GUIDE 2016
Special Supplement to
The Crescent-News
Thursday, January 28, 2016
A Tax Preparation and Financial Planning Guide
2
2016 Tax & Finance
The Crescent-News, Defiance, Ohio - Thursday, January 28, 2016
Tax season starts as IRS begins to accept returns WASHINGTON (AP) — What’s new when you file your taxes this year? Taxpayers without health insurance will face larger penalties, and those insured by their employers will get a new tax form. There also have been adjustments for inflation, and Congress extended expiring tax breaks, some permanently. “The good news is that we finally have some certainty,” said Kathy Pickering, executive director of the Tax Institute at H&R Block. The arrival of the new year means it’s time to start thinking about gathering the documents needed to file taxes. They include W-2 forms reporting wages or salaries, which employers will send out this month. You’ll also need Form 1099 reporting interest and dividend income, Form 1098 showing interest paid on a
home mortgage, and Form But do take into account 1095-A if you bought cov- any changes in your pererage through the Health sonal life, he urged. Did you get married, have a child or Insurance Marketplace. begin caring for an elderly MORE TIME TO FILE relative, for example? “As things change in your Tax season opened Jan. 19, when the Internal Revenue personal life, so do taxes Service began accepting change,” he said. Tax brackets, the value returns. If you like to procrastinate, of each exemption and the you’ll have four extra days standard deduction have — counting Feb. 29 because been adjusted for inflation. this is a leap year — to file So have the levels at which without needing an exten- certain tax credits and sion. The deadline is April deductions begin to phase 18 because of the celebra- out. Fewer people are itemiztion of Emancipation Day in the District of Columbia. If ing because the standard you live in Massachusetts or deduction continues to Maine, Patriots Day means creep upward, said Barbara you’ll have still another day Weltman, a consultant and author of books on taxes, to file. Taxpayers will not see law and finance. For 2015, the standard many significant changes when they start filling deduction is $6,300 for sinout their forms, said Greg gle filers, $12,600 for marRosica, tax partner at Ernst ried couples filing jointly and $9,250 for heads of & Young LLP.
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In this Dec. 30 file photo, IRS new forms, 1095B and 1095C, for employer provided health insurance or for use if a taxpayer got health insurance from the marketplace are displayed in Los Angeles. Taxpayers who didn't have coverage in 2015 will face significantly higher penalties than the previous year, meaning a bigger tax bill come April or a smaller refund.
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overview From Page 2
FILING ELECTRONICALLY
Taxpayers increasingly are choosing to file electronically. Electronic filing was up 2.4 percent in 2015 from 2014. Similarly, the use of direct deposit for refund checks also is gaining in popularity. Last year, more than 86 million tax refunds were paid through direct deposit, up 2.7 percent over 2014. Overall, the average refund in 2015 was $2,797, a slight increase over the previous year. “Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund,” the IRS said on its website. The agency expects to pay more than 90 percent of refunds in less than 21 days.
IDENTITY THEFT
Identity theft continues to be a problem. Sometimes the first indication is a notice from the IRS that a tax return already has been filed with a taxpayer’s Social Security number. To combat the problem, the IRS launched a public awareness campaign in November and began issuing a series of tips on how to protect data online. “The IRS and the states have been working to get better at detecting these false returns, but as the criminals steal more and more personal data, they can do an
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even better job of making a tax return look legitimate,” IRS Commissioner John Koskinen said in a statement. “In short, the criminals are evolving, and so must we,” he said. At an IRS security summit, tax preparers, software companies and the agency came together “to establish standards for authenticating tax filers online, and sharing information with the IRS and state departments of revenue on patterns of fraudulent behavior,” Pickering said. Taxpayers filing electronically might see requests for stronger passwords, and security questions to help validate that they are who they say they are. The extra security “shouldn’t be burdensome,” Pickering said, and could help taxpayers feel “a little more protected.” States also are taking steps, she said; more than a dozen now require employers to send copies of the W-2 directly to them by Jan. 31. The IRS also plans to require that in the future. Taxpayers should know that the IRS “does not initiate contact by email to request personal or financial information,” the agency emphasizes on its website. “This includes any type of electronic communication, such as text messages and social media channels.” If your identity is stolen, resolving the issue can take months, even longer. “It’s very difficult for taxpayers as well as practitioners to effectively resolve issues,” said Joseph Perry, the partner in charge of the tax and business services at Marcum LLP.
HEALTH INSURANCE AND TAXES
“The Affordable Care Act has now made health care a tax issue,” Pickering said. In a report to Congress earlier this month, National Taxpayer Advocate Nina Olson said the IRS faced “a few unanticipated challenges” last year regarding
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the tax-related provisions of the health care law. “In general,” she said, “the IRS has sufficiently addressed the issues as they arise in order to avoid similar issues in future filing season.” Taxpayers will see some new forms, 1095B and 1095C, if they have employer-provided health insurance or got it outside the marketplace. Lisa GreeneLewis, CPA and editor of the TurboTax blog, called the forms a “non-issue.” She said they are informational only. AP Photo “The IRS computers are going to be able to verify In this 2013 file photo, Kathy Pickering, executive your information that you director of the Tax Institute at H&R Block, speaks about and your dependents had the implications of health care reform in Springfield, Ill. the coverage,” she said. Taxpayers who didn’t have coverage in 2015 www.edwardjones.com or didn’t qualify for an exemption from coverage will face significantly higher penalties than last year, meaning a bigger tax bill come April or a smaller refund. “The fee is calculated two different ways — as a percentage of your household income and per person,” While markets and lifestyles may change, it’s likely according to the federal website healthcare.gov. your long-term financial goals have not. That’s “You’ll pay whichever is why it’s so important to take advantage of our higher.” complimentary portfolio review at least once every For those who don’t qualify for an exemption, year. Together, we’ll assess how changes in your the penalty for not having career, aspirations and goals can impact your insurance in 2015 is geninvestments and discuss whether adjustments are erally the greater of $325 per person or 2 percent of necessary to help keep you on track to where you taxable income over the filwant to be long-term. ing threshold up to certain limits. Call your local Edward Jones financial Last year was the first time penalties were coladvisor today to schedule your complilected. Recently released mentary review. IRS numbers indicate that 7.9 million households Matt Schmenk, AAMS® Heather R Allman, AAMS® paid fines averaging $210 Financial Advisor Financial Advisor apiece on their tax returns 410 Fifth St 1018 Ralston Ave Suite 104 for 2014. The penalties then Defiance, OH 43512 Defiance, OH 43512 were lower — $95 for the 419-782-1118 419-782-2119 flat fee, or 1 percent of taxable income. Matt Schmenk, AAMS® Heather Allman, AAMS® Blake A Sizemore Blake A Sizemore Financial Advisor Many lower-income Financial Advisor Financial Advisor people are exempt from 1018 Ralston Ave. 101 Clinton St. 410Financial Fifth St. Advisor the penalty, so taxpayers Suite 104 Suite 1700 Defiance, OH 43512 101 Clinton St Suite 1700 Defiance, OH 43512 Defiance, OH 43512 419-782-1118 should check if they qualDefiance, OH 43512 419-782-2119 419-782-1573 ify for an exemption (use 419-782-1573 Form 8965 to do so). About 3.5 million returns were filed that included the health insurance pre-
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2016 Tax & Finance
The Crescent-News, Defiance, Ohio - Thursday, January 28, 2016
Three ways to plan ahead for tax season now Taxes are an unpleasant fact of life for most people, but planning ahead can make the task a little easier. Addressing each of the following areas can also help you legally minimize your taxes, and leave more money in your pocket. MINIMIZE TAXABLE INCOME Taxes are based on the income an individual earns each year, but not all cash a person receives is treated the same way. “There are numerous tax laws that individuals need to take into account when trying to plan the best way to manage their tax liability,” said Bill Rivero, a partner at accounting firm Correia, Rivero and LeFebvre. “An accountant or tax professional can help with this problem.” One way you can minimize your tax liability is to shift as much income into long-term capital gains as possible. Investment assets held for more than 365 days are generally taxed at a much lower rate than ordinary income or short-term capital gains (those held for less than 365 days). This reality can
401(k) plans is that since the money is intended for retirement, it can’t be withdrawn until the individual is 591⁄2 years old. Any funds withdrawn before that time face hefty fines and taxes from the IRS. However, not everyone has access to a 401(k) plan, and some people who do might not take full advantage of it because they want to save more than $18,000 annually. For those facing that dilemma, maximizing deductions is critical. Some of the most important and common tax deductions include those for mortgage interest, student loan interest, charitable contributions, union dues and foreign taxes. Smart planning can help you MAXIMIZE 401(k) identify and take advantage of all CONTRIBUTIONS the deductions for which you’re A 401(k) plan ranks as one of the eligible. best ways to manage one’s tax liability, but it requires some advance MAXIMIZE TAX CREDITS planning. An individual can conAlthough tax deductions lower tribute up to $18,000 of pretax one’s taxable income, they do not income to a qualified 401(k) plan lower taxes as much as tax credits each year, and when it’s matched do. A $100 deduction for a person by an employer, the individual gets at the 25 percent rate will lower an automatic 100 percent return on tax liability by $25. In contrast, a their investment. The catch with $100 tax credit lowers tax liability influence investment choices for many individuals. Individuals whose income varies from year to year might want to consider shifting some of that income to the next calendar year, to more evenly distribute their income over time. This can help you to avoid paying very high tax rates one year, and then very low tax rates the next year. For instance, salespeople, those working on commission or expecting a bonus can ask their employers to defer a December payment until January. In some cases, waiting a couple extra weeks for a check can mean thousands of dollars in tax savings.
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mium tax credit — a key part of the health care law. Taxpayers can either get the credit in advance when buying insurance through the exchanges or receive it as a refund on their taxes. Either way, they need to fill out Form 8962 and attach it to their return.
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by $100. Tax credits vary from year to year, and small business owners can take advantage of several credits not available to most individuals. Still, there are tax credits even the average employee can take advantage of with proper planning. Common tax credits include the earned income tax credit, the American opportunity tax credit and the child tax credit. Under the child tax credit, individuals are given up to a $1,000 credit for each qualifying child under the age of 17. This credit only applies to individuals with incomes under $110,000 for married couples, and under $75,000 for those filing individually. The earned income tax credit applies to those with low incomes. Finally, the American opportunity credit is available to people who have college education expenses, and whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing jointly. The credit can be worth up to $2,500, but the value drops as an individual’s income increases.
sion last June. With gay marriage now recognized across the nation, gay and lesbian couples can file as married, filing jointly on both their state and federal returns.
TAX BREAKS EXTENDED
Congress acted in midDecember to extend about 50 expiring tax breaks for individuals and businesses. “Some of the credits and deductions which are pretty popular with people have been extended permanently,” Pickering said. The American Opportu-
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nity Tax Credit, for example, provides eligible students with a maximum annual credit of $2,500 for the first four years of college. The congressional action making it permanent helps students or their parents plan four years out, she said. Congress also made permanent the $250 abovethe-line deduction for elementary and secondaryschool teachers who use their own money to buy school supplies, as well as the deduction for state and local sales taxes, primarily designed for people who live in states without a state income tax. As part of the legislation, small-business owners will be able to take a deduction right away for up to $500,000 in eligible property without depreciating it. Also made permanent was the expanded and enhanced earned income tax credit for taxpayers with three or more children.
The Crescent-News, Defiance, Ohio - Thursday, January 28, 2016 2016
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Government trying to make it easier to save for retirement
WASHINGTON (AP) — Saving for retirement might seem like a luxury to Americans living paycheck to paycheck, but the government is trying to make it a bit easier. The saver’s — or retirement savings contributions — credit is sometimes overlooked. Aimed at low- and moderate-income workers, the credit “helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs,” the Internal Revenue Service said. The credit is on top of the allowable reduction in income on tax returns for contributions to qualified retirement plans. “It’s one of the few times that the law lets you double dip,” said Barbara Weltman, a consultant and author of books on taxes, law and finance. “You get two benefits for the price of one.” As with many other tax credits or deductions, the saver’s credit phases out as incomes become higher. For single taxpayers, the credit phases out at $30,500, at $61,000 for married couples filing jointly, and at $45,750 for heads of households. In addition to the income requirements, a person has to be at least 18. Taxpayers who were full-time students in 2015 or could be claimed as a dependent on another person’s tax return are not eligible. To claim the credit, fill out Form 8880. “Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed,” the IRS says. It cautioned, though, that the credit often is less than the maximum $1,000 for single filers or $2,000 for married couples filing jointly because of other deductions and credits claimed. Kathy Pickering, executive director of the Tax Institute at H&R Block, said the company is working to
AP Photo
The U.S. Department of the Treasury website page for myRA — My Retirement Account is displayed on a mobile phone. myRA is designed to remove common barriers to saving and give people who want to save an easy way to get started.
determine what it would take to get people to save. “While oftentimes lowincome people do under-
stand and want to save for retirement, their economic situation makes it very difficult,” she said.
Joseph Perry, partner in charge of the tax and business services at Marcum LLP, points to another reason why people might not have had an incentive to save: low interest rates. But with the Federal Reserve indicating interest rate increases in 2016, “it’s possible we’ll see some better returns. We might see more people willing to save.” There’s still time to contribute to an IRA and have it impact your 2015 taxes; the deadline is April 18, the same as the deadline for filing your tax return. Another federal program aimed at getting people to save for retirement is myRA, which was created by President Obama a year ago. The program targets people who don’t have a
401(k) or other retirement plan at work. “myRA is designed to remove common barriers to saving, and give people who want to save an easy way to get started,” U.S. Treasury Secretary Jacob Lew said in a statement on the program’s website. “myRA has no fees, no complicated investment options, no risk of losing money, and no minimum balance or contribution requirements.” According to the Treasury Department, people can contribute through an employer, through contributions from a bank account, or by directing all or part of their tax refund to their myRA account. Contributions are limited to $5,500 per year, or $6,500 • retirement, Page 11
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2016 Tax & Finance
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Program provides tax-free savings for disabled children WASHINGTON (AP) — Americans who are disabled or have a dependent who is, might be able to take advantage of a series of tax benefits designed to ease the burden. The newest program, called ABLE, was created in 2014 and is similar to the 529c programs administered by the states for education expenses. “Supporters of the law pointed out that the U.S. tax code provided significant tax benefits to parents who save money for their children’s college education in 529 plans,” according to Intuit, publisher of TurboTax. “But parents of people with disabilities had no similar way to save for their children’s future needs, such as occupational therapy or assisted living.” ABLE accounts allow parents to do just that. Contributions of up to $14,000 — the annual tax-
free gift limit — can be made to ABLE accounts. The earnings are not taxable if they are withdrawn and used to pay for disability-related expenses. Among eligible expenses, according to the Internal Revenue Service: housing, education, transportation, medical care, job training and others. “There’s no federal tax benefit, but the money in that ABLE account can grow tax-free,” said Kathy Pickering, executive director of the Tax Institute at H&R Block. She called it a “very important mechanism” for attending to the needs of a disabled dependent. Barbara Weltman, a consultant and author of books on taxes, law and finance, said the program’s definition of disability is broad but is restricted to people who became disabled before age 26.
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AP Photo
In this 2015 file photo, Vice President Joe Biden talks to Kayla Kosmalski of Bear, Del., during a celebration of the ABLE Act (Achieving a Better Life Experience Act) with members of Congress.
Already, nearly three dozen states have passed legislation implementing the ABLE program, according to the National Down Syndrome Society, one of a consortium of groups advocating for the disabled that
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“It’s designed to allow for savings for disabled children without causing them the loss of government benefits,” she said. Under the program, the first $100,000 in an ABLE account is not considered a personal asset, according to Intuit. “This is important because federal law generally bars individuals from receiving assistance such as Medicaid, housing aid and Supplemental Security Income if they have more than $2,000 worth of financial assets,” the company said. Congress last month made it easier for people to set up ABLE accounts by removing the residency requirement. “By allowing ABLE beneficiaries the ability to enroll in programs outside their state, individuals will now have greater options in choosing which program best meets their needs,” the National Disability Institute said on its website. “In addition, this could mean qualified persons may have the ability to open an ABLE account much sooner than previously anticipated.”
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had pushed for the law. The IRS said two new forms will be required for those participating in the accounts: Form 1099-QA for reporting distributions and Form 5498-QA for reporting contributions. Among other tax breaks or benefits that the IRS says might be available to the disabled: a higher standard deduction for people who are legally blind; a credit for working taxpayers paying the cost of caring for a spouse or dependent who is physically or mentally unable to care for themselves; a deduction for impairment-related work expenses, and a deduction for unreimbursed, disability-related medical expenses. The IRS said taxpayers also might be eligible for the Earned Income Tax Credit if they are disabled or have a child who is. The refundable credit benefits people with low or moderate income, and the agency estimates that as many as 1.5 million eligible taxpayers with disabilities fail to claim it each year. • ABLE, Page 11
The Crescent-News, Defiance, Ohio - Thursday, January 28, 2016 2016
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IRS Web move may leave older, poorer filers behind By SUZANNE WOOLLEY Bloomberg News
NEW YORK (TNS) — Think reaching a human at the Internal Revenue Service last tax filing season was tough? National Taxpayer Advocate Nina Olson anticipates even less telephone and face-to-face customer service in future years. A planned expansion of IRS online offerings will leave taxpayers seeking help the old-fashioned way “up a creek,” Olson said, listing it as the No. 1 problem in a report to Congress released recently. The analysis by the Taxpayer Advocate Service, an independent office within the IRS, must include at least 20 of the “most serious problems” taxpayers face when dealing with the agency. The main focus this year: what it says is an emphasis on enforcement over customer service in the IRS’s long-term strategic plan, and how it could force many to pay tax preparers for advice they used to get for free. Olson’s warning comes as Congress, after an abysmal 2015 tax
op a plan for how it will operate over the next five years. The details in the report haven’t been made public or shared with Congress, and the IRS hasn’t solicited comments from a broad pool of constituents, the advocate’s report notes. Additionally, the IRS has never asserted so many times that data and documents the taxpayer Advocate planned to include were for “official use only” and couldn’t be made public. That made this year’s report difficult to write, Olson said, “because while the intent to reduce telephone and faceto-face service has been a central assumption in the five-year ‘Future State’ planning process, little about service reductions has been committed to writing.” Olson is calling for congressional hearings on the IRS plan over the next few months, and will solicit comments at public hearings held across the country. Among groups she plans to invite are those with the greatest need for free help, LACK OF TRANSPARENCY Since 2014 the IRS has spent “sev- including the elderly, the disabled, eral million dollars” working with small businesses, low-income taxmanagement consultants to devel- payers, and people with limited
season, gave the cash-starved agency an additional $290 million at the end of the budgeting process. The money is “targeted solely for taxpayer services to ensure the agency responds to taxpayer questions in a timely manner, and to improve fraud detection and prevention and cybersecurity,” according to a summary of the bill from the House Appropriations Committee. Responding to the taxpayer advocate’s report, the IRS says it “does not paint a full picture” of evolving, long-term planning. “The Advocate seems to want the IRS to do business the way we did 10 years ago,” the agency wrote in a statement to Bloomberg. The IRS “believes increasing the availability of self-service interaction frees up in-person resources for taxpayers who truly need them.” Here are some of the other major problems the taxpayer advocate identified in its report:
Helpware: Solving one of life’s two inevitabilities By HAROLD GLICKEN Tribune News Service
It’s too soon for the inevitable, but all things considered, I’ll choose taxes every time. I want to peer into the dark recesses of the Internal Revenue Service and find out what evil lurks in the hearts of men. (The Shadow knows.) I have a good reason to be concerned about my 2015 tax bill, since my situation will change dramatically next year. Intuit, the maker of TurboTax, has a bunch of free online what-if tools to help figure things out for folks like me. The tools (https://turbotax.intuit. com/tax-tools/) will tell you approximately how much you’ll pay the federal government, or how much
of a refund you’ll get. A tool will also tell you how much your penalty will be if you don’t get health insurance, among other bad news items. It also will tell you which version of TurboTax will serve your needs. There’s even a free online version that Intuit offers for folks whose taxes are simply the difference between money earned and the taxes already paid through withholding. I chose the online version of TurboTax this year for the simple reason that despite all my backups I had the devil of a time finding last year’s file. When you file online, you open a TurboTax account, complete with sign-on and password. Each time you call up • HELPwARE, Page 10
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English proficiency. UNREALISTIC EXPECTATIONS FOR ONLINE EFFORTS The impression the taxpayer advocate’s office has, based on discussions with IRS officials, is that the agency’s ultimate goal is “to get out of the business of talking with taxpayers.” It would do that in part by creating online accounts for filers, which Olson sees as a good way to supplement, not replace, existing service — as long as data security concerns are addressed. While far more people file electronically now, and the IRS has taken many steps to limit the need for taxpayers to phone the IRS, the demand for personal service hasn’t decreased. In fact, over the past decade the number of calls the IRS received on its accounts management lines rose from about 64 million for fiscal year 2006 to about 102 million for fiscal year 2015. Automating customer service even more, the report said, “will mean only those with the means to
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2016 Tax & Finance
The Crescent-News, Defiance, Ohio - Thursday, January 28, 2016
Workers in ‘on demand’ economy face different tax issues WASHINGTON (AP) — Did you start driving for Uber or Lyft last year? Rent your house out through Airbnb? You could be in for some surprises come tax time if you didn’t pay any estimated taxes. About 14.6 million people — roughly 10 percent of the U.S. workforce — were selfemployed in 2014, according to a Pew Research Center analysis of Census Bureau data. Of those, about 3.2 million are working in the socalled “on-demand” or gig economy, accord to Intuit, the software company that produces TurboTax. The company defines the on-demand economy “as an online marketplace or application that connected providers-freelancers with customers.” In addition to transportation and home or apartment rentals, that also can include job sites or other services. Some people just starting out with Uber, Airbnb or another on-demand service might not realize they’re in a business or are a business owner, said Lisa GreeneLewis, a CPA and editor of the TurboTax blog. “It’s new and different, and everyone is superexcited about it,” said Kathy Pickering, executive director of the Tax Institute at H&R Block, but the tax implications can catch people by surprise. Drivers for Uber and similar companies are often considered independent contractors who are self-employed. Rather than receive a W-2, they’ll get a
AP Photo
In this 2013 photo, Lyft passenger Christina Shatzen often are considered independent contractors who gets into a car driven by Nancy Tcheou, in San are self-employed. Rather than receive a W-2, they'll Francisco. Drivers for Uber and other companies most get a 1099 form reporting their income.
1099 form reporting their income. “It’s different from being an employee, where income taxes are automatically withheld, where Social Security and Medicare taxes are automatically withheld,” said Barbara Weltman, a consultant and author of “J.K. Lasser’s Guide to SelfEmployment,” and other books on taxes, law and finance. “The money comes in and they think it’s theirs to spend, and they don’t figure that a portion of what they take in has to be appor-
tioned to taxes,” she said. Independent contractors are subject not only to regular income taxes but also to the self-employment tax, which the Internal Revenue Service said “is a Social Security and Medicare tax primarily for individuals who work for themselves.” The taxes are on the business’ net profit. “The good news with Uber is everything is automated and tracked,” Pickering said. That makes it easier to keep track of business mileage. Keep track of other
expenses too, like the cost of a car wash, or providing water or snacks for riders. “You want to keep the best records you can so you don’t pay more taxes than you have to,” she said. But if the car also is used for personal use, you’ll have to determine how much and deduct only a percentage for business use. Schedule C is used to report profit and loss from business income. Schedule SE is used to compute the self-employment tax. Renting your home out through sites like Airbnb
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also can have tax implications, depending on how many days you rent it out. People who live near the site of the Super Bowl, for instance, have rented their homes out for the long football weekend and taken in “huge bucks,” Weltman said. But if that’s all they do for the year, they’re not required to report the rental income for taxes. The threshold for reporting rental income is more than two weeks. “If you rent your home out for 15 days or more • ON-DEMAND, Page 9
The Crescent-News, Defiance, Ohio - Thursday, January 28, 2016 2016
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The how and why of a great expense policy By OMAR QARI
Business Management Daily
Most office managers have probably faced questions from employees about which type of restaurant is appropriate for a client lunch, or whether they’re able to take a convenient, but more expensive, flight home from a business trip. What is the best balance between being a responsible employee and being too extravagant (or stingy)? While understanding proper business etiquette and using good judgment are often the best starting points, a company expense policy can help validate employees’ selections and,
more importantly, ensure corporate dollars are being spent on valuable items and initiatives. Management should keep in mind the following considerations when developing their organization’s expense policy: UNDERSTAND LEGAL LIMITS Understanding IRS and state regulations is absolutely paramount when developing an expense policy. Regulations may vary for things like spending limits or rates for certain businesses and industries. Information about national or state-specific policies (e.g., keeping expense
records for three years) can be found on the IRS website or through the General Services Administration. Employers can also refer to independent tax firms that may offer more conservative suggestions.
SECURE EXECUTIVE AND DEPARTMENTAL INSIGHT Expense policies may change based on corporate or departmental activity. For instance, the sales team may require specific rules around client lunches, whereas the marketing department may need to set particular policies for per diems. Connect with each team when finalizing the
expense policy to get their quickly refer to the policy feedback and ensure that no matter where they are. the rules do not hinder EASE REPORTING departmental goals. PROCESSES Work expenses don’t BE AS CLEAR AS always happen in the office. POSSIBLE Expense policies should In fact, it’s rare that they clearly outline what must do. Typically, expenses are be included when expens- incurred in cabs, restaues are submitted, the time rants or airports. To save frame for submission and employees the hassle of totwhat employees should ing crumpled receipts at the expect for a reimbursement bottom of their briefcases, businesses should think period. However, it’s important about using an expense to remember that there will management solution that inevitably be exceptions to can be used on the go. If companies do invest in these rules. For instance, sending an employee on a technologies that simplify last-minute trip may require the expense management a hotel stay above the allot- process, they should make sure that the solution can ted policy budget. integrate with their existing accounting software. PROVIDE EASY This will decrease manual ACCESS This one sounds simple data entry and administrabut is incredibly impor- tive tasks for the finance tant. If employees don’t team. have easy access to the (Omar Qari writes for expense policy, they Management won’t know what rules to Business follow. Businesses should Daily, which has been proconsider using an inter- viding sound business news, nal website or expense insight and advice since management tool to 1937. Distributed by Tribune make sure employees can Content Agency, LLC.)
It’s Income Tax Time!
AP Photo
Dominic Hrabe holds the family dog, house for two nights after using airbnb to Gracie, in front of his home that he is rent their place to people attending the renting out for Super Bowl weekend NFL Super Bowl football game. in Phoenix. The family is vacating the
ON-DEMAND From Page 8
now, you need to start reporting that rental income and the expenses associated with it,” Pickering said. Deductible expenses like utilities must be allocated according to the proportion of business versus personal use. Weltman recommends that people working in the on-demand economy set aside
money to pay their tax bill so it “doesn’t snowball into an amazing amount.” That includes making estimated tax payments. Jan. 15 was the last date to pay estimated taxes for the fourth quarter of 2015. For more information, Publication 334 is the IRS’ Tax Guide for Small Business. Publication 527 focus on rental income and expenses, and Publication 463 provides information on the use of a car for business.
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2016 Tax & Finance
5 tips to protect your identity and celebrate refund season (BPT) — The holidays may be over, but refund season is just beginning, and there’s a lot to celebrate. This tax season, while consumers are eagerly awaiting their refund, tax preparation companies, tax officials and the IRS are working together to combat one of the fastest growing threats for tax season 2016 — tax identity fraud. Based on IRS data, nearly 3 million people have been victims of tax identity theft since 2010. Every year, criminals use increasingly advanced tactics — particularly geared toward taxpayers filing online — to steal taxpayers’ personal information, file fraudulent tax returns in their names and steal their refunds. After fraud occurs, it can take months and multiple steps by the victim to access a stolen refund and regain an identity with the IRS. Protect your identity — and your refund — with these five tax tips from H&R Block:
Photo courtesy of Brandpoint
By following a few simple and common sense practices, you can make it nearly impossible for criminals to compromise your personal information and potentially steal your identity during tax filing season.
yourself (DIY) space. When using at-home tax software, such as H&R Block’s DIY products, create a strong password with capitalization, numbers, and symbols or avoid the risk by visiting a tax preparer.
1. File early and be cautious. Filing your taxes early will allow you to claim your refund before a criminal can. Before you file, protect your personal information by installing 5. Use tax identity protection sera security software with anti-virus vices. Visit the IRS website to learn and firewall protections. more about how to protect your 2. Keep your paper records safe. identity. Additionally, H&R Block’s Shred records you are no longer Tax Identity Shield provides clients using and keep your Social Security with tools to reduce the risk of tax card and any sensitive documents identity theft and resolution services, if a client becomes a victim of under lock and key. tax identity theft. 3. Do not respond to individuals This tax season, take away the posing as a tax agency. The IRS does not demand immediate payment stress and put the “fun” back in without sending a bill in the mail “refund” by filing early. Plus, this first. If you receive a phone call or an year, you’ll have a chance to boost email with an external link, do not your refund — as an extra incentive, click on the link or share personal H&R Block is celebrating refund or financial information unless you season by awarding $1,000 a day to personally know the person on the 1,000 people. The first drawing for this limited time offer was Jan. 16. other end. Visit hrblock.com/grand for rules 4. Change your password. The and an alternate method of entry. 2015 tax season saw a significant Enter early to protect your refund increase of tax fraud in the do-it- and for more chances to win.
elderly From Page 7
pay for it can receive help with their taxes.” DELAYED REFUNDS
DUE TO ANTIFRAUD FILTERS Some of the filters used by the IRS, while increasingly necessary to identify tax fraud, have a high false positive rate. That
The Crescent-News, Defiance, Ohio - Thursday, January 28, 2016
Helpware From Page 7
the program, a code is sent to your phone or email account, and you can’t sign in without it. That’s the kind of security that convinced me to use the online version. Other online versions, now on sale, start at $35 and go to $80, the latter for business owners (not including Amazon or IBM, of course). Comes the dawn of a new day, corporate taxes will be simple enough that a $55 program will suffice. There also is a version for people who own property and have investments, but that version probably isn’t appropriate for Donald Trump. Most tax filers will use the Deluxe version for $35. Those are sale prices; they could change as it gets closer to serious tax time. That’s if you use the online versions. Free e-filing of federal returns and state returns (but no free-filing) are included. I always e-file, since I get confirmation that my return was accepted by the IRS within a matter of days. Refunds arrive very quickly, as opposed to mailing the return to the IRS. For folks who want the download or CD versions, prices are higher, and there’s no free version. A version for corporations and partnerships costs about $150. Again, Amazon or Microsoft corporate bean counters need not apply. I’ve been using TurboTax ever since I discovered that the accountant who was preparing my taxes was using a similar program and charging me $500 (in 1990 dollars). Through the years, the program has gotten slicker, more friendly and more able to handle complex situations. The latest version, TurboTax for the 2015 tax year, has a breezy feel to it, almost as if Mr. Rogers were doing the interviewing. I’m waiting for the day when the interview is actually vocalized to the point where it would seem like you’re in your accountant’s office with
causes refund delays for hundreds of thousands of legitimate taxpayers. The filter that halts returns potentially tied to identify theft, for example, had a 36 percent rate of false posi-
the lights down low, a glass of sherry in your hand. Entire tax returns don’t have to be done in one sitting. Each time you sign out of the online version, the return is saved to the cloud. That means you can access and work on your return from any device capable of connecting to the Internet. There was a time when I would hunt through a drawer full of receipts and bank statements before I did my return. And then I discovered Quicken, which allows you to download bank account, credit card and investment transactions on a daily basis. If you pay your bills online through financial institutions you can either pay bills on the bank’s website or pay directly through Quicken. The advantage of using Quicken is that you can transfer all your tax-related data into TurboTax. True, it takes a few minutes a day, or week, to download those transactions, but the convenience it provides at tax time more than makes up for the daily downloads. Intuit makes tax experts available at no cost in the event that you need help preparing your taxes. As an added touch, you’ll be able to see the expert on your monitor, but he or she won’t be able to see you. Free basic help on running the program is available, too. The folks at Intuit pledge that you’ll get connected to an agent within one minute. With a base of 30 million people using the various versions of TurboTax, that’s quite an undertaking. As you do your taxes, the program also tells you why your refund or liability is changing. Folks who have complex tax issues still might benefit from having their tax returns done by professionals, but for many people, TurboTax, either the online or the download/CD versions, should do the job just fine. (Harold Glicken is a retired newspaper editor. He can be reached at helpware.column@gmail.com <mailto:helpware.column@gmail. com>.)
tives last year, according to the report. Compounding the hassle for taxpayers caught up in the filter’s web was that they were asked to verify their identification over the
phone or online. But for three straight weeks during last year’s filing season, fewer than 10 percent of taxpayer calls about those flagged returns were answered.
The Crescent-News, Defiance, Ohio - Thursday, January 28, 2016 2016
Donate to a charity? IRS sets rules for taking a deduction
Tax & Finance
WASHINGTON (AP) — Did you donate a car to a charitable organization in 2015, or some clothing to the church thrift shop? Maybe you made a cash contribution to your alma mater or in memory of a loved one. If you want to take a deduction for the donation, you have to itemize on your tax return. But there’s more to it than that. First, you have to make sure the organization to which you’re donating is a qualified charity. And the money can’t be targeted to a particular individual, even if it’s going through that charity, said Dave Du Val, vice president for consumer advocacy at taxaudit.com. He uses this example: Say you’re driving to Goodwill to drop off some clothes and you see a homeless man in the street. You give him one of the coats that you were planning to donate. “It suits (you) well in the next life, but it’s not a deduction,” he said. Similarly, if your neighbors’ house burns down and your church starts a fund to help them rebuild,
a contribution to the fund isn’t deductible, Du Val said. However, if the church has a fund to help people in need, but not specifically your neighbor, you could take the deduction. For a cash contribution, you need proof that you made the donation. That could be a canceled check or an itemized line on your credit card statement. So, Du Val said, if you put a $10 bill in the bucket of a Salvation Army bell ringer, that’s not deductible. But if you wrote out a check to the Salvation Army and put that in the bucket, it is. If the contribution is more than $250, you also will need a receipt from the organization. The Internal Revenue Service makes clear, “If you get something in return for your donation, your donation is limited. You can only In this 2010 file photo, shoppers go deduct the amount of your into a Goodwill store in Paramus, N.J. gift that is more than the Did you donate a car to a charitable value of what you got in organization in 2015 or some clothing to return.” The IRS lists possible items received for donations, including meals,
ABLE
for the credit based on filing status and the number of children in the household. For the 2015 tax year, the maximum credit is $6,242 if there are three or more children in the home. It phases down to $503 for taxpayers with no children. “If the taxpayer’s child is disabled, the age limitation for EITC is waived,” the IRS said.
From Page 6
The National Disability Institute said the credit is critical “considering the disproportionate number of Americans with disabilities living at or below poverty, as compared to their non-disabled peers.” There are income limits
• Charity, Page 12
retirement From Page 5
per year for those over 50. The money is invested in U.S. Treasury retirement savings bond and will earn interest until the value of the account reaches $15,000 or you have held it for 30 years. The account can be rolled over to a Roth IRA at any time. “It’s kind of a cool program for someone who is just getting started but maybe understands the value of savings,” Pickering said.
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AP Photo
the church thrift shop or Goodwill store? If you want to take a deduction for the donation, you have to itemize on your tax return.
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2016 Tax & Finance
The Crescent-News, Defiance, Ohio - Thursday, January 28, 2016
Key numbers to know as you prepare your tax returns By Associated Press
Taxpayers who are 65 or older or who are blind may be eligible for a higher standard deduction. ALTERNATIVE MINIMUM TAX THRESHOLD • $83,400 for married couples filing jointly. • $53,600 for singles and heads of household. INCOME TAX BRACKETS • 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, 39.6 percent.
Key numbers to know when filing your 2015 taxes, according to the Internal Revenue Service: PERSONAL EXEMPTION • Each personal or dependent exemption is worth $4,000. • Phase-out begins at incomes of $258,250 for individuals, $284,050 for heads of household, $309,900 for married filing jointly. STANDARD DEDUCTION • $12,600 for married couples filing a joint return, and qualifying EARNED INCOME TAX CREDIT widows and widowers. To qualify, income must be no • $6,300 for singles and married greater than: individuals filing separate returns. • $47,747 ($53,267 married filing • $9,250 for heads of household. jointly) with three or more qualify-
ing children. • $44,454 ($49,974 married filing jointly) with two qualifying children. • $39,131 ($44,651 married filing jointly) with one qualifying child. • $14,820 ($20,330 married filing jointly) with no qualifying children. Maximum credit: • $6,242 with three or more qualifying children. • $5,548 with two qualifying children. • $3,359 with one qualifying child. • $503 with no qualifying children. CAPITAL GAINS • 0 percent if taxpayer is in the
Making last minute tax adjustments could save you money (BPT) — With 2015 coming to a close, it might be prudent to consider making adjustments to manage your tax liability. Compare your income now with what you anticipated when you set up your 2015 tax withholding or estimated tax payments. Is the income what you expected? More? Less? If more, do you need to increase your withholding or your estimated payments to ensure you’re not under withheld and subject to penalties? Remember, there’s a withholding safe
CHARITY From Page 11
merchandise or tickets. Charitable organizations often will include on your receipt the amount that is deductible. Congress, as part of the tax extender bill passed late last year, made permanent the ability of people 701⁄2 years old or older to roll over up to $100,000 from their IRA to a charity tax-free. Those who take advantage of that provision won’t have to count the distribution from the IRA as income. But there’s no double-dipping. If you make the direct donation, you can’t also deduct it on your return. Du Val said taxpayers who want to donate are “generally better off” if they don’t have to deal with the extra income and the resulting taxes. He said
harbor that allows you to pay either 100 percent of your prior year tax liability or 90 percent of your current year liability to avoid penalties. For those who make more than $150,000, the safe harbor is met when you pay 110 percent of your prior year tax liability or 90 percent of your current-year liability. Taxpayers with wage income, who have withheld less than they should for 2015 should consider paying more tax by adjusting withholding immediately.
the distribution also counts toward the required minimum distribution that IRA holders have to start taking at that age. What about deductions for contributions of clothing and other property? You can only deduct the fair market value of an item or what it would sell for at a thrift store, for example. “Even if the shirt is new and still has the tag on it, people aren’t going to go into the thrift store and pay $100 for it,” Du Val said. And there’s no deduction for sentimental value. If the non-cash donation is more than $500, you must fill out Section A of Form 8283 and file it with your return. If it’s more than $5,000, Section B also is required. You’ll also need a valid appraisal of the item in hand when you file your taxes, Du Val said.
If you donate a car, the deduction is not the fair value of the car but what the charitable organization sells it for, according to Du Val. However, there is an exception: If the organization gives the car to a needy family, for example, or uses it for an ambulance, you can take the fair market value, he said. In either case, you have to substantiate the vehicle’s value. Don’t forget that if you’re delivering the donation or doing other work for a charitable organization, you can deduct the mileage. The rate for 2015 was 14 cents a mile for using your car for charitable work. As the presidential campaign moves toward the first primaries and caucuses, taxpayers should be aware that donations to political candidates are not deductible.
10 percent or 15 percent income tax brackets. • 15 percent top rate if in the 25 percent, 28 percent, 33 percent or 35 percent income tax bracket. • 20 percent if taxed at the 39.6 percent rate. ESTATE AND GIFT TAXES • Exclusion of $5,430,000 for individual estates of people who died in 2015. • Gift tax exclusion of $14,000. Married couples can each give $14,000 to the same person before it becomes taxable. IRA CONTRIBUTIONS • Contribution limit: $5,500. • Additional contribution if 50 or over: $1,000.
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