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Tax Tip of the Week | No. 283 | Happy New Year! December 31, 2014

Posted by bradstreetblogger in : General, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Taxes , add a comment

Tax Tip of the Week | Dec 31, 2014 | No. 283 | Happy New Year!

And get ready for the tax filing season…

Hopefully, you followed some of the suggestions we outlined a couple of years ago in Kick off the New Year… by getting organized!  to organize your records. If you did, great!  This will make filing your tax returns a lot easier this year.  It also means that you and your tax advisor can spend more time on tax and financial planning issues for 2015 vs. looking back to 2014.

If you are new to our Tax Tip of the Week series, or didn’t follow our suggestions from a few years ago, now would be a good time to review TTW #21.   You might want to make getting organized your 2015 New Year’s Resolution!

This week we will look at some of the more common forms that you should be watching for in the coming weeks and months:

W-2:          Employers should mail these by 1/31/15. If you have moved during the year, make sure former employers are aware of your new address.

W-2G:     Casinos, Lottery Commissions and other gambling entities should mail these by 1/31/15 if you have gambling winnings above a certain threshold.
Note:  Some casinos will issue you a W-2G at the time you win a jackpot.  Make sure you have saved those throughout the year.

1099-INT:    Banks, Credit Unions, Brokerage firms, etc. will issue these by 1/31/15 to show the amount of interest income you earned on your savings/investments.

1099-DIV:    Brokerage firms, mutual funds, etc. have until 2/14/15 to issue these forms to show the dividend income you earned for the year.

1099-B:    Brokerage firms, mutual funds, etc. have until 2/14/15 to show the proceeds from the sale of stocks and mutual funds. Most brokerage firms have gotten better at showing the cost basis on the sale of these investments.  If the statements do not show the basis, then you have some homework to do before filing your tax return.
NOTE:  Most of the larger brokerage firms issue “Consolidated Statements” that have the 1099-INT, 1099-DIV and 1099-B earnings reported on the same report.

K-1s:    If you are a partner in a business or a limited partner in some investments, your income and expenses will be reported to you on a K-1.
The tax returns for these entities are not due until 4/15/15 (if they have a calendar-year accounting). Sometimes, you may not receive a K-1 until shortly after the entities’ tax return is filed in April.

If you are a beneficiary of an estate or trust, your share of the income and expenses for the year will also be reported on a K-1.  The timing of when you may receive your K-1 is the same as outlined above.

NOTE:  Many times partnerships, estates and trusts will put their tax returns on extension.  If they do, the due date of the return is not until 9/15/15.  We often see client’s receiving K-1s in the third week of September.

If you receive, or expect to receive, a K-1 it may be best if you place your personal return on extension. It is a lot easier to extend your return then it is to amend your return after receiving a K-1 late in the year.

So start watching your mailbox and put all of these statements you receive in that new file you created!

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 282 | Special Holiday Edition… December 24, 2014

Posted by bradstreetblogger in : General, Taxes, Uncategorized , add a comment

Tax Tip of the Week | Dec 24, 2014 | No. 282 | Special Holiday Edition…

Enjoy the Holidays!

We are going to take a break from tax planning this week.  Instead, the family of Bradstreet & Company would like to wish you and your family the most joyous holiday season and best wishes for 2015.

We hope you have enjoyed the Tax Tip of The Week this year.  Please let us know what topics you would like us to cover as we enter the New Year.

Is the Tax Tip of the Week real?
While your kids are questioning if Santa is real, we continue to receive some interesting feedback that some of you don’t realize this is really Bradstreet CPAs reaching out each week (… some suspect this is a “packaged” communication to which we add our logo.) Well, rest assured it’s us and we’d love to hear from you.

Enjoy the week and, “Yes Virgina, there is a Santa Claus”.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 281 | What Entities Will the IRS Target for 2014 and 2015 Audits? December 17, 2014

Posted by bradstreetblogger in : General, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Taxes , add a comment

Tax Tip of the Week | Dec 17, 2014 | No. 281 | What Entities Will the IRS Target for 2014 and 2015 Audits?

What to expect this year and next….

The GAO says that since FY 2010, the IRS has lost 10,000 employees and had its budget cut by $900 million. More cuts are proposed for the 2015 IRS budget. Identity theft issues, foreign asset reporting, and Affordable Care Act (ACA) responsibilities will continue to absorb personnel and resources. This budget reality will hamper IRS audit goals, but there are still many audit targets that you need to be aware of in the next few months.

The rich and their entities. High-income taxpayers will continue to receive audit attention (at about a 9% rate for those reporting income of $1 million to $5 million). Since these taxpayers often have complex tax returns with income and losses from many flow-through entities, the audit of the owner will often lead to an expansion of the IRS examination into the various entities.

Partnership returns. Partnerships are the fastest-growing segment of all tax returns filed. The IRS hopes to expand its audits of partnership and LLC returns. Flow-through losses from developers and real estate investors will get special attention. The audit rate of partnerships and LLCs was a dismal .42% for FY 2013. The IRS did special training this year to increase the number of auditors with a specialized knowledge in partnership law.

Employment taxes. Employment taxes are a focus this year, and this includes a continuing look by the IRS at:
1.  Employee versus independent contractor
2.  Form 1099 compliance
3.  S corporation reasonable compensation issues.

Remember that when the ACA’s employer mandate takes effect in 2015 and 2016, the employee versus independent contractor determination will become more important. Employer ACA penalties can be up to $3,000 for each misclassified employee.

Cash businesses. The tax gap remains a hot item, so cash-intensive businesses will receive a little more attention from the IRS. The IRS is using Form 1099-K to help it select some of these businesses for audit.

One more item of news on business audits. Ninety-four percent of small businesses use QuickBooks software for their accounting records, but the IRS does not have the budget to update its QuickBooks software yearly. Thus, it is unable to accept electronic records from many of the small businesses it is auditing. Without access to electronic records, the audit will be less efficient. Is that good or bad news for the taxpayer and/or the tax practitioner?

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 280 | 1099 and Related Form Changes December 10, 2014

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Tax Tip of the Week | Dec 10, 2014 | No. 280 | 1099 and Related Form Changes

Changes to look for….

When you receive your 1099s and 1098s in the upcoming weeks the forms may have a different look. They may also contain some additional information you will need to complete your 2014 federal tax return. The following is a summary:

1098: Mortgage Insurance Premiums
Mortgage insurance premiums paid or accrued after Dec. 31, 2013, are no longer eligible to be treated as interest paid by the payer/borrower. Box 4 on Form 1098, formerly used for reporting these premiums paid or accrued, has been reconfigured for providing other information.

1098-C: Motor Vehicle Odometer Mileage Entry
Donators of motor vehicles must enter the odometer reading of the motor vehicle in the new box 2a.

1099-B: New Reporting Requirements
Brokers are required to report the adjusted basis of certain debt instruments upon a sale of the debt instrument. In addition, brokers are required to report the adjusted basis of certain securities futures contracts and options upon a sale or closing transaction as well as the gross proceeds from the sale or closing transaction. Brokers also must report whether any gain or loss from these transactions is short-term, long-term or ordinary. Furthermore, there are reporting requirements for a transfer of a debt instrument, an option or a securities futures contract to another broker and for an organizational action that affects the basis of a debt instrument, an option, or a securities futures contract.

Additional changes to this form include:

• The form has been redesigned to conform to the box numbers on Form 8949. A new box has been added at the top center of the form to enter a code that will assist the recipient in reporting the transaction on Form 8949 and/or Schedule D.

• Additional State Copies: Copy 1 (For Payer State) and Copy 2 (For Recipient State) were added for 2014.

• Boxes 14 through 16 (state boxes) allow for a second data entry.

1099-INT
Boxes 10 and 11 were added to accommodate the new reporting requirements for a debt instrument that is a covered security and that is acquired by a taxpayer with market discount, bond premium or acquisition premium.

1099-K 
• Box 1b, Card Not Present transactions: Box 1b was added to the form to be used to enter the gross amount of total reportable payment card/third party network transactions for the calendar year where the card was not present at the time of the transaction or the card number was keyed into the terminal, such as in the case of online, phone, or catalogue sales. Reporting in box 1b is optional for 2014.

• Second TIN notification box: The 2nd TIN notification box was added to Copies A and C.

1099-MISC 
Box 11, Foreign tax paid, and Box 12, Foreign country or U.S. possession, were deleted.  This information is now reported on Form 8966, Foreign Asset Tax Compliance Act Report.

1099-OID
Boxes 5 and 6 headings changed from Foreign tax paid and Foreign country or U.S. possession to Market discount and Acquisition premium respectively. Boxes 5 and 6 are now used for the new reporting requirements for a debt instrument that is a covered security and that is acquired by a taxpayer with market discount, bond premium, or acquisition premium.

1099-R: New Distribution Code
Use Distribution Code K to report distributions of IRA assets not having a readily available fair market value (FMV).

Give us a call if you have any questions. You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 279 | What New IRA Rules Mean for Your Retirement Account December 3, 2014

Posted by bradstreetblogger in : General, Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Taxes , add a comment

Tax Tip of the Week | Dec 3, 2014 | No. 279 | What New IRA Rules Mean for Your Retirement Account

Here is a recent article from U.S. News & World Report….

Sometimes, a loophole is too tempting.

A few folks thought they could use their individual retirement accounts for short-term loans to themselves. The Internal Revenue Service was not amused. Starting in 2015, new rules apply for withdrawing money from an IRA with the aim of rolling it into another IRA investment, taking possession of the funds yourself in the process.

The short version of the new rule is that you can only roll over an account this way once every 365 days, investment advisors say. But the longer version is: Don’t even try to skirt this rule.

“The rollover rules have been tightened – a lot,” says Ed Slott, a certified public accountant and chief executive officer of Ed Slott & Co., which runs professional training courses on IRAs. “Everybody with an IRA needs to know about this because at some point, everybody with an IRA wants to change investments.”

“Any time you’re tempted to move money, talk with a financial professional, because tax rules are different for IRAs and 401(k)s,” says Doug Orton, vice president of MFS, a Boston-based asset management firm. “Don’t get fooled into thinking that a rollover is a no-fault transaction. Sometimes people make horrific mistakes by assuming there’s no penalty. “

Start thinking now about how this will affect the management of your retirement accounts, recommends David W. Smith, an advisor with Strategic Wealth Management in Bend, Oregon. If you were considering taking distributions from any IRA account this year, know the IRS has stated that existing rules apply through Dec. 31. After that, the new rules – which are still being fine-tuned – will apply.

The important distinction is that there are still no limits on rolling over IRAs and Roth IRAs from one institution to another. That’s called a “trustee to trustee transfer,” and you can do that as often as you want, Slott and other IRA experts say.

You can also shift money among different types of retirement accounts – say, from a 401(k) to a Roth IRA – without complications. Of course, before making any moves, have a one-on-one discussion with a financial advisor to make sure you are well within the guidelines. You should also talk through the potential tax implications of shifting funds among accounts.

However, the new rules do apply to rollovers in which “you say, ‘I want to move the money, but give me the check,’” Slott says. “You can only do that once every 365 days.”

It’s important to note the rule specifies “every 365 days,” not once a calendar year, he says. That means you can’t take cluster withdrawals, or closely timed withdrawals and deposits, giving yourself access to those retirement funds for two penalty-free 60-day periods in a row.

Although it has been relatively rare for IRA account holders to play roulette with their financial futures, the option was too much for a few people to resist. Most often, advisors say, those who used the 60-day rollover period inappropriately did so to fund business cash flow, college tuition bills and other big-ticket cash shortages.

It was never a commonplace gamble, but the ploy was sufficiently flagrant to elicit a strongly worded IRS slap down and stringent rules advisors expect will apply to all without exception or mercy. Translation: Take your money for a stroll and return it a day late, and you will face huge losses for the privilege.

Slott says the smartest way to sidestep rollover woes is simply to not take the money yourself. Always direct the money from one institution to another in a “trustee to trustee” transfer.

If you take a risk for, say, trying to use rolling IRA funds for a do-it-yourself bridge loan as you buy one house before selling the other, you could pay a very high price. If the money is not redeposited in another IRA within 60 days and you are younger than 59½, you will pay a 10 percent penalty, Slott says. And the funds will likely be subject to income taxes.
You might get away with it. But you might not. As Slott says, “Why invite disaster?”

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.