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2017 Tax Season Update/Reminders

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by Tony Pandiscia

Updates to Important 2016 Income Tax Return Filing Deadlines:

  • Individuals                  Tuesday, April 18, 2017
  • C Corporations           Tuesday, April 18, 2017
  • Trust/Estates              Tuesday, April 18, 2017
  • Partnerships       Wednesday, March 15, 2017
  • S-Corporations   Wednesday, March 15, 2017

HIGHLIGHTS OF FEDERAL TAX CHANGES

  • The Standard Deduction amount for Married Filing Joint couples has increased by $100 for 2017 to $12,700; all other filing status standard deductions have increased by $50.
  • The maximum annual “profit sharing” contribution limit for certain retirement plans has increased to $54,000 for 2017.
  • The annual compensation limit for certain retirement plans has increased to $270,000 for 2017.
  • The Social Security maximum earnings base for application of FICA tax has increased to $127,200 for 2017.
  • The thresholds for each of the Individual Income Tax Brackets for 2017 have been increased slightly due to annual Cost of Living Adjustments.
  • The gross income levels for which a 2017 income tax return is required have been increased to $ $20,800 (Married Filing Joint filers) and $10,400 (Single filers).
  • Effective January 1, 2017, Business-related travel expense “standard mileage rate” has been revised to 53.5 cent per mile for business miles driven. The “standard mileage rates” for medical or moving expense purposes is now 17 cents per mile, but the rate for charitable activities remains unchanged at 14 cents per mile.
  • Tax Exempt Organizations can now receive an automatic six-month extension of time to file using Form 8868 prior to the initial due date for their 2016 tax returns.

HIGHLIGHTS OF NORTH CAROLINA TAX CHANGES

  • The standard deduction has been increased by $1,000 for married individuals who file jointly (or as “head of household”) and $500 for all other individuals.
  • Effective January 1, 2017, many service businesses will now be subject to Sales & Use Tax collection and reporting when providing “repair, maintenance, or installation” services that are not “Capital Improvements.” In addition, a new exemption form has been issued for service businesses to qualify for a “Capital Improvement” exemption.

HELPFUL REMINDERS

  • Charitable Contribution:
    • Tax deductible contributions can be made in the form of cash or noncash but not “service” to a qualified 501(c)(3) organization. Out-of-pocket costs and travel expenses incurred may be subject to deduction.
  • Any single donation larger than $250 to a “qualified organization” requires acknowledgement (or receipt). For noncash donations, fair market value assessment is the responsibility of the donor and if over $5,000, a certified appraisal is required.
  • Reporting of Foreign Bank and Financial Accounts (FBAR):
    • If you have a financial interest in or signature authority over a foreign financial account with overall value exceeding $10,000 at any time during the calendar year, you are required to file an FBAR. (As a protective measure, many of our clients file this report regardless of the threshold in order to run the statute of limitations for audit.)
    • The annual due date for filing has been revised to April 18, 2017. All taxpayers will be granted an automatic six-month extension to October 15.

This is a summary of 2017 tax changes.  If you have any questions regarding the details of the changes and how they may affect your specific situation, please feel free to contact us to discuss.

Tony ([email protected]) is the Tax Partner with Langdon & Company LLP.  He is a CPA and also an attorney, advocating for clients on many levels-including with the State and the IRS.

New Registration Requirements for 990-N postcard Filers

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by Kendall TysonIRS_logo-233x300

Effective February 29, 2016, the IRS will launch a new website for submitting Form 990-N filings.  Most organizations exempt from income tax under section 501(a) must file an annual information return or submit an annual electronic notice (990-N).  An organization that normally has gross receipts of $50,000 or less must file the 990-N if it chooses not to file Form 990 or Form 990-EZ.

Previously all 990-N filings were completed and filed through the Urban Institute Form 990-N submission website.  However, their website will permanently close on February 28, 2016.  Per the Urban Institute website, “any Form 990-N filings in the Urban Institute system  that have not been completed and submitted by 11:59 pm (eastern) on February 28, 2016, will be lost and will not be submitted to the IRS.  Those Form 990-N filings will need to be entered into the new IRS system beginning February 29, 2106.”

Beginning on February 29, 2016, all 990-N users will need to complete a one-time registration with the IRS before they can complete the 990-N filing.  Form 990-N is due every year by the 15th day of the 5th month after the close of an organization tax year.  There is no paper form for the filing, and all 990-N filings must be completed and filed electronically.

All 990-N filers should plan their filings according to the new website and registration requirements in order to avoid any unexpected delays in completing their annual filing.  Langdon & Company LLP will be happy to help deal with this regulatory change.  Please contact our office for additional information.

Kendall ([email protected]) is a Manager in our Tax practice.  She focuses on various corporate clients and their industry-specific issues.

Have you received all of the tax forms you expected?

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by Cody Taylor

As we’re into February you should have received most if not all of the tax documents related to preparing your 2015 tax returns.  This article in Forbes explains when various tax forms are due to you.  What if you are missing some forms you were expecting?

It’s important to note that some forms may not be received in time to prepare your tax returns on time and you may require an extension as a result.  The most common scenario is if you receive a Schedule K-1 from a pass-through entity.  These entities have to file their tax returns before issuing you a Schedule K-1 which may not happen right away.  As the article also says- your best course of action is to contact the K-1 issuer and find out when they expect the tax returns to be completed so you can plan your own tax filings accordingly.tax forms

If you haven’t received expected W-2s, 1099s or other forms that should have been received by now you have a few options available.  The first and most obvious is to look back through any mail you have sitting around and to check your emails to see if you missed anything.  We’ve all missed something the first time through only to have to document be sitting right there the whole time.  However if the forms really are missing here are a few steps you can take as outlined here and summarized below.

  1. Contact the issuer – They may have simply mailed it to the wrong address, maybe you moved or your form got lost in the mail. Most issuers will be happy to send you a new copy, but keep in mind if they tell you it was sent and you did not receive it make sure to check that they have the correct address on file for you.
  2. Employer or Issuer has moved or closed – Still try to contact them. The income they paid you still should be reported on your tax returns and if they issued W-2s or 1099s in your Social Security number that are not reported on your tax returns the IRS will almost assuredly contact you about it.
  3. Still no forms by February 14th – If you are unable to resolve the missing information through the previous steps you can contact the IRS starting February 15th regarding missing forms. Try to have your address, phone number, Social Security Number, dates of employment, earnings estimate and federal withholdings amount on hand when you call the IRS.  Your most recent pay stub is a good place to get this information.  The IRS phone number is 1-800-829-1040 and I recommend trying to call first thing in the morning when the wait times are often shorter.
  4. Patience – The IRS will then contact the issuer to send you replacement forms but this is done through the mail and is usually not a fast process.

The good news is most of the time the issue of missing forms can be resolved rather painlessly, but if you find yourself missing important tax documents as it gets closer to filing time follow the above steps and contact the IRS, if necessary.

Cody ([email protected]) is a member of our tax staff at Langdon & Company LLP.  He works with various types of clients on tax matters year-round.  Please contact us to get more information on how we can help make your 2015 tax season, a smooth one.

 

Have you been scammed?

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by Susan DeanGranny on phone

Have you received a phone call that you thought was from the Internal Revenue Service (IRS)? If so, you are not alone. Many people have been a victim of these recent phone scams. Criminals pose to be an IRS representative in order to gain personal information, receive money or even steal your identity. Below are several examples of phone scams and helpful tips the IRS released in the recent article, IRS Urges Public to Stay Alert for Scam Phone Calls.

  • Scammers make unsolicited calls. Thieves call taxpayers claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls,” or via phishing email.
  • Callers try to scare their victims. Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don’t get the money.
  • Scams use caller ID spoofing. Scammers often alter caller ID to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim’s name, address and other personal information to make the call sound official.
  • Cons try new tricks all the time.  Some schemes provide an actual IRS address where they tell the victim to mail a receipt for the payment they make. Others use emails that contain a fake IRS document with a phone number or an email address for a reply. These scams often use official IRS letterhead in emails or regular mail that they send to their victims. They try these ploys to make the ruse look official.
  • Scams cost victims over $23 million. The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 736,000 scam contacts since October 2013. Nearly 4,550 victims have collectively paid over $23 million as a result of the scam.

The IRS will not:

  • Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
  • Demand that you pay taxes and not allow you to question or appeal the amount you owe.
  • Require that you pay your taxes a certain way. For instance, require that you pay with a prepaid debit card.
  • Ask for your credit or debit card numbers over the phone.
  • Threaten to bring in police or other agencies to arrest you for not paying.

If you don’t owe taxes, or have no reason to think that you do:

  • Do not give out any information. Hang up immediately.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.

If you know you owe, or think you may owe tax:

  • Call the IRS at 800-829-1040. IRS workers can help you.

Phone scams first tried to sting older people, new immigrants to the U.S. and those who speak English as a second language. Now the crooks try to swindle just about anyone. And they’ve ripped-off people in every state in the nation.

Stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.  If you have questions about your rights, or any other tax issue, give Langdon & Company LLP a call.  We’d be happy to help!

Susan Dean ([email protected]) is an Enrolled Agent with Langdon & Company LLP’s tax practice.  She focuses on corporate tax and closely-held family businesses.

Rollover of Retirement Plan and IRA Distributions – 60 day rule

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by Jessica DuPree

When taking early distribution from a retirement plan or IRA, it is important to remember the 60 day rule for the distribution to be considered “rolled over”.  To rollover a retirement plan means depositing the amount distributed from one retirement plan and placing these funds into another retirement plan or IRA.

Why roll over?jessica's blog

When you roll over a retirement plan distribution, you generally don’t pay tax on it until you withdraw it from the new plan. By rolling over, you’re saving for your future and your money continues to grow tax-deferred.

If you don’t roll over your early distributions, then this income is taxable (other than qualified Roth distributions and any amounts already taxed) and will also be subject to additional tax unless you’re eligible for one of the exceptions to the 10% additional tax on early distributions. See IRS website for more information on exceptions for early distribution additional tax.

How do I complete a rollover?

  1. Direct rollover – If you’re getting a distribution from a retirement plan, you can ask your plan administrator to make the payment directly to another retirement plan or to an IRA. Contact your plan administrator for instructions. The administrator may issue your distribution in the form of a check made payable to your new account. No taxes will be withheld from your transfer amount.
  1. Trustee-to-trustee transfer – If you’re getting a distribution from an IRA, you can ask the financial institution holding your IRA to make the payment directly from your IRA to another IRA or to a retirement plan. No taxes will be withheld from your transfer amount.
  2. 60-day rollover – If a distribution from an IRA or a retirement plan is paid directly to you, you can deposit all or a portion of it in an IRA or a retirement plan within 60 days. Taxes will be withheld from a distribution from a retirement plan, so you’ll have to use other funds to roll over the full amount of the distribution.

When should I roll over?

You have 60 days from the date you received the distributions from the retirement plan or IRA to roll it over to another plan. It is up to the IRS to waive the 60 day roll over requirement based on the situation if it is a circumstance beyond the taxpayer’s control. This is decision is at the IRS’s will and should not be heavily relied on.

IRA one-rollover-per-year rule 

Beginning after January 1, 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own.

The one-per year limit does NOT apply to:

  • rollovers from traditional IRAs to Roth IRAs (conversions)
  • trustee-to-trustee transfers to another IRA
  • IRA-to-plan rollovers
  • plan-to-IRA rollovers
  • plan-to-plan rollovers

Once this rule took effect, the tax consequences are:

  • You must include in gross income any previously untaxed amounts distributed from an IRA if you made an IRA-to-IRA rollover (other than a rollover from a traditional IRA to a Roth IRA) in the preceding 12 months, and
  • You may be subject to the 10% early withdrawal tax on the amount you include in gross income.

Is my retirement plan required to accept rollover contributions?

Your retirement plan is not required to accept rollover contributions. Check with your new plan administrator to find out if they are allowed and, if so, what type of contributions are accepted.   You can roll your money into almost any type of retirement plan or IRA.  Click this link to access the Rollover Chart located on the IRS website for more information.

Contact Langdon & Company LLP for more information about retirement plans and other ways to be prepared for retirement.

Jessica ([email protected]) is an intern in our tax practice.  She works on various projects from individuals to corporate clients.

Opportunities for Tax Savings Using a Section 1031 Exchange

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by Morgan Norris

What is a Section 1031 exchange? exchange-money

An exchange using Section 1031 of the Internal Revenue Code occurs when you sell an investment property and subsequently purchase another similar property within a certain amount of time.  This exchange is also known as a “like-kind” exchange, and can be used to postpone paying tax on the gain from the property sale if all the IRC requirements surrounding the exchange are met.  A Section 1031 exchange is reported on Form 8824, Like-Kind Exchanges.

Who qualifies?

Owners of investment and business property; including individuals, C corporations, S corporations, Partnerships, LLC’s and trusts can all qualify to take part in the Section 1031 exchange.

What are the requirements?

There must be an exchange of properties.  Examples of property exchanges include:  a simultaneous swap of one property for another or a deferred property exchange.  A deferred exchange allows you to dispose of a property, and then identify and purchase another property within a certain window of time.  Two time limits must be met in order to avoid a taxable event during a deferred exchange.  The first time limit requires you to identify potential replacement properties within 45 days from the date of the original property sale.  Your identification of the potential property must be in writing and must follow certain additional rules in order to be valid.  The second time limit requires that the replacement property be received and the exchange completed no later than 180 days subsequent to the sale of the original property or the extended due date of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier.  The replacement property must be substantially the same as the property identified in the original paperwork issued.  There is no limit on how many times, or how frequently you can participate in a Section 1031 exchange.

Ways in which taxable gain may result

The exchange can include like-kind property exclusively, or a combination of like-kind property and cash, liabilities and/or non-like-kind property.  Exchanges consisting of cash, debt relief or non-like-kind property may trigger some taxable gain in the year of the exchange.  Taxable gain may also be generated from taking possession of cash from the sale of the relinquished property.  A Section 1031 exchange requires that a third party, such as a qualified intermediary, hold the proceeds from the original sale until the full exchange is complete.  Your real estate agent, broker, accountant or attorney may not act as your qualified intermediary.  Additional stipulations are also placed on the qualified intermediary.

Depreciation recapture may also be the result of certain exchanges.  This is taxed as ordinary income, and is usually the result of swapping items that are not necessarily of like-kind, such as improved land with a building for unimproved land without a building.

The fine print

A properly constructed Section 1031 exchange allows one to defer; but not forgive, taxable gain.  It is pertinent that the basis in each additional property purchased be tracked until the last replacement property is eventually sold.  Once this occurs, taxable gain will be calculated using the basis schedule.

Morgan ([email protected]) is a tax senior at Langdon & Company LLP.  She has experience with individual and corporate tax preparation.  Please contact our office if we can provide additional information.

The Interaction of Pell Grants and Tax Credits

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by Rebecca Lunnpell grant

Federally funded Pell Grants assist millions of students annually. However, for students with these scholarships, the process of claiming tax credits is complex and often confusing. As a result, students with the greatest financial need may be foregoing additional tax benefits available.

Based on an IRS publication (see link below), under current law a Pell Grant student can choose to allocate his or her Pell Grant funds either to qualified tuition and related expenses (QTRE) or to living expenses (up to the amount of actual living expenses), which constitutes taxable income. Most students and parents do not understand this option, so often families allocate all QTRE to the Pell Grant funds, leaving little or no QTRE to allocate to an educational tax credit.

For 2014, the American Opportunity Tax Credit (AOTC) provides a 100% credit for the first $2,000 of QTRE and a 25% credit for the next $2,000, for a total credit up to $2,500. As noted in the IRS publication, if a student’s QTRE exceeds scholarships by $4,000, the student would still qualify for the maximum AOTC credit. However, if the QTRE exceeds scholarships by less than $4,000, the student may benefit from including some of the Pell Grant in taxable income in order to claim a larger AOTC. It is important to note that any scholarship that is allocated to living expenses must be included in taxable income on the student’s (not the parent’s) tax return.

If you need additional assistance in understanding how to obtain the maximum tax benefit with a Pell Grant scholarship, the tax department at Langdon & Company LLP is pleased to assist.

Please click here for detailed examples of the interaction of Pell Grants and tax credits.

Rebecca Lunn ([email protected]) is a Senior in our Audit Department working primarily with the non profit, and health care industries.

college diploma

NC 2014 Tax Law Changes

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by Leonora Bowman

Yea!  North Carolina reduced the individual income tax rate beginning in 2014.  That means that I will pay less tax to NC when I file my 2014 Form D-400, right?  Like all tax questions the answer is “It depends.” NC flag

The following was taken from the North Carolina Department of Revenue’s Instructions for Individual Returns Form D-400:

What’s New : 

For information about any additional changes to the 2014 tax law or any other developments affecting Form D-400 or its instructions, go to www.dornc.com.

Session Law 2013-316, House Bill 998, An Act to Simplify the North Carolina Tax Structure and to Reduce Individual and Business Tax Rates, was signed into law on July 23, 2013. The individual income tax rate was reduced, the N.C. standard deduction was increased, and many deductions and tax credits are no longer available for tax years beginning on or after January 1, 2014.

Change in tax rate.

The individual income tax rate is reduced to a flat 5.8 percent for tax years beginning on or after January 1, 2014 and to 5.75 percent for tax years beginning on or after January 1, 2015. N.C.

Standard Deduction or N.C. Itemized Deductions. You may continue to claim either the N.C. standard deduction or N.C. itemized deductions, however, both have changed. (See Page 8)

• N.C. standard deduction has increased for each filing status,

• No additional standard deduction is available for taxpayers age 65 or older, or blind.

• N.C. itemized deductions are no longer identical to federal itemized deductions and are subject    to certain limitations.

N.C. Itemized Deductions.

• Qualified home mortgage interest and real estate property taxes are allowed as deductions. The sum of those deductions cannot exceed $20,000,

• Charitable contributions allowed as a deduction on the federal return are allowed without limitation.

 Deduction for Other Retirement Benefits.

There are no longer deductions available to certain taxpayers for up to $4,000 for federal, state, or local government retirement benefits or up to $2,000 for private retirement benefits.

Deduction for Net Business Income that is Not Considered Passive Income.

There is no longer a deduction available to certain taxpayers for up to $50,000 of net business income included in federal adjusted gross income.

Deduction for Contributions to N.C. College Savings Program.

There is no longer a deduction for contributions made during the taxable year to an account in the Parental Savings Trust Fund of the State Education Assistance Authority (North Carolina’s National College Savings Program – N.C. 529 Plan).

N.C. Standard Deduction Amounts for Most Taxpayers:

Filing Status                                                    Standard Deduction

Single                                                                           $ 7,500

Married Filing Jointly/Qualifying Widow(er)                 $15,000

Married Filing Separately                                             $ 7,500

Head of Household                                                     $12,000

N.C. Personal Exemption Allowance.

You may no longer claim a personal exemption for yourself, your spouse, children, or any other qualifying dependents.

Credit for Children.

Amounts are increased from $100 to $125 per qualifying child for some taxpayers. If you are allowed a federal child tax credit under section 24 of the Code you are allowed a tax credit for each dependent child for whom a federal credit was allowed. The credit amount is based on your filing status and adjusted gross income, as calculated under the Code.

Child and Dependent Care Credit.

North Carolina no longer allows a tax credit for child and dependent care expenses.

Earned Income Tax Credit.

North Carolina no longer has a State earned income tax credit.

N.C. Education Endowment Fund:

Contribute to the N.C. Education Endowment Fund by making a contribution or designating some or all of your overpayment to the Fund.

nc-general-assembly-entrance-304xx2100-3150-0-3Analysis of these changes:

So who will pay higher taxes?  “It depends.”  Families who could pay more are as follows:

Retirees can no longer deduct a portion of their retirement benefits.

Small business owners who were previously allowed to deduct the first $50,000 of self-employment income from their NC taxable income.  For a married couple, who both have self-employment income that equals or exceeds $50,000, they will now be taxed on an additional $100,000 previously excluded.  The tax on that is $5,800.  Whether their NC tax will be higher or lower depends on their other taxable income and the other changes in deductions allowed.

Young families will no longer receive a child and dependent care credit or an earned income tax credit.

All wage earners in NC were required to resubmit withholding allowance forms to their employers in January, 2014 which would adjust the amount of state income tax withholdings typically taken from their pay.  The intent by the state Department of Revenue was that the new allowances would better align with the law changes, however each individual taxpayer’s circumstances is different.  NC taxpayers will have a better idea of how their state income tax withholdings match their actual income tax liability with the filing of their 2014 NC Individual Income Tax Returns.  Should adjustments be necessary to increase state income tax withholdings in 2015, revised withholding allowance requests may be filed by employees with their employers at any time or alternatively quarterly estimated tax payments may be scheduled.

 

The Tax Team at Langdon & Company LLP will be happy to discuss these NC tax law changes with you.  Please contact our office if you have additional questions.

Leonora “Lee” Bowman ([email protected]) is a Manager in our Accounting Services practice.  She has over 25 years of experience in taxation and also specializes in multi-dimensional corporate accounting across various states.

Premium Tax Credit Reporting

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by Kendall Tyson

Beginning in 2014, individuals and families with low or moderate income could purchase health insurance through the Health Insurance Marketplace, also known as the Exchange.  The premium tax credit is an advanceable, refundable tax credit designed to help those individuals and families.  The credit could be paid in advance to insurance companies to lower the monthly premiums or the credit could be claimed with the individual tax return.  If the credit was paid in advance, individuals must reconcile the amount paid in advance with the actual credit computed on the individual’s tax return.

Reporting and Claiming:

Will I have to file a federal income tax return to get the premium tax credit?  

For any tax year, if you receive advance credit payments in any amount or if you plan to claim the premium tax credit, you must file a Form 8962, Premium Tax Credit (PTC) and attach it to your federal income tax return for that year. If you receive any advance credit payments, you will use your return to reconcile the difference between the advance credit payments made on your behalf and the actual amount of the credit that you may claim. This filing requirement applies whether or not you would otherwise be required to file a return. If you are married and you file your tax return using the filing status Married Filing Separately, you will not be eligible for the premium tax credit unless you meet the criteria in Notice 2014-23, which allows certain victims of domestic abuse to claim the premium tax credit using the Married Filing Separately filing status for the 2014 calendar year.

Will I be eligible for the premium tax credit if I’m married but I file my tax return using the filing status Married Filing Separately?

If you are married and you file your tax return using the filing status Married Filing Separately, you will not be eligible for the premium tax credit unless you meet the criteria in section 1.36B-2T(b)(2) of the Temporary Income Tax Regulations, which allows certain victims of domestic abuse and spousal abandonment to claim the premium tax credit using the Married Filing Separately filing status.  Taxpayers may claim this relief from the joint filing requirement for no more than three consecutive years.

Note:  Generally, a married taxpayer who lives apart from his or her spouse for the last six months of the taxable year is considered unmarried if he or she files a separate return, maintains as the taxpayer’s home a household that is also the main home of a dependent child for more than half the year, and furnishes over half the cost of the household during the taxable year.

For purposes of the relief from the joint filing requirement for certain victims of domestic abuse and spousal abandonment, how are domestic abuse and spousal abandonment defined?

 Domestic abuse includes physical, psychological, sexual, or emotional abuse, including efforts to control, isolate, humiliate, and intimidate, or to undermine the victim’s ability to reason independently.  All the facts and circumstances are considered in determining whether an individual is abused, including the effects of alcohol or drug abuse by the victim’s spouse. Depending on the facts and circumstances, abuse of the victim’s child or other family member living in the household may constitute abuse of the victim.

A taxpayer is a victim of spousal abandonment for a taxable year if, taking into account all facts and circumstances, the taxpayer is unable to locate his or her spouse after reasonable diligence.

If I get insurance through the Marketplace, how will I know what to report on my federal tax return?

If you purchased coverage through the Health Insurance Marketplace you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace by early February. This form provides information you will need when completing Form 8962. If you have questions about the information on Form 1095-A for 2014, or about receiving Form 1095-A for 2014, you should contact your Marketplace directly.  The IRS will not be able to answers questions about the information on your Form 1095-A or about missing or lost forms.

Filing electronically is the easiest way to file a complete and accurate tax return. Electronic Filing options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.

How is the amount of the premium tax credit determined?

The law bases the size of your premium tax credit on a sliding scale. Those who have a lower income get a larger credit to help cover the cost of their insurance. In other words, the higher your income, the lower the amount of your credit.You will figure your credit on Form 8962. You must complete this form to claim the premium tax credit and reconcile any advance credit payments with the premium tax credit you are eligible to claim on your return. Form 1095-A from your Marketplace provides information you will need when completing Form 8962.(see question 14) Filing electronically is the easiest way to file a complete and accurate tax return. Electronic Filing options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance

Additionally, the premium tax credit is a refundable tax credit. This means that if the amount of the credit is more than the amount of your tax liability, you will receive the difference as a refund. If you owe no tax, you can get the full amount of the credit as a refund. However, if you receive advance payments of the credit, you will reconcile the advance payments with the amount of the actual premium tax credit that you calculate on your tax return. If your actual allowable credit on your return is less than your advance credit payments, the difference, subject to certain caps, will be subtracted from your refund or added to your balance due. If your actual allowable credit is more than your advance credit payments, the difference will be added to your refund or subtracted from your balance due.

This excerpt and additional Q&A information on the Premium Tax Credit can be found on the IRS website: http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Questions-and-Answers-on-the-Premium-Tax-Credit#.VNO4_QFEocQ.gmail

Kendall Tyson ([email protected]), a Tax Manager at Langdon & Company LLP.  She specializes in physician/dentist practices, multi-state and nonprofit returns.

College Tax Credits 2014

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by Cody Taylor

college-debtThere is often confusion surrounding who can claim college tax credits and for how much.  The two college tax credits are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit.  You can only claim one of these credits per student on your federal tax return.  The American Opportunity Tax Credit is worth up to $2,500 per qualifying student for up to four years and is currently available through 2017.

Everyone wants to be able to claim a college tax credit but there are various rules, income limitations and exclusions that apply for each credit.  The source of the money used to pay for qualified tuition expenses matters in determining whether you can qualify for one of the college tax credits.  For example, 529 college savings plans are utilized by many taxpayers to plan for college expenses, but expenses that were used to calculate the tax-free portion of a distribution from a 529 plan may not also be used to calculate the American Opportunity Tax Credit.  There are ways to claim the AOTC in the same year as a tax-free distribution from a 529 plan is made, but it takes planning.

You should receive a Form 1098-T from your school in the mail.  This and other related costs (often textbooks) should be supplied to your tax professional along with your other tax information so that they can help adopt the best college tax credits for your particular situation.  Proper planning ahead of time can save you money in the long run.  A tax professional can help you discuss college tuition planning so that when the time comes for you or your child to go off to college, you will be able to claim the maximum credit allowable to you.

Langdon & Company LLP has a tax department full of experience to help you make the right choice for this deduction.  Please feel free to contact our office for more information.

Cody Taylor ([email protected]) is a tax staff who specializes in various issues related to individuals and their businesses.