Monthly Archives: February 2015

Obama’s 2016 Budget Proposal: Part 3 Business Provisions

President Obama's 2016 Budget ProposalIn Part 1 of our three part series, we presented President Obama’s 2016 Budget Proposal for individuals. This proposal was recently released. The tax proposal would increase the taxes on higher-income taxpayers. It would also provide tax breaks for low-to middle-income taxpayers. The provisions we posted on were:

  • Child Care
  • Second Earner Tax Credit
  • Earned Income Tax Credit (EITC)
  • Education Tax Benefits – The American Opportunity Tax Credit (AOTC)
  • Top Capital Gains Rate
  • Itemized Deductions
  • Limit Retirement Account Contributions
  • Buffett Rule

In Part 2, we brought up some highlights that would impact individuals and small businesses regarding gifts and inheritance tax provisions.

Our final post in our three-part series is about President Obama’s 2016 Budget Proposal provisions for businesses. We want to remind you, these are proposals only.

Business Provisions

Section 179 Expensing:

  • Would make the Sec. 179 expense cap $500,000 for 2015 (it is currently at $25,000, down from $500,000 in 2014).
  • Would raise the expense cap to $1 million in 2016. This would make the $1 million permanent with inflation adjustment for future years.

Cash Basis Accounting:

  • Would expand use of the cash method of accounting to small businesses with less than $25 million in average annual gross receipts.
  • Estimated to apply to 99% of all businesses.

Qualified Small Business Stock:

  • Would permanently extend the 100% exclusion on capital gains from sales of tax-qualified small business stock held by individuals for more than five years
  • Would eliminate the inclusion of excluded gain from the Alternative Minimum Tax

Start-Up & Organizational Expense:

  • Would increase and consolidate the deduction for start-up and organizational expenditures

Small Employer Health Insurance Credit:

  • Would expand the credit for small employers to provide health insurance to apply to up to 50 (rather than 25) full-time equivalent employees
  • Phaseout between 20 and 50 employees (rather than between 10 and 25)

Mandatory Employer IRA Payroll Deductions

  • Would require employers with 10 or more employees, who do not have a 401(k) plan, to automatically enroll full-time and part-time employees in an optional IRA payroll deduction plan

Questions About the President Obama’s 2016 Budget Proposal?

Do these provisions and rules confuse you? Are you concerned what the president’s 2016 budget has in store for you, if it is passed? If you have thoughts, questions or concerns regarding how your taxes are filed, contact us or visit any one of our locations. You may also leave your comments below or post on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
Linkedin - Joseph Cahill / WorthTaxTwitter - Joseph Cahill / WorthTax / WorthTaxPrepFacebook - Joseph Cahill / WorthTaxGoogle+ - Joseph Cahill / WorthTaxalignable_logo - Joseph Cahill / WorthTax

 

Tax Season is Here!

Time flies – before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment and learn about our client discounts here.

Facebooktwittergoogle_pluslinkedinFacebooktwittergoogle_pluslinkedin

Obama’s 2016 Budget Proposal: Part 2 Gift and Inheritance Provisions

President Obama's 2016 Budget ProposalPresident Obama’s 2016 Budget Proposal for individuals which was recently released, and was presented in Part 1. The blog noted an increase to the taxes on higher-income taxpayers, as well as provide tax breaks for low-to middle-income taxpayers. This week we will discuss some highlights of the President Obama’s 2016 Budget Proposal that would impact individuals and small businesses regarding gifts and inheritance tax provisions. As we mentioned before, please remember, these are proposals only.

If you did not get the chance Part 1, you can click here.

Gift and Inheritance Tax Provisions

Inheritances and Gifts:

  • Would eliminate the current step-up in tax basis at death.
  • Require payment of capital gains tax on the increase in value of securities at the time they are inherited.
  • Generally, a $100,000-per-person, portable-between-spouses exclusion would apply for inherited appreciated assets. This would also have exceptions for surviving spouses, small businesses, charities, and residences, among others.
  • For couples, no tax would be due until the death of the second spouse.
  • No tax would be due on inherited small, family-owned-and-operated businesses unless and until the business was sold. Also, unless any closely held business would have the option to pay tax on gains over 15 years.
  • Couples would have an additional $500,000 exemption for personal residences ($250,000 per individual). This exemption would be automatically portable between spouses.
  • Tangible personal property, other than expensive art and similar collectibles, would be tax-exempt (e.g., bequests or gifts of clothing, furniture, and small family heirlooms).

Inheritance and Gift Tax:

  • Would reinstate the prior, 2009, estate and gift tax rates with lower exclusions (generally at 45% at $3.5 million for estates and $1 million for gifts).

A final reminder, that these are all proposals by the Obama administration and must be approved by Congress. The information is being passed along so you will have an idea of what might happen in the future.

In Part 3 we will put up Obama’s 2016 Budget Proposal for Business Provisions.

Do you have any questions about President Obama’s 2016 Budget Proposal?

Do you have thoughts, questions or concerns about your tax filing? Maybe you need help. Worthtax is not about gimmicks, we don’t waste our money and we wouldn’t waste yours either. WorthTax is a serious business that wants to help you get every penny back that belongs to you. WorthTax has ultra convenient services. Feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
Linkedin - Joseph Cahill / WorthTaxTwitter - Joseph Cahill / WorthTax / WorthTaxPrepFacebook - Joseph Cahill / WorthTaxGoogle+ - Joseph Cahill / WorthTaxalignable_logo - Joseph Cahill / WorthTax

 

Tax Season is Here!

Time flies – before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment and learn about our client discounts here.

Facebooktwittergoogle_pluslinkedinFacebooktwittergoogle_pluslinkedin

President Obama’s 2016 Budget Proposal: Part 1 Individual Provisions

President Obama's 2016 Budget ProposalPresident Obama’s 2016 Budget Proposal was just released and includes a number of tax proposals that would increase the taxes on higher-income taxpayers and provide more tax breaks for low- to middle-income taxpayers. The following are some highlights of the proposal that would impact individuals and small businesses – but remember, these are proposals only.

Individual Provisions

Child Care:

  • President Obama’s 2016 Budget proposal would allow a credit of up to $3,000 (50% credit for up to $6,000 of expenses per child), for each child under the age of 5.
  • Would enable gainful employment of the parent(s) or other qualified taxpayer.
  • The regular credit for those ages 5 through 12 would begin to phase out at $120,000, instead of $15,000 under the current law.
  • Flexible spending accounts for child care would be eliminated.

Second Earner Tax Credit:

  • Would provide a new tax credit up to $500 (5% of the first $10,000 of earnings for the lower-earning spouse) for joint filers with two wage earners.
  • Would begin to phase out at $120,000 income.
  • Would fully phase out when family income reaches $210,000. It is estimated that this new credit would benefit 24 million joint filers.

Earned Income Tax Credit (EITC)

  • Would double the EITC for workers without a child. It would also increase the credit applicability for childless workers with earnings up to 150% of the federal poverty level (currently about 125%).
  • Would expand the applicability of the EITC to workers age 21 to 66 (currently 24 to 64).

Education Tax Benefits – The American Opportunity Tax Credit (AOTC):

  • Would be expanded from the current AOTC to cover five years of post-secondary education
  • The current $2,500 tax credit would be adjusted for inflation.
  • The refundable portion of the AOTC would be increased to $1,500.
  • Part-time students would be eligible for a $1,250 AOTC (up to $750 refundable).
  • Duplicative and less effective provisions, including the Lifetime Learning Credit, the tuition and fees deduction, the student loan interest deduction (for new borrowers), and Coverdell accounts (for new contributions) would be repealed or allowed to expire.
  • The credit would be better coordinated with Pell Grants with the President Obama’s 2016 Budget proposal.

Top Capital Gains Rate:

  • Would raise the top effective capital gains and qualified dividends tax rate to 28% (24.2% plus the 3.8% net investment income tax).
  • For couples, the 28% rate would apply where income is more than $500,000 annually.

Itemized Deductions:

  • Would limit to 28% the value of itemized deductions and other tax preferences for married taxpayers with incomes over $250,000 and individual taxpayers with income over $200,000.
  • The limit would apply to all itemized deductions.
  • The limit would also apply to other tax benefits, such as tax-exempt interest and tax exclusions for retirement contributions and employer-sponsored health insurance.

Limit Retirement Account Contributions:

  • Would prohibit contributions to and accruals of additional benefits in tax-preferred retirement plans and IRAs once balances are about $3.4 million.
  • Would be about enough to provide an annual income of $210,000 in retirement.

Buffett Rule:

President Obama’s 2016 Budget proposal would implement the Buffett Rule. This rule, which is a carryover from prior year budget proposals, would require the wealthy to pay at least a 30% effective tax rate.

What’s Next?

These are all proposals by the Obama administration. Keep in mind that they still must be approved by Congress. The information is being passed along so you will have an idea of what might happen in the future.

In Part 2 we will talk about Gift and Inheritance tax provisions.

Questions About the President Obama’s 2016 Budget Proposal?

Do these provisions and rules confuse you? Are you concerned what the president’s 2016 budget has in store for you, if it is passed? If you have thoughts, questions or concerns regarding how your taxes are filed, contact us or visit any one of our locations. You may also leave your comments below or post on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
Linkedin - Joseph Cahill / WorthTaxTwitter - Joseph Cahill / WorthTax / WorthTaxPrepFacebook - Joseph Cahill / WorthTaxGoogle+ - Joseph Cahill / WorthTaxalignable_logo - Joseph Cahill / WorthTax

 

Tax Season is Here!

Time flies – before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment and learn about our client discounts here.

Facebooktwittergoogle_pluslinkedinFacebooktwittergoogle_pluslinkedin

Bartering and Snowpocalypse 2015

By: Alex Franch, BS EA

bartering, snowpocalypseDo you feel like you are in a Snowpocalypse this year? If this winter keeps going as it has been and Massachusetts grinds to a halt, we might be reminded of a simpler time. Those olde tyme days when we might considering bartering by trading a bushel of wheat for a couple of chickens.

Nowadays, it might instead be agreeing to shovel or snowblow your neighbor’s driveway in exchange for designing a website. Just when you thought Snowpocalypse 2015 could not get any scarier, consider this: that type of exchange is barter income. Bartering is both reportable and taxable.

What is Bartering?

Bartering is an exchange of property or services. You must include the fair market value of the goods or services exchanged as income. Barter income can be taxed in a number of different ways. If you exchange a capital asset, the barter income could be taxed as a capital gain – think classic car for example. If the exchange of services involves your business or profession, it can fall into the self-employment category and thus be subject to Federal Income Tax, payroll taxes, and state taxes. If the exchange falls outside the scope of your typical business or profession, it might be reportable as ‘other income’ on line 21 of the 1040 Form. To learn more you can read IRS Topic 420 – Bartering Income.

Next time you are thinking about clearing out some snow for your 95 year old WW2 veteran neighbor, ask yourself this: Is the IRS watching?

Questions About Bartering and Snowpocalypse?

Did you have a bartering agreement with anyone last year?  If you have questions, thoughts or concerns regarding how to file bartering income, WorthTax can review your taxes for you and advise you what is best for your tax filing status. We guarantee our pricing so you will never pay more than was discussed. Please feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
Linkedin - Joseph Cahill / WorthTaxTwitter - Joseph Cahill / WorthTax / WorthTaxPrepFacebook - Joseph Cahill / WorthTaxGoogle+ - Joseph Cahill / WorthTaxalignable_logo - Joseph Cahill / WorthTax

 

Tax Season is Here!

Time flies! Before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment. Learn about our client discounts here. See our locations.

Facebooktwittergoogle_pluslinkedinFacebooktwittergoogle_pluslinkedin

Tax Filing: Jointly or Separately?

By: Alex Franch, BS EA

2015_02_12 Tax Filing Joint or SeparateMost married taxpayers know that they have the option to file jointly or separately for tax filing. The Federal income tax system prods taxpayers toward joint filing. This results in the loss of certain deductions and credits. Also, the inclusion of Social Security benefits is taxable income for those who file separately. Assuming you are better off filing a Federal joint return, when might you consider filing separately? Here are three scenarios for tax filing:

Different Residency Periods

If a taxpayer and spouse are part-year Massachusetts residents and they had different residency periods, they have to file separately on their Massachusetts return. For example, John moves to Massachusetts from Texas in February. He moved due to a new job as a snow plow operator. Marsha remains in their old state to finish out the school year with the kids. She does not move to Massachusetts until July. They are required to file separate Massachusetts tax returns. Note, they are better off in this case, since Marsha’s Texas income will be excluded from taxation in Massachusetts for her tax filing.

IOUs

If a taxpayer has certain unpaid debts, they may opt to file separately. If a taxpayer is in arrears with student loans, back taxes, or child support, their spouse may benefit from filing separately. Your refund can be garnished by various government authorities, and if there is a nominal difference in tax liability, Married Filing Separately (MFS) may be the way to go. Also, if one spouse expects a tax balance in the current year, Married Filing Separately can be appropriate. For example, John and Marsha are filing a joint return. Marsha had some unemployment income and had no tax withheld. They do not expect any Federal tax liability. However, they do expect to owe Massachusetts. They can file separately on Massachusetts only so John is not liable for the taxes owed on Marsha’s unemployment income.

Squirrely Business

If your husband is Vito Corleone, our official advice is, file separately. Oh, and never ask him about his business. If a spouse has questionable business practices, that taxpayer can file separately. This shields them form the associated tax risks.

By the way, If you are stuck at home for Snowpocalypse 3.0, Vito makes for a good trilogy read.

Questions About Tax Filing?

Are you clear about your tax filing status? If you have thoughts, questions or concerns regarding how your taxes are filed, WorthTax uses a triple check accuracy system. We also go though great lengths to protect your information on secured servers. Please feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
Linkedin - Joseph Cahill / WorthTaxTwitter - Joseph Cahill / WorthTax / WorthTaxPrepFacebook - Joseph Cahill / WorthTaxGoogle+ - Joseph Cahill / WorthTaxalignable_logo - Joseph Cahill / WorthTax

 

Tax Season is Here!

Time flies! Before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment. Learn about our client discounts here. See our locations.

Facebooktwittergoogle_pluslinkedinFacebooktwittergoogle_pluslinkedin

Funny Money – 4 Odd Types of Taxable Income

By: Alex Franch, BS EA

There are more ways to make money than just working or investing. If you come into some “funny money” – money won by bets, pools, gambling, illegal gains, or somehow, buried treasure – you can bet Uncle Sam still wants his share. Hey, it could happen.

Football Pool Winnings

funny money taxable incomeMy 9th place fantasy finish does not qualify me for funny money. However, if you actually won money in a fantasy football pool or league, this money is taxable income. In most cases, this would be considered gambling income and would be reported as Other Income on line 21. You could also deduct your gambling losses on Schedule A.

That is interesting, but many people are aware of this one. However, did you know that on your Massachusetts tax return, you can deduct the price of your wager? Depending on your pool or league, this can be more than a couple of bucks. You can do the same for those $30 scratch tickets. However, if that deduction happens to be greater than $20, you cannot take both the deduction and e-file your return.

Gambling Winnings

My wife and I like to joke about stopping at Mohegan Sun to see an old crooner play whenever we are on I-95 in Connecticut. We might even have a go at the roulette or blackjack tables. In the event that we win, that income would be taxable at the Federal and State levels, and not just Massachusetts. If you have gambling winnings in Connecticut, Rhode Island, or virtually every other state that has casinos or a lottery, then you may be liable for income tax in that state. Depending on the amount of your winnings, you might have the privilege of filing an additional state tax return.

Illegal Gains

Any income from illegal activity is taxable income. It is recorded either on the Form 1040 as Other Income on line 21 or Schedule C income. Funny money from drugs, embezzlement, bribes, larceny, etc. are all earned income. This taxable income should be reported on your tax return, otherwise you might be charged with tax evasion in addition to whatever crime generated the income. Does the IRS rat you out to the coppers? The IRS will not comment on this. However, it is suspected that there are enough loopholes in the tax return confidentiality rules that the IRS likely does tip off other law enforcement agencies. Remember, that’s how they got Capone.

Buried Treasure

taxable-incomeMy son might be in trouble one day. He loves digging in the yard for buried treasure. I even planted a box of coins for him once. He has also found old whiskey bottles (circa 1920), farm tools, railroad track parts, and other tetanus carrying stuff in my 150 year old back yard. If he ever hits the mother lode, he would have to pay income tax on the treasure. He won’t have any taxable income when he sells it, but he will have to pay the tax when he finds it. I am hoping for a 1913 Liberty Head V Nickel to show up one of these days . . .  then he can pay for his own college.

Questions About Taxable Income?

Maybe you have funny money of your own. Well, at the very least, maybe you have income you are not quite sure how to record on your tax returns. If you have thoughts, questions or concerns regarding how your taxes are filed, WorthTax uses a triple check accuracy system. We also though great lengths to protect your information on secured servers. Please feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
Linkedin - Joseph Cahill / WorthTaxTwitter - Joseph Cahill / WorthTax / WorthTaxPrepFacebook - Joseph Cahill / WorthTaxGoogle+ - Joseph Cahill / WorthTaxalignable_logo - Joseph Cahill / WorthTax

 

Tax Season is Here!

Time flies – before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment and learn about our client discounts here.

– – – – – – – – – –
photo credit: SAM_0625 via photopin (license)

Facebooktwittergoogle_pluslinkedinFacebooktwittergoogle_pluslinkedin

Divorce: It Takes Two to Tango

By: Alex Franch, BS EA

This is the time of year when many divorced taxpayers ask themselves, who gets to claim the children as tax deductions? When unmarried or divorced parents have children, they get to experience the intersection of Federal and State law.

Parents Who Divorce

DivorceThe State typically decides who gets to claim the kids as part of the separation agreement. In this case, State law dictates Federal treatment of the dependent on your taxes. If a divorce is amicable, one parent can opt to release the dependency to the other parent. This can be beneficial because a number of credits follow the dependency. If the entitled parent makes too much money, these credits and write-offs can be lost. By releasing the dependency to the parent with lesser income, they may end up ahead. IRS rules dictate the available filing statuses that the parents can use.

Okay, so let’s say the divorce is not official. What happens then?

Separated Parents – Non-divorce

If you still live together and there is no separation agreement, legally you are not separated – you are just having a bad fight. If you actually separate, the dependency follows IRS rules of relationship, residency, and income to break the tie between two parents. Once again, IRS rules dictate the available filing statuses that the parents can use.

Shacking up

If a taxpayer is living with his or her significant other and they have a child together, the parent with the higher income is typically be entitled to the Head of Household filing status, as well as the dependency. The parents have to have joint custody of the child as dictated by State law. Once again, there exists the option to release the (Federal law) tax exemption if this is beneficial. Additionally, if one of the parents stays home or makes very little income, the taxpayer might be able to claim his or her partner as a dependent as well.

The Wisdom of King Solomon

What happens when parents can’t agree? The parent who files and claims the child first will have their tax return accepted by the IRS. The parent who files second will have their e-file rejected and they will have to paper file. If the first parent was not entitled to claim the dependent, he will have to amend his tax return after it was filed. If the parents cannot work it out, both parents will then receive a notice from the IRS with a checklist of information so that they can make a decision for you. Divorce or separation of any kind can be difficult. Read the follow the State and IRS rules to make it a little less.

Wondering how your household qualifies?

Maybe you went through a recent divorce, separation or you are in a relationship with a partner. Do you have thoughts, questions or concerns regarding how your household qualifies for tax filing? WorthTax has ultra convenient services. Feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
Linkedin - Joseph Cahill / WorthTaxTwitter - Joseph Cahill / WorthTax / WorthTaxPrepFacebook - Joseph Cahill / WorthTaxGoogle+ - Joseph Cahill / WorthTaxalignable_logo - Joseph Cahill / WorthTax

 

Tax Season is Here!

Time flies – before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment and learn about our client discounts here.

– – – – – – – – – –

photo credit: Microsoft

Facebooktwittergoogle_pluslinkedinFacebooktwittergoogle_pluslinkedin

Taxing the Robots

 

By: Alex Franch, BS EA

robotThese days, we are constantly bombarded with economic data. I ask myself, what does all the labor market data have in common? It is clear that the robots are taking over our jobs.

While automation has entered into every field, let us focus our discussion around the auto industry as the poster child for the displacement of workers in favor of robots. Tony the mechanic used to tighten the alternator mounting bolts at his station on the assembly line. He made $50,000 per year and paid $3,825 in Social Security & Medicare taxes plus $5,000 in Federal Income Tax. His employer ponied up an additional $3,825 Social Security and Medicare match. He cost the company $7,500 in employee benefits (mostly health insurance). All in, Tony costs his employer $61,325 per year to tighten those bolts.

Robot? What the HAL?

Along comes the new ‘Hands-free Alternator Linker’ or HAL. HAL cost the company $100,000 up front to do the same job as Tony. HAL is also under warranty for ten years so we can ignore maintenance costs for now. Over the next ten years, HAL cost the company an average of $10,000 per year. Where does the other $51,000 go?  Some of it will result in cheaper cars for all of us and make the auto manufacturer more competitive. Some will trickle up to the CEO. Some will trickle out to the shareholders.

Robots? How does it compute?

The consumers save money on the cars. The additional income to the CEO & shareholders will be taxed in various ways. Let’s split the $51,000 savings three ways between these 3 groups:

  1. $17,000 vanishes into the ether of macroeconomics in the form of lower car prices.
  2. $17,000 goes to the salaries of the CEO and the management team.
  3. $17,000 goes to the shareholders in the form of dividends.

The CEO pay and dividends (due to the double taxation of dividends) will be taxed at about 40% to 45% or $15,000 total. HAL’s $15k sounds better than the $12,650 Tony’s job generated in tax revenues. However, Tony is now out of a job, and the $15,000 in tax revenues generated by HAL, are now paid to support Tony (through the ether of the vast government safety net).

Should HAL help pay to retrain Tony through taxation?  After all, robots are why he lost his job in the first place. That is the question of the day. How can we tax robots you ask? Corporations, Trusts, and Estates all pay taxes and they only exist on paper. HAL is a red eyed bundle of circuits and metal. There are countless categories of products used for computing sales taxes when you consider all fifty states. Essentially, we have mechanisms for creating a new legal category and tax framework. Just be nice to HAL, he had some workplace troubles back in 2001.

Perhaps Tony can one day get a new job as a bureaucrat who oversees the taxation of robots. His new job would be to create more red tape and volumes of bylaws, policies, and procedures, thus making himself a productive member of society once again.

Do you have any questions?

Do you have thoughts, questions or concerns regarding about taxes? Maybe you need help having your taxes filed. WorthTax has ultra convenient services. Feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
Linkedin - Joseph Cahill / WorthTaxTwitter - Joseph Cahill / WorthTax / WorthTaxPrepFacebook - Joseph Cahill / WorthTaxGoogle+ - Joseph Cahill / WorthTaxalignable_logo - Joseph Cahill / WorthTax

 

Tax Season is Here!

Time flies – before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment and learn about our client discounts here.

– – – – – – – – – –

photo credit: Marufish via photopin cc

Facebooktwittergoogle_pluslinkedinFacebooktwittergoogle_pluslinkedin