Warning! IRS Phone Scams

Please be wary of any unsolicited phone calls or emails you get from individuals claiming to represent the IRS or the US Treasury. This is one of the biggest scams out there and is a crime of opportunity. Do not engage these callers, who often threaten to issue arrest warrants or involve local law enforcement if you do not cooperate. If they call you, simply hang up on them.

The IRS usually first contacts people by mail — not by phone or email — about unpaid taxes. The IRS will never request personal or financial information by email, text or any social media. And the IRS will NOT ask for payment using a pre-paid debit card or wire transfer. The IRS also won’t ask for a credit card number over the phone.

If you get a call from someone claiming to be with the IRS asking for a payment, here’s what you need to do:

* If you owe Federal taxes or think you might owe taxes, hang up and call the IRS at 800-829-1040. IRS workers can help you with your payment questions.
* If you don’t owe taxes, fill out the “IRS Impersonation Scam” form at www.treasury.gov/tigta or call 800-366-4484.
* You can also file a complaint with the Federal Trade Commission. Add “IRS Telephone Scam” to the comments in your complaint.
* Forward scam emails to phishing@irs.gov. Do not open any attachments or click on any links in questionable emails.

We hope you find this information helpful. Please contact us if you have any questions.

2015 Tax Planning Starts Now

Whether you filed your 2014 income tax return by the April 15 deadline or filed for an extension, you may think that it’s a good time to take a break from thinking about taxes. But doing so could be costly. Now is actually the time you should begin your 2015 tax planning — if you haven’t already.

A tremendous number of variables affect your overall tax liability for the year, and starting to look at these variables early in the year can give you more opportunities to reduce your 2015 tax bill. For example, the timing of income and deductible expenses can affect both the rate you pay and when you pay. By regularly reviewing your year-to-date income, expenses and potential tax, you may be able to time income and expenses in a way that reduces, or at least defers, your tax liability.

In other words, tax planning shouldn’t be just a year end activity. To get started on your 2015 tax planning, contact us. We can discuss what strategies you should be implementing now and throughout the year to minimize your tax liability.

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A net operating loss on your tax return isn’t all bad news

When a company’s deductible expenses exceed its income, generally a net operating loss (NOL) occurs (though of course the specific rules are more complex). If you’ve found when filing your income tax return that your business had an NOL, there is an upside: tax benefits.

When a business incurs a qualifying NOL, the loss can be carried back up to two years, and then any remaining amount can be carried forward up to 20 years. The carryback can generate an immediate tax refund, boosting cash flow.

However, there is an alternative: The business can elect instead to carry the entire loss forward. If cash flow is fairly strong, carrying the loss forward may be more beneficial, such as if the business’s income increases substantially, pushing it into a higher tax bracket — or if tax rates increase. In both scenarios, the carryforward can save more taxes than the carryback because deductions are more powerful when higher tax rates apply.

In the case of flow-through entities, owners might be able to reap individual tax benefits from the NOL.

Please contact us if you’d like more information on the net operating loss rules and how you can maximize the tax benefit of an NOL.

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Filling a paper return? Understand the Timely Mailed Timely Filed Rule

The IRS considers a paper return that’s due April 15 to be timely filed if it’s postmarked by midnight on April 15. But dropping your return in a mailbox on the 15th may not be sufficient.  You need to understand the Timely Mailed Timely Filed Rule.

For example, let’s say you mail your return with a payment on April 15, but the envelope gets lost. You don’t figure this out until a couple of months later when you notice that the check still hasn’t cleared. You then re-file and send a new check. Despite your efforts to timely file and pay, you’re hit with failure-to-file and failure-to-pay penalties totaling $1,500.

To avoid this risk, use certified or registered mail or one of the private delivery services designated by the IRS to comply with the timely filing rule, such as:
• FedEx Priority Overnight
• FedEx Standard Overnight
• FedEx 2Day
• UPS Next Day Air Saver
• UPS 2nd Day Air
• UPS 2nd Day Air A.M.

Beware: If you use an unauthorized delivery service, your return isn’t “filed” until the IRS receives it. For example, DHL is no longer an authorized delivery service.

If you’re concerned about meeting the April 15 deadline, another option is to file for an extension. Call us, and we can help you determine if that makes sense for you.

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2014 IRA Contribution Deadline: April 15

The 2014 IRA contribution deadline is April 15, 2015. The limit for total contributions to all IRAs generally is $5,500 ($6,500 if you were age 50 or older on Dec. 31, 2014).

If you haven’t already maxed out your 2014 limit, consider making one of these types of contributions by April 15:

1. Deductible traditional. If you and your spouse don’t participate in an employer-sponsored plan such as a 401(k) — or you do but your income doesn’t exceed certain limits — the contribution is fully deductible on your 2014 tax return. Account growth is tax-deferred; distributions are subject to income tax.

2. Roth. The contribution isn’t deductible, but qualified distributions — including growth — are tax-free. Income-based limits may reduce or eliminate your ability to contribute, however.

3. Nondeductible traditional. If your income is too high for you to fully benefit from a deductible traditional or a Roth contribution, you may benefit from a nondeductible contribution to a traditional IRA. The account can still grow tax-deferred, and when you take qualified distributions you’ll be taxed only on the growth. Alternatively, shortly after contributing, you may be able to convert the account to a Roth IRA with minimal tax liability.

Want to know which option best fits your situation? Contact us.

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Tangible Property Safe Harbors

If your business has made repairs to tangible property, such as buildings, machinery, equipment and vehicles, you may be eligible for a deduction on your 2014 income tax return. But you must make sure they were truly “repairs,” and not actually “improvements.”

Why? Costs incurred to improve tangible property must be depreciated over a period of years. But costs incurred on incidental repairs and maintenance can be expensed and immediately deducted. Distinguishing between repairs and improvements can be difficult, but a couple of IRS safe harbors can help:

Routine maintenance safe harbor. Recurring activities dedicated to keeping property in efficient operating condition can be expensed. These are activities that your business reasonably expects to perform more than once during the property’s “class life,” as defined by the IRS.

Small business safe harbor. For buildings that initially cost $1 million or less, qualified small businesses may elect to deduct the lesser of $10,000 or 2% of the unadjusted basis of the property for repairs, maintenance, improvements and similar activities each year. (A qualified small business is generally one with gross receipts of $10 million or less.)

Contact us to ensure that you’re taking all of the repair and maintenance deductions you’re entitled to.

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Deducting Investment Interest for 2014

Investment interest — interest on debt used to buy assets held for investment, such as margin debt used to buy securities — generally is deductible for both regular tax and alternative minimum tax purposes. But special rules apply that can make the deduction less beneficial than you might think.

Your investment interest deduction is limited to your net investment income, which, for the purposes of this deduction, generally includes taxable interest, nonqualified dividends and net short-term capital gains, reduced by other investment expenses. In other words, long-term capital gains and qualified dividends aren’t included. However, any disallowed interest is carried forward, and you can deduct it in a later year if you have excess net investment income.

You may elect to treat net long-term capital gains or qualified dividends as investment income in order to deduct more of your investment interest. But if you do, that portion of the long-term capital gain or dividend will be taxed at ordinary-income rates.

If you’re wondering whether you can claim the investment interest expense deduction on your 2014 return, please contact us. We can run the numbers to calculate your potential deduction — or to determine whether you could benefit from treating gains or dividends differently to maximize your deduction.

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Proper Substantiation for 2014  Charitable Donations

If you don’t meet IRS substantiation requirements, your deductions for charitable donations could be denied. To comply, generally you must obtain a contemporaneous written acknowledgment from the charity stating the amount of the donation, whether you received any goods or services in consideration for the donation, and the value of any such goods or services.

If you haven’t yet received substantiation for all of your 2014 donations, you may still have time to obtain it: “Contemporaneous” means the earlier of 1) the date you file your tax return, or 2) the extended due date of your return. So as long as you haven’t filed your 2014 return, you can contact the charity and request a written acknowledgement — you’ll just need to wait to file your return until you receive it. (But don’t miss your filing deadline; consider filing for an extension if needed.)

Be aware that certain types of donations are subject to additional substantiation requirements. To learn what requirements apply to your charitable donations, please contact us.