If you're over 70 1/2 years, don't forget about the Required Minimum Distribution from your retirement account by December 31st. | |
|
NEW 2016 401(k) and Pension Limits | | The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan is $18,000 - unchanged from 2015.The catch-up contribution limit for employees aged 50 and over who participate in these plans is $6,000 unchanged from 2015.The limit on annual contributions to an Individual Retirement Arrangement (IRA) is $5,500 - unchanged from 2015 and the additional catch-up contribution for individuals 50 and over remains unchanged at $1,000.The limitation for defined contribution plans is unchanged from 2015 at $53,000.The annual compensation limit is also unchanged at $265,000. |
|
Will you be audited?
The good news is audit counts are declining. The overall average during fiscal year 2015 was 0.84%. Beware that as your income increases so does your chance of audit. | |
|
Did you move or change your email address in 2015? Call or email the office and let us know! |
|
|
Greetings! Hope you are enjoying the cooler fall weather! The just ended 2015 tax-filing season for tax year 2014 continued to present unpleasant results for upper income taxpayers as they pay higher taxes from the so-called American Taxpayer Relief Act of 2012. Things in Washington are not getting any easier either. A
vote on a package of already expired
tax provisions known as extenders has not occurred and needs to be voted on soon for taxpayers to be able to act before December 31. In the meantime, many favorite tax breaks such as the deduction for state and local general sales taxes, higher education expenses, charitable donations from IRAs, and bonus depreciation for business owners are no longer in effect. Fingers crossed that Congress will reinstate these provisions retroactively. 2015 will be the second year for taxpayers to declare they had minimum essential health care coverage or pay a penalty (called the Individual Shared Responsibility payment). For 2015, the payment can be as high as 2% of your household income. In addition, this will be the first year for many taxpayers to receive a Form 1095 showing health coverage information (from your employer, the health marketplace or from your insurer). Please retain this form as we'll need it when preparing your tax return. |
To Bundle or Not to Bundle? | Every year you must decide whether you will take the standard deduction
on your income taxes or itemize
your personal deductions. Personal deductions include property taxes, sales tax (if reinstated for 2015), qualified home mortgage interest, charitable contributions and some miscellaneous deductions such as investment advisor fees, or unreimbursed employee expenses. You itemize only if your deductions for the year are more than the applicable standard deduction. If you don't have enough deductions to itemize, you lose those deductions forever--you can't save them up and use them in a later year. For your reference, the standard deductions for 2015 are $6,300 for a single taxpayer ($12,600 for a married filing jointly couple). If you are over 65 years old, add $1,550 for single ($1,250 per person for Married Filing Jointly).
If you don't have enough itemized deductions to itemize every year, consider bunching your itemized deductions. This means that you pile on your itemized deductions every other year, giving yourself the maximum itemized deduction for that year. You then take the standard deduction in the alternate years, when you have fewer itemized deductions. During the year you plan to itemize, do everything you can to make your itemized deductions exceed your standard deduction. Pay every bill that will result in an itemized deduction. The most common are property taxes, charitable deductions and miscellaneous deductions. However, you do want to be aware of a possible Alternative Minimum Tax bite.
Call or email the office if you wish to see if this strategy will work for you. |
Did You Know About These Deductions and Tax Savings? |
Charitable Out of Pocket Deductions : Keep track of what you spend while doing charitable work, from what you spend on stamps for a fundraiser, to the cost of ingredients for casseroles you make for the homeless, to the number of miles you drive your car for charity (currently at 14 cents a mile). Add such costs with your cash contributions when figuring your charitable contribution deduction.
Medical Travel Deductions: In addition to the cost of getting to and from the doctor, you can deduct up to $50 a night for lodging if seeking medical care requires you to be away from home overnight. The $50 is per person, so if you travel with a sick child to get medical care, you can deduct $100 a day. You get a tax benefit only to the extent your expenses exceed 10% of adjusted gross income, or 7.5% if you're 65 or older. Health Savings or Flexible Spending: If you don't qualify for the medical expense deduction because you don't exceed the threshold, consider enrolling in a Health Savings Account (HSA) or Flexible Spending Account with your employer. - An HSA is an account created for individuals who are covered under high-deductible health plans (HDHPs) to save for medical expenses
that HDHPs do not cover. Contributions are made into the account by the individual or the individual's employer and are limited to a maximum amount each year ($3,350 for an individual and $6,750 for a family; add $1,000 if you're 55 or over). The contributions are invested over time and can be used to pay for qualified medical expenses, which include most medical care such as dental, vision and over-the-counter drugs.
- A FSA is set up by an employer for an employee, the account allows employees to contribute a portion of their regular earnings
on a tax-free basis to pay for qualified expenses, such as medical expenses
or dependent care expenses. The limit is $2,550 for the employee.
|
Foreign Financial Asset Reporting | The world is getting to be a smaller place and foreign banks are sharing information with the US Treasury. This is a reminder that taxpayers with foreign financial accounts or foreign financial assets have filing and possible tax payment responsibilities that should not be overlooked during tax season. Depending on the type of foreign asset and the dollar amount, you may need to report information on your tax return and / or information on the Report of Foreign Banks and Financial Accounts (FBAR). If you have a financial interest in a foreign bank or financial account with a combined balance of more than $10,000 (at any time during the year), or you have signature authority over such an account, you are required to report the account annually to the Treasury Department by filing the FBAR. Similarly, Form 8938 is used to report "specified foreign financial assets" if the total value of all specified foreign financial assets in which you have an interest is more than the reporting threshold. For a single taxpayer, you satisfy the reporting threshold if the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. The amounts for a married filing jointly couple is $100,000 and $150,000, respectively. Call the office if you wish to discuss.
|
|
As always, we are honored to handle your tax and accounting matters. Thank you for your business! Sincerely,
Doris Cloud and Paul Cloud This newsletter is for general guidance only, and does not constitute tax advice or professional consulting. Before any action, consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information.
|
|
|
