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Saving for the future has several benefits. You pay less in taxes, ensure your retirement years are secure and qualify for tax breaks. The simplest way to realize the full advantages of your retirement account is to maximize your retirement contributions. You may make a contribution anytime from January 1 to the tax filing deadline (April 17 in 2017).

401(k)

If you have a 401(k) plan, you can contribute up to $18,000 in 2016. The limit was the same in 2015. If you maxed out your 401(k) in 2015, then you should keep your monthly contributions at the same rate.

Roth IRA

Eligibility for a Roth IRA phases out for taxpayers with income between $116,00 and $131,000 ($183,000-$193,000 for couples). Couples earning more than this limit can convert a traditional IRA to a Roth IRA.

You do not pay taxes on your contributions to a 401(k), but you’re taxed on withdrawals. However, on Roth IRA, you pay taxes at the time of making the contribution and make tax-free withdrawals later. Depending on which retirement account you have, you can plan your contributions based on how you are taxed. If you prefer paying taxes at a known tax rate, then the Roth IRA is preferable. However, if you want tax-free growth, a traditional IRA or a 401(k) is the retirement account to choose.

IRA

You can contribute up to a maximum of $5,500 to an IRA in 2016. If you are age 50 years or older, the maximum contribution limit is $6,500. One restriction to an IRA is that if you have a workplace retirement plan and a modified adjusted gross income (AGI) between $61,000 and $71,000 for individuals ($98,000-$118,000 for couples) in 2015, then you cannot make a full deduction on the contribution. In some cases, you cannot even take a partial deduction.

Also, even if you don’t have a workplace retirement plan but your spouse does, you cannot deduct the full amount of your contribution to an IRA if your income together is over $183,000. If your income together is over $193,000, then you cannot take any deduction.

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Preparing your tax and financial records for 2016 will help you to keep track of your income, expenditures, savings and taxes. These four elements are vital in measuring monetary growth. Organized records also make preparing your tax return easier. Here are tips on what to do when preparing your records.

What Records to Keep

Records of receiving of income such as bank statements, expenditures such as credit card statements, and receipts of expenses that are tax deductible such as those of charitable giving are important and should be retained. Any document that supports the claims you make on your tax return should find a space in your tax records.

In case of an audit, the responsibility of proving deductions, entries and statements on your tax return falls on you. This is called the burden of proof. Even if you did not include incorrect information on the return, you must be able to prove that you included the correct information by using supporting documents.

Collect Information Returns

Depending upon whether you file as individual or business, you might be required to file various information returns. Some of the most commonly filed information returns are:

• Form W-2 for Wage & Tax Statement
• 1099-INT for Interest Income
• 1099-D for Dividends
• 1099-MISC for Miscellaneous Income
• 1098-E for Student Loan Interest
• 1099-R for Distribution from Pensions, Annuities, IRAs, Retirements, etc.
• 5754 for Receiving Gambling Winnings
• 1099-C for Cancellation of Debt

For businesses, there are forms, including:

• Form 8027 – Employer’s Annual Information Return of Tip Income & Allocated Tips
• Form 8300 – Report of Cash Payments Over $10,000 Received in a Trade or Business

The recipient must receive these forms by January 31 unless the deadline doesn’t apply, such as in the case of gambling winnings.

Gather the Receipts

If you itemize deductions, it is vital to keep the receipt or bank record of any deduction you claim on your return. You may gather receipt for medical expenses that are not covered, charitable contributions, restaurant bills for business meetings, property taxes, and so on. If you are unsure of what to keep, retain and organize the receipts of all the expenses before your return preparer informs you of which deductions to claim.

For help with tax planning call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that provides free assistance to taxpayers in resolving tax problems. The TAS can be beneficial to both individual taxpayers and businesses whose problems are causing financial difficulty.

Eligibility

Taxpayers who tried but failed to resolve their tax issues through normal IRS channels are eligible to receive help from the TAS. Also, taxpayers who are dissatisfied with the procedures and service of the IRS can seek assistance from the TAS. Some of the problems that the organization helps to resolve are identity theft, fraud by unscrupulous return preparers, tax debt and collection actions.

If you or your business is experiencing financial difficulties due to the IRS, are in danger of IRS collection actions, or are frustrated with the IRS’ service, you may seek help from the TAS.

Resolution Process

As part of the TAS resolution process, an individual or business is assigned to an advocate who listens to their tax problem and helps them to become familiar with standard IRS procedures. All services of the TAS are free.

The information taxpayers share with the TAS is not shared with the IRS except when it is necessary to provide relief to the taxpayer.

How to Contact

The TAS has at least one local taxpayer advocate office in every state, the District of Columbia, and Puerto Rico. Taxpayers can contact the advocate in their state by finding their phone number in Publication 1546. Additionally, taxpayers may call the TAS toll-free number 1-877-777-4778.

To send a request for assistance, file Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order) with the TAS. Form 911 is available by phone at 1-800-829-3676, and on the IRS website – irs.gov.

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Al Capone was a famous gangster who was charged with the most severe tax crime: tax evasion. After he was imprisoned for just nine months for carrying a concealed weapon and two months for contempt of court, the feds began to build up a case of tax evasion against him.

With millions in unaccounted income from illegal earnings, he was found guilty of not reporting and paying taxes, and was awarded 11 years in prison. He was also fined $50,000 for the tax crime and ordered to pay $215,000 in back taxes, with interest.

The federal law requires that illegal income be reported and taxed just like legal income. It means that gangsters, scammers and thieves are also legally required to file a return and pay taxes on their income. Disclosing illegal income to the IRS, however, poses problems. Tax experts say that most criminals do not declare their “earnings”. The only ones that report their earnings do it because they fear being caught.

The feds, on the other hand, use this tax law to put criminals behind bars; if not for their other criminal activities, then for tax evasion. The case of Al Capone stands as example. The IRS says, “When no other crimes could be pinned to Al Capone, the Internal Revenue Service obtained a conviction for tax evasion. As the astonished Capone left the courthouse he said, ‘This is preposterous. You can’t tax illegal income!’ But the fact is income from whatever source derived (legal or illegal) is taxable income.”

When attempting to evade tax, or a willful failure to collect or pay over tax, the penalty is not more than $250,000 for individuals and $500,000 for corporations with or without imprisonment for a maximum of 5 years.

For willful failure to file a return, supply information, or pay tax, the penalty is not more than $100,000 for individuals and $200,000 for corporations with or without imprisonment for a maximum of 1 year.

On any unpaid taxes, a penalty and interest are added each month. That substantially increases the total taxed owed.

Criminals that disclose their illegal earnings face the risk of being caught because the IRS does inform law enforcement agencies of the illegal activity. Also, in case of an IRS audit, they fail to furnish receipts and supporting documents to reveal income sources. The bright side is that they do not have to face criminal tax charges that can mean more years in prison and a heavy fine.

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

A new federal law moves up the W-2 filing deadline for employers and small businesses to Jan. 31. The new law makes it easier for the IRS to find and stop refund fraud. It also delays some taxpayer refunds. Those taxpayers claiming the Earned Income Tax Credit or the Additional Child Tax Credit won’t see refunds until Feb.15, at the earliest.

Here are some key points to keep in mind:

• Protecting Americans from Tax Hikes (PATH) Act. Enacted last December, the new law means employers need to file their copies of Forms W-2  by Jan. 31. These forms also go to the Social Security Administration. The new deadline also applies to certain Forms 1099. Those reporting nonemployee compensation such as payments to independent contractors submitted to the IRS are due Jan. 31. Employers have long faced a Jan. 31 deadline in providing copies of these forms to their employees. That date won’t change.
• Different from past deadline. Employers normally had until the end of February, if filing on paper, or the end of March, if filing electronically, to send in copies of these forms. The IRS is working with the payroll community and other partners to spread the word.
• Helps stop fraud or errors. The new Jan. 31 deadline will help the IRS to spot errors on returns filed by taxpayers. Having these W-2s and 1099s sooner will make it easier for the IRS to verify legitimate tax returns and get refunds to taxpayers eligible to receive them. The changes will allow the IRS to send some tax refunds faster.
• Some refunds delayed. Certain taxpayers will get their refunds a bit later. By law, the IRS must hold refunds for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until Feb. 15. This means the whole refund, not just the part related to the EITC or ACTC.
• File tax returns normally. Taxpayers should file their returns as they normally do. The IRS issues more than nine out of 10 refunds in less than 21 days. However, some returns may need further review. Whether or not claiming EITC or ACTC, the IRS cautions taxpayers not to count on getting a refund by a certain date. Consider this fact when making major purchases or paying debts.
• Use IRS.gov online tools. Starting Feb. 15, the best way to check the status of a refund is with the Where’s My Refund? tool on IRS.gov or the IRS2Go Mobile App.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers may need their Adjusted Gross Income amount from a prior tax return to verify their identity. They can get a transcript of their return at www.irs.gov/transcript.

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Did you know that not everyone or every dollar earned is taxed the exact same amount?

This is because the United States tax system aims to be progressive. A progressive tax system tries to collect more tax from those who earn more. In essence, a million dollar earner pays more total tax as well as a higher percentage of their income in tax than someone who earns far less.

One of the ways our tax system achieves this is through tax brackets. A tax bracket is simply a range of incomes that are taxed at a set rate.

For the 2016 tax year, there are seven tax brackets of varying size with the lowest bracket being subject to a 10% marginal tax rate and the highest being subject to 39.6%.

Let’s see how this works in real life. If you’re a single filer who earns $60,000 a year after you take all the necessary exemptions, adjustments and deductions, the first $9,275 in earnings will be taxed 10%. From $9,276 to $37,650 you will be taxed 15%. On the rest, you’ll be taxed 25%. You are in the 25% tax bracket though your effective tax rate will be much lower.

If you are married filing jointly, the first $18,550 will be taxed 10%. Any amount over $18,550 to $75,300 is taxed at 15%.

The tax brackets are adjusted each year for inflation, so the 2016 tax brackets are higher than the 2015 tax brackets.

Earlier, I mentioned that there were exemptions, adjustments and deductions. What you earned from your job is considered ordinary or gross income but you are taxed on your adjusted gross income, which is your income minus those exemptions, adjustments, and deductions.

When you know your tax bracket, you can easily calculate how valuable different tax deductions are for you. If you are in the 25% tax bracket, a $1000 deduction will reduce your tax liability by $250.

Not all of your income is taxed based on these brackets. If you have long term capital gains and qualified dividends, that rate will depend on your tax bracket. If you are in 10% or 15% tax brackets, you pay 0% on long term capital gains and qualified dividends. If you are in the 25%, 28%, 33% and 35% brackets then you’ll pay 15%. Those in the highest bracket, 39.6%, will pay 20% on long term capital gains and qualified dividends.

Understanding how tax brackets work as well as which bracket you are in can help you make better informed financial decisions.  Call one of our offices.  We will automatically figure out your tax bracket based on your information and give you the tax deductions and credits you deserve.

We are located in:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

The Internal Revenue Service and its Security Summit partners are warning taxpayers and tax professionals of fake IRS tax bills related to the Affordable Care Act.

The IRS has received numerous reports of scammers sending a fraudulent version of a notice- labeled CP2000 – for tax year 2015. The issue has been reported to the Treasury Inspector General for Tax Administration for investigation.

This scam may arrive by email, as an attachment, or by mail. It has many signs of being a fake:

• The CP2000 notices appear to be issued from an Austin, Texas, address;
• The letter says the issue is related to the Affordable Care Act  and requests information regarding 2014 coverage;
• The payment voucher lists the letter number as 105C;
• Requests checks made out to I.R.S. and sent to the “Austin Processing Center” at a post office box.

IRS impersonation scams take many forms: threatening phone calls, phishing emails and demanding letters. Learn more at Reporting Phishing and Online Scams. The IRS does not initiate unsolicited email contact or contact by social media.

An authentic CP2000 notice is used when income reported from third-party sources such as an employer does not match the income reported on the tax return. Unlike the fake, it provides extensive instructions to taxpayers about what to do if they agree or disagree that additional tax is owed. A real notice requests that checks be made out to “United States Treasury.”

Millions of taxpayers ask for an extra six months to file their taxes every year. If you are one of them, then you should know that Monday, Oct. 17 is the extension deadline in 2016. This is so because Oct. 15 falls on a Saturday. If you have not yet filed, here are some things to keep in mind about the extension deadline and your taxes:

• Try IRS Free File or e-file. You can still e-file your tax return for free through IRS Free File. The program is available only on IRS.gov through Oct. 17. IRS e-file is easy, safe and the most accurate way to file your taxes.
• Use Direct Deposit. If you are due a refund, the fastest way to get it is to combine direct deposit and e-file. Direct deposit has a proven track record; eight out of 10 taxpayers who get a refund choose it.
• Use IRS Online Payment Options. If you owe taxes, the best way to pay them is with IRS Direct Pay. It’s the simple, quick and free way to pay from your checking or savings account. You also have other online payment options. Check them out by clicking on the “Payments” tab on the IRS.gov home page.
• Refunds. As you prepare to file your 2015 return, keep in mind next year’s taxes. IRS is urging taxpayers to check their tax withholding as the year winds down. New factors may delay tax refunds in 2017. For more on what you can do now, see our Aug. 31 news release.
• Don’t Overlook Tax Benefits. Be sure to claim all the tax breaks you are entitled to. These may include the Earned Income Tax Credit and the Saver’s Credit. The American Opportunity Tax Credit can help offset college costs.
• Keep a Copy of Your Return. Be sure to keep a copy of your tax return and supporting documents for at least three years. Among other things, this will make filing next year’s return easier. When you e-file your 2016 return, for example, you will often need the adjusted gross income (AGI) amount from your 2015 return.
• File On Time. If you owe taxes, file on time to avoid a potential late filing penalty. If you owe and can’t pay all of your taxes, pay as much as you can to reduce interest and penalties for late payment. You might also consider an installment agreement where you can pay over time.
• More Time for the Military. Military members and those serving in a combat zone generally get more time to file. If this applies to you, you typically have until at least 180 days after you leave the combat zone to both file returns and pay any taxes due.
• More Time in Disaster Areas. If you have an extension and live or work in a disaster area, you often have more time to file. Currently, taxpayers in parts of Louisiana and West Virginia have additional extensions beyond Oct. 17. See the disaster relief page on IRS.gov for details.
• Try Easy-to-Use Tools on IRS.gov. Use the EITC Assistant to see if you’re eligible for the credit. Use the Interactive Tax Assistant tool to get answers to common tax questions. The IRS Tax Map gives you a single point to get tax law information by subject. Find them all here.

If you need last minute help filing your return call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Madison Heights 248.544.6160, Royal Oak 248.399.7331,

Saginaw 989.782.1985, or St. Clair Shores 313.371.6600

Bulk up your retirement contributions.

You can contribute up to $18,000 for your 401(k) in 2016. If you’re age 50 or over, the limit is $24,000. If you’re nowhere close to that amount, you can ramp up your contributions to take advantage of tax-advantaged individual retirement accounts. The same goes for Roth IRAs and traditional IRAs. If you want to max out your retirement savings, now is the time to start putting more money away. (You can contribute up to the 2016 limit until April 17, 2017.)

Check out one-time benefits that might apply.

Investments in certain energy-efficient products, water heaters, central air conditions, new windows and doors, and insulation could make you eligible for tax credits this year. A new water heater or air conditioner with an Energy Star label, for example, may result in a $300 credit, while window credits are available up to $200. If you install a solar energy system (or other type of renewable energy system), you could be eligible for a tax credit of up to 30 percent of the cost. Details about these types of tax credits are available at www.energysavers.gov.

Delay deductions.

Because tax experts say tax increases are likely in the future, they recommend saving big deductions until next year, if possible. So if you’re planning to make a sizable charitable contribution, for example, you might want to hold off for the sake of your tax bill. Similarly, if you have flexibility over when you receive income, you might want to put as much in the bank before Dec. 31 so it counts as income in 2016 – before any potential tax increases.

Check that you’ve been paying enough taxes.

If you received income beyond your usual paycheck because of freelance work or income from a side business, then you might end up owing a lot of money in April. You’re also at greater risk if you got married this year and earn a relatively high salary similar to your spouse. That’s because of the so-called marriage penalty, which often means dual, high-earning couples owe more when they file taxes jointly than they did when they were single.

People who earn significant chunks of their salary in cash also need to make sure they’re saving enough of that cash to pay the appropriate amount of taxes in the spring. The IRS keeps a close eye on people in professions that pay in cash, like waiters, by using formulas that estimate expected income. If you report less, you could be flagged for an audit – not something you want.

A big tax bill can not only shock your budget – you might owe the government additional fines, too. Check to see if you’ve been paying the correct amount of taxes by reviewing your payroll stubs or other documentation. If you’re going to owe money, prepare by starting to save now.

Keep track of important receipts.

If you run your own business, are self-employed or spend money on education to boost your career, then many of your expenses may be tax deductible. Make sure you put your receipts in an easy-to-find filing system so you can claim them when you file your taxes next year. If your employer offers flexible spending accounts for health care costs, you also want to make sure to keep eligible receipts for doctor visits, pharmaceuticals and other health-related expenses. You often have until April 15 to file those claims.

Talking taxes might not be as fun as picking out your Halloween costume, but it can get you a much bigger treat in the spring.

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Madison Heights 248.544.6160, Royal Oak 248.399.7331,

Saginaw 989.782.1985, or St. Clair Shores 313.371.6600

The Internal Revenue Service and its Security Summit partners are warning taxpayers and tax professionals of fake IRS tax bills related to the Affordable Care Act.

The IRS has received numerous reports of scammers sending a fraudulent version of a notice- labeled CP2000 – for tax year 2015. The issue has been reported to the Treasury Inspector General for Tax Administration for investigation.

This scam may arrive by email, as an attachment, or by mail. It has many signs of being a fake:

• The CP2000 notices appear to be issued from an Austin, Texas, address;
• The letter says the issue is related to the Affordable Care Act  and requests information regarding 2014 coverage;
• The payment voucher lists the letter number as 105C;
• Requests checks made out to I.R.S. and sent to the “Austin Processing Center” at a post office box.

IRS impersonation scams take many forms: threatening phone calls, phishing emails and demanding letters. Learn more at Reporting Phishing and Online Scams. The IRS does not initiate unsolicited email contact or contact by social media.

An authentic CP2000 notice is used when income reported from third-party sources such as an employer does not match the income reported on the tax return. Unlike the fake, it provides extensive instructions to taxpayers about what to do if they agree or disagree that additional tax is owed. A real notice requests that checks be made out to “United States Treasury.”

The IRS and its Security Summit partners – the state tax agencies and the private-sector tax industry – are conducting a campaign to raise awareness among taxpayer and tax professionals about increasing their security and becoming familiar with various tax-related scams. Learn more at Taxes. Security. Together. or Protect Your Clients; Protect Yourself.

For help with any income tax question call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,

Grayling 989.348.4055,  Livonia 734-462-6161,

Madison Heights 248.544.6160, Royal Oak 248.399.7331,

Saginaw 989.782.1985, or St. Clair Shores 313.371.6600