Check Tax Withholding Now to Avoid Surprises at Tax Time

Each and every year I see a handful of clients that are more shocked than surprised at how much they may owe at time time. I tell them to start thinking about tax consequences for the following year right after I finish the current year return! Below is a tax tip from the IRS that may answer a few questions and I recommend you make any necessary changes now so you have that shocked look at year end!

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How to Handle an IRS Letter or Notice

Tax notices have always evoked panic with many of my clients. One thing you have to remember is many of these notices are “auto generated” and not always up to date or even accurate. If you receive a notice – you may be expecting it. As the tip below reads….do not panic. Many times you can call the IRS, I would suggest any day during the week except for Monday or Friday, and inquire about your notice. Depending on the agent you get – many of these notices can be taken care of right over the phone!

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Summer Newlyweds Should Also Think About Taxes

One thing many married couples may not think about after “tying the knot” is what steps they should take regarding taxes.  In years past I have received a host of questions such as “should I change my exemptions,” “should we file married or married filing separately?”  Below is an IRS tax tip that may answer […]

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Online Tools Help Individuals and Employers Estimate Health Care Law’s Effect on Taxes

Whether you’re an employer or an individual taxpayer, the Taxpayer Advocate Service has several tools available to assist you in estimating credits and payments related to the Affordable Care Act. The Taxpayer Advocate Service recently added a tool to help employers understand how the employer shared responsibility provisions apply to their organization.
Because these tools provide only an estimate, you should not rely on them as an accurate calculation. You should use these estimators only as a guide to assist you in making decisions regarding your tax situation.
Tools for Employers
The Employer Shared Responsibility Provision Estimator helps you understand how the provision works and how it may apply to your organization. If you are an employer, you can use the estimator to determine the number of your full-time employees, and whether you might be an applicable large employer. You can also use this estimator to compute your maximum potential liability for the employer shared responsibility payment.
The Small Business Health Care Tax Credit Estimator helps determine if you might be eligible for the Small Business Health Care Tax Credit and how much credit you might receive. This tool provides you with an estimate for tax year 2014 and beyond. However, some figures used in determining the credit are indexed for inflation. Because of this, for future years, the estimator cannot provide a detailed estimate.
Tools for Individuals
The Premium Tax Credit Change Estimator helps estimate how your premium tax credit will change if your income or family size changes during the year. This estimator tool does not report changes in circumstances to your Marketplace. To report changes and to adjust the amount of your advance payments of the premium tax credit you must contact your Health Insurance Marketplace. Be sure to report all changes directly to that Marketplace because they can affect both your coverage and your final credit when you file your federal tax return.
The Individual Shared Responsibility Payment Estimator helps you estimate the amount you may have to pay if you did not have minimum essential coverage during the year. This tool can only provide an estimate of your individual shared responsibility payment. To determine the payment when you file your tax return, use the Shared Responsibility Payment Worksheet in the instructions for Form 8965.

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Getting Advance Payments of the Premium Tax Credit? Remember to Report Changes in Circumstances

If you purchased 2016 health care coverage through the Health Insurance Marketplace, you may have chosen to have advance payments of the premium tax credit paid to your insurance company to lower your monthly premiums. If this is the case, it’s important to let your Marketplace know about significant life events, known as changes in circumstances.
These changes – such as those to your income or family size – may affect your premium tax credit. Reporting the changes will help you avoid getting too much or too little advance payment of the premium tax credit. Getting too little could mean missing out on premium assistance to reduce your monthly premiums. Getting too much means you may owe additional money or get a smaller refund when you file your taxes. If your income for the year turns out to be too high to receive the premium tax credit, you will have to repay all of the payments that were made on your behalf, with no limitation. Changes in circumstances that you should report to the Marketplace include:
• an increase or decrease in your income
• marriage or divorce
• the birth or adoption of a child
• starting a job with health insurance
• gaining or losing your eligibility for other health care coverage
• changing your residence
Changes in circumstances may qualify you for a special enrollment period to change or get insurance through the Marketplace. In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances. You can find Information about special enrollment at HealthCare.gov.
The Premium Tax Credit Change Estimator can help you estimate how your premium tax credit will change if your income or family size changes during the year. This estimator tool does not report changes in circumstances to your Marketplace. To report changes and to adjust the amount of your advance payments of the premium tax credit you must contact your Health Insurance Marketplace.
Find out more about the premium tax credit and other tax-related provisions of the health care law at IRS.gov/aca.

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Five Facts about the Small Business Health Care Tax Credit

If you are a small employer, there is a tax credit that can put money in your pocket. The small business health care tax credit benefits employers that:
• offer coverage through the small business health options program, also known as the SHOP marketplace
• have fewer than 25 full-time equivalent employees
• pay an average wage of less than $50,000 a year
• pay at least half of employee health insurance premiums
Here are five facts about this credit:
• The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
• To be eligible for the credit, you must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program Marketplace, or qualify for an exception to this requirement.
• The credit is available to eligible employers for two consecutive taxable years beginning in 2014 or later. You may be able to amend prior year tax returns to claim the credit for tax years 2010 through 2013 in addition to claiming this credit for those two consecutive years.
• You can carry the credit back or forward to other tax years if you do not owe tax during the year.
• You may get both a credit and a deduction for employee premium payments. Since the amount of your health insurance premium payments will be more than the total credit, if you are eligible, you can still claim a business expense deduction for the premiums in excess of the credit. For more information, see the small business health care tax credit page on IRS.gov.

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Landscapers and Gardeners:

The IRS recognizes Small Business Week May 1–7 by highlighting some of its most popular educational products, videos and webinars to help your small business thrive. If you are a self-employed landscaper or gardener, be sure to view the IRS webinar “Business Taxes for the Self-Employed: The Basics.” Here are some topics included in the webinar or on IRS.gov that you should know:
Accounting Method. An accounting method is a set of rules about when to report income and expenses. Many small businesses use the cash method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Find out more in IRS Publication 538, Accounting Periods and Methods.
Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. You may need to pay self-employment tax as well as income tax if you make a profit. Self-employment tax includes Social Security and Medicare taxes. With estimated tax payments, you pay taxes at various times during the year to ensure you don’t have a large tax bill when you file your tax return. Use IRS Direct Pay, the fast, easy and secure way to pay from your checking or savings account.
Tax Forms. There are two forms to report self-employment income. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet other conditions. See the form instructions to find out if you can use the form. Use Schedule SE, Self-Employment Tax, to figure your SE tax. If you owe this tax, make sure you file the schedule with your federal tax return.
Allowable Deductions. You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business. View the webinar “Small Business Owners: Get All the Tax Benefits You Deserve” to learn more.
Business Use of a Vehicle. If you use your car or truck for your business, you may be able to deduct the costs to operate the vehicle for the business use. Refer to IRSPublication 463, Travel, Entertainment, Gift, and Car Expenses for details.

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