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Ten Key Tax Facts about Home Sales

The following is from a recent IRS Tax Tip designed to help you with selling your home.  If you have any questions, please feel free to give us a call; we’re always here to help.

In most cases, gains from sales are taxable.  But did you know that if you sell your home, you may not have to pay taxes?  Here are ten facts to keep in mind if you sell your home this year.

  1. Exclusion of Gain.  You may be able to exclude part or all of the gain from the sale of your home.  This rule may apply if you meet the eligibility test.  Parts of the test involve your ownership and use of the home.  You must have owned and used it as your main home for at least two out of the five years before the date of sale.
  2. Exceptions May Apply.  There are exceptions to the ownership, use and other rules.  One exception applies to persons with a disability.  Another applies to certain members of the military.  That rule includes certain government and Peace Corps workers.
  3. Exclusion Limit.  The most gain you can exclude from tax is $250,000.  This limit is $500,000 for joint returns.  The Net Investment Income Tax will not apply to the excluded gain.
  4. May Not Need to Report Sale.  If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
  5. When You Must Report the Sale.  You must report the sale on your tax return if you can’t exclude all or part of the gain.  You must report the sale if you choose not to claim the exclusion.  That’s also true if you get Form 1099-S, Proceeds from Real Estate Transactions.
  6. Exclusion Frequency Limit.  Generally, you may exclude the gain from the sale of your main home only once every two years.  Some exceptions may apply to this rule.
  7. Only a Main Home Qualifies.  If you own more than one home, you may only exclude the gain on the sale of your main home.  Your main home usually is the home that you live in most of the time.
  8. First-time Homebuyer Credit.  If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale.
  9. Home Sold at a Loss.  If you sell your main home at a loss, you can’t deduct the loss on your tax return.
  10. Report Your Address Change.  After you sell your home and move, update your address with the IRS.  If you purchase health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan.

Additional IRS Resources:

  • Publication 5152: Report changes to the Marketplace as they happen – English | Spanish

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Overview of the Employer Shared Responsibility Provisions

The Affordable Care Act contains specific responsibilities for employers.  The size and structure of your workforce – small, large, or part of a group – helps determine what applies to you.  Employers with 50 or more full-time equivalent employees will need to file an annual information return reporting whether and what health insurance they offered employees. In addition, they are subject to the Employer Shared Responsibility provisions. All employers that are applicable large employers are subject to the Employer Shared Responsibility provisions, including federal, state, local, and Indian tribal government employers.

An employer’s size is determined by the number of its employees.  Generally, if your organization has 50 or more full-time or full-time equivalent employees, you will be considered a large employer.  For purposes of this provision, a full-time employee is an individual employed on average at least 30 hours of service per week.

Under the Employer Shared Responsibility provisions, if an applicable large employer does not offer affordable health coverage that provides a minimum level of coverage to their full-time employees and their dependents, the employer may be subject to an Employer Shared Responsibility payment.  They must make this payment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage through the Health Insurance Marketplace.

The Employer Shared Responsibility provisions generally are effective at the beginning of this year.  Employers will use information about the number of employees they have and those employees’ hours of service during 2014 to determine if they are an applicable large employer for 2015.

If you are a self-insured employer – that is, an employer who sponsors self-insured group health plans – you are subject to the information reporting requirements for providers of minimum essential coverage whether or not you are an applicable large employer under the employer shared responsibility provisions.

It’s Time for a Mid-Year Premium Tax Credit Checkup

If you have insurance through the Health Insurance Marketplace, you may be getting advance payments of the premium tax credit. These are paid directly to your insurance company to lower your monthly premium.  Changes in your income or family size may affect your premium tax credit.  If your circumstances have changed, the time is right for a mid-year checkup to see if you need to adjust the premium assistance, you are receiving.  You should report changes that have occurred since you signed up for your health insurance plan to your Marketplace as they occur.

Changes in circumstances that you should report to the Marketplace include:

  • an increase or decrease in your income
  • marriage or divorce
  • the birth or adoption of a child
  • starting a job with health insurance
  • gaining or losing your eligibility for other health care coverage
  • changing your residence

Reporting the changes will help you avoid getting too much or too little advance payment of the premium tax credit.  Getting too much means you may owe additional money or get a smaller refund when you file your taxes.  Getting too little could mean missing out on premium assistance to reduce your monthly premiums.

Repayments of excess premium assistance may be limited to an amount between $300 and $2,500 depending on your income and filing status.  However, if advance payments of the premium tax credit were made, but your income for the year turns out to be too high to receive the premium tax credit, you will have to repay all of the payments that were made on your behalf, with no limitation.  Therefore, it is important that you report changes in circumstances that may have occurred since you signed up for your plan.

Changes in circumstances also may qualify you for a special enrollment period to change or get insurance through the Marketplace.  In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances.  You can find Information about special enrollment at HealthCare.gov.

Tips on Travel While Giving Your Services to Charity

The following is from a recent IRS Tax Tip regarding charitable contributions.  As always, there is a link on our home page to the IRS Tax Tips page so that you can view any of them.  Also, if you have any questions, don’t hesitate to contact us for questions.

Do you plan to donate your services to charity this summer?  Will you travel as part of the service?  If so, some travel expenses may help lower your taxes when you file your tax return next year.  Here are several tax tips that you should know if you travel while giving your services to charity.

  • Qualified Charities.  In order to deduct your costs, your volunteer work must be for a qualified charity. Most groups must apply to the IRS to become qualified.  Churches and governments are qualified, and do not need to apply to the IRS.  Ask the group about its IRS status before you donate.  You can also use the Select Check tool on IRS.gov to check the group’s status.
  • Out-of-Pocket Expenses.  You may be able to deduct some costs you pay to give your services. This can include the cost of travel.  The costs must be necessary while you are away from home giving your services for a qualified charity.  All costs must be:
    • Unreimbursed,
    • Directly connected with the services,
    • Expenses you had only because of the services you gave, and
    • Not personal, living, or family expenses.
  • Genuine and Substantial Duty.  Your charity work has to be real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.
  • Value of Time or Service.  You can’t deduct the value of your services that you give to charity. This includes income lost while you work as an unpaid volunteer for a qualified charity.
    • Deductible travel.  The types of expenses that you may be able to deduct include:
    • Air, rail and bus transportation,
    • Car expenses,
    • Lodging costs,
    • The cost of meals, and
    • Taxi or other transportation costs between the airport or station and your hotel.
  • Nondeductible Travel.  Some types of travel do not qualify for a tax deduction. For example, you can’t deduct your costs if a significant part of the trip involves recreation or a vacation.

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Ohio’s First Sales Tax Holiday is Near

Tax Commissioner Joe Testa Reminds Ohioans about the Tax Free Weekend

Ohio back-to-school shoppers can soon cash-in on the state’s first sales tax holiday. The one-time holiday, enacted by Senate Bill 243 which was sponsored by State Senator Kevin Bacon, starts at 12:01 a.m. Friday, August 7, 2015 and runs till 11:59 p.m. Sunday, August 9, 2015.

During those three days, the following items will be exempt from the combined state and local sales and use tax:

  • Clothing priced at $75.00 per item or less;
  • School supplies priced at $20.00 per item or less; and
  • School instructional material priced at $20.00 per item or less.

There is no limit on the quantity of items purchased. Merchandise bought for use in a trade or business is not eligible for the sales tax holiday.

Ohio Tax Commissioner Joe Testa says this occasion will help people stretch their dollars, “As the new school year approaches additional expenses can put a strain on family budgets. This sales tax holiday will give back-to-school shoppers a break from paying sales tax, and let Ohio families save some money.”

In addition to in-store sales, the tax free holiday also applies to eligible items purchased online, by mail, telephone or e-mail. To qualify, the order must be placed, paid for and accepted by the retailer for immediate shipment during the sales tax holiday, though actual delivery can be completed after the exemption period.

For additional information, frequently asked questions, and a detailed list of items that qualify for the exemption, refer to the Ohio Department of Taxation’s FAQ’s: www.tax.ohio.gov/sales_and_use/salestaxholiday/holidayfaq.aspx.

State of Ohio Issues Guidance on Same Sex Marriage

Good news for our clients in the LGBT community!

In keeping with the Supreme Court’s ruling in Obergefell v. Hodges and IRS Revenue Ruling 2013-17, the Ohio Department of Taxation has issued guidance consistent with current federal law.  In addition, previous guidance, IT 2013-01 and EW2013-01, have been withdrawn.  Now, when determining employee withholding, employers should follow guidance from IRS Revenue Ruling 2013-17 regarding the definition of spouses.  Similarly, these definitions apply when filing Ohio tax returns; no longer is Schedule IT-S required.  All legally married couples may either file married filing jointly or married filing separately.  Additionally, some previously filed state returns may be eligible for amending.

For further questions, please feel free to give us a call or email.

Governor Releases 2016-17 Official State Budget Proposal

Update(with updated link):  The governor signed the budget into law last Wednesday, July 1st and used his line item veto on 44 items.

On Monday, June 29th Governor Kasich released his budget recommendations for Fiscal Years 2016-2017, which included a proposal to continue the Small Business Investor Deduction at 75% for 2015 and increase it to 100% for qualified business income below $250,000 in 2016 and beyond.  The proposal was part of an assortment the governor brought before the General Assembly that included individual income tax cuts and tuition freezes.  The budget and explanations can be read here: http://obm.ohio.gov/Budget/operating/fy16-17.aspx.

Don’t Overlook the Child and Dependent Care Tax Credit this Summer

The following is from a recent IRS Special Tax Tip detailing information about certain child related tax credits and summer camps.  Remember, as always, we are here to help you and guide you through the preparation and filing process.  If you think you might be eligible, be sure to bring it to our attention next year when dropping off your information or when you come in for an appointment.

Day camps are common during the summer months. Many parents pay for them for their children while they work or look for work. If this applies to you, your costs may qualify for a federal tax credit that can lower your taxes. Here are the top ten tips to know about the Child and Dependent Care Credit:

  1. Care for Qualifying Persons. Your expenses must be for the care of one or more qualifying persons. Your dependent child or children under age 13 usually qualify.
  2. Work-related Expenses. Your expenses for care must be work-related. This means that you must pay for the care so you can work or look for work. This rule also applies to your spouse if you file a joint return. Your spouse meets this rule during any month they are a full-time student. They also meet it if they’re physically or mentally incapable of self-care.
  3. Earned Income Required. You must have earned income, such as from wages, salaries and tips. It also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care. This rule also applies to you if you file a joint return.
  4. Joint Return if Married. Generally, married couples must file a joint return. You can still take the credit, however, if you are legally separated or living apart from your spouse.
  5. Type of Care. You may qualify for it whether you pay for care at home, at a daycare facility, or at a day camp.
  6. Credit Amount. The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on the amount of your income.
  7. Expense Limits. The total expense that you can use in a year is limited. The limit is $3,000 for one qualifying person or $6,000 for two or more.
  8. Certain Care Does Not Qualify. You may not include the cost of certain types of care for the tax credit, including:
    • Overnight camps or summer school tutoring costs.
    • Care provided by your spouse or your child who is under age 19 at the end of the year.
    • Care given by a person you can claim as your dependent.
  1. Keep Records and Receipts. Keep all your receipts and records for when you file your tax return next year. You will need the name, address and taxpayer identification number of the care provider. You must report this information when you claim the credit on Form 2441, Child and Dependent Care Expenses.
  2. Dependent Care Benefits. Special rules apply if you get dependent care benefits from your employer.

Remember that this credit is not just a summer tax benefit. You may be able to claim it for qualifying care that you pay for at any time during the year.

Additional IRS Resources:

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Breaking – Identity Thieves Steal More than 100,000 Tax Transcripts from Online IRS Application

The IRS issued a news release yesterday.  If you believe you may have been affected, please give us a call.

Nearly 104,000 taxpayers have become victims of a new, sophisticated identity theft scheme involving the IRS’s online “Get Transcript” application, IRS Commissioner John Koskinen announced on May 26. The IRS detected the data breach in May while investigating a suspected denial-of-service attack on the application. After recognizing a large number of suspicious domains used to access an unexpectedly high volume of tax transcripts, the IRS determined that organized criminals had attempted to access the tax transcripts of approximately 200,000 taxpayers, and had been successful in an estimated 104,000 cases. As a result, the IRS has disabled the online application and is taking aggressive steps to warn the affected taxpayers.

“We have detected and determined that there was unauthorized access to our Get Transcript application that ran from February to May,” Koskinen told reporters. To try to get through to get that transcription, the criminals had to already have stolen Social Security numbers, names, addresses and other personal identifiers available. Then they had to have enough personal information for each taxpayer to get through the so-called personal related questions—the so-called auto-wallet questions.”

The IRS Get Transcript application enables taxpayers to obtain line-by-line tax return information going back five or more tax years. Criminals may use this specific tax return information to file false tax returns that claim tax items similar to those taxpayers have claimed in the past. The false tax returns would appear more like legitimately-filed past-year returns and would be able to bypass the IRS’s filters that flag suspicious returns by looking for anomalies in tax information.

Koskinen stated that, during the 2015 filing season, there were a total of 23-million successful downloads through the Get Transcript application. Thus, the 104,000 downloads by criminals represents a small fraction of total downloads, he stated. He estimated further that these 104,000 criminal downloads might result in only 15,000 false tax return filings and under $50 million paid out in fraudulent refunds. However, the IRS would release the actual figures as soon as it discovers them, Koskinen said.

One of the IRS’s highest priorities at the moment, Koskinen explained, is to inform the 200,000 taxpayers whose transcripts were downloaded (or nearly downloaded) that identity theft criminals have uncovered a large volume of their personal information. Such information would include Social Security numbers, names, current and past addresses, car ownership histories, high school mascots, places of marriage and other information commonly used to authenticate identity. In addition to sending letters to these taxpayers, the IRS will provide free credit monitoring services to the 104,000 taxpayers whose accounts were actually accessed, Koskinen promised. “We greatly regret that this additional information is available to criminals,” he said.

Koskinen notified Senate Finance Committee Chairman Orrin G. Hatch, R-Utah, and other relevant committee chairmen of the an IRS data breach late last week by phone. The committee itself did not disclose the breach because it relates to an ongoing investigation.

Lawmakers Respond

“Since learning of the breach, the committee has been working with the IRS to better understand the nature of the attack, what information was compromised, and how such a devastating breach could occur. That the IRS—home to highly sensitive information on every single American and every single company doing business here at home—was vulnerable to this attack is simply unacceptable,” said Hatch.

House Ways and Means Committee Chairman Paul Ryan, R-Wis., called for greater accountability from the IRS. “While the committee is seeking more information about the situation, it’s deeply concerning that taxpayer information has been compromised. Protecting the taxpayer is supposed to be the IRS’s top priority, and we need answers from them,” he said.

Ways and Means ranking member Sander Levin, D-Mich., issued a statement saying he had been briefed by Koskinen, who “has expressed his strongest commitment to protecting taxpayer information…. The commissioner also assured me that the IRS is reviewing its systems to get to the bottom of how an organized criminal syndicate was able to use taxpayer information stolen from non-IRS sources to access taxpayer data in the “Get Transcript”system. It is important that members of Congress work together to ensure that the IRS has adequate resources to carry out the vital priority of protecting confidential taxpayer information.”

Koskinen explained that there was an ongoing criminal investigation into the perpetrators of this scheme. He could not divulge more details concerning the investigation, but he did stress that the data breach had affected only the Get Transcript application. The basic tax filing system used by 150-million taxpayers was unaffected, he said.

Five Key Tax Tips about Tax Withholding and Estimated Tax

The following tips are from a recent IRS Tax Tip regarding estimated payments.  As always, we are here to help our clients calculate and prepare any estimated payments needed.

If you are an employee, you usually will have taxes withheld from your pay. If you don’t have taxes withheld, or you don’t have enough tax withheld, then you may need to make estimated tax payments. If you are self-employed you normally have to pay your taxes this way. Here are five tips about making estimated taxes:

  1. When the tax applies.  You should pay estimated taxes in 2015 if you expect to owe $1,000 or more when you file your federal tax return next year. Special rules apply to farmers and fishermen.
  2. How to figure the tax. Estimate the amount of income you expect to receive for the year. Also make sure that you take into account any tax deductions and credits that you will be eligible to claim. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax.
  3. When to make payments.  You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 15, and Sept. 15 in 2015, and Jan. 15, 2016.
  4. When to change tax payments or withholding.  Life changes, such as a change in marital status or the birth of a child can affect your taxes. When these changes happen, you may need to revise your estimated tax payments during the year. If you are an employee, you may need to change the amount of tax withheld from your pay. If so, give your employer a new Form W–4, Employee’s Withholding Allowance Certificate. You can use the IRS Withholding Calculator tool help you fill out the form.
  5. How to pay estimated tax.  Pay by mail using the payment vouchers that come with Form 1040-ES that we provide for you.

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