Beginning January 1, 2017, the IRS will hold the refunds on all returns that contains an Earned income Credit or Additional Child Tax Credit until February 15th. This change is the result of the Protecting Americans from Tax Hikes Act of 2015 that was enacted December 18th, 2015.
This change allows additional time for filers to complete their return in order to prevent revenue lost due to identity theft and refund fraud related to fabricated wages and withholdings. The process in which these returns are conducted will not change, and the IRS will process these returns like they have in the past, payments will just be held. If you qualify for one of these credits, it is highly recommended that you file your return prior to February 15th to ensure you get your full refund. More informatoin about this law can be found at IRS.gov.
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VLast year the IRS took down their 'Get Transcript' App after they discovered criminals were using it to access transcripts of hundreds of thousands of old tax returns. The App was designed to allow tax payers to look up all their old tax returns easily. The App did not have sufficient security measures in place allowing for tax payers returns to be accessed by people other than the tax payer.
After taking down the 'Get Transcript' App last year, the IRS solicited the help of digital experts from the U.S. Digital Service and other security authorities to beef up their security measures. With increased security measures in place, the IRS reported the App is back up and running. The 'Get Transcript' App not only has additional security measures in place, it has new features allowing taxpayers to see the date and time when their page was last accessed. The App allows taxpayers to validate income for mortgages or student loans as well as obtain their prior year adjusted gross income (AGI), which is needed to e-file current year returns. You can access the 'Get Transcript' App today at: www.irs.gov/individuals/get-transcript Today you see more and more CPA's offering Advisory Services, but why do we see this trend? There is two ways to answer this question, from both the Accountants perspective and from the clients.
With an evolving accounting environment with more and more automation it has given Accountants the opportunity to spend more time and expertise looking at the numbers rather then just recording them. Accountants are well positioned, especially ones that provide bookkeeping services, to offer these services as they are already familiar with the inner workings of the clients they serve. Additionally, CPA's are changing. As new, younger CPA's come into business are willing to think more broadly about the performance metrics rather than just financials, and many of them want to. The bigger drive for this drive is the clients are demanding it. Businesses are trying to gain advantages in an increasingly competitive market and become more agile. Some companies have gone to hiring expensive consulting firms that first spend time learning their business, when they realize they already have experts that know their business. This can greatly reduce consulting fees as well as improve the quality of advise they receive. Businesses are finding out more and more they need help interpreting their numbers, so why not turn to someone they already trust and have a relationship with. I believe this trend will continue as both parties are seeing high gains from this relationship. Small business get services that in the past have only been available to large corporations. For Accountants, it has given them another way to serve their clients and help them grow. This trend only puts more stress on ensuring your CPA is someone you trust and believe in. Do you currently own real estate investment properties or are you thinking about it? There are many tax items to be aware of including the 1031 exchange. Real Estate investments offer a lot of tax advantages if you are informed and utilize them, for this post we are going to focus on the 1031 Exchange.
What the 1031 Exchange allows for is the deferral of paying taxes on property you sell when you purchase a "Like-Kind Asset." Meaning that when you sell a house you buy a house or an apartment building. The advantage here is that since the gain of the sale is not taxed it allows for more purchasing power of your next real estate investment. That gain will eventually be taxed when you sell your final asset and don't by another "Like-Kind Asset" with the gain. There are a few rules to be aware of in order to take advantage of this benefit. First there are time limits. The IRS requires you to identify the property or three potential properties you intend to buy within 45 days. In addition, you must close on the new property within 180 days of the sale of your old property. The other rule to be aware of is that you can't touch the cash. When you sell a property the proceeds of the sale need to stay with an intermediary until you purchase the next property. Make sure you understand the advantages and limitations of these rules so you can make the most out of your money, as navigating the tax law can allow for faster growth and more profits in your real estate ventures. Always consult with your CPA before you make any moves so they can advise you on your specific situation. Bookkeeping is the record keeping of your business, allowing for timely and accurate picture of the fiscal status of your company. Whether you decide to do it yourself, or hire it out, having accurate records is extremely important to the success of your business. Lets look at some of the advantages provided by Bookkeeping.
Financial Picture Bookkeeping allows for you to know that status of your company and the financial health of it. You can see how you are performing compared to historical data as well as competitors. It provides targets and can help identify were you may be throwing money away. Knowing where you are will allow you to make better decisions. Monitoring your Budget Creating a budget is essential for keeping cost under control, but without accurate bookkeeping it is impossible to know if you are sticking to your budget. It will also allow for you to adjust your budget and make for better spending in the future. Get your cost under control by sticking to your budget. Tax Advantages Accurate bookkeeping will help to identify where you can take deductions and make sure your expenses are being captured. Your accountant will also be able to give advice throughout the year and conduct tax planning so you don't get hit with a large tax bill and penalties at the end of the year. Find a system that works for you and your company and get your bookkeeping in order so you can give your company the best chance at success. Investing in Real Estate provides tax benefits that other forms of investing don't. The two major benefits are received from depreciation deduction and loan interest, both of which can greatly reduce the taxable income being received. Real Estate investing historically has been tough to get into as a result of the initial investment required and expertise needed to improve your chances of making smart investments. Today there are organizations that you can invest in that remove those barriers but allow you to get those tax benefits. See the link below for more details on how you can take advantage of these benefits.
https://www.realtymogul.com/resource-center/articles/the-tax-benefits-of-equity-real-estate-investing Congratulations. You have started your own business. You built your website, your business cards are printed and you’ve started closing on some new accounts and your thinking “this running a business thing isn’t so hard”. Unfortunately, one of the things that is always present but often forgotten is planning for taxes. The following is a quick guide on typical taxes that a small business/sole-proprietor in Michigan would be required to pay. Federal Income Tax The rates for federal income taxes vary depending on the amount of your taxable income. Rates range from 10% to 39.6% for 2015. So, at a minimum you will have to pay 10 to 15 percent on your business income, possibly more if you are in a higher tax bracket. For our example we will assume a 15% tax bracket. Self-Employment Tax Have you ever noticed the tax withheld from your paycheck for Social Security and Medicare tax? Did you know that the amount withheld on your paycheck is only half of the tax? That’s right, for payroll, the employee pays 7.65% and the employer pays another 7.65%. Guess what happens when you are self-employed. You get to pay both halves. That is another 15.3% in tax that will need to be paid on business income. Michigan Income Tax Don’t even think about forgetting the State. They want their share too. The State of Michigan has a Flat income tax rate of 4.25% for 2015. Adding it All Up If you add it all up, that comes to a total tax rate of 34.55%. To put in terms of dollars. If, for example, you had business income of $50,000. Your tax would be $17,275. Now, this is a very over simplified example and many different things can affect your tax liability. The point of this article is to be prepared. We suggest that, when starting a new business, talk to a tax professional and get some advice before the end of the tax year when you are stuck with a $17,000 tax bill. Here's what taxpayers should know about how to file to get the most out of these credits and deductions. The American Opportunity Credit can be a good way to reduce the amount of total tax you owe as it allows you to credit up to $2,500 in qualified education expenses that you paid over the tax year, per student. If you have more than one student in your household, those credits can add up pretty quickly while your tax bill goes down. You can only claim it, however, if the student for whom you paid these expenses was you, your spouse or someone that you claim as a dependent. If you’re the student and you paid the expenses but someone else claims you as a dependent, you won’t be able to claim the credit. The person that claims you, however, can. You also can’t claim the credit if you’re married and you and your spouse decide to file your taxes separately. Up to 40 percent of this credit is refundable, so if you end up having money left over after paying your taxes, you could get some of this credit back in cash. The Lifetime Learning Credit can also reduce the total amount of income tax you may owe by up to $2,000, although this one is nonrefundable. This means that it can bring your income tax bill to zero, but you won’t ever get a refund of any excess you claimed beyond your income tax owed. On the other hand, while you are only allowed to claim the American Opportunity Credit for a total of four years per student, there is no limit to the number of years you can claim the Lifetime Learning Credit. If you are paying qualified education expenses for more than one student, you can claim a different credit for each student if you choose to. A deduction is different from a credit in that instead of reducing the tax you owe, it reduces the income from which your tax liability is calculated. So if your income is $60,000, but you have deductions equaling $5,000, the IRS will only calculate the tax you owe off $55,000. There are two higher education-related tax deductions you might qualify for. The most common is the student loan interest deduction that allows some consumers to deduct up to $2,500 in qualified interest payments made during the tax year from their taxed income. You may be able to claim this deduction if you or someone else made interest payments on your qualified student loan during the tax year. If someone else claims you as an exemption on their return, neither of you may claim the deduction. You also are excluded from claiming the deduction if you are married but filing separately from your spouse. The other deduction you might be eligible for is up to $4,000 in qualified tuition and fees you paid during the year for yourself, your spouse or a dependent. You can even claim those qualified expenses that were paid with the funds from a loan. Similar to the other credits and deductions, you cannot use this deduction if you are married filing separately or if someone else can claim you as a dependent. You also cannot claim both this deduction along with either the American Opportunity or Lifetime Learning credits. As you can see, all of these deductions and credits have similar, but not quite the same filing rules in order to qualify. It’s important to know all the rules and consult with a qualified tax professional. http://www.usnews.com/education/blogs/student-loan-ranger/2015/01/28/common-tax-filing-rules-for-student-loan-credits-deductions IRS has provided a procedure under which many taxpayers who are unable to repay any excess advance payments of the Affordable Care Act (ACA)'s premium credit for the 2014 tax year by the due date of their 2014 return, or who have an underpayment of estimated tax attributable to that excess, can obtain relief from the late payment penalty and/or the underpayment of estimated tax penalty. Individuals that choose to have the credit paid in advance to their insurance company to lower what they pay for their monthly premiums, and then reconcile the amount paid in advance with the actual credit computed when they file their tax return will have some relief. A taxpayer claims the premium tax credit on the income tax return for the tax year of coverage, then must reconcile the amount of premium tax credit allowed on the tax return with advance credit payments. If advance credit payments are more than the premium tax credit allowed on the return, the difference (excess advance payments) is treated as additional tax and may result in either a smaller refund or a larger balance due. The tax Code imposes a penalty on a failure to pay (on or before the due date for payment, including any extension of time for payment) an amount shown as tax on any return or in the case of an underpayment. However, the Code allows for the penalty to not imposed if the taxpayer shows that the failure was due to reasonable cause and not willful neglect. In general, individuals must pay the tax shown on the return by April 15. Additionally, the IRS will waive the penalty for tax year 2014 for an underpayment of estimated tax for taxpayers who have an underpayment attributable to excess advance credit payments if the taxpayers (i) are otherwise current with their filing and payment obligations; and (ii) report the amount of the excess advance credit payments on a 2014 tax return timely filed, including extensions. To request a waiver of the penalty as provided in the Notice, taxpayers should check box A in Part II of Form 2210, complete page 1 of the form, and include the form with their return, along with the statement: "Received excess advance payment of the premium tax credit." Taxpayers do not need to attach documentation from the Exchange, explain the circumstances under which they received an excess advance payment, or complete any page other than page 1 of the Form 2210.Taxpayers also do not need to figure the amount of penalty for the penalty to be waived. If you see your wages go up during 2014 and you are taking advantage of an Affordable Health Care Act, it may mean trouble for next years tax return. To ensure you don't owe money when tax returns become due next year, ensure you update any increased wages to the Exchange. If your wage increases and you don't report it, the difference in the subsidy you should receive based on wages will be taken out of any refund and my require you to pay. |