February 2016 Letter

As your mailbox fills up with information required to organize your 2015 tax records, there is still time to reduce 2015's tax obligation with a contribution to an IRA. This issue covers recent news from the IRS and provides an important update for small business treatment of small capital purchases. An interesting perspective on the popular "free shipping" marketing technique rounds 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.

A Couple IRS Wrinkles That May Impact You

The IRS made two recent announcements that may impact you this tax-filing season. Being aware of these announcements may keep you from unknowingly delaying filing your tax return. One topic is regarding proof you have qualified health insurance and the other topic is an error in notices sent to victims of IRS identity theft. Extension in Form 1095 reporting

For 2015 tax returns, everyone employed by a company with 50 or more employees will receive a new Form 1095. This form is in addition to the Form 1095-A's received by other taxpayers using the Marketplace to purchase their health insurance. You need this form to file your taxes as it provides the necessary proof that you have adequate health insurance for the year. Without this proof you could be subject to the new shared responsibility tax.

What is happening

The IRS has granted an extension for Form 1095 B and 1095 C being sent to employees. Here are the old and new dates.

Form	Purpose	Original due date	New due date
1095 B & 1095 C	Report to employees of adequate health insurance coverage by month	2/1/2016	3/31/2016
Summary forms 1094 B & 1094 C	Summary forms sent to the government confirming employee health care coverage	2/29/2016 (3/31 if filing electronically)	5/31/2016 (6/30 if filing electronically)

Note: This delay does not impact the timing of Form 1095 A, Health Insurance Marketplace Statement. 1095 A is the form you receive if you purchase your health insurance through the Marketplace and not through your employer.

What it means to you

Since the IRS understands that taxpayers do not wish to wait to file their 2015 tax returns, the IRS is allowing you to file your 2015 tax return without receiving this form. Here are some suggestions.

	Check with your employer. If you work for an employer with more than 50 employees, check with your human resources department to find out when you can expect to receive the 1095 form. If there is no delay, then wait for Form 1095.
	Look for other supporting documents. For 2015, the IRS will allow you to support your insurance coverage with means other than Form 1095. Simply collect this proof of insurance and save it in case of a future audit.
	Wait. If you changed jobs or have a situation that suggests there may be a gap in insurance coverage you may wish to wait until you receive your documents. There is no corresponding delay granted to file your tax return. Federal taxes owed are still due on or before April 18th.

Identity theft PINs are for 2015 not 2014 If you are one of the unfortunate victims of IRS identity theft you will need a one time PIN to file your tax return. This numeric identifier is sent to you via mail by the IRS. What has happened IRS PIN notice ( letter: CP01A) is being mailed to identity theft victims right now. The tax year on many notices is incorrectly stated as 2014, when the PIN is to be used for your 2015 tax return. This mistake is causing confusion among taxpayers.

What to do

	Do not throw out the notice! This PIN is for your 2015 tax return. Without it you cannot file your 2015 tax return.
	File your tax return. Remember identity theft victims who are provided this PIN must submit their tax return with this PIN entered in the correct field. You may not efile your tax return without it.

A Couple IRS Wrinkles That May Impact You

The IRS made two recent announcements that may impact you this tax-filing season. Being aware of these announcements may keep you from unknowingly delaying filing your tax return.

Read full article

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There is Still Time for Retirement Funding

There is still time to make a contribution to a Traditional IRA or Roth IRA for the 2015 tax year. The annual contribution limit is $5,500 or $6,500 if you are age 50 or over. Prior to making the contribution, if you (or your spouse) are an active participant in an employer's qualified retirement plan, you will want to make sure your modified adjusted gross income (MAGI) does not exceed certain thresholds. There are also income limits to qualify to make Roth IRA contributions. The limits are outlined here.

2015 IRA Contribution limit: $5,500 or $6,500 (with age 50+ catch up provision)

2015 IRA Income (MAGI) Limits
Filing Status	Traditional IRA allowed contribution range		Roth IRA allowed contribution range
	Full contribution	Phase-out complete	Full contribution	Phase-out complete
SINGLE	$61,000	$71,000	$116,000	$131,000
MARRIED	$98,000 both participating	$118,000 both participating	$183,000	$193,000
	$183,000 spouse participating	$193,000 spouse participating

Note: Married Traditional IRA limits depend on whether either you, your spouse or both of you participate in a qualified employer-provided retirement plan. If married filing separate and either spouse participates in an employer's qualified plan, the income phase-out to contribute is $0 - $10,000.

A final thought

If your income is too high to take advantage of these IRAs you can always make a non-deductible contribution to an IRA. While the contributions are not tax-deferred, the earnings are not taxed until they are withdrawn.

There is Still Time for Retirement Funding

Remember you have until you file your tax return to make a contribution to a Traditional IRA or Roth IRA for the 2015 tax year. The annual contribution limit is $5,500 or $6,500 if you are age 50 or over.

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Free Shipping is Not so Free

One of the most successful selling techniques used today is to offer "free" shipping for mail and internet orders. But shipping is never free. So why is it such a popular offer to buyers of goods and services?

The average order size play. The classic way sellers pay for the shipping is to get you to increase your average order size. The hope is that your increased purchases will not only cover the cost of shipping, but will enhance their per order profitability. Amazon does this with their $35 order size requirement and their annual Prime fee. Upcharge shipping. Another way to get free shipping is to entice you to pay for more expedited shipping. Remember, part of your cost of free shipping is paid for in the slower shipping time. If enough customers pay to receive their orders sooner it can cover the seller's cost of free shipping to everyone else.

It is in the cost. Don't be fooled. Shipping charges are built into the cost of what you are buying. Even worse, if you live in a state that does not charge sales tax on shipping charges, you actually pay more money for free shipping as the buried shipping costs are now being subjected to sales tax. What are companies paying for shipping? Companies like Fed Ex and UPS offer large discounts to major customers like Amazon. Small companies' shipping costs can be much higher. In addition, Fed Ex and UPS add fees onto deliveries such as fuel surcharges, residential delivery fees and non-urban delivery fees. A minimum undiscounted, one pound ground shipment (with tracking information) can easily range from $5.75 to well over $8.00. So what? If you have a small business and wish to try free shipping, you need to understand your costs and what the lift in business sales free shipping will yield. As a consumer, don't be fooled. You are paying for shipping. Try to calculate the trade-off on this popular consumer hook with the value of a discount offer on your desired purchase. You may be surprised at what you find.

Free Shipping is Not so Free

One of the most successful selling techniques used today is to offer "free shipping" for mail and internet orders. But shipping is never free. It always has a cost. So why is it such a popular offer to buyers of goods and services?

Read full article

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IRS Revises Safe Harbor Repair Regulations

In November the IRS increased the amount your business can expense versus capitalize from $500 to $2,500. This change impacts businesses that do not publish applicable financial statements. The new rule takes effect starting in 2016, but there is audit protection for using this new limit in prior years. What this means

This new rule is typically referred to as the safe harbor de minimis limit. Now small businesses may expense versus capitalize purchases of equipment that cost less than $2,500 and not have it challenged by the IRS. Without this change, small businesses would need to capitalize these purchases and then recapture the cost using depreciation over many years.
The irony is that with the recent extension of bonus depreciation through 2019, many small businesses would already expense many of these purchases. If this change could impact recent purchases of your business please ask for a review of your situation.

IRS Revises Safe Harbor Repair Regulations

In November the IRS increased the amount your business can expense as a repair from $500 to $2,500. This change impacts businesses that do not publish applicable financial statements. The new rule takes effect starting in 2016, but there is audit protection for using this new limit in prior years.

Read full article

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

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.