Wednesday, October 26, 2016

As we draw closer to the end of 2016, the question of tax planning takes on a greater importance for many taxpayers.  For residents of the State of Arizona, the various tax credit donation options have always seemed to be a great way to reduce their tax liability while doing good for the community.

For those taxpayers who are not familiar with these tax credit donations or how they apply to your individual income taxes, here is a very quick and brief explanation.  The State of Arizona allows taxpayers to make donations to a variety of organizations, for several different purposes and, instead of deducting the donation as an itemized deduction on the Arizona return, take a dollar for dollar tax credit (a direct reduction of the tax liability).  By taking advantage of these tax credits, the taxpayer can reduce their total Arizona tax obligation to zero and receive a refund of all the Arizona taxes that have been paid for the year, through withholding or estimated tax payments.  The amount of reduction is limited to the amount of the total tax obligation or the limits on the donations, whichever is lower.

Here is the good news, Arizona Governor Doug Ducey signed both SB 1216 and SB 1217 into law earlier this year.  These new laws both increase the amount that taxpayers may donate under some of the credits and extend the due date for the donations to be claimed as a credit on the Arizona return. The following is a recap of these credits, the due date and the maximum amount.

                                       Single/Head of        Married Filing
Credit Type                    Household Cap            Joint Cap             Due Date for 2016 Donations

Qualified Charitable
  Organization                    $400.00                   $800.00                  April 15, 2017

Foster Care Charitable
  Organization                    $500.00                $1,000.00                 April 15, 2017

Public School Tax
  Credit                               $200.00                   $400.00                 April 15, 2017

Private School Tuition
  Tax Credit and overflow  $1,087.00             $2,173.00                 April 15, 2017
        Regular (Form 323)    $545.00               $1,090.00
        Overflow (Form 348) $542.00               $1,083.00

Military Family Relief
  Fund Tax Credit                $200.00                  $400.00                 December 31, 2016
  (This donation is limited to a
    total aggregate amount of
    $1,000,000.  This means that
    once a total of $1,000,000
    has been donated for the year,
    the credit is no longer available
    for any taxpayer).

This can be a somewhat confusing system, so I urge you to give me a call to discuss the impact they may have on your income tax returns for 2016.

Friday, February 12, 2016

A quick follow-up on the scams

It seems like a lot of people may be catching on to the phone scam, although you should not let your guard down.  The scammers are still active.  However, it now appears that they have added the internet to their arsenal of weapons to get your money out of your pocket and into theirs'.  Reports have been coming in about emails being received by taxpayers, allegedly from the IRS collections division demanding immediate payment of the delinquent tax judgement.  The emails even contain what looks like an official IRS logo.

If you do get one of these emails, hit the JUNK MAIL button immediately, and add it to your blocked senders' list.  It is a FRAUD.

These emails have several tell-tale faults.  First, the IRS NEVER contacts taxpayer's by email.  NEVER, EVER!!!!!!!!!!!  Second, when the recipient looks at the logo, it is clearly not real.  Thirdly, the usually come from a gmail or yahoo account.  Lastly, there are typically misspellings in the email address or the body of the text.

Remember, the IRS does not want to arrest you, especially over a debt of several thousand dollars.  It would cost them more than that to feed you!!!  The world is full of dishonest people who want to separate you from your money.  Just hang up or hit delete and go on with your day.

Saturday, January 30, 2016

More Scams

Back in April, 2015 I warned of an IRS scam.  I just received a notice from the IRS warning that the scam is back.

The premise of this scam is that the caller is a special agent with the collections division of the IRS, and is calling to advise the person that a warrant for their arrest has been issued due to their fraudulent tax returns.  They will say that the person has one last chance to avoid arrest and prison time.  All they have to do is send several thousand dollars in cash cards immediately.  The person is advised to withdraw the cash from their bank account and purchase the cards at WalMart or some other store which sells them.  These cards are not traceable and cannot be cancelled.  Once the money is sent, the scam is complete.  Needless to say, he victim is not arrested, but then they never would have been arrested.  The reported losses from this scam are in excess of $30 million, and that is only what has been reported.

If you get one of these calls, the best thing to do is hang up IMMEDIATELY!!!!!  The IRS NEVER makes these types of calls.  All IRS communications is done through the mail.  

Saturday, January 9, 2016


I hope all of you had a very Merry Christmas and a Happy and Safe New Year.  As an accountant, the dropping of the ball in Times Square also signifies the start of another Tax Season!  Here is a very quick, and brief update on what's new in taxes for the 2016 filing season (meaning the filing of the 2015 income tax returns).

Hooray for Congress!?  Isn't it just great to see how responsive Congress is to the needs of the American Public?  Instead of waiting until the absolute last minute this year, Congress passed the Protecting Americans from Tax Hikes Act or PATH Act of 2015 on December 18, 2015.  (Yes, that is the real name of the bill).  This law extends and makes permanent many of the income tax provisions that expired December 31, 2014, retroactive to January 1, 2015.

Not wanting to make things too easy for taxpayers and their advisers, Congress also included provisions that have an impact on most people's income tax returns, in the Trade Preferences Extension Act of 2015 and the Defending Public Safety Employees' Retirement Act.  Both of these pieces of legislation were signed into law on January 29, 2015.  As they say in the As Seen on TV Commercials, "But wait, that's not all!"  On July 31, 2015, the President signed the 2015 Highway Funding Bill (H. R. 3236).  In order to provide the funding for this bill, Congress included some additional tax law changes in this piece of legislation.

The PATH Act includes provisions that impact approximately 24 different provisions of the tax code which had expired on December 31, 2014.

What's new with ACA (the Affordable Care Act, aka Obama Care)?

The IRS is the Federal Agency that has been charged with the enforcement of the ACA and for making sure that every individual has health insurance or pays a fine if they do not qualify for one of the exclusions.  To do this, the IRS set up three new reporting forms, Forms 1095-A, 1095-B and 1095-C.  These are forms which must be provided to every individual in the United States (or family) to show if they met the requirements of the law for the entire year.  The forms are issued as follows:  Form 1095-A is issued by the Marketplace Exchanges to individuals obtaining coverage through the marketplace.  This usually means that they received a premium tax credit.  The Form 1095-B is issued by insurance companies to individuals who obtain private insurance directly from an insurance company, and not through the Exchange or who work for a small employer.  Form 1095-C is to be issued by the large employers that are required to offer affordable health insurance to their employees.  These forms were originally required to be provided to individuals by January 31, 2015 for the 2014 calendar year, which was the first year that individuals were required to have insurance. The provision of the law requiring insurance companies and large employers to provide these forms in 2015 was dropped, and they were given until January 31, 2016 to provide the forms for 2015.

As a tax preparer, I am required to verify that the information included on the return agrees with the information on these forms.  This all sounds easy enough, right?  "But wait, that's not all!"

In the last week of December, 2015, the IRS issued Notice 2016-4, which extends the due dates for the 2015 information reporting requirements, both to the individuals and to the IRS, by 60 days.  This applies only to the insurance companies and large employers, and means that they are not required to provide the Forms 1095-B or 1095-C to the individuals until March 31, 2016.

This means that, as a preparer, if you do not have the Form 1095-B or 1095-C, I either have to independently verify your insurance coverage or wait until you have the form and can verify the information on your return before the return can be filed.  Failure to do so could result in significant penalties for both the taxpayer and the taxpreparer, if the information on the Form 1095 does not agree with what is reported to the IRS.  We are still waiting to see if the IRS will provide some form of relief to taxpayers and taxpreparers.

There is some hope, I have been hearing from a number of clients that they have already received their Form 1095-B from the insurance company.  It is possible that most insurance companies were not anticipating the delay in the filing dates and have already sent out the forms or will be sending them very soon.  Hopefully, this will be the same for many of the large employers required to file Form 1095-C.

Remember, NOW is the time to start gathering your tax documents.  Even if you don't have the Form 1095-B or 1095-C, get everything else together and bring it in.

Please let me know if you have any questions.

Friday, April 3, 2015

BEWARE of the IRS Scam

Recently, I have received a number of phone calls from panicked clients, reporting that the IRS is going to arrest them.  The theme is always is the same.  They report receiving a very stern call from someone identifying themselves as an IRS agent.  They even give a "badge number."

Their story is that the individual being called has been indited on a criminal tax evasion charge.  They inform the person that a warrant has been issued for their arrest and will be served by Federal Agents within a few days.  They may even say that the person will be taken into custody because they have ignored the prior correspondence and attempts to contact them by the agents.

By this time the person being called is usually in a panic.  Now they move in for the kill.  They tell the person that the arrest warrant can be killed IF the person is willing to pay the taxes in full immediately.  The problem is that they cannot accept personal checks or credit cards because the person cannot be trusted, since they have ignored the previous attempts to collect the debt.  The only way to avoid being arrested is to obtain and send a prepaid money (debit) card.  During the call, they may warn the person not to hang up or they will have the arrest warrant served immediately.

THIS SI A SCAM!!!!!  The IRS NEVER contacts people in this way.  If you receive one of these calls, do exactly what they tell you not to do, HANG UP IMMEDIATELY.  Then, you should notify your local police or sherrif's department.  If they call back, do not answer or hang up again.

I have heard estimates that this scam has cost people over $15,000,000.  Don't  add  to the total.

Wednesday, November 12, 2014

Are YOU ready for the 2014 tax reporting of the ACA?

The individual mandate section of the Affordable Care Act (ACA), or Obamacare, became effective on January 1, 2014.  Essentially, this requires all individuals to have health insurance that meets the requirements of the law, for ALL of 2014.  Certain taxpayers, who meet the income tests and who obtained coverage through the insurance exchange, may have received a premium assistance credit.  Other taxpayers may have ignored the mandate and did not obtain insurance.

The IRS has been charged with the task of enforcing the provisions of the Act.  This means that the information will have to be included on every taxpayers' income tax return for 2014.  This, in turn, will increase the work that is required to prepare even the easiest of returns.  In order to help insure compliance with the law, the IRS has developed several new forms.

The first set of forms is designed to provide information about the period for which the taxpayers, and all dependents, had coverage, and if they received the benefit of a premium assistance credit.  Form 1095-A will be issued by the insurance exchanges to all indivivuals who have obtained coverage through the exchange.  Forms 1095-B and 1095-C will be issued by insurance companies (B) and employers (C).  These forms will provide valuable information necessary to ascertain and report compliance with the law and to calculate the correct amount of credit.  Unfortunately, the forms are not required to be filed until 2016 for the 2015 tax year.  This means that if the Form 1095-B or -C is not voluntarily filed by the insurance company or employer, the the taxpayer will have to provide the information and verificatio from an alternate source.

If you have not obtained insurance through an exchange, you will need to verify that you do have coverage that meets the requirements of Minimum Essential Coverage, or a Bronze Level plan for ALL of 2014 or face the shared responsibility penalty.  If you do have coverage, you need to make sure that you receive verification from the insurance company that it meets the MEC requirements and have verification as to the period of coverage and the fact that it covers all members of the household.  If you have received a premium credit from the exchange, you will need to have the Form 1095-A and details about your total household income.

The bottom line is simply this, it is going to  be a rather tedious task to prepare income tax returns this year.  It is wise to begin planning and gathering the necessary information well in advance to avoid unnecessary delays, expenses and surprises.

If you need additional information or want to discuss this in more detail, please give me a call.

Wednesday, May 29, 2013

Arizona Sales Tax Changes

In 2010, voters in the State of Arizona approved a Temporary Sales Tax of 1%.  This tax was approved for a period of three (3) years, beginning June 1, 2010 and ending May 31, 2013.  In November, 2013, an initiative appeared on the ballot to make this Temporary Tax a permanent tax.  It was soundly defeated by the voters in Arizona.  As a result, the Temporary Tax of 1% will expire on May 31, 2013.  The result being that the state wide sales tax in Arizona will drop by 1% on June 1, 2013.

Currently, the Arizona Transaction Privilege Tax (more commonly known as the sales tax) will drop from 6.6% of taxable sales to 5.6% of taxable sales.  Many counties in Arizona, including Pima County, have enacted an additional 0.5% (1/2%) sales tax in addition to the state tax.  Since this is collected by the Arizona Department of Revenue, the effective rate in Pima County is currently 7.1% and will drop to 6.1% on June 1, 2013.

What does this all mean?  For consumers, the sales taxes you pay on purchases will drop by 1%.  For purchases made in Tucson Arizona, the combined State/County and City of Tucson tax rate drops from 9.1% to 8.1% on June 1.  For a purchase of $100.00, the sales tax will drop from $9.10 to $8.10.  For the merchant, the rate of tax collected will therefore drop.  This means that effective Saturday, June 1, all merchants will need to reduce the taxes by 1%.  This will most likely require a reprogramming or correction to the tax section of your cash registers or computer programs to reflect the corrected rate.

What happens if a merchant forgets to adjust the tax rate?  The merchant DOES NOT realize an additional profit if they forget to adjust their tax tables.  The excess amount collected still must be paid to the state or city.  Each jurisdiction has a section on their sales tax reports to show "excess taxes collected."  This is where the merchant is required to report any excess taxes collected in error.

Please contact me if you have any questions concerning this issue.