Burchett Financial Services

Transcription

1 Burchett Financial Services CHECKLIST Again, it is extremely important for you to bring all the following to your appointment: All W-2 s, 1099 s and all other income items such as 1099 INT, 1099 DIV or 1099B (broker statements from investment companies). If you sold stock, please provide cost basis or what you paid for the stock sold. If a stock purchase plan, ask your company or broker what is the cost basis. Bring a prepared list of questions to ask during your appointment time. If you have refinanced, purchased or sold a home or any other properties during the year please bring closing statements and refinance paperwork. Don t forget your itemized deductions including all medical expenses: doctors, dentists, eyeglasses, insurance premiums and all related medical expenses as well as your mileage. All real estate taxes on your house and property, personal property taxes on all vehicles, boats, motor homes and motorcycles. Don t forget your church contributions, cash & non-cash. Important reminder, you must have receipts for all contributions and all non-cash items must be itemized and an amount listed. The item must be in good condition or it is not deductible. It is not necessary to bring the receipts; I only need to have the total amounts. Any business related expenses including purchase of tools and supplies, mileage that was not reimbursed or actual vehicle expenses. Was there a vehicle allowance given to you? Professional dues, continuing education, uniform cost and cleaning are deductible. Remember to add all your receipts before coming in order to expedite the time involved in the tax preparation. It is not necessary to bring the receipts, bank statements or any back-up information to your appointment; I only need to have the totals per category. If you have a business (Sch.C or LLC). Please print out before you arrive for your appointment a profit & loss statement and a balance sheet. Mailing, faxing, ing or dropping off your tax return information is acceptable. I understand that gas is expensive and traffic is always bad, we want to be accommodating to you as much as possible. Please let us know when you are sending us the information and we will let you know when we receive it. Please send in a PDF format and we can return your completed return in the same format for you to print and put together before mailing or for your copies. Appointment times are scheduled every hour unless there is additional time required for your preparation. If you have unusual or difficult first time situations this year and you are not sure of what to bring, please call the office and discuss this before making your appointment. Some of these situations are: Can I take office in home, I sold a rental house, I sold my second home, I sold stock, I sold my primary residence, I bought a primary residence. It is a very costly proposition for you if we have to make an additional

2 scheduled appointment or if your appointment runs into the next clients scheduled time. You may be asked to reschedule and/or you will also be charged an additional sitting fee. With this being the second year for Obamacare and since it took extra time last year, please let us know so that we can schedule you accordingly. If you don t have health insurance or you have insurance through the Marketplace, there are additional forms to fill out to make sure you got the correct subsidy or see if you were overpaid. If you have dependents who worked part time, we will need to know their income as well. Please bring these W-2s with you at the time of your appointment. We will need the form 1095 from the Marketplace which has to be sent out by January 31 in order to complete your returns. This area is very complicated and time consuming. We need time to complete in one sitting. EXTREMELY IMPORTANT: All tax returns and work prepared by my company and myself must be paid for when completed and picked-up. There will be no exceptions to this rule. We will be accepting Debit and Credit cards this year as well as several main banks within walking distance of the office. There will be a 5% processing fee assessed for all Debit and Credit card charges. In the past, we have mailed returns back with no additional charge but this has proved very costly. Therefore, we will now be adding to the returns from $5 up to cover the additional expense. When your tax return is finished, you are given a copy for your files, and we can send the tax return to you in a PDF file for your records and printing as you deem necessary. If additional copies or faxes are necessary, there is an additional $10 fee or $25 for larger or business returns. Before you call the office asking us to fax a copy of your return to someone or make you another copy, please look for your copy. I will need that request in writing along with the additional fee before I can make any copies or fax any returns. If you have received letters from the IRS or NC throughout the year and you have not previously notified us please let us know. We ask that in the future you let us know as soon as they are received because most of these are time sensitive. Complete the update sheet and checklist before coming in for appointments or you can send back early. This will eliminate coming in early for our appointments. Organizers are available as a PDF file and will be sent to you in January. Please send an requesting one or call the office. You can even send them back to us prior to your appointment to expedite your tax preparations. TAX PLANNING TIPS FOR 2016 AND BEYOND The capital gains breaks could end by 2016, so you should utilize the lower capital gains rates by selling highly appreciated stock. Higher income tax payer should look at reducing dividends if they go back to ordinary income rates Higher income tax payer should also look at the.9% Medicare tax on their wages and self-employments income, as well as the additional 3.8% Medicare contribution tax on all or part of their net investment income. Watch taxability of Social Security benefits Charitable gift giving of highly appreciated stock

3 Investment allocations look at them for strategies to maybe have more tax exempt and tax deferred income Doing Roth conversions of IRA s on additional withdrawals of IRA before RMD s Looking at not investment income which includes: interest, dividends, annuities, royalties, and rents unless divided from ordinary course of business net gains from property held for investment including taxable portion of gains from selling personal residence Income from S- corporation where there is active participation is not included Other types of income excluded from net investment income (Tax exempt bond interest, municipal bonds, tax deferred non-qualify annuities, life insurances, and veteran s benefits) Direct tuition payments for students get two breaks. It doesn t count against the $14,000 gift tax exclusion and it reduces the size of your taxable estate Direct payments of medical payments do the same thing As we soar in 2016, Medicare and social security costs will also soar. Each day for the next 17 years 10,000 people turn 65 adding 30 million to America s senior citizen s ranks. In 2026, the Medicare trust fund will be exhausted already because its outflows exceed its income. By 2021, social security payouts will outstrip funds coming in, and in 2033 the social security trust fund accumulated over 75 years will be kaput, so just hold on for the wild ride into the tax reform and overhaul of our lives By working together, your tax professionals, investment brokers, and estate planning attorneys can bring their impact into the plan to develop a more balanced and workable investment and retirement plan. Recap of Tax Laws For 2016 Medical expenses deduction is now at 10% of adjusted gross income. Additional.9% Medicare tax on part of their wages and self-employment income o Kicks in on singles wages exceeding $200,000 and couple s wages exceeding $250,000. Self-employed are also subject to the 0.9% surtax on earnings above the thresholds. Additional 3.8% Medicare contribution tax on all or part their net investment income IRA contributions will stay steady at $5,500 plus over 50 catch-up $1,000 for a total of $6500. This is for all kind of IRA (Traditional, Nondeductible, and Roth) 2016 s limits will be $98,000 to $118,000 for couples and $61,000 to $71,000 for singles. Maximum taxable payroll earnings for Social Security $118,500 plus unlimited for Medicare Cost of Living Adjustment (COLA) for Social Security recipients for 2016 is 0 (no increase). Medicare Part B monthly premium $ per month in Basic premiums for some people are $

4 The 401K limit will be $18,000 plus over 50 catch up is an additional $6,000. These contribution limits apply to 403B and 457 plans. The ceiling on Simples will hold steady to $12,500 and folks age 50 and over can put in $3,000 more. Contributions phase out at AGI of $184,000 to $194,000 for couples and $117,000 to $132,000 for singles. The maximum on the HSA rises to $6,750 in 2016 for family coverage. Self-coverage remains $3,350. IRS eases the use-it-or-lose-it rule for health flexible spending plans. Plans can allow employees to carry over up to $500. Employers must adopt the change IRS is starting to have a heart. If you filed or paid late, there is a first time abate program that may waive any late payment and filing penalties. The top rate on capital gains and dividends 20%, 0%, 15% are still in effect. The standard mileage rate for business use is 54 cents. Medical and moving is at 19 cents and charity miles are still at 14 cents a mile. For 2015, business is 57.5, medical and moving is 23 cents, and charity remains 14 plus parking tolls. The estate and gift tax exemption increased to $5,450,000. The annual gift tax exclusion stays the same at $14,000 per donee Obamacare will provide many people with refundable credits to help them buy health coverage. To get the credit, household income must be between 100% and 400% of the federal poverty which is currently $11,770 to $47,080 for singles and $24,250 and $97,000 for a family of four. So if an employee s premium exceeds 8% of the household s AGI then the penalty tax doesn t apply. Members of households where total income is below the level needed to file a tax return also are exempted. Therefore, once the formula is done, I believe that most people will not be subject to the penalty tax because it will prove to be unaffordable for them. We saw this in the last filing season. Starting in 2016, firms with 50 to 99 full-time-equivalent workers will be subject to the pay-or play rules, and the coverage offer will be expanded to dependents, including kids under age 26. Starting in January 2016, firms with 50 or more full-time-equivalent employees must report 2015 ins. data for each full-timer to the Service and the worker on Form 1095-C. The individual mandate s fine for going without insurance is higher in The tax is typically the greater of two amounts: the basic fine or an income-based levy. The basic fine is soaring to $325 a person ($ for each family member under 18), with a ceiling of $975 (up to $230 and $690, respectively). And the income-based levy doubles to 2% of the excess of household income over the tax return filing threshold. In 2016 the maximum fine is $695 a person, $2085 per uninsured families. The income levels to qualify for the health premium credit also increase.

5 The income tax brackets for 2016 are a tad higher than last year s and the 20% top rate on dividends and long-term gains starts at a higher level for Extender bills passed in December 2014 only extended the bills for 2014 and not into 2015, so we had the same uncertainty as we did last year with business and investment decisions. They were extended mid-december of 2015, but retracted to January 1, They include the itemized deduction for state sales tax in lieu of income tax and the above-the-line deduction for up to $250 of educators classroom supplies. Also the exclusion for up to $2 million of forgiven debt on primary homes and the ability of folks age 70.5 and older to make direct payouts of up to $100,000 from IRAs to charity. Businesses can claim 50% bonus depreciation and the R&D tax credit for They also can expense up to $500,000 of assets that are put in use in The $500,000 limitation is reduced dollar for dollar once a business places in service more than $2 million of qualifying assets this year. Also in the final bill: Tax-deferred ABLE savings accounts for the disabled, similar to 529 plans. Starting in 2015, nondeductible pay-ins of up to $14,000 a year can be made to ABLEs for those who become blind or disabled before age 26. Payouts will be tax-free if used for housing, transportation, education, job training and the like. A separate budget law in 2015 cut IRS s total funding by $345.6 million. The $10.95 billion that the agency was scheduled to receive is less than it got in Although taxpayer service will get $34 million more than in 2014 (up 1.6%). That won t be enough to vastly improve service. Wait times to get through to a live person will still be long, especially since many taxpayers are expected to call for help about complying with the new tax rules involved with the health reform law. Funding for enforcement is slashed by $254 million for 2015 (a 5% reduction). Thus, the IRS audit rate will keep on plummeting. The exam rate for 2013 fell below 1% for the first time in several years, and the rate for this year is expected to be even lower. With the current funding cut, the 2016 audit rate will sink lower still. The tax burden on upper-incomers is rising, according to new IRS statistics. The top 1% of all filers paid about 38.1% of all federal income taxes in 2012, the most recent year IRS has analyzed. That s up from 35.1% the previous year. They reported 21.9% of total adjusted gross income (AGI), also larger than the year before. Filers needed to have AGIs of at least $434,682 to qualify for the top 1% of earners. (Their burden for 2013 should be higher, since the top tax rate increased after 2012.) The highest 5% paid 58.9% of total income tax and accounted for 36.8% of all AGI. They each had AGI of at least $175,817. The top 10% of filers, those with AGIs of $125,195 or more, bore 70.2 % of the total tax burden while bringing slightly less than 48% of the total AGI. The bottom 50% of filers paid 2.8% of the total federal income tax take. Their share is so low because the figures do not include Social Security tax

6 payments and because many of them get substantial tax relief through the earned income credit. IRS continues to pay billions in erroneous claims for refundable tax credits, Treasury inspectors say. Even though the Revenue Service achieved some success in detecting fraudulent claims before money went out the door, inspectors estimate that the agency paid $14 billion last year in phony claims for the earned income credit and an additional $6 billion in improper claims for the refundable child tax credit. The problem will only continue to grow in the coming years. The IRS says that limited examination resources keep it from putting a larger dent in the problem. More info and further explanations can be obtained at Look for 1040 central or use a keyword for any topic. You can also go to our webpage ( and link to the IRS and NCDOR for more information.