- February 29 – Payers must file information returns, such as Forms 1099, with the IRS. This deadline is extended to March 31 when the forms are filed electronically.
- February 29 – Employers must send W-2 copies to the Social Security Administration. This deadline is extended to March 31 for electronic filing.
- March 1 – Farmers and fishermen who did not make 2015 estimated tax payments must file 2015 tax returns and pay taxes in full to avoid a penalty.
- March 15 – 2015 calendar-year corporation income tax returns are due.
- March 15 – Deadline for calendar-year corporations to elect S corporation status for 2016.
- March 31 – Large employers must furnish Forms 1095-C to employees.
Certain tax numbers are adjusted for inflation each year. This year, many of the numbers are unchanged or change only slightly from 2015 amounts. Here are some of the tax numbers to use in your 2016 tax planning.
- The maximum earnings subject to social security tax in 2016 is $118,500, unchanged from 2015. The $15,720 earnings limit for those under full retirement age is also unchanged. If you’ve reached full retirement age, there is no earnings limit.
- The “nanny tax” threshold is $2,000 in 2016, up from $1,900 for 2015. If you pay household employees $2,000 or more during the year, you’re generally responsible for payroll taxes.
- The “kiddie tax” threshold remains $2,100 for 2016. If your under-age 19 child (under age 24 for students) has more than $2,100 of unearned income, such as dividends and interest income, this year, the excess could be taxed at your highest rate.
- The maximum individual retirement account (IRA) contribution you can make in 2016 remains unchanged – $5,500 if you’re under age 50 and $6,500 if you are 50 or older.
- The maximum amount of wages employees can put into a 401(k) plan remains at $18,000. The 2016 maximum allowed for SIMPLE plans is $12,500. If you are 50 or older, you can contribute up to $24,000 to your 401(k) and $15,500 to your SIMPLE plan.
- For 2016, the maximum amount you can contribute to a health savings account is $3,350 for individuals and $6,750 for families. The catch-up contribution when you’re age 55 or older is $1,000.
Contact us for additional information about these and other inflation-adjusted tax numbers.
Discussing finances with your parents may be a talk none of you are eager to tackle. But addressing the topic can benefit your entire family by clarifying your parents’ wishes and enabling you to help establish a joint plan for carrying those wishes to fruition. Here are questions that can start the dialogue.
- Legal – Do your parents have a will and an estate plan? Have they executed a trust, a durable power of attorney for finances, or an advance healthcare directive? Will they allow you to review the documents and/or speak with their attorney?
- Medical – What medical insurance policies are in place? Do your parents have long-term care insurance? Who is their personal physician and what significant medical issues exist?
- Income, expenses, and debt – What are the sources and amounts of your parents’ income and expenses? To whom do your parents owe money, and how much do they owe?
- Records – Where do your parents keep tax returns, bank and brokerage statements, and similar records? Who are their tax preparers, financial advisors, and/or stockbrokers? Will your parents allow you current access to those records and advisors?
Talking about finances with your parents can be a daunting prospect. Give us a call if you’d like us to be part of the conversation. We’re here to help.
What supporting documentation do you need to claim charitable deductions on your federal income tax return?
In general, you can support monetary contributions of any amount with a cancelled check, credit card statement, proof of payroll deduction, or a receipt from the charity. The paperwork must show the organization’s name and the amount and date of your contribution.
When you contribute cash of $250 or more, get a written acknowledgement from the charity. The receipt must show the name of the charity, the date of your donation, and the amount donated, as well as a description and the estimated value of any nondeductible item (such as a book or dinner) provided to you.
For property donations, keep copies of support for the value you claimed. The allowable deduction for a property donation is generally limited to the lesser of cost (or other basis) or fair market value. That means you’ll need records showing what you paid for the item, as well as support for the current value. For example, you might use ads from second-hand stores or consignment shops to determine the fair market value of donated clothing and household items.
Be aware that the higher the value of a property donation, the more support you need. When you donate an item with a value under $250, ask for a receipt from the charity showing the organization’s name, the date and location of the contribution, and a description of the property. For items valued up to $500, the receipt also needs to include a statement indicating whether you were given any goods or services in exchange for your contribution. In addition, the receipt must provide a description and estimated value for those goods or services. If you donate property with a value between $500 and $5,000, your paperwork must show how and when you got the property and its cost or other basis. Items valued over $5,000 generally need a written appraisal from a qualified appraiser.
Additional requirements apply when you donate property that has appreciated in value. Call us for more information.
In mid-December, Congress renewed a long list of tax breaks known as “extenders” that have been expiring on an annual basis. This year many of the rules are retroactive to the beginning of 2015, and you can benefit from them as you prepare your 2015 federal income tax return.
In addition, the Protecting Americans from Tax Hikes Act of 2015, which was signed into law on December 18, 2015, makes some of the rules effective through December 31, 2016. Others are effective through 2019, and some are effective permanently. Provisions in the Act also make changes to existing tax rules that were not part of the extenders. All of these changes will affect your tax planning for 2016 and future years. Here’s an overview of selected provisions.
- When you’re age 70½ and over, you can make a tax-free distribution of up to $100,000 from your IRA to a charity. This provision was reinstated for 2015 and is now permanent.
- The deduction for up to $250 of out-of-pocket eligible educator expenses is available for your 2015 return. It’s now permanent and will be indexed for inflation beginning with 2016 tax returns.
- You can choose to claim the itemized deduction for state and local sales taxes in lieu of deducting state and local income taxes on your 2015 return. This break is now permanent.
- The tuition and fees above-the-line deduction for qualified higher education expenses is available for 2015 and 2016.
- If you’re a homeowner, you can exclude mortgage debt cancellation or forgiveness of up to $2 million in 2015 and 2016. Discharges of qualified mortgage debt can also be excluded after January 1, 2017, if you have a binding written agreement in effect before that date. This tax break is only available for your principal residence.
- The maximum Section 179 deduction for qualified business property, including off-the-shelf software, is available for 2015 and is now permanently set at $500,000 (subject to a taxable income limitation). The deduction is phased out above a $2 million threshold. Both thresholds will be indexed for inflation beginning in 2016.
- The additional first-year depreciation deduction, known as “bonus depreciation,” is available for 2015 when you buy qualified business property. The deduction is extended through 2019.
- You can claim the work opportunity tax credit for 2015 if you hired eligible individuals last year. This credit is extended for five years (through 2019).
Because the Act was passed so late in the year, you’ll have to review your 2015 transactions to take advantage of applicable breaks and claim them on your 2015 federal income tax return. Also, with the rules now extended through 2016 (and in some cases beyond), you can begin to update your current tax plan with some measure of certainty.
Give us a call for more information and for help in determining which changes affect you.
- Starting January 1, the standard mileage rate for driving a vehicle for business purposes is set at 54 cents per mile. That’s down from 57.5 cents in 2015.
- Medical and moving. The rate for medical and moving mileage decreases from last year’s 23 cents a mile to 19 cents a mile.
- The general rate for charitable driving remains at 14 cents a mile.
Add cash management to your list of business goals for 2016. Commitment to effective practices and techniques can be the key to keeping your business operating on a sound footing. Some tips:
Reduce lag time. Reducing the time between sending out invoices and receiving payment may take the form of giving incentive discounts to customers who pay early. On the expense side, aim for just-in-time inventory to reduce holding costs.
Establish a line of credit. To cover shortfalls resulting from excessive lag time, unforeseen business disruptions, or weakening in your particular market, set up a line of credit with your local financial institution. What to watch out for: The tendency to let short-term credit develop into a crutch that props up poor cash management.
Check out new customers. Assess whether new clients are likely to pay on time before extending credit. Deadbeat clients can squeeze your firm’s cash flow quickly.
Grow with caution. Expanding into new markets can bring momentum and additional sources of income. But developing new product lines, expanding facilities, hiring employees, and ramping up your marketing budget all consume cash. Be sure your cash forecasts are accurate. Review and update them on a regular basis.
A new year means tax return filing season has arrived once again. Among the tax deadlines you may be required to meet in the next few months are the following:
- January 15 – Due date for the fourth and final installment of 2015 estimated tax for individuals (unless you file your 2015 return and pay any balance due by February 1).
- February 1 – Employers must furnish 2015 W-2 statements to employees. Payers must furnish 1099 information statements to payees. (The deadline for Form 1099-B and consolidated statements is February 16.)
- February 1 – Employers must generally file 2015 federal unemployment tax returns and pay any tax due.
- February 29 – Payers must file information returns (except Forms 1095-B and 1095-C) with the IRS. (March 31 is the deadline if filing electronically.)
- February 29 – Employers must send W-2 copies to the Social Security Administration. (March 31 is the deadline if filing electronically.)
- March 31 – Large employers must furnish Form 1095-C to employees.
- May 31 – Forms 1095-B and 1095-C due to IRS. (June 30 is the deadline if filing electronically.)