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Tuesday Tax Tips

2016 Tax Changes

Three Extra Days to File and Pay

Taxpayers will have until Tuesday, April 18, 2017 to file their 2016 returns and pay any taxes due. That’s because of the combined impact of the weekend and a holiday in the District of Columbia. The customary April 15 deadline falls on Saturday this year, which would normally give taxpayers until at least the following Monday. But Emancipation Day, a D.C. holiday, is observed on Monday, April 17 giving taxpayers nationwide an additional day. By law, D.C. holidays impact tax deadlines for everyone in the same way federal holidays do. Taxpayers requesting an extension will have until Monday, Oct. 16, 2017 to file.

Refunds Delayed for Some Taxpayers

A law change that went into effect this year requires the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until at least Feb. 15. Still, even with this change, the fastest way to get a refund is to file electronically and choose direct deposit. Even though the IRS will begin releasing EITC and ACTC refunds on Feb. 15, many early filers will still not have actual access to their refunds until at least the week of Feb. 27. The additional delay is due to several factors including the time needed by banks to process direct deposits.

Under this change, required by the Protecting Americans from Tax Hikes (PATH) Act, the IRS must hold the entire refund — even the portion not associated with the EITC and ACTC. This change helps ensure that taxpayers get the refund they are owed by giving the IRS more time to help detect and prevent fraud. Taxpayers should file as usual, and tax return preparers should submit returns as they normally do. Beginning a few days after Feb. 15, affected taxpayers can check the status of their refund by visiting IRS.gov/Refunds and clicking on Where’s My Refund? Or using the IRS2Go mobile app.

Renew ITIN Soon to Avoid Refund Delays

Many Individual Taxpayer Identification Numbers (ITINs) expired on Jan. 1, and affected taxpayers should act soon to avoid refund delays and possible loss of eligibility for some key tax benefits until the ITIN is renewed. An ITIN is used by anyone who has tax-filing or payment obligations under U.S. law but is not eligible for a Social Security number.

Under a PATH Act change, any ITIN not used on a tax return at least once in the past three years has expired. Also now expired is any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN).

It can take up to 11 weeks to process a complete and accurate ITIN renewal application. For that reason, the IRS urges anyone with an expired ITIN needing to file a return this tax season to submit their ITIN renewal application soon. ITIN renewal applicants can get help by visiting IRS.gov/ITIN, consulting a Certified Acceptance Agent or Acceptance Agent or making an appointment at an IRS Taxpayer Assistance Center (TAC).

Olympic Medals and Prize Money Now Tax-Free for Most Olympians

Starting in 2016, most Olympic and Paralympic winners qualify for a new tax benefit. To qualify, the taxpayer’s adjusted gross income (AGI) must be $1 million or less ($500,000 or less, if married filing separately. For these taxpayers, the value of Olympic and Paralympic medals and the amount of United States Olympic Committee (USOC) prize money is not taxable. These amounts are shown in Box 3 on Form 1099-MISC. See the Form 1040 instructions for Lines 21 and 36 for details on how to report.

ABLE Accounts Now Available for Some People with Disabilities

States are now offering specially designed, tax-favored ABLE accounts to people with disabilities who became disabled before age 26. Originally authorized in legislation enacted in late 2014, these special accounts first became widely available during 2016. Recognizing the special financial burdens faced by families raising children with disabilities, ABLE accounts are designed to enable people with disabilities and their families to save for and pay for disability-related expenses.

Contributions totaling up to the annual gift tax exclusion amount — $14,000, in both 2016 and 2017 — can generally be made to an ABLE account each year. Though contributions are not deductible, distributions are tax-free if used to pay qualified disability expenses. See the Tax Benefit for Disability page for more information.

Standard Mileage Rates Revised

The standard mileage rates for the use of a car, van, pickup or panel truck are:

  • 54 cents per mile for business miles driven in 2016, down from 57.5 cents in 2015. For those planning ahead, the 2017 rate, for use on a 2017 return filed next year, is 53.5 cents per mile.
  • 19 cents per mile driven for medical or moving purposes in 2016, down from 23 cents in 2015. The 2017 rate is 17 cents.
  • 14 cents per mile driven in service of charitable organizations. This rate is set by law and is unchanged.

The tax instructions have details on taking advantage of each of these provisions.

New Self-Certification Available for Missed Rollover Deadline

Beginning Aug. 24, 2016, a taxpayer who inadvertently fails to properly complete a tax-free rollover of a distribution from an IRA or workplace retirement plan to another eligible retirement program can often qualify to use a new self-certification procedure. Under the procedure, eligible taxpayers, encountering a variety of mitigating circumstances, can qualify for a waiver of the 60-day time limit and avoid possible early distribution taxes. Normally, an eligible distribution from an IRA or workplace retirement plan can only qualify for tax-free rollover treatment if it is contributed to another IRA or workplace plan by the 60th day after it was received. Previously, in most cases, taxpayers who failed to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS.

Now, a taxpayer who missed the time limit ordinarily qualifies for a waiver if one or more of 11 circumstances apply to them. They include a distribution check that was misplaced and never cashed, the taxpayer’s home was severely damaged, a family member died, the taxpayer or a family member was seriously ill, the taxpayer was incarcerated or restrictions were imposed by a foreign country.

Ordinarily, the IRS and plan administrators and trustees will honor a taxpayer’s truthful self-certification that they qualify for a waiver under these circumstances. Moreover, even if a taxpayer does not self-certify, the IRS now has the authority to grant a waiver during a subsequent examination. Further details, including a sample self-certification letter that a taxpayer can use to notify the administrator or trustee of the retirement plan or IRA receiving the rollover that they qualify for the waiver, can be found in Revenue Procedure 2016-47, posted on IRS.gov.

The IRS encourages eligible taxpayers wishing to transfer retirement plan or IRA distributions to another retirement plan or IRA to consider requesting that the administrator or trustee make a direct trustee-to-trustee transfer, rather than doing a rollover. Doing so can avoid some of the delays and restrictions that often arise during the rollover process. For more information about rollovers and transfers, check out the Can You Move Retirement Plan Assets? section in Publication 590-A or the Rollovers of Retirement Plan and IRA Distributions page on IRS.gov.

New Deadline for Reporting Foreign Accounts

The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is now the same as for a federal income tax return. This means that the 2016 FBAR, Form 114, must be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 18, 2017. FinCEN will grant filers missing the April 18 deadline an automatic extension until Oct. 16, 2017 to file the FBAR. Specific extension requests are not required. In the past, the FBAR deadline was June 30 and no extensions were available.

In general, the filing requirement applies to anyone who had an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2016. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-Filing System website.

FS-2017-01, January 2017

6 Critical Leadership Skills That Will Take Your Career To The Next Level

All these skills apply regardless of your current job status, role, title, or position. It doesn’t matter if you’re just starting an entry-level position, a manager, or the Vice President of your company. All levels can benefit from these 6 leadership skills.

  1. Embracing Politics
    I know what you may be thinking… Yes, politics in an office can have a negative connotation associated with it, but it can be used for good too. At it’s core, it’s about building relationships with the people you work with. There are many different types of power and influence that exists in an organization, but there are three that stand out when talking about politics in an organization.

      1. Role Power
        This is also referred to as “legitimate power” and is very hard to change in a company. It refers to where you sit in an organizational chart. It asks the questions; who reports to you, who do you report to, and who does your yearly performance evaluation?
      2. Expertise Power
        This refers to who perceives you to be knowledgeable about a certain subject they care about. The key word here is, “perception.” You could be really knowledgeable about a subject but if people don’t perceive you to be knowledgeable in that subject, then you do not have “expertise power.” There may be times when you wonder why a certain individual received a promotion or how that person got into that position. This happens all too often. At some point, someone who had the “role power” to make that decision, perceived these people to be experts, even though they might not be. A lot of times this happens because the person had a relationship with the decision maker, which brings me to the third power,
      3. Relationship Power
        This is the most important power for you to develop, because it transcends the organizational chart. You can develop relationship power with anyone, at anytime. The first step to get them to follow you is to get them to like you. Take the time to get to know other people even outside your own department. Use the people you get to know, but don’t “use” them so that the relationship is one-sided. The relationship should be a reciprocal relationship. Think about yourself as being a service to others. The goal is to fundamentally lift them up to help them succeed. The energy you put out, will come back to you. When you adopt that kind of service mentality, that’s embracing the good kind of office politics.
  2. Picking Your Battles
    This skill goes hand-in-hand with office politics. You have to know when to hold them and when to fold them. You can gain political capital by building relationships, but you can just as easily blow it all by choosing to fight too many battles. Save the political capital up for the times that really matter and those times are when they directly contribute to advancing your priorities. Don’t sweat the small things, instead focus on the things that allow you to get you where you want to go.
  3. Crafting Your Vision
    Battles you choose to fight all depend on what you’re trying to achieve. Great leaders have a plan and need to establish a clear set of goals. It’s important to have a sense of purpose, know what it’s going to take and how to articulate it simply to your team. If you can’t articulate it correctly, they may not jump on board. Remember, just because it makes sense to you, doesn’t mean it will make sense to them. Be Bold. Leaders are meant to inspire people and if you accomplish that, they will be more likely to show up and do their best work.
  4. Build Alignment
    Great leaders bring other people along with them. Companies gain buy-in from different levels of people within the organization. That means communicating the big picture to everyone who needs to be involved. This ensures that everyone who wants to be involved has that chance to be included and anyone who doesn’t, can opt out. Include the reasoning behind your methods and really encourage questions. A lot of people are going to have a lot of ideas and make good points and so it’s important for you to remain open-minded. This is also a chance to look for opportunities to collaborate with them or refine your vision.
  5. Inspiring Execution
    At this point, you know where you’re going, you have your group of people, and now it’s time to see your vision through and to do that, you have to create a tactical execution plan that illustrates what’s expected from each person. Make sure to give feedback along the way and set the example through your own behavior.
  6. Learn To Give Up Control
    How you execute a vision or a plan is critical, but don’t mistake it for micro-managing. Leaders set goals and empower the people around them with the resources and support they need to get the job done. Even if you see them doing something different then what you would do, it doesn’t mean they’re doing it wrong and it doesn’t mean it won’t work. Don’t control them into doing it your way. Instead, ask questions and try to see it from their point of view.

If you don’t achieve your goal or see it through like you thought, you have the opportunity to learn from it and make improvements for the next time around. The only failure that really happens is the one we don’t learn from. Even if you let your people execute it the way they wanted, bring them along with you. They will learn something they didn’t know before. That’s going to set them up for future success. That, at the core, is what being a leader is really about.

Borysenko, Karlyn. “Human Strategies Podcast #11: Six Critical Leadership Skills That Will Take Your Career to the next Level.” Audio blog post. Zen Workplace. N.p., 3 Jan. 2016. Web. 9 Aug. 2016.

Negative Social Media Comments by Employees

Employers have a myriad of questions and concerns about employees use of Social Media, especially when it comes to limiting what an employee may say about the company. No employer wants negative comments about their product, or their employment policies and procedures, put out for the world to see. However, as our world has become more entrenched with social media, disgruntled employees are able to easily reach a wide audience through various avenues of not only their own posting, but their followers/friends then re-posting any thoughts that they may have.

It is important that employers know the rules regarding social media and their employees use of such, and there are plenty of laws that surround an employees rights when it comes to social media.

A recent blog post by Eric B. Meyer, on The Employer Handbook blog, discussed a concluding opinion of a NLRB Administrative Law Judge that addressed negative tweets about employment matters by an employee, and whether or not the Employer could make the employee delete the tweets. The answer is No. “Section 7 protects employees’ right to engage in concerted activities for the purpose of mutual aid or protection”….The tweets concerned wages and working conditions and are protected matters. The issues raised were not purely individual concerns, but  issues common to many employees. “Concerted activities include individual activity where “individual employees seek to initiate or to induce or to prepare for group action, as well as individual employees bringing truly group complaints to the attention of management.”

“How can employers avoid this problem? Look, employees are going to talk about work. Count on it. And a blanket ban on social media discussions about work would violate the National Labor Relations Act. But, you can — and should — encourage your employees to address work issues directly with co-workers, supervisors, HR, other decisionmakers. In most situations, this direct communication is a more effective way to address workplace issues and resolve problems, than venting on social media.”

Source: Can you force an employee to delete critical tweets about the company? NLRB says no.

Tuesday Tax Tip: Self Employment

If you are self-employed, you normally carry on a trade or business. Sole proprietors andindependent contractors are two types of self-employment. If this applies to you, there are a few basic things you should know about how your income affects your federal tax return. Here are six important tips from the IRS:

  • SE Income. Self-employment can include income you received for part-time work. This is in addition to income from your regular job.
  • Schedule C or C-EZ. You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040. You may use Schedule C-EZ if you had expenses less than $5,000 and meet certain other conditions. See the form instructions to find out if you can use the form.
  • SE Tax. You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. If you owe this tax, attach the schedule to your federal tax return.
  • Estimated Tax. You may need to make estimated tax payments. Try IRS Direct Pay. People typically make these payments on income that is not subject to withholding. You usually pay estimated taxes in four annual installments. If you do not pay enough tax throughout the year, you may owe a penalty.
  • Allowable Deductions. You can deduct expenses you paid to run your business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.
  • When to Deduct. In most cases, you can deduct expenses in the same year you paid, or incurred them. However, you must ‘capitalize’ some costs. This means you can deduct part of the cost over a number of years.

IRS Tax Tip 2016-23, February 19, 2016

Happy Saint Patrick’s Day!

It will be a festive and fun day for many as we keep an eye out for leprechauns. But if we aren’t careful, our Pot O’ Gold, may suffer by not following some simple tips for Saint Patrick’s Day when it comes to work.

st patricks day hat

1. No Green Beer

Simply put: alcohol and work do not mix. So save the green beer and Jameson for your personal time after hours! A green tinted non-alcoholic punch or drink would be a great way to celebrate with your co-workers!

2. Costumes

Be mindful of what you are representing when picking out your attire. It is always imperative that your attire stays within the realms of your company’s dress code. That being said, why not sport a green top, tie, or socks?

3. No Pinching Zone

Legend has it that if you don’t wear green on St. Paddy’s Day then you get pinched. This is one thing that we need to leave in the school yard. No green pinch is worth a sexual harassment claim!

4. Irish Flu

The day after St. Paddy’s Day has long been a day of high absenteeism. As an employee, do you have a PTO day you can schedule? As a boss, are you prepared for scheduling problems?

With those for things in mind, be ready to sport your shamrocks, eat your corned beef and cabbage, and have a festive day!

 

Salary Exempt Absenteeism

Employers should be careful how they deal with absenteeism by exempt employees.

Don’t dock an exempt employee’s paycheck for missing less than one full day of work because it could destroy their exemption and entitle them to time-and-a-half for all overtime they have worked in the past or work in the future. However, the FLSA does allow for partial day absences to be paid through an employee’s accrual bank of PTO, Vacation, or Sick hours. The only exception for docking a salary exempt employees pay for a partial day absence is if the absence is covered by the FMLA, and the employee has exhausted their accrual bank hours.

Full Day deductions of pay from a salary exempt employee are allowed only under the following circumstances:

  • dilemmaDuring the initial or final week of employment the employees pay may be reduced to reflect the actual hours worked.
  • Full-day absences for personal reasons.
  • Full day absences for disciplinary suspension for safety violations.
  • Full day absences in which an employee has exhausted their entitled Paid Leave plan balances.
  • FMLA Absences.

Two other attendance issues protected by law are employees called to jury duty and employees who request time off for religious reasons. State and federal laws generally require employers to give workers leave when called to serve on a jury. And employers may have to bend their attendance rules to accommodate a worker’s religious practices or beliefs.

A key to curbing abuse is to have an absenteeism policy that clearly sets forth which absences are allowed, and what behavior will subject the employee to discipline.

Tuesday Tax Tip: Tax Scams

Each year, people fall prey to tax scams. That’s why the IRS sends a list of its annual “Dirty Dozen.” Stay safe and be informed – don’t become a victim.

If you get involved in illegal tax scams, you can lose money or face stiff penalties, interest and even criminal prosecution. Remember, if it sounds too good to be true, it probably is. Be on the lookout for these scams:

Identity theft. Identity theft, especially around tax time, is at the top of the “Dirty Dozen” list again this year. The IRS continues to aggressively pursue criminals who file fraudulent returns using someone else’s Social Security number. The IRS is making progress on this front. Remain vigilant to avoid becoming a victim.

Telephone scams. Threatening phone calls by criminals impersonating IRS agents remain an ongoing threat. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation, license revocation and more. These con artists often demand payment of back taxes on a prepaid debit card or by immediate wire transfer. Be alert to con artists impersonating IRS agents and demanding payment.

Phishing.  Phishing scams typically use unsolicited emails or fake websites that appear legitimate but are attempting to steal your personal information. The IRS will not send you an email about a bill or tax refund out of the blue. Don’t click on strange emails and websites that may be scams to steal your personal information.

Return Preparer Fraud. About 60 percent of taxpayers use tax professionals to prepare their returns. While most tax professionals provide honest, high-quality service, there are some dishonest ones who set up shop each filing season to perpetrate refund fraud, identity theft and other scams. Be on the lookout for unscrupulous tax return preparers. Choose your preparer wisely.

Offshore Tax Avoidance.  Hiding money and income offshore is a bad bet. If you have money in offshore banks, it’s best to contact the IRS to get your taxes in order. The IRS offers the Offshore Voluntary Disclosure Program to help you do that.

Inflated Refund Claims.  Be on the lookout for anyone promising inflated tax refunds. Also be wary of anyone who asks you to sign a blank return, promises a big refund before looking at your tax records or charges fees based on a percentage of the refund. Scam artists use flyers, advertisements, phony store fronts and word of mouth via trusted community groups to find victims.

Fake Charities. Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. If you are making a charitable contribution, you should take a few extra minutes to ensure your hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools you need to check out the status of charitable organizations. Be wary of charities with names that are similar to familiar or nationally-known organizations.

Falsely Padding Deductions on Returns. Don’t give in to the temptation to inflate deductions or expenses on your tax return. Think twice before overstating deductions such as charitable contributions, inflating claimed business expenses or including credits that you are not entitled to receive, such as the Earned Income Tax Credit or Child Tax Credit. Complete an accurate return.

Excessive Claims for Business Credits. Don’t make improper claims for fuel tax credits. The credit is generally limited to off-highway business use, including use in farming. It is generally not available to most taxpayers. Also avoid misuse of the research credit. If it doesn’t apply to your business and you don’t meet the criteria, don’t make the claim.

Falsifying Income to Claim Credits. Don’t invent income to erroneously claim tax credits. A scam artist may try to talk you into doing this. You should file the most accurate tax return possible because you are legally responsible for what is on your return. Falling prey to this scam may mean you have to pay back taxes, interest and penalties. In some cases, you may even face criminal prosecution.

Abusive Tax Shelters. Avoid using abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. Be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, seek an independent opinion regarding these complex situations or offers. Most taxpayers pay their fair share, and so should you.

Frivolous Tax Arguments.  Using frivolous tax arguments to avoid paying taxes can have serious financial consequences. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying taxes. The law is crystal clear that people must pay their taxes. For decades, the federal courts have consistently upheld the tax laws. The penalty for filing a frivolous tax return is $5,000.

Tax scams can take many forms beyond the “Dirty Dozen.” The best defense is to remain alert. Additional information about tax scams is available on IRS social media sites, including YouTubeand Tumblr, where you can search “scam” to find all the scam-related posts.

IRS Special Edition Tax Tip 2016-03, February 22, 2016

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