Winter 2015

April 15, 2016 Is Just Around The Corner

Spend A Little Time Each Week To Be Prepared!

Most tax records will show up in the mail in January.  Keep all  of these together in a special place.  Collecting all of your tax-related documents is important so we report a complete and accurate return.  The IRS also gets copies of many of these documents…we don’t want to miss any!

Let’s review what you should be looking for …

W-2s.  Read them carefully.  Contact your employer if there is a problem or if you don’t receive them by the end of January.

Form 1098.  Reports mortgage interest paid to a bank, savings & loan or credit union. These forms may also report real estate taxes (if payment are escrowed by the lender) and mortgage insurance premiums, if applicable.

Form 1098T.  Shows college tuitions.  These forms are mailed to the student.  Make sure Johnny and Sally watch for these forms – you’ll need them.  I need these forms as well as details on the payments and all other expenses including books and class supplies.

1099s.  You get 1099-INT or 1099-DIV for any accounts that pay interest or dividends.  Even tax-exempt interest will be reported.  IMPORTANT:  “Corrected” forms are always a possibility.  Be alert for any announcements that warn you of these situations.

Other 1099s.   Real estate sales are reported on 1099-S.  Stock sales on 1099-B.  Pension, 401K and IRA distributions are reflected on 1099-R.  Pay special attention to forms 1099-A and 1099-C.  These report foreclosures and debt consolidations…these may or may not result in taxable income.  We need to see them to correctly prepare your return.  Always look for “Important Tax Information Enclosed” on the envelope.

1095-A, 1095-B & 1095-C.  You will receive these forms if you purchased Health Care through the Health Insurance Marketplace and had part of your premium offset by the new Premium Tax Credit.

Other Income.  Look for reports of state tax refunds, unemployment income, prizes or gambling winnings or rents that you collect.  Read each one carefully and keep them with all of your other tax documents.  We don’t want to miss anything!

Your Records.  Check all of your records for income or deductions.  Review everything that occurred during the past year.  Checking registers or calendars will help jog your memory.  Look for medical related receipts as well as receipts for taxes paid.  If you recall paying a deductible expense but don’t have a receipt, claim it.  Charitable contributions are different – you must have receipts or your deduction could be challenged and denied!

You will be prepared if you take a few minutes each week to gather and review your documents and records.  Short reviews help you remember items that you are missing or might have forgotten.

It’s your money at stake here – let’s make sure that you protect it!

Need To Send 1099s?  you may need to send Form 1099 to someone else.  Here are a few cases:

Businesses.  You must report payments for services.

“Nominee” amounts. If you are named as receiving income, but part or all of the income really belongs to someone else, you are a nominee.  You must send Form 1099 to the other party by January 31.  IRS wants their copy from you by February 29.  You pay a penalty for not sending them!  Call me to discuss these situations…we don’t want to miss these filing deadlines.

Businesses.  If you paid $600 or more to anyone during 2015 you may need to issue a form.  Look at “business” expenses only.  Some bills show both labor and materials.  If any of the payment is for service, report the total amount on Form 1099-MISC.  Paying for merchandise alone doesn’t count.  Look for painters, consultants, builders and the like.  If you are unsure, call me.  You will need name, address and tax ID number for these people.  Call them or send Form W-9 to request the information.  If someone uses their own name, they should provide their Social Security Number (like 555-55-5555).  If they give you a business name, you should use their Employer ID Number (like 55-5555555).

Nominees.  If you get a payment in your name and then pay part to another you must file the form.  You file the same 1099 as you received but you are filing as the “middle man”.  Usually these are Form 1099-INT or 1099-DIV.

Getting The Forms.  The IRS can send you the forms. Start early.  Let me know if you need my help.  Call the IRS at 1-800-829-3676 for forms.  You can see the forms on the IRS website at but you will need the official paper forms for filing.  You will need to use the proper Form 1099 and Form 1096 as a cover sheet.

Heading Into An Election Year, Tax Extenders Still On Hold

Efforts by the Senate to renew the 50+ temporary tax laws continue to be delayed as we believed months ago.  These laws expired at the end of 2014 and hopefully will be renewed at least through 2015.  With any luck, Congress could pass a big “extenders” bill in December.

Some of the specific items that are on the table until Congress acts are big ticket business items such as the research and development tax credit, Section 179 expensing and bonus depreciation.  Waiting for extension on the personal side are the deductions for charitable tax-free IRA distributions to charities, the $4,000 tuition & fees deduction, energy savings tax credits for home improvements, the deduction for mortgage insurance premiums and many more.

At any rate, tax time is rapidly approaching and at this point we are forced to look at the laws as they exist today.  With an election year coming up, no Congress member wants to lose their seat by taking tax deductions away from voters.  Be prepared!  Collect information on these and we will use them if the laws are extended.

Tax Tips for You… Now!

Roth IRA Conversions & Re-characterizations.

Conversions generally come at an immediate tax cost but could result in major tax-free gains over the years as distributions begin.  Managing the tax impact of a Roth IRA conversion requires careful analysis.  Ideally, we should review the transaction carefully.  Higher-income filers have to deal with phase-outs on itemized deductions and personal exemptions which can make computing taxable income more complex.

There are also other things to consider.  Your conversion must be completed by December 31.  Estimating your taxable income may be tricky until you’ve received all your tax reporting documents, which typically aren’t available until well after December 31.  So your income may end up being higher or lower than you expected.  A solution: a re-characterization.  It allows you to “undo” some, or all, of a conversion made the prior year.  You have until October 15 of the year following conversion to recharacterize.  This may be a solution if the tax on your conversion ends up exceeding your estimate.

Required Minimum Distributions.

Once you reach 70 ½ , you’re generally required to start taking required minimum distributions (RMDs) from traditional IRAs and employer-sponsored retirement plans (special rules apply if you’re still working and participating in your employer’s retirement plan).  You have to make the required withdrawals by the date required – the end of the year for most individuals- or a 50% penalty tax applies.

The following is a portion of the law that has not yet been extended.  IF this one gets extended then you’ll be able to make qualified charitable contributions (QCDs) of up to $100,000 from an IRA directly to a qualified charity if you’re 70 ½ or older.  Such distributions may be excluded from income and count toward satisfying any RMDs you would otherwise have to receive from your IRA in 2015.

Re-align Your Portfolio.  Many taxpayers have taken gains on investments up to this point in 2015.  The markets have become increasingly volatile and by selling some losing investments to offset the gains you may also reduce your risk to further downturns in the markets.  Remember, if you have more losses than gains the IRS will allow you to take up to $3,000 of net losses to reduce your income.

Increase or Accelerate Your Charitable Contributions.  The joys of giving cannot only help those in need, but can also help you as your donations to charitable organizations may count as tax deductible expenses!  Make sure that all contributions are made by December 31 and that a receipt of your gift is included in your tax documents.

Make State Tax Estimates By December 31, 2015.  Most of these estimated payments are not due until January 2016 but if you make the payment in 2015 you will get the deduction on your 2015 tax return.  Get the deduction a year earlier by making the payment a few weeks earlier.

Other Deductions.  Medical expenses such as hospital bills, doctor charges and prescriptions can create sizable itemized deductions.  Look for any balances still owed on medical related bills and pay them before the end of 2015.

Beware!  Scam IRS Phone Calls Continue.  The Internal Revenue Service has issued a consumer alert providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.  These callers may demand money or may say you have refund due and try to trick you into sharing private information.  These con artists can sound convincing when they call.  They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling.  They use fake names and bogus IRS identification badge numbers.  If you don’t answer, they often leave an “urgent” callback request.

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake.  Here are five things the scammers often do but the IRS will not do.  Any one of these five things is a tell-tale sign of a scam.  The IRS will never:

  1. Call to demand immediate payment, nor will they call about taxes owed without first having mailed you a bill.
  2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say  you owe.
  3. Require you to use a specific payment method for your taxes such as a prepaid debit card.
  4. Ask for credit or debit card numbers over the phone.
  5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.


If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

If you know you owe taxes or think you might owe, call the IRS at 1-800-829-1040.  The IRS can help you with a payment issue.

If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484 or at  You can file a complaint using the FTC Complaint Assistant; choose “Other” and then “Imposter Scams”.  If the complaint involves someone impersonating the IRS, include the words “IRS Telephone Scam” in the notes.  Remember, too, the IRS does not use unsolicited email, text messages or any social media to discuss your personal tax issue.  Be on alert!