Author Archives: Taraleigh Gray

IRS Delays Refunds

There is a new law that requires the IRS to hold refunds claiming the Earned Income Tax Credit and the Additional Child Tax Credit. The IRS will NOT begin to release EITC/ACTC refunds until February 15, 2017. However, these refunds likely will not reach taxpayers until the week of February 27, 2015.

If you have any questions, please contact our office at 330-645-4869.

Affordable Care Act

Affordable Care Act of 2016 is now in full swing and under the general rule every American is required to have medical insurance coverage which satisfies the rules under what is defined as “essential minimum cover- age.” In summary, “essential minimum coverage” means that the policy has no annual or lifetime coverage caps; cannot deny coverage because of a pre-existing condition, provides access to the emergency room, allows for an annual physical and assessment of the insured’s health status, allows for testing for breast cancer, ovarian cancer, etc., and allows for a colonoscopy.

The most important issues about these coverages and mandates is that reporting about your coverage is required on your federal income tax return each year. If a taxpayer has coverage through one of the State Exchanges or the Federal Marketplace then they are required to be issued an IRS Form 1095-A “Health Insurance Marketplace Statement” from the agency through which they obtained the coverage. The rule states that the taxpayer is to receive the form no later than January 31, 2017 for the 2016 coverage year. Note, however, that the IRS has recently extended the due date for the Forms 1095-B and 1095-C until March 2, 2017 so you may receive the forms after January 31st. If you obtained your 2016 coverage through the State Exchange or Federal Marketplace then please make sure that you give me a copy of the Form 1095-A when you present your 2016 tax information to me for preparation of your 2016 tax return.

The Form 1095-A will provide the needed information to determine if you are eligible for any premium tax credit, if you received any advanced premium tax credit and who in your household was covered under this policy. The information will also determine if you will be eligible to receive additional premium tax credits or if you must repay some or all of the advanced premium tax credits that you received in each month that you obtained coverage through the State Exchange or Federal Marketplace.

If you have individual coverage through a private insurance policy purchased on the open market or under a government sponsored plan during 2016 then you should be receiving an IRS Form 1095-B titled “Health Coverage” no later than March 2, 2017. You will need to include a copy of this document to Weber ATS for use in preparing your 2016 income tax return. This will be issued to you by your insurance carrier, government sponsored plan or could also be issued by the group plan administrator if the coverage is under an employer’s plan.

This document is important because it will report the months that your plan met the requirements of minimum essential coverage and everyone in your household who was covered. As a result of this coverage you will not be subject to the “individual shared responsibility payment” (penalty) assessed for not being covered. This penalty is the greater of $695 for up to 3 individuals in your household who are 18 and older or 2½% of your adjusted gross income over the required threshold for filing your return. If you would like to discuss this further please contact me for this and other issues related to health insurance and medical deductions.

There is another IRS form that could possibly be sent to you which is IRS Form 1095-C “Employer-Provided Health Insurance Offer and Coverage.” You could receive this document because you work for an employer who employs 50 or more full-time employees. The form is used to report information about whether the employer made an offer to you for minimum essential coverage for 2016 and whether or not the coverage offered, had value which pays at least 60% of the claims under the coverage and whether it is affordable coverage to you. In addition, if your employer had 50 or more full-time employees and did not offer coverage then the employer also will be required to provide you with a Form 1095-C if no offer of coverage was made. This form will also be required to be issued to you no later than March 2, 2017. Please provide a copy to Weber ATS when it is time to prepare your 2016 income tax return.

If you would like to discuss any issues concerning health insurance coverage requirements as it pertains to your tax issues please contact Weber Accounting & Tax Service at 330-645-4869.

Take Advantage of Last Minute Tax Deductions

There is still an opportunity to lower your tax liability before the year ends. This can be accomplished in a few different ways as follows:

CHARITABLE CONTRIBUTIONS:

If you are electing to itemize your allowable itemized deductions on Schedule A of your 2016 federal income tax return, then charitable donations are an excellent way to accomplish this Whether the contribution is in the form of checks written and deposited into the U.S. Postal Box before midnight on December 31, 2016, or made online with a credit card or direct transfer from a bank account, your tax bill can decrease based on your individual marginal tax bracket. For example, if your bracket is at 25% then you will save 25 cents on each dollar contributed.

When you do make charitable contributions make sure that you have received a written acknowledgment from the charitable organization which specifies that they are a Section 501(c)(3) organization, the amount of your contribution, and language which specifies that you have not received any goods or services in exchange for your donation. If you have received any goods or services in exchange then the amount must be specified on the acknowledgment and the net charitable contribution is the amount which will be allowed to be deducted.

If a check is written or a credit card is used, then the taxpayer must have a written acknowledgment for each individual contribution, which is greater than $249. The law requires that the taxpayer “may deduct a charitable contribution if the taxpayer substantiates the deduction with a contemporaneous written acknowledgment of the contribution by the Donee Organization.” The important item here is that the taxpayer must have this document in their possession by the earlier ofthe time that the return is filed or the due date of the tax return including extensions. The original due date of the return is April 15 therefore, if the taxpayer files the return on March 27 then that is the day on which they must have the document in their possession. If the IRS audits the return then the taxpayer must be able to prove the day that the document was received. If the document is not in their possession then the return needs to be extended so that it can be received and considered contemporaneous.

NON-CASH CHARITABLE CONTRIBUTIONS:

There are charitable contribution deductions allowed for property which is donated to qualifying charities and the rules are specific based on dollar amounts attributed to those donations. The contribution is allowable only if the taxpayer satisfies substantiation requirements.

The law provides that there are separate requirements for all contributions of property with a claimed value of $250 or more, contributions of property with a claimed  value  exceeding  $500, and contributions of property with a claimed value exceeding $5,000.

The rules state that for contributions exceeding $5,000, “similar items of property” are aggregated for purposes of the substantiation rules. The term “similar items of property” is defined to mean “property of the same generic category or type,” such as clothing, jewelry, furniture, electronic equipment, household appliances, or kitchenware.

Again the rules state that an individual may deduct a gift of $250 or more only if he substantiates the deduction with “a contemporaneous written acknowledgment of the contribution by the donee organization.” The law provides that this acknowledgment must include a description of any property other than cash contributed.

For non-cash contributions in excess of $500, taxpayers are required to maintain written records with respect to eachitem of donated property that include, among other things:

  • the approximate date the property was acquired and the manner of its acquisition;
  • a description of the property in detail reasonable under the circumstances;
  • the cost or other basis of the property;
  • the fair market value (FMV) of the property at the time it was contributed; and
  • the method used in determining its

One rule states that no deduction is allowed for contributions of clothing or “household items” unless such items are “in good used condition or better.” The rule defines the term “household items” to include furniture, furnishings, electronics, appliances, linens and other similar items.

Of major importance are the rules for contributions of property valued in excess of $5,000. Here the taxpayer must generally satisfy the substantiation requirements discussed above and must also obtain a “qualified appraisal” of the items and attach, to their tax return, a fully completed appraisal summary.

The law provides that a “qualified appraisal” must be performed by someone recognized and designated as a “qualified appraiser” by the IRS.

This issue of non-cash items greater that   $5,000 is very serious because there are times when a large amount of a home’s contents are being disposed of because of a lifestyle change such as the death of a spouse or parent and the property is not going to be used by the survivors of the decedent. Sometimes the large disposition of property is when there is a relocation from the family home because of a job change, divorce, down-sizing because of empty nest or retirement.  The IRS has challenged several large contributions over the past four to five years which have been major Tax Court cases finding in favor of the government because the strict substantiation rules have not been followed by the taxpayers.

The important issue here is that the greater than $5,000 substantiation and appraisal rule is a cumulative rule. There- fore, if the taxpayer had several non-cash contributions during the calendar year then an appraisal would still be needed. It is not just one specific contribution.  As an example if you gave away clothing in January, March, July and December and each one was $1,500, you would need your acknowledgment because each one was greater than $249 and you would have to report the details of each of the contributions on IRS Form 8283 but because the cumulative amount was $6,000 (4 times $1,500) you still need to meet the appraisal requirement.

IF YOU WOULD LIKE TO DISCUSS THESE RULES ON CHARITABLE CONTRIBUTIONS PLEASE CONTACT WENDY AT 330-645-4869 EXT 104.

Ohio now requires a driver’s license or state ID number to e-file

The State of Ohio has announced, if you plan to file your state return electronically, you MUST provide them with your driver’s license or state ID number.

Ohio now requires driver’s license information for both the primary taxpayer and spouse (if Married Filing Jointly in an effort to combat stolen–identity tax fraud.  Taxpayers will be asked to provide the information from the driver’s license or state issued identification card if they plan to file their tax return electronically.

Please be sure to bring your driver’s license or state ID card with you when you come to have your tax return prepared.  If you are dropping off your documentation, be sure to include a copy of your (and your spouse’s if you are filing jointly) driver’s license or state ID.

We will not be able to file your return without this information.