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November/December, 2015 Newsletter

Dear Client:

Yes, we are into the Holiday Season already! So a very Merry Christmas, Happy Chanukah, and Happy New Year to everyone!

Before I get into the details and tax savings available, there some office updates I am delighted to share with everyone:

  1. If you have not booked an appointment for 2015 tax analysis review, there is still time to book that now. An alternative is to mail in the basic information, or inform us ahead of time if you expect any unexpected things (i.e. winning the lottery, collecting on BINGO, or just having a really good year for more income). Just CALL the office and we will take care of the rest.
  2. We have added another convenient payment option on our website. (henrykulik.com) You may now pay invoices via e-check (electronic debit—not immediate ACH) or via debit or credit card. We now accept Discover, MC/Visa, American Express and even Diner’s Club.
  3. Corporate and LLC/S-Corp clients: If at all possible, please get us as much information as possible in early January! QuickBooks files, source documents (loans and bank statements, etc.) so we can get an early start. That avoids your corporate work being pushed into the February/March individual tax return rush!! Use our convenient online web-portal that only active clients of this firm have access to. (Virtually anything can be uploaded to us using this method- electronic files (QuickBooks, Peachtree) and zipped and unzipped documents. Even if everything is similar to the prior year, please let us know that too!
  4. Electronic individual tax organizer will be released to the web portal (along with an email announcement) the week before the last week of the year.

As the end of the year approaches, it is a good time to think of planning moves that will help lower your tax bill for this year and possibly the next. Factors that compound the challenge include turbulence in the stock market, overall economic uncertainty, and Congress’s failure to act on a number of important tax breaks that expired at the end of 2014. (My other research materials claim that all or most of these tax breaks will be reinstated again!- but no guarantees) Some of these tax breaks ultimately may be retroactively reinstated and extended, as they were last year, but Congress may not decide the fate of these tax breaks until the very end of 2015 (or later).

These breaks include, for individuals:

  1. the option to deduct state and local sales and use taxes instead of state and local income taxes;
  2. the above-the-line-deduction for qualified higher education expenses;
  3. tax-free IRA distributions for charitable purposes by those age 70-1/2 or older;
  4. and the exclusion for up-to-$2 million of mortgage debt forgiveness on a principal residence.

 

For businesses, tax breaks that expired at the end of last year and may be retroactively reinstated and extended include:

  1. 50% bonus first-year depreciation for most new machinery, equipment and software
  2. the $500,000 annual expensing limitation (Section 179)
  3. the research tax credit
  4. the 15-year write-off for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.

Higher-income earners have unique concerns to address when mapping out year-end plans. They must be wary of the 3.8% surtax on certain unearned income and the additional 0.9% Medicare (hospital insurance, or HI) tax. The latter tax applies to individuals for whom the sum of their wages received with respect to employment and their self-employment income is in excess of an unindexed threshold amount ($250,000 for joint filers, $125,000 for married couples filing separately, and $200,000 in any other case).

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Henry’s Year-End Tax Planning Moves for Individuals

Henry’s Year-End Tax-Planning Moves for Businesses & Business Owners

These are just some of the year-end steps that can be taken to save taxes. Again, by contacting us, we can tailor a particular plan that will work best for you. We also will need to stay in close touch in the event that Congress revives expired tax breaks to assure that you don’t miss out on any resuscitated tax-saving opportunities!

Other Miscellaneous Tax Items

  1. Firms that reimburse workers directly for health insurance or Medicare bought separately are in for a surprise The IRS will fine you $100 per day, per employee you reimburse. Wow! That can add up quickly…
  2. NO increase in social security wage base. It will remain at $118,500 subject to FICA tax. After that, only the Medicare tax is charged.
  3. IRS will stop seizing Social Security disability payments for unpaid taxes. Other Social Security income can be grabbed up to 15% of the amount paid.
  4. If you self-insure your employees, the “special tax” increases to $2.17 x the number of employees, dependents, and spouses (all lives)
  5. Right here in MA, a court ruled the IRS had to use a CPA’s calculations for basis on 200 old stocks and securities sold. You can’t beat a good CPA!!
  6. States are considering a tax on electronic cigarettes to raise revenue. Watch those E-Cigs!
  7. IRS is going after (auditing) entertainers, including songwriters, musicians, and producers. *AUDIT ALERT* IRS is also closely looking at TIP income re: hotels, restaurants, hair salons, etc. Be sure to report every $ earned by wages, tips, or cash- just like you do now.
  8. IRS did fewer personal (individual) audits during 2014. In 2010 the rate was 1.11%; now its .86% But the “red flags” still can trigger a review/exam, even if a correspondence exam. But the IRS has 22% less revenue agents than 5 years ago.
  9. ACA/HEALTH INS: The penalty has again increased if you refuse insurance. In 2016 the amounts are $695 per adult and $348 per child. Family ceiling is $2,085. The other fine is 2% to 2.5% of gross family income; whichever is larger of the 2 methods is due.
  10. RMD- If you turn 70-1.2 this year you can delay your 2015 payment until April 1, 2016.
  11. President Obama’s MY-IRA plan is expanded- now nationwide. They work similar to a Roth, but the principal is Government insured, like a bank. There are income limits and other restrictions. Check out www.myira.gov
  12. If you owe more than $50,000 in federal taxes, your passport could be seized! Taxpayers who are compliant with a payment plan are OK..for now.

 

Very truly yours,

Henry C Kulik, Jr. CPA LLC

 

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