January 2016 Letter

appy New Year! With the recent passing of the PATH Act, many temporary tax laws have been made permanent. Other popular tax laws have been extended through 2016 and beyond. A recap of the more commonly used tax benefits in this new tax law is summarized for you here. Also included is a new legally required debt collection practice for the IRS and a recap of standard mileage rates for use in 2016. All this and a reminder to start collecting your 2015 tax information round out this month's newsletter. As always, should you know of someone who may benefit from this information please feel free to forward this newsletter to them.

PATH Act Passes: What you need to know Once again, with the signature of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), many popular tax items have either been made a permanent part of the tax code or have been extended to 2016 and beyond. Here are the more commonly used tax savings items and their new status; Teacher $250 deduction for qualified classroom expenses. Impacts: All qualified elementary and secondary educators. This deduction does not require itemizing and the provision is now a permanent part of the tax code. What's new? Starting in 2016 you can also deduct the cost of qualified continuing education courses. Deduction for state and local general sales taxes (in place of state income tax deduction) as an itemized deduction. Impacts: All taxpayers in states without income taxes who itemize deductions and taxpayers who have high sales tax obligations versus state income tax obligations. This provision is now permanent. Deductibility of home mortgage insurance premiums. Impacts: All qualified home-owners required to carry mortgage insurance by their lenders. This provision is extended through 2016. Tuition and fees deduction Impacts: All students now have an additional program to help reduce the cost of their education. This provision is now valid through 2016. 50% additional first year depreciation deduction and higher Section 179 expense limits. The new Section 179 annual expense limit is now $500,000 (up from $25,000 prior to the extension.) Impacts: All businesses who have acquired and placed qualified assets into service during 2015. The expanded Section 179 is now made permanent while the bonus depreciation program now runs through 2019. Tax-free deductions from retirement plans for charitable contributions. Impacts: All taxpayers over 70� years old who make qualified charitable contributions of up to $100,000 directly from their IRAs. This provision is now a permanent benefit in the tax code. There are many other changes in this tax law. Clarifications on the signed bill will become known over the next few months.

IRS Now Required to Use Collection Agencies In a 1,300 page Transportation Bill signed into law in December, 2015, there are eight pages that require the IRS to assign unpaid tax bills to outside collection agencies. This means that third party companies will now be calling taxpayers as representatives of the IRS to collect unpaid taxes. What you need to know What has changed. Prior to this bill, the IRS had the option, but not the "requirement", to use other companies to try to collect past due tax bills. The IRS is now required to assign some of these unpaid taxes to outside companies for collection whether it is cost effective or not. Non-IRS companies may call you. If the IRS thinks you owe money and the statute of limitations for collection is approaching, you may have your tax bill assigned to a debt collector. This means you could receive phone calls and communication from a third party company that has your tax information. Your fraud alert senses should go up. This debt collector requirement may open the door to more tax fraud as thieves know they can falsely represent themselves as an agent of the IRS. Please be vigilant to this risk. The $900 million problem? The IRS acknowledges over $900 million in premium health care credits during 2014 will need to be repaid by taxpayers. There is the possibility of having some of this collection activity assigned to third party companies due to lack of IRS resources. There are rules. While the IRS may assign any unpaid debt to collection agencies, the "required transfer" of unpaid debts has specific rules. You may NOT be asked to pay tax bills from a third party debt collector if: You are under age 18 The taxpayer is deceased You are a victim of identity theft You have an innocent spouse case Your tax case is active within the IRS Remember to be cautious if you are contacted by someone representing themselves as an agent of the IRS. When in doubt ask for help before providing any information.

Time to Start Preparing While most see January as the start of something new, you should also see it as a time to start the collection of your prior year information. Here are some things to consider: Receive and Review Informational Tax Forms. Create a list of all your anticipated W-2s, 1099-MISC, 1099-DIV, 1099-B, and SSA-1099s. Check them off as you receive them, but not before confirming the information is accurate. Be aware of other informational tax form needs. Here are some of the more common. W2-G for any gambling winnings 1099-G for any tax refunds or unemployment payments 1099-K for any credit card activity over $20,000 and 200 transactions. Look for this if you are a heavy seller on sites like Amazon or E-bay. Don't forget your 1098s. Like 1099's, Form 1098's provide information to help maximize your possible tax deductions. Here are some of the most common. 1098 mortgage interest statement 1098-T for confirmation of tuition and fee payments to colleges and universities. 1098-C for confirmation of the value of contributed property like a used car to a charitable organization. 1098-E to report any student loan interest The NEW 1095. Most taxpayers will now need to provide proof of adequate health insurance. This proof will be required to file your tax return and is typically done using Form 1095. Your employer will usually provide this to you if you are not purchasing insurance through Medicare or through the new Federal Affordable Care Act marketplace. Please be aware of this new form and look for it. Other records; Collect your receipts and sort them. Using last year's tax return, begin to gather and sort your necessary tax records. Sort your tax records to match the items on your tax return. Make sure you have the necessary documentation. Here is a master list of the more common in no particular order: Informational tax forms (W-2, 1099, 1098, 1095-A, plus others) that disclose wages, interest income, dividends, and capital gain/loss activity Other forms that disclose possible income (jury duty, unemployment, IRA distributions and similar items) Business K-1 forms Social Security records Mortgage interest statements Tuition paid statements Property tax statements Mileage log(s) for business, moving, medical, and charitable driving Medical, dental and vision expenses Business expenses Records of any asset purchases and sales Health insurance records (including Medicare and Medicaid) Charitable contribution receipts and documentation Bank and investment statements Credit card statements Records of any out of state purchases that may require use tax Records of any estimated tax payments Home sales records Educational expenses (including student loan interest expense) Casualty and theft loss documentation Moving expenses Retirement contribution records Remember, if in doubt whether something is important for tax purposes, retain the documentation. It is better to throw unnecessary documentation out, than to wish you had the document to support your deduction. By starting now, you can identify missing items in time to meet the tax filing deadline.

2016 Standard Mileage Rates The IRS recently announced mileage rates to be used for travel in 2016. The Business mileage rate decreases by 2.5 cents while Medical and Moving mileage rates are lowered by four cents. Charitable mileage rates are unchanged. 2016 Standard Mileage Rates Mileage Rate/Mile Business Travel 54.0¢ Medical/Moving 19.0¢ Charitable Work 14.0¢ Here are the 2015 rates for your reference as well. 2015 Standard Mileage Rates Mileage Rate/Mile Business Travel 57.5¢ Medical/Moving 23.0¢ Charitable Work 14.0¢ Remember to properly document your mileage to receive full credit for your miles driven.

As always, should you have any questions or concerns regarding your situation please feel free to call.

December 2015 Letter

With the outcome of Congressional action as uncertain as ever, what can be done to manage your own affairs as the 2015 tax year winds down? Included here are a number of areas for possible year-end review and tips to make your charitable giving more effective. There is also a recap of key tax code provisions that expired in 2014, but may still impact your 2015 taxes. Looking for something to talk about at the next family gathering? Consider sharing a quick, fun quiz regarding an iconic reindeer with a big shiny red nose. Should you wish to review your situation please call. Also feel free to forward this newsletter to someone who may benefit from this information.

Tis the Season...for Review As 2015 winds to a close, there are a number of tasks that should be reviewed. To help you plan accordingly, here are some things to consider. Employee benefits. Most employer benefit plans have enrollment periods that coincide with the calendar. Please review your benefit options with your employer and make any necessary changes. Common areas of review include employer-provided health insurance, dental benefits, childcare benefits, Health Spending Account contributions, Flex Spending Account contributions, disability insurance and employer retirement account contributions. Beneficiary review. Make it a practice to review beneficiary assignments on all your key accounts. This is especially important for your retirement accounts as the beneficiary assignment within the account can supersede a will. Retirement plan contributions. Review and adjust your contributions to your retirement plans. At minimum, try to contribute enough to take advantage of any employer matching funds in your work sponsored plan. This review should include IRAs (Roth, Traditional, SEP and SIMPLE), 401(k)s, 403(b)s, and 457 plans. Insurance review. Consider an annual review of your insurance policies. This includes health insurance, life insurance, disability insurance, home insurance and potential umbrella policies. Are the beneficiaries up to date? Are you happy with the coverage? Automatic billing. Review your checking account's automated billing transactions. This is a good time to identify what automatic monthly expenses should be reviewed, reduced or eliminated. You may also discover billing for services you thought were cancelled. This specific review often catches errors that a simple account reconciliation may be missing. Withholdings. Sometime in December or early January you may wish to review your payroll withholdings. Many of us do this after our tax return is filed. However, if you file close to April 15th, you are losing four plus months of proper withholdings. Develop your own list. The review suggestions mentioned here impact most of us. However, everyone's situation is not the same. Use this time to develop a list of your own annual review items. It might include reviewing College Savings Accounts or having an annual sit down to go through an aging parent's financial accounts.

Be a Better Charitable Giver Simple moves to make your giving go further These days, we all want our money to go further and charitable donations are no exception. Yet sometimes, even well-intentioned gifts may end up going to a poorly run charity or the charity does not receive the full benefit of your gift. Here are some tips to ensure that your donation makes the biggest impact: Research the Charity. Make sure the charity you donate to is a good steward of your resources. Websites like www.charitynavigator.org track the financial health and effectiveness of charities. Effective charities spend 75% or more of their resources on their services and 25% or less on fundraising and administrative costs. Be Proactive. Identify the causes that are most important to you and your family and then target those organizations - it's just too easy to give haphazardly to whomever asks you for money. Do Not Give Over the Phone. Charitable telemarketing campaigns generally use for-profit fundraisers who take a percentage of your gift. This means the charity often receives substantially less of your donation if you give over the phone. If you truly support the organization, hang-up. Then contact the charity directly to make your donation. Focus Your Support. Focus on one or two charities that you are passionate about. Repeat donations from reliable donors save charities money because they don't have to go looking for more donors and are not wasting money trying to woo uncommitted, one-time donors. Share Your Intentions. Whether your donation is a one-time gift or part of a long-term commitment, tell the charity so that they do not continue to spend money on seeking more donations from you. As part of your holiday season of giving, consider giving to a favorite charity. It can also serve as part of your year-end tax planning.

The ''Special'' Reindeer Quiz As the holidays approach, we will quickly be flooded with holiday specials, iconic movies and lit-up everything. As you sit around the fire staying warm, consider your knowledge of that iconic reindeer who guided Santa's sleigh on a stormy winter night. How old is Rudolf? The story of Rudolf is now 76 years old. Who wrote the now famous glowing nose reindeer story? Robert L. May. He created it for Montgomery Wards in 1939 as a free promotional book. The first year they printed over 2 million copies of the product. The Reindeer was not originally going to be a reindeer. What animal was he? A moose. The reindeer's nose was not initially going to be red. Why not? Montgomery Wards was afraid the red nose would be associated with chronic alcoholism. It was only when the cartoon shape was fashioned after a deer, that the shiny red nose was established and approved. Who made the now popular Rudolf the Red-Nosed Reindeer song famous? Most of us know the tune as sung by Burl Ives in the popular holiday TV show using stop motion animation. But the song was made popular by Gene Autry in 1949. Autry was widely known as the singing cowboy. He was also a former owner of the Angels major league baseball team. This song is one of the most popular holiday songs recorded of all time.

Déjà vù All Over Again Will the habit of late law changes continue? The Congressional habit for repeatedly making late tax law changes is now so bad that the IRS is reserving blank lines on the form 1040 for possible law changes this month. Given the potential for retroactive tax law changes in 2015, please prepare for the extension of the following tax laws that expired in 2014. While there is no guarantee that tax law extensions will be made, by being prepared with the proper documentation you can take advantage of any forecasted changes. Educator's $250 tax deduction If you are a teacher and have out-of-pocket expenses please keep your receipts. You may be able to deduct up to $250 of qualified expenses even if you do not itemize deductions. State sales tax itemized deduction option Keep receipts of any large purchases. The sales tax provision allows for you to take either a general sales tax deduction or a state income tax deduction as an itemized deduction. Direct contribution from retirement accounts for qualified seniors In 2014, qualified seniors who donated funds directly from their retirement plan could exclude the plan withdrawal from income. Hold off using this technique in 2015 until you receive confirmation from Congress this tax law is extended. Itemized deduction for mortgage insurance premium costs Keep your mortgage insurance documentation for a potential itemized deduction. Changes in small business depreciation Through late November, 2015 there is no longer bonus first year depreciation. In addition, Section 179 amounts are greatly reduced from $500,000 in qualified assets to $25,000. Even if the law changes, you have little time to purchase and install equipment. Please plan accordingly. If other late law changes impact you, rest assured those changes will be applied to your tax return as they become known. Note: Special thanks to the late Yogi Berra, baseball great, for our article headline.

As always, should you have any questions or concerns regarding your situation please feel free to call.