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Tax Relief to Louisiana Storm Victims

Louisiana storm victims will have until January 17, 2017

to file certain Federal individual and business tax returns and make certain Federal tax payments, the Internal Revenue Service announced Monday.  All workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also qualify for relief.  Taxpayers in East Baton Rouge, Livingston, St. Helena, Tangipahoa, Acadia, Ascension, East Feliciana, Iberia, Lafayette, Pointe Coupee, St. Landry, Vermillion, Avoyelles, Evangeline, Iberville, Jefferson Davis, St. Martin, St. Tammany, Washington, and West Feliciana parishes will receive this and other special tax relief.

The Federal tax relief

postpones various tax filing and payment deadlines that occurred starting on August 11, 2016.  As a result, affected individuals and businesses will have until January 17, 2017 to file Federal returns and pay any Federal taxes that were originally due during this period.  This includes the September 15, 2016 deadline for making quarterly estimated tax payments.  For individual tax filers, it also includes 2015 income tax returns that received a tax-filing extension until October 17, 2016. The IRS noted, however, that because tax payments related to these 2015 returns (see more on this below) were originally due on April 18, 2016, they are not eligible for this relief.  A variety of business tax deadlines are also affected including the September 15, 2016 deadline for corporation and partnership returns on extension and the October 31, 2016 deadline for quarterly payroll and excise tax returns.

In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after August 11, 2016 and before August 26, 2016 if the deposits are made by August 26, 2016.  Details on available relief can be found on the disaster relief page on IRS.gov.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area.  Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area.  Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227.

What does this mean for you?

  • Any 2015 individual or business tax return (including trusts) with an extended due date ON OR AFTER August 11, 2016 will now be extended until January 17, 2017 (Federal tax returns)
    • This includes 2015 individual income tax returns originally due April 18, 2016 but on extension until October 17, 2016. 
    • This includes S Corporations and C Corporations originally due March 15, 2016 but on extension until September 15, 2016 as well as partnerships and trusts originally due April 18, 2016 but on extension until September 15, 2016.
    • This includes 2016 3rd quarter estimated (quarterly) tax payments due September 15, 2016.
    • This includes 2016 3rd quarter payroll tax returns due October 31, 2016
  • CAUTION:  This relief does not apply to Federal taxes owed prior to August 11, 2016.
    • What do we mean by this?
      • Consider your 2015 Federal individual income tax return originally due April 18, 2016.  If you filed for an extension but did not pay ALL of the tax due, any penalty/interest accruing from April 18, 2016 will continue to accrue.  The individual extension extends the time to file the return (originally until October 15, 2016, now until January 17, 2017 based on the info above) but does NOT extend the time to pay your tax.

In addition to the Federal relief detailed above, the Louisiana Department of Revenue has also granted relief.  Individual and corporate tax returns as well as estimated payments due on or after August 11, 2016 (including returns on extension) will have an extended deadline of January 17, 2017.  This new due date mirrors the Federal extended due date.

Please do not hesitate to contact us if you have any questions.  We are here to help! CONTACT US TODAY!

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Get in Gear for the New Year!

With the new year approaching here’s a quick list to refresh your memory on the documents you’ll need to give to your tax preparer.

  • W-2s, 1099s, 1098s, K-1s, 5498s, etc.
    • While you may not be sure of the relevance, if it comes on a standard form like W-2, 1099, 1098, K-1, etc., it makes sense to give it to your tax preparer.  Let them sort it out instead of you.  I’ve had clients receive notices from the IRS  resulting from income not reported on a tax return.  This error was directly related to the documents they DID NOT provide to me.  This could have been easily avoided.  When in doubt, toss these documents in your stack to give to your tax preparer.
    • Make sure to include ALL pages of 1099s, especially those lengthy consolidated 1099s received from your financial adviser.  Many times deductible investment advisory fees are shown on the 20th page of a 22 page document.
  • Business income and deductions
    • Have a business operated as a sole proprietorship?  You will need to calculate your income and categorize your expenses for the year.  Make sure you have proper documentation to substantiate your business expenses
  • Charitable donation receipts.
    • This is a sticky issue with the IRS and should be taken seriously.  Make sure those charities you give to frequently provide a receipt detailing the annual donations given.  Also, make sure the receipt includes some sort of language specifying that nothing was received in exchange for the donation.  This applies to gifts of cash (or check, credit card charge) to charities where nothing was received by the donor in exchange for the donation.  The best example of these are church donations.
    • If you purchased an item at a charity function, gala, fundraiser, etc. your donation will be limited to the excess you paid for the item.  For example:  A $500 purchase of a painting worth $200 would only yield a $300 donation.  Make sure the charity can provide a value of the item for purposes of properly limiting your deduction to only the excess.
  • Records of taxes paid.
    • This would only include real estate taxes paid in 2015.
    • Federal and state estimated (quarterly) tax payments
  • Full names, dates of birth, and Social Security numbers for any new dependents.
    • Birth of a new child
    • Family member(s) you’re now supporting (think elderly parent living in your home without much income)
  • Homeowners insurance “declarations page.”
    • Louisiana allows a credit for 72% of the amount of the LA Citizens (or LA Fair Plan) assessment included in your homeowners insurance premium.  Make sure this premium is for the policy period beginning in 2015.
  • Completed tax organizer.
    • Our policy at PRM is to send every existing client a tax organizer.  Our organizer includes a list of pertinent questions to answer and provides prior year data as a reminder.  Flipping through this document, and answering the questions, should refresh your memory about tax documents you need to gather.

Obviously this is not an exhaustive list.  Many of the documents referenced above will be mentioned in your tax organizer.  This is simply a way to get you thinking and preparing for tax season.

 

Feel free to call/email with any questions.

I look forward to hearing from you!

Happy Holidays!

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Do I have to pay these estimated taxes?

This question is a rather common one and the answer is, “It depends”.  The IRS and most states require taxpayers to “pay as you go”.  For many of us, that consists of having taxes withheld from our paychecks.  In that case, estimates are not required unless you receive other types of income (investments, business income, income from partnerships and S-corporations).  For taxpayers who are not solely W-2 wage earners, but receive other forms of compensation, estimates may be necessary.

The federal underpayment/estimated tax penalty is actually interest at the federal rate for underpayments (currently 3%).

For 2015, you could be subject to a federal underpayment penalty if you do not pay in:

  • 90% of your 2015 tax or
  • 100% or 110% of your 2014 tax (110% applies for high income earners)

 

* Qualified farmers and fishermen have alternative methods for calculating estimates.

Estimates must be paid in four equal installments to avoid a penalty.  Due dates for 2015 estimates are April 15th, June 15th, September 15th, and January 15th.  If the estimated tax payment is paid late, penalty is charged from the date it is due until the date of payment.  You cannot avoid penalty by doubling up on your next payment, since the penalty runs from the due date of the original payment.  If you are a W-2 wage earner with other taxable income, you might be able to avoid an underpayment penalty by increasing your federal withholding.  Withholdings are considered to be paid equally throughout the year, regardless of when the tax is withheld.

If you have a spike in income at the end of the year, there are methods to reduce the penalty for not having paid in higher estimates at the beginning of the year.  Mention this to your tax preparer if this happens to you.

Coming soon….June 15th estimated tax deadline.  Get your checkbook ready unless you are OK with tacking on extra to your tax bill!

http://www.irs.gov/pub/irs-pdf/f1040es.pdf – Federal Tax Voucher

http://www.revenue.louisiana.gov/IndividualIncomeTax#det – LA Est Tax

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Tax season is over…now what?

Your tax return has been submitted electronically to Federal and state taxing agencies.  Your refunds have been direct deposited.  Whew!!  Now you can leave the mess of taxes alone until next April, right?? Wrong!

The tax “off season” is a great time to get organized in preparation of filing your 2015 tax returns due 4/15/16.  Here are a few things to consider:

1. Did you incur costly out-of-pocket medical expenses that provided little or no benefit tax benefit due to the high threshold (> 10% of adjusted gross income) medical expenses have to exceed before they’re deductible?

If your health insurance carries a high deductible and meets certain other criteria, you could make tax deductible contributions to a health savings account (H.S.A.). Contributions TO a health savings account are deductible and distributions FROM a health savings account are non taxable to the extent distributions are used to pay for qualified medical expenses.  You could now deduct those previously non-deductible medical expenses by diverting the money to a health savings account.  For 2015 the maximum contribution to a health savings account is $3,350 for single coverage and $6,650 for family coverage ($4,350/$7,650 for taxpayers over 55).  Here’s a quick list of eligible expenses that meet the definition of “qualified medical expenses” for purposes of H.S.A. distributions

http://www.hsacenter.com/qualified-med-expenses.htm

2. Does the bulk of your income consist of W-2 wages for yourself and/or spouse? Did you receive a large refund or have a substantial balance due to the IRS or state?  If so, now is the time to review your withholding allowances on Federal form W-4 and LA form L-4 (R-1300) for LA residents.

Maybe your traditional method of filing single with zero (0) withholding allowances (or something similar) has your employer withholding WAY too much throughout the year. Changing your withholding status (single vs. married) and/or the number of withholding allowances claimed could leave you with more money in your pocket throughout the year avoiding the long wait until tax time to recoup your over payment (essentially a loan to the government).  Run a few scenarios with the payroll processor at your company to see what works for you.

Here are quick links to the current Federal and LA withholding forms.

http://www.irs.gov/pub/irs-pdf/fw4.pdf

http://revenue.louisiana.gov/TaxForms/1300(4_11)F.pdf

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