Category Archives: Uncategorized

Four Things You Should Know about the Child Tax Credit

The Child Tax Credit is an important tax credit that may save you up to $1,000 for each eligible qualifying child. Be sure you qualify before you claim it. Here are four useful facts from the IRS on the Child Tax Credit:

1. Qualifications. For the Child Tax Credit, a qualifying child must pass several tests:

  • Age. The child must have been under age 17 at the end of 2015.
  • Relationship. The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, or half sister. The child may be a descendant of any of these individuals. A qualifying child could also include your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
  • Support. The child must have not provided more than half of their own support for the year.
  • Dependent. The child must be a dependent that you claim on your federal tax return.
  • Joint return. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
  • Citizenship. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
  • Residence. In most cases, the child must have lived with you for more than half of 2015.

2. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate your credit depending on your filing status and income.

3. Additional Child Tax Credit. If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the Additional Child Tax Credit.

4. Schedule 8812. If you qualify to claim the Child Tax Credit, make sure to check if you must complete and attach Schedule 8812, Child Tax Credit, with your tax return. For example, if you claim a credit for a child with an Individual Taxpayer Identification Number, you must complete Part I of Schedule 8812. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812. You can visit IRS.gov to view, download or print IRS tax forms anytime.

 

SC Refunds are Coming In!!

ALERT!!! SC refunds are starting to come in!  The SC refunds are coming in the mail instead of being Direct Deposited into your bank account… Please be on the lookout for your refunds!! We were not given an explanation as to why this is happening only that it is!!

Thanks,                                                                                                                                                                Woodruff Accounting

IRS to Parents: Don’t Miss Out on These Tax Savers

Children may help reduce the amount of taxes owed for the year. If you’re a parent, here are several tax benefits you should look for when you file your federal tax return:

  • Dependents.  In most cases, you can claim your child as a dependent. You can deduct $4,000 for each dependent you are entitled to claim. You must reduce this amount if your income is above certain limits. For more on these rules, see Publication 501, Exemptions, Standard Deduction and Filing Information.
  • Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more information, see Schedule 8812 and Publication 972, Child Tax Credit.
  • Child and Dependent Care Credit.  You may be able to claim this credit if you paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. You must have paid for care so that you could work or look for work. SeePublication 503, Child and Dependent Care Expenses, for more on this credit.
  • Earned Income Tax Credit.  You may qualify for EITC if you worked but earned less than $53,267 last year. You can get up to $6,242 in EITC. You may qualify with or without children. Use the 2015 EITC Assistant tool at IRS.gov to find out if you qualify. See Publication 596, Earned Income Tax Credit, to learn more.
  • Adoption Credit.  You may be able to claim a tax credit for certain costs you paid to adopt a child. For details see Form 8839, Qualified Adoption Expenses.
  • Education Tax Credits.  An education credit can help you with the cost of higher education.  Two credits are available. The American Opportunity Tax Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the credit reduces your tax to less than zero, you may get a refund. Even if you don’t owe any taxes, you still may qualify. You must complete Form 8863, Education Credits, and file a return to claim these credits. Use the Interactive Tax Assistant tool on IRS.gov to see if you can claim them. Visit the IRS’sEducation Credits Web page to learn more on this topic. Also, seePublication 970, Tax Benefits for Education.
  • Student Loan Interest.  You may be able to deduct interest you paid on a qualified student loan. You can claim this benefit even if you do not itemize your deductions. For more information, see Publication 970.
  • Self-employed Health Insurance Deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid during the year. This may include the cost to cover your children under age 27, even if they are not your dependent. SeePublication 535, Business Expenses, for details.

You can get related forms and publications on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Affordable Care Act: Tax Facts for Individuals and Families

The Affordable Care Act includes the individual shared responsibility provision and the premium tax credit that may affect your tax return. This year marks the first time that certain taxpayers will receive new health-care related information forms that they can use to complete their tax return and then keep with their tax records.

Information Forms – Forms 1095-A, 1095-B and 1095-C

Depending upon your specific circumstances, the Health Insurance Marketplace, health coverage providers, and certain employers may provide information forms to you early in 2016. These forms can help you accurately report health coverage information for you, your spouse and any dependents when you file your 2015 individual income tax return in 2016. The Marketplace, health coverage providers, and employers will also file these forms with the IRS.

The information forms are:

  • Form 1095-A, Health Insurance Marketplace Statement: The Health Insurance Marketplace sends this form to individuals who enrolled in coverage there, with information about the coverage, who was covered, and when.  This is the second year in which the Marketplace is issuing Form 1095-A to enrollees.
  • Form 1095-B, Health Coverage: Health insurance providers – for example, health insurance companies – send this new form to individuals they cover, with information about who was covered and when.
  • Form 1095-C, Employer-Provided Health Insurance Offer and Coverage: Certain employers send this new form to certain employees, with information about what coverage the employer offered. Employers that offer health coverage referred to as “self-insured coverage” send this form to individuals they cover, with information about who was covered and when.

The list below highlights key elements regarding these information forms:

  • The deadline for the Marketplace to provide Form 1095-A is February 1, 2016.
  • The deadline for coverage providers to provide Forms 1095-B and employers to provide Form 1095-C is March 31, 2016.
  • If you are expecting to receive a Form 1095-A, you should wait to file your 2015 income tax return until you receive that form.
  • Some taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return. It is not necessary to wait for Forms 1095-B or 1095-C in order to file. Taxpayers may instead rely on other information about their health coverage and employer offer to prepare their returns
  • These new forms should not be attached to your income tax return.

See our questions and answers that explain who should expect to receive the forms, how they can be used, and how to file with or without the forms, and that address various other questions you may have about these new forms.

Individual Shared Responsibility Provision

The individual shared responsibility provision requires everyone on your tax return to have qualifying health care coverage for each month of the year orhave a coverage exemption. Otherwise, you may be required to make anindividual shared responsibility payment.

The list below highlights key elements of the individual shared responsibility provision:

  • If you maintain qualifying health care coverage for the entire year, you don’t need to do anything more than report that coverage on your federal income tax return by simply checking a box. Qualifying coverage includes most employer-sponsored coverage, coverage obtained through a Health Insurance Marketplace, coverage through most government-sponsored programs, as well as certain other specified health plans.
  • If you go without coverage or experience a gap in coverage, you may qualify for an exemption from the requirement to have coverage. If you qualify for an exemption, you use Form 8965, Health Coverage Exemptions, to report a coverage exemption granted by the Marketplace or to claim a coverage exemption on your tax return.
  • If for any month during the year you don’t have qualifying coverage and you don’t qualify for an exemption, you will have to make anindividual shared responsibility payment when you file your federal income tax return.
  • The payment amount for 2015 is the greater of 2 percent of the household income above the taxpayer’s filing threshold, or $325 per adult plus $162.50 per child (limited to a family maximum of $975). This payment is capped at the cost of the national average premium for a bronze level health plan available through Marketplaces that would provide coverage for the taxpayer’s family members that neither had qualifying coverage nor qualify for a coverage exemption. The instructions for Form 8965, Health Coverage Exemptions, provide the information needed to calculate the payment that will be reported on you federal income tax return.
  • Form 1095-B will be sent to individuals who had health coverage for themselves or their family members that is not reported on Form 1095-A or Form 1095-C. Form 1095-A will be sent to individuals who enrolled in health coverage for themselves or their family members through the  Marketplace. Form 1095-C will be sent to certain employees of applicable large employers.
  • Some taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return. It is not necessary to wait for Forms 1095-B or 1095-C in order to file. Taxpayers may instead rely on other information about their health coverage and employer offer to prepare their returns

Health Coverage Exemptions

 

Individuals who go without coverage or experience a gap in coverage may qualify for an exemption from the requirement to have coverage.

  • You may qualify for an exemption if one of the following applies:
    • You do not have access to affordable coverage
    • You have a one-time gap of less than three consecutive months without coverage
    • You qualify for one of several other exemptions, including a hardship exemption
  • How you get an exemption depends upon the type of exemption. You can obtain some exemptions only from the Marketplace in the area where you live, others only from the IRS when filing your income tax return, and others from either the Marketplace or the IRS. For more information, visit IRS.gov/aca or see the instructions to Form 8965.
  • If you qualify for an exemption, you use Form 8965 to report a coverage exemption granted by the Marketplace or to claim a coverage exemption on your tax return.

Premium Tax Credit

For an explanation of the Premium Tax Credit see IRS Fact Sheet 2016-05, entitled “Tax Credit Helps Make Health Insurance Affordable for Middle-Class Americans.”

More Information

 

Remember that filing electronically with tax preparation software is the quickest and easiest way to file a complete and accurate tax return, as the software guides you through the filing process and does all the math for you.

For more information about the premium tax credit or the individual shared responsibility payment, visit IRS.gov/aca. For more information about the Marketplace, visit HealthCare.gov. For more information on the new health care related information forms, see the Form 1095 questions and answers.

Funding Concierge Medicine Costs with HSAs/FSAs (A.I. Group Inc.)

Most of us have heard of “concierge medicine” and it’s gaining popularity, especially among executives.  As more people enroll, more questions are popping up that we haven’t heard before.  One of the most frequent questions we’ve heard is, “Can I fund the cost of the concierge with my health savings account (HSA) or flexible spending account (FSA)?”

The answer is an absolute “maybe!”

Why, the squishy answer?  It’s because not all medical concierge services operate alike and the portion of the expenses that are qualified aren’t always in a particular model.

Here’s a brief description of the four prevalent models of concierge services and what is qualified for reimbursement:

  1. Fees for Care.  In this model, the participant subscribes to a medical concierge to have access to care.  At the time services are rendered, additional fees are charged that are directly related to the medical care given.  The subscription portion of the fee is not eligible, but generally the amount related to actual care provided would be considered as an eligible medical expense under the HSA guidelines.
  2. Annual Physical. Here a fee is charged for an annual physical, usually more comprehensive than covered under the Patient Protection and Affordable Care Act (PPACA) requirements, and the model includes no additional non-medical services or “amenities.”  The physical is considered to be medical care and would also generally be considered an eligible medical expense under the HSA guidelines.  If the fee is payable up front, it would only be reimbursable once the physical has actually been performed.
  3. Annual Physical Plus Amenities. Here a fee is charged for an annual physical and with it some additional non-medical services (amenities) are added. The physical is considered to be medical care and would generally be considered an eligible medical expense under the HSA guidelines, assuming the billing outlines the service(s) and their associated cost(s).The amenities (e.g., retainer fess, access fees, or expedited appointment access to a physician, etc.) are not eligible medical expenses under the HSA guidelines even if the bill has a line item for the access or amenities portion. If the medical provider only furnishes a global bill with no itemization for specific services, it may be difficult to substantiate the service was an eligible expense.
  4. Amenities Only. Here the fees are exclusively for access to the medical concierge.  These fees pay for the amenities like retainer fees, access fees, or expedited appointment access. These are not qualified medical expenses and, therefore, are generally not eligible for reimbursement through the participants HSA or FSA.

A quick rule of thumb is if the bill is directly related to a qualified medical service or expense, it is reimbursable.  If it is only for access to, or the right to “get in the door,” then it is not a qualified medical expense for HSA/FSA reimbursement purposes.  As with everything, there are exceptions and qualifications and only the participant’s qualified tax consultant can properly advise.

Finally, the participant can reimburse him/herself from his/her HSA or send payment to the medical concierge directly from his/her HSA regardless of the qualification of the expense.  If the expense is non-qualified, they simply have to declare non-qualified disbursals on their Federal Income Tax and pay both the appropriate ordinary income tax as well as the excise penalty of 20% of the disbursement.

 

By Dave Woodruff
The A.I. Group, Inc.

http://analytics.ubabenefits.com/blog/bid/334713/Funding-Concierge-Medicine-Costs-with-HSAs-FSAs

 

Don’t Fall for New Tax Scam Tricks by IRS Posers (IRS)

Though the tax season is over, tax scammers work year-round. The IRS advises you to stay alert to protect yourself against new ways criminals pose as the IRS to trick you out of your money or personal information. These scams first tried to sting older Americans, newly arrived immigrants and those who speak English as a second language. The crooks have expanded their net, and now try to swindle virtually anyone. Here are several tips from the IRS to help you avoid being a victim of these scams:

  • Scams use scare tactics.  These aggressive and sophisticated scams try to scare people into making a false tax payment that ends up with the criminal. Many phone scams use threats to try to intimidate you so you will pay them your money. They often threaten arrest or deportation, or that they will revoke your license if you don’t pay. They may also leave “urgent” callback requests, sometimes through “robo-calls,” via phone or email. The emails will often contain a fake IRS document with a phone number or an email address for you to reply.
  • Scams use caller ID spoofing.  Scammers often alter caller ID to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legit. They may use online resources to get your name, address and other details about your life to make the call sound official.
  • Scams use phishing email and regular mail.  Scammers copy official IRS letterhead to use in email or regular mail they send to victims. In another new variation, schemers provide an actual IRS address where they tell the victim to mail a receipt for the payment they make. All in an attempt to make the scheme look official.
  • Scams cost victims over $20 million.  The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 600,000 contacts since October 2013. TIGTA is also aware of nearly 4,000 victims who have collectively reported over $20 million in financial losses as a result of tax scams.

The real IRS will not:

  • Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
  • Demand that you pay taxes and not allow you to question or appeal the amount that you owe.
  • Require that you pay your taxes a certain way. For instance, require that you pay with a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in police or other agencies to arrest you for not paying.

If you don’t owe taxes or have no reason to think that you do:

  • Do not provide any information to the caller. Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
  • You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.

If you know you owe, or think you may owe taxes:

  • Call the IRS at 800-829-1040. IRS workers can help you if you do owe taxes.

Stay alert to scams that use the IRS as a lure. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.

Job Search Expenses May be Deductible (IRS)

People often change their job in the summer. If you look for a job in the same line of work, you may be able to deduct some of your job search costs. Here are some key tax facts you should know about if you search for a new job:

  • Same Occupation.  Your expenses must be for a job search in your current line of work. You can’t deduct expenses for a job search in a new occupation.
  • Résumé Costs.  You can deduct the cost of preparing and mailing your résumé.
  • Travel Expenses.  If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.
  • Placement Agency. You can deduct some job placement agency fees you pay to look for a job.
  • First Job.  You can’t deduct job search expenses if you’re looking for a job for the first time.
  • Substantial Job Break.  You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
  • Reimbursed Costs.  Reimbursed expenses are not deductible.
  • Schedule A.  You usually deduct your job search expenses on Schedule A, Itemized Deductions. You’ll claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.
  • Premium Tax Credit.  If you receive advance payments of the premium tax credit it is important that you report changes in circumstances, such as changes in your income or eligibility for other coverage, to your Health Insurance Marketplace. Other changes that you should report include changes in your family size or address.  Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

14 red flags that will get you audited by the IRS (clarkhoward.com)

 

  1. You make too much money.  The IRS will target those with incomes above $200,000. You have a 1 in 30 chance of being audited.
  2. Not reporting taxable income. You must report all 1099s and W-2s, even if you believe them to be incorrect. (Deal with the discrepancies after filing.)
  3. You give a lot of money to charity. The IRS knows what others who make similar income to you tend to give and will question you if you’re claiming too much.
  4. Claiming day-trading losses on Schedule C.
  5. Claiming rental losses.
  6. Deducting business meals, travel and entertainment.
  7. Claiming 100% business use of a vehicle. Be careful, salespeople! To counter any possible IRS questions, I know someone who keeps a paper log on the dashboard and writes down every mile for work, the date and what it was for. If you do want to claim all the cost for a business expense, be sure you have another vehicle too.
  8. Writing off a loss for a hobby.
  9. Claiming a home office deduction.
  10. Taking an alimony deduction.
  11. Running a business where almost all money is in cash.
  12. Not reporting a foreign bank account.
  13. Engaging in currency transactions.
  14. Taking excessive deductions. Again, the IRS knows what is outside normal bounds based on your income.

 

Best Tax Deductions for Timeshares (AICTC)

A timeshare is not only a great opportunity to get away for a while, it can be a wonderful investment. Not only does your timeshare qualify for some of the same types of deductions that other property would get you, there are some specific types of deductions you may be able to claim depending on what type of timeshare you have and how you use it.

Let’s take a look at some of the best tax deduction opportunities for your timeshare:

  1. Maintenance fees. The money you pay to maintain the property may be tax deductible, but only if you rent your timeshare. If you own the timeshare outright, however, you can’t deduct the maintenance fees. This is one of the rare cases where you have access to a deduction when renting that you won’t have access to if you own the property or if you have a secured loan on the property.
  2. Loan interest payments. Here again, it depends on the exact status of your timeshare. If you’re still making those initial purchase price payments for the timeshare, then the interest can be taxed. However, if you have a secured loan on the timeshare property then you may be able to deduct your interest.
  3. Property tax deductions. If you’re paying property taxes on your timeshare, and if they are billed separately from your maintenance charges, then you should be able to deduct them as well. If they’re billed the same, you’ll have a harder time deducting those payments. In some cases, it’s simply a matter of asking the management company to send you an itemized bill that shows exactly how much you’re paying in maintenance fees versus how much you’re paying for property taxes.
  4. Donations. If you donate a timeshare to charity instead of selling it, then you’re going to be entitled to a tax rebate equal to the fair market value of your property. This requires an independent appraisal so you can back up the amount that you’re claiming. There are specific regulations about how much that can be, and a limit to the amount you can claim as a deduction, as well.
  5. Rental-use deductions. If you own a timeshare that you rent out to someone else, you may be eligible for a rental-use tax deduction on that timeshare.

These are just some of the more common and best tax deductions you can claim on your timeshare; there may be others, depending on the specifics of your timeshare and where it’s located.

In addition, as you prepare your taxes, keep these principles in mind in regard to those timeshare tax deductions:

  • The most important factor in how you file your tax deductions in regard to your timeshare is your ownership status. There are some deductions that work only if you own the property, or if you have a secured loan on the property. If you’re purchasing a timeshare on a lease-purchase agreement or still making the down payment, you’re going to miss out on the best deductions.
  • When in doubt, talk to a tax professional. The last thing you want to do is face an audit situation where you’ve claimed deductions you weren’t entitled to. Talk to a tax professional who has a comprehensive tax education about navigating those timeshare tax deductions to make sure you get all of those that are coming to you, and that you don’t inadvertently claim one that isn’t.
  • You can only claim deductions on a single timeshare. If you own multiple timeshare properties, you’re going to be limited to claiming the deductions on only one of those properties.
  • Don’t forget the income implications of a timeshare. If you rent your timeshare out, you’re going to have to pay taxes on that income. Make sure you know the implications before you rent.
  • State and local tax implications may vary. Depending on where your timeshare is located, there may be specific incentives you can take advantage of. Be sure to talk to your tax professional about these, as well.

If you’re smart about it and take advantage of all of the available tax deductions, your timeshare can be a wonderful investment. Make sure you understand the tax laws in your area, and that you keep up with the changes that may take place to the tax code at the federal level each year as well.

 

Taken from: http://www.certifiedtaxcoach.org/blog/best-tax-deductions-for-timeshares/

Top 10 Tips about Tax Breaks for the Military (IRS)

If you are in the U. S. Armed Forces, special tax breaks may apply to you. For example, some types of pay are not taxable. Certain rules apply to deductions or credits that you may be able to claim that can lower your tax. In some cases, you may get more time to file your tax return. You may also get more time to pay your income tax. Here are the top 10 IRS tax tips about these rules:

  1. Deadline Extensions.  Some members of the military, such as those who serve in a combat zone, can postpone some tax deadlines. If this applies to you, you can get automatic extensions of time to file your tax return and to pay your taxes.
  2. Combat Pay Exclusion.  If you serve in a combat zone, certain combat pay you get is not taxable. You won’t need to show the pay on your tax return because combat pay is not part of the wages reported on your Form W-2, Wage and Tax Statement. If you serve in support of a combat zone, you may qualify for this exclusion.
  3. Earned Income Tax Credit or EITC.  If you get nontaxable combat pay, you can include it to figure your EITC. Doing so may boost your credit. Even if you do, the combat pay stays nontaxable.
  4. Moving Expense Deduction.  You may be able to deduct some of your unreimbursed moving costs. This applies if the move is due to a permanent change of station.
  5. Uniform Deduction.  You can deduct the costs of certain uniforms that you can’t wear while off duty. This includes the costs of purchase and upkeep. You must reduce your deduction by any allowance you get for these costs.
  6. Signing Joint Returns.  Both spouses normally must sign a joint income tax return. If your spouse is absent due to certain military duty or conditions, you may be able to sign for your spouse. In other cases when your spouse is absent, you may need a power of attorney to file a joint return.
  7. Reservists’ Travel Deduction.  If you’re a member of the U.S. Armed Forces Reserves, you may deduct certain costs of travel on your tax return. This applies to the unreimbursed costs of travel to perform your reserve duties that are more than 100 miles away from home.
  8. ROTC Allowances.  Some amounts paid to ROTC students in advanced training are not taxable. This applies to allowances for education and subsistence. Active duty ROTC pay is taxable. For instance, pay for summer advanced camp is taxable.
  9. Civilian Life.  If you leave the military and look for work, you may be able to deduct some job search expenses. You may be able to include the costs of travel, preparing a resume and job placement agency fees. Moving expenses may also qualify for a tax deduction.
  10. Tax Help.  Most military bases offer free tax preparation and filing assistance during the tax filing season. Some also offer free tax help after April 15.