In this week’s episode, I discuss the important dates to remember when it comes to filing the 2016 individual and business tax returns.

Individual Tax Returns

Beginning this tax filing season, the IRS is not longer allowing the use of electronic PIN numbers to file your individual tax return.

Instead, taxpayers will need the 2015 Adjusted Gross Income Amount to file your tax return electronically this year since Electronic Filing PINs was phased out.

Dates to remember for filing individual tax returns are:

January 23, 2017 - IRS begins processing returns

February 15, 2017 - IRS will begin issuing refunds for taxpayers that are claiming the Earned Income Tax Credit and Advance Child Tax Credit.

IRS has indicated that most taxpayers refunds whose individual tax returns that were filed in late January or early February that have a refund may not receive the refund until the week of February 28th.

April 18, 2017 - Individual tax returns have to extended or filed by this date. If you are extending the tax return and believe you will owe an additional tax liability, the payment is due by April 18th with the extension.

October 16, 2017 - Individual Tax Return Extension Due Date. Individual tax returns that have been extended are due by this date.

Business Tax Returns and Forms

Beginning January 1, 2017, business tax returns and forms due dates have changed. What used to be true in the past for corporate and partnership returns, W-2s, 1099s, are no longer true for these types of returns and forms.

Beginning January 1, 2017, the due date for W-2s, 1099-Misc, partnership and corporate returns dates are:

January 31, 2017 - W-2s, 1099-Misc
March 15, 2017 - Partnership Returns
April 18, 2017 - Corporate Returns
September 15, 2017 - Extended due date for corporate and partnership tax returns that were extended.

For the IRS notice regarding these changes, click here.

 

In this week’s episode, I discuss how to organize and begin preparing to file your 2016 tax return before you even get your tax documents.   1.  Review and save your last 2016 pay stub to compare it to check your W-2 when you receive it for accuracy.   2.  Prepare a binder, folder, or notebook to organize your 2016 tax documents that will be used to prepare your tax return as you receive them.  Review the previous year’s tax return to determine what tax documents were used to prepare last year’s tax return.   3.  Determine if you’re going to prepare your tax return yourself using a paper tax return, a software to prepare your taxes, or a tax preparer.   4.  After you review your last pay stub or file your tax return, do you need to make changes to on a Form W-4 for your 2017 taxes being withheld.   5.   Make an appointment with your tax preparer if you plan on using a tax preparer to file your tax return(s).   6.  In addition to making an appointment with your tax preparer that you will use to prepare your tax return, make an appointment with a tax preparer to discuss tax planning for 2017.

In this week’s episode, I discuss the top 2016 tax stories and events.

1. Tax Inversions
Earlier in the year, it seemed everyone was talking about tax inversions where U.S. companies would merge with a foreign company and move their U.S. headquarters overseas to get a favorable (lower tax rate). The U.S. Treasury Department got involved and changed some of the regulations making it more difficult for companies to use tax inversions.

2. Apple’s $14 Billion European Fine
As things were heating up on tax inversions, the European Union was looking at tax structures in their membership countries to determine if why they felt companies were paying what they considered their fair share of taxes. One of those companies was Apple which has it’s European office in Ireland. The European Union felt that Ireland had went beyond it’s tax code to create a favorable tax haven for Apple. The result was that the European Union fined Apple $14 billion.
3. Taxing the Cloud
With the internet, cities and countries begin the process of reviewing their tax rules on internet and cloud computing. Chicago announced that it would begin taxing services like Netflix and Hulu creating what has become known as the Netflix tax. Other countries and cities involved in taxing cloud services are Japan, South Korea, Japan, New Zealand, Australia, and Buenos Aires.

4. Sugar Tax
Cities begin taxing sugar beverages beginning with San Francisco. Philadelphia joined the list as they not only will begin taxing sugar beverages but also the sugar free beverages.

5. Trump Tax Plan
With President-Elect Donald Trump winning the November election, we have to wait to see whether is pla1n to lower income and remove income tax brackets will happen when he takes office in 2017. His tax proposal was to have three individual tax brackets at 12%, 25% and 33%.

6. Tax Extenders
In last week’s episode 181, I discussed the 2016 tax extenders that were expiring at the stroke of midnight on December 31, 2016. Congress is currently on vacation and their has not been any indication whether they will extend any of these expiring tax provisions.

7. Unmarried Mortgage Loan Limitations
The Ninth Circuit Court of Appeals ruled that unmarried tax payers who purchase a home together can deduct interest payments on the qualifying home and home equity debt up to the $1.1 million limitation.

As we move into 2017 on January, I just wanted to say “Happy New Year”.
If you want to keep up with the tax changes and tax case rulings, you can sign up for the FREE “Navigating the Tax Headlines Newsletter.”

As 2016 is coming to close, it’s almost time to begin thinking about the 2017 tax filing season and whether you will be using a tax software package like Turbo Tax, H&R Block tax software, and Tax Act.   These tax software packages will ask you questions in an interview format.    The software will usually ask you whether you used the software last year.  If yes, you can import the data into the software.  Then, the software will ask your name, address, social security numbers, dependents, and martial status.  Based on your address, the software will determine if you need to complete and file a state tax return.     The software will most likely ask whether there were changes in your marital status, purchase or sold a home, had moving expenses, or a change in dependent status.  Based on these answers, the software will prepare additional interview questions.   For income, the software will ask for information about wages, miscellaneous income, retirement income, social security income, business income, K-1 income, investment sales, dividends, interest, unemployment income, and state tax refunds.   For deductions, the software will ask in an interview format whether you had mortgage interest, mortgage points, miscellaneous deductions, IRA contributions, self-employment insurance, tuition deduction, charitable contributions, premium mortgage insurance (PMI deduction expires this year unless it extended by Congress).   For credits to apply towards your tax liability, the software will ask if you had child care credits, educational credits, home energy credits, alternative fuel vehicles.  Both the home energy credit and alternative fuel vehicle credit will expire this year unless Congress extends the credits.   Based on your estimated tax payments and the tax withheld from your income sources, the tax due or tax refund information will change in the top right hand corner (usually) as you enter the information.   Depending on which software package you use will determine how many ads you will receive during the interview process.

In this week’s episode, I discuss some of the tax extenders expiring at the end of the 2016 (December 31, 2016) unless Congress extends them. At this time, Congress has not extended these tax rules or have given any indication of extending them.

1. Renewable Energy Credits -
Electric vehicles
Bio-diesel
Residential Energy Credit (Non-business)
Other Energy Credits

2. Homeowner’s -
Loan Forgiveness - Foreclosures and short sales on your personal residence are not subject to cancellation of debt income.
Mortgage Insurance Premiums - Currently, mortgage insurance premiums can be deducted as an itemized deduction like the mortgage interest deduction.

3. Medical expenses for taxpayers 65 and over can deduct any medical expenses over 7.5% of the taxpayers AGI (adjusted gross income). After December 31, 2016, the rate will increase to 10%.

4. Other business deductions -
Rum
Railroad
Energy efficient commercial property
Indian Empowerment Credit
Mining deductions
Empowerment Zone
American Samoa Economic Development

5. Qualified tuition and related educational expenses up to $4,000

Episode 140 was the episode where I discussed the IRS free file software.

In this episode, I discuss tax planning ideas for year-end tax planning. 1.  Realize stock losses against gains while sustaining your investment position.   2.  Postpone income (dividends, interest, etc...) until 2017. 
 Accelerate Deductions into the current tax year (2016). (Child Credits, Higher              Educational Tax Credits, Student Interest, etc... 
 
3.  Convert a Traditional IRA into a Roth IRA especially if the IRA is in investments that   have decreased in value. ***Note this will increase your Adjusted Gross Income.   4.  Defer bonus income until 2017.   5.  Pay expenses (ie Medical, Mortgage, Property Taxes, Schedule C, Schedule E, Schedule F due in 2017 before the end of 2016.   6.  If you expect to owe State and Local taxes, made estimated tax payments so that you can deduct the taxes in 2016 as long as you’re not subject to AMT Tax.   7.  Use Your Itemized Deductions.  If you need to have surgery in 2017, can you move it to 2016?   The 7.5% medical expense deduction of adjusted gross income for seniors over 65 will be phase out at the end of this year unless Congress extends the deduction. Pay additional mortgage payments to pull the interest deduction into 2016.  Make additional charitable contributions to non-profit organization.   8.  Pay contested taxes (Property, State Income) before 2016 year-end.   9.  Settle a casualty loss insurance / damage claim before year-end.
 
10.  Increase your deduction for HSA and Flex Spending Accounts.   11. Install energy saving for non-business property.   12.  Make gifts up to $14,000 utilizing the gift and estate tax exclusion.

In this episode, I discuss tax notices and tax preparers. Sometimes, you will get a notice but for some reason, you’re not able to reach your tax preparer to discuss the tax notice. When you get the notice:

1. Don’t ignore the tax notice. Ignoring the tax notice is never a good thing and the notice will not go away on it’s own.

2. After opening the notice, what does it say? What is it the state or the IRS are asking for?

3. Review your tax return that pertains to the tax notice/

4. Is the IRS notice correct when it comes to the tax return.

5. Contact your tax preparer? If you’re not able to get your tax preparer to help you, find someone else to assist you.

6. Amend the tax return if the return needs to be amended.

Before filing the tax return:

1. Don’t sign and date the return until you have reveiwed it.

2. Compare the return to prior year. Are there major differences in income between the current year and the prior year. If the current year is comparable to the prior year and their prior year tax law changes, the return and tax liability should be similar.

In this week’s episode, I discuss the 2017 business tax reform and proposals that President Elect Trump and the Republicans have proposed.

1. Creating a new business rate for small business organized as sole proprietors and pass through entities (LLCs, Partnerships, and S-Corps).

2. Reduce the corporate tax rate to 20%

3. Provide for immediate expensing for the cost of business investments

4. Allowing interest expense to only be deducted against interest income. Any net interest expense will be allowed to carry forward as a deduction against net interest income in future years

5. Allowing NOLs (Net Operating Losses) to be carry forward indefinitely and increased by an interest factor

6. Retaining the research tax credit and make it more effective

7. Eliminating certain special interest and credit deduction

8. Shift to a territorial tax system

9. Move toward’s a consumption tax system

10. Provide 100% exemption for dividends received from foreign subsidiaries

11. Simplifying international tax rules and eliminating most of the “subpart F rules”

In this episode, I discuss President Elect Trump’s tax reform proposal and use examples. Under President Elect Trump’s plan:

Tax rates and breakpoints for Married Filing Jointly
<75,000 12%
>75,000 <225,000 - 25%
> 225,000 33%

Brackets for Single Filers would be

<37,500 12%
>37,500 <112,500 - 25%
> 112,500 33%

Capital Gains - Remain at 20%

Carried Interest - Taxed as Ordinary Income

Affordable Healthcare Act Repeals with the 3.8% tax on investment income repealed

Standard Deduction would be increased to $30,000 for Married Filing Jointly and Single Filers would be 15,000

Personal Exemptions would be eliminated

Head of Household Filing Status would be eliminated

Itemized deductions would be capped at $200,000 for Married Filing Jointly and $100,000 for single

 

In this week’s episode, I discuss the qualifications needed to file as “Head of Household”.

1. You are unmarried or considered unmarried on the last day of the tax year.

2. You paid more than one-half of the cost of keeping up your home..

3. A qualifying person lived with you for more than one-half of the tax year (excluding attending school or other absences.) If the qualifying person is a parent, they are exempt from the living requirement that they live with you for more than one-half of the year but you do have to pay more than one-half of the cost of keeping up the parent’s home.

4. You can not claim your spouse as a qualifying person to file as under the “Head of Household” status.

You are considered unmarried if:

1. File separate tax returns
2. You paid more than one-half of the cost of keeping up your home.
3. Your spouse didn’t live with you during the last six months of the tax year.
4. You home was the primary home for your child, step-child, adopted child, foster child. If the qualifying person is a parent, they are exempt from the living requirement that they live with you for more than one-half of the year but you do have to pay more than one-half of the cost of keeping up the parent’s home.

Publication 501 can be found here.