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Moving Expense Deduction

The following is from a recent IRS Tax Tip regarding moving expenses and how and what you can deduct.  As always, we are here to assist and direct you with completing your taxes and answering your questions.

If you move your home, you may be able to deduct the cost of the move on your federal tax return next year.  This may apply if you move to start a new job or to work at the same job in a new location.  In order to deduct your moving expenses, your move must meet three requirements:

  1. Your move must closely relate to the start of work.  In most cases, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.
  2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your prior job location. For example, let’s say that your old job was three miles from your old home.  To meet this test, your new job must be at least 53 miles from your old home.
  3. You must meet the time test.  You must work full-time at your new job for at least 39 weeks the first year after the move. If you’re self-employed, you must also meet this test.  In addition, you must work full-time for a total of at least 78 weeks during the first two years at the new job site.  If your tax return is due before you meet the time test, you can still claim the deduction if you expect to meet it.

If you qualify for this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct certain transportation and lodging expenses while moving.  This applies to costs for yourself and other household members while moving from your old home to your new home.  You may not deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your property.  This may include the cost to store or insure the items while in transit.  You can deduct the cost to disconnect or connect utilities at your old and new homes.
  • Expenses you can’t deduct.  You may not deduct:
    • Any part of the purchase price of your new home.
    • The cost of selling your home.
    • The cost of breaking or entering into a lease.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income.  You must report any taxable amount on your tax return in the year you get the payment.
  • Address change.  When you move, make sure to update your address with the IRS and the U.S. Post Office.  To notify the IRS, file Form 8822, Change of Address.

Premium Tax Credit – Changes in Circumstances.  If you purchased health insurance coverage from the Health Insurance Marketplace, you may receive advance payments of the premium tax credit. It is important that you report changes in circumstances, such as when you move to a new address, to your Marketplace.  Other changes that you should report include changes in your income, employment, family size, or eligibility for other coverage.  Advance credit payments provide premium assistance to help you pay for the insurance you buy through the Marketplace.  Reporting changes will help you get the proper type and amount of premium assistance so you can avoid getting too much or too little in advance.

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Determine If You Are Subject to the Individual Shared Responsibility Provision

The following is from a recent IRS Tax Tip outlining who is responsible for the PPACA’s Individual Shared Responsibility payment.  As always, if you have any questions, please don’t hesitate to call or write with your questions.

The Affordable Care Act includes the individual shared responsibility provision that requires all taxpayers, including their spouse and dependents, to have qualifying health insurance for the entire year, report a health coverage exemption, or make a payment when you file.

Who is subject to this provision?

All U.S. citizens living in the United States are subject to the individual shared responsibility provision.

Children are subject to the individual shared responsibility provision.

  • Each child must have minimum essential coverage or qualify for an exemption for each month in the calendar year.  Otherwise, the adult or married couple who can claim the child as a dependent for federal income tax purposes will generally owe a shared responsibility payment for the child.

Senior citizens are subject to the individual shared responsibility provision.

  • Both Medicare Part A and Medicare Part C – also known as Medicare Advantage – qualify as minimum essential coverage.

All permanent residents and all foreign nationals who are in the United States long enough during a calendar year to qualify as resident aliens for tax purposes are subject to the individual shared responsibility provision.

  • Foreign nationals who live in the United States for a short enough period that they do not become resident aliens for federal income tax purposes are not subject to the individual shared responsibility payment even though they may have to file a U.S. income tax return.
  • Individuals who are not U.S. citizens or nationals and are not lawfully present in the United States are exempt from the individual shared responsibility provision.  For this purpose, an immigrant with Deferred Action for Childhood Arrivals status is considered not lawfully present, and therefore is eligible for this exemption even if he or she has a social security number.  Claim coverage exemptions on Form 8965, Health Coverage Exemptions.
  • U.S. citizens living abroad are subject to the individual shared responsibility provision.
  • However, U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period.  In addition, U.S. citizens who are bona fide residents of a foreign country or countries for an entire taxable year are treated as having minimum essential coverage for that year.
  • All bona fide residents of the United States territories are treated by law as having minimum essential coverage.

Don’t Fall for New Tax Scam Tricks by IRS Posers

The following is from a recent IRS Tax Tip warning taxpayers to beware of scams.  It’s very important that you be as well armed as you can be and be mindful that tricksters are real and dangerous.  As always, if you have any questions, we are here to help you in any way we can.

Though the tax season is over, tax scammers work year-round.  The IRS advises you to stay alert to protect yourself against new ways criminals pose as the IRS to trick you out of your money or personal information.  These scams first tried to sting older Americans, newly arrived immigrants and those who speak English as a second language.  The crooks have expanded their net, and now try to swindle virtually anyone.  Here are several tips from the IRS to help you avoid being a victim of these scams:

  • Scams use scare tactics.  These aggressive and sophisticated scams try to scare people into making a false tax payment that ends up with the criminal.  Many phone scams use threats to try to intimidate you so you will pay them your money.  They often threaten arrest or deportation, or that they will revoke your license if you don’t pay.  They may also leave “urgent” callback requests, sometimes through “robo-calls,” via phone or email.  The emails will often contain a fake IRS document with a phone number or an email address for you to reply.
  • 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 legit.  They may use online resources to get your name, address and other details about your life to make the call sound official.
  • Scams use phishing email and regular mail.  Scammers copy official IRS letterhead to use in email or regular mail they send to victims.  In another new variation, schemers provide an actual IRS address where they tell the victim to mail a receipt for the payment they make.  All in an attempt to make the scheme look official.
  • Scams cost victims over $20 million.  The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 600,000 contacts since October 2013.  TIGTA is also aware of nearly 4,000 victims who have collectively reported over $20 million in financial losses as a result of tax scams.

The real 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 that you owe.
  • Require that you pay your taxes a certain way.  For instance, require that you pay with a prepaid debit card.
  • Ask for 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 provide any information to the caller.  Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration.  Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
  • You should also report it to the Federal Trade Commission.  Use the “FTC Complaint Assistant” on FTC.gov.  Please add “IRS Telephone Scam” in the notes.

 

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Back-to-School Education Tax Credits

The following is from a recent IRS Tax Tip regarding education tax credits.  If you believe you may qualify, let us know and we’ll help you determine your best options.

If you, your spouse or a dependent are heading off to college in the fall, some of your costs may save you money at tax time.  You may be able to claim a tax credit on your federal tax return.  Here are some key IRS tips that you should know about e tax credits:

  • American Opportunity Tax Credit.  The AOTC is worth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of higher education.  Forty percent of the AOTC is refundable.  That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes.
  • Lifetime Learning Credit.  The LLC is worth up to $2,000 on your tax return. There is no limit on the number of years that you can claim the LLC for an eligible student.
  • One credit per student.  You can claim only one type of education credit per student on your tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student.  For instance, you can claim the AOTC for one student, and claim the LLC for the other.
  • Qualified expenses.  You may use qualified expenses to figure your credit. These include the costs you pay for tuition, fees, and other related expenses for an eligible student.
  • Eligible educational institutions.  Eligible schools are those that offer education beyond high school.  This includes most colleges and universities.  Vocational schools or other postsecondary schools may also qualify.  If you aren’t sure if your school is eligible:
    • Ask your school if it is an eligible educational institution, or
    • See if your school is on the U.S. Department of Education’s Accreditation database.
  • Form 1098-T.  In most cases, you should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. This form reports your qualified expenses to the IRS and to you.  The amounts shown on the form may be different than the amounts you actually paid.  That might happen because some of your related costs may not appear on the form.  For instance, the cost of your textbooks may not appear on the form.  However, you still may be able to include those costs when you figure your credit.  Don’t forget that you can only claim an education credit for the qualified expenses that you paid in that same tax year.
  • Nonresident alien.  If you are in the United States on an F-1 Student Visa, the tax rules generally treat you as a nonresident alien for federal tax purposes.  To find out more about your F-1 Student Visa status, visit U.S. Immigration Support.
  • Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income.

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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.