Client letters:
2016 Tax Preparation

As the end of the year approaches, it is a good time to think of planning moves that will help lower your tax bill for this year and possibly the next. 

2016 Year End Tax Planning Tips

• If you are required to take required minimum distributions (RMD) for 2016 from your retirement accounts, make sure that you fulfilled your requirement by year end.   RMD is required if you are over 70 ½.
• If you have investments with an unrealized loss, consider whether you should realize those losses by selling the investments before the end of the year.  If you like the stock and want to buy it back, be aware of the wash sale rules, which is 30 days before and after the sale.
• To the extent you can control the timing of your medical expenses, group them into the same tax year so they will exceed the yearly threshold to deduct them.  The threshold is 10% of your AGI for those under 65; 7.5% for those above 65.
• Be sure to check your flexible spending account balance as you are only allowed to carry over $500 to the next year.
• If you are thinking about making gifts to charities, consider appreciated securities.  If you are unsure which charities to give yet, or won't be itemizing next year, but want the tax deduction this year, consider a donor advised fund (DAF). 
• If you paid household employees $2,000 or more, remember the payroll tax filings are due by January 31, 2017.
• Microsoft employees – Microsoft increased the company's 401(k) match program, matching 50% of employee deferrals up to $9,000 per year vs the old policy of 50% of the first 6% of employee deferral to a maximum of 3%.  Please take a look at your 401(k) set up and be sure to take advantage of this increase in benefit.

For more tax planning tips and recent tax updates, please visit our website at www.bolsoncpa.com or contact us.

Tax Reform after the Election

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years.    President-elect Trump has declared that a "major tax bill lowering taxes in this country" would be one of his top three priorities.  Proposed changes include:

• Simplified Individual tax brackets of 12%, 25%, and 33% vs. the current system of 10%, 15%, 25%, 28%, 33%, 35% and 39.6%
• Elimination or limits on the amount of allowed charitable deductions
• Repeal of the 3.8% Net Investment Income Tax embedded in the Affordable Care Act on certain income, gains, and pass thru entity income.
• Reduction of long term capital gain tax rate from 20% to 15%
• Exclusion up to 50% from tax for certain investment income, interest dividends, and capital gains
• Repeal of federal estate and gift tax (although Washington State Estate Tax would still continue to apply)
• Reduction of C corporation top tax rate from 35% to 25% or lower, and, a limit on pass thru entity income to owners to 25% or lower
• Repeal of itemized deductions for taxes (sales tax, state and foreign income taxes) and two versions of the GOP plan allow only mortgage interest and charitable contributions as itemized deductions
• Significant increase in the individual standard deduction making itemized deductions less attractive to taxpayers ($15,000 for individuals and $30,000 for couples under President Trump's plan)
• President-Elect Trump's plan further puts a $100,000 cap for singles and $200,000 for couples on total itemized deductions.

For those that believe the Trump tax plan will prevail over others in Congress, and will go into effect for tax year 2017, these following moves might be considered: 

• Defer the 2016 year-end bonus until 2017
• If you are a cash basis business, hold off billing until next year
• Defer "first year" required minimum distribution (RMD) from an IRA or 401(k) plan (or other employer-sponsored retirement plan). Delaying 2016 distributions to 2017 thus will bunch income into 2017, but that would be beneficial if the taxpayer winds up in a substantially lower bracket that year.
• Defer a traditional IRA-to-Roth IRA conversion until 2017.
• Defer property sales.  If the sale can't be postponed, it may be possible to structure the deal as an installment sale.

Of course, each individual or business must decide whether to implement specific year-end strategies based on the context of their unique situation. Accordingly, it is important to have a conversation with us about how the potential changes might impact you.

Change in Filing Due Dates

The highway funding extension bill changed the due dates for several returns that are important to note as they are effective beginning 2016.  The due date for FinCen 114 is changed from June 30 to April 15, with extension allowed until October 15.  The due date for W2 and most 1099-Misc with the IRS are changed from February 28 to January 31.  The due date for partnership is changed from April 15 to March 15; C corporations changed from March 15 to April 15.  For other due date changes, please contact us.

Getting Ready for Taxes

We want to make tax filings easy for you.  We have developed the schedule below for you to use so the return preparation process can be efficient and effective.

We do our best to work on tax returns whenever we receive your data, but we may not be able to complete returns by IRS deadlines when the data is submitted late.  Our turnaround time for completion is 2 – 3 weeks. The turnaround for tax data received from late February on is typically about 3-4 weeks, therefore, please plan ahead.

We Appreciate Referrals

Your referrals have enabled our firm to grow.  We appreciate your trust and confidence in us and will take good care of everyone you send us.  As a token of our appreciation, we will send you a $25 gift card for each person that you refer to us that has become a client.

Privacy

We respect your privacy.  The personal, non-public information we collect about you has been derived from information that you have provided to us directly or indirectly and from transactions with us.  We do not disclose personal information about you to anyone outside our firm, except at your specific request, as required by law, or to our software vendors in resolving an IT issue.