Filing Season Is Now Open

As of yesterday you can now officially file your 2016 tax return!  Although filing early, for some, may not mean an early refund.  There’s a new law that requires the IRS hold refunds until mid-February.  This will only affect those that claim the Earned Income Tax Credit and the Additional Child Tax Credit.

I know, you’re thinking, they’ve already had your money long enough, so why do they get to hold onto it longer?  There’s a perfectly good reason for this and it has to do with identity theft and refund fraud.  The cliff notes explanation is by holding the refund longer the agency is better able to weed out the fraudulent returns from the legitimate returns.  The IRS has been making significant progress in the fight against identity theft and refund fraud.  Thus far, they have seen a 50% decline in the number of new reports of stolen identities on tax returns.

I understand this is a complete inconvenience and frustration for our legitimate returns but it’s better to know what’s going on ahead of time.  The IRS will start releasing the refunds on February 15th but you shouldn’t expect to see the money in your account until after February 27th.

Click here to check out more information on this.

 

It’s Tax Season!

A new year has begun bringing with it the start of tax season!  I know, just hearing the word taxes can cause anxiety and stress therefore, causing you to put it off as long as possible.  There’s no need to panic, I’m here to help you!  Free yourself from the anxiety and stress and let me and my team handle your taxes.

All that you need to do is start prepping.  As your tax documents start arriving in the mail put them in a file, envelope, or shoe box to bring to us.  If they’re organized, great!  If not, don’t worry, we’ll make sense of it all!  When you’ve got all your documents ready you can schedule an appointment or just come right on in.  It’s that simple!  We really try to make this as painless as possible for you.  If you have more questions or the anxiety is already taking hold please schedule an appointment here so we can talk through your personal tax situation.

 

 

Revised Due Dates for Partnership and C Corporation Returns provided by Thompson Reuters

On July 31, 2015, President Obama signed into law P.L. 114-41, the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015.” Although this new law was primarily designed as a 3-month stopgap extension of the Highway Trust Fund and related measures, it includes a number of important tax provisions, including revised due dates for partnership and C corporation returns and revised extended due dates for some returns. This letter provides an overview of these provisions, which may have an impact on you, your family, or your business.

Revised Due Dates for Partnership and C Corporation Returns

Domestic corporations (including S corporations) currently must file their returns by the 15th day of the third month after the end of their tax year. Thus, corporations using the calendar year must file their returns by Mar. 15 of the following year. The partnership return is due on the 15th day of the fourth month after the end of the partnership’s tax year. Thus, partnerships using a calendar year must file their returns by Apr. 15 of the following year. Since the due date of the partnership return is the same date as the due date for an individual tax return, individuals holding partnership interests often must file for an extension to file their returns because their Schedule K-1s may not arrive until the last minute.

Under the new law, in a major restructuring of entity return due dates, effective generally for returns for tax years beginning after Dec. 31, 2015:

  • Partnerships and S corporations will have to file their returns by the 15th day of the third month after the end of the tax year. Thus, entities using a calendar year will have to file by Mar. 15 of the following year. In other words, the filing deadline for partnerships will be accelerated by one month; the filing deadline for S corporations stays the same. By having most partnership returns due one month before individual returns are due, taxpayers and practitioners will generally not have to extend, or scurry around at the last minute to file, the returns of individuals who are partners in partnerships.
  • C corporations will have to file by the 15th day of the fourth month after the end of the tax year. Thus, C corporations using a calendar year will have to file by Apr. 15 of the following year. In other words, the filing deadline for C corporations will be deferred for one month.

Please remember to get your partnership tax information to me in time to meet this earlier deadline.

 

Tax Developments in 2016

By Thompson Reuters

The following is a summary of some important tax developments that have occurred in 2016 that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.

Date extended for employers to claim revived work opportunity tax credit. The Code Sec. 51 work opportunity tax credit allows employers who hire members of certain “targeted groups” to get a credit against income tax. The credit was retroactively revived by the Protecting Americans from Tax Hikes Act of 2015. The previous transitional relief for eligible employers who want to claim credit has been extended. The transitional relief gives employers three extra months—until Sept. 28, 2016—to file the forms necessary to claim the credit for certain eligible workers. An employer that hires a member of a targeted group, including a long-term unemployment recipient, who begins work for that employer on or after Sept. 1, 2016, is not eligible for this transition relief with respect to any such new hire.

ACA premium credit and individual mandate 2017 indexing adjustment. IRS has provided indexing adjustments for the Code Sec. 36B premium tax credit and Code Sec. 5000A individual mandate (also called the individual shared responsibility payment) for 2017. These inflation adjusted percentages are used to determine whether an individual is eligible for affordable employer-sponsored minimum essential coverage (and so ineligible for the premium tax credit to help afford health insurance purchased through an Exchange) and to determine whether an individual is eligible for an exemption from the individual shared responsibility payment because of a lack of affordable minimum essential coverage. Taxpayers are not treated as eligible for employer-sponsored minimum essential coverage if their required contribution with respect to the plan exceeds 9.69% of the their household income for plan years beginning in 2017 (up from 9.66% for 2016). An individual is exempt from the requirement to maintain minimum essential coverage for a month in which the individual lacks affordable coverage—i.e., a month in which his required contribution (determined on an annual basis) for coverage for the month exceeds 8.16% of the individual’s household income for plan years beginning in 2017 (up from 8.13% for 2016).

Taxpayers can pay IRS in cash at 7-Elevens. IRS announced a new payment option for individual taxpayers who need to pay their taxes with cash. Under the new arrangement that IRS provides in partnership with ACI Worldwide’s OfficialPayments.com and the PayNearMe Company, individuals can make a payment without the need of a bank account or credit card at over 7,000 7-Eleven stores. There is a $1,000 payment limit per day and a $3.99 fee per payment. Because PayNearMe involves a 3-step process, IRS urges taxpayers choosing this option to start the process well ahead of the tax deadline to avoid interest and penalty charges.

Court rules Obamacare reimbursements unconstitutional. A district court has granted summary judgment to the House of Representatives in their challenge to the funding of a health insurance providers’ reimbursements in the Affordable Care Act (ACA, i.e., Obamacare). While the ACA explicitly provides a permanent appropriation for the Code Sec. 36B premium tax credit, which makes insurance premiums more affordable for low-income taxpayers, such funding isn’t specified for the reimbursements of “cost-sharing reductions” by insurers that reduce deductibles, coinsurance, copayments, and similar charges in the qualified health plans they offer through an Exchange. The court found that the ACA impermissibly appropriated money for the reimbursements to insurers in violation of the Constitution, which requires that such monies can only be appropriated by Congress. The court enjoined any further reimbursements until a valid appropriation was in place, but stayed its injunction pending an appeal by the parties.

Social Security wage base could increase to $126,000 for 2017. The Social Security Administration’s Office of the Chief Actuary (OCA) has projected, under two out of three of its methods of forecasting, that the Social Security wage base will increase from $118,500 for 2016 to $126,000 for 2017. Based on the OCA estimate, on a salary of $126,000 (or more), an employee and his employer each would pay $7,812.00 in Social Security tax in 2017. Based on the OCA estimate, a self-employed person with at least $126,000 in net self-employment earnings would pay $15,624.00 for the Social Security part of the self-employment tax in 2017.

No deduction for clothing. The Tax Court held that a salesman for a major designer who was required to wear the designer’s apparel while representing the company couldn’t deduct the cost of such clothing as unreimbursed employee expenses. Clothing worn by a taxpayer in connection with his trade or business is generally nondeductible, unless:

1.  The clothing is required or essential in the taxpayer’s employment;

2.  The clothing is not suitable for general or personal wear; and

3.  The clothing is not so worn.  Here, the clothing was clearly suitable for regular wear.

New Website Launched

We are excited to announce the launch of our new website!  Our goal with this new website is to provide our visitors with an easier way to learn about Ray Jeffs CPA and the services we provide.

This website is interactive and contains many of the same things the old site had with a few new additions.  Some things you may be used to like our Tax Portal and Financial Stories logins are still available and are located under Client Login.  Some of the new features that visitors have access to are Make an Appointment on the homepage and this Blog.  We will be updating the Blog with helpful information, newsletters, and company announcements.

We hope that you enjoy discovering the new website and that you find it easy to access and navigate.

We would also like to thank Robert Anderson from High Effect Web Design for his time and energy to make this site what it is.

Feel free to contact us with any questions, feedback or comments!

 

Misclassification Of Employees Can Be Expensive

Like most business owners, I am always looking for ways to cut costs and increase profits.  One way that is often used is to treat workers as “independent contractors” rather than “employees”.  That’s a good strategy if you get it right.  But if you aren’t very careful, this approach can end up being far more expensive in the long run.

The consequences of misclassification may include having to pay payroll taxes that should have been withheld from employees plus federal and state unemployment on those wages.  But the greater risk is the penalties and fines that state and federal Labor Departments can levy.  The penalties and fines can be substantial enough to put any company out of business.  In New Hampshire, a single violation can lead to a $2,500 fine plus $100 per employee per day for noncompliance, for as far back as a year.  So, yes, do the math.  $36,500 per employee plus $2,500.  You may not live or work in New Hampshire, but your state probably has something comparable.

I was recently made aware of a Labor Department case where the department insisted that a non-working spouse was an employee of her husband’s sole proprietorship simply because she assisted him with the business (for no pay).  Seems innocuous enough, until you consider record keeping requirements, employment taxes, and worker’s compensation insurance.

The IRS has established a 20 factor test to help determine the employment status of workers.  These factors are broad, and I can often find arguments to support either position:  that the worker is or is not an employee.

However, the State of New Hampshire has established a three factor test which makes it very difficult to have independent contractors working in or for your business.

NH RSA 282-A:9 defines employment in the State.  Here is the legal language:

III. Services performed by an individual for wages shall be deemed to be employment subject to this chapter unless and until it is shown to the satisfaction of the commissioner of the department of employment security that:
(a) Such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact; and
(b) Such service is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
(c) Such individual is customarily engaged in an independently established trade, occupation, profession, or business.

Notice that you have to pass all three tests; failure on any one factor means the worker is an employee.  In my experience, the hardest one to pass is the second one:  the worker is doing something for you that is outside your normal course of business or away from any of your places of business.  Say, for example, if your business is painting houses and you have someone working with you to paint houses, that person is probably an employee.  If you are a landscaper with a crew working for you, those workers  are probably employees, even if they are part-time, temporary, or seasonal.

And I am finding that both the NH Department of Employment Security and the NH Department of Labor are becoming much more aggressive in enforcing these standards.

If this article raises concerns for you about your classification of workers, then we need to talk … SOON!  Please call me before the auditors show up at your door.