This being my last article you will read from me before the tax filing deadline of April15, we should go over some items that can be taken care of before April 15 and discuss the importance of April 15 itself. As we all know, April 15 was just another day until Congress made it the filing deadline for all individual and certain other returns such as partnership and estate/trust returns. Originally, all tax returns, including corporation returns, were due on March 1. The entire Internal Revenue Code was re-written several times and has been re-codified between its first publication in 1913 and today. There was a large amount of editing completed in 1954 and to this day, we still operate under the general auspices of the Internal Revenue Code of 1954. Any amendments that we see enacted today are still amendments to the IRC of 1954. One of those amendments was to determine that it was advantageous to split up the corporation and other return due dates. The corporation due date was move to March 15 and the other returns were moved to April 15. That is where we have stayed since that change. Even though most actions that affect a tax return must be completed by December 31, there are a few important things taxpayers can do after December 31 and before the close of business on April 15. The first and probably most used tax planning arrow in a taxpayer’s quiver is to be able to invest funds in an Individual Retirement Account right up until April 15. Taxpayers under the age of 50 can invest up to $5,500 into a either a Traditional IRA or a Roth IRA. Taxpayers age 50 and older can invest an additional $1,000 into the IRA of their choice. Taxpayers cannot invest $5,500 or $6,500 into both the Traditional and the Roth IRA. The total can be divvied up between the two but no more than the upper limit can be invested in total. The difference between the Traditional and the Roth IRA is that, in many cases, the investment in the Traditional IRA is deductible. Unfortunately, the tax laws are complicated in this area. How much is deductible depends upon the income of the taxpayer […]
Useful tax tips and information from Jerry Coon of Action Tax Service.
This past Monday, the City of Rockford hosted its’ 27th Annual Board and Commission Recognition Reception at City Hall. City Manager Michael Young and his staff did a wonderful job of putting the event together. It was well attended by a Council Chambers full of volunteers. “Volunteers” is the key word here because those serving on Rockford’s various boards and commissions all do so on a volunteer, non-paying, basis. Since Rockford’s incorporation in 1935, and most likely previous to that date when it was a village, as pointed out to me by Neil Blakeslee, dedicated Rockford residents from all walks of life have served their fellow residents on a volunteer basis. There is, my friends, a long and deep history here in Rockford of residents serving their fellow man and of being able to make decisions based on what is good for Rockford as opposed to what is good for a particular person at a particular time. That’s not to say these volunteers don’t have opinions. They do and often those opinions are strong. What I am saying is they are able to have their opinion and still look at an issue from varying points of view and make a final decision that might very well go contrary to their personal feelings. In my opinion, that’s a rare commodity. Perhaps Washington could take some lessons from Rockford. On behalf of my fellow City Council members, Mayor Pro-tem Tamra Bergstrom, Brien Dews, Gail Mancewicz, and Steve Jazwiec, I want to publicly thank each person who serves on these boards and commissions, as well as the City staff. They do a great service to all of us. There are also volunteers in the tax business that work on a non-paying basis to help their fellow men and women get their tax returns completed and filed for free. The Internal Revenue Service currently has two programs, VITA and TCE, to aid people who need help. VITA is the acronym for “Volunteer Income Tax Assistance”. VITA is staffed by volunteers who help qualified people get their tax returns prepared and filed for free. Those with income of $53,000 or less, with disabilities, or with limited English understanding qualify to be helped by the VITA volunteers. The TCE program […]
A grand total of three weeks are left in the 2015 tax season; meaning that April 15 is right around the corner. It seemed like yesterday that we flipped the calendar to January 1. A snap of the fingers and it will be all over for this year which will put another tax season into the books. Let’s do a little analysis of how the season has gone in relation to how tax professionals like me thought it would go. First, to a person, we thought that the Affordable Care Act would create more problems with tax returns than it really has. Most tax professionals created some type of worksheet or checklist that was filled out with each client to determine if the taxpayer was subject to being penalized for not having insurance. I would bet that easily 95% of our clients did have insurance for all of 2014. We did a good job of determining the remaining 5% who didn’t have insurance. What surprised us was the fact that most of that 5% still was not subject to being penalized. In retrospect, that probably should have been a foregone conclusion when we found out there are 24 specific reasons and one open-ended reason for not having insurance. Of course, “in retrospect” is just another way of saying “hindsight is always 20-20”. We couldn’t really have seen that one coming so we spent a good amount of time on determining the penalty calculation. I realize that time spent on education is never wasted so my stance is that we are just pre-trained for next year. Second, we thought that people who purchased insurance through the Marketplace Exchange would receive correct paperwork, called a Form 1095-A, in a timely manner, so that we could prepare those tax returns. We were half right on that one. Everyone seems to have received paperwork on a timely basis. The paperwork received, however, was not necessarily correct. Again, in retrospect, there were so many problems with the Marketplace Exchange that it was not a stretch to believe the paper-work was prepared incorrectly. Perhaps their software processing people are now pre-trained for next year, too. Third, we did foresee that communicating with the Internal Revenue Service would be difficult at best. […]
I believe it’s time for me to write an article concerning the coming May 5 vote on Proposal 1. Whether or not to pay some tax and fix our roads is the question that will be answered on May 5. There are plenty of organizations promoting the negatives of the proposal. They are right in that there are a few big negatives. However, there are also quite a few off-setting positives as well to the proposal. In the interest of full disclosure, all of you know that my day job is running Action Tax Service, a tax and accounting business. My other job, albeit non-paying, is acting as the Mayor of Rockford. If Proposal 1 passes, the tax professional Jerry Coon, just like everyone else, will pay more tax. However, it is also true that if Proposal 1 passes, the Mayor Jerry Coon will benefit because the City of Rockford will receive more infrastructure funding. The projected revenue increase could be approximately $270,000 annually by the year 2018 that will be used to fix and maintain our City of Rockford roads. In this instance, I’m going to have to say that Jerry, the Mayor, out-weighs Jerry, the tax professional. The residents of Rockford deserve well-maintained roads. Proposal 1 will help to make that happen. What exactly will happen if Proposal 1 passes? A number of actions will occur that will eventually raise $1.3 billion of additional revenue per year. First, our sales tax will increase from 6% to 7%. Second, gasoline and diesel fuel tax will be increased and will be adjusted annually for inflation. Third, vehicle registration fees will be increased. Fourth, revenue received by the State of Michigan will be dedicated to roads and public transportation. This is important. Future legislatures will not be able to raid the fund and re-allocate those dollars. Fifth, education will benefit by increasing the dollars allocated to the School Aid Fund. Approximately $300 million new dollars will be injected into the education system. Simultaneously, higher education funding will be removed the School Aid Fund. Sixth, the Earned Income Tax Credit will be increased from the current 6% up to 20%. Seventh, road work will be required to be competitively bid and required to be warranted by […]
I have a long history in the tax business having taken my first course in the preparation of tax returns back in 1978. That was before every household had multiple laptop and desktop computers; Apple had not invented the I-pad; when you said something about Windows, it still meant something you looked through; the words “smart” and “phone” had not been combined into the term smart-phone; there was no such thing as electronic filing; and what the heck was software anyway. In 1978, we did everything by hand. We did have adding machines so we didn’t have to do the math totally in our heads, but we did have to know which form inter-acted with which other forms. For example, we had to know that a taxpayer who works as a salesman and is normally able to deduct business mileage might be precluded from deducting a portion of that mileage by a separate tax called the alternative minimum tax. Forget about the alternative minimum tax and the taxpayer gets a bill in October because the Internal Revenue Service never forgets. Some things don’t change. The Internal Revenue Code was and is still peppered with hundreds, if not thousands, of gotcha’s like the alternative minimum tax. The tax preparers of 1978 were the “software” of the day. It was fun then and it’s fun now but we have help now. Today, we have incredibly complex software that has all of the gotcha’s programmed into the calculation. That is one of the true benefits of software. However, we still have to know situations and which rules apply to which situations. Put garbage into the software and garbage will come out of the software. Even after all of these years, I still encounter situations frequently in which the facts are clear but the application to the tax law is not quite so clear. Back in 1978, we had an internal research department that researched this type of complicated situation for an answer. Today, we buy research from an organization such as the Appleton, Wisconsin based National Association of Tax Professionals (NATP). I have been a member of NATP for over 20 years now and in those years have received nothing but timely and correct answers from them. […]