Author: Eric Buechler

Running behind on your tax returns this year?  If you’re still sorting out receipts and penciling in numbers,  it might be time to start thinking about an extension!

We say “might” because, this year, you still have the weekend to wrap things up. The Internal Revenue Service will accept 2015 returns filed or mailed through the end of the day on Monday, April  18.   (The extra time has to do with a holiday in Washington, D.C.)

If you still can’t make that deadline, it’s time to join the multitudes of taxpayers asking for an extension.

The extension adds another six months to the normal deadline, making it Oct. 17.  The IRS won’t ask you why you need it.  BUT – and it can be a big “but” – the IRSstill expects you to estimate income and pay any taxes by the normal deadline.

You accomplish that on Form 4868 or “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.” The extension generally is automatic. For a copy, see http://www.irs.gov/pub/irs-pdf/f4868.pdf.

The clock is ticking with this. Whether you’re sending it electronically or by “snail mail,” the extension form and any payments must be recorded or postmarked by the end of the day on April 18 to avoid penalties.

Now, from a technical standpoint, if you are absolutely certain that you will not owe any income taxes, you don’t need to file Form 4868. You can file your normal 1040 return later in order to capture your refund.

However, to be safe, we at EricJohn Ltd. advise filing the application for extension, whether or not you think you need it.  Miscalculations can happen, and there is a late filing penalty in addition to late payment penalties for any unpaid tax.

Finally, don’t forget any state taxes you owe.  In Minnesota, you don’t have to file an extension form. BUT – just as with the federal return – you must pay an estimate of tax due to avoid penalties. Minnesota Department of Revenue accepts tax payments through its Web site.

We at EricJohn Ltd. wish you easy and accurate filings for your 2015 filing season!

 

April 1 has a reputation as April Fool’s Day.  But for retired taxpayers who turned 70½ last year, it’s time to make a wise financial move.

April 1 is the deadline for retirees to take their first required distributions from traditional IRAs and employee retirement plans. The deadline also applies to SEP and SIMPLE IRAs, but not Roth IRAs, the Internal Revenue Service reminds us.

IRA owners who reached 70½ during 2015 – they were born after June 30, 1944, and before July 1, 1945 – have until April 1 (this Friday) to begin taking their money out.  The initial distribution is for 2015; the IRA owner also will have to take a “required minimum distribution” for 2016 by Dec. 31.

The IRS notes that some employees who still are working can wait to make their first withdrawals until April 1 of the year after they retire.

Take a look at IRS Publication 590-B, which spells out the details and contains tables for calculating distributions. It’s available at www.irs.gov.. Trustees of IRA plans also are required to provide a required minimum distribution or to offer to calculate one for retirees, the IRS notes.

Your IRA also has tax implications. Contact us at EricJohn Ltd. to explore them!

 

 

By now, you know the raw tax numbers – income, business expenses etc. – going into your 2015 return. But how familiar are you with the tax preparer who act on your behalf to send them to Internal Revenue Service and state tax collectors? Let’s take a few minutes for consumer savvy here in the thick of tax time!

Indiana’s Department of Revenue recently suggested five questions your tax preparer ought to be able to answer to your satisfaction.  We at EricJohn Ltd. also will answer them with our approach.  (Well, after all, this is OUR blog!)

Here’s a starting tip. Before hiring a tax preparer, you might want to check in with the Better Business Bureau or your state’s board of accountancy for any reports of adverse business practices or formal sanctions.

You also might be able to check the preparer’s professional credentials related to tax work. For example, Eric Buechler, the owner of EricJohn Ltd., holds the credential of an enrolled agent (EA), a credential for expertise that is recognized by the IRS.

Here are five questions and answers prompted by Indiana Revenue, followed by EricJohn’s approach (Italic type):

•  Q:  If I hire you, how can I contact you both in AND out of tax season? A: Find a preparer who will be available throughout the year in case of questions from tax agencies.                                                                                                                                  EricJohn Ltd. is available year-round via email, telephone and Webex meetings online.
• Q:  How do you protect my personal information and tax return?  A: Paper documents should be kept locked in secure containers and destroyed when no longer needed. Digital data should be encrypted in computer systems used for filing returns.                                                                                                                      EricJohn Ltd. provides a secure portal and Web “cloud” site for sending and receiving documents. All access to that information and to tax returns is password-protected. In addition, we use anti-virus and malware software, along with restrictions on downloads to flash drives.
• Q:  Will I receive a copy of my completed tax return(s)?  A:  Insist on it from your tax preparer. You need a copy in case of future questions from the IRS or amendments you make to the return. Always have a record.                                        EricJohn Ltd. provides you with an electronic copy via email using a password or a paper copy by regular mail.
• Q:  Who will sign my return(s)?  A: The tax preparer always should sign the return and include his/her PTIN (tax preparer identification number). You also will sign or authorize your signature electronically, of course. Never sign a blank tax return, even if the tax preparer promises to enter the numbers for your convenience.                                                                                                                              Owner Eric Buechler signs all returns prepared by EricJohn Ltd.
• Q:  How do you charge for preparing returns?  What are your service fees?  A:  Do not hire a tax preparer who charges a fee based on the amount of a refund. “Not only is this practice unethical – it is illegal, too!”  Indiana Revenue notes.               EricJohn Ltd. bases its fees on the forms being completed. There also may be charges for extra work, such as calculating the tax basis of a stock or researching an unusual tax situation.

There’s still time left in tax season to make a wise move and contact EricJohn Ltd. about your 2015 return!

If you’re still waiting for your year-end report from MNsure — the health insurance marketplace for Minnesota – you’re not alone. Twin Cities news outlets reported Wednesday (3/9) that a little less than 18,000 MNsure clients still don’t have the 1095-A certifications of insurance, which should have been mailed by Jan. 31.

MNsure’s CEO did say – but could not guarantee – that all forms will arrive before the April 18 deadline for filing taxes. However, some will not make it by March 15, a much more comfortable date for preparing returns. MNsure has delivered close to 62 percent, or 47,000 forms.

The 1095-A is important for tax returns of MNsure clients and others who bought insurance last year on federal or state marketplaces. It confirms coverage and also reports any federal aid received for paying premiums.

What should you do if it hasn’t arrived? This may be inconvenient, but the Internal Revenue Service says “Wait.”  Don’t file your tax return without the information on it. That might mean filing tax extensions instead of fully completed returns.

Allison O’Toole, MNsure’s top executive, said next week she plans to release advice for any clients who haven’t received forms.

For help navigating difficult tax situations, contact Eric at EricJohn Ltd. He’s an Enrolled Agent certified by the IRS.

You’re bound to run across this number for your 2015 tax returns. For the first time, the Internal Revenue Service is requiring health insurance companies and employers to verify health coverages for their clients or employees. The report comes on Form 1095, and, basically, every insured person in the United States should be listed on one. (There are exceptions, of course, but I’m not going to attempt them here.)

The IRS enforces the federal Affordable Care Act, which enables universal health insurance. Last tax season for the first time, taxpayers verified on their federal returns that they were covered for all or part of 2014.  For many, that amounted just to a check mark on their returns  (although it could get much more complicated).

The 2015 return works much the same, but taxpayers this year also are receiving proof of insurance at tax time. The proof is IRS Form 1095. It has three versions that follow the alphabet.

• 1095-A   It comes to people who were insured through one of the federal or state-created marketplaces for health insurance, such as MNsure in Minnesota. Those clients received the form in 2014, as well, so many will be familiar with it. Form 1095-A (called “Health Insurance Marketplace Statement”) should have arrived by Feb. 1.  But, if it hasn’t, don’t ignore it. The IRS suggests that affected taxpayers wait to file their 2015 returns until they have it in hand because it may contain details important for filing.
• 1095-B   This will come from private health insurance companies or from some small employers, particularly those who are self-insured. Don’t panic if this has not landed yet in your mailbox. The IRS extended the deadline for insurers to give out 1095-Bs until March 31.
• 1095-C   Millions of taxpayers will receive the C version from their employers. People working for companies or organizations with more than 50 employees can expect to see the 1095-C.  But maybe not yet. The IRS also extended the deadline for employers to provide this form until March 31.

Here’s something to note. All the 1095s are information statements, so taxpayers do not submit them to IRS when they file their returns. Also, the IRS says people getting 1095-B and 1095-C forms can file returns before they arrive, using their own records.

In an upcoming post, we’ll provide you with some quick-hit sources for health insurance reporting. As always, EricJohn Ltd. can lead you through the complexities of ACA reporting. See our Website!

MN TAX FORMS: SOME APPEARANCES AND DISAPPEARANCES FOR 2015

Do you use your prior-year tax return as a jumping-off point for this year’s forms?  Minnesota taxpayers generally can match up their 2014 returns with their 2015 forms without many changes – except for the different numbers on the lines, of course.

But Minnesota Department of Revenue and the Legislature did add and subtract items important to some state taxpayers. Here are a few:

 Minnesota Political Contribution Refund.  As we reported earlier, it’s gone, at least through mid-year 2017. Previously, the benefit returned as much as $50 to politically active individuals and $100 to marrieds filing together. But Minnesota taxpayers still can claim contributions they made during the first six months of 2015. They use Form PCR, which has been updated. (See  http://www.revenue.state.mn.us/Forms_and_Instructions/pcr_15.pdf .)  Be prompt. April 18 is the absolute deadline for this form. No extensions or amendments are allowed.

Reading Tax Credit.  This credit was authorized only for the 2014 tax year and is not available for 2015. It was a break to help families with children who showed reading deficiencies and, at the same time, did not qualify for individualized education programs. Parents could take the credit for specialized tutoring or reading-related instruction.

Reporting of Mortgage Insurance Premiums, etc.   Welcome to Form M1NC, which flows into Form M1M, which flows into Form M1. State legislators never adopted federal changes made to tax laws during 2015. So, mortgage insurance premiums that are deducted on federal Schedule A are not deductible and must be added back into Minnesota tax forms. Other deductions, exclusions or depreciation amounts from federal returns also are affected, with some involving recalculations to conform to Minnesota’s rules.

Working Family Credit.  The credit, which is the Minnesota equivalent of the federal Earned Income Tax Credit, still exists for full-year and part-year Minnesota residents. However, non-resident taxpayers – for example, Wisconsin residents who work in Minnesota – no longer qualify for the credit.

We at EricJohn Ltd. are used to dealing with Minnesota’s year-to-year tax changes, big or small. Let us know if we can help this tax season!

Many of us taxpayers now are waiting for something else before filing our tax returns. It’s not the Internal Revenue Service or state tax collectors like the Minnesota Department of Revenue getting a late start. They began accepting 2015 income tax returns on Jan. 19.

But those of us who are employees – who work for someone beside ourselves – probably still are waiting for critical wage reports for their returns. Employers have until Jan. 31 to send out W-2 forms and some 1099 notices, and they often take at least that long.

Taxpayers who have investments likely will wait even longer for their 2015 reports to arrive. In many cases, investment houses, brokers, mutual fund companies, IRA custodians, etc. have weeks longer to assemble last year’s results for clients.

We’re caught in the lag time, but that doesn’t mean we’re stuck on “idle.”  There probably are plenty of last year’s financials to pull together so you’re ready to go when those key documents arrive in your mailbox or online. So, use your lag time!

Here are some essentials you’ll need to prepare for tax filings both before and after Jan. 31:

• Receipts to support deductions and business expenses (if you have self-employment income, too). Place them in distinct categories so that you or your accountant will be able to quickly add them for the return.
• Some specialized items.  Statements of post-secondary tuition payments from schools, if you intend to claim those fairly generous deductions or tax credits involved. In Minnesota, find your auto license fees and figure how much you might be able to deduct on your federal Schedule A. Do the same for home mortgage interest from your lender’s Form 1098.
• Any changes to family status. Have documents if appropriate.

One preparation tip is simple. Pull out the prior year’s tax returns and use them as starting points. Of course, you’ll need to adjust for your 2015 circumstances.

Here at EricJohn Ltd., we send out a “tax organizer” to help clients pull together the ingredients for their 1040s and M1s (Minnesota). It prompts them with pre-filled data from the prior year’s returns. It also speeds up tax preparation!

Organize and prepare your 2015 tax returns by contacting eric@ ericjohnltd.com or (763) 537-3244.

Many taxpayers will be looking backwards to 2015 finances as the filing season for income tax returns gets underway (on Tuesday, Jan. 19). But it’s going to pay to focus forward to 2016 now for one essential chore. If you haven’t locked in health insurance for the coming year, you’ll need to act by Jan. 31 to keep penalties as low as possible.

Remember the Affordable Care Act, also known as Obamacare?  That federal law requires everyone – with few exceptions – to be covered by health insurance and to declare it on federal tax returns. Deadlines for purchasing affordable insurance through the ACA expire by the end of this month.

Most people already have their coverage in place. For example, taxpayers covered by employer-provided health insurance are not affected. The deadlines apply to residents who purchase through a low-cost federal or a state “marketplace” created by the ACA.  The marketplace for Minnesota residents is called MNsure. See https://www.mnsure.org/

Here’s the reason for the rush. MNsure and similar insurance exchanges only accept new enrollments for insurance during a three-month window each year, unless there are special circumstances. We’re close to the end of the open enrollment period on Jan. 31.

Actually, the deadline for full-year coverage for 2016 was Dec. 28 and already has passed. But residents still can obtain 11 months of insurance – from February through December – by signing up with MNsure and selecting a plan through Jan. 15. Enrollment is available online.

Likewise, residents who enroll in MNsure between Jan. 16 and Jan. 31 still can buy 10 months of insurance (March 1-Dec. 31).  Those with part-year plans might pay tax penalties for months in which they did not have insurance.

After Jan. 31, residents won’t be able to buy health insurance through the marketplaces until the open enrollment period for 2017 begins again, probably  in the fall.  Of course, residents always can check to see if they qualify for “special” enrollments.

One important improvement this year is people with insurance will receive notices from their marketplaces or their employers confirming that they are covered.

Health insurance was a new addition, beginning with the 2014 tax return. We at EricJohn Ltd. are ready to help with the new ACA reporting requirements.

 

 

It’s the final day of the year, and many of us still can take one quick tax action before the famous crystal ball drops in Times Square – or actually an hour later here in the Midwest time zone!

Make a cash donation; contribute unneeded clothing, etc. to a favorite charity. After all, it is the season of giving!

If you can mail a check, send an electronic donation or deliver used – but still useful – stuff to your local charity before the stroke of midnight, you can deduct the value of that giving on your 2015 tax return.

 

The key to deducting is fair market value, Eric notes. Cash and credit card donations are obvious. You can take the dollar amount given.

Clothing and other goods are valued in current condition – not at the price tag when purchased new. The Internal Revenue Service reminds us that household items and apparel must be in “good, used condition” to be acceptable.

 

There are ways to figure out reasonable value. For example, even sales of comparable items listed online at Ebay can verify current market value; don’t forget to print off that proof.  Just about any acceptable donation can be valued at 10 percent of the original cost, we at EricJohn Ltd. suggest.

Here are a few details about deducting charitable gifts:

• Eligible charities: The IRS maintains a database called “Select check” at https://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check . In addition, churches and government agencies that are not shown also qualify.
• Money donations:  A cancelled check or credit card statement with the name of the charity proves donations up to $249. IRS wants an acknowledgment from the charity from $250 up.
• Household items: The charity’s statement is required for donations starting at $250. It’s best to get some type of acknowledgment slip for any donation.  But, especially, if dropped at an unattended site, make sure to have a written record of the items and their values. Also, Eric suggests taking a cell phone photo of items donated as a back-up. You probably won’t be donating items over $500 at this late date, so contact Eric in 2016 for direction on those large gifts.
• Charity mileage:  You can deduct 23 cents a mile for driving donations to a charity’s store/drop-off site.

Finally, many, but not all, taxpayers can deduct charitable giving. Those who expect to use the standard 1040 will take donations as part of a group of deductions on Schedule A. Those who expect to file short forms 1040A and 1040EZ might or might not benefit from donations.

You’ll find a summary of IRS charitable giving rules at https://www.irs.gov/Credits-&-Deductions/Individuals/Deducting-Charitable-Contributions .

Whether or not you make a last-day donation, Happy New Year and best wishes for 2016 from EricJohn Ltd.!