Monthly Archives: September 2016

   IRS Warns of Email Tax Scam

The Internal Revenue Service and its Security Summit partners have issued an alert to taxpayers to be on guard against fake emails purporting to contain an IRS tax bill related to the Affordable Care Act.

The IRS has received numerous reports around the country of scammers sending a fraudulent version of CP2000 notices for tax year 2015. Generally, the scam involves an email that includes the fake CP2000 as an attachment. The issue has been reported to the Treasury Inspector General for Tax Administration for investigation.

The CP2000 is a notice commonly mailed to taxpayers through the United States Postal Service. It is never sent as part of an email to taxpayers. The indicators are:

  • These notices are being sent electronically, even though the IRS does not initiate contact with taxpayers by email or through social media platforms;
  • The CP2000 notices appear to be issued from an Austin, Texas, address;
  • The underreported issue is related to the Affordable Care Act (ACA) requesting information regarding 2014 coverage;
  • The payment voucher lists the letter number as 105C.

The fraudulent CP2000 notice included a payment request that taxpayers mail a check made out to “I.R.S.” to the “Austin Processing Center” at a Post Office Box address. This is in addition to a “payment” link within the email itself.

IRS impersonation scams take many forms: threatening telephone calls, phishing emails and demanding letters. Learn more at Reporting Phishing and Online Scams. Taxpayers who receive this tax scam email should forward it to phishing@irs.gov and then delete it from their email account.

Taxpayers can do a keyword search on IRS.gov or contact their local Dallas CPA firm for any notice they receive. Taxpayers who receive a notice or letter can view explanations and images of common correspondence on IRS.gov at Understanding Your IRS Notice or Letter.

To determine if a CP2000 notice you received in the mail is real, see the Understanding Your CP2000 Notice, which includes an image of a real notice. A CP2000 is generated by the IRS Automated Underreporter Program when income reported from third-party sources such as an employer does not match the income reported on the tax return. It provides extensive instructions to taxpayers about what to do if they agree or disagree that additional tax is owed. It also requests that a check be made out to “United States Treasury” if the taxpayer agrees additional tax is owed. Or, if taxpayers are unable to pay, it provides instructions for payment options such as installment payments.

The IRS and its Security Summit partners — the state tax agencies and the private-sector tax industry — are conducting a campaign to raise awareness among taxpayers about increasing their security and becoming familiar with various tax-related scams. Learn more at Taxes. Security. Together.

Taxpayers should always beware of any unsolicited email purported to be from the IRS or any unknown source. They should never open an attachment or click on a link within an email sent by sources they do not know. They should also remember that their local Dallas CPA firm is always there to help when questions or concerns arise.

   Still Need to File Your 2015 Taxes? File Now to Get Your 2017 Health Insurance APTC

Did You File a Tax Extension?  File Now to Get Your Health Insurance Advanced Premium Tax Credit

Did you apply for an extension of time to file your 2015 federal taxes and receive an advanced premium tax credit to help you pay for your 2016 health insurance?  If the answer is yes, the IRS urges you to file your 2015 taxes as soon as possible, in order to receive a timely advanced premium tax credit from your Marketplace for the next open enrollment period (2017 health insurance).

If I Filed a Tax Extension Why Do I have to File Before the October 15 Extended Tax Deadline?

Even if you received a six month extension of time to file, you should still file your 2015 taxes as soon as possible to report 2016 advance premium tax credits you received and maintain your eligibility for future premium assistance to help you pay for your Marketplace insurance since the Marketplace will not review your eligibility for advance premium tax credits and cost-sharing reductions for 2017 health insurance coverage unless you file.

Under the Affordable Care Act, when you purchase your health insurance from a Health Insurance Marketplace and receive an advanced premium tax credit, your advanced premium tax credit is reported and compared to the actual premium tax credit you are eligible for. Depending on your actual income and family size, you may receive a bigger tax credit or may have to pay some back when you file your taxes, just like when your actual withholding is compared to your tax liability.

How Do I Report My Advanced Premium Tax Credit?

You should have received a 2015 Form 1095-A from the Health Insurance Marketplace (Healthcare.gov or your state exchange). The form  indicates information like date of coverage, amount of insurance premium, and your advanced premium tax credit applied to your insurance.

Are There Tips if I Filed an Extension and Received an Advanced Premium Tax Credit?

First, don’t be afraid to jump in and file your 2015 taxes as soon as possible, if you want to qualify for an advanced premium tax credit to help you pay for 2017 health insurance.  Also, don’t forget about any IRA contributions or other deductions that may lower your adjusted gross income, increasing the possibility of a bigger premium tax credit.

Your circumstances may have changed in the past year and you may now be eligible for an exemption from the tax penalty if you didn’t  have a full year of 2015 health coverage. Exemptions can range from income being below the IRS tax-filing threshold to hardship exemptions like losing your home to foreclosure. You can check out the IRS free exemption tool to find out if you might be eligible for one of the exemptions.  Some exemptions – such as only having access to health insurance plans that exceed 8 percent of household income – can be claimed directly on your tax return. But other exemptions, including hardship cases, require that you apply through a state or federal Health Insurance Marketplace to receive an exemption certificate number.

As with all the tax laws, your local Dallas CPA Firm is always up to date and has you covered. If you have more questions about the Affordable Care Act and how it impacts you, give us a call!

   2016 Tax Brackets

Did you know that not everyone or every dollar earned is taxed the exact same amount? This is because the United States tax system aims to be progressive. A progressive tax system tries to collect more tax from those who earn more. In essence, a million dollar earner pays more total tax as well as a higher percentage of their income in tax than someone who earns far less.

One of the ways our tax system achieves this is through tax brackets. A tax bracket is simply a range of incomes that are taxed at a set rate.

For the 2016 tax year, there are seven tax brackets of varying size with the lowest bracket being subject to a 10% marginal tax rate and the highest being subject to 39.6%.

How this looks in real life:

  • If you’re a single filer who earns $60,000 a year after you take all the necessary exemptions, adjustments and deductions, the first $9,275 in earnings will be taxed 10%. From $9,276 to $37,650 you will be taxed 15%. On the rest, you’ll be taxed 25%. You are in the 25% tax bracket though your effective tax rate will be much lower.
  • If you are married filing jointly, the first $18,550 will be taxed 10%. Any amount over $18,550 to $75,300 is taxed at 15%.

The tax brackets are adjusted each year for inflation, so the 2016 tax brackets are higher than the 2015 tax brackets.

Mentioned above were exemptions, adjustments and deductions. What you earned from your job is considered ordinary or gross income but you are taxed on your adjusted gross income, which is your income minus those exemptions, adjustments, and deductions.

When you know your tax bracket, you can easily calculate how valuable different tax deductions are for you. If you are in the 25% tax bracket, a $1000 deduction will reduce your tax liability by $250.

Not all of your income is taxed based on these brackets. If you have long term capital gains and qualified dividends, that rate will depend on your tax bracket. If you are in 10% or 15% tax brackets, you pay 0% on long term capital gains and qualified dividends. If you are in the 25%, 28%, 33% and 35% brackets then you’ll pay 15%. Those in the highest bracket, 39.6%, will pay 20% on long term capital gains and qualified dividends.

Understanding how tax brackets work as well as which bracket you are in can help you make better informed financial decisions, but you don’t need to know how to calculate tax brackets when you can just consult your local Dallas CPA Firm.  A CPA will figure out your tax bracket based on your information and give you the tax deductions and credits you deserve.

   6 Money Saving Tax Tips for the Self-Employed

Self-employment can be hard, but if it was easy, everyone would do it, right? In an attempt to lighten your load and ease your burden, whether you are just trying to make the October 17 tax extension deadline, figuring out estimated taxes, or are gearing up for next tax season, take a look at these six tax tips for the self-employed and some of the most missed tax deductions.

Work Expenses and Related Fees

It’s time to think inside, outside, and around every corner of the box for this one. What does it cost to run your business? You can deduct office equipment such as printers and computers – even replacement ink and toner. The paper you’re printing on? Your company letterhead and business cards? Yep, all of those relatively small and possibly overlooked costs can be deducted from your taxable income. Just make sure they are costs dedicated to your business. In the age of online media, costs and fees are looking different every year. Do you pay for your website hosting and domain name? Do you pay online banking fees or online payroll software costs? Make sure you don’t skip those expenses when you file your taxes.

Your Home Office Situation

Not only are you able to write off your equipment expenses, but you’re actually able to take the space you use in your house as a home office tax deduction as long as it is dedicated work space for your job at home. The IRS allows you to deduct part of your home payment (either rent or mortgage) as it relates to the amount of space you use in your home for your office. Because your office is within the walls of your home, you are also able to write off part of your home insurance and your utility bills. The amount, again, depends on the size of your office. And even if you choose not to take the home office deduction, you can still deduct your office supplies expenses. You may also be able to deduct your home office using the simplified home office deduction which is up to a flat $1,500 based on up to 300 square feet of office space used at $5.00 per square.

Travel and Education

Doctors have journals and teachers have in-service training to help keep them educated and up to date about current strategies and the best new ideas. For the self-employed, keeping up to date with the latest and greatest trends isn’t always so easy. For most of us, training and education comes at a price. We have to pay for the conference or the class, we have to pay for travel, we might even have to get a hotel room depending on the length of the conference. Luckily business travel, education, and training expenses may all be tax deductible. Even taxi, shuttle, and parking costs are tax deductible. If you rent a car when you arrive at your destination, the expense is deductible as long as the car is used exclusively for business.

Hardware and Software

Did you buy a desktop computer, a laptop, a new monitor, an iPad, or any other piece of technology to help grow your business? It all may be deductible. Just be sure your iPad is strictly for business purposes and not your child’s favorite toy! What about computer software? If you didn’t buy a new computer this past year, but you had to update your current software or purchase new software to get the job done, you can write that spending off. This is an especially important deduction to remember because, as we all know, software gets expensive . . . quickly.

Everyday Supplies and Office Furniture

Remember back in the day when you worked in a cubicle at some big office? Remember how many pens you lost? How many Post-It pads you went through? How many highlighters and paperclips and staplers you used? You don’t think about the costs of such items when you’re an employee. But when you’re self-employed, you realize how quickly those everyday items add up. And don’t forget your home office furniture. Your desk, your chair, your printer stand, and even your trash can are all able to be deducted on your tax return. Just remember to keep your receipts!

All the Rest

There are so many tax deductions related to being self employed – don’t worry about knowing all of them. Your local Dallas CPA Firm is here to help you with all of your self-employment tax questions and needs, so contact us today!