Tax Planning Tips


In this upcoming tax season, all Americans could be seeing changes on their tax returns.

General Tax Tips
Make sure your computer, phone and iPads are password protected in case they are lost or stolen. The earlier you file, the less likely you will be a victim of tax return fraud.

  • We want to bring some special items to your attention below:


  • Security and Identity Theft
    Avoid sending sensitive information and documents via unsecure email, as this creates an opportunity for your information to be compromised.

    Affordable Care Act
    The Affordable Care Act requires that a taxpayer and each member of their family either has qualifying health coverage for each month of the year, qualifies for an exemption, or makes an individual shared responsibility payment when filing their tax returns. You should receive documentation to support your coverage.

    Health Care Deductions
    There will be very few deductions available for medical costs now unless you have substantial bills. The amount of your medical expenses in most cases must now be more than 10% of AGI before we can deduct anything, so weigh carefully whether to go to the trouble of summarizing these costs. People over age 65 only need to exceed 7.5% of AGI for 2016, however this will increase to 10% of AGI in 2017. If you are self-employed, we still need to know how much you paid for health insurance.

    Several states allow a deduction for medical expenses. In NJ, you can deduct your medical expenses (prescriptions, dental, and vision are included) that are above 2% of your New Jersey gross income. Pennsylvania does not have a deduction for medical expenses. We can advise you about other states if requested.

    Children/Student Tax Returns
    Allowing a child to file their own return, particularly a student, can possibly cost the child and parent thousands of dollars in health care penalties and/or credits. Whether or not a college student qualifies as a dependent affects both the parents’ and student’s tax returns. If the student qualifies as a dependent of the parents, the parents are allowed the following benefits, subject to varying phase-outs and limitations: Exemption deduction, American Opportunity or Lifetime Learning Credit, and Tuition and Fees deduction. If the student provides more than one-half of his or her support, the student qualifies for the aforementioned benefits on his or her tax return. As is often the case, taxpayers and their tax professional are advised to approach the dependency issue with prudent planning.

    Charity
    ALL deductions of any amount must have a receipt. Any individual contribution over $250 must also have an acknowledgement letter from the charity, which should show the date and amount of the contribution, and should also state that no goods or services were received in return for the contribution. Remember if you charge a charitable contribution to a credit card by 12/31/2016, you are able to deduct it in 2016!

    Foreign Accounts
    If you have an account, retirement account, or business interest in a foreign country, or a foreign business ownership (not through a mutual fund) please let us know as some special rules will apply to you. There are substantial penalties for failure to disclose these items. Due to new legislation, the due date of FinCen Form 114 (known as the “Foreign Bank Account Report” or “FBAR”) will be April 15 instead of June 30.

    Mortgage Interest
    All mortgage interest statements (Form 1098) are needed to do your tax return. Be sure to obtain refinancing closing statements. Remember to get statements for all mortgages you had during the year. You may have more than one due to a change in mortgage companies or a refinance of your mortgage. Additionally, if you bought or sold a house, closing statements should be reviewed for possible deductions.

    Gifting
    The amount you may give to one person in one year without any return filing requirements is $14,000.

    Other Income
    If you have any income from 1099s through AirBNB, Turo, Etsy, EBay or similar consumer to consumer programs it may be reportable and taxable.

    Tax Planning
    The simplest and most effective tax planning tool for all Americans of all income levels is full participation in retirement plans. Make sure you maximize your 401-k deferral if available.

    Check your employee handbook and see what other fringe benefits are available at work and call us if you aren’t sure if it will benefit you. Some of the best fringe benefits provided by employers include cafeteria (or 125) plans, as well as child care plans and wellness programs.

    IRS Notes and Recommendations
    The IRS will begin releasing EITC and ACTC refunds starting Feb. 15, 2017 but cautions taxpayers that these refunds will not start arriving in bank accounts or on debit cards until the week of Feb. 27, 2017. The IRS wants taxpayers to know it will take additional time for their refunds to be processed and for financial institutions to accept and deposit the refunds to bank accounts.

    The IRS recommends that all taxpayers file their returns as early as possible to avoid having to deal with the hassle of someone fraudulently filing a tax return under their identity.