Get the most out of your energy credits. Read about options in the article below from Business Management Daily.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
Raising the standard deduction…read all about it here in the article from The News & Observer
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
There are virtually countless charitable organizations to which you might donate. You may choose to give cash or to contribute noncash items such as books, sporting goods, or computers or other tech gear. In either case, once you do the good deed, you owe it to yourself to properly claim a tax deduction.
No matter what you donate, you’ll need documentation. And precisely what you’ll need depends on the type and value of your donation. Here are five things to know:
1. Cash contributions of less than $250 are the easiest to substantiate. A canceled check or credit card statement is sufficient. Alternatively, you can obtain a receipt from the recipient organization showing its name, as well as the date, place and amount of the contribution. Bear in mind that unsubstantiated contributions aren’t deductible anymore. So you must have a receipt or bank record.
2. Noncash donations of less than $250 require a bit more. You’ll need a receipt from the charity. Plus, you typically must estimate a reasonable value for the donated item(s). Organizations that regularly accept noncash donations typically will provide you a form for doing so. Keep in mind that, for donations of clothing and household items to be deductible, the items generally must be in at least good condition.
3. Bigger cash donations mean more paperwork. If you donate $250 or more in cash, a cancelled check or credit card statement won’t be sufficient. You’ll need a contemporaneous written acknowledgment from the recipient organization that meets IRS guidelines.
Among other things, a contemporaneous written acknowledgment must be received on or before the earlier of the date you file your return for the year in which you made the donation or the due date (including an extension) for filing the return. In addition, it must include a disclosure of whether the charity provided anything in exchange. If it did, the organization must provide a description and good-faith estimate of the exchanged items or service. You can deduct only the difference between the amount donated and the value of the item or service.
4. Noncash donations valued at $250 or more and up to $5,000 require still more. You must get a contemporaneous written acknowledgment plus written evidence that supports the item’s acquisition date, cost and fair market value. The written acknowledgement also must include a description of the item.
5. Noncash donations valued at more than $5,000 are the most complicated. Generally, both a contemporaneous written acknowledgement and a qualified appraisal are required—unless the donation is publicly traded securities. In some cases additional requirements might apply, so be sure to contact us if you’ve made or are planning to make a substantial noncash donation. We can verify the documentation of any type of donation, but contributions of this size are particularly important to document properly.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
The PATH Act gives business owners much to thing about as well. First, there’s the enhanced Section 179 expensing election. Now permanent (and indexed for inflation beginning in 2016) is the ability for companies to immediately deduct, rather than depreciate, up to $ 500,000 in qualified new or used assets. The deduction phases out, dollar for dollar, to the extent qualified asset purchases for the year exceeded $2 million.
The 50% bonus depreciation break is also back, albeit temporarily. It’s generally available for new (not used) tangible assets with a recovery period of 20 years or less, and certain other assets. The 50% amount will drop to 40% for 2018 and 30% for 2019, however.
In addition, the PATH Act addresses two important tax credits. First, the research credit has been permanently extended, with some specialized provisions for smaller businesses and start-ups. Second, the Work Opportunity credit for employers that hire members of a “target group” has been extended through 2019.
Does your company provide transit benefits? If so, note that the law makes permanent equal limits for the amounts that can be excluded from an employee’s wages for income and payroll tax purposes for parking fringe benefits and van-pooling/ mass transit benefits.
Much, much more
Whether you’re filing as an individual or on behalf of a business, the PATH Act could have a substantial effect on your 2015 tax return. We’ve covered only a few of its many provisions here. Please contact us to discuss these and other provisions that may affect your situation.
Sidebar: Good news for generous IRA owners
The recent tax extenders law makes permanent the provision allowing taxpayers age 70.5 or older to make direct contributions from their IRA to qualified charities up to $100,000 per tax year. The transfer can count towards the IRS owner’s required minimum distribution. Many rules apply so, if you’re interested, let us help with this charitable giving opportunity.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
Like many taxpayers, you may have been expecting to encounter a few roadblocks while traversing your preferred tax-savings avenues. If so, tax extenders legislation signed into law this past December may make your journey a little easier. Let’s walk through a few highlights of the Protecting Americans from Tax Hikes Act of 2015 (the Path Act).
If you’re a homeowner, the PATH Act allows you to treat qualified mortgage insurance premiums as interest for purposes of the mortgage interest deduction through 2016. However, this deduction is phased out for higher income taxpayers. The law likewise extends through 2016 the exclusion from gross income for mortgage loan forgiveness.
Those living in a state with low or no income taxes (or who make large purchases, such as a car or boat) will be pleased that the itemized deduction for state and local sales taxes, instead of state and local income taxes, is now permanent. Your deduction can be determined easily by using an IRS calculator and adding the tax you actually paid on certain major purchases.
Investors should note that the PATH Act makes permanent the exclusion of 100% of the gain on the sale of qualified small business stock acquired and held for more than five years (if acquired after September 27, 2010). The law also permanently extends the rule that eliminates qualified small business stock gain as a preference item for alternative minimum tax (AMT) purposes.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
IRA’s with multiple beneficiaries that include charity or other non-person entity must pay out that entity’s share by September 30 of the year following the owner’s death. If that share isn’t paid out and the account hasn’t been split, the rest of the beneficiaries can’t take withdrawals over their life expectancies. They will have to empty the account within five years if the owner died before his required beginning date for taking distributions. If the owner died after that date, the beneficiaries must take annual RMDs based on the deceased’s life expectancy, as noted in IRS tables.
If a trust is a beneficiary, send a copy of the trust to the IRA custodian by October 31 of the year following the year the owner dies. Otherwise, the trust is considered a non- designated beneficiary and the same pay-out rules that applied in the previous scenario with the charity will kick in.
Source: Kiplinger’s Retirement Report
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
Be sure to advise your beneficiaries to split the IRA, especially if they have a wide age difference. If the account is not split, the age of the oldest beneficiary will be used to calculate RMD’s which will shorten the number of years the money can grow tax deferred.
Say the beneficiaries are a 75 year old sister, a 50 year old son and a 20 year old grandchild. If the account remains whole, all the heirs will have to calculate their RMDs based on the 75 year old’s life expectancy. Instead, if the account is split by December 31 of the year following the year the owner dies, each beneficiary can use their own life expectancy to take RMDs—and can choose hoe to invest the money. “The distribution depends on age—the younger the beneficiaries are, the less they have to take out,” says Mike Piershale, president of Piershale Financial Group, in Crystal Lake, Illinois.
Source: Kiplinger’s Retirement Report
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
Tax and Money Tip this Week:
Inheriting an IRA: Titling the IRA Account Improperly
April 20, 2016 | No. 281
Nonspouse beneficiaries cannot roll an inherited IRA into their own IRA. Instead, a separate account must be set up with a title that includes the decedent’s name and the fact that the account is for a beneficiary. For example, the account could be retitled to “John Doe (deceased April 14, 2014) IRA for the benefit of Jane Doe.” If the account is split among beneficiaries, each new IRA must be properly retitled. And once the IRA is retitled, don’t forget to name successor beneficiaries.
Source: Kiplinger’s Retirement Report
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
The Week After Tax Season
Aaah…..the week after tax season is the best week in a CPA’s life each year!
We met a lot of new clients this year because of referrals from existing clients, and readers of our Tax and Money Tip of the Week. Thank you!
Our firm continues solid growth thanks to all of you.
A referral is the best compliment we can ever receive.
Even though our tax season is over, we will continue our Tax and Money Tip of the Week for the rest of the year. We will keep you updated on the constant tax law changes as well as spotlighting specific tax and money making ideas.
Again, thank you for making this one of the most successful tax seasons yet.
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
Owners of traditional IRAs must start taking required minimum distributions when they turn 70 1/2. Nonspouse beneficiaries of any age who want to “stretch” the IRA over their own life expectancies must start RMDs the year following the year the owner died. Heirs will have to pay tax on distributions of deductible contributions and earnings from a traditional IRA.
Also, while Roth IRA owners never have to take RMDs, nonspouse beneficiaries must. However, withdrawals from an inherited Roth IRA are still tax free.
Not taking an RMD results in a 50% penalty on the amount that should have been withdrawn for the year. If you miss an RMD, you may avoid the penalty by emptying the account within five years of the owners death (if the owner died before he had to start RMDs). “However, depending on the size of the IRA and the age of the beneficiary, it might be smarter to pay the penalty than to liquidate the account simply to avoid the penalty.” says Twila Slesnick, author of IRAs, 401(k)s & Other Retirement Plans.
Note, if the owner died after starting RMDs but had not yet taken the RMD for the year in which he or she died, the nonspouse beneficiary must take that RMD.
Source: Kiplinger’s Retirement Report
Questions or Comments?
You can add comments on the blog, call 919-847-2981, or visit our web site. We look forward to hearing from you.
Mark Vitek, CPA/PFS, CFP®
…until next week.
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