Author: Eric Buechler

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CONGRESS PAVES A WIDE P.A.T.H. FOR TAXPAYERS

Countless taxpayers can cruise confidently into tax breaks on Jan. 19 – the beginning of the 2015 tax filing season – now that Congress has laid out an extraordinarily expansive PATH.

Yes, that’s an acronym for the “Protecting Americans from Tax Hikes Act of 2015.”  Packed with dozens of deductions, credits and other tax saving devices, it was signed by the President on Dec. 18. So those breaks are ready for your tax return.

Taxpayers should like it, because Congress carved a wide path with this law. It cemented into law some tax cuts that were temporary and due to expire; at the least, it extended popular tax breaks through 2016.

We can’t point out all of them at one time, but here are some that we at EricJohn Ltd.think particularly will benefit you, our clients, as you drive into the 2015 tax season!

Now Permanent

State and local sales tax deduction: Option to itemize state and local sales taxes paid OR income taxes.

  • Computer/technology costs:  They qualify as education expenses.
  • American Opportunities Act tax credit:  This credit applies to as many as four years of post-secondary education. Its phase-out based on income also was enhanced through 2017.
  • Employee mass transit passes:  This fringe benefit from employer now enjoys a permanent exclusion from income to a set limit.
  • Tax-free distributions to charities from retirement plans:  Donations made from IRAs and other permanently are excluded from income to a limit of $100,000 per year.

 Temporary Changes Through 2016

Mortgage debt exclusion for primary residence:  Excludes discharge of debt from gross income.

  • Mortgage insurance deduction:  Premiums are treated as mortgage interest, subject to a phase-out beginning at $100,000 of adjusted gross income.
  • Tuition deduction:  Qualified tuition and related expenses remain deductible to past limits.

Changes in Depreciation, Retroactive To 2015

  • Bonus depreciation continues:   Depreciation percentage on qualified property is 50 percent through 2017, with lesser percentage through 2019.
  • Section 179 expensing limitations:  A permanent extension of $500,000 allowance with phase out to $2 million, primarily affecting small businesses. The new law also eliminated some caps and embedded computer software as an allowed expense.

These are just a few of the revisions in this new PATH.  Want to delve deeper? Give Eric a call or an email.

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THEY’RE PHISHING BY PHONE AGAIN!

Tax season is still a few weeks away, but phishers and con artists steal from us taxpayers year-round.

The Minnesota Department of Revenue this week alerted Minnesotans about a recent phone campaign by thieves masquerading as IRS officials.  Beware of calls claiming that the IRS is suing you or taking other legal action, the agency warns. That’s simply not the way the IRS works.  Scammers will leave voice mail messages as well as live calls.

“Phishing” is a scheme designed to deceive people into giving away sensitive personal information, such as Social Security numbers or banking data.  Criminals can reach into bank accounts, set up credit cards and even collect refunds from false tax returns once they have a victim’s name and enough personal info.

Phishers also use emails to dupe their victims.

Check out this IRS Web site for more information on phishers and scammers:  https://www.irs.gov/uac/IRS-Urges-Public-to-Stay-Alert-for-Scam-Phone-Calls

Minnesota Revenue also offers free fraud alerts and email addresses for reporting suspicious calls at http://www.revenue.state.mn.us/use_of_information/Pages/fraud_alerts.aspx.

Identity theft still is a threat, both in and out of tax season!

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GET A GRIP ON EMPLOYER ISSUES AT A ROCHESTER LANDMARK

Are you stumped by employment taxes?

Do you know if Homeland Security reports required for new hires?

Can you use a refresher on your employer responsibilities?

The Minnesota Business Tax Partnership is bringing federal and state experts to Rochester on Dec. 17 for a free seminar that will dig into workforce issues, including employment taxes.

It’s being held at the landmark Plummer House in Rochester from 8:30 a.m. to 4 p.m. that day.  While there’s no charge, the organizers are requiring advance registration. Go to http://www.uimn.org/uimn/employers/help-and-support/educational-seminars/seminar-schedule.jsp  to make them.

Here’s another long, online address where you can see an agenda and find more information: http://www.uimn.org/uimn/employers/help-and-support/educational-seminars/sem-desc.jsp.

I took a glance at the agenda, and you’ll receive plenty of guidance about regular state and federal filings, online reporting systems, labor standards, employment taxes and hiring new employees among other related topics.

Whether or not there’s a seminar in town, you can call us at EricJohn Ltd. for expert advice about business plans, financing and taxes.

 

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FUTURE TALK: IRA AND 401(k) DEDUCTIONS FOR 2016

If you’re prognosticating for 2016 already, you’ll be happy to know the Internal Revenue Service has got your numbers. The tax agency recently set the official limits for IRA, 401(k) and pension contributions. In short, there is some – but not much – change.

This will get a little detailed.  We’ll spare you the complexities of pension plans, which also were announced.

So, here’s a general thumbnail from IRS Central:

401(k), 403(b) AND MOST 457 RETIREMENT PLANS

Contribution limits for 2016 remain the same as for this year at $18,000. The cost-of living index did not reach its trigger point for an upward change under federal law.

  • The catch-up contribution for employees who are age 50 or older also remains unchanged at $6,000

TRADITIONAL IRAs and ROTH IRAs

  • Annual contribution limits to Individual Retirement Arrangements stay at the 2015 level. $5,500.
  • The catch-up contribution likewise doesn’t move. It still will be $1,000 in 2016, again setting the maximum contribution for working 50-year-olds and up at $6,500.
  • The starting point for phasing out contributions to a Roth IRA generally will increase $1,000 in 2016. It will begin at $184,000 of  adjusted gross income for married couples filing jointly, and at $117,000 in AGI for single taxpayers and for heads of households
  • The phase-out for the deduction allowed for a traditional IRA also will go into effect at $184,000 in income instead of the current $183,000 for a married couple filing jointly in one type of situation. It occurs when one spouse holds another workplace retirement plan in addition to the IRA and one spouse does not.

RETIREMENT SAVER’S CREDIT

This credit also is subject to a limitation, based on adjusted gross income, and the limit will increase a few hundred dollars for most categories of taxpayers in 2016.  The credit applies to low and moderate-income taxpayers who make retirement plan contributions. Here are the AGI levels where the credit disappears:

  • Married filing jointly — $61,500, up $500 from 2015.
  • Head of household — $46,125, up $375 from this year.
  • Single or married filing separately — $30,750, up $250 from current range.

Otherwise, most of the limitations affecting retirement plans won’t change in 2016. For a complete rundown, take a look online at www.irs.gov/uac/Newsroom/IRS-Announces-2016-Pension-Plan-Limitations;-401(k)-Contribution-Limit-Remains-Unchanged-at-$18,000-for-2016.

The IRS even cites the tax codes involved. Of course, if you’d rather not dig into Section 414(v)(2)(B)(i)  for catch-up contributions, EricJohn Ltd. can dig for you!

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I’VE BEEN THINKING ABOUT TAXES IN INDIA

While we American businesses complain about our tax burdens, at least the overall system is timely and somewhat consistent!

In the huge nation of India, tax disputes over mergers and acquisitions have landed international conglomerates such as Nokia and Vodafone Group in court with billions of dollars at stake. One irritating law even allows tax collectors to reach backwards in time.

Bloomberg News recently described India’s tax practices as “whimsical.” In fact, the news service says none of 21 major insurance companies doing business in India will write what is called “tax indemnity” insurance, a common coverage in cross-border mergers. Underwriting deals in a place “where the law changes retrospectively is a challenge,” one official from a worldwide insurer said in a recent Bloomberg article.

India is not the only country considered by insurers to be too big a risk. On the other hand, the United States ranks among countries with relatively stable and transparent systems where insurers will offer the tax-related coverage, the official said.

ERIC’S TAKE!

 While our U.S. system needs more funding to improve services to taxpayers along with simplification of its tax codes, it’s much better than most tax systems.  Next up?  How about fixing how politicians spend our tax dollars? Maybe we should be pairing elected officials with an “accountant” administrators to keep them from overspending!

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BE ON GUARD IF THEY SAY “IRS CALLING”!

The Internal Revenue Service is warning that scammers are getting more sophisticated.

They’re still using past ploys, such as posing as IRS agents and sending emails or letters with official-looking letterhead. Now the thieves also are spoofing the caller IDs on taxpayers’ phones, making it appear that the call is coming from the IRS. Some even are giving panicked victims directions to local banks for money or debit cards to pay taxes. And, in another new twist, some are embellishing their scams by providing a real IRS address for victims to send receipts after a supposed payment.

The tax agency says scare tactics often are part of the con artists’ pitches.

SIGNS OF FRAUD

Here are some ways to tell if you’re being scammed. The IRS says its representatives will NOT:

o Phone you about taxes – even if you do owe money – until the agency has sent you a formal bill. IRS agents also do not demand immediate payment by phone or computer. And they don’t get angry and badger taxpayers.
o Threaten to have you arrested by local police or any other agency for not paying taxes.
o Request credit or debit card numbers over the phone – or require a certain type of payment, such as a debit card.
o Discuss any payment without offering you an opportunity to question or to appeal the amount due.

Also, the IRS says it does not send emails, text messages or social media messages asking for any kind of personal or financial information.

TAKING IT FURTHER

If you actually do owe taxes, call the IRS at 1-800-829-1040 for official help.

If you’re sure you don’t owe taxes, you can report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484. You can also contact the Federal Trade Commission at https://www.ftccomplaintassistant.gov and include “IRS Telephone Scam” in your complaint.

Sadly, these illegal tax scams sometimes do succeed. The U.S. Treasury reports close to 4,000 taxpayers nationwide have lost about $20 million to tax thieves since fall 2013.

For more information, visit www.IRS.gov and type “scam” in the search box.

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PHONE TIP CAN BACK UP SCHOOL SUPPLIES DEDUCTION

Parents, that smartphone you’re carrying can do more for school shopping than reach the children at the other end of the discount store. It could be a convenient way to prove a tax break.

Many Minnesota families with children attending grade schools, high schools and home schools can subtract costs of school supplies and other expenses from incomes on state tax returns. Even better, some families with limited incomes can qualify for tax credits, the most powerful breaks available. Credits offset state taxes on a dollar-for-dollar basis.

While stocking up on pens, notebooks, erasers, calculators, etc., this month, try this tip:

o After check-out – perhaps in the car between stores – take photos of  those itemized receipts with your cell phone.
o Give each picture a name to describe the purchase, such as “2015 school supplies John.”
o Place the photo in a folder in the phone’s memory, or, better, email it to yourself for saving with other tax notes. You’ll have it when you need it next April.

That little click of the phone’s camera could have a significant effect. The Minnesota subtraction can lower income on your 2015 tax return as much as $1,625 for grade school students and $2,500 for high schoolers.

How do you know which expenses will qualify and which won’t? Minnesota’s Department of Revenue offers two fact sheets to help with those details. Look online for Income Tax Fact Sheet 8, called “K-12 Education Credit and Subtraction.” Eligible expenses for home schooling are spelled out in Income Tax Fact Sheet 8a.

In case you’re wondering, that handy smartphone can help bag a tax break for education, but it can’t be one. “Cell phones” is the first item on Minnesota Revenue’s do-not-include list in the fact sheet about the K-12 deductions and credits.

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PROCRASTINATORS BEWARE; HEALTH PREMIUMS MIGHT BE AT RISK!

Did Obamacare help pay for some of your health insurance premiums in 2014? If so, you might have to act now to assure that you’ll receive similar payments next year, in 2016.

Taxpayers who filed their 2014 income tax returns on time – and that is most of us – don’t need to worry. Neither do people who have private coverage through their employers or private insurance programs.

But anyone who was insured through the public “health insurance marketplaces” AND has not yet submitted a 2014 tax return needs to get it filed, pronto. The Internal Revenue Service is saying that any 2016 assistance in paying premiums depends on it. Even taxpayers who received automatic extensions until Oct. 15 should get their 2014 returns in as soon as possible.

Here’s why. Under the cost-sharing system in the Affordable Care Act (aka “Obamacare”), the government helps people pay insurance premiums through a “premium tax credit” on their income tax returns. People also can choose to have the government pay those premiums to insurance companies when bills are due. Anyone who filed a federal income tax return already should have accounted for those “advance payments of the premium tax credit,” abbreviated APTC.

But, apparently, about 710,000 taxpayers who received APTC had not filed their 2014 returns by the end of May. On July 17, IRS Commissioner John Koskinen told Congress, “We are urging these taxpayers to file an electronic tax return to reconcile their APTC within 30 days.”

Another 360,000 filed for automatic extensions, and the IRS wants to get those returns in “as soon as possible,” according to an announcement.

The government and the marketplaces will be figuring out who can receive 2016 payments this fall. In short, if you haven’t filed a tax return with proper paperwork, the government might not send out the critical premium payments on time or at all.

By the way, people receiving government help with premiums payments must file a tax return – even if they would not normally file one because of low incomes or other reasons.

The 2014 tax return is the first one to include health insurance reporting under Obamacare. EricJohn Ltd. is equipped to file your late or extended return. Of course, we’ll also deal with the advanced premium tax credit.

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MINNESOTA REMINDER!

Homeowners and renters, don’t skip one last piece of 2014 paperwork!

The preferred date for claiming a state property tax refund is Aug. 15, just about a month away.

Not every homeowner or renter will reap a refund. But it might pay to crunch a few numbers nonetheless. Check into the prospects with the Minnesota Department of Revenue’s form, called the “Homestead Credit Refund for Homeowners and Renters Property Tax Refund.”

It’s available online at www.revenue.mn.us, navigate to “For individuals” and you’ll see “Property Tax Refund.”

Minnesota Revenue really wants you to file by Aug. 15 this year, but the final deadline actually is Aug. 15, 2016.

More later about the details. Of course, check in with us at EricJohn Ltd. for personal guidance on refunds and taxes.

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GOODBYE (FOR NOW) TO MINNESOTA REFUND FOR POLITICAL GIVING!

Planning to back your favorite state politicians with a few bucks in 2016? Feel free to send them a check, as always. But don’t expect the state to reward your political action with a refund, as in past years.

On July 1, Minnesota lawmakers are shutting the door on refunds for political contributions. Minnesota’s Department of Revenue used the word “suspended” to announce the change; it lasts until June 30, 2017.

State residents have been able to claim a refund as large as $50 a person ($100 for married couple) for donations to Minnesota political parties or to individual candidates for major elected offices, ranging from governor to state representative. It’s done on Minnesota Form PCR and requires receipts.

There’s still a little time left. Contributors can capture the refund for any donations made through June 30, 2015, Minnesota Revenue says. The PCR form must be submitted as of April 18, 2016.

http://www.revenue.state.mn.us/individuals/individ_income/Pages/Refund_for_Political_Contribution.aspx

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