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Important Dates


15 Individuals - 4th Quarter Estimated Tax Payments are due


Year-end tax planning.  Consider year-end bonus and adjusting tax wtihholding if apprpriate.October 2015





The Tax Report Newsletter

The link below is to tax report, a bi-monthly newsletter on U.S. taxes. I purchase this for use by my clients and friends. When content within the newsletter contains information that I find important or relative to current issues, I will make additional comments here.

November 2015 Highlights

Year-end Planning

The two things  you can plan for are the timing of capial gains & losses, and contributions to a returement account.  If you turned 70-1/2 in 2015, pay particular to the comments regarding the timing of our initial required mininum distribution (RMD).

Estate Planning

The commentary on A New Framework for Estate Planning is particularly good, and I commend it to your reading.

September 2015 Highlights

Tax Obligations for Estate Executors

The executor of a decedent’s estate has basically three duties—identify and collect all of the decedent’s assets, satisfy all the decedent’s and the estate’s obligations (including the taxes described in the article) and make distribution in accordance with the decedent’s Will.  The trustee of a living trust has similar obligations that are not eliminated by the use of a trust.  There are two items to emphasize—one included in the article and the other not.

The article speaks of the $5.43 million exclusion for federal estate taxes.  This is a federal number.   The State of Washington also has an estate tax, but the state exclusion is only $2 million.  It is quite common to be exempt from filing a federal estate tax return while still having a State of Washington tax obligation.

The last paragraph in the article deserves careful reading. The election to pass the unused exclusion amount to the surviving spouse for eventual use can be very valuable. While it is common to leave everything to the surviving spouse, that often will result in an estate tax in the estate of the surviving spouse.  Making the election could result in a significant estate tax savings in the estate of the surviving spouse, but not without a cost.  To make the election it is necessary to file a federal estate tax return, which could be costly.

The real lesion of this article is to plan your estate, and to revisit your estate plan at lease every decade, or whenever you have a significant personal or financial change in your life.

 Switching Jobs

The paragraph on Health Insurance speaks of COBRA coverage.  If you are of 65 years of age or older and are not yet enrolled in Medicare Part B coverage, you should be aware of the COBRA trap.  The Medicare rules impose a time frame for enrolling in Medicare Part B after you turn 65, and impose financial penalties for those who do not enroll timely.  One can defer enrolling in Medicare Part B if he or she is covered by an employer’s health plan.  While COBRA coverage can extend for up to 18 month after leaving the employer, COBRA coverage is not considered coverage under an employer’s plan for Medicare purposes.  If you are 65 or older and wait to expiration of COBRA coverage before enrolling in Medicare Part B, you may find yourself subject to a financial penalty.

Pay particular attention to the indirect rollover paragraph under Retirement Benefits.  The rule to follow is to never, never, never take an indirect rollover, but always, always, always use a trustee to trustee transfer for a rollover.

 Accountable Plan Advantages

If you are an employer, know about and implement an Accountable Plan. If you’re an employee, make sure your employer’s expense reimbursement policies constitute an Accountable Plan.  Enough said.


July 2015 Highlights

Social Security Benefits

The article, "Are Social Security Benefits Taxable?" contains some good advice about planning for the timing of the receipt of other income, if possible, to minimize the taxability of Social Security Benefits.  There is a parallel issue with the cost of Medicare. The basic basic Medicare cost is $104.90 per month for those with incomes under $170,000.  That cost increases to $146.90 for incomes between $170,000 and $214,000, with more dramtic increases as income increases.  The Social Security Administration has some descretionary ability to not increase Medicare costs where where the increase in income is due to a one-time event, such as the sale of a personal residence, but that involves a process of dealing with bureaucracy, which is never a welcome task. Where your income is close to one of the levels that can result in an increase in Medicare costs, it might be wise to plan the timing of the receipt of income to prevent an unwelcome surprise a year later.

The Repair Regulations

If you run a business or own rental property, read this article several times until you understand it.  We can help with the process.  Adopting the repair regulations can help to avoid future controversy and may result in significant future tax savings when repairs to property are required.


May 2015

TOP 5 Mobile Apps to use for Tax Season

Mobile apps seem to make everything easier, don’t they? Here are the TOP 5 Mobile apps that can help you save time filing your taxes and finding the financial resources you need for your business.

TurboTax Mobile App

Rather than having to calculate your own tax information, you simply answer questions that TurboTax asks you about your earnings and expenses, making tax time easy for those uncomfortable with filings. TurboTax is available on the computer and you can seamlessly switch over to your tablet or smartphone to continue working on your taxes. This app is available and free for iOS and Android.

Quick Tax Reference

In addition to filing your taxes, it’s helpful to have a handy reference for things like the current standard mileage rate, corporate tax rate schedules, and retirement plan limits. Quick Tax reference provides these tax references in an easily accessible format. This app is free and available for iOS and Android.

Ask a CPA

When you have a tax or accounting question and can’t find the answer online, you may not need to hire an accountant just to get that one answer. Instead, try downloading Ask a CPA. Its database is filled with commonly asked questions on topics like dependent care benefits, depreciation and startup expenses. If you can’t find the answer in the app, the app will connect you with a CPA in your area, who can answer the question for free. The free app is available for iOS and Android.


This app is useful year round. Expensify helps you keep track of your business expenses without juggling paper receipts. So if you’re on a business trip or just have receipts you want to save for tax time, take a photo of it with your phone and categorize it through your app. This app is available for iOS, Android and window phone devices.


The IRS got its own app game. IRS2Go lets you check your status of your refund within 24 hours of your electronic filing. The App is free and available for iOS and Android.

Retirement Savings: Leave, Take, or Roll?

If you are about to switch employers or retire, what are you going to do with the money you have in your employer’s retirement plan? Here are some options to consider:

You may leave the money where it is or you can take the cash distribution. Taking the distribution is the least desirable alternative from a tax viewpoint because you have to pay income taxes. To avoid the tax, you can do a direct rollover. You can have your money transfer from your former employer to your new employer’s retirement plan. These transfers are nontaxable.

New Support for the Young Disabled!!

The Achieving a Better Life Experience (ABLE) Act of 2014 allows qualifying disabled individuals to have accounts to help them cover certain living expenses! The ABLE accounts will not affect the individual’s benefits such as Medicaid or Supplemental Security Income. Only individuals who became blind or disabled before age 26 may qualify for an ABLE account!

Depreciating Business Property Saves Taxes

Depreciation deductions can be extremely valuable for a business. Regular deprecation deductions can significantly reduce a company’s tax bill depending on which method used.

Deduct your Taxes!

State or local income taxes paid during the year are deductible. Taxpayers may choose between deducting the actual sales taxes they paid or deducting an amount provided in IRS tables, plus the actual amount of sales taxes paid on purchases of motor vehicles, boats, and certain other items specified by the IRS.

Real Estate Taxes and Personal Property Taxes are also deductible.

Deduct your Refinancing Costs!

As the real estate market improves and mortgage rates remain low, many homeowners are considering refinancing their home mortgages. Interest on a refinanced loan will be deductible to the extent the loan refinances up to $1 million of home acquisition debt.  Points paid in connection with the portion of a mortgage used to finance home may be deductible in the year of refinancing.


January 2015

Documentation Counts!

It is important to know that taxpayers claiming deductions must follow the specific documentation rules established by the IRS in order to receive the proper deductions. Watch out for these common pitfalls:


·         Cash Contributions equal $250 or more, you need a contemporaneous written acknowledgment, a statement of whether the charity provided any goods or services in exchange for the gift, and, if so, a description and a good faith estimate of the value.

·         Cash Contributions less than $250 require a bank record or written receipt indicating the name of the organization, the date, and the amount of the contribution.

·         Noncash donations, you need a receipt and a record showing the name and a description of the gift.

Hobbies: Deductions for hobby expenses are strictly limited. If you wish to claim the full deductions, you must be prepared to show that your activity qualifies as a business. The IRS will presume it’s a business if you can show a profit in three of the past five years. If not, then you should prepare to produce evidence to satisfy a number of subjective tests to avoid the tax law’s “hobby loss” restrictions.

Divorce: Alimony payments are tax deductible, but payments for child support are not. Taxpayers should retain their final divorce decree and any agreements for child support in case the IRS questions claimed deductions. Also retain any agreements regarding who will claim exemptions for dependent children.

Business expenses (travel, meals, entertainment, and transportation): You must retain documentation to establish the amount, time, place, and business purpose for each expenditure. Specific expense categories may have additional requirements.

Business use of an automobile: Maintain records for the cost of the car and any improvements starting from the day you started using it for business. That includes the mileage, destination, the business purpose for each trip, and the total mileage for the year.

Home Office: Be prepared to produce records of your claimed expenses, and show regular and exclusive business use of that part of the home.

Student Loan Interest: Taxpayers may deduct up to $2,500 of interest expense on qualified higher education loans.

Moving Expenses: Taxpayers who moves as a result in change in his or her principal place of work may deduct certain costs of moving to the new residence.

Health Savings Account: The 2014 deduction limits are $3,300 for those with self-only coverage under an eligible high-deductible health plan and $6,550 for those with family coverage. An additional $1,000 deduction is available to those 55 and older who are not enrolled in Medicare.

Self-employed taxpayers: The self-employed also may be able to deduct retirement plan contributions, qualified health insurance premiums, and a portion of their self-employment taxes.

Residential Energy Credits

You might have begun to notice more solar energy panels lately! Part of the reason may be the generous federal tax credit available for these and other types of renewable energy equipment installed in residences before 2017. The residential energy-efficient property credit allows taxpayers a tax credit of up to 30% of the expenses paid for solar electric, solar hot water, geothermal heat pumps, small wind energy, and fuel cell property. The credit covers both equipment and installation expenses including the cost of piping or wiring the equipment into the home. In order to be qualified, the qualified property must be placed in service prior to 2017 in the taxpayer’s new or existing U.S residence.

Tracking down Interest Deductions

Here are different categories of interest expenses that have different deductibility rules.

·         Personal Interest: Interest paid by consumers on their personal credit cards is generally not deductible.

·         Student Loan Interest: Up to $2,500 is potentially deductible.

·         Qualified Residence interest: On a mortgage up to $1 million used to buy, build, or substantially improve your home, along with interest on a home equity loan of up to $100,000, is generally allowed as an itemized deduction.

·         Investment interest: Deductible to the extent of “net investment income.”

·         Trade or business interest: Generally deductible in full.

·         Passive activity interest: Generally deductible against passive activity income.

Tax Efficient Investing

When it comes to investment decisions, taxes should never be the deciding factor. But a smart investor looks to minimize taxes wherever possible. The following are several tax strategies you can use to minimize taxes on investments.

·         Minimize Retirement contributions: to tax-deferred accounts by making tax-deductible or pretax contributions to IRAs or employer-sponsored retirement plan accounts. Investing the tax savings can boost returns.

·         Minimize Turnover: One way to minimize turnover is to avoid frequent trading. Another is to avoid mutual funds with high turnover ratios. Passively managed index funds trade relatively infrequently and tend to have lower tax costs.

·         Asset Allocation: Because higher tax rates point toward tax deferral, a logical strategy is placing assets that are taxed at relatively low rates in taxable accounts and assets taxed at higher rates in tax deferred accounts.



Please click the tax report link below to read previous month's tax issues.