What is New on the 2016 1040.

More tax geek talk from Accounting Today.com:



Form 1040—Adjusted Gross Income
Line 23. Educator expenses. Beginning in 2016, this up-to-$250 per educator deduction can include certain expenses for professional development courses related to the curriculum, or to the students, that the educator teaches.
Line 26. Moving expenses. The 2016 standard mileage rate for moving expenses is 19¢ per mile.
Line 32. IRA deduction. In general, an individual who isn't an active participant in certain employer-sponsored retirement plans, and whose spouse isn't an active participant, may make an annual deductible cash contribution to an IRA up to the lesser of:
1.A statutory dollar limit, or
2. 100 percent of the compensation that's includible in his gross income for that year.
For 2016, the statutory dollar limit is $5,500, plus an additional $1,000 for those age 50 or older. If the individual (or his spouse) is an active plan participant, the deduction phases out over a specified dollar range of modified AGI. For 2016, a taxpayer may be able to take an IRA deduction if he was covered by a retirement plan and his 2016 MAGI is less than $71,000 ($118,000 if married filing jointly or qualifying widow(er)). If the taxpayer's spouse was covered by a retirement plan, but the taxpayer was not, he may be able to take an IRA deduction if 2016 MAGI is less than $194,000.
Form 1040—Tax And Credits
Line 40. Itemized deductions or standard deduction. For 2016, the standard deduction is $6,300 for single filers and for married persons filing separately, $12,600 for joint filers and qualifying widow(er)s, and $9,300 for heads of household.
Line 42. Exemptions. The amount of each exemption for 2016 is $4,050. Exemptions are reduced for taxpayers with AGIs in excess of the "applicable amount" ($311,300 for joint filers or a surviving spouse, $285,350 for a head of household, $259,400 for a single individual who isn't a surviving spouse, and $155,650 for marrieds filing separately).
Line 45. Alternative minimum tax. Under Code Sec. 55(d), the alternative minimum tax exemption amount for 2016 is $53,900 ($83,800 if married filing jointly or a qualifying widow(er); $41,900 if married filing separately). The AMT exemption amount is reduced if alternative minimum taxable income is above statutorily defined amounts that depend upon filing status.
Line 54. Other credits. For 2016, the maximum adoption credit is $13,460 per eligible child for both non-special needs adoptions and special needs adoptions. The amount begins to phase out if modified adjusted gross income (MAGI) is in excess of $201,920 and is completely phased out if MAGI is $241,920 or more.
Form 1040—Other Taxes
Line 57. Self-employment tax. Maximum amount of self-employment income subject to FICA tax is $118,500; there is no ceiling on Medicare wage base.
An individual may use the farm optional method only if:
a. His gross farm income was not more than $7,560 or
b. His net farm profits were less than $5,457.
Using this method, farm self-employment earnings equals the smaller of:
1. Two-thirds of gross farm income, or
2. $5,040.
An individual may use the nonfarm optional method only if:
a. His net nonfarm profits were less than $5,457 and also less than 72.189 percent of his gross nonfarm income and
b. He had net earnings from self-employment of at least $400 in 2 of the prior three years.
Individuals may compute their self-employment earnings as the smaller of two-thirds of gross nonfarm income or $5,040.
A self-employed individual with both farm and nonfarm incomes is allowed to use both optional computation methods if the farm income qualifies for the farm optional method and the nonfarm income qualifies for the nonfarm optional method. If both optional methods are used to compute net earnings from self-employment, the maximum combined total net earnings from self-employment for any tax year can't be more than $5,040.
Line 61. Health care: individual responsibility. As was the case in 2015, a taxpayer must either:
• Indicate on line 61 that he, his spouse (if filing jointly) and his dependents had health care coverage throughout 2016;
•    Claim an exemption from the health care coverage requirement for some or all of 2016 and attach Form 8965; or
•    Make a "shared responsibility payment" if, for any month in 2016, he, his spouse (if filing jointly) or his dependents did not have coverage and do not qualify for a coverage exemption.
However, the monthly shared responsibility payment amount has increased for 2016. For 2016, it is the lesser of:
i. The sum of the monthly penalty amounts for months in the tax year during which one or more failures occurs, or
ii. The sum of the monthly national average bronze plan premiums for the plan.
The monthly penalty amount is equal to 1/12 of the greater of $695 per family member (up to a ceiling of $2,085) or 2.5 percent of the amount by which the taxpayer's household income exceeds the filing threshold.
Form 1040—Payments and Refunds
Line 66. Earned income tax credit (EITC). The maximum credit is higher, and the AGI-based phaseout figures are revised.
Line 71. Excess social security and RRTA tax withheld. Maximum Social Security (OASDI) tax for 2016 is $7,347 (computed on the first $118,500 of wages) for purposes of credit for excess tax withheld.
Line 73. Credits. Line 73, box b is labeled as "Reserved". The draft instructions contain no information on this box. The final version of 2015 Form 1040 also had this box labeled as "Reserved".
Lines 74-77. Refund. Effective for credits or refunds made after Dec. 31, 2016, the IRS can't issue refunds before February 15 (thus, before Feb. 15, 2017 for 2016 returns) for returns that claim the earned income credit and/or the additional child tax credit. This rule applies to the entire refund, not just the portion associated with those credits.
Line 78. Amount you owe. The Form 1040 instructions reflect the fact that IRS2GO is the IRS mobile application; taxpayers can access "Direct Pay" or "Pay By Card" by downloading the application.





Read more by clicking on this link.  

Long waits for refund checks. New law delays tax refunds until Feburary 15, 2017.

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.


IRS special edition tax tips dated 11-01-16

10 Ways to Lose A Client

Accountants are the absolute worse dealing with people.

They are in the losing client business.

Don't believe me?  Why else would Accounting Today write this:


From Accounting Today:


Everyone knows how difficult it can be to find new clients – but the flip side of that is how easy it is to lose the clients you already have, through inattention, complacency, or worse.

“There are challenges that we all face, especially as we get comfortable in our client relationships,” noted Maureen Schwartz, executive director of BKR International (http://www.bkr.com), a leading global association representing  more than 160 independent accounting and business advisory firms in over 500 offices and 80 countries. “CPAs must be mindful of how they talk and act in order to keep client trust and loyalty.”



1. Only talk about yourself. Your clients do not really care that your firm won “Best Places to Work” for three years straight. Clients want to talk about their business and how you can help them. Do your homework. Review their Web site, social media pages and research their industry’s key business trends and challenges. Bring key questions to ask so that you can get the information you need to provide value.

2. Constantly check your phone. Turn your phone off and keep it in your pocket/purse during meetings. Do not keep it on the conference table or in your lap, where you will be sure to look at it. Give your client your undivided attention so you can play the role of trusted advisor.

3. Arrive late to client meetings. Always give yourself plenty of time to deal with traffic, street closings, accidents and other potential time-robbers, especially if you are meeting a client for the first time.

4. Only communicate by e-mail. Know how each of your clients wants to communicate. If you’re not sure, ask them and then note it in their file. Most importantly, know when to pick up the phone.

5. Only communicate when it’s time to bill or renew. Send relevant alerts, timely articles and specific industry information on a regular basis. Show that you’re thinking about them and share why you thought they would find the information interesting.

6. Send a large invoice with no details. Clients hate getting a large bill all at one time. Prepare accurate time reports and send interim bills for work in process on a timely basis.

7. Never own up to mistakes. Once you realize a mistake has been made, contact your client right away. (This would be the time to pick up the phone.) Apologize and offer a swift remedy. Never ignore the problem and hope it goes away. It will come back much bigger, more complicated and more difficult to fix.

8. Eat alone. Instead of wolfing down a cold sandwich or wilted salad at your desk, designate one day a week to take a client to lunch. Make it breakfast if your time or budget is tight. You can easily catch up with your clients in an hour and get to work before the business day begins.

9. Never give away free information. If you bill for every client call, you’ll never hear from them. This creates missed opportunities to discuss new products and services and ways in which you can help. These conversations also help expand your personal relationship. Marketing experts say it takes 14 touches to establish a buying relationship.

10. Excuse yourself from social events. Invited to a special client event where you won’t know anyone? Want to make a flimsy excuse and rationalize to yourself that you won’t be missed? Spoiler alert: You will be. Go prepared with information that everyone can engage in. Popular conversation starters include sports, community initiatives, kids, travel and television shows. Avoid conversations about politics and religion.

Lessons from Chik-fil-a

From our friends at Tax Coach.

"Saturday afternoon, my girlfriend and I spent much of the day painting my daughter Margaret’s bedroom. (Apparently the bright green she picked when she was 10 years old was a little “robust” for her 16-year-old taste.) At one point, I ran out for another set of rollers and some more painters tape. My girlfriend asked me to pick up a Chick-fil-a sandwich for her on my way back. I said “sure,” and headed off to Target for supplies.

 

After I picked up the supplies, I pulled into the Chick-fil-a, and my heart sank. There was a long line of cars waiting at the drive-through. I knew that a line that long at the McDonald's down the street signaled a long wait, and I would be better off parking and going in to the store.

 

But then I saw a couple of staffers approaching the cars at the end of the line with iPads in hand, and I decided to give the drive-through a try. Sure enough, taking orders like that really did speed things up, and I was back on the street with Liza’s sandwich in a jiffy.

 

That experience got me to thinking, as I often do, what lessons it might hold for us. And I started musing on the nature of franchises like Chick-fil-a in general.

 

What do you really get when you invest your start-up money ($280 - $815K, in the case of Chick-fil-a) and ongoing fees in a franchise? Mainly, two things: 1) branding and advertising, to help jump-start your sales, and 2) systems, to jump-start your operations.

 

I’ve always enjoyed Chick-fil-a’s advertising, with desperate cows begging us to “eat mor chikin.” (Who doesn’t like cows painting billboards?) But seeing those kids with iPads running outside to take orders and speed up the car line, now that’s a system.

 

Successful systems are the heart of any franchised business. They’re the key to ensuring customers are treated uniformly from store to store. When they work, customers zip through drive-throughs with smiles on their faces. And when they break down (as seems to be the case with that McDonald's I was talking about earlier and its bloated menu), customers gripe, grumble, and give up.

 

What do your systems look like?

 

Let’s say you thought about franchising yourself, just to take a good hard look at your business from an outside perspective. What sort of systems do you have in place for your franchisees? Are they written, or just verbal? Do your staff all understand them identically, or does one employee understand things one way and the other understand them a different way? (And if that’s so, does either employee get it right?) Are your systems effective enough that you could use them to attract franchisees and justify ongoing fees? Are you adapting them to keep up with technology and client demand?

 

If not, why not? Are you just “winging it”? If so, how’s that working out for you? Is a lack of clearly delineated systems slowing things down, making life harder, and keeping you from delivering your services or growing your business the way you’d like?

 

Take a few minutes to think about how you would organize your systems to franchise your business. You’ll find it makes life easier and more profitable even without taking that step!"

IRS Turns To 3rd Party Collection Agencies. Now How Do You Tell Whether it is an Imposter or the Real Thing?

From accounting today.com

 "In late 2015, Section 32102 of the Fixing America’s Surface Transportation, or FAST, Act was put into law, requiring the IRS to use private debt collectors for delinquent tax debts."

The IRS tried using private debt collectors two times previously and decided the programs were not cost effective.


"Seven facts you need to know

1. It’s coming soon. The IRS plans to select its authorized private debt collectors in the next two months and then begin using them in early 2017. The IRS will publish the names of these collectors on IRS.gov.
2. Private debt collectors will try to pursue the old, uncollectible accounts. The IRS wants private debt collectors to go after cases the IRS would never pursue – that is, outstanding, inactive receivables. The case criteria for private debt collectors are:

• More than one-third of the 10-year collection statute has expired;
• No IRS employee is assigned to collect the debt; and,
• The IRS hasn’t contacted the taxpayer in a year, and the taxpayer isn’t requesting a payment alternative or relief (such as innocent spouse relief, a collection due process hearing, an offer in compromise, an installment agreement, etc).

Private debt collectors won’t pursue taxpayers younger than 18, those who have been a victim of tax identity theft, or taxpayers in a federally declared disaster area or combat zone.

3. The private debt collectors will try to locate “missing” taxpayers. When the IRS can’t locate taxpayers, it removes them from active collection. In the FAST Act, private debt collectors will pursue those accounts. As the National Taxpayer Advocate has pointed out, the methods these collectors might use to find and collect from these taxpayers could conjure up fears about how the IRS will protect taxpayer rights, information, and privacy.

4. Private debt collectors won’t have enforcement authority. Private debt collectors won’t be able to file liens or issue levies. Keep in mind, however, that the IRS may have already filed a tax lien on some taxpayers before the private debt collector ever calls. Collectors also won’t be able to help taxpayers get liens removed. To address enforcement actions, taxpayers or their advisors will need to contact the IRS directly.

5. Collection alternatives are still available through the IRS. If taxpayers need a payment alternative, such as an installment agreement, currently not collectible status, or an offer in compromise, they should contact the IRS.

6. The IRS will notify taxpayers if a private debt collector is assigned to their case. Before starting the private collection process, the IRS and the collector will send two letters:

• First, the IRS will send a letter notifying the taxpayer that the IRS has assigned their case to a private debt collector.
• Second, after assignment and before contacting the taxpayer, the private debt collector will send a letter.

According to the IRS, these notices will also go to the taxpayer’s representative on file, if any. The IRS hopes that these steps will notify taxpayers of the impending collection and relieve their fears about IRS imposter schemes.

7. Taxpayers experiencing economic hardship aren’t included. Taxpayers who are experiencing severe economic hardship and have an outstanding tax debt can apply for a special status that suspends their obligation to pay (referred to as currently not collectible status). Taxpayers who have negotiated this status with the IRS appear to be excluded from the private debt collection program. The IRS has not finalized this exclusion, but it appears likely that these taxpayers would be treated similarly to those who have requested a payment agreement with the IRS on their outstanding debt.

Third time’s a charm?

Navigating the IRS can be difficult. With imposter schemes running rampant, adding a third-party collector to the mix could add to taxpayer confusion.
According to IRS plans, taxpayers and their advisors should expect two letters to come before a private debt collector calls. And if a legitimate collector calls for payment, taxpayers and their advisors should first consider whether the client qualifies for a payment alternative with the IRS.
Congress hopes that the third private debt collector program will work better than the previous two initiatives. Time will tell, because the third round starts soon."

TWO SMART WORDS FROM ONE SMART GUY

From our friends at Tax Coach.

Marc Andreesen is one of the smarter guys to emerge from the Silicon Valley tech world.  He coauthored Mosaic, which became the first widely-used internet browser. He co-founded Netscape and sold it to AOL for $4.2 billion. He co-founded LoudCloud and sold it to Hewlett-Packard for $1.6 billion. Today he helms the venture capital firm Andreesen Horowitz and sits on the boards of Facebook, eBay, and Hewlett-Packard. He’s even one of just six inductees in the World Wide Web Hall of Fame. (Bet you didn’t even know that was a thing!)

 

So when Marc Andreesen offers some advice, it’s probably worth listening to—even if it doesn’t seem directly relevant to you or your business.

 

Last month, “Four-Hour Work Week” author Tim Ferris sat down to interview Andreesen for his “Tim Ferris Show.” Ferris asked Andreesen what words he would put on a billboard to reach the greatest number of people. Andreesen replied that he’s actually considering hiring a skywriter to put two words in front of every startup in San Francisco.

 

And what are those two words? “Dream big”?  “Cut costs”? “Don’t be evil”? (That’s three words, and Google already claims them.)

 

No, Andreesen’s two words would be familiar to anyone who’s been around TaxCoach long enough. They’re “raise prices.” And I couldn’t agree with him more.

 

Andreesen describes the problem as “too hungry to eat”:

 

“The No. 1 thing—just the theme and we see it everywhere—the No. 1 theme our companies have when they get really struggling is they are not charging enough for their product. It has become absolutely conventional wisdom in Silicon Valley that the way to succeed is to price your product as low as possible under the theory that if it's low-priced everybody can buy it and that's how you get the volume.

 

They don't charge enough for their product to be able to afford the sales and marketing required to actually get anybody to buy it. And so they can't afford to hire the sales rep to go sell the product."

 

If startups can’t sell, they start lowering prices to boost volume. But at that point, says Andreesen, it’s a race to the bottom.

 

“It just makes the problem worse. And so, probably the single number one thing we try to get our companies to do is raise prices,” Andreessen said. “By the way, it's like, ‘Is your product any good if people won't pay more for it?’”

 

Raising prices takes confidence, and that’s a commodity that can be in short supply during times of struggle. But I can tell you that I’ve spoken with easily a hundred TaxCoach members over the years who have raised prices substantially—in many cases, by 25% or more across the board. Not one of them has told me they regret it. (Yes, it’s possible to charge too much. But it’s hard to find someone making that mistake!)

 

So . . . are you just starting a business, and hoping to stand out from the crowd as a premium provider? Raise prices.

 

Are you struggling to take your business to “the next level,” whatever that is? Raise prices.

 

Are you looking to re-invent a mature, successful business to move away from low return items and attract successful customers? Raise prices. 

Summer wedding and taxes. How the IRS can take the wind out of a beautiful thing.

As part of their summertime tax tips, the IRS had this to say about your wedding and taxes.  I kid you not.

How a Summer Wedding Can Affect Your Taxes
With all the planning and preparation that goes into a wedding, taxes may not be high on your summer wedding checklist. However, you should be aware of the tax issues that come along with marriage.

Here are some basic tips to help with your planning:

• Name change. The names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov, by calling 800-772-1213 or from your local SSA office.

• Change tax withholding. A change in your marital status means you must give your employer a new Form W-4, Employee's Withholding Allowance Certificate. If you and your spouse both work, your combined incomes may move you into a higher tax bracket or you may be affected by the Additional Medicare Tax. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax, for more information.

• Changes in circumstances. If you or your spouse purchased a Health Insurance Marketplace plan and receive advance payments of the premium tax credit in 2016, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace when they happen. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance credit payments are paid directly to your insurance company on your behalf to lower the out-of-pocket cost you pay for your health insurance premiums. Reporting changes now will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance, which may affect your refund or balance due when you file your tax return.

• Address change. Let the IRS know if your address changes. To do that, send the IRS Form 8822, Change of Address. You should also notify the U.S. Postal Service. You can ask them online at USPS.com to forward your mail. You may also report the change at your local post office. You should also notify your Health Insurance  Marketplace when you move out of the area covered by your current  health care plan.

• Tax filing status. If you’re married as of Dec. 31, that’s your marital status for the whole year for tax purposes. You and your spouse can choose to file your federal income tax return either jointly or separately each year. You may want to figure the tax both ways to find out which status results in the lowest tax.

• Select the right tax form. Choosing the right income tax form can help save money. Newly married taxpayers may find that they now have enough deductions to itemize on their tax returns. You must claim itemized deductions on a Form 1040, not a Form 1040A or Form 1040EZ.


So there you go.  Not high on the wedding list of things to do.  But does make a difference next April 15th. 

This is the video we mentioned in this month's client newsletter.

We know it is selling an information product, but we couldn't help but post this video from you tube. Great motivation stuff.  Great examples how this business owner increased his sales in 90 days.

Industrial Repair Center marketing video.

New Federal Tax Law May Affect Some Refunds Filed in Early 2017

From the IRS press release date 06-09-16

The Internal Revenue Service has announced initial plans for processing tax returns involving the Earned Income Tax Credit and Additional Child Tax Credit during the opening weeks of the 2017 filing season. The IRS is sharing the information now to help the tax community prepare for the 2017 season, and plans are being made for a wider communication effort this summer and fall to alert taxpayers about the changes that will affect some early filers.

This action is driven by the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) that was enacted Dec. 18, 2015, and made several changes to the tax law to benefit taxpayers and their families. Section 201 of this new law mandates that no credit or refund for an overpayment for a taxable year shall be made to a taxpayer before Feb. 15 if the taxpayer claimed the Earned Income Tax Credit or Additional Child Tax Credit on the return.

This change begins Jan. 1, 2017, and may affect some returns filed early in 2017. Additional information is listed below.

• To comply with the law, the IRS will hold the refunds on EITC and ACTC-related returns until Feb. 15.
• This allows additional time to help prevent revenue lost due to identity theft and refund fraud related to fabricated wages and withholdings.
• The IRS will hold the entire refund. Under the new law, the IRS cannot release the part of the refund that is not associated with the EITC and ACTC.
• Taxpayers should file as they normally do, and tax return preparers should also submit returns as they normally do.
• The IRS will begin accepting and processing tax returns once the filing season begins, as we do every year. That will not change.
• The IRS still expects to issue most refunds in less than 21 days, though IRS will hold refunds for EITC and ACTC-related tax returns filed early in 2017 until Feb. 15 and then begin issuing them.

This is one more step the IRS is taking to ensure taxpayers receive the refund they are owed. The IRS plans to work closely with stakeholders and IRS partners to help the public understand this process before they file their tax returns and ensure a smooth transition for this important law change.

More information about this law will be posted to IRS.gov and shared with partners and taxpayers throughout the second half of 2016.

Big surprise H and R Block and Liberty cost more.....exploiting the poor

From Accounting today:


"National tax preparation chains are exploiting the working poor by forcing them to spend a significant portion of the Earned Income Tax Credit just to pay for filing their taxes, according to a new report, and H&R Block is firing back.


The report, from the Progressive Policy Institute, a liberal think tank, found that workers eligible for the EITC continue to spend fees averaging around $400 at national tax preparation chains such as Block and Liberty Tax Service. The report was coauthored by Paul Weinstein Jr., a senior fellow at PPI and director of the Public Management Graduate Program at Johns Hopkins University, and Bethany Patten, a policy and research manager at Excellent Schools Detroit.
In a recent survey of storefront operations in Baltimore and Washington, D.C., the researchers found that those eligible for the EITC, who are typically low-income workers with children, would spend between 13 and 22 percent of their refund this year at local tax preparation outlets. In Baltimore, where the average EITC refund is $2,335, the cost to file ranged from $309 at H&R Block to $509 at Liberty Tax Service. In Washington, D.C., where the average EITC refund is $2,351, the cost to file ranged from $315 at H&R Block to $485 at Liberty Tax Service."


The fees quoted are extraordinary.    And despite H and R Blocks protest, we find that our clients were paying comparable fees for the simplest of returns.


 Read more by clicking on this link.

What is the worst part of owning a business?

Last year I wrote, what is the worst part of owning a business?  If you guessed employees you would be wrong. According to the small business owners polled by the Service Corps of Retired Executives,  40 percent said bookkeeping and taxes are the worst part of owning a business.  It is still true.  

Want to save money on taxes?  Keep better records. Want to make more money, become more profitable?  Keep better records. Want to breeze through an IRS examination?  Keep better records.

We call it the very exciting world of record keeping for business.  Unfortunately us small business owners are doing it every day.  You know the things that your small business does. The production end. Recordkeeping is often put off or not completed at all. As most businesses grow, eventually the light bulb goes on, usually at tax time, and the realization that some record keeping needs to be done.  

What can you do?

In the old days we built our business on bookkeeping....an era before desktop computers and the internet. Nowadays the computer has revolutionized your small business record keeping.  Here are three options you can try to make things a little easier.  Don’t struggle.  Don’t miss out valuable deductions.  Make record keeping part of your daily routine.

1.  Go online. Free advertiser supported online accounting software is available.  Probably the most popular free software online is Wave.

Here is a link to their website: https://www.waveapps.com/.

It is easy. Fairly comprehensive. Working with your tax guy is easy, too. Just invite us as a Guest Collaborator and we can both see your data, securely, in real time.  Perhaps the best part is the automatic download your bank account into your accounting records limiting the amount of data input you have to do. Advantages? It is free.  It is intuitive.  No need to change the way you are doing business today.  We like wave accounting so much we became a Wave accounting pro advisor.

2.  Consider a stand alone accounting software.  We recommend the Quickbooks clone Avanquest Bookkeeper.  This program offers more bang for the bucks than the 800 pound elephant Quickbooks.  It is $39.95.  What do you get for your money?  A fully functioning accounting software that includes credit card processing for no additional charge.  

3.  The ubiquitous Quickbooks.  It is expensive.  Requires yearly updates.  Currently the payroll update alone is $400.00.  Our payroll service is cheaper. And it seems that you are constantly bombarded with additional add-ons to buy.  However, the accounting community has embraced it as the defacto standard that our client’s are using to keep track of their records. We work every day with Quickbooks.

I know that there are other methods and systems.  I have always taken the position that what works for you works for me.  However, I suggest that you give the Wave accounting folks a try first and help you not miss all those deductions next year.

Competition between online tax preparation services heats up. However they kinda got a lot more expensive.

Accounting today reported on the increased competition between the three biggest online tax preparation services.


"The annual battle of tax preparers is nasty, brutish, and short. TurboTax, which dominates online filing, and H&R Block Inc., with 10,000 U.S. locations, have three months to win over taxpayers before this year's April 18 deadline.

Sparing no expense in their Hobbesian struggle, TurboTax hired Academy Award winner Anthony Hopkins as an unlikely Super Bowl pitchman, and H&R Block vowed to reward customers with $32 million, $1,000 at a time.

Squeezed between the two giants is TaxAct, a 150-employee company based in Cedar Rapids, Iowa, that handled 5.5 million U.S. filers’ tax returns last year. The country's third-largest online tax-prep firm, TaxAct was started by the former employees of another online tax business that was scooped up and then shut down by TurboTax’s parent company, Intuit Inc. TaxAct has nevertheless survived and thrived, thanks in part to one secret weapon: It’s cheap.




By charging as little as a third of what TurboTax charges, TaxAct was able to consistently expand its customer base, letting word of mouth make up for a puny marketing budget. Two decades after its predecessor was shut down by TurboTax, it has positioned itself as the scrappy, growing alternative to its colossal cousins.


Those salad days may be over. TurboTax made a surprise move to undercut TaxAct’s claim to be the best deal in tax prep: For simple tax situations, such as filing a 1040EZ or 1040A form, TurboTax launched its “Absolute Zero” campaign, charging nothing at all for both federal and state returns."


Not filing a simple return?  Get ready for a price shock.


"Beyond its free product, TurboTax’s next cheapest option is $72 for federal and state returns. That won’t work for taxpayers with investments, who are charged $92 for both returns. (H&R Block’s free product can be used by a wider range of taxpayers than the free options offered by TurboTax and TaxAct, but it charges $10 for an online state return. For investors, online H&R Block federal and state returns now cost $72.)"

The no charge easy tax return fee is probably a response to TurboTax initial campaign claiming you don't need to be genius to prepare your taxes.  It probably wasn't very persuasive.  Timing is also interesting.  Traditionally the easier returns are filed early in the tax season.  With less than two months left before the due date, you would think they would be aiming at the more complicated tax returns.  

 




Read more by clicking on this link.  

Stupid things very smart people do to mess up their taxes...from our June 1, 2015 all client newsletter

Here is our June 1, 2015 all client newsletter reprint. 

CPA Trendlines has been reporting that tax preparers and accountants have had it, calling “2015 the most stressful and confusing tax season in history.”   Although our take is maybe not that bad, the IRS continues to unimpress. Lack of staffing because of budget cuts has affected almost every facet of this very large, very powerful, very scary organization.

As we approached the April 15th deadline this year, phone calls to the IRS averaged over an hour on hold before a real live agent answered the phone. And the hold times haven’t changed much since then. For taxpayers, and tax preparers for that matter, who are not perfect and sometimes omit information for a variety of reasons on originally filed tax returns,  IRS has been noticeably dropping the ball on any of these so called CP2000 letters. In July 2014 the Kiplinger newsletter wrote; “Response to taxpayer correspondence has slowed so dramatically, to the extent where many filers who sent in documentation establishing that a tax bill was erroneous keep receiving bills;” IRS is way behind on answering correspondence from taxpayers.  Last year, IRS responded timely to fewer than half of taxpayers who protested adjustments.  Our colleague, attorney Jim Chipman, has successfully defended more that five tax court cases this year because of the IRS’ failure to respond to these CP2000 letters in a timely manner.

Why every client should consider tax planning or as well like to call it, celebrate Tax Freedom Day earlier.  Illinois observed April 30, 2015 as Tax Freedom Day, 43rd worst in the nation.  Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. Tax Freedom Day takes all federal, state, and local taxes and divides them by the nation’s income. Americans will collectively spend more on taxes in 2015 than they will on food, clothing, and housing combined. That means that your largest budget item is taxes. Unfortunately we spend little or no effort on taking steps to reduce our taxes.  And yet with a little planning on our part, it doesn’t have to be that way.

The good news is with the 2014 tax filing season behind us, the 2015 tax planning season is just beginning.

Each year after tax season we stop, take a deep breath, and wonder why our very smart clients sometimes do very stupid stuff with their taxes.  Each year we make a list, compiling the knuckle headed stuff that some clients did causing a painful April 15th, with a hope that this list and some tax planning will help you avoid their mistakes.  We have supplemented this list, geared to non business owner's taxpayers with a second, business owners slanted list, planned for a second mailing.  Please note that references to links at our web site 1taxes.com on can be found on the resources page.

How to avoid that what were you thinking moment.  The now retired David Letterman had his stupid pet tricks, we have our stupid tax mistakes or how to avoid that what were you thinking moment.

And the winner of our number one stupid thing smart people do to mess up their taxes is…..

A lot of jobs with little or no withholding. Or spouse's income pushes clients into a higher tax bracket yet they are not recognizing this fact that by not withholding enough you are not paying the correct tax liability. There is no other way to describe it:  The IRS does a lousy job helping us figure out the correct amount of withholding from our paycheck.  The assumption that the amount of withholding is based upon our dependents has gone the way of the dinosaur.  In fact form W-4 is a fairly complicated calculation requiring you to take in account your marital status, whether you itemize deductions, and whether you have more than one job or if you have two spouses working.   By our calculation the form requires answering 17 questions, and a good number of calculations.  Five in fact.  Two solutions to the problem.  Call us.  Our computer program can make the calculation fairly simply, or check out the link on web site 1taxes.com to the IRS interactive W4 calculator.

Take money out of their IRA or pension plan and don’t have any money withheld for taxes. Almost a tie for number one it is the cause of more heartache when a client takes an early distribution from tax sheltered plans with no withholding. If you have to take money out of your tax sheltered plan don’t forget that there is a 10 percent penalty in addition to Federal tax owed on the distribution if you are under age 59 1/2.  Don’t ever take money out of these plans without having the most Federal tax withheld from the distribution.  Call our office. We can help.

Take money out of their IRA or pension plan or 401 K and not roll it over to another tax deferred plan.  Back on this subject again. Leaving your job usually means cashing in a pension plan or 401 K.  We understand that sometimes the money is needed to pay for day to day bills until you can find a new job.  But if you don’t need the money don’t spend it, roll it over. We can help you if you don’t know what to do.  We can refer you to very competent people that can help with the rollover.  Taking the money if you don’t need it means additional tax liability.

Don’t keep any records. Records are very important in our imaginary tax world, a place nobody really lives in, yet we all step in it come April 15th. Recordkeeping is very important.  Especially for business tax deductions like car expenses. Jotting down on a daily basis in a daily planner, online, or a pocket calendar is all you need.  Keep a file nearby for tax deductible receipts.  Better yet get a credit card that you use only business tax deductions.  That way you all the receipts organized for you.  Your credit card along with your milage calendar is all you need to make April 15th very less taxing.

Give charitable deductions, especially non cash and don’t make any attempt to value the donation. Each year clients drop off  blank receipts from the charitable organization you donated your items to. The receipt is incomplete unless you write a note about the date and time of your deduction and a short list of the description of the deduction in your tax deduction file is all you need.  The million dollar question is how much should I value that deduction I just made.  The internet has made it simpler.  We have linked on our website, 1taxes.com, several websites maintained by various charitable organizations to help you value that deduction.  It is good stuff and helps you increase your refund.  

Not filing your taxes because you don’t have the money to pay. This is a very fatal mistake.  Always file, even if you do not have the money to pay the taxes you owe. The IRS considers not paying on time and not filing as two separate issues, and a penalty is involved for each.  Those penalties are rather steep  It can be as high as 25% of your unpaid tax liability.  When you file your tax return, you have several options. You can apply for an "offer in compromise," make monthly payments through an IRS installment agreement, or temporarily delay paying. Whichever is best for you, we will help you contact the IRS right away to let them know you cannot pay. You should pay as much as you can when you file because the IRS assesses penalties and interest on the amount not paid.

Ignore those letters from the IRS. Do not ignore mail from the IRS. If you owe taxes, the IRS will collect. Persons who do not communicate with the IRS about inability to pay can expect a "Notice of Federal Tax Lien" to be filed against their property. In lien terms, this is a lien about the size of Alaska. Few carry more weight. The lien attaches all your property, including your house, car and any future property you might obtain. A levy, which is a legal seizure of property to satisfy a tax debt, is another legal means the IRS can use to collect taxes. This means the IRS can seize your car, boat or home and sell it to satisfy your tax debt or it can place a levy on your wages. More good news is that these liens often stay on your records long after the issue has been resolved or until the IRS gets around to removing it. So it's also the gift that keeps on giving!  We have spent significant time and energy in our tax resolution service.  If you are in trouble, it really pays to hire us to help.

Big refunds.  Isn’t that the point of filing? Big refunds. In fact some clients rate the expertise of their tax preparer with the size of their refund.  The bigger the refund the better the tax preparer.  Nothing can be farther from the truth.  Refunds are nothing more than interest free loans of your money to the government.  Then you have to go through the expense and the wait of getting your refund when you file your taxes. Extra withholding doesn’t benefit you, only the government. Don’t stand for big refunds.  Stand for bigger paychecks.  Your goal should be break even on April 15th.

Assuming the wrong filing status.  Single taxpayers are probably the most guilty for assuming that they should file as single taxpayers when in fact they qualify for the much-more-favorable head-of-household (HOH) filing status. Say you're single and your non-adult child lives with you and pays for less than half of his or her own support. If you pay more than half the household's costs, you qualify. You may also qualify if you are still married and lived with your child but apart from your spouse for at least the last half of the year. Finally, if you are single and can claim your parent as a dependent, you can probably file as HOH. This is true even if your parent has his or her own place. You are the HOH if you pay more than half the cost of your dependent parent's home.  This year we also had a number of clients for whatever reason, decided to file separately from their spouse.  Married filing separately is the highest tax rate, period.  You lose certain deductions and credits when you file separately.  All too often one spouse will itemize deductions, taking all the mortgage interest and real estate taxes, leaving the other spouse who is forced to itemize with no deductions.  Don’t settle for separate.  File with your spouse.  Or if you are in the middle of a divorce you may in fact qualify for the single filing status, even though you are not officially divorced.  IRS rules concerning whether you are in fact single are quite favorable.  Much more than state law.  Something that you should discuss with us when you file your taxes next year.

Not taking advantage of employer sponsored retirement plans or making an IRA contribution. Although many will agree that contributing to a retirement plan is a good financial decision, a significant number of employees still do not participate in their employer sponsored retirement plans. This lack of participation is often the result of a misunderstanding of the rules or a lack of awareness of the benefits. Not only does taking advantage of your employer sponsored plan save you money, it allows you to grow you to take advantage of tax free growth and tax deferral, and even allows you to get free money.  Many times employers will match your retirement contribution.  Why is an IRA a good deal?  Because money in the plan grows free from the clutches of Uncle Sam. That is, the income from interest, dividends and capital gains can compound each year without taxes nipping away at it. In addition, you also can escape taxes on either the money you put into the plan initially or on the money you withdraw in retirement, depending upon whether you choose a traditional or Roth IRA.

Do You Pay Too Much Tax?

If you’re like most Americans, you probably think you pay too much tax. And you’re probably right! So perhaps you’re considering a new tax pro this year.

Most tax professionals do a fine job putting the “right” numbers in the “right” boxes on the “right” forms. But then they call it a day.

It doesn’t matter how good your tax preparer is with a stack of receipts on April 15. The real secret to reducing your tax bill is planning.

At Tax Partners, we’re different. We don’t just record history. We help you write it, with a complete lineup of court-tested, IRS-approved concepts and strategies to give you the savings you really want.

This year, don’t settle for just “filing” your return. Call me today at 217-241-4597 for your free Tax Analysis. We’ll find the mistakes and missed opportunities that may be costing you thousands, and show you how proactive planning can save those dollars. We guarantee you’ll leave with new information, or we’ll donate $50 to your favorite charity. So call now to schedule your Analysis!

As a ongoing client our service doesn’t just mean we will prepare your tax return.  As a benefit of being our client you are entitled to something we call:

The Tax Partners Advantage.  

1    Annual subscription to our email newsletter.  Ten times a year we update clients, with a locally written newsletter, letting you know what is happening in our tax world and include specific easy to follow tactics on how to reduce your tax liability.

2    Free copies of your tax return.  Refinancing?  Call our office and we will forward you a copy of any and all tax returns we have prepared for you at no additional charge.

3    Unlimited telephone support.  We don’t start the extra charge meter every time you call.  Have a problem?  Suggestion on how to handle a situation?  Call us.  We can help.

4    Help with IRS and other taxing bodies correspondence.  We don’t close after April 15th. Your preparer is available to help. You can contact us any time of the year.

5    Free look back at previous years tax filings.  Let’s face it not all tax preparers are the same.  Each year we file amended returns for our clients and have   

I appreciate your trust in my firm and I look forward to working together for many years. If you have any questions, call me at 217-241-4597 or email me at taxpartnerclients@gmail.com.

This year’s tax season went a whole lot more smoothly than the last two.  Our goal of course is 100% client  satisfaction.  We value your input.  We have put together a small online survey about our tax service. You can find the survey online at our website: 1taxes.com. You will find it on our homepage just click the “Tax Partners Client Satisfaction Survey” link. Please take a few minutes to tell us your thoughts.  What did we do right?  What can we do better? We all appreciate your input.

More IRS Computer Breaches Reported

From the Orange County Register:




"Criminals attacked the IRS’ digital systems in an attempt to steal data that could be used to collect fraudulent refunds, the agency announced last week.

The incident was the latest in a string of identity theft-related breaches that have been announced by tax officials and tax software companies this year. The news also comes shortly after the IRS temporarily stopped processing tax returns this month, an issue it says was unrelated to the online attack.

Using stolen personal information obtained elsewhere, the criminals used a bot to try to obtain electronic filing PINs from the IRS’ website last month, the agency said in a statement. Taxpayers can sometimes use the PINs to help verify their identities when they file returns online.

The thieves attempted to collect PINs for more than 464,000 stolen Social Security numbers but were only successful with 101,000 of them. The agency said it would let the affected taxpayers know by mail that criminals used their personal information to attempt to access IRS systems. It said no other taxpayer information was compromised.

The breach was the most recent hiccup that taxpayers have encountered less than one month into the tax filing season. Early this month, the IRS dealt with a roughly daylong outage that forced it to stop processing tax returns and blocked taxpayers from accessing the “Where’s my refund?” tool online.

The agency said the outage, caused by a hardware failure, should not significantly delay tax refunds.
At least two tax software providers have also alerted taxpayers of attacks in which criminals took over online accounts and gained access to sensitive tax data. The most recent incident came from TaxSlayer, which notified 8,800 people that their accounts may have been accessed by thieves using stolen usernames and passwords. Another tax software provider, TaxAct, reported a similar attack in January when criminals used stolen usernames and passwords to access information from 450 tax accounts, though the company detected suspicious activity on roughly 9,000 accounts."



Read more by clicking on this link. 

More bad news for Liberty Tax Service. Maryland Suspends Liberty Tax Service Franchises.

From Accounting Today:


"Maryland Comptroller Peter Franchot said Tuesday he has suspended processing of electronic and paper tax returns from 16 Liberty Tax Service franchise locations due to a high volume of questionable returns received, on top of seven Baltimore-area Liberty locations that he suspended processing last week..

Some of the suspicious characteristics detected on the tax returns included business income reported when taxpayers did not own a business, refund amounts requested much higher than previous year tax returns, inflated and/or undocumented business expenses, dependents claimed when taxpayer did not provide required 50 percent support or care, and inflated wages and withholding information.

The U.S. Attorney for the Eastern District of Michigan also issued a complaint last week seeking an injunction against another Liberty Tax Service franchisee in Detroit, Craig M. Comer, who manages five Liberty stores, claiming he filed hundreds, if not thousands, of fraudulent income tax returns.



Liberty told Accounting Today it is cooperating with the Maryland investigation, and that the franchisee in Detroit is no longer part associated with the company.


Liberty Tax has a robust compliance program, and we expect our franchisees to make sure that their offices comply with all federal and state tax requirements," said Jim Wheaton, general counsel, chief compliance officer and vice president of legal and governmental affairs at Liberty Tax. "Since we learned of Maryland's concerns late last week, we have provided all requested information to the state, and have devoted significant efforts to looking at the offices identified last Thursday. We offered additional training to our franchisees' employees in Maryland earlier this week, and will do so again in the coming days. We will also address any concerns with the offices Maryland identified to us this afternoon. We have had a cooperative and productive relationship with the State of Maryland in the past, and expect to work with them to address their current concerns. In fact, we have offered to meet with them at their convenience, and look forward to the opportunity to work with the state to protect the public and meet the needs of each of our customers and the state."

Of the Detroit case, Wheaton said, "We’re looking at that concern, which relates to prior tax seasons, but the person who was the subject of that injunction lawsuit last week is actually no longer a franchisee. They disposed of their stores last year and they’re no longer on our system. So while we’re certainly looking at it and taking it seriously, that franchisee is not a franchisee in the Liberty system any longer."