No need to itemize to claim these deductions

No need to itemize to claim these deductions

Are you part of the approximately 68% of taxpayers who IRS statistics say claim the standard deduction instead of itemizing? If so, you can still deduct some expenses on your 2015 federal income tax return.

●  Individual retirement account (IRA) contributions – For 2015, you may qualify to deduct up to $5,500 in contributions to a traditional IRA. That increases to $6,500 if you're age 50 or older. Income limitations may apply in some cases. The same limits apply to Roth IRA contributions, which are not deductible.

●  Health Savings Account (HSA) contributions – HSAs are IRA-like accounts set up in conjunction with a high-deductible health insurance policy. The annual contributions you make to your HSA are deductible. Contributions are invested and grow tax-free, and you withdraw the money tax-free to pay unreimbursed medical expenses. The HSA contribution limit for 2015 is $3,350 for individuals and $6,650 for families. You can contribute an additional $1,000 when you're age 55 and older.

●  Student loan interest and tuition fees – Deduct up to $2,500 of interest on student loans for yourself, your spouse, and your dependents. For 2015, you can also deduct up to $4,000 of tuition and fees for qualified higher education courses. Income limitations apply, and you must coordinate these deductions with other education tax breaks.

●  Self-employment deductions – If you're self-employed, you can generally deduct the cost of health insurance premiums, retirement plan contributions, and one-half of self-employment taxes.

●  Other deductions – Don't overlook deductions for alimony you pay, certain moving expenses, and early savings withdrawal penalties. Educators can deduct up to $250 for classroom supplies purchased in 2015.

Contact our office for more information on these and other deductions you may be entitled to claim on your 2015 return.

Do you have enough emergency savings?

Do you have enough emergency savings?

A December 2015 survey by a consumer financial services company showed that 36% of the people who participated said they dealt with their most recent unexpected expense by using savings. Would you be part of that group? Here are tips for starting your "rainy day" fund.

Define how much emergency savings is enough. A good starting point is to plan for your emergency fund to cover three to six months of expenses. Another good starting point: Ask yourself how much you'll need to cover minimum monthly expenses without resorting to credit cards or lines of credit. Your assessment of an adequate balance will vary based on your financial situation, including the vulnerability of your income. For example, a one-earner household is more vulnerable than a two-earner household when it comes to paychecks, so the one-earner family generally will need to set aside more for emergencies.

Track how much you already have set aside. Include all sources in your accounting. For instance, some companies provide payment for accrued vacation and/or sick leave to laid-off employees. If your company provides this benefit and you maintain significant balances, you may not need as much in an emergency fund to help you weather an unexpected layoff.

Decide whether to pay off bills first. Putting excess cash toward high interest credit card balances might make more sense than funding a savings account that earns a much lower rate of interest.

Keep your funds liquid. Emergency money should be easy to get at. You don't want to have to sell investments at a potential loss or pay withdrawal penalties in order to cover an unexpected hit to your finances. Look into savings or money market accounts as places to accumulate cash.

We can help you estimate how much to stash away in your emergency fund. Give us a call for help establishing a savings goal for those stormy days.

Depreciation breaks boost tax deductions

Depreciation breaks boost tax deductions

Did you buy equipment or other business assets during 2015? Here are the current rules for maximizing your tax deduction.

● Section 179. Under code Section 179, you can expense many types of otherwise depreciable property used in your business. Both new and used assets qualify for Section 179.

For 2015, the maximum amount you can expense is $500,000 of the cost of qualifying property you began to use during the year. The $500,000 is reduced when the cost of the property you purchased during the year exceeds $2,000,000. Your deduction may also be limited by the amount of your business income.

Planning tip: The Section 179 amounts are now permanent. Beginning in 2016, both will be adjusted annually for inflation.

● Bonus depreciation. In addition to Section 179, you can benefit from the 50% bonus depreciation deduction for tangible personal property that you purchased and placed in service during 2015. Bonus depreciation is generally available for new assets that have a useful life of 20 years or less.

Planning tip: The December "extenders" tax law made bonus depreciation available through 2019, though the deductible amount will decrease in 2018 and 2019.

Please contact us about the latest depreciation breaks available to your business.

Who can be your dependent?

Who can be your dependent?

You might believe a "dependent" is a minor child who lives with you. While that is essentially correct, dependents can include parents, other relatives and nonrelatives, and even children who don't live with you. Here's an overview of the dependency exemption.

Exemptions and your taxable income. Each dependent deduction is worth $4,000 on your 2015 federal income tax return, and reduces your taxable income by this amount. You'll lose part of the benefit when your adjusted gross income reaches a certain level. For 2015, the phase-out begins at $309,900 when you're married filing jointly and $258,250 when you're single.

Definition of a dependent. A dependent is a qualifying child or a qualifying relative. While there are specific rules, very broadly speaking, a dependent is someone who lives with you and who meets several tests, including the support test. For qualifying children, the support test means the child cannot have provided more than half of his or her own support for the year. For qualifying relatives, the support test means you generally must provide more than half of that person's total support during the year. There are many exceptions. For example, parents don't have to live with you if they otherwise qualify, but certain other relatives do. If you're divorced and a noncustodial parent, your child doesn't necessarily have to live with you for the dependent deduction to apply.

Who can't be claimed? Your spouse is never your dependent. In addition, you generally may not claim a married person as a dependent if that person files a joint return with a spouse. Also, a dependent must be a U.S. citizen, resident alien, national, or a resident of Canada or Mexico for part of the year.

For a seemingly simple deduction, claiming an exemption for a dependent can be quite complex. You'll want to get it right, because being able to claim someone as a dependent can lead to other tax benefits, including the child tax credit, education credits, and the dependent care credit.

Contact our office to learn who qualifies as your dependent. We'll help you make the most of your federal income tax exemptions.

Sunk costs could lead to bad business decisions

Sunk costs could lead to bad business decisions

Do you think pulling the plug on a failed contract would be "wasting all the money" your business has spent to date?

If so, you may be making the choice based on emotion and "sunk costs." Sunk costs are past expenses that are irrelevant to current decisions – such as those spent on non-performing contracts. Why are they irrelevant? Because that money is already spent and generally cannot be recovered.

While admitting mistakes may be difficult and ego-bruising, staunching the flow of cash and changing course by abandoning a failed contract can be a wise decision. That's because the only relevant costs are those that influence your company's current and future operations.

For example, say your firm hires a new sales representative. You spend thousands of dollars sending the rep to training seminars. You assign mentors who take time from their busy schedules to provide on-the-job coaching and oversight. But despite your best efforts, the new hire isn't working out. The rep doesn't fit your firm's culture, doesn't grasp the company's goals and procedures and doesn't generate adequate revenues for the business.

As a manager, what should you do? At some point, you may need to terminate the employee and start over with someone else. But what about all that time and money you spent on training and mentoring? Those are sunk costs. Acknowledge that you can't get them back, cut your losses, and start anew. Throwing good money after bad won't salvage a poor business investment – or a poor business decision.

Count the ways you can fund your myRA

Count the ways you can fund your myRA

 A myRA ("my Retirement Account") is a simplified Roth IRA that belongs entirely to you. Roth annual contribution limits apply to these retirement accounts and your funds are invested in government-guaranteed Treasury securities. You can choose to contribute to your account from your paycheck by completing a direct deposit authorization form and giving it to your employer. In addition, the Department of Treasury recently added new ways to fund myRAs. Now you also have the option of making direct deposits from a checking or savings account or from your federal income tax

refund. To learn more about myRAs, please contact us.

Form 1099 penalties increase sharply

Form 1099 penalties increase sharply

Have you filed required Forms 1099 for 2015? The forms were due by February 1 to individuals you paid $600 or more in the course of your business during the year. If you haven't completed Forms 1099, you'll want to do so as soon as possible. The penalties for failing to file range from $50 to $250 per form, depending on how late your filing is and whether or not the failure to file was intentional. Total penalties can go as high as $1 million for businesses with gross receipts under $5 million or $3 million for those with gross receipts over $5 million. Contact us for help in determining whether you need to file.

What's the penalty for not having health insurance?

What's the penalty for not having health insurance?

Did you have health insurance in 2015? If not, you may owe a penalty on your federal income tax return. For 2015 returns, the penalty is the higher of a flat dollar amount or a percentage of your household income. The flat dollar amount is $325 per adult and $162.50 per child under age 18, up to a maximum of $975 per family. The percentage-of-income amount is 2% of household income above the filing threshold for your filing status. The maximum penalty for this calculation is based on the total annual average premium for a bronze level insurance plan purchased from the government website.

Will this IRS due date extension hold up your tax return?

Will this IRS due date extension hold up your tax return?

In December, the IRS extended the time to file for employers wh

o were required to provide health care information forms such as Form 1095-C to employees. Because the new due date is March 31, you may be ready to file your federal income tax return before you receive Form 1095-C. The IRS says that for 2015, you do not need to wait to receive the form. Instead, you can rely on other information to complete and file your return. Contact us if you have questions about tax forms you may be receiving regarding your health insurance coverage.

Stay compliant with minimum wage laws

Stay compliant with minimum wage laws

With some exceptions, the federal minimum wage is $7.25 per hour. But your state may require you to pay a different rate, and that rate may have changed as of January 1. When employees are subject to both state and federal minimum wage laws, the law says you need to pay the higher of the two. Remember that overtime rates are also affected by the minimum wage. Review your payroll practices, including the posting of required notices to employees.

Do younger workers value your company's benefits?

Do younger workers value your company's benefits?

 You may consider the fringe benefits your company provides to employees to be a valuable recruiting and retention tool. But recent studies indicate that younger workers – those born after 1980 – may not agree. The studies show that these workers prefer paid time off or cash to more traditional benefits. In addition, they may not be as aware of the benefits your company offers if you're not communicating in ways they're famil
iar with, such as text or instant messages.