IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017

IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017
IR-2017-210, Dec. 27, 2017
WASHINGTON – The Internal Revenue Service advised tax professionals and taxpayers today that pre-paying 2018 state and local real property taxes in 2017 may be tax deductible under certain circumstances.
The IRS has received a number of questions from the tax community concerning the deductibility of prepaid real property taxes. In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018.  A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017.  State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.
The following examples illustrate these points.
Example 1: Assume County A assesses property tax on July 1, 2017 for the period July 1, 2017 – June 30, 2018.  On July 31, 2017, County A sends notices to residents notifying them of the assessment and billing the property tax in two installments with the first installment due Sept. 30, 2017 and the second installment due Jan. 31, 2018.   Assuming taxpayer has paid the first installment in 2017, the taxpayer may choose to pay the second installment on Dec. 31, 2017, and may claim a deduction for this prepayment on the taxpayer’s 2017 return.
Example 2: County B also assesses and bills its residents for property taxes on July 1, 2017, for the period July 1, 2017 – June 30, 2018. County B intends to make the usual assessment in July 2018 for the period July 1, 2018 – June 30, 2019.  However, because county residents wish to prepay their 2018-2019 property taxes in 2017, County B has revised its computer systems to accept prepayment of property taxes for the 2018-2019 property tax year.  Taxpayers who prepay their 2018-2019 property taxes in 2017 will not be allowed to deduct the prepayment on their federal tax returns because the county will not assess the property tax for the 2018-2019 tax year until July 1, 2018.
The IRS reminds taxpayers that a number of provisions remain available this week that could affect 2017 tax bills. Time remains to make charitable donations. See IR-17-191 for more information. The deadline to make contributions for individual retirement accounts – which can be used by some taxpayers on 2017 tax returns – is the April 2018 tax deadline.
IRS.gov has more information on these and other provisions to help taxpayers prepare for the upcoming filing season.
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IRS Alerts Payroll and HR Professionals to Phishing Scheme Involving W-2s

IR-2016-34, March 1, 2016

WASHINGTON — The Internal Revenue Service today issued an alert to payroll and human resources professionals to beware of an emerging phishing email scheme that purports to be from company executives and requests personal information on employees.

The IRS has learned this scheme — part of the surge in phishing emails seen this year — already has claimed several victims as payroll and human resources offices mistakenly email payroll data including Forms W-2 that contain Social Security numbers and other personally identifiable information to cybercriminals posing as company executives.

“This is a new twist on an old scheme using the cover of the tax season and W-2 filings to try tricking people into sharing personal data. Now the criminals are focusing their schemes on company payroll departments,” said IRS Commissioner John Koskinen. “If your CEO appears to be emailing you for a list of company employees, check it out before you respond. Everyone has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees.”

IRS Criminal Investigation already is reviewing several cases in which people have been tricked into sharing SSNs with what turned out to be cybercriminals. Criminals using personal information stolen elsewhere seek to monetize data, including by filing fraudulent tax returns for refunds.

This phishing variation is known as a “spoofing” email. It will contain, for example, the actual name of the company chief executive officer. In this variation, the “CEO” sends an email to a company payroll office employee and requests a list of employees and information including SSNs.

The following are some of the details contained in the e-mails:

  • Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review.
  • Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary).
  • I want you to send me the list of W-2 copy of employees wage and tax statement for 2015, I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me asap.

The IRS recently renewed a wider consumer alert for e-mail schemes after seeing an approximate 400 percent surge in phishing and malware incidents so far this tax season and other reports of scams targeting others in a wider tax community.

The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. E-mails can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information.

The IRS, state tax agencies and tax industry are engaged in a public awareness campaign — Taxes. Security. Together. — to encourage everyone to do more to protect personal, financial and tax data. See IRS.gov/taxessecuritytogether or Publication 4524 for additional steps you can take to protect yourself.

 

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Government Spells Out the New Social Security Rules

Boomers who are in their sixties, tune in: The Social Security Administration has finally issued official guidance on the phase-out of two popular claiming strategies, and if you qualify, you need to act quickly.

The agency issued an emergency message to its field offices on February 18 regarding the phase-out of the benefits of the file and suspend strategy. If you will be full retirement age of 66 or older by the end of April, you need to consider immediately whether you should file and suspend your benefit because the deadline to make that move is April 29 — a day earlier than most experts expected. The agency says it will honor file and suspend requests made by April 29, even if the agency does not process the request until after that date.

Filing and suspending by April 29 has a few advantages. Primarily, it will allow a lower-earning spouse to claim a spousal benefit or minor children to get benefits off your record while you delay taking your benefit, which will earn 8% a year in delayed retirement credits until you turn 70. Under the new rules effective April 30, a married spouse who suspends his benefit also suspends all other benefits, such as a spousal benefit, paid off his record.

Suspending a benefit by the April deadline also allows you to get a larger lump sum if you later decide delaying was a mistake. Under the old rules, if you file and suspend your benefit while it earns delayed credits, you can later change your mind and get a lump sum of benefits going back to the day you filed. (Your monthly benefit would also revert to the amount it was worth on that date, wiping out the delayed credits.) As of April 30, this move is no longer possible.

One piece of good news: The guidance confirms that a divorced spouse doesn’t have to worry if an ex suspends his benefit. If one ex-spouse decides to suspend his benefit, the other ex-spouse can still apply for spousal benefits off his record, if she meets the eligibility requirements to qualify for that benefit.

The agency also issued guidance on the other claiming strategy that is phasing out. The agency confirms that those who were born on January 1, 1954, or earlier still qualify to use the “restricted application” strategy. This strategy allows an eligible beneficiary who is full retirement age to apply for a spousal benefit only, while allowing his own benefit to earn delayed credits.

Also, a spouse born on January 1, 1954, or earlier who takes her own benefit early but becomes eligible for a spousal benefit once her spouse has applied for his benefits won’t automatically have to claim the spousal benefit if it’s higher. She could choose to wait to bump up to the higher spousal benefit once she turns full retirement age. (Under the rule changes, those born after January 1, 1954, are automatically given the higher of their own or their spousal benefit, once they are eligible for both benefits.)

But beware if you are eligible for both strategies: Make sure you don’t want to use the restricted application strategy before filing and suspending, because you can’t do both. Run your numbers and see which strategy will pay out more before making any move.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc

 

 

http://theinvestorzone.com/2016/02/22/government-spells-out-the-new-social-security-rules/
February 22, 2016
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PA 529 College Plan – (800) 440-4000

For your PA 529 College Plan, we’ve been asking for your year-end statement showing the calendar year contributions.

Apparently, that statement only shows your contributions for the last quarter of the calendar year.

 

You can get the info that we need by logging into your account at www.PA529.com

Go to <account overview>

Go to <transaction history>

Go to <contributions>

Instead of asking for the last 12 months, specify your dates from 01/01/20XX – 12/31/20XX, where XX is the year of your tax return that we are working on.

 

The report will NOT show the student’s social security number (SSN).

BUT, the Pennsylvania Department of Revenue wants the entire SSN of each student to whom you contributed, (even if they’re your grandchildren, or anyone else that might not be listed on your return).

if you have given us their SSN before, we don’t need it again.

 

Either:

(1) fax the calendar year report to us at 610.446.0441, or

(2) email the report to Steve@SteveClott.com , or

(3) mail the report to us at 2024 Darby Rd, Havertown, PA 19083-2305.

(Try not to send SSN’s via email.  Either call them in, or mail them in to us.)

 

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Auto log/diary

IRS requires this, to document your auto / mileage expenses.

pro-auto-mileage

 

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The Tax Organizers Are Coming Next Week – Get out your Driver’s License!

Your Tax Refund May Take Longer, But at Least You’ll Get It

More security to combat increased identity theft threatens to delay processing this year.

Last year’s income tax season was marked by an explosion of refund theft. Will this year be any different?

Increased protections may cut down on fraud but will likely draw out the wait for your money. Changes will be visible when you use tax preparation firms and filing software, with warnings akin to those from your bank if you try to log in from a new device or change account information. Less visible will be broader changes, such as revamped fraud-sniffing programs used by the IRS, states, and the tax prep industry, as well as new information-sharing agreements among all three.

Whether these measures will make it appreciably harder for someone to use your identity to claim your refund isn’t clear. — But the best defense is to set your deductions ahead of time so that you get no refund at all.

Here’s what taxpayers can expect this season:

More identity verification

Yes, this means wider use of those multiple-choice questions about where you lived 30 years ago if you’re filing electronically. It also means “a lot more reactive warnings to users that something has been changed, and making sure it was them that changed it,” said JoAnn Kintzel, chief executive of Tax Act, a tax software firm. “If an e-mail address changes, a message will go both to the new e-mail and the old e-mail.”

Taxpayers will also get a notice if bank deposit information or their home address is changed, said Julie Miller, a spokesperson for tax software company TurboTax, and companies will check to see if more than one account is using the same Social Security number.

Leading tax prep and software companies, as well as payroll and tax financial payment processors, working with states and the IRS, have all agreed to a set of minimum security measures. Companies and states may put in place additional measures, — requiring anyone filing electronically in that state to provide information from a driver’s license or state ID card.

Stronger passwords

Though complex passwords are commonplace on other consumer and bank websites, the tax industry has finally joined the club. The passwords must now include a lowercase letter, an uppercase letter, a symbol, and a number (for example, #H8This). A new timed lockout feature will kick in after repeated failed login attempts.

The IRS launched a consumer education and awareness campaign this past November about security basics. They include not using the same password for multiple accounts, using anti-virus protection, and encrypting sensitive data.

Looser refund timing

There will be less certainty about when taxpayers can expect state refund checks, said Verenda Smith, deputy director of the Federation of Tax Administrators. “In the past, there was a political imperative to get refunds out the door, and that has certainly changed,” she said. “You may have a perfectly fine return, but the state will take just a little longer to confirm that it’s you who is filing it.”

More paper checks

There may also be more refunds that come in paper checks, even for those who request direct deposit. That may prove particularly true for first-time filers, said Smith.

Last year, many fraudsters changed a taxpayer’s preferences in favor of direct deposit to a prepaid debit card account created before filing the false return. So this year, Utah will directly deposit a refund only into a bank account or prepaid debit card issued by a taxpayer’s financial institution. Alabama also changed its policy so that its Department of Revenue can send paper checks to your mailbox even if a taxpayer requested direct deposit, which will be done on a case-by-case basis.

“Prepaid cards are the currency of criminals,” IRS Commissioner John Koskinen told 60 Minutes in 2014. “Our problem is you can’t distinguish the number of a prepaid card from a legitimate bank account.”

Suzanne Woolley WealthWatch
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Year-End Form 1099-MISC

This announcement is meant for all of our self-employed clients (Schedule C), and all of our landlord clients (Schedule E).

There are penalties for not filing form 1099 to the government and to your subcontractors who are not incorporated, regarding your payments to them during the year.  These payments would be for either services performed by them, or repairs and improvements made by them.  Both the IRS and your state accept these filings.

This is our way of making sure that we can answer IN THE AFFIRMATIVE, the question on your tax return that you DID COMPLY with the 1099 filing requirements.  By making this announcement to notify you of the filing requirements, now we can affirm that you did so, within the deadline limits, when we prepare your returns.  This question has been on the forms every year, for both schedules C and E.
Reporting Payments to Independent Contractors:
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Reporting-Payments-to-Independent-Contractors

What is a Form W-9?
https://www.irs.gov/Government-Entities/Indian-Tribal-Governments/ITG-FAQ-%235-Answer-What-is-a-Form-W-9-and-when-is-it-applicable%3F

Online service for annual 1099 reporting:
http://www.avalara.com/products/avalara-1099/

Avalara will take care of notifying the government and your subcontractors.

If you do not want to pay Avalara’s fee ($2 per form ?), you can do it yourself by requesting from us the actual forms that you must complete and file, and then mail them yourself, to the government and to your subcontractor(s).  These forms WON’T be in our Tax Organizer packets because they have an earlier due date than your Form 1040.

In the end, you need to make sure that your subcontractors report their proper income to the government. If you haven’t completed the forms yet, let your subcontractors know ASAP that you will be reporting their payments that you made, so they will report and pay their fair share of taxes.

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Twins Born In Different Years Deliver Quirky Tax Result for Parents

Maribel Valencia, 22, and her husband, Luis, became parents in 2015. And again in 2016. Maribel Valencia delivered twin babies at San Diego Kaiser Permanente Zion Medical Center over the weekend but the twins have different birthdays. Jaelyn, a girl, was delivered at 11:59 p.m. on December 31, 2015, while her brother, Luis, was delivered at 12:02 a.m. on January 1, 2016.

The babies were scheduled to be delivered by Cesarean section a week later, on January 6, 2016, but the twins apparently had something else in mind, making a surprise appearance a bit earlier. Fortunately, the babies are healthy: both 18.5 inches long. Jaelyn weighed four pounds, 15 ounces, while Luis weighed five pounds, nine ounces.

The pair has an older sister. But what about their Uncle… Sam? When it comes to tax time, the fact that little Jaclyn and Luis were born minutes apart doesn’t matter. The fact that they are born in different years does matter.

By law, you are allowed one exemption for each person you can claim as a dependent. A dependent can be either “qualifying child” or a “qualifying relative.” To be considered a “qualifying child,” the child must meet the following criteria:

  • The child must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them;
  • The child must be under age 19 at the end of the year and younger than you (or your spouse, if filing jointly), under age 24 at the end of the year, a student, and younger than you (or your spouse, if filing jointly), or any age if permanently and totally disabled;
  • The child must have lived with you for more than half of the year;
  • The child must not have provided more than half of his or her own support for the year; and
  • The child must not be filing a joint return for the year (unless that return is filed only to get a refund of income tax withheld or estimated tax paid).

Of course, this being tax, there are exceptions and special rules that apply. One of the special rules is that a child who is born (or has died) during the calendar year is still considered to be a qualifying child if he or she meets all of the other criteria.

That means a baby born on December 31, 2015, would be considered a qualifying child for 2015. A baby born on January 1, 2016, would not be considered a qualifying child for 2015: that child would be a qualifying child for 2016.

In other words, assuming all of the other criteria are met, baby Jaelyn would be considered a dependent for 2015 – and little Luis would not. That’s a tough break for the Valencia’s, who, since they both work (according to the hospital, Maribel works as a cashier and Luis is a diesel mechanic for the United State Navy), could likely benefit from the extra exemption in 2015: the amount you can deduct in 2015 is $4,000.

 

by Kelly Phillips Erb Forbes Staff

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Daily Gambling Log

Technically speaking, an amateur gambler must report the full amount of each and every win on the miscellaneous income line on page 1 of Form 1040.
Use this for your LOG, and enclose it with the rest of your tax info, and Tax Organizer.

Daily Gambling LOG

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How Far Back Can the IRS Audit?

 

There are two basic statutes of limitation.

 

First is the statute of limitations, which provides that the IRS has three years to assess an additional tax due.

For example, for a taxpayer who filed a 2012 tax return on April 15, 2013, the IRS has until April 15, 2016, to assess an additional tax.

This rule has two major exceptions. The three-year statute is extended to six years in a case where the taxpayer has omitted more than 25% of gross income.

 

Second, there is no statute of limitation in cases where no return has been filed, or where the taxpayer has filed a fraudulent return.

 

These two exceptions permit the IRS to assess an additional tax at any time.

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Year-End Tax Tips for Individuals 2015-2016

ALEXANDRIA, VA. (NOVEMBER 30, 2015)

BY MICHAEL COHN (Accounting Today)

 

The National Society of Accountants has released some suggested year-end tax tips for individuals, courtesy of Wolters Kluwer Tax & Accounting US.

Individual income tax rates of 10, 15, 25, 28, 33, 35 and 39.6 percent remain in place for filing next April. (The more you made, the greater your percentage.) The standard deduction for 2016 income will stay the same: $6,300 if you file your taxes using the status single or married filing separately. Married joint filers still receive a $12,600 deduction; head of household filers’ deduction jumps $50, to $9,300.

Year-end tax-saving tactics include spreading recognition of your income between years by postponing year-end bonuses and maximizing both deductible retirement contributions and allowable retirement distributions for this calendar year, coordinating capital losses against the sale of appreciated assets, postponing redemption of U.S. Savings Bonds, and delaying your year-end billings and collections.

You may also want to defer corporate liquidation distributions (full cash-value payment for all a company’s stock you hold) until 2016, pay your last state estimated tax installment in 2015 and pre-pay real estate taxes or mortgage interest.

Life changes: Did you get married or divorced? Have a child? Buy a home? Change jobs or retire? A change in employment, for example, may bring severance pay, sign-on bonuses, stock options, moving expenses and COBRA health benefits, among other changes that affect your taxes.

Additionally, try to predict any life events in 2016 that might trigger significant income or losses, as well as a change in your filing status.

Retirement savings: You can contribute up to $5,500 to an individual retirement account or Roth IRA for 2015 and, if you’re 50 or older, $1,000 more in catch-up contributions. You also have until April 15, 2015, to make an IRA contribution for 2015. One tax move in this area: Delay until 2016 converting your traditional IRA to a Roth IRA, which incurs taxes.

Giving: You can still make tax-free gifts of $14,000 per recipient (a total of $28,000 in the case of married couples).

Tax-free distributions, up to a maximum of $100,000 per taxpayer each year from IRAs to public charities, have been allowed as an alternative to reporting the income and taking an itemized deduction. You must be 70½ or older to do this.

High Earners
If your income is six figures or more, you should anticipate possible liability for the 3.8 percent net investment income (NII) tax calculated on net investment income in excess of your modified adjusted gross income (MAGI). Threshold MAGIs for the NII tax are $250,000 in the case of joint returns or a surviving spouse, $125,000 for a married taxpayer filing a separate return, and $200,000 in any other case.

Keeping income below the thresholds is worth exploring, as is spreading income out over a number of years or offsetting the income with both above-the-line and itemized deductions. Of course, planning for the NII tax requires a very personalized strategy.

The tax rate on net capital gain is no higher than 15 percent for most taxpayers. Net capital gain may not be taxed if you’re in the 10 or 15 percent income tax brackets. A 20 percent rate on net capital gain can apply if your taxable income exceeds the thresholds set for the 39.6 percent rate ($413,200 if you file single, $464,850 for married filing jointly or as a qualifying widow[er], $439,000 for head of household and $232,425 for married filing separately).

Wash sale rules: These cover sales of stock or securities in which your losses are realized but not recognized for tax purposes because you acquire substantially identical stock or securities within 30 days before or after the sale.

Alternative minimum tax: The AMT is now “patched,” which permanently increases the exemption amounts and indexes those amounts for inflation. For 2015, the exemption amounts are $53,600 for single individuals and heads of household, $83,400 for married couples filing a joint return and surviving spouses and $41,700 for married couples filing separate returns.

You can take several steps to reduce the AMT’s effect on your tax liability. Avoid certain deductions, including the accelerated depreciation deduction on real property or expensed research, among others. You might also avoid exercising incentive stock options in a year in which you’re subject to AMT.

Pease limitation: This reduces a higher-income taxpayer’s allowable itemized deductions by 3 percent of the amount (up to 80 percent), with the reduction kicking in after certain income thresholds. For 2015, Pease thresholds are $309,900 for married couples and surviving spouses, $284,050 for heads of households, $258,250 for unmarried taxpayers and $154,950 for married taxpayers filing separately.

Related to the Pease limitation is the personal exemption phase-out (PEP). The threshold income amounts for the PEP are the same as those for the Pease limitation.

Health Insurance
The Affordable Care Act requires that you have minimum essential health coverage or make a shared responsibility payment, unless you’re exempt. On 2014 returns filed in 2015, taxpayers reported if they had minimum essential coverage; that reporting requirement will again be on 2015 returns filed in 2016.

If you may be liable for a shared responsibility payment, carefully review the significant number and variety of exemptions available. You may also be able to project the amount of any payment. Closely related are changes to the medical expense deduction, health flexible spending arrangements (and similar arrangements), insurance coverage for children, and more.

Potential Legislation
As of mid-November, tax bills pending in Congress included a package of tax extenders, revisions to the Affordable Care Act and more. Lawmakers might renew them either before year-end or early in 2016. Incentives include:

Exclusion of cancellation of indebtedness on principal residence: Allows you to exclude from income the cancellation of mortgage debt of up $2 million on a qualified principal residence.

Higher education tuition and fees deduction: Provides a maximum $4,000 deduction for qualified tuition and fees at post-secondary institutions of learning, subject to income phase-outs.

Classroom expense deduction. Primary and secondary education professionals may take an above-the-line deduction for qualified unreimbursed expenses up to $250 paid during the year.

Stay tuned to see which of these and other extenders continue or end. In the meanwhile, planning for their potential renewal is key.

 

Watch this video for all services offered by Steve Clott.

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