IRS: Five Common Questions from Taxpayers

From Neikirk, Mahoney & Smith, the IRS has released five common questions that they receive from taxpayers, along with the answers.

1. What is included in household income?
"For purposes of the PTC, household income is the modified adjusted gross income of you and your spouse if filing a joint return, plus the modified AGI of each individual in your tax family whom you claim as a dependent and who is required to file a tax return because their income meets the income tax return filing threshold. Household income does not include the modified AGI of those individuals you claim as dependents and who are filing a return only to claim a refund of withheld income tax or estimated tax."

2. The IRS is asking to see my 1095-A. What should I do?
"You should follow the instructions on the correspondence that you received from the IRS.  You may be asked for a copy of Form 1095-A in order to verify information that has been entered on your tax return."

3. If I got advance payments of the PTC, do I have to file even if I never had a filing requirement before?
"Yes. If you received the benefit of advance payments of the premium tax credit, 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 a return and submit a Form 8962 for this purpose even if you are otherwise not required to file a return."

4. Marketplace says I did not file, but I did file before the extended due date.  What should I do?
"In advance of the open enrollment period that runs through January 31, 2016, the Marketplace sent Marketplace Open Enrollment and Annual Redetermination letters to individuals who might not have filed a tax return. Follow the instructions in the letter you received."

5. What are my options to receive help with filing a return and reconciling?
"Filing electronically is the easiest way to file a complete and accurate tax return as the software guides you through the filing process. Electronic filing options include free Volunteer Assistance, IRS Free File, commercial software, and professional assistance."

For more information from the IRS, check out their website at irs.gov
You can also contact Neikirk, Mahoney & Smith PLLC at 502-896-2999, or through our website contact form.

Tax Planning Strategies for the Year's End

From Neikirk, Mahoney & Smith...
The year is coming to an end, and the Journal of Accountancy has published some tips on last minute tax planning strategies.
According to the Journal of Accountancy, "Taxpayers who have been sitting on the sidelines due to the lack of certainty on the expanded Section 179 deduction, bonus depreciation, the R&D credit and other items normally renewed in an extender package need to take action soon, according to Michael Silvio, director of tax services at Hall & Co. CPAs."

Their last minute strategies include:

1) A Hierarchy of Planning
"Last-minute tax issues could be things that can be done by the end of the year before it’s too late to do them, or could be things that can still be done up to the time you file the tax return or later, to get a better result for that prior year, according to Matthew Frooman, a member at the Atlanta office of Top 100 Firm Warren Averett."

2) New Due Dates
"For tax years beginning after Dec. 31, 2015, the due dates for partnership tax returns will change from April 15 for calendar-year partnerships to March 15, and the fifteenth day of the third month after the end of the fiscal year for fiscal-year partnerships. The due date for C corporations will be April 15, or the fifteenth day of the fourth month after the close of their year. S corporation return due dates continue to be March 15, or the third month following the close of the taxable year."

3) Extender Watch 
"The tax extenders have historically been passed, so we have to plan for the fact that they will be passed, advised Gary Fox, managing partner of tax services at Top 100 Firm Crowe Horwath."

4) Hoping for Better
"Next filing season can’t be as bad as the previous one, according to Rick Wojciechowski of Top 100 Firm The Bonadio Group: 'Provided the extenders get passed earlier than they did for 2014, it should be better. Plus, the tangible property regs are better understood now. But we do have layering of the ACA, which affects business clients. CPAs need to communicate the rules to their clients.'"

You can check out the full article at the Journal of Accountancy.
You can also contact Neikirk, Mahoney & Smith PLLC at 502-896-2999, or through our website contact form.

FASB Proposes Clarifying the Definition of a Business

From Neikirk, Mahoney & Smith, the FASB is proposing clarifications to the definition of the business. This proposal is not because the FASB believes that the current definition is too narrow, but rather that it is too broad. They are concerned that this broad definition can lead to transactions being reported as acquisitions or disposals of businesses rather than assets.

"Clarifying the Definition of a Business, would require that under FASB’s definition, a business would include at least an input and a substantive process that together contribute to the ability to create outputs and would remove the evaluation of whether a market participant could replace any missing element."

You can check out the full article at the Journal of Accountancy.
You can also contact Neikirk, Mahoney & Smith PLLC at 502-896-2999, or through our website contact form.

AICPA Proposes Peer Review Standards Changes

From Neikirk, Mahoney & Smith, according to the Journal of Accountancy the AICPA has proposed changes to the peer review standards "to help audit firms increase their focus on the proper design and operating effectiveness of their systems of quality control."

The AICPA peer review program monitors the quality of reviewed firms’ accounting and auditing engagements and evaluates the systems under which those engagements are performed. Participation in the peer review program is mandatory for AICPA membership, and peer review is required for licensure in nearly every state.

For more details on the specific changes that have been proposed to the peer review standards, check out the full article at The Journal of Accountancy 

You can also contact Neikirk, Mahoney & Smith PLLC at 502-896-2999, or through our website contact form.

IRS Instructions for Requesting Copy of Fraudulent Returns

From Neikirk, Mahoney & Smith, the IRS has published the following instructions for requesting copy of fraudulent returns.

A victim of identity theft or a person authorized to obtain the identity theft victim’s tax information may request a redacted copy (one with some information blacked-out) of a fraudulent return that was filed and accepted by the IRS using the identity theft victim’s name and SSN. Due to federal privacy laws, the victim’s name and SSN must be listed as either the primary or secondary taxpayer on the fraudulent return; otherwise the IRS cannot disclose the return information. For this reason, the IRS cannot disclose return information to any person listed only as a dependent.
Partial or full redaction will protect additional possible victims on the return. However, there will be enough data for you to determine how your personal information was used.
To make the request, you will need to prepare a signed letter with the information described below and mail it and any additional documentation to the following address:

IRS
P.O. Box 9039
Andover, MA 01810-0939

The IRS may return your request if it is missing the required information and/or documentation, or is made in a manner other than described in these instructions.

If you are the victim of identity theft requesting a copy of fraudulent returns, you will need to provide the following information and documentation:

• Your name and SSN
• Your mailing address
• Tax year(s) of the fraudulent return(s) you are requesting
• The following statement, with your signature beneath: “I declare that I am the taxpayer.”

If you are a person authorized to obtain the identity theft victim’s tax information however, you will need to provide quite a bit more documentation.

For more information on what that documentation is, you can see the full IRS article here.
You can also contact Neikirk, Mahoney & Smith PLLC at 502-896-2999, or through our website contact form.

Three Tax Considerations during Marketplace Open Enrollment

From Neikirk, Mahoney & Smith, the IRS has just published some tips on the health insurance marketplace. 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 31, 2016, visit Healthcare.gov. You can also contact Neikirk, Mahoney & Smith PLLC at 502-896-2999, or through our website contact form.

Are You Underestimating Your Retirement Expenses?

From Neikirk, Mahoney & Smith, a recent AICPA survey revealed that over 50% of people underestimated their retirement expenses and the amount of money that they would need to be able to retire. According to the survey, the main cause for people having to change their retirement plans included overspending, health care costs, and poor estimates of retirement spending and income. According to the Journal of Accountancy, to increase clients’ confidence about investing, CPA financial planners who hold the PFS credential recommend that advisers take the following three steps.

1. Help clients create disciplined investing plans
2. Educate clients about the factors that cause volatility
3. Remind clients that stock market returns should be evaluated in terms of three-to-five-year cycles, not quarterly returns.

You can read more on this topic from this article at the Journal of Accountancy.

If you have any questions or concerns, contact Neikirk, Mahoney & Smith PLLC at 502-896-2999. You can also contact us through our website contact form.