• Tax Filing Deadline Is Around the Corner

    29 March 2017
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    REMINDER: April 18, 2017 is the due date to file your return(s), pay any taxes owed, or file for a six-month extension. It is important to know that with this extension you will end up paying the tax you estimate to be due.

    In addition, this deadline also applies to the following:

    • Tax year 2016 balance-due payments – Taxpayers that are filing extensions are cautioned that the filing extension is an extension to file, NOT an extension to pay a balance due.  Late payment penalties and interest will be assessed on any balance due, even for returns on extension.  Taxpayers anticipating a balance due will need to estimate this amount and include their payment with the extension request.
    • Tax year 2016 contributions to a Roth or traditional IRA – April 18 is the last day contributions for 2016 can be made to either a Roth or traditional IRA, even if an extension is filed.
    • Individual estimated tax payments for the first quarter of 2017 – Taxpayers, especially those who have filed for an extension to file their 2016 return, are cautioned that the first installment of the 2017 estimated taxes are due on April 18.  If you are on extension and anticipate a refund, all or a portion of the refund can be allocated to this quarter’s payment on the final return when it is filed at a later date. If the refund won’t be enough to fully cover the April 18 installment, you may need to make a payment with the April 18 voucher. Please call this office for any questions.
    • Individual refund claims for tax year 2013 – The regular three-year statute of limitations expires on April 18 for the 2013 tax return.  Thus, no refund will be granted for a 2013 original or amended return that is filed after April 18. Caution: The statute does not apply to balances due for unfiled 2013 returns.

    If Dagley  & Co. is holding up the completion of your returns because of missing information, please forward that information as quickly as possible in order to meet the April 18 deadline.  Keep in mind that the last week of tax season is very hectic, and your returns may not be completed if you wait until the last minute.  If it is apparent that the information will not be available in time for the April 18 deadline, then let the office know right away so that an extension request, and 2017 estimated tax vouchers if needed, may be prepared.

    If your returns have not yet been completed, please call Dagley & Co. right away so that we can schedule an appointment and/or file an extension if necessary.

     

     

     

     

     

     

     

     

     

     

     

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  • February 2017 Individual Due Dates

    2 February 2017
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    As the busy month of January passes by, February is known as the shortest month of the year. We’ve created a list of individual due dates to help keep you organized:

    February 1 – Tax Appointment

    If you don’t already have an appointment scheduled with Dagley & Co., you should call to make an appointment that is convenient for you.

    February 10 – Report Tips to Employer

    If you are an employee who works for tips and received more than $20 in tips during January, you are required to report them to your employer on IRS Form 4070 no later than February 10.

    Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

    February 15 – Last Date to Claim Exemption from Withholding

    If you claimed an exemption from income tax withholding last year on the Form W-4 you gave your employer, you must file a new Form W-4 by this date to continue your exemption for another year.

    Give us a call at (202) 417-6640 to make an appointment.

     

     

     

     

     

     

     

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  • January 2017 Individual Due Dates

    3 January 2017
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    JANUARY 2017 INDIVIDUAL DUE DATES

    January 3 – Call for Your Tax Appointment –

    It’s the beginning of tax season. If you have not made an appointment to have your taxes prepared, we encourage you do so ASAP.

    January 10 – Report Tips to Employer –

    If you are an employee who works for tips and received more than $20 in tips during December, you are required to report them to your employer on IRS Form 4070 no later than January 10.

    January 17 – Individual Estimated Tax Payment Due –

    It’s time to make your fourth quarter estimated tax installment payment for the 2016 tax year.

    January 17 – Farmers & Fishermen Estimated Tax Payment Due – If you are a farmer or fisherman whose gross income for 2015 or 2016 is two-thirds from farming or fishing, it is time to pay your estimated tax for 2016 using Form 1040-ES. You have until April 18, 2017 to file your 2016 income tax return (Form 1040). If you do not pay your estimated tax by January 17, you must file your 2016 return and pay any tax due by March 1, 2017 to avoid an estimated tax penalty.

     

    Contact Dagley & Co. with any questions, or concerns about January’s due dates.

     

     

     

     

     

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  • September 2016 Individual Due Dates

    1 September 2016
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    September 1 – 2016 Fall and 2017

    Contact Dagley & Co. at (202) 417-6640 to schedule a consultation appointment for your individual tax planning.

    September 12 – Report Tips to Employer

    If you are an employee who works for tips and received more than $20 in tips during August, you are required to report them to your employer on IRS Form 4070 no later than September 12. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

    September 15 – Estimated Tax Payment Due
    The third installment of 2016 individual estimated taxes is due. Our tax system is a “pay-as-you-go” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-go” requirement. These include:

    • Payroll withholding for employees;
    • Pension withholding for retirees; and
    • Estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding.

    When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This penalty is equal to the federal short-term rate plus 3 percentage points, and the penalty is computed on a quarter-by-quarter basis.

    Federal tax law does provide ways to avoid the underpayment penalty. If the underpayment is less than $1,000 (the de minimis amount), no penalty is assessed. In addition, the law provides “safe harbor” prepayments. There are two safe harbors:

    • The first safe harbor is based on the tax owed in the current year. If your payments equal or exceed 90% of what is owed in the current year, you can escape a penalty.
    • The second safe harbor is based on the tax owed in the immediately preceding tax year. This safe harbor is generally 100% of the prior year’s tax liability. However, for taxpayers whose AGI exceeds $150,000 ($75,000 for married taxpayers filing separately), the prior year’s safe harbor is 110%.

    Example: Suppose your tax for the year is $10,000 and your prepayments total $5,600. The result is that you owe an additional $4,400 on your tax return. To find out if you owe a penalty, see if you meet the first safe harbor exception. Since 90% of $10,000 is $9,000, your prepayments fell short of the mark. You can’t avoid the penalty under this exception.

    However, in the above example, the safe harbor may still apply. Assume your prior year’s tax was $5,000. Since you prepaid $5,600, which is greater than 110% of the prior year’s tax (110% = $5,500), you qualify for this safe harbor and can escape the penalty.

    This example underscores the importance of making sure your prepayments are adequate, especially if you have a large increase in income. This is common when there is a large gain from the sale of stocks, sale of property, when large bonuses are paid, when a taxpayer retires, etc. Timely payment of each required estimated tax installment is also a requirement to meet the safe harbor exception to the penalty. If you have questions regarding your safe harbor estimates, please call this office as soon as possible.

    NOTE: Some state de minimis amounts and safe harbor estimate rules are different than those for the Federal estimates. Please call Dagley & Co. for particular state safe harbor rules.

     

    Dagley & Co. is here for you. Contact our office directly at (202) 417-6640.

     

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  • August 2016 Due Dates

    29 July 2016
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    August is here, which means there are due dates you need to know about. We have both individual and business due dates in the following:

    August 2016 Individual Due Dates

    August 10 – Report Tips to Employer

    If you are an employee who works for tips and received more than $20 in tips during July, you are required to report them to your employer on IRS Form 4070 no later than August 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

    August 2016 Business Due Dates

    August 1 – Self-Employed Individuals with Pension Plans 

    If you have a pension or profit-sharing plan, this is the final due date for filing Form 5500 or 5500-EZ for calendar year 2015.

    August 1 – Social Security, Medicare and Withheld Income Tax

    File Form 941 for the second quarter of 2016. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until August 10 to file the return.

    August 1 – Certain Small Employers

    Deposit any undeposited tax if your tax liability is $2,500 or more for 2016 but less than $2,500 for the second quarter.

    August 1 – Federal Unemployment Tax

    Deposit the tax owed through June if more than $500.

    August 1 – All Employers

    If you maintain an employee benefit plan, such as a pension, profit-sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar year 2015. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year-ends.

    August 10 – Social Security, Medicare and Withheld Income Tax

    File Form 941 for the second quarter of 2016. This due date applies only if you deposited the tax for the quarter in full and on time.

    August 15 – Social Security, Medicare and Withheld Income Tax

    If the monthly deposit rule applies, deposit the tax for payments in July.

    August 15 – Non-Payroll Withholding

    If the monthly deposit rule applies, deposit the tax for payments in July.

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  • Due Dates June 2016 – Individual and Business

    29 May 2016
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    June 2016 Individual Due Dates

    June 10 – Report Tips to Employer

    If you are an employee who works for tips and received more than $20 in tips during May, you are required to report them to your employer on IRS Form 4070 no later than June 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

    June 15 – Estimated Tax Payment Due

    It’s time to make your second quarter estimated tax installment payment for the 2016 tax year. Our tax system is a “pay-as-you-go” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-go” requirement. These include: payroll withholding for employees; pension withholding for retirees; and estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding.

    When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This penalty is equal to the federal short-term rate plus 3 percentage points, and the penalty is computed on a quarter-by-quarter basis.

    Federal tax law does provide ways to avoid the underpayment penalty. If the underpayment is less than $1,000 (the “de minimis amount”), no penalty is assessed. In addition, the law provides “safe harbor” prepayments. There are two safe harbors:  The first safe harbor is based on the tax owed in the current year. If your payments equal or exceed 90% of what is owed in the current year, you can escape a penalty. The second safe harbor is based on the tax owed in the immediately preceding tax year. This safe harbor is generally 100% of the prior year’s tax liability. However, for taxpayers whose AGI exceeds $150,000 ($75,000 for married taxpayers filing separately), the prior year’s safe harbor is 110%.

    Example: Suppose your tax for the year is $10,000 and your prepayments total $5,600. The result is that you owe an additional $4,400 on your tax return. To find out if you owe a penalty, see if you meet the first safe harbor exception. Since 90% of $10,000 is $9,000, your prepayments fell short of the mark. You can’t avoid the penalty under this exception.

    However, in the above example, the safe harbor may still apply. Assume your prior year’s tax was $5,000. Since you prepaid $5,600, which is greater than 110% of the prior year’s tax (110% = $5,500), you qualify for this safe harbor and can escape the penalty.

    This example underscores the importance of making sure your prepayments are adequate, especially if you have a large increase in income. This is common when there is a large gain from the sale of stocks, sale of property, when large bonuses are paid, when a taxpayer retires, etc. Timely payment of each required estimated tax installment is also a requirement to meet the safe harbor exception to the penalty. If you have questions regarding your safe harbor estimates, please call this office as soon as possible.

    CAUTION: Some state de minimis amounts and safe harbor estimate rules are different than those for the Federal estimates. Please call Dagley & Co. for particular state safe harbor rules.

    June 15 – Taxpayers Living Abroad

    If you are a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, June 15 is the filing due date for your 2015 income tax return and to pay any tax due. If your return has not been completed and you need additional time to file your return, file Form 4868 to obtain 4 additional months to file. Then, file Form 1040 by October 17. However, if you are a participant in a combat zone, you may be able to further extend the filing deadline (see below).

    Caution: This is not an extension of time to pay your tax liability, only an extension to file the return. If you expect to owe, estimate how much and include your payment with the extension. If you owe taxes when you do file your extended tax return, you will be liable for both the late payment penalty and interest from the due date.

    Combat Zone – For military taxpayers in a combat zone/qualified hazardous duty area, the deadlines for taking actions with the IRS are extended. This also applies to service members involved in contingency operations, such as Operation Iraqi Freedom or Enduring Freedom. The extension is for 180 consecutive days after the later of: The last day a military taxpayer was in a combat zone/qualified hazardous duty area or served in a qualifying contingency operation, or have qualifying service outside of the combat zone/qualified hazardous duty area (or the last day the area qualifies as a combat zone or qualified hazardous duty area), or the last day of any continuous qualified hospitalization for injury from service in the combat zone/qualified hazardous duty area or contingency operation, or while performing qualifying service outside of the combat zone/qualified hazardous duty area.

    In addition to the 180 days, the deadline is also extended by the number of days that were left for the individual to take an action with the IRS when they entered a combat zone/qualified hazardous duty area or began serving in a contingency operation.

    It is not a good idea to delay filing your return because you owe taxes. The late filing penalty is 5% per month (maximum 25%) and can be a substantial penalty. It is generally better practice to file the return without payment and avoid the late filing penalty. We can also establish an installment agreement which allows you to pay your taxes over a period of up to 72 months.

    Please contact Dagley & Co. for assistance with an extension request or an installment agreement.

    June 30 – Taxpayers with Foreign Financial Interests

    A U.S. citizen or resident, or a person doing business in the United States, who has a financial interest in or signature or other authority over any foreign financial accounts (bank, securities or other types of financial accounts), in a foreign country, is required to file Form FinCEN 114 with the Department of the Treasury (not the IRS). The form must be filed with the Treasury Department no later than June 30, 2016 for 2015. No extension of time to file is permitted. The form must be filed electronically; paper forms are not allowed. This filing requirement applies only if the aggregate value of these financial accounts exceeds $10,000 at any time during 2015. Contact Dagley & Co. for additional information and assistance filing the form.

    June 2016 Business Due Dates

    June 15 – Employer’s Monthly Deposit Due

    If you are an employer and the monthly deposit rules apply, June 15 is the due date for you to make your deposit of Social Security, Medicare and withheld income tax for May 2016. This is also the due date for the non-payroll withholding deposit for May 2016 if the monthly deposit rule applies.

    June 15 – Corporations

    Deposit the second installment of estimated income tax for 2016 for calendar year corporations.

    June 30 – Taxpayers with Foreign Financial Interests

    A U.S. citizen or resident, or a person doing business in the United States, who has a financial interest in or signature or other authority over any foreign financial accounts (bank, securities or other types of financial accounts), in a foreign country, is required to file Form FinCEN 114 with the Department of the Treasury (not the IRS). The form must be filed with the Treasury Department no later than June 30, 2016 for 2015. No extension of time to file is permitted. The form must be filed electronically; paper forms are not allowed. This filing requirement applies only if the aggregate value of these financial accounts exceeds $10,000 at any time during 2015. Contact Dagley & Co. for additional information and assistance filing the form.

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  • May 2016 Individual and Business Due Dates

    30 April 2016
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    The following are Individual, followed by Business, due dates for May 2016:

    Individual:

    May 10 – Report Tips to Employer

    If you are an employee who works for tips and received more than $20 in tips during April, you are required to report them to your employer on IRS Form 4070 no later than May 10. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

    May 31 –  Final Due Date for IRA Trustees to Issue Form 5498

    Final due date for IRA trustees to issue Form 5498, providing IRA owners with the fair market value (FMV) of their IRA accounts as of December 31, 2015. The FMV of an IRA on the last day of the prior year (Dec 31, 2015) is used to determine the required minimum distribution (RMD) that must be taken from the IRA if you are age 70½ or older during 2016. If you are age 70½ or older during 2016 and need assistance determining your RMD for the year, please give this office a call. Otherwise, no other action is required and the Form 5498 can be filed away with your other tax documents for the year.

     

    Business:

    May 2 –  Federal Unemployment Tax Deposit the tax owed through March if it is more than $500.

    May 2 – Social Security, Medicare and Withheld Income Tax 

    File Form 941 for the first quarter of 2016. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until May 10 to file the return.

    May 10 – Social Security, Medicare and Withheld Income Tax

    File Form 941 for the first quarter of 2016. This due date applies only if you deposited the tax for the quarter in full and on time.

    May 16 – Employer’s Monthly Deposit Due

    If you are an employer and the monthly deposit rules apply, May 16 is the due date for you to make your deposit of Social Security, Medicare and withheld income tax for April 2016. This is also the due date for the non-payroll withholding deposit for April 2016 if the monthly deposit rule applies.

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  • April 2016 Due Dates

    5 April 2016
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    April 2016 Individual Due Dates

    April 1 – Last Day to Withdraw Required Minimum Distribution

    Last day to withdraw 2015’s required minimum distribution from Traditional or SEP IRAs for taxpayers who turned 70½ in 2015. Failing to make a timely withdrawal may result in a penalty equal to 50% of the amount that should have been withdrawn. Taxpayers who became 70½ before 2015 were required to make their 2015 IRA withdrawal by December 31, 2015.

    April 11 –  Report Tips to Employer

    If you are an employee who works for tips and received more than $20 in tips during March, you are required to report them to your employer on IRS Form 4070 no later than April 11. Your employer is required to withhold FICA taxes and income tax withholding for these tips from your regular wages. If your regular wages are insufficient to cover the FICA and tax withholding, the employer will report the amount of the uncollected withholding in box 12 of your W-2 for the year. You will be required to pay the uncollected withholding when your return for the year is filed.

    April 18 –  Individual Tax Returns Due

    File a 2015 income tax return (Form 1040, 1040A, or 1040EZ) and pay any tax due. If you want an automatic six-month extension of time to file the return, please call this office.

    Caution: The extension gives you until October 17, 2016 to file your 2015 1040 return without being liable for the late filing penalty. However, it does not avoid the late payment penalty; thus, if you owe money, the late payment penalty can be severe, so you are encouraged to file as soon as possible to minimize that penalty. Also, you will owe interest, figured from the original due date until the tax is paid. If you have a refund, there is no penalty; however, you are giving the government a free loan, since they will only pay interest starting 45 days after the return is filed. Please call Dagley & Co. to discuss your individual situation if you are unable to file by the April 18 due date.

    Note: the normal April 15 due date is a federal holiday in the District of Columbia, so for almost all individuals their 2015 Form 1040 returns aren’t due until the next business day, which is Monday, April 18 (except residents of Massachusetts and Maine, who have until April 19 to file).April 15 – Household Employer Return Due

    April 18 – Estimated Tax Payment Due (Individuals)

    Estimated Tax Payment Due (Individuals)
    It’s time to make your first quarter estimated tax installment payment for the 2016 tax year. Our tax system is a “pay-as-you-go” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-go” requirement. These include: Payroll withholding for employees; Pension withholding for retirees; and Estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding.

    When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This penalty is equal to the federal short-term rate plus 3 percentage points, and the penalty is computed on a quarter-by-quarter basis.

    Federal tax law does provide ways to avoid the underpayment penalty. If the underpayment is less than $1,000 (the “de minimis amount”), no penalty is assessed. In addition, the law provides “safe harbor” prepayments. There are two safe harbors: The first safe harbor is based on the tax owed in the current year. If your payments equal or exceed 90% of what is owed in the current year, you can escape a penalty. The second safe harbor is based on the tax owed in the immediately preceding tax year. This safe harbor is generally 100% of the prior year’s tax liability. However, for taxpayers whose AGI exceeds $150,000 ($75,000 for married taxpayers filing separately), the prior year’s safe harbor is 110%.

    Example: Suppose your tax for the year is $10,000 and your prepayments total $5,600. The result is that you owe an additional $4,400 on your tax return. To find out if you owe a penalty, see if you meet the first safe harbor exception. Since 90% of $10,000 is $9,000, your prepayments fell short of the mark. You can’t avoid the penalty under this exception.

    However, in the above example, the safe harbor may still apply. Assume your prior year’s tax was $5,000. Since you prepaid $5,600, which is greater than 110% of the prior year’s tax (110% = $5,500), you qualify for this safe harbor and can escape the penalty.

    This example underscores the importance of making sure your prepayments are adequate, especially if you have a large increase in income. This is common when there is a large gain from the sale of stocks, sale of property, when large bonuses are paid, when a taxpayer retires, etc. Timely payment of each required estimated tax installment is also a requirement to meet the safe harbor exception to the penalty. If you have questions regarding your safe harbor estimates, please call Dagley & Co. as soon as possible. 

    CAUTION: Some state de minimis amounts and safe harbor estimate rules are different than those for the Federal estimates. Please call Dagley & Co. for particular state safe harbor rules.

    April 18 – Last Day to Make Contributions

    Last day to make contributions to Traditional and Roth IRAs for tax year 2015.

    April 2016 Business Due Dates

    April 18 – Household Employer Return Due 

    If you paid cash wages of $1,900 or more in 2015 to a household employee, you must file Schedule H. If you are required to file a federal income tax return (Form 1040), file Schedule H with the return and report any household employment taxes. Report any federal unemployment (FUTA) tax on Schedule H if you paid total cash wages of $1,000 or more in any calendar quarter of 2014 or 2015 to household employees. Also, report any income tax that was withheld for your household employees. For more information, please call Dagley & Co.

    April 18 – Social Security, Medicare and Withheld Income Tax

    If the monthly deposit rule applies, deposit the tax for payments in March.

    April 18 – Corporations

    The first installment of 2016 estimated tax of a calendar year corporation is due.

    April 18 – Partnerships

    File a 2015-calendar year return (Form 1065). Provide each partner with a copy of Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., or a substitute Schedule K-1. If you want an automatic 5-month extension of time to file the return and provide Schedules K-1 or substitute Schedules K-1 to the partners, file Form 7004. Then, file Form 1065 and provide the K-1s to the partners by September 15.

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  • Tax Filing Deadline Rapidly Approaching

    29 March 2016
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    Sit down and get to work. Tax day is just a few weeks away! For those of you who have not yet filed their 2015 tax return, tax day is the due date to either file your return and pay any taxes owed, or file for the automatic six-month extension and pay the tax you estimate to be due. Usually April 15 is the due date, but because Friday, April 15, is a legal holiday in the District of Columbia (where the IRS is headquartered), the filing date is advanced to the next day that isn’t a weekend or holiday – Monday, April 18 – even for taxpayers not living in DC.

    In addition, the April 18, 2016 deadline also applies to the following:

    Tax year 2015 balance-due payments – Taxpayers that are filing extensions are cautioned that the filing extension is an extension to file, NOT an extension to pay a balance due.  Late payment penalties and interest will be assessed on any balance due, even for returns on extension.  Taxpayers anticipating a balance due will need to estimate this amount and include their payment with the extension request.

    Tax year 2015 contributions to a Roth or traditional IRA – April 18 is the last day contributions for 2015 can be made to either a Roth or traditional IRA, even if an extension is filed.

    Individual estimated tax payments for the first quarter of 2016 – Taxpayers, especially those who have filed for an extension, are cautioned that the first installment of the 2016 estimated taxes are due on April 18.  If you are on extension and anticipate a refund, all or a portion of the refund can be allocated to this quarter’s payment on the final return when it is filed at a later date. If the refund won’t be enough to fully cover the first installment, you may need to make a payment with the April 18 voucher. Please call this office for any questions.

    Individual refund claims for tax year 2012 – The regular three-year statute of limitations expires on April 18 for the 2012 tax return.  Thus, no refund will be granted for a 2012 original or amended return that is filed after April 18. Caution: The statute does not apply to balances due for unfiled 2012 returns.

    Note: The deadline for any of the above actions is increased by an additional day, to April 19, 2016, for taxpayers who live in Maine or Massachusetts because of a holiday observed on the 18th in Massachusetts which affects the IRS Service Center located in Massachusetts that serves these two states.

    If this office is holding up the completion of your returns because of missing information, please forward that information as quickly as possible in order to meet the April 18 deadline.  Keep in mind that the last week of tax season is very hectic, and your returns may not be completed if you wait until the last minute.  If it is apparent that the information will not be available in time for the April 18 deadline, then let the office know right away so that an extension request, and 2016 estimated tax vouchers if needed, may be prepared.

    If your returns have not yet been completed, please call Dagley & Co. right away so that we can schedule an appointment and/or file an extension if necessary.

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  • Minimizing Tax on Social Security Benefits

    18 March 2016
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    Are your Social Security benefits taxable and if so how many of them are? This depends on a number of issues. The following facts will help you understand the taxability of your Social Security benefits.

    For this discussion, the term “Social Security benefits” refers to the gross amount of benefits you receive (i.e., the amount before reduction due to payments withheld for Medicare premiums). The tax treatment of Social Security benefits is the same whether the benefits are paid due to disability, retirement or reaching the eligibility age. Supplemental Security Income (SSI) benefits are not included in the computation because they are not taxable under any circumstances.

    How much of your Social Security benefits are taxable (if any) depends on your total income and marital status. If Social Security is your only source of income, it is generally not taxable. On the other hand, if you have other significant income, as much as 85% of your Social Security benefits can be taxable. If you are married and filing separately, and you lived with your spouse at any time during the year, 85% of your Social Security benefits are taxable regardless of your income. This is to prevent married taxpayers who live together from filing separately, thereby reducing the income on each return and thus reducing the amount of Social Security income subject to tax.

    The following quick computation can be done to determine if some of your benefits are taxable: Step 1. First, add one-half of the total Social Security benefits you received to the total of your other income, including any tax-exempt interest and other exclusions from income. Step 2. Then, compare this total to the base amount used for your filing status. If the total is more than the base amount, some of your benefits may be taxable.

    The base amounts are: $32,000 for married couples filing jointly; $25,000 for single persons, heads of household, qualifying widows/widowers with dependent children, and married individuals filing separately who did not live with their spouses at any time during the year; and $0 for married persons filing separately who lived together during the year.

    Where taxpayers can defer their “other” income from one year to another, such as by taking Individual Retirement Account (IRA) distributions, they may be able to plan their income so as to eliminate or minimize the tax on their Social Security benefits from one year to another. However, the required minimum distribution rules for IRAs and other retirement plans have to be taken into account.

    Individuals who have substantial IRAs—and who either aren’t required to make withdrawals or are making their post age 70.5 required minimum distributions without withdrawing enough to reach the Social Security taxable threshold—may be missing an opportunity for some tax-free withdrawals. Everyone’s circumstances are different, however, and what works for one may not work for another.

    If you have questions about how these issues affect your specific situation, or if you wish to do some tax planning, please give Dagley & Co. a call.

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