• 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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  • March 2017 Individual Due Dates

    24 February 2017
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    The month of March is quickly approaching. Flowers are starting to pop up out of the winter soil, the grass and trees are growing greener, and whether we’re ready or not, tax season is coming to an end. Plan ahead for March’s individual due dates:

    March 10 – Report Tips to Employer

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


    March 15 – Time to Call for Your Tax Appointment
    It is only one month until the April due date for your tax returns. If you have not made an appointment to have your taxes prepared, we encourage you to contact Dagley & Co. before it becomes too late.

    Do not be concerned about having all your information available before making the appointment. If you do not have all your information, Dagley & Co. will make a list of the missing items. When you receive those items, just forward them to us.

    Even if you think you might need to go on extension, it is best to prepare a preliminary return and estimate the result so you can pay the tax and minimize interest and penalties. Dagley & Co. can then file the extension for you.










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  • October 2015 Tax Due Dates for Individuals

    2 October 2015
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    Obviously April 15 is widely regarded as the all-important “tax day,” but October is also an extremely important month for tax deadlines. It’s been 6 months since they were due – and if you filed for an extension or just forgot to do them, your time is up on October 15. Here is a run down of the important October 2015 tax due dates for individuals (and check back next week when we cover deadlines for business owners):

    October 13 – Report Tips to Employer

    If you are an employee who works for tips and received more than $20 in tips during September, you are required to report them to your employer on IRS Form 4070 no later than October 13. 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.

    October 15 – Individuals

    If you have an automatic 6-month extension to file your income tax return for 2014, file Form 1040, 1040A, or 1040EZ and pay any tax, interest, and penalties due.

    October 15 – SEP IRA & Keogh Contributions

    Last day to contribute to SEP or Keogh retirement plan for calendar year 2014 if tax return is on extension through October 15.

    October 31 – Set a tax appointment with Dagley & Co.

    What’s scarier than Halloween? Owing the government a lot of money! The end of the year will be here before you know it. Contact Dagley & Co. soon to set up a tax appointment with us! You’ll find our information at the bottom of this page.

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  • Did You Receive a Letter From The IRS? Don’t Panic

    18 June 2015
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    Each year, the IRS sends millions of letters and notices to taxpayers. Don’t panic if you’re one of them. Image via public domain.

    It happens – you check your mailbox this time of year and there’s a little letter in there from the IRS. It will probably increase your heart rate a bit, too. Don’t panic; many of these letters can be dealt with simply and painlessly.

    First of all, remember that you are not alone. Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account, or to request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what needs to be done to satisfy the inquiry.

    However, the letters also must advise you of your rights and other information required by law. Thus, these letters can become overly lengthy and sometimes difficult to understand. That is why it is important to either call us at Dagley & Co. or forward us a copy of the letter or notice so it can be reviewed and handled accordingly.

    Do not procrastinate or throw the letter in a drawer hoping the issue will go away. Most of these letters are computer generated and, after a certain period of time, another letter will automatically be produced. As you might expect, each succeeding letter will become more aggressive and more difficult to deal with.

    Most importantly, don’t automatically pay an amount the IRS is requesting unless you are positive it is correct. Quite often, you really do not owe the amount being billed, and it will be difficult and time consuming to get your payment back. It is good practice to have us review the notice prior to making any payment.

    Unfortunately, many taxpayers are issued these letters and don’t know it because they have moved and left no forwarding address. Even though the IRS will register your address change when you file your annual tax return, that may not be timely enough, especially if your return is on extension or you are behind in your filings. It is always better to notify the IRS, and your state if applicable, that you have a new address, just as you would your family and financial and business affiliations. You may not want to receive correspondence from the IRS, but it is easier to deal with the first notice. The complications can only increase as the notices go unanswered. The IRS provides Form 8822– Change of Address for taxpayers who have relocated between tax filings.

    It is important for any IRS correspondence to be dealt with promptly and correctly. Dagley & Co. can handle these matters for you; so please call or email us for assistance. It doesn’t matter where you are located; we have clients all over the globe.

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  • How Long Are You at Risk for an Audit?

    28 May 2015
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    An occasional question from our clients is: How long does the IRS have to question and assess additional tax on my tax returns? For most taxpayers who reported all their income, the IRS has three years from the date of filing the returns to examine them. This period is termed the statute of limitations. However, as in all things taxes, it is not that clean cut. Here are some complications:

    You file before the April due date – If you file before the April due date, the three-year statute of limitations still begins on the April due date. So filing early does not start an earlier running of the statute of limitations. For example, whether you filed your 2014 return on February 15, 2015 or April 15, 2015, the statute did not start running until April 15, 2015.

    You file after the April due date – The assessment period for a late-filed return starts on the day after the actual filing, whether the lateness is due to a taxpayer’s delinquency, or under a filing extension granted by IRS. For example, say your 2014 return is on extension until October 15, 2015, and you actually file on September 1, 2015. The statute of limitations for further assessments by the IRS will end on September 2, 2018. So the earlier you file those extension returns, the sooner you start the running of the statute of limitations.

    If you want to be cautious you may wish to retain verification of when the return was filed. For electronically filed returns, you can retain the confirmation from the IRS accepting the electronically filed return. If you file a paper return, proof of mailing can be obtained from the post office at the time you mail the return.

    You file an amended tax return – If after filing an original tax return you subsequently discover you made an error, an amended return is used to make the correction to the original. The filing of the amended tax return does not extend the statute of limitation unless the amended return is filed within 60 days before the limitations period expires. If that occurs, the IRS generally has 60 days from the receipt of the return to assess additional tax.

    You understated your income by more that 25% – When a taxpayer underreports his or her gross income by more than 25%, the three-year statute of limitations is increased to six years.

    In determining if more than 25% has been omitted, capital gains and losses aren’t netted; only gains are taken into account. These “omissions” don’t include amounts for which adequate information is given on the return or attached statements. For this purpose, gross income, as it relates to a trade or business, means the total of the amounts received or accrued from the sale of goods or services, without reduction for the cost of those goods or services.

    10-year collection period – Once an assessment of tax has been made within the statutory period, the IRS may collect the tax by levy or court proceeding started within 10 years after the assessment or within any period for collection agreed upon by the taxpayer and the IRS before the expiration of the 10-year period.

    You file three years late – Suppose you procrastinate and you file your return three years or more after the April due date for that return. If you owe money, you will have to pay what you owe plus interest and late filing and late payment penalties. If you have a refund due, you will forfeit that refund and perhaps get stuck with a $135 minimum late filing penalty. No refunds are issued three years after the filing due date.

    You should not discard your tax records until after the statute has run its course. When disposing of old tax records, be careful not to discard records that prove the cost of items that have not been sold. For example, you may have placed home improvement records in with your annual receipts for the year the improvement was made. You don’t want to discard those records until the statute runs out for the year you sold the home. The same applies to purchase records for stocks, bonds, reinvested dividends, business assets, or anything you will sell in the future and need to prove the cost.

    If you are behind on filing your returns and would like to get caught up, please get in touch with Dagley & Co. You can find our information at the bottom of this page. If you discovered you omitted something from your original return and would like to file an amended return, we can help with that as well.

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  • Read This Before Tossing Out Your Old Tax Records

    5 May 2015
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    Now that your taxes are completed, you are probably wondering if your old tax records can be discarded, and when. If you are like most taxpayers, you have records from years ago that you are probably afraid to throw away.  So, it would be helpful to understand why the records must be kept in the first place, and what’s okay to toss as you break into your spring cleaning.

    Generally, we keep tax records for two basic reasons: (1) in case the IRS or a state agency decides to question the information reported on our tax returns, and (2) to keep track of the tax basis of our capital assets so that the tax liability can be minimized when we dispose of them.

    With certain exceptions, the statute for assessing additional taxes is three years from the return due date or the date the return was filed, whichever is later.  However, the statute of limitations for many states is one year longer than the federal law.  In addition to lengthened state statutes clouding the recordkeeping issue, the federal three-year assessment period is extended to six years if a taxpayer omits from gross income an amount that is more than 25 percent of the income reported on a tax return.  And, of course, the statutes don’t begin running until a return has been filed.  There is no limit where a taxpayer files a false or fraudulent return to evade taxes.

    If an exception does not apply to you, for federal purposes, most of your tax records that are more than three years old can probably be discarded; add a year or so to that if you live in a state with a longer statute.

    Examples – Ashley filed her 2011 tax return before the due date of April 15, 2012. She will be able to dispose of most of the 2011 records safely after April 15, 2015. On the other hand, Jon files his 2011 return on June 2, 2012. He needs to keep his records at least until June 2, 2015. In both cases, the taxpayers may opt to keep their records a year or two longer if their states have a statute of limitations longer than three years.  Note: If a due date falls on a Saturday, Sunday or holiday, the due date becomes the next business day.

    The big problem!  The problem with the carte blanche discarding of records for a particular year because the statute of limitations has expired is that many taxpayers combine their normal tax records and the records needed to substantiate the basis of capital assets.  These need to be separated and the basis records should not be discarded before the statute expires for the year in which the asset is disposed.  Thus, it makes more sense to keep those records separated by asset.  The following are examples of records that fall into that category:

    • Stock acquisition data – If you own stock in a corporation, keep the purchase records for at least four years after the year the stock is sold.  This data will be needed to prove the amount of profit (or loss) you had on the sale.
    • Stock and mutual fund statements (If you reinvest dividends) – Many taxpayers use the dividends they receive from stocks or mutual funds to buy more shares of the same stock or fund.  The reinvested amounts add to the basis in the property and reduce gain when it is finally sold.  Keep statements at least four years after the final sale.
    • Tangible property purchase and improvement records – Keep records of home, investment, rental property, or business property acquisitions AND related capital improvements for at least four years after the underlying property is sold.

    For example, when the large $250,000 and $500,000 home exclusion was passed into law several years back, homeowners became lax in maintaining home improvement records, thinking the large exclusions would cover any potential appreciation in the home’s value.  Now that exclusion may not always be enough to cover sale gains, particularly in markets where property values have steadily risen, so records of home improvements are vital.  Records can be important, so please use caution when discarding them.

    What about the tax returns themselves? While disposing of the back-up documents used to prepare the returns can usually be done after the statutory period has expired, you may want to consider keeping a copy of your tax returns (the 1040 and attached schedules/statements plus your state return) indefinitely. If you just don’t have room to keep a copy of the paper returns, digitizing them is an option.

    If you have questions about whether or not to retain certain records, get in touch with us at Dagley & Co. first; it is better to make sure, before discarding something that might be needed down the road.

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  • Individual Estimated Tax Payments for 2015 Start Soon

    15 April 2015
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    Business owners and independent contractors: listen up, because you probably don’t have your taxes withheld from your paycheck. The United States’ tax system is a “pay-as-you-go” system, and if your pre-paid amount is not enough, you become liable for non-deductible interest penalties. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-go” requirement. The primary among 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.

    Determining how much tax to pre-pay through withholding and estimated tax payments has always been difficult, and thanks to Congress’ constant tinkering with the tax laws, ensuring there are no underpayment penalties or tax surprises when the tax return is prepared next year can be challenging.

    Recently, several new tax laws and changes took effect that add complexity to estimating one’s tax liability, including: higher ordinary tax rates, higher capital gains tax rates, the phase out of exemptions and itemized deductions for higher income taxpayers, the 3.8% tax on net investment income, and .9% increase in self-employment tax for upper-income self-employed individuals, not to mention a myriad of sun setting tax provisions.

    When a taxpayer fails to prepay a safe harbor (minimum) amount, he or she can be subject to the underpayment of estimated tax penalty. This penalty is the short-term federal rate plus 3 percentage points, and the penalty is computed on a quarter-by-quarter basis. So, even if you pre-pay the correct amount for the year, if the amounts are not paid evenly, you could be subject to a penalty. Interestingly enough, withholding amounts are treated as paid ratably throughout the year, so taxpayers who are underpaid in the earlier part of the year can compensate by bumping up their withholding in the later part of the year.

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

    1. 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.
    2. 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 a higher income taxpayer who has AGI exceeding $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. As 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. As 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.

    If your state has a state tax, the state’s de minimis amount and safe-harbor percentage and amount may be different.

    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, or when a taxpayer retires.

    If you have questions regarding your pre-payments or would like to review and adjust your W-4 payroll withholding, W-4P pension withholding, and estimated tax payments to provide the desired tax result for 2014, please get in touch with us at Dagley & Co. You can find our contact information at the bottom of this page.

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  • Time Is Running Out To Collect Your 2011 Tax Refund!

    3 April 2015
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    Did you know: It’s 2015, and the IRS estimates that there are in excess of 1.1 million taxpayers who have not filed their 2011 tax returns and that there is in excess of $1.1 billion dollars of unclaimed refunds available for those taxpayers. If you have not yet filed your 2011 federal tax return and have a refund coming, time is running out! If you’re one of these people, you need to act quickly because the return must be filed by April 15, 2015 to claim a refund for 2011.  Otherwise, the money becomes the property of the U.S. Treasury.

    By failing to file a return, people stand to lose more than a refund of taxes withheld or paid during 2011.  Many low- and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC).  The EITC helps individuals and families with incomes below certain thresholds, which for unmarried individuals in 2011 were $40,964 for those with two or more children, $36,052 for people with one child, and $13,660 for those with no children. Each amount is $5,080 more for married joint filers. In addition, parents eligible to claim the refundable portion of the child tax credit will forfeit that benefit if they don’t file a return.

    When filing a 2011 return, the law requires that the return be properly addressed, mailed and postmarked by the April 15th date. There is no penalty for filing a late return qualifying for a refund.

    As a reminder, taxpayers seeking a 2011 refund should know that their checks will be held if they have not filed tax returns for 2009 and 2010.  In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past-due federal debts such as student loans.

    If Dagley & Co. can be of assistance in bringing you current with your tax filing obligations, please get in touch with us. You’ll find our information at the bottom of this page.

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  • Where’s My Refund? How To Check The Status Of Your Federal Tax Refund

    6 March 2015
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    You’ve filed your taxes, and you’re ready for the best part: getting that refund. It’s pretty easy to check the status of your refund online.

    Where’s My Refund? is an interactive tool on the IRS web site that’s updated about once every 24 hours. Whether you split your refund among several accounts, opted for direct deposit into one account, or asked the IRS to mail you a check, Where’s My Refund? will give you online access to your refund information nearly 24 hours a day, 7 days a week.

    If you e-file, you can get refund information 24 hours after the IRS acknowledges receipt of your return. Nine out of 10 taxpayers typically receive refunds in less than 21 days when they use e-file with direct deposit. If you file a paper return, refund information will be available starting four weeks after mailing your return.  When checking the status of your refund, have a copy of your federal tax return handy. To access your personalized refund information, you must enter:

    • Your Social Security Number (or Individual Taxpayer Identification Number);
    • Your Filing Status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er)); and
    • The exact refund amount shown on your tax return.

    Once your personal information has been entered, one of several personalized responses may come up, including the following:

    • Acknowledgement that your return was received and is in processing.
    • The mailing date or direct deposit date of your refund.
    • Notice that the IRS could not deliver your refund due to an incorrect address.  You can update your address online using the Where’s My Refund? feature.

    Where’s My Refund? also includes links to customized information based on your specific situation.  The links guide you through the steps to resolve any issues affecting your refund.  For example, if you do not get the refund within 28 days from the original IRS mailing date shown on Where’s My Refund?, you can start a refund trace online.

    Where’s My Refund? is also accessible to visually impaired taxpayers who use the Job Access with Speech screen reader used with a Braille display and is compatible with different JAWS modes.

    IRS2Go is the IRS’ first smartphone application that lets taxpayers check on the status of their tax refund. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Google Play Store to download the free IRS2Go app.

    Where’s My Refund? provides the most up-to-date information the IRS has. There’s no need to call the IRS unless Where’s My Refund? tells you to do so. As we said earlier, Where’s My Refund? is updated every 24 hours (usually overnight) so you only need to check once a day. Please call this office if you encounter problems – or if you want to file your taxes so you can get your refund sooner!

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  • It’s Tax Season!

    30 January 2015
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    Tax Time

    If you’re like most taxpayers, you find yourself with an ominous stack of things to do around tax time. Pulling together the records for your tax appointment is never easy, but the effort usually pays off in the extra tax you save! When you arrive at your appointment fully prepared, you’ll have more time to:

    • Consider every possible legal deduction;
    • Evaluate which income reporting and deductions are best suited to your situation;
    • Explore current law changes that affect your tax status;
    • Talk about tax-planning alternatives that could reduce your future tax liability.

    Choosing Your Best Alternatives – The tax law allows a variety of methods of handling income and deductions on your return. Choices you make as you prepare your return often affect not only the current year, but future returns as well. Topics these choices relate to include:

    • Sales of propertyIf you’re receiving payments on a sales contract over a period of years, you can sometimes choose between reporting the whole gain in the year you sell or over a period of time as you receive payments from the buyer.
    • DepreciationYou’re able to deduct the cost of your investment in certain business properties. You can either depreciate the costs over a number of years; or, in certain cases, deduct them all in one year.

    Where to Begin? Preparation for your tax appointment should begin in January. Right after the New Year, set up a safe storage location, such as a file drawer, cupboard, or safe. As you receive pertinent records, file them right away, before you forget or lose them. Make this a habit, and you’ll find your job a lot easier on your appointment date. Other general suggestions to prepare for your appointment include:

    • Segregate your records according to income and expense categories. File medical expense receipts in one envelope or folder, mortgage interest payment records in another, charitable donations in a third, etc. If you receive an organizer or questionnaire to complete before your appointment, fill out every section that applies to you. (Important: Read all explanations and follow instructions carefully. By design, organizers remind you of transactions you may otherwise miss.)
    • Call attention to any foreign bank account, foreign financial account, or foreign trust in which you have an ownership interest, signature authority, or controlling stake. We also need to know about foreign inheritances and ownership of foreign assets. In short, bring any foreign financial dealings to our attention so we know if you have any special reporting requirements. The penalties for not making and submitting required reports can be severe.
    • New this year is the Affordable Care Act reporting requirements. If you acquired your health insurance through a government Marketplace you will receive a new form, 1095-A, issued by the Marketplace that will include information needed to complete your return. In addition, all taxpayers will need to provide proof of insurance to avoid a penalty or qualify for one of the many exemptions from the penalty.       If you received a hardship penalty exemption from the Marketplace you will have been issued an exemption certificate number (ECN). That number must be included on your tax return. The 1095-A and ECN documentation need to be included with the other material you bring to your appointment. If your insurance coverage was through an employer, and the employer issued Form 1095-B, 1095-C or a substitute form detailing your coverage, bring it to the appointment.
    • Keep your annual income statements separate from your other documents (e.g., W-2s from employers, 1099s from banks, stockbrokers, etc., and K-1s from partnerships). Be sure to take these documents to your appointment, including the instructions for K-1s!
    • Write down questions so you don’t forget to ask them at the appointment. Review last year’s return. Compare your income on that return to your income in the current year. A dividend from ABC stock on your prior-year return may remind you that you sold ABC this year and need to report the sale, or that you haven’t yet received the current year’s 1099-DIV form.
    • Make sure you have social security numbers for all your dependents. The IRS checks these carefully and can deny deductions and credits for returns filed without them.
    • Compare deductions from last year with your records for this year. Did you forget anything?
    • Collect any other documents and financial papers that you’re puzzled about. Prepare to bring these to your appointment so you can ask about them.

    Accuracy Even for Details – To ensure the greatest accuracy possible in all detail on your return, make sure you review personal data. Check name(s), address(es), social security number(s) and occupation(s) on last year’s return. Note any changes for this year. Although your telephone numbers and e-mail address aren’t required on your return, they are always helpful should questions occur during return preparation.

    Marital Status Change – If your marital status changed during the year, if you lived apart from your spouse or if your spouse died during the year, list dates and details. Bring copies of prenuptial, legal separation, divorce or property settlement agreements, if any, to your appointment. If your spouse passed away during the year, you should have a copy of his or her trust agreement or will available for review.

    Dependents – If you have qualifying dependents, you will need to provide the following for each (if you previously provided us with items 1 through 3 you will not need to supply them again):

    1. First and last name
    2. Social security number
    3. Birth date
    4. Number of months living in your home
    5. Their income amount (both taxable and nontaxable). If your dependent is your child over age 18, note how long the child was a full-time student during the year.

    For anyone other than your child to qualify as your dependent, they must pass five strict dependency tests. If you think one or more other individuals qualify as your dependents (but you aren’t sure), tally the amounts you provided toward their support vs. the amounts they provided. This will simplify a final decision.

    Some Transactions Deserve Special Treatment – Certain transactions require special treatment on your tax return. It’s a good idea to invest a little extra preparation effort when you have had the following transactions:

    • Sales of Stock or Other Property: All sales of stocks, bonds, securities, real estate and any other property need to be reported on your return, even if you had no profit or loss. List each sale, and have purchase and sale documents available for each transaction.

    Purchase date, sale date, cost and selling price must all be noted on your return. Make sure this information is contained on the documents you bring to your appointment.

    • Gifted or Inherited Property: If you sell property that was given to you, you need to determine when and for how much the original owner purchased it. If you sell property you inherited, you need to know the original owner’s death-date and the property’s value at that time. You may be able to find this on estate tax returns or in probate documents; otherwise, ask the executor.
    • Reinvested Dividends: You may have sold stock or a mutual fund in which you participated in a dividend reinvestment program. If so, you will need to have records of each stock purchase made with the reinvested dividends.
    • Sale of Home: The tax law provides special breaks for home sale gains, and you may be able to exclude up to $500,000 of the gain from your primary home if you file a married joint return and meet certain ownership, occupancy, and holding period requirements. The maximum exclusion is $250,000 for others. Since the cost of improvements made on your home can also be used to reduce any gain, it is good practice to keep a record of them. The exclusion of gain applies only to a primary residence; so keeping a record of improvement to other property, such as your second home, is important. Be sure to bring a copy of the sale documents (usually the closing escrow statement).
    • Purchase of a Home: Be sure to bring a copy of the final closing escrow statement if you purchased a home.
    • Vehicle Purchase: If you purchased a new plug-in electric car (or cars) this year, you may qualify for a special credit. Please bring the purchase statement to the appointment with you.
    • Home Energy-Related Expenditures: If you installed solar, geothermal or wind-power-generating systems, please bring the details of those purchases and manufacturer’s credit qualification certification to your appointment. You may qualify for a substantial energy-related tax credit.
    • Identity Theft: Identity theft is becoming more prevalent and can impact your tax filings. If you have reason to believe that your identity has been stolen, please contact this firm as soon as possible. The IRS provides special procedures for filing if you have had your identity stolen.
    • Car Expenses: Where you have used one or more automobiles for business, list the expenses of each separately. The government requires your total mileage, business miles, and commuting miles for each business use of your car to be reported on your return, so be prepared to have those numbers available. If you were reimbursed for mileage through an employer, know the reimbursement amount and whether it is included in your W-2.
    • Charitable Donations: You must substantiate cash contributions (regardless of amount) with a bank record or written communication from the charity showing the name of the charitable organization, date and amount.

    Unreceipted cash donations put into a “Christmas kettle,” church collection plate, etc., are not deductible. For clothing and household contributions, items donated must generally be in good or better condition, and items such as undergarments and socks are not deductible. You must keep a record of each item contributed that indicates the name and address of the charity, date and location of the contribution, and a reasonable description of the property. Contributions valued under $250 and dropped at an unattended location do not require a receipt. For contributions above $500, the record must also include when and how the property was acquired and your cost basis in the property. For contributions above $5,000 and other types of contributions, please call this office for additional requirements.

    If you have questions about assembling your tax data prior to your appointment, please get in touch with Dagley & Co.

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