Carol McAtee's Blog

Carol McAtee & Associates, CPAS

Monday, April 18, 2016, was the tax deadline for most taxpayers to file their 2015 tax return. If you didn’t file a tax return or an extension to file but should have, take action now….

                                     What to Do if You Haven’t Filed a Tax Return

Filing a past due return may not be as difficult as you think.

Taxpayers should file all tax returns that are due, regardless of whether full payment can be made with the return. Depending on an individual’s circumstances, a taxpayer filing late may qualify for a payment plan. It is important, however, to know that full payment of taxes upfront saves you money.

Here’s What to Do When Your Return Is Late

First, gather any and all information related to income and deductions for the tax years for which a return is required to be filed, then call the office.

If you’re owed money, then the sooner you file, the sooner you’ll get your refund. If you owe taxes, you should file and pay as soon as you can, which will stop the interest and penalties that you will owe.

If you owe money but can’t pay the IRS in full, you should pay as much as you can when you file your tax return to minimize penalties and interest.

Payment Options – Ways to Make a Payment

There are several different ways to make a payment on your taxes. Payments can be made by credit card, electronic funds transfer, check, money order, cashier’s check, or cash. If you pay your federal taxes using a major credit card or debit card, there is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee.

Payment Options – For Those Who Can’t Pay in Full

Taxpayers unable to pay all taxes due on a tax bill are encouraged to pay as much as possible. By paying as much as possible now, the amount of interest and penalties owed will be less than if you do not pay anything at all. Based on individual circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, a temporary delay, or an offer in compromise. Please call if you have questions about any of these options.

When it comes to paying your tax bill, it is important to review all your options; the interest rate on a loan or credit card may be lower than the combination of penalties and interest imposed by the Internal Revenue Code. You should pay as much as possible before entering into an installment agreement.

For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. Taxpayers who need more time to pay can set up either a short-term payment extension or a monthly payment plan. Most people can set up a payment plan using the Online Payment Agreement tool on IRS.gov.

• A short-term extension gives a taxpayer an additional 60 to 120 days to pay. No fee is charged, but the late-payment penalty plus interest will apply. Generally, taxpayers will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.
• A monthly payment plan or installment agreement gives a taxpayer more time to pay. However, penalties and interest will continue to be charged on the unpaid portion of the debt throughout the duration of the installment agreement/payment plan.

Taxpayers who owe $25,000 or less in combined tax, penalties and interest can apply for and receive immediate notification of approval through an IRS web-based application. Balances over $25,000 require taxpayers to complete a financial statement to determine the monthly payment amount for an installment plan.

A user fee will also be charged if the installment agreement is approved. The fee, normally $120, is reduced to $52 if taxpayers agree to make their monthly payments electronically through electronic funds withdrawal. The fee is $43 for eligible low-and-moderate-income taxpayers.

• Starting in 2016, individual taxpayers who do not have a bank account or credit card and need to pay their tax bill using cash, are now able to make a payment at one or more than 7,000 7-Eleven stores nationwide. Individuals wishing to take advantage of this payment option should visit the IRS.gov payments page, select the cash option in the other ways you can pay section and follow the instructions.

Penalties for Filing a Late Tax Return

If you are due a refund there is no penalty if you file a late tax return. If you owe tax, and you failed to file and pay on time, you will most likely owe interest and penalties on the tax you pay late. Here are some facts that you should know about penalties for filing a late return:

Two penalties may apply. One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of the penalties.

Penalty for late filing. If you file your 2015 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if you owe less than $205, 100 percent of the unpaid tax. Otherwise, the penalty can be as much as five percent of your unpaid taxes each month up to a maximum of 25 percent.

Penalty for late payment. The penalty is generally 0.5 percent of your unpaid taxes per month. It can build up to as much as 25 percent of your unpaid taxes.

Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent per month.

Late payment penalty may not apply. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 18 due date.

File even if you can’t pay. Filing on time and paying as much as you can keeps your interest and penalties to a minimum. If you can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS. If you do owe the IRS, the sooner you pay your bill the less you will owe.

What Happens If You Don’t File a Past Due Return or Contact the IRS?

It’s important to understand the ramifications of not filing a past due return and the steps that the IRS will take. Taxpayers who continue to not file a required return and fail to respond to IRS requests for a return may be considered for a variety of enforcement actions.

Don’t Wait!

If you haven’t filed a tax return yet, call us today to schedule an appointment for as soon as possible

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

Carol McAtee & Associates, CPAs

As a follow up to last week’s post discussing estimated tax payments, this week we are sharing some important information for those of you who are self-employed or who may be considering a self-employed business venture.

                          Tax Tips for the Self-Employed

If you are a self-employed, you normally carry on a trade or business. Sole proprietors and independent contractors are two types of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return. If you’re self-employed, here are six important tax tips you should know about:

• Self-Employment Income. Self-employment can include income you received for part-time work. This is in addition to income from your regular job.
• Schedule C or C-EZ. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet certain other conditions. Please call if you are not sure whether you can use this form.
• Self-Employment Tax. If you made a profit, you may have to pay self-employment tax as well as income tax. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. If you owe this tax, attach the schedule to your federal tax return.
• Estimated Tax. You may need to make estimated tax payments. These payments are typically made on income that is not subject to withholding. You usually pay estimated taxes in four annual installments. If you do not pay enough tax throughout the year, you may owe a penalty.  See last week’s post (April 19th), Estimated Tax Payments – Q & A, for more information about estimated tax payments.
• Allowable Deductions. You can deduct expenses that you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.
• When to Deduct. In most cases, you can deduct expenses in the same year you paid, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAS

From the pages of our April Firm Newsletter . . .

                      Estimated Tax Payments:  Q & A

Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough. If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

How do I know if I need to file quarterly individual estimated tax payments?

If you owed additional tax for the prior tax year, you may have to make estimated tax payments for the current tax year. The first estimated payment for 2016 was due April 18, 2016.  If you determine that you should make estimated tax payments for 2016, make this first payment at soon as possible to avoid or minimize any possible penalty.

If you are filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.

If you are filing as a corporation you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return.

If you had a tax liability for the prior year, you may have to pay estimated tax for the current year; however, if you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings.

Note: There are special rules for farmers, fishermen, certain household employers, and certain higher taxpayers.

Who Does Not Have To Pay Estimated Tax

You do not have to pay estimated tax for the current year if you meet all three of the following conditions:

• You had no tax liability for the prior year
• You were a U.S. citizen or resident for the whole year
• Your prior tax year covered a 12-month period

If you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings. To do this, file a new Form W-4 with your employer. There is a special line on Form W-4 for you to enter the additional amount you want your employer to withhold.

You had no tax liability for the prior year if your total tax was zero or you did not have to file an income tax return.

How Do I Figure Estimated Tax?

To figure your estimated tax, you must figure out your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year. If you estimated your earnings too high, simply complete another Form 1040-ES, Estimated Tax for Individuals worksheet to refigure your estimated tax for the next quarter. If you estimated your earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated tax for the next quarter.

Try to estimate your income as accurately as you can to avoid penalties due to underpayment. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90 percent of the tax for the current year, or 100 percent of the tax shown on the return for the prior year, whichever is smaller.

Tip: When figuring your estimated tax for the current year, it may be helpful to use your income, deductions, and credits for the prior year as a starting point. Use your prior year’s federal tax return as a guide and use the worksheet in Form 1040-ES to figure your estimated tax.

You must make adjustments both for changes in your own situation and for recent changes in the tax law.

When Do I Pay Estimated Taxes?

For estimated tax purposes, the year is divided into four payment periods and each period has a specific payment due date. For the 2016 tax year, these dates are April 18, September 15, June 15, and January 17, 2017. You do not have to pay estimated taxes in January if you file your 2016 tax return by January 31, 2017, and pay the entire balance due with your return.

Note: If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.

The easiest way for individuals as well as businesses to pay their estimated federal taxes is to use the Electronic Federal Tax Payment System (EFTPS). Make ALL of your federal tax payments including federal tax deposits (FTDs), installment agreement and estimated tax payments using EFTPS. If it is easier to pay your estimated taxes weekly, bi-weekly, monthly, etc. you can, as long as you have paid enough in by the end of the quarter. Using EFTPS, you can access a history of your payments, so you know how much and when you made your estimated tax payments.

Please call if you are not sure whether you need to make an estimated tax payment or you would like assistance setting up EFTPS.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN

McAtee & Associates, CPAs

This week, we are sharing information on the ever-important health coverage requirements of the Affordable Care Act drawn from the government’s website, www.irs.gov, which you may visit for in-depth, details . . .

           The Individual Shared Responsibility Provision

What is the individual shared responsibility provision?

The individual shared responsibility provision of the Affordable Care Act requires you and each member of your family to do at least one of the following:

• Have qualifying health coverage called minimum essential coverage

• Qualify for a health coverage exemption

• Make a shared responsibility payment with your federal income tax return for the months that you did not have coverage or an exemption

If you, your spouse and dependents had health insurance coverage all year, you will indicate this by simply checking a box on your tax return.

In most cases, the shared responsibility payment reduces your refund. If you are not claiming a refund, the payment will increase the amount you owe on your tax return. Here are some basic facts about the individual shared responsibility provision.

Who is subject to the individual shared responsibility provision?

The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the shared responsibility payment if the dependent does not have coverage or an exemption.

How do I get a health coverage exemption?

You can claim most exemptions when you file your tax return. There are certain exemptions that you can obtain only from the Marketplace in advance. You will claim or report coverage exemptions on Form 8965, Health Coverage Exemptions, and attach it to Form 1040, Form 1040A, or Form 1040EZ. You can file any of these forms electronically. For any month that you or your dependents do not have coverage or qualify for an exemption, you will have to make a shared responsibility payment

What do I need to do if I am required to make a payment with my tax return?

If you have to make an individual shared responsibility payment, you will need to use the worksheets found in the instructions to Form 8965, Health Coverage Exemptions, to figure the shared responsibility payment amount due. You only make a payment for the months you did not have coverage or qualify for a coverage exemption. If you need assistance, please call.

What happens if I owe an individual shared responsibility payment, but I cannot afford to make the payment when filing my tax return?

The law prohibits the IRS from using liens or levies to collect any individual shared responsibility payment and they routinely work with taxpayers who owe amounts they cannot afford to pay. However, if you owe a shared responsibility payment, the IRS may offset that liability against any tax refund that may be due to you.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAs

       Reduce Your Taxes with the Child Care Tax Credit

If you pay someone to care for a person in your household while you work or look for work, then you may be able to take the Child and Dependent Care Tax Credit and reduce the amount of tax you owe.

Here are 12 facts you should know about this important tax credit:

1. Child, Dependent or Spouse. You may be able to claim the credit if you pay someone to care for your child, dependent or spouse.

2. Work-related Expenses. Your expenses for care must be work-related. This means that you must pay for the care so you can work or look for work. This rule also applies to your spouse if you file a joint return. Your spouse meets this rule during any month they are a full-time student. They also meet it if they’re physically or mentally incapable of self-care.

3. Qualifying Person. The care must be for “qualifying persons.” A qualifying person can be your child under age 13. A qualifying person can also be your spouse or dependent who lives with you for more than half the year and is physically or mentally incapable of self-care.

4. Earned Income Required. You must have earned income, such as from wages, salaries and tips. It also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care. This rule also applies to you if you file a joint return.

5. Credit Percentage / Expense Limits. The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on the amount of your income. Your allowable expenses are limited to $3,000 if you pay for the care of one qualifying person. The limit is $6,000 if you pay for the care of two or more.

6. Dependent Care Benefits. If your employer gives you dependent care benefits, special rules apply.

7. Qualifying Person’s SSN. You must include the Social Security Number of each qualifying person to claim the credit.

8. Keep Records and Receipts. Keep all your receipts and records for when you file your tax return. You will need the name, address and taxpayer identification number of the care provider. You must report this information when you claim the credit.

9. Form 2441. File Form 2441, Child and Dependent Care Expenses with your tax return to claim the credit.

10. Joint Return if Married. Generally, married couples must file a joint return. You can still take the credit, however, if you are legally separated or living apart from your spouse.

11. Don’t overlook vacation and summer camps. Day camps are common during the summer months. Many parents pay for day camps for their children during school vacations while they work or look for work. If this applies to you, your costs may qualify for a federal tax credit that can lower your taxes.

12. Certain Care Does Not Qualify. You may not include the cost of certain types of care for the tax credit, including:

• Overnight camps or summer school tutoring costs.
• Care provided by your spouse or your child who is under age 19 at the end of the year.
• Care given by a person you can claim as your dependent.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAs

Compiled annually by the IRS, the “Dirty Dozen” is a list of common scams taxpayers may encounter in the coming months. While many of these scams peak during the tax filing season, they may be encountered at any time during the year. Here is this year’s list.

                              IRS Dirty Dozen Tax Scams for 2016

1. Identity Theft
Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. Taxpayers should use caution when viewing e-mails, receiving telephone calls or getting advice on tax issues because scams can take on many sophisticated forms, according to IRS Commissioner John Koskinen. Taxpayers should secure personal information by protecting their computers and only giving out Social Security numbers when absolutely necessary.

 2. Phone Scams
Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers. In recent weeks, the agency has seen a surge of these phone scams as scam artists threaten police arrest, deportation, license revocation and other things.

Scammers make unsolicited calls claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave “urgent” callback requests through phone “robocalls,” or via a phishing email.

Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don’t get the money.

Scammers often alter caller ID numbers to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim’s name, address and other personal information to make the call sound official.

 3. Phishing
Phishing schemes using fake emails or websites are used by criminals to try to steal personal information. Typically, criminals pose as a person or organization you trust and/or recognize. They may hack an email account and send mass emails under another person’s name, or pose as a bank, credit card company, tax software provider or government agency. These criminals go to great lengths to create websites that appear legitimate but contain phony log-in pages, hoping that victims will take the bait so they can steal the victim’s money, passwords, Social Security number and identity.
Scam emails and websites also can infect your computer with malware without you even knowing it. The malware can give the criminal access to your device, enabling them to access all your sensitive files or track your keyboard strokes, exposing login information.

 4. Tax Return Preparer Fraud
About 60 percent of taxpayers use tax professionals to prepare their returns. The vast majority of tax professionals provide honest, high-quality service, but there are some dishonest preparers who set up shop each filing season. Well-intentioned taxpayers can be misled by preparers who don’t understand taxes or who mislead people into taking credits or deductions they aren’t entitled to in order to increase their fee.
Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

  5. Hiding Money or Income Offshore
Through the years, offshore accounts have been used to lure taxpayers into scams and schemes. Numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

 6. Inflated Refund
Taxpayers should be on the lookout for unscrupulous tax return preparers pushing inflated tax refund claims. Scam artists routinely pose as tax preparers during tax time, luring victims in by promising large federal tax refunds or refunds that people never dreamed they were due in the first place. They might, for example, promise inflated refunds based on fictitious Social Security benefits and false claims for education credits, the Earned Income Tax Credit (EITC), or the American Opportunity Tax Credit, among others.

Scammers use flyers, advertisements, phony store fronts and even word of mouth to throw out a wide net for victims. They may even spread the word through community groups or churches where trust is high. Scammers frequently prey on people such as the elderly or non-English speakers, who may or may not have a filing requirement.
Because taxpayers are legally responsible for what is on their returns (even if it was prepared by someone else), those who buy into such schemes can end up being penalized for filing false claims or receiving fraudulent refunds.

7. Fake Charities
Taxpayers should be aware that phony charities use names or websites that sound or look like those of respected, legitimate organizations. For instance, following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists use a variety of tactics including contacting people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds. They may also attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources.

 8. Falsely Padding Deductions
The vast majority of taxpayers file honest and accurate tax returns on time every year. However, each year some taxpayers fail to resist the temptation of fudging their information. That’s why falsely claiming deductions, expenses or credits on tax returns is on the “Dirty Dozen” tax scams list for the 2016 filing season. The IRS warns taxpayers that they should think twice before overstating deductions such as charitable contributions, padding their claimed business expenses or including credits that they are not entitled to receive. Avoid the temptation of falsely inflating deductions or expenses on your return to underpay what you owe and possibly receive larger refunds.

 9. Excessive Claims for Business Credits
Improper claims for business credits such as the fuel tax and the research credit are also on the IRS “Dirty Dozen” list this year. The fuel tax credit is generally limited to off-highway business use or use in farming. Consequently, the credit is not available to most taxpayers. Still, the IRS routinely finds unscrupulous preparers who have enticed sizable groups of taxpayers to erroneously claim the credit to inflate their refunds. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

The research credit is an important feature in the tax code to foster research and experimentation by the private sector; however, the IRS does see a significant amount of misuse of the research credit each year. Improper claims for the research credit generally involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses.

10. Falsifying Income
This scam involves inflating or including income on a tax return that was never earned, either as wages or as self-employment income, usually in order to maximize refundable credits. Just like falsely claiming an expense or deduction you did not pay, claiming income you did not earn in order to secure larger refundable credits could have serious repercussions. Well-intentioned taxpayers can be misled by tax preparers who don’t understand taxes or who mislead people into taking credits or deductions they aren’t entitled to in order to increase their fee.

Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is ethical and up to the task.

11. Abusive Tax Shelters
Phony tax shelters and structures to avoid paying taxes continue to be a problem and taxpayers should steer clear of these types of schemes as they can end up costing taxpayers more in back taxes, penalties, and interest than they saved in the first place.
Abusive tax schemes have evolved from simple structuring of abusive domestic and foreign trust arrangements into sophisticated strategies that take advantage of the financial secrecy laws of some foreign jurisdictions and the availability of credit/debit cards issued from offshore financial institutions. For example, multiple flow-through entities are commonly used as part of a taxpayer’s scheme to evade taxes. These schemes may use Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs), foreign financial accounts, offshore credit/debit cards and other similar instruments. They are designed to conceal the true nature and ownership of the taxable income and/or assets.

Trusts also commonly show up in abusive tax structures. They are highlighted here because unscrupulous promoters continue to urge taxpayers to transfer large amounts of assets into trusts. These assets include not only cash and investments but also successful on-going businesses. There are legitimate uses of trusts in tax and estate planning, but the IRS commonly sees highly questionable transactions. These transactions promise reduced taxable income, inflated deductions for personal expenses, reduced (even to zero) self-employment taxes, and reduced estate or gift transfer taxes. These transactions commonly arise when taxpayers are transferring wealth from one generation to another.

Another abuse involving a legitimate tax structure involves certain small or “micro” captive insurance companies. In the abusive structure, unscrupulous promoters, accountants, or wealth planners persuade the owners of closely held entities to participate in these schemes. The promoters assist the owners to create captive insurance companies onshore or offshore and cause the creation and sale of the captive “insurance” policies to the closely held entities. The promoters manage the entities’ captive insurance companies for substantial fees, assisting taxpayers unsophisticated in insurance, to continue the charade from year to year.

12. Frivolous Tax Arguments
Taxpayers are also warned against using frivolous tax arguments to avoid paying their taxes. Examples include contentions that taxpayers can refuse to pay taxes on religious or moral grounds by invoking the First Amendment or that the only “employees” subject to federal income tax are employees of the federal government; and that only foreign-source income is taxable.

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. These arguments are wrong and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000.
If you think you’ve been a victim of a tax scam, don’t hesitate to give us a call.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAS

The April 18^th tax return due date is fast approaching, but we still we have a few more weeks to share timely tax information with you . . .

                            Who Should File a 2015 Tax Return?

Most people file a tax return because they have to, but even if you don’t, there are times when you should because you might be eligible for a tax refund and not know it. This year, there are a few new rules for taxpayers who must file. The tax tips below should help you determine whether you’re one of them.

 General Filing Rules. Whether you need to file a tax return this year depends on a few factors. In most cases, the amount of your income, your filing status, and your age determine if you must file a tax return. For example, if you’re single and 28 years old you must file if your income, was at least $10,300. Other rules may apply if you’re self-employed or if you’re a dependent of another person. There are also other cases when you must file. If you have any questions, don’t hesitate to call.

 Premium Tax Credit. If you bought health insurance through the Health Insurance Marketplace in 2015, you might be eligible for the Premium Tax Credit; however, you will need to file a return to claim the credit.

If you purchased coverage from the Marketplace in 2015 and chose to have advance payments of the premium tax credit sent directly to your insurer during the year, you must file a federal tax return. You will reconcile any advance payments with the allowable premium tax credit.

You should have received Form 1095-A, Health Insurance Marketplace Statement, in February. The new form has information that helps you file your tax return and reconcile any advance payments with the allowable Premium Tax Credit.

 Tax Withheld or Paid. Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.

Earned Income Tax Credit. Did you work and earn less than $53,267 last year? You could receive EITC as a tax refund if you qualify with or without a qualifying child. You may be eligible for up to $6,242. If you qualify, file a tax return to claim it.

Additional Child Tax Credit. Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit.

American Opportunity Credit. The AOTC (up to $2,500 per eligible student) is available for four years of post-secondary education. You or your dependent must have been a student enrolled at least half-time for at least one academic period. Even if you don’t owe any taxes, you still may qualify; however, you must complete Form 8863, Education Credits, and file a return to claim the credit.

And, a bit more timely tax season information for your consideration . . .

               It’s Not Too Late to Make a 2015 IRA Contribution

If you haven’t contributed funds to an Individual Retirement Arrangement (IRA) for tax year 2015, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 18th due date, not including extensions.

Be sure to tell the IRA trustee that the contribution is for 2015. Otherwise, the trustee may report the contribution as being for 2016 when they get your funds.

Generally, you can contribute up to $5,500 of your earnings for tax year 2015 (up to $6,500 if you are age 50 or older in 2015). You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.

Traditional IRA: You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you or your spouse, if filing jointly, are covered by an employer’s pension plan.

Roth IRA: You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.

Each year, the IRS announces the cost of living adjustments and limitation for retirement savings plans.

Saving for retirement should be part of everyone’s financial plan and it’s important to review your retirement goals every year in order to maximize savings. If you need help deciding on what is right for you the 2015 tax year, please give us a call.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

Carol McAtee & Associates, CPAs

More than 50 tax provisions, including the tax rate schedules and other tax changes are adjusted for inflation in 2016. This week we’re going to take a look at the ones most likely to affect taxpayers like you . . .

                             Tax Brackets, Deductions, and Exemptions for 2016

• The tax rate of 39.6 percent affects singles whose income exceeds $415,050 ($466,950 for married taxpayers filing a joint return), up from $413,200 and $464,850, respectively. The other marginal rates–10, 15, 25, 28, 33 and 35 percent–and related income tax thresholds–are found at IRS.gov.
• The standard deduction remains at $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly. The standard deduction for heads of household rises to $9,300, up from $9,250.
• The limitation for itemized deductions to be claimed on tax year 2016 returns of individuals begins with incomes of $259,400 or more ($311,300 for married couples filing jointly).
• The personal exemption for tax year 2016 rises to $4,050, up from the 2015 exemption of $4,000. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $259,400 ($311,300 for married couples filing jointly). It phases out completely at $381,900 ($433,800 for married couples filing jointly.)
• The Alternative Minimum Tax exemption amount for tax year 2016 is $53,900 and begins to phase out at $119,700 ($83,800, for married couples filing jointly for whom the exemption begins to phase out at $159,700). The 2015 exemption amount was $53,600 ($83,400 for married couples filing jointly). For tax year 2016, the 28 percent tax rate applies to taxpayers with taxable incomes above $186,300 ($93,150 for married individuals filing separately).
• For 2016, the maximum Earned Income Credit amount is $6,269 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,242 for tax year 2015. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
• Estates of decedents who die during 2016 have a basic exclusion amount of $5,450,000, up from a total of $5,430,000 for estates of decedents who died in 2015.
• For 2016, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $148,000, up from $147,000 for 2015.
• For 2016, the foreign earned income exclusion rises to $101,300, up from $100,800 in 2015.
• The annual exclusion for gifts remains at $14,000 for 2016.
• The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains at $2,550.
• Under the small business health care tax credit, the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,900 for tax year 2016, up from $25,800 for 2015.

If you would like help with tax planning for 2016, please give us a call at 727-327-1999.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAs

In this week’s blog, we are sharing tax information for your reference if you are selling or considering selling your home . . .

                   Ten Key Tax Facts about Home Sales

1. Exclusion of Gain. You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale.

2. Exceptions May Apply. There are exceptions to the ownership, use, and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more information about these exceptions, please call our office.

3. Exclusion Limit. The most gain you can exclude from tax is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.

4. May Not Need to Report Sale. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.

5. When You Must Report the Sale. You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale, take a look at the Questions and Answers on the Net Investment Income Tax on IRS.gov or call the office.

6. Exclusion Frequency Limit. Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule.

7. Only a Main Home Qualifies. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.

8. First-time Homebuyer Credit. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules, please call.

9. Home Sold at a Loss. If you sell your main home at a loss, you can’t deduct the loss on your tax return.

10. Report Your Address Change. After you sell your home and move, update your address with the IRS. To do this, file Form 8822, Change of Address. You can find the address to send it to in the form’s instructions on page two. If you purchase health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan.

 
If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.

McAtee & Associates, CPAs

This week we are sharing some more helpful information from our monthly firm newsletter. . .

                  Job Search Expenses May be Deductible

New year, new job? If you’ve decided it’s time to move on from your current position and look for a new one, you may be able to deduct some of your job search costs. Here’s what you need to know:

1. Same Occupation. You can’t deduct expenses for a job search in a new occupation; your expenses must be for a job search in your current line of work.
2. Resume Costs.You can deduct the cost of preparing and mailing your resume.
3. Travel Expenses.If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.
4. Placement Agency. You can deduct some job placement agency fees you pay to look for a job.
5. First Job. You can’t deduct job search expenses if you’re looking for a job for the first time.
6. Substantial Job Break. You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
7. Reimbursed Costs. Reimbursed expenses are not deductible.
8. Schedule A. You usually deduct your job search expenses on Schedule A, Itemized Deductions. You’ll claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.
9. Premium Tax Credit.If you receive advance payments of the premium tax credit it is important that you report changes in circumstances, such as changes in your income or eligibility for other coverage, to your Health Insurance Marketplace. Other changes that you should report include changes in your family size or address.Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER  PARTY ANY MATTERS ADDRESSED HEREIN.