds. Tax-free interest is exempt from the 3.8% surtax and does not affect the owner’s AGI. If selling property, use an installment sale to spread out a large gain. And, if feasible, do a like-kind exchange of investment realty to defer the gain instead of a taxable sale.
Think about selling some poor performers. Capital losses that you incur can offset your capital gains plus up to $3,000 of other income. Any excess losses are then carried over to the next year and can help offset future capital gains. Taking losses to offset gains can also reduce the tax bite of the 3.8% Medicare surtax.
Don’t run afoul of the wash-sale rule, which bars a capital loss write-off if you buy substantially identical securities within 30 days before or after a sale. Instead, any suspended loss is added to the tax basis of the replacement shares. This rule can apply in surprising ways: For example, selling a mutual fund at a loss within 30 days of the date a dividend is reinvested. Or having your IRA buy shares shortly after you sell the same stock at a loss out of your taxable investment account.
Donate appreciated stock or mutual fund shares to a tax-exempt charity. Provided you’ve owned the property for more than a year, you can deduct its full value. And neither you nor the charitable organization has to pay tax on the appreciation.
However, don’t contribute property that’s fallen in value. If you do, the capital loss is wasted. Taxwise, you’re better off selling it, claiming the capital loss on your tax return and then donating the proceeds to the charity of your choice.
Be wary of buying a mutual fund late in the year for your taxable portfolio.If the fund pays a 2016 dividend after you buy it, you owe tax on the payout this year. However, you aren’t any better off financially because the fund’s share price decreases by a corresponding amount. In effect, you’re prepaying tax to IRS. To avoid this trap, buy the stock after the dividend record date. Ask the fund whether it will pay a dividend.
Take advantage of the gift tax exclusion this year. For 2016, you can give up to $14,000 apiece to a child or other person without gift tax consequences. Your spouse can also give $14,000 to the same donee, making the tax-free gift $28,000. Any unused amount is gone forever. You can’t give extra next year to make up for it.
Pay attention to the required distribution rules for traditional IRAs.
Folks age 70½ and older must take withdrawals by year-end or pay a penalty equal to 50% of the shortfall. You start with your IRA balances as of Dec. 31, 2015, and divide each one by the factor for your age, which you can find in IRS Pub. 590-B. A higher factor applies if you are more than 10 years older than your spouse. The sum of these required withdrawal amounts can be taken from any IRAs you pick. (Similar rules apply to payouts from 401(k) plans, except that people owning 5% or less of a company who work past age 70½ can delay taking payouts until they retire, and the minimum required distribution must be taken from each retirement plan.)
If you’ve turned 70½ this year, you can delay 2016’s payout till April 1, 2017. This special rule doesn’t apply for account withdrawals in subsequent tax years, and the payout for 2016 is still based on your total IRA balance as of Dec. 31, 2015. Take care if you decide to defer the payout to 2017. If you choose this option, you’ll be taxed in 2017 on two distributions: The one for 2016 that you opted to defer and your payout for 2017. This doubling up could push you into a higher tax bracket.
Take advantage of a charitable break for IRA owners that’s now permanent. People age 70½ and older can transfer as much as $100,000 annually from their IRAs directly to charity. If married, you and your spouse can give up to $100,000 each from your separate IRAs. The transfers count as part of your required distribution. Unlike other IRA payouts, these direct gifts are not added to your taxable income, so they don’t reduce the value of your itemized deductions or personal exemptions, or trigger a Medicare premium surcharge. Of course, you can’t deduct the donation.
Consider whether it’s the right time to convert a traditional IRA to a Roth IRA. You will have to pay tax on the converted funds, but once the money is in the Roth, future earnings are tax-free. If you think you’ll be in a low tax bracket this year, you may want to convert only a part of your IRA to push your 2016 taxable income to the top of that bracket but not enough to tip you into the next higher bracket.
Be sure to check your health flexible spending account. You must clean it out by Dec. 31 if your employer hasn’t implemented either the 2½-month grace period or the $500 carryover rule. Otherwise, you will forfeit any money left in the account.
Act fast if you’re considering putting energy-efficient windows in your home.
A limited credit is available if you install them by Dec. 31. Last year’s tax law extended through 2016 the credit for energy-saving items added to one’s residence, such as windows, insulation, roofs and doors. The credit is 10% with a $500 maximum, and credits taken in prior years count against the $500. Many items are capped. The same urgency doesn’t apply to the 30% credit for residential solar energy systems. The full credit applies through 2019 and then phases out until it ends after 2021.
If you think you’ll be hit by the 0.9% Medicare surtax on earned income...
You may need to jack up withholding. The levy kicks in for single taxpayers and heads of household with earnings over $200,000…$250,000 for married couples. Employers must begin to withhold the tax from worker paychecks in the pay period when wages first exceed $200,000, regardless of the employee’s marital status. This can lead to underwithholding for a couple if each spouse earns less than $200,000 but their combined wages total more than $250,000. The same goes for an employee with a self-employed spouse if the combined earnings will exceed $250,000.
Boosting tax withholding can also help you avoid an underpayment penalty.You’re off the hook from the fine as long as you prepay at least 90% of 2016’s tax bill or 100% of what you owed for 2015 (110% if your 2015 AGI was more than $150,000). You can have more tax withheld from Nov.-Dec. paychecks or a year-end IRA payout. Tax withheld at any point during the year is treated as if paid evenly over the year.
Now let’s turn to practical ways that you and your business can save taxes.
Business owners can shift income and expenses between 2016 and 2017. Professionals can postpone their year-end billings to collect less revenue in 2016 or they can speed them up if they expect to be in a higher tax bracket next year. Firms can juggle their income by shifting some expenses from one year to another. However, the Service will look askance if there’s too much distortion of earnings.
Note the tax rules on year-end bonuses. It may pay to postpone a bonus. But delaying a bonus for a firm’s majority owner won’t work if the amount is set in 2016 and the company has cash to pay it…the owner has constructive receipt of the bonus. Write-offs of bonuses by accrual method firms are limited. They can’t deduct in 2016 bonuses deferred to 2017 by owners of greater than 50% of regular corporations or by owners of any interest in an S corporation, personal service firm or partnership.
Putting assets into service by Dec. 31 can provide large write-offs:
50% bonus depreciation is one. Companies can deduct half the cost of new assets with useful lives of 20 years or less that are put into use this year, including machinery and equipment, land improvements and some farm structures. Leasehold improvements made to the interiors of commercial realty are eligible, too.
Expensing is also available. For 2016, firms can expense up to $500,000 of new or used business assets in lieu of depreciating them…an even better deal than bonus depreciation. The $500,000 limitation phases out dollar for dollar once more than $2,010,000 of assets are placed in service during this year.
Buying a new heavy SUV by Dec. 31 can generate a slew of tax breaks. Up to $25,000 of the cost of a new SUV with gross vehicle weight over 6,000 pounds can be expensed, the balance gets 50% bonus depreciation, and the remainder may qualify for regular five-year depreciation. Used SUVs don’t get bonus depreciation. Say you buy a new large SUV for $65,000 and use it 100% for business this year. $25,000 can be expensed. Half the remaining cost…$20,000…is bonus depreciation. 20% of the $20,000 balance, $4,000, can also be deducted as regular depreciation.
Purchasing a large pickup truck can lead to an even juicier tax break. The cost of a pickup truck with gross weight over 6,000 pounds can be fully expensed as long as the cargo bed is at least six feet long and is not accessible from the cab.
There’s a twist if too many assets are bought in the last quarter of the year.If over 40% of your 2016 business asset purchases are put in service after Sept., regular depreciation on all assets put in use in 2016 is figured on a quarterly basis. So assets that are put in use in late 2016 are eligible for 1½ months of depreciation instead of six months’ worth. Buildings aren’t affected because depreciation for them depends on the month they’re put in use. And 50% bonus depreciation isn’t reduced if a business puts the bulk of its assets in service at year-end. So in our SUV example, even if the midquarter rule applied, the total write-offs would still exceed $45,000.
Owners of regular corporations should weigh taking dividends in lieu of salary if the corporation is in a low tax bracket and the owner is in a high tax bracket. The owner’s preferential rate on dividends plus the corporation’s payroll tax savings from paying dividends instead of salaries can exceed the firm’s forgone tax benefit from not being able to deduct the dividend. This doesn’t work for S corporations. Or for personal service companies, which pay a flat 35% tax on their income.
By Brent Hunsberger | For The Oregonian/OregonLive
Email the author | Follow on Twitter
on January 09, 2016 at 6:01 AM
What has happened in Washington D.C.?
For the first time in a long time, there's been a spasm of bipartisan lawmaking and deal hatching that has averted government shutdowns and global hand wringing.
Last month's tax package is the latest example. It made permanent a number of tax breaks scheduled to expire practically every year, only to be extended at the last minute (or, in one case, after Jan. 1).
This kind of of jerk-chain legislation frustrated taxpayers and tax practitioners. As if the tax code wasn't confusing enough.
But this recent act of true governance stands to benefit all walks of life – teachers, parents, retirees with IRAs. And residents of that state north of the Oregon border that imposes no income tax and shall not yet be named.
It's a great way to kick off tax season. Here's another: Oregonians don't need to pay their state and federal tax bills until Monday, April 18 -- three days later than usual. That's thanks to Emancipation Day, a Washington-D.C.-only-holiday that falls on April 15 because the normal holiday, April 16, hits the calendar on a Saturday this year.
The extension deadline for filing your return also differs. It's Oct. 17 instead of Oct. 15. Still, you need to pay any tax you owe for 2015 by April 18. Otherwise, you face late-payment penalties .
"An extension to file is not an extension to pay," Oregon Department of Revenuespokesman Robert Estabrook said.
As Estabrook's colleagues and the Internal Revenue Service gear up to accept tax returns Jan. 19, let's look at what expiring federal tax breaks were made permanent.
Enhanced child tax credit. This credit provides $1,000 per child under age 17. For many taxpayers, the credit can be refundable, meaning it can produce a refund even when the taxpayer owes no tax. In 2009, Congress expanded the refundable credit by reducing the income threshold at which it could be claimed from $10,000 to $3,000. Now, that lower threshold has been made permanent.
American Opportunity Tax Credit. In 2009, this credit replaced the Hope scholarship credit. But it was slated to expire in two years. Now it's permanent. And no wonder: In 2013, 10.4 million federal taxpayers reaped $9.25 billion from this credit, or about $890 each, IRS data show.
The credit covers the first $2,000 of college tuition and materials and 25% of the next $2,000. That's a maximum of $2,500 for each of the first four years of college. Taxpayers whose modified adjusted gross income is more than $80,000 (or $160,000 for couples filing jointly) receive a reduced credit. Those whose income exceeds $90,000 (or $180,000 for couples) are ineligible.
Part of the credit is refundable for most taxpayers who qualify. By comparison, the Hope credit was smaller, wasn't refundable, phased out at lower income levels and was only available for the first two years of college.
Educators' deduction. Score one for teachers. Congress made permanent the $250 deduction for unreimbursed educator expenses, and also sweetened it a bit.
The deduction amount will now be indexed for inflation (it hadn't changed in years). And starting in 2016, primary and secondary teachers can deduct the cost of professional development courses. Counselors, aides and principals also can claim the deduction, though aides must work at least 900 hours a year.
It's a popular break. In 2013, nearly 33,400 Oregon taxpayers claimed the deduction, averaging $241, according to Oregon Department of Revenue data.
Sales tax deduction. Poor Washingtonians. They can't take itemized deductions for state income taxes like Oregonians can because THEY DON'T PAY INCOME TAX! Instead, Congress had allowed them to deduct sales taxes in lieu of income taxes. In 2013, nearly 850,000 Washington taxpayers deducted a total of $2 billion in sales taxes, IRS stats show.
That break had been scheduled to expire in 2014. It's now been reinstated for 2015 and all years forward. Washingtonians, I'm told, can either tally the actual taxes paid by adding up their receipts. Or they can use a table provided by the IRS. Lucky them.
Transit benefits. Congress finally brought some sanity to employer-provided transit perks. For 2015, employers could have provided workers a pre-tax benefit of up to $250 a month for parking, vanpool and transit passes. That will bump up to $255 in 2016. Had Congress not acted, vanpool and transit pass perks would've dropped to $130 while parking passes would've remained at $250.
Earned income tax credit. This credit provides a big boost for low- and moderate-income workers. It phases out as income increases. It also differs based on the number of children in a household. The credit for families with three or more children (45 percent of earnings up to $13,870) was set to expire in 2017. It's now permanent. So is a higher income phase-out amount for married couples filing jointly. Now, the credit will phase out for couples earning more than $23,630, instead of for those making more than $18,110.
Charitable IRA distributions. Retirees age 70-and-a-half and older can make tax-free donations directly to charities from their IRAs. This effectively reduces their annual required minimum distribution from their traditional IRAs and does not increase their adjusted gross income. This benefit is capped at $100,000 a year. It had expired at the end of 2014, but this move reinstates it for 2015 and makes it permanent going forward. The donation must be made directly from an IRA to the charity to qualify.
It mainly benefits seniors who don't itemize their deductions or who might, by reducing their required minimum distribution, also be able to reduce the amount of their Social Security income subject to tax. Talk to your tax adviser to see if it benefits you.
Temporary extensions: Several expiring breaks were merely extended through 2016, including deductions for higher education expenses and mortgage insurance premiums, certain energy-efficiency tax credits and an exclusion for mortgage debt forgiven during the financial crisis.
A few business tax breaks also were extended, either permanently or through 2019. Business owners should talk with their tax adviser about how those might help.
-- Brent Hunsberger is an investment adviser representative and certified financial planner in Portland.
For important disclosures and information about Hunsberger, visit ORne.ws/aboutbrent. Reach him at 503-683-3098 or email@example.com.
800,000 Taxpayers Received Wrong Tax Info from Health Insurance Marketplace
BY MICHAEL COHN
Approximately 800,000 taxpayers who received health care coverage through the federal insurance marketplace Healthcare.gov were sent the wrong information on their Form 1095-A and are being urged to wait to file their taxes until the first week of March when they receive the correct information from the federal government.
“About 20 percent of the tax filers who had Federally-facilitated Marketplace coverage in 2014 and used tax credits to lower their premium cost —about 800,000 (< 1% of total tax filers) —will soon receive an updated
Form 1095-A because the original version they were issued listed an incorrect benchmark plan premium amount,” said a blog post on the Web site of the Centers for Medicare and Medicaid Services. “Based upon preliminary estimates, we understand that approximately 90-95% of these tax filers haven’t filed their tax return yet. We are advising them to wait until the first week of March when they receive their new form or go online for correct information before filing. For those who have filed their taxes—approximately 50,000 (< 0.05% of total tax filers) —the Treasury Department will provide additional information soon.”
CMS noted that taxpayers who received health coverage under the Affordable Care Act should have received a statement in the mail in February from the health insurance marketplace called a Form 1095-A. The statement includes important information needed to complete and file their tax returns. One piece of information included on the 1095-A is the premium amount for the “second lowest cost Silver plan” in the taxpayer’s area. This premium amount represents the benchmark plan used to determine the amount of premium tax credit they were eligible to receive. Unfortunately that information was calculated incorrectly for many taxpayers, although CMS stressed that it won’t be an issue for the majority who received health coverage through Healthcare.gov.
CMS noted that taxpayers whose forms were affected will receive a phone call about the problem from the Marketplace by early March, in addition to letters and emails with additional information about the status of their forms. “It’s important to note that this issue does not affect the majority of Marketplace consumers and only affects people who signed up through one of the 37 states using HealthCare.gov,” said CMS. “About 80 percent of Marketplace consumers who received a 1095-A from the federal Marketplace do not have affected forms and should go ahead and file their annual tax return. Additionally, this issue does not mean that consumers received the incorrect amount of tax credit throughout the year. It’s also important to note that this does not affect the vast majority of tax filers who will just need to check a box on their tax return to indicate that they had health coverage in 2014 either through their employer, Medicare, Medicaid, veterans care, or other qualified health coverage programs.“
Taxpayers who are concerned about the status of their 1095-A forms can find out if they are affected by logging in to their account at HealthCare.gov. They will see a notice message that will let them know if their form was or was not affected. Approximately 90 percent of tax filers with Marketplace coverage through HealthCare.gov who received a 1095-A will find that their form was not affected by the issue, according to CMS, and will be able to file their taxes with their current form.
If their form was affected, CMS advised them to wait to file their tax return until they receive a corrected 1095-A Form from the Marketplaces. New forms will be sent from the Marketplace beginning in early March and taxpayers will also receive a message in their Marketplace account on HealthCare.gov.
If taxpayers need to file their taxes before them, CMS is making available a tool to help them determine the correct amount of the second lowest cost Silver plan that applied to their household in 2014. They can also call the Marketplace Call Center at 1-800-318-2596 (TTY: 1-855-889-4325) for assistance.
CMS said it acted quickly once it learned about the problem. “As soon as we discovered the error, we immediately began examining who was affected, how to communicate about the error, and how to make the corrections process as simple as possible for consumers,” said CMS. “We are committed to making sure that consumers who need corrected forms are contacted with updates and will receive new forms quickly. We are focused on making sure that every Marketplace consumer understands how taxes and health care intersect and if they need to get a corrected form, the steps they need to take.”
Separately, CMS also announced Friday that it will implement a special enrollment period for individuals who learn, at the time they file their taxes, of the Affordable Care Act-mandated tax penalty for not having health insurance coverage (see CMS Announces Special Tax Season ACA Enrollment Period).
At least one lawmaker in Congress expressed her outrage about the glitch. Rep. Diane Black, R-Tenn., a member of the House Ways & Means Health Subcommittee and a nurse for more than 40 years, said in a statement, “The Obama Administration has built a healthcare law so complex, so confusing, and so costly that even they don’t know how to properly administer it. From a faulty website, to staggering cost estimates, to more Administration-led delays, the hits just keep coming under Obamacare. Now, the White House tells us in a classic Friday news dump that nearly one million Americans could see their tax refunds delayed because of this President’s inability to implement his own law. This is beyond embarrassing for President Obama and is an unfair blow to taxpayers who are once again left holding the bag for this Administration’s incompetence. Moreover, it is yet another example of why the House voted earlier this month with my support to repeal this disastrous law once and for all.”
SmartVault is the company we are using for our new Client Portal. You can access your Client Portal several different ways. Including apps on your phone or tablet and going directly through the web page. This gives you and MB Tax Pro a secure place to share files. You will have a "Correspondence" folder and a folder for your tax returns. This is our preferred method of electronic communication and safest way to share your personal information online.
We will invite you and you will be asked to set up a password and sign into your Client Portal. You will only need to do this once and then you will be good to go.
Turn your phone into a mobile scanner. Genius Scan is a great way to take those files from your mailbox and turn them into PDFs and send them to us. Click the link, download it on your phone or tablet. http://www.thegrizzlylabs.com/
Client Portal Website:
The website is great for PDFs, Excell worksheets, QuickBooks files (backup copies) and other files you may need to share with us. There are also apps for your computer. Add on buttons for Outlook, Quickbooks, Freshbooks, Xero and your computer itself. An easy way to take a document and send it to your Client Portal
Client Portal App:
Use your iPad or iPhone to send us documents.
Download the app https://itunes.apple.com/us/app/smartvault-for-ipad/id551492813?mt=8
After you download the app you will sign in and now you have your secure Client Portal on your mobile device. Simply take a picture of the documents and add it to your file. And you are good to go.
Your Client Portal link is:
Click the link, sign in and start sharing your important tax documents with us.
If you already filed your federal tax return and are due a refund, you have several options to check on your refund. Here are some things the IRS wants you to know about checking the status of your refund. "Where’s My Refund?" is an interactive tool on http://www.irs.gov and is the fastest, easiest way to get information about your federal income tax refund. Whether you split your refund among several accounts, opted for direct deposit into one account, used part of your refund to buy U.S. Savings Bonds or asked the IRS to mail you a check, Where’s My Refund? gives you online access to your refund information, 24 hours a day, 7 days a week. It’s quick, easy and secure. If you e-file, you can get refund information 72 hours after the IRS acknowledges receipt of your return. If you file a paper return, refund information will generally be available three to four weeks after mailing your return. When checking the status of your refund, have your federal tax return handy. To get your personalized refund information you must enter your Social Security Number or Individual Taxpayer Identification Number, your filing status which will be Single, Married Filing Joint Return, Married, Filing Separate Return, Head of Household, or Qualifying Widow(er), AND the exact whole dollar refund amount shown on your tax return. IRS2Go is is the IRS’ first smartphone application that lets taxpayers check on the status of their tax refund. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.
Want to check on the status of your Oregon personal income tax refund? With just your name, your Social Security number, and last year's Oregon Taxable Income, you can look up your status online! It's safe, it's secure, and it's really easy, just go to "Where's My Refund?" and follow the steps online.
You will need the following to check the status of your California personal income tax refund: Your social security number, your mailing address, and the refund amount shown on your tax return. For more information and to check on your refund, see "Where's My Refund California?"
Generally, you'll get your refund in six to eight weeks from the date we receive your return. You'll get it faster if you e-file your return and have your refund deposited directly into your bank account. If we identify an issue with a tax return, our review may take longer than six to eight weeks.
To check the status of your refund, see Income Tax Refund Status.
Website & App We Love
Office - app
View, create, and edit Office documents on your iPad® with touch-friendly Word, Excel, and PowerPoint apps. In Word, add comments or track changes while you work together with others. Review and update Excel spreadsheets and add formulas or charts. Change PowerPoint presentations and project them wirelessly on a big screen.
Livemocha.com - website
Creating a World without Barriers
Free online language learning with lessons, courses and other language-learning activities. Our fun and effective language lessons are available in 35 languages. Registration, lessons, and access to native speakers are FREE!
Pick Ups & Extensions
The tax deadline is fast approaching. We will be serving snacks and beverages on April 14th and 15th for any clients who want to stop by and help us celebrate another tax season close. If your tax return is done and ready to be picked up you are welcome to stop by anytime between 10:00 and 6:00 Monday thru Friday and 10:00 and 5:00 on Saturdays. Other times can be arranged by appointment. You can also pay by phone and have your forms mailed or emailed to you. If you have not met with us or dropped off your tax information yet then we will need to put you on extension. Please contact our office to give us permission to file your extension for you.
Where's My Refund?
If you already filed your tax return and are due a refund, you have several options to check on your refund. You can find your IRS, Oregon, California and New York refund on our blog. You will need your blue folder as they will ask you specific questions.
Office Hours & April 15th
We are wrapping up the full time office hours that we keep during our busy tax season. The office will be closed from Tuesday, April 16th through Monday, April 28th. If you haven't completed your 2013 taxes with us yet and need an extension, please let us know. All extensions and completed 2013 tax returns must be filed by April 15th. All tax is due on April 15th, whether or not you have filed a completed tax return, so if you think you may owe tax, please let us know that as well when filing your extension. If you receive any correspondence from the IRS, Oregon, the City of Portland, or any other entity regarding your taxes, please email it over right away to firstname.lastname@example.org , or fax it over to 503.282.0513. Happy Spring!
First Quarter Estimated Tax Payment Due
Your first quarter estimated tax payment is due on April 15th. If you have any questions about this first payment please call or email the office at 503.595.5890 or email@example.com and we will do our best to help you.
April 9 - The Joyners in 3D signing with David Marquez and Tara Rhymes
David Marquez is the New York Times bestselling artist of Ultimate Comics Spider-Man, All-New X-Men and Fantastic Four: Season One, and made his comics debut with writer R.J. Ryan in 2010 with the graphic novel Syndrome. David is based in Portland, OR.
Tara Rhymes earned her BFA at the University of Texas at Austin with a focus in Studio Art and Transmedia. The Joyners in 3D markes her comics debut, co-developing the 3D process used in the book. She lives and works in Portland, OR.
For more information, visit: floatingworldcomics.com/archives/2058
“At MB we are tax professionals and business consultants. We are in partnership with you, year round, to lower your tax liability to the fullest extent of the law, maximize profits, inspire growth and provide peace of mind.”