Wednesday, November 25, 2015

Repairs expensing just allowed to $2,500, new safe harbor rules (was $500 which was tough)

Inside This Issue

Notice 2015-82 increases the de minimis safe harbor limit provided in the new Tangible Property Regulations (§ 1.263(a)-1(f)(1)(ii)(D)) of the Income Tax Regulations for a taxpayer without an applicable financial statement (“AFS”) (in other words, clients without audited financial statements) from $500 to $2,500.
Notice 2015-82 will be published in Internal Revenue Bulletin 2015-50 on Dec. 14, 2015.

Wednesday, November 11, 2015

Start Up costs and the tax effects

New businesses, which are vital to a healthy economy, usually incur costs before they begin active conduct of their intended business operations. These costs are frequently generically referred to as startup costs of a business. Typical examples of these costs include expenditures to investigate whether to create or acquire a particular business and, for a business operated through a partnership or corporation, the organization costs to form the entity; however, costs incurred before a business begins active operations can include a wide variety of types of costs.
For financial accounting purposes, these costs are generally included in the category of startup costs and are all treated the same way. However, for tax purposes, costs that are financial accounting startup costs may be required to be further subdivided into smaller more specific categories, each of which is treated differently. This article discusses how these costs incurred by a business before it begins its active operations are treated for financial accounting and tax purposes.
For book purposes, startup costs are costs a business incurs in its activities in preparing to begin its active conduct. Under ASC Section 720-15-20, startup activities include:
  • Opening a new facility;
  • Introducing a new product or service;
  • Conducting business in a new territory;
  • Conducting business with an entirely new class of customers ... or beneficiary;
  • Initiating a new process in an existing facility;
  • Commencing some new operation.
Financial accounting standards also treat the costs of organizing a corporation or partnership as startup costs rather than as separate costs (ASC Paragraph 720-15-15-2).
Although companies refer to startup costs using varying terms, including preopening costs, preoperating costs, organization costs, and startup costs, financial accounting standards refer to these costs only as startup costs (ASC Paragraph 720-15-15-3). For financial accounting purposes, a business must expense startup costs as incurred (ASC Paragraph 720-15-25-1). Example 1 shows the financial accounting treatment of these costs.
Example 1: ABC Corp. incurred $65,000 of startup costs. It records the startup costs using the following entry:
Startup expense  $65,000
   Cash                              $65,000
The treatment of preoperational startup costs is potentially much more complex for tax purposes than financial accounting purposes. Costs that are startup costs for financial accounting purposes must be analyzed and possibly subdivided into smaller categories, each of which is treated differently for tax purposes. Making things more confusing, one of these smaller categories for tax purposes includes the costs described in Sec. 195, which commonly are referred to as startup costs in tax discussions.
The other categories that financial accounting startup costs might fall into for tax purposes are organizational costs, syndication costs, Sec. 197 intangible costs, and tangible depreciable personal property costs. The different book and tax treatment is reconciled on an attachment to the federal tax return using Schedule M-1, Reconciliation of Income (Loss) per Books With Income per Return.
For tax purposes, Sec. 195 defines startup costs as costs incurred to investigate the potential of creating or acquiring an active business and to create an active business. To qualify as startup costs, the costs must be ones that could be deducted as business expenses if incurred by an existing active business and must be incurred before the active business begins (Sec. 195(c)(1)). Startup costs include consulting fees and amounts to analyze the potential for a new business, expenditures to advertise the new business, and payments to employees before the business opens. Startup costs do not include costs for interest, taxes, and research and experimentation (Sec. 195(c)(1)). Once a taxpayer decides to acquire a particular business, the costs to acquire it are not startup costs (Rev. Rul. 99-23), and the taxpayer must capitalize the acquisition costs (Sec. 263(a) and INDOPCO, Inc., 503 U.S. 79 (1992)).
A taxpayer may elect to deduct a portion of startup costs in the tax year in which the active conduct of the business to which the costs relate begins and to amortize the portion of the startup costs not deducted over a 180-month period under Sec. 195(b)(1)(A). A taxpayer is deemed to make the election to deduct and amortize startup costs unless it affirmatively elects to capitalize startup costs by attaching a statement to the taxpayer's timely filed tax return, including extensions, for the tax year in which the active conduct of the business begins (Regs. Sec. 1.195-1(b)). The deemed election to deduct and amortize startup costs or the affirmative election to capitalize them is irrevocable (Regs. Sec. 1.195-1(b)).
A taxpayer that elects to deduct and amortize startup costs may deduct up to $5,000 of startup costs in the year the active conduct of the business begins (Sec. 195(b)(1)(A)). The taxpayer amortizes any startup costs over the deduction limit for 180 months beginning in the month the active conduct of the business to which the costs relate begins (Sec. 195(b)(1)(B)). Because costs that qualify as startup costs will be deductible as ordinary and necessary business expenses when the business becomes active, a taxpayer might want to begin the active conduct of the business before startup costs exceed $5,000. This will help the taxpayer avoid having to amortize costs rather than taking a current deduction.
In addition, if the startup costs related to the business exceed $50,000, the taxpayer must reduce the $5,000 limit on the deduction (but not below zero) by the startup costs over $50,000 (Sec. 195(b)(1)(A)). If the startup costs are $55,000 or more, the taxpayer cannot deduct any of the startup costs except as an amortization deduction. Example 2 illustrates the tax treatment for a corporation that incurred more than $50,000 but less than $55,000 of startup costs.
Example 2: The startup costs for XYZ Corp. are $52,000. XYZ may deduct $3,000 ($5,000 — [$52,000 — $50,000]) of these costs currently. XYZ amortizes the remaining $49,000 ($52,000 — $3,000) of startup costs over 180 months, beginning in the month it begins the active conduct of its business (Sec. 195(b)(1)(B)). The entry to record the startup costs for tax purposes is:
Startup costs expense   $ 3,000
Deferred startup costs  $49,000
   Cash                                       $52,000
The IRS is authorized to issue regulations to clarify the date a new business is considered to have begun for amortizing startup costs (Sec. 195(c)(2)(A)), but it has not yet done so. However, the IRS believes that for the amortization period for startup costs to begin, the business must be a going concern for which its expenses would be deductible as ordinary and necessary business expenses under Sec. 162(a) (Technical Advice Memorandum 9027002 and IRS Letter Ruling 9047032).
If a taxpayer acquires a business, Sec. 195(c)(2)(B) deems the acquired business to have begun on its acquisition date. Example 3 shows the tax treatment of startup costs for a sole proprietor who incurred less than $50,000 of startup costs.
Example 3: Assume T incurred startup costs of $23,000 on April 1, 2014, and began business on May 1, 2014. T may deduct $5,000 immediately and the remaining $18,000 of startup costs at the rate of $100 a month ([$23,000 — $5,000] ÷ 180). The entry to record the startup costs for tax purposes is:
Startup costs expense   $ 5,000
Deferred startup costs  $18,000
   Cash                                        $23,000
At the end of calendar year 2014, T would record $800 in amortization expense (8 months × $100 per month) for the deferred $18,000 startup costs:
Amortization expense—startup costs                    $800
    Deferred startup costs                  $800
In 2015 and later years until T has fully amortized the startup costs, she records $1,200 (12 months × $100 per month) in amortization expense for the deferred startup costs:
Amortization expense­—
startup costs                  $1,200
    Deferred startup costs                 $1,200
A taxpayer claims the amortization deduction on Form 4562, Depreciation and Amortization, and then carries the total deductions to the appropriate return. In Example 3, T would show the amortization deduction on Form 4562 and then carry the deduction to Schedule C, Profit or Loss From Business, of Form 1040 because T is a sole proprietor.
If the taxpayer sells or abandons the business before deducting all the startup costs, the taxpayer may deduct the remaining startup costs as a loss (Secs. 165 and 195(b)(2)). Example 4 illustrates this rule.
Example 4: After recording 40 months of amortization of the deferred startup costs, T sold the business. T may deduct $14,000 ($18,000 — [40 × $100]) as a loss. The entry to record this loss for tax purposes is:
Loss on deferredstartup costs                $14,000
    Deferred startup costs           $14,000
The new tangible property regulations (often called the repair regulations (T.D. 9636)) might require some repair costs to be capitalized as costs of depreciable property. Those costs might have been deducted immediately in the past as startup costs. To be a startup cost, the cost must be deductible if the business was an active business (Sec. 195(c)(1)(B)). Some repair costs that were previously deductible may now have to be capitalized under the new repair regulations. In that case, if the business incurs such a capitalized repair cost before beginning the active business, the cost cannot be a startup cost. The business may be able to recover the cost more or less quickly as a capitalized repair cost than as a startup cost depending on the depreciable life of the asset for which the business capitalizes the cost.
The breadth of the definition of startup costs for book purposes means that some of the costs included in book startup costs may be costs for tangible depreciable personal property. The taxpayer should be careful to account for the costs of this property separately. A taxpayer recovers the costs of tangible depreciable property through depreciation (cost recovery) deductions over the depreciable life of the property. A small business may be able to deduct some of the cost of tangible depreciable personal property immediately under Sec. 179, and the depreciable life for tangible depreciable personal property is generally less than 15 years. Thus, any costs properly classified as tangible depreciable personal property can usually be recovered more quickly than costs classified as startup, organization, or Sec. 197 intangible costs that must be amortized.
For partnerships and corporations, organization costs for tax purposes are costs incurred in forming a partnership or corporation, including the legal fees for drafting a partnership agreement or corporate charter and bylaws, necessary accounting services in forming the entity, filing fees, and costs of organizational meetings of stockholders and directors (Sec. 709(b)(3) and Regs. Secs. 1.709-2(a) and 1.248-1(b)(2)). Corporate reorganization costs are not organization costs unless they directly relate to the creation of a new corporation (Regs. Sec. 1.248-1(b)(4)).
The organization costs of a partnership or corporation are generally not deductible until the business liquidates (Wolkowitz, 8 T.C.M. 754 (1949)), but, as with startup costs, a partnership or corporation may elect to deduct up to $5,000 of organization costs and amortize the remainder of its organization costs over 180 months beginning in the month the entity begins business. The regulations deem a corporation or partnership to have made this election (Regs. Secs. 1.248-1(d) and 1.709-1(b)(2)) unless the entity affirmatively elects to capitalize the organization costs by attaching a statement to a timely filed return, including extensions, for the tax year in which the entity begins business. The partnership or corporation must reduce the $5,000 maximum deduction (but not below zero) by the amount of the total organization costs over $50,000 (Secs. 248(a)(1) and 709(b)(1)(A)). Example 5 shows the tax treatment of organization costs for a corporation that incurred more than $50,000 but less than $55,000 of organization costs.
Example 5: DEF Corp. incurred $51,800 in organization costs; it may deduct $3,200 ($5,000 — [$51,800 — $50,000]) of these organization costs. The entry to record the organization costs on its tax books is:
Organization costsexpense                 $3,200
Deferred organization
costs                     $48,600
    Cash                                $51,800
If the partnership or corporation deducts up to $5,000 of organization costs it paid or incurred, it must amortize any remaining organization costs over 180 months beginning in the month the entity begins business (Secs. 248(a)(2) and 709(b)(1)(B)). Example 6 illustrates the amortization of the organization costs of a corporation.
Example 6: DEF Corp. amortizes its remaining $48,600 ($51,800 — $3,200) of organization costs at the rate of $270 ($48,600 ÷ 180) per month for 180 months beginning in the month it begins business. The entry it makes to record the amortization of its organization costs for one year ($270 × 12 = $3,240) for tax purposes is:
Amortization expense—
organization costs          $3,240
    Deferred organization
    costs                                      $3,240
If a partnership or corporation incurs $55,000 or more in organization costs, it may not deduct any of them immediately. The entity amortizes all organization costs over 180 months beginning in the month it begins business (Secs. 248(a) and 709(b)(1)(B)).
If a partnership or corporation liquidates before it has deducted all the deferred organization costs, it may deduct the unamortized organization costs as a loss (Secs. 165(a) and 709(b)(2), and Regs. Sec. 1.709-1(b)(3)). Example 7 illustrates this rule.
Example 7: When DEF Corp. liquidates 68 months after it began amortizing the remaining $48,600 of organization costs, it recognizes a deductible loss of $30,240 ($48,600 — [68 × $270]). The entry to record this loss for tax purposes is:
Loss on unamortizedorganization costs           $30,240
    Deferred organization
    costs                                         $30,240
If a corporation merges with another corporation and does not dissolve, it may not deduct its unamortized organization costs as a loss (Citizens Trust Co., 20 B.T.A. 392 (1930)). Instead, the unamortized organization costs are a capital cost of the new corporation (Vulcan Materials Co., 446 F.2d 690 (5th Cir. 1971), and Regs. Sec. 1.248-1(b)(4)).
Organization costs do not include the syndication costs of a partnership, which are the costs of issuing and marketing ownership interests in the partnership. Syndication costs are treated differently for tax purposes. Unlike organization costs, syndication costs are not eligible for an immediate deduction or amortization, and instead must be capitalized (Regs. Sec. 1.709-2(b)). Similar to partnership syndication expenses, the expenditures a corporation incurs issuing stock and transferring assets to itself are not organization costs and are not deductible or amortizable (Regs. Sec. 1.248-1(b)(3)). A partnership may not claim a loss for unamortized syndication costs (Regs. Sec. 1.709-1(b)(3)).
Sec. 197 Costs
Another category of costs for tax purposes that may be included in startup costs for book purposes is Sec. 197 intangibles. Among other things, under Sec. 197(d) these include:
  • Goodwill.
  • Going concern value.
  • Workforce in place.
  • Business books, records, and operating systems.
  • Patents.
  • Copyrights.
  • Trade secrets.
  • Licenses.
  • Franchises.
  • Trademarks.
  • Trade names.
  • Covenants not to compete.
The rules for recovering the costs of Sec. 197 intangibles are similar to the rules for recovering startup costs, but there are significant differences. One difference is that while a taxpayer may deduct up to $5,000 of startup costs, a taxpayer may not deduct any cost for goodwill or other intangible assets listed in Sec. 197 except through amortization. A taxpayer amortizes the startup costs not eligible for an immediate deduction over 180 months. Likewise, a taxpayer amortizes goodwill and other intangibles listed in Sec. 197 over 15 years (Sec. 197(a)).
Another difference is if a taxpayer disposes of any Sec. 197 intangible before fully amortizing its cost, the taxpayer may not deduct a loss (Sec. 197(f)(1)(A)(i)). Instead, the taxpayer adds the unamortized cost to the adjusted basis of retained intangibles (Sec. 197(f)(1)(A)(ii)).
For financial accounting purposes, the treatment of costs a business incurs before the beginning of the active conduct of its business operations is relatively straightforward, with all the costs falling into one category and all being treated the same way. However, for tax purposes, things are potentially much trickier, with the various costs possibly falling into several categories that are treated differently. For some of the costs, a taxpayer may have a choice as to how the costs are treated. Thus, it is important to correctly account for startup costs to ensure that the costs are treated appropriately for tax purposes and in the manner that is most beneficial to the taxpayer.
Organization costs are subject to the same deduction and amortization rules as startup costs. However, a taxpayer must account for them separately.
- See more at:
Thanks to Allen Campbell, CPA for pulling this interesting material together!

Tax Consequenses for the Obamacare Marketplace Open Enrollment

Three Tax Considerations during Marketplace Open Enrollment
When you apply for assistance to help pay the premiums for health coverage through the Health Insurance Marketplace, the Marketplace will estimate the amount of the premium tax credit that you may be able to claim.  The Marketplace will use information you provide about your family composition, your projected household income, whether those that you are enrolling are eligible for other non-Marketplace coverage, and certain other information to estimate your credit.
Here are three things you should consider during the Health Insurance Marketplace Open Enrollment period:
1. Advance credit payments lower premiums - You can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums.  These payments are called advance payments of the premium tax credit or advance credit payments.  If you do not get advance credit payments, you will be responsible for paying the full monthly premium.
2. A tax return may be required - If you received the benefit of advance credit payments, you must file a tax return to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit.  You must file an income tax return for this purpose even if you are otherwise not required to file a return.
3. Credit can be claimed at tax time - If you choose not to get advance credit payments, or get less than the full amount in advance, you can claim the full benefit of the premium tax credit that you are allowed when you file your tax return. This will increase your refund or lower the amount of tax that you would otherwise owe.
For more information about open season enrollment, which runs through January 1, 2016, visit See our Questions and Answers on for information about the premium tax credit.

Thursday, October 29, 2015

Record keeping is essential!

Every year a few taxpayers go to court hoping for a better outcome than the one offered by the IRS. Usually, they lose due to poor records, not meeting all requirements for particular deductions, or inadequately separating business from personal expenditures. This article examines a few 2015 cases involving these issues and makes suggestions for practitioners to remind clients that they need timely records and should only report allowable deductions.
Legitimacy and realism
In Chen, T.C. Memo. 2015-167, the Tax Court upheld the IRS’s assessment of tax and penalty totaling over $22,000 for three tax years. In 2009, taxpayers, a married couple, formed an LLC involved in biotech with the husband as the sole shareholder. For the years involved, the LLC had no revenues or clients. Deductions the IRS and the court denied included:
  • Wages of almost $10,000 paid to the taxpayers’ two 11-year-old children for office cleaning and organizing. The taxpayers submitted Forms W-2, Wage and Tax Statement, to the IRS for their “wages.” The deduction was denied because the taxpayers did not prove that the children were actually paid or performed work for the LLC.
  • Car and truck expenses were denied due to lack of records required under Sec. 274(d). There was no record of mileage, time and place, or business purpose.
  • Home office expenses were denied as there was no proof they had a home office. Yet, they claimed some household expenses, such as utilities, which would be permissible only if there was an office used regularly and exclusively in a business. Although the taxpayers told the IRS that their entire personal residence was used to operate the LLC, the LLC’s records at the Maryland Department of Assessments and Taxation listed a different address for its principal office.
  • Other expenses were denied because they were claimed in the wrong year, and many appeared to be for personal purposes, such as purchases at Macy’s, Hair Cuttery, and music stores. The taxpayers also depreciated their children’s musical instruments and deducted their day care expenses as employee benefits.
Accuracy-related penalties were upheld as the court found that the taxpayers were negligent in not keeping accurate books and “not exercising reasonable care given the circumstances.”
Proper documentation
In Flying Hawk, T.C. Memo. 2015-139, the IRS challenged expenses claimed over two years by a taxpayer who was an accountant and provided tax preparation and other services. She had an office, but she claimed she also used her residence and a house trailer for client work. She claimed expenses for both homes on her Schedule C, Profit or Loss From Business. She also claimed mileage on a car she owned as well as mileage on a car she neither leased nor owned. Some of her Schedule C expenses were for health products. The court agreed with the IRS’s disallowance of many of these expenses and also that she did not use her home office as her principal place of work; that she did not use it to meet clients; or that it was a separate structure, one of which must be present to take the deduction.
Although the IRS allowed a portion of the car expenses for the car she owned, despite having no records, the taxpayer argued she used the car 100% for business. At trial, she conceded that she used the car 5% of the time for personal use, including taking her father to the doctor. She later claimed, though, that she used his car for those trips. The court did not find her credible.
The court noted that taxpayers may claim mileage allowance on up to four vehicles under Rev. Proc. 2006-49 (rather than only one as the IRS argued), but this did not help the taxpayer get expenses for the second car because she did not show that she owned or leased that vehicle, which is a requirement to deduct the standard mileage rate because it includes depreciation. The taxpayer claimed this car was used 100% by her worker, but she had no Form W-2 or Form 1099 to support the position that the person who drove the car was employed by her and she did not reimburse the person for any business miles driven.
Deductions for business gifts were also denied because the taxpayer’s documentation included only “marked-up credit card statements” with the notations made about one year after she received the statements. Thus, the substantiation was “not prepared at or near the time of the gift” as required.
With one exception for payroll funds the taxpayer handled for a client, the court agreed that she was subject to negligence penalties.
Another recent case where deductions were lost due to poor records and not following all requirements for a deduction was Grossnickle, T.C. Memo. 2015-127. Despite receiving Forms 1099-MISC, Miscellaneous Income, exceeding $10,000 each year, the taxpayer did not file a return for 2010 believing she did not have sufficient income. The IRS agreed to some expenses but challenged others. Disallowed expenses included for a home office, phone and internet access, and business mileage. The court agreed, finding that the taxpayer did not have proper records to substantiate the expenses.
For the home office, the taxpayer claimed she paid rent to use a room in her sister’s home. One piece of documentation was a Google aerial picture of the house with notations on it, but no proof of regular and exclusive use was provided. For the mileage, the court reminded the taxpayer that Sec. 274(d) requires her to:
[S]ubstantiate by adequate records: (1) the mileage; (2) the time and place of the use; and (3) the business purpose of the use. … Substantiation by adequate records requires the taxpayer to maintain an account book, a diary, a log, a statement of expense, trip sheets, or a similar record prepared contemporaneously with the use or expenditure and documentary evidence (e.g., receipts or bills) of certain expenditures. [T.C. Memo. 2015-127 at *12]
Need for a bookkeeping lesson
In addition to recordkeeping problems, Rochlani, T.C. Memo. 2015-174, involved a somewhat humorous story of a 16-year-old incorporating his parents’ business. In 2006, the taxpayer, a full-time engineer, started a business called Ultimate Presales (UP), which bought and resold tickets for concerts and sporting events. In 2006, without his parent’s permission, their 16-year-old son incorporated UP in Michigan using an online legal service. The son did not know about differences between types of business entities. When the paperwork arrived, the father took no action to undo his son’s actions and filed corporate annual reports for UP.
The parents and two sons traveled around the country to buy and resell tickets. Since the finances were handled through personal accounts, the mother closed UP’s bank account because it was never used. No travel logs were kept; credit card statements were used to reconstruct expenses.
The parents reported UP’s activities on Schedule C. Upon audit, the IRS removed the Schedule C and asserted that UP was a C corporation. The father passed away before the case was heard in court.
The court found that UP was a legitimate business, but it still had to decide the issue of whether it was a sole proprietorship as the taxpayers reported or a C corporation because of the incorporation. While the minor son was not authorized to incorporate UP, once the father followed through on his actions, it was valid. The court dismissed the taxpayers’ argument that the corporation had no books or accounts and therefore should not be respected, citing Moline Properties, 319 U.S. 436 (1943). The court also upheld the imposition of penalties for substantial understatement of tax should the IRS’s calculation of the tax the C corporation owed result in an understatement under Sec. 6662(d)(1)(A).
Marijuana operations
Two recent cases involved sellers of medical marijuana. Olive, 792 F.3d 1146 (9th Cir. 2015), aff’g 139 T.C. 19 (2012), involved a seller of medicinal marijuana with missing and unreliable records. Because marijuana is a controlled substance, Sec. 280E mandates that a seller may reduce gross receipts only by the cost of goods sold; nothing else is deductible. Based on expert testimony, the Tax Court estimated that 75.16% was a “reasonable measure” of the taxpayer’s cost of sales. The court further adjusted this percentage to address inventory given to customers for free or withdrawn for personal use.
The court rejected the taxpayer’s argument that Sec. 280E did not apply to medical marijuana dispensaries because they did not exist when Congress enacted Sec. 280E. The Ninth Circuit noted that marijuana is still a controlled substance under federal law and that if Congress wanted a different result today, it could change the statute.
In Beck, T.C. Memo. 2015-149, the taxpayer was assessed tax for 2007 of just over $1 million, as well as an accuracy-related penalty of almost $210,000. The IRS concluded that the taxpayer did not properly follow Sec. 280E; claimed as cost of sales marijuana seized by the Drug Enforcement Administration; and did not pay self-employment tax. The court upheld the IRS’s assessments.
The taxpayer had no records to prove a deduction of $600,000 for the seized drugs. The failure to substantiate led the court to disallow these amounts in the cost of sales. The court noted though, that even with substantiation, “the seized marijuana would still not be allowable as COGS because the marijuana was confiscated and not sold” (T.C. Memo. 2015-149 at *18).
The court disallowed a Sec. 165 loss for the seized drugs because of Sec. 280E. According to the court, “no deduction or credit (including a deduction pursuant to section 165) shall be allowed for any amount paid or incurred in connection with trafficking in a controlled substance.”
Finally, the court upheld penalties because the taxpayer “intentionally destroyed most of the inventory and sales records related to his … dispensaries” and also did not keep adequate records to support items reported on his Schedule C and underreported his income.
Advice for clients
While the cases summarized here do not provide new legal interpretations, the fact patterns and the adverse holdings for taxpayers offer lessons and reminders for business owners that CPAs may find appropriate to share with their clients:
  • Taxpayers lacking records or with incomplete records or who treat personal expenses as business expenses will have those deductions disallowed. Invalid and unsubstantiated expenses, of course, should never be included in the information provided to the return preparer.
  • Keep separate bank accounts and credit cards for business and personal expenses.
  • Employing your children can provide tax benefits and helpful experience but needs to be legitimate work. A good rule regarding the appropriate age might be whether any other business would hire the children.
  • Beyond the application of Sec. 162, some expenses require additional records such as home office expenses (Sec. 280A) and travel, gifts, and entertainment (Sec. 274(d)).
  • Per Rev. Proc. 2010-51, Section 4.05(1), the standard mileage rate may not be used for more than four vehicles a taxpayer owns or leases.
  • Many aspects of operating a marijuana business allowed under state law present problems for the operator and the tax adviser. These operations are illegal under federal law, and Sec. 280E prohibits any deductions (only cost of goods sold is allowed). If the operations follow the approach in the Beck case and destroy most records daily, determining gross receipts and cost of sales will be difficult. These businesses are usually all cash without a bank account because banks will not do business with them, adding further challenges. Efforts still need to be made, though, to properly measure gross receipts and cost of sales.
Looking forward
The cases summarized involve long-standing problems for individual taxpayers who claim business deductions. One unfavorable change from past decades is that people tend to be busier, leaving less time for adequate recordkeeping. A positive change, though, is the availability of various apps and software programs to simplify recordkeeping that may also be assisted by electronic records maintained by suppliers. One fact that remains unchanged today is that regular visits and conversations with clients are likely to catch poor recordkeeping procedures and improper expenses before they create filing problems.
Thanks to Annet Nellen, CPA for putting in words what I so often try to tell my clients!

Monday, September 28, 2015

Audit Findings in small businesses!

My firm routinely audits business entities.  Many of our audits reveal a problem with segregation of duties (usually A/R and A/P and bank reconciliations performed by a  "trusted" employees or volunteers).  I raise the issue and the entity will try to placate my objections by saying I am going overboard with my audit. 
Well, Mr.Yigal M. Rechtman of Grassi & Co. recently concluded a fraud investigation involving a cash-skimming scheme. Here he shares his findings to help give tax professionals performing audits new perspective.

The Scheme Investigated:
A clerk collected cash from customers and provided a sequentially numbered receipt. At the end of the day, the receipts were supposed to be entered into the accounts receivable system and reconciled with the deposit slip. Instead, the clerk pocketed the cash, and used one of several methods to conceal her acts:
1. She would record an unauthorized credit memo to the customer account.
2. She would take payments from other customers, and credit the account from which she stole. This is a kiting scheme where the clerk “robbed Peter to pay Paul.”
After roughly three years, the clerk was able to pocket an amount greater than $270,000 (that’s $90,000 a year!) and was caught when a customer complained about their account status, which was shorted due to the scheme.

How did the audit fail?
Although we don’t know what the auditors (not our firm) did in terms of their audit procedures, from what we can gather, here are a few points we think they missed:
• The auditors apparently failed to see that this is a high-risk area. Most of the receipts were in cash—this presents a high risk for fraud and theft of cash. It appears they did very little by way of sampling the paper receipts and tracing them to the accounts receivable system. Had they done it, they had a good chance of finding discrepancies and raising questions.
• The auditors appear to have not identified a lack of segregation of duties; the clerk was the one collecting the cash, entering the cash in the accounts receivable system, reconciling the cash collected, depositing the cash, and responding to customer complaints and questions regarding their accounts. At no time did the auditor inform management this is a lack of segregation of duties that should be addressed, nor did he/she recommend changes.
• The cash shortfall could have been identified if the auditors had simply looked at the top-level analysis of the credit-memo balances. They would have noticed the allowance for uncollectable accounts (or its equivalent) would have been "off" because of all the credit memos. The amount would be material, and that should have prompted more questions, an expanded scope in terms of the nature, timing and extent of the audit procedures for revenues.
• The auditors also did not confirm balances, review the reconciliations, or look at why it takes sometimes up to three weeks for daily reconciliations to be prepared. The delay in the daily reconciliations (between the system and the bank deposit) should have been noticed, and at least mentioned to management and the board. That didn’t happen.
What I see here is a lack of critical thinking by the auditors. Although we are not entirely sure what they did, it appears they did not think in a skeptical manner about the risks to revenues, especially when cash collection was a significant portion of the receipts. They also appear to have created a good analysis of the risks of fraud and may have done “check-list mentality” on their audit programs.
Bottom Line:
• Think about what you see and hear.
• If you think there is a chance that the audit plan is not responsive to what’s needed, say something.
• If you think something is fishy, follow that trail.
• And most importantly, be skeptical of what you're told and verify the facts.
I hope this scenario helps all us auditors and accountants do a better job!
Yigal M. Rechtman, CPA, CFE, CITP, CISM, is a principal in Grassi & Co.’s Forensic

Thursday, September 24, 2015

The Shared Responsibility Payment and its consequences

How Coverage You Offer (or Don’t Offer) May Mean an Employer Shared Responsibility Payment for Your Organization
Under the Affordable Care Act, certain employers, based on workforce size – called applicable large employers – are subject to the employer shared responsibility provisions. The vast majority of employers fall below the workforce size threshold and, therefore, are not subject to the employer shared responsibility provisions.
If you are an employer that is subject to the employer shared responsibility provisions, you may choose either to offer affordable minimum essential coverage that provides minimum value to your full-time employees and their dependents, or to potentially owe an  employer shared responsibility payment to the IRS.  Many employers already offer coverage that is sufficient to avoid owing a payment.
If your organization is an applicable large employer, and you choose not to offer affordable minimum essential coverage that provides minimum value to your full-time employees and their dependents, you may be subject to one of two potential employer shared responsibility payments.
More specifically, you may need to make an employer shared responsibility payment to the IRS if you are an applicable large employer and either of these circumstances applies for 2015:
  • You offered minimum essential coverage to fewer than 70 percent of your full-time employees and their dependents, and at least one full-time employee enrolled in coverage through the Health Insurance Marketplace and received the premium tax credit.    
  • You offered minimum essential coverage to at least 70 percent of your full-time employees and their dependents, but at least one full-time employee enrolled in coverage through the Health Insurance Marketplace and received the premium tax credit.  A full-time employee could receive the premium tax credit because the coverage that was offered was not affordable, did not provide minimum value, or was not offered to the full-time employee. 
For both of these circumstances, the 70 percent threshold changes to 95 percent after 2015.
The terms “affordable” and “minimum value” have specific meanings under the Affordable Care Act that are explained in questions 19 and 20 on the employer shared responsibility provision questions and answers page on  Transition relief for offers of coverage to dependents for 2015 is described in question 33 on the same page.  

Thursday, September 17, 2015

Health car law and letters sent from the IRS

The Health Care Law and You: Nine Facts about Letters Sent by the IRS
The IRS sent letters to taxpayers this summer who were issued a Form 1095-A, Health Insurance Marketplace Statement, showing that advance payments of the premium tax credit were paid on the taxpayer’s behalf in 2014. At the time, the IRS had no record that the taxpayer filed a 2014 tax return.
Here are nine facts about these letters and the actions you should take:
  • IRS letters 5591, 5591A, or 5596 remind you of the importance of filing your 2014 federal tax return along with Form 8962, Premium Tax Credit.
  • You must file a tax return to reconcile any advance credit payments you received in 2014 and to maintain your eligibility for future premium assistance.
  • If you do not file, you will not be eligible for advance payments of the premium tax credit in 2016.
  • Even if you don’t usually file or if you requested an extension to Oct. 15, you should file your 2014 tax return as soon as possible.
  • Until you file a 2014 tax return to resolve the issue with your Marketplace, you will not be eligible to get advance payments of the premium tax credit to help pay your health coverage premiums in 2016 from the Marketplace.
  • You should have received a Form 1095-A, Health Insurance Marketplace Statement, earlier this year if you or a family member purchased health insurance coverage through the Marketplace in 2014.  This form provides the information you need to complete Form 8962. You must attach Form 8962 to the income tax return you file.
  • Contact your Marketplace if you have questions about your Form 1095-A.
  • If you have recently filed your 2014 tax return with Form 8962, you do not need to file another tax return or call the IRS about these letters.   In general, if you filed your tax return electronically, it takes three weeks before it is processed and your information is available. If you mailed your tax return, it takes about six weeks. However, processing times can vary based on other circumstances.
  • You should follow the instructions on any additional IRS correspondence that you receive to help the IRS verify information to process your tax return.
In addition to these letters from the IRS, your health insurance company may contact you to remind you to file your 2014 federal tax return along with Form 8962. In some cases, they may contact you even if you did not receive advance credit payments in 2014. If you are not otherwise required to file a tax return, you do not have to file a return if you or anyone on your return did not receive advance credit payments in 2014.

Friday, September 11, 2015

Business returns on extension coming due

Business returns are due to the IRS 9/15/15.  They need to be postmarked by then at least.  At my firm we finished our remaining few yesterday....but would enjoy the chance to help any business get finished on time.  Call direct to my cell phone at 8133090504 if you need to get your returns filed!

Wednesday, September 09, 2015

Traditional IRA vs. a Roth IRA

Traditional IRA vs. Roth IRA

A Traditional IRA or a Roth IRA? Here are the differences.

A Comparison
The type of individual retirement account you choose can significantly affect you and your family’s long-term savings. So it’s worth understanding the differences between traditional IRAs and Roth IRAs in order to select the best one for you.
Here are the key considerations:

Income Limits

Anyone with earned income, who is younger than 70 ½, can contribute to a traditional IRA. Roth IRAs, however, have income-eligibility restrictions: Single tax filers, for instance, must have modified adjusted gross incomes of less than $129,000 in 2012 to contribute to a Roth IRA. (Contribution limits are phased out starting at $114,000 in modified AGI, per IRS guidelines.) Married couples filing jointly must have modified AGIs of less than $191,000 in 2012 in order to contribute to a Roth; contribution limits are phased out starting at $181,000. You can also see the full income limits here.

Tax Incentives

Both traditional and Roth IRAs provide generous tax breaks. But it’s a matter of timing when you get to claim them. Traditional IRA contributions are tax deductible on both state and federal tax returns for the year you make the contribution, while withdrawals in retirement are taxed at ordinary income tax rates. Roth IRAs provide no tax break for contributions, but earnings and withdrawals are generally tax-free. So with traditional IRAs, you avoid taxes when you put the money in. With Roth IRAs, you avoid taxes when you take it out in retirement.

Future Tax Rates

Do you expect your income to increase or decrease in retirement?
Deciding to contribute to a traditional or Roth IRA should depend on whether you expect your income tax rate in retirement to be higher or lower than what you currently pay. That’s because it determines whether the tax rate you pay on your Roth IRA contributions (today’s tax rate) is higher or lower than what you’d pay on your traditional IRA’s withdrawals in retirement.
Of course, it’s hard to predict what federal and state tax rates will be 10, 20 or even 40 years from now. But you can ask yourself some basic questions to help determine your personal situation: Which federal tax bracket are you in today? Do you expect to your income including Social Security to increase or decrease in retirement? Although conventional wisdom suggests that gross income declines in retirement, taxable income sometimes does not. Think about it. Once the kids are grown and you stop saving for retirement, you lose some valuable tax deductions and tax credits, leaving you with higher taxable income in retirement.
What about tax rates? Do you expect your tax rate will be higher or lower when you retire? Given today’s historically low federal tax rates and large U.S. deficit, many economists believe federal income tax rates will rise in the future — meaning Roth IRAs may be the better long-term choice.

Withdrawal Rules

One major difference between traditional IRAs and Roth IRAs is when the savings must be withdrawn. Traditional IRAs require you to start taking required minimum distributions (RMDs) at age 70 1/2. Roth IRAs, on the other hand, don’t mandate withdrawals during the owner’s lifetime. So, if you don’t need the money, Roth IRAs can continue to grow tax-free throughout your lifetime, making them ideal wealth-transfer vehicles. Beneficiaries of Roth IRAs don’t owe income tax* on withdrawals and can stretch out distributions over many years.
*Beneficiaries may still owe estate taxes—particularly if congress drops estate tax exclusion limits after 2012.
Both traditional and Roth IRAs allow owners to begin taking penalty-free, “qualified” distributions at age 59 ½. However, Roth IRAs require that the first contribution be at least five years before qualified distributions begin.

Extra Benefits & Considerations

It’s also worth factoring in some of the specific rules and benefits of traditional and Roth IRAs. Here’s a breakdown:

Traditional IRAs:

  • Contributions to traditional IRAs lower your taxable income in the contribution year. That lowers your adjusted gross income, helping you qualify for other tax incentives you wouldn’t otherwise get, such as the child tax credit or the student loan interest deduction.
  • Up to $10,000 can be withdrawn without the normal 10% early-withdrawal penalty to pay for qualified first-time homebuyer expenses. However, you’ll pay taxes on the distribution.

Roth IRAs:

  • Roth contributions (but not earnings) can be withdrawn penalty- and tax-free any time, even before age 59 ½.
  • five tax years after the first contribution, you can withdraw up to $10,000 of Roth earnings penalty-free to pay for qualified first-time homebuyer expenses.
Keep in mind that Congress can change these rules at any time. So while these are the rules today, they may be very different when you retire.
Thanks to Kelly Spors of who compiled much of this information.

Wednesday, August 19, 2015

Education Tax Credits are available!

Back-to-School Reminder for Parents and Students: Check Out College Tax Credits for 2015 and Years Ahead
WASHINGTON ― With another school year just around the corner, the Internal Revenue Service today reminded parents and students that now is a good time to see if they will qualify for either of two college tax credits or other education-related tax benefits when they file their 2015 federal income tax returns.
In general, the American Opportunity Tax Credit or Lifetime Learning Credit is available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer, spouse and dependents. The American Opportunity Tax Credit provides a credit for each eligible student, while the Lifetime Learning Credit provides a maximum credit per tax return.
Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year.  To claim these credits on their tax return, the taxpayer must file Form 1040 or 1040A and complete Form 8863, Education Credits.
The credits apply to eligible students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. The credits are subject to income limits that could reduce the amount claimed on their tax return.
To help determine eligibility for these benefits, taxpayers should visit the Education Credits Web page or use the IRS’s Interactive Tax Assistant tool. Both are available on
Normally, a student will receive a Form 1098-T from their institution by Jan. 31 of the following year. (For 2015, the due date is Feb. 1, 2016, because otherwise it would fall on a Sunday.) This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits. Taxpayers should see the instructions to Form 8863 and Publication 970 for details on properly figuring allowable tax benefits.
Many of those eligible for the American Opportunity Tax Credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified education expenses paid during the entire tax year for a certain number of years:
  • The credit is only available for four tax years per eligible student. 
  • The credit is available only if the student has not completed the first four years of postsecondary education before 2015.
Here are some more key features of the credit:
  • Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student. Other expenses, such as room and board, are not qualified expenses.
  • The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
  • Forty percent of the American Opportunity Tax Credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student.
  • The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.
The Lifetime Learning Credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American Opportunity Tax Credit, the limit on the Lifetime Learning Credit applies to each tax return, rather than to each student. Also, the Lifetime Learning Credit does not provide a benefit to people who owe no tax.
Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:
  • Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.
  • The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability.
  • Income limits are lower than under the American Opportunity Tax Credit. For 2015, the full credit can be claimed by taxpayers whose MAGI is $55,000 or less. For married couples filing a joint return, the limit is $110,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $130,000 or more and singles, heads of household and some widows and widowers whose MAGI is $65,000 or more.
Eligible parents and students can get the benefit of these credits during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.
There are a variety of other education-related tax benefits that can help many taxpayers. They include:
  • Scholarship and fellowship grants — generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.
  • Student loan interest deduction of up to $2,500 per year.
  • Savings bonds used to pay for college — though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.
  • Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education.
Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the Earned Income Tax Credit.
The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for these benefits. Details can also be found in the Tax Benefits for Education Information Center on

Tuesday, August 18, 2015

Truckers and Taxes

Truckers: For Most, Highway Use Tax Return is due Aug. 31
Truckers and other owners of heavy highway vehicles that in most cases their next federal highway use tax return is due Monday, Aug. 31, 2015.
The deadline generally applies to Form 2290 and the accompanying tax payment for the tax year that begins July 1, 2015, and ends June 30, 2016. Returns must be filed and tax payments made by Aug. 31 for vehicles used on the road during July. For vehicles first used after July, the deadline is the last day of the month following the month of first use.
Though some taxpayers have the option of filing Form 2290 on paper, the IRS encourages all taxpayers to take advantage of the speed and convenience of filing this form electronically and paying any tax due electronically. Taxpayers reporting 25 or more vehicles must e-file. A list of IRS-approved e-file providers can be found on
The highway use tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more. This generally includes trucks, truck tractors and buses. Ordinarily, vans, pick-ups and panel trucks are not taxable because they fall below the 55,000-pound threshold. The tax of up to $550 per vehicle is based on weight, and a variety of special rules apply, explained in the instructions to Form 2290.
For more information, visit the Trucking Tax Center or just call us!

Monday, August 03, 2015

FIFO, LIFO, what is up with inventory valuation?

The Financial Accounting Standards Board (FASB) issued new guidance on July 22 that is intended make the measurement of inventory in financial statements less complex.  Stakeholders told the board that guidance on the subsequent measurement of inventory is unnecessarily complex because there are several potential outcomes. Inventory (Topic 330) currently requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin, according to the FASB.
Under Accounting Standards Update No. 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory, the FASB decided to exclude inventory measured using last-in, first out (LIFO) or the retail inventory method, after stakeholders said there could be significant transition costs. Instead, the amendments apply to all other inventory, including inventory measured using first-in, first out (FIFO) or average cost. Stakeholders said inventory measured using FIFO or average cost would reduce costs and increase comparability.
The new guidance states that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method.
In addition, the FASB amended some of the other guidance in Topic 330 to more clearly articulate the requirements for the measurement and disclosure of inventory. However, the board does not intend for those clarifications to result in any changes in practice.
For public business entities, the amendments will take effect for fiscal years beginning after Dec. 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments take effect for fiscal years beginning after Dec. 15, 2016, and interim periods within fiscal years beginning after Dec. 15, 2017. The new guidance should be applied prospectively, and earlier application is permitted as of the beginning of an interim or annual reporting period.

The FASB launched its simplification initiative in June 2014, with the objective of identifying, evaluating, and improving areas of US Generally Accepted Accounting Principles for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to financial statement users.

Thursday, July 30, 2015

Employers and the ACA

Overview of the Employer Shared Responsibility Provisions
The Affordable Care Act contains specific responsibilities for employers. The size and structure of your workforce – small, large, or part of a group – helps determine what applies to you. Employers with 50 or more full-time equivalent employees will need to file an annual information return reporting whether and what health insurance they offered employees. In addition, they are subject to the Employer Shared Responsibility provisions. All employers that are applicable large employers are subject to the Employer Shared Responsibility provisions, including federal, state, local, and Indian tribal government employers.
An employer’s size is determined by the number of its employees. Generally, if your organization has 50 or more full-time or full-time equivalent employees, you will be considered a large employer. For purposes of this provision, a full-time employee is an individual employed on average at least 30 hours of service per week. 
Under the Employer Shared Responsibility provisions, if an applicable large employer does not offer affordable health coverage that provides a minimum level of coverage to their full-time employees and their dependents, the employer may be subject to an Employer Shared Responsibility payment. They must make this payment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage through the Health Insurance Marketplace.
The Employer Shared Responsibility provisions generally are effective at the beginning of this year. Employers will use information about the number of employees they have and those employees’ hours of service during 2014 to determine if they are an applicable large employer for 2015. 
If you are a self-insured employer – that is, an employer who sponsors self-insured group health plans – you are subject to the information reporting requirements for providers of minimum essential coverage whether or not you are an applicable large employer under the employer shared responsibility provisions.
For more information, visit the employer shared responsibility page. For information about transition relief available for employers related to the shared responsibility provision, visit

Tuesday, July 21, 2015

Self Insured Employers have to file Health Coverage Info Returns also!

Self-Insured Employers Must File Health Coverage Information Returns
Regardless of size, all employers that provide self-insured health coverage to their employees are treated as coverage providers. These employers must file an annual return reporting certain information for each employee they cover.
As coverage providers, these employers must:
  • File a Form 1095-B, Health Coverage, with the IRS, accompanied by a Form 1094-B transmittal. Filers of more than 250 Forms 1095-B must e-file. The IRS allows and encourages entities with fewer than 250 forms to e-file.
  • Furnish a copy of the 1095-B to the responsible individual – generally the primary insured, employee, parent or uniformed services sponsor. You may electronically furnish the Form 1095-B.
If a provider is an applicable large employer also providing self-insured coverage, it reports covered individuals on Form 1095-C instead of Form 1095-B. Form 1095-C combines reporting for two provisions of the Affordable Care Act for these employers.
The information reporting requirements are first effective for coverage provided in 2015.  Thus, health coverage providers will file information returns with the IRS in 2016, and will furnish statements to individuals in 2016, to report coverage information in calendar year 2015.
The information that a provider must report to the IRS includes the following:
  • The name, address, and employer identification number of the provider.
  • The responsible individual’s name, address, and taxpayer identification number, or date of birth if a TIN is not available.  If the responsible individual is not enrolled in the coverage, providers may, but are not required to, report the TIN of the responsible individual.
  • The name and TIN, or date of birth if a TIN is not available, of each individual covered under the policy or program and the months for which the individual was enrolled in coverage and entitled to receive benefits.
For more information, see Questions and Answers on Information Reporting by Health Coverage Providers on  Employers who provide self-insured coverage should review Publication 5125, Responsibilities for Health Coverage Providers. Applicable large employers should review Publication 5196, Reporting Requirements for Applicable Large Employers

Thursday, July 16, 2015

We received the acceptance of the Offer in Compromise

IRS accepted another Offer in Compromise that my office prepared!  Great for us and my client!

Friday, July 10, 2015

Another IRS Offer In Compromise being accepted

Some good news to report, our firm is on the cusp of having another Offer in Compromise accepted by the IRS.  This is good news for us and it is GREAT news for our client!  If you could use the assistance of an Offer in Compromise, and you meet the stringent guidelines, we can help!  Call today!

Monday, June 29, 2015

Summer Wedding and taxes

Include a Few Tax Items in Your Summer Wedding Checklist
If you’re preparing for summer nuptials, make sure you do some tax planning as well. A few steps taken now can make tax time easier next year. Here are some tips from the IRS to help keep tax issues that may arise from your marriage to a minimum:
  • Change of name. All the names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. The easiest way for you to get the form is to download and print it on You can also call SSA at 800-772-1213 to order the form, or get it from your local SSA office.
  • Change tax withholding. When you get married, you should consider a change of income tax withholding. To do that, give your employer a new Form W-4, Employee's Withholding Allowance Certificate. The withholding rate for married people is lower than for those who are single. Some married people find that they do not have enough tax withheld at the married rate. For example, this can happen if you and your spouse both work. Use the IRS Withholding Calculator tool at to help you complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax, for more information. You can get IRS forms and publications on at any time.
  • Changes in circumstances. If you receive advance payments of the premium tax credit you should report changes in circumstances, such as your marriage, to your Health Insurance Marketplace. Other changes that you should report include a change in your income or family size. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes in circumstances will allow the Marketplace to adjust your advance credit payments. This adjustment will help you avoid getting a smaller refund or owing money that you did not expect to owe on your federal tax return.
  • Change of address. Let the IRS know if you move. To do that, file Form 8822, Change of Address, with the IRS. You should also notify the U.S. Postal Service. You can change your address online at, or report the change at your local post office.
  • Change in filing status. If you are married as of Dec. 31, that is your marital status for the entire year for tax purposes. You and your spouse can choose to file your federal tax return jointly or separately each year. It is a good idea to figure the tax both ways so you can choose the status that results in the least tax.