New Law Sets Jan. 31 W-2 Filing Deadline; Some Refunds Delayed Until Feb. 15

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

 

What is a Tax Bracket?

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

 

Beware of Fake IRS Tax Bill Notices

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.”

IRS Reminds Extension Filers of the Oct. 17 Deadline

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

The Best Tax Moves for Fall

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

Beware of Fake IRS Tax Bill Notices

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

 

Home Energy Tax Credits Save You Money at Tax Time

Certain energy-efficient home improvements can cut your energy bills and save you money at tax time. Here are some key facts that you should know about home energy tax credits:

Non-Business Energy Property Credit

  • Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
  • The other part of the credit is not a percentage of the cost. This part of the credit is for the actual cost of certain property. This may include items such as water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
  • This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
  • Your main home must be located in the U.S. to qualify for the credit.
  • Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
  • You must place qualifying improvements in service in your principal residence by Dec. 31, 2016.

Residential Energy Efficient Property Credit

  • This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
  • Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
  • Qualified wind turbine and fuel cell property must be placed into service by Dec. 31, 2016. Hot water heaters and solar electric equipment must be placed in to service by Dec. 31, 2021.
  • The tax credit for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity. The amount for other qualified expenditures does not have a limit. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return. • The home must be in the U.S. It does not have to be your main home, unless the alternative energy equipment is qualified fuel cell property.

Use Form 5695, Residential Energy Credits, to claim these credits. For more on this topic refer to the form’s instructions. You can get IRS forms on IRS.gov/forms anytime.

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

 

 

A Moment of Silence for the Fallen on September 11

Sunday is the 15th anniversary of 9/11, when more than 3,000 people were killed in terrorist attacks in the United States.

For many Americans, the tragic events of 9/11 instill a renewed sense of patriotism and an incentive to serve others. Here are some ways that you can reflect, serve, and remember this September 11:

  • Observe a moment of silence. Many Americans observe a moment of silence at 8:46 a.m. (Eastern Daylight Time), marking the exact moment Flight 11 crashed into the World Trade Center.
  • Volunteer for service. September 11 is a National Day of Service and Remembrance, when you can volunteer in your community.

Learn about what happened on 9/11. Find out what happened 15 years ago at the airplane crash sites in New York, Washington, DC, and Pennsylvania.

We’ll never forget.  ATS Advisors, A CPA Firm

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

Five Tax Tips for Gambling Income and Losses

Report any gambling winnings as income on your tax return. Be sure you itemize to deduct gambling losses up to the amount of your winnings. If you are a casual gambler, these tax tips can help:

  1. Gambling income.  Income from gambling includes winnings from the lottery, horse racing and casinos. It also includes cash and non-cash prizes. You must report the fair market value of non-cash prizes like cars and trips.
  2. Payer tax form.  If you win, the payer may give you a Form W-2G, Certain Gambling Winnings. The payer also sends a copy of the W-2G to the IRS. The payer must issue the form based on the type of gambling, the amount you win and other factors. You’ll also get a form W-2G if the payer must withhold income tax from what you win.
  3. How to report winnings.  You normally report your winnings for the year on your tax return as “Other Income.” You must report all your gambling winnings as income. This is true even if you don’t get a Form W-2G.
  4. How to deduct losses.  You can deduct your gambling losses on Schedule A, Itemized Deductions. The total you can deduct, however, is limited to the amount of the gambling income you report on your return.
  5. Keep gambling receipts.  Keep records of your wins and losses. This means keeping items such as a gambling log or diary, receipts, statements or tickets.

See Publication 525, Taxable and Nontaxable Income for rules on this topic. Refer to Publication 529, Miscellaneous Deductions for more on losses. It also lists some of the types of records you should keep. You can download and view both on IRS.gov/forms at any time.

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

It’s Not Too Early to Determine Whether You Have Qualifying Health Care Coverage

The individual shared responsibility provision requires you and each member of your family to have basic health coverage – also known as minimum essential coverage – qualify for a health coverage exemption, or make an individual shared responsibility payment for months without coverage or an exemption when you file your federal income tax return.

Many people already have minimum essential coverage. If you do, you’ll simply report your coverage when you file your 2016 tax return in 2017. If you and your family members all had minimum essential coverage for each month of the tax year, you will indicate this on your tax return by checking a box on Form 1040, 1040A or 1040EZ. No further action is required.

If you do have health coverage, you’ll receive one or more forms early next year about the health care coverage that you had or were offered during 2016. You should not attach any of these forms to your tax return but should keep them with your tax records.

Here are some examples of coverage that qualify as minimum essential coverage:

Employer-sponsored coverage

  • Group health insurance coverage for employees under
    • a governmental plan such as the Federal Employees Health Benefit program
    • a plan or coverage offered in the small or large group market within a state
    • a grandfathered health plan offered in a group market
  • Self-insured group health plan for employees
  • COBRA coverage
  • Retiree coverage

Individual health coverage:

  • Health insurance you purchase directly from an insurance company
  • Health insurance you purchase through the Health Insurance Marketplace
  • Health insurance provided through a student health plan

Coverage under government-sponsored programs:

  • Medicare Part A coverage
  • Medicare Advantage plans
  • Most Medicaid coverage
  • Children’s Health Insurance Program, also known as CHIP
  • Most types of TRICARE coverage
  • Comprehensive health care programs offered by the Department of Veterans Affairs
  • Department of Defense Nonappropriated Fund Health Benefits Program
  • Refugee Medical Assistance

U.S. citizens, who are residents of a foreign country for an entire year, and residents of U.S. territories, are considered to have minimum essential coverage for the year.

For a list of the types of coverage that qualify as minimum essential coverage and information on those that do not qualify – as well as information on certain coverage that may provide limited benefits – visit the MEC page on IRS.gov/aca.

If you need health coverage, visit HealthCare.gov to learn about health insurance options that are available for you and your family, how to purchase health insurance, and how you might qualify to get financial assistance with the cost of insurance.

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