Child Care Credit

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Going back to school? What you need to know about the child care credit A couple can claim the Child and Dependent Care Credit — commonly called the "child care credit" for short — if they pay someone to watch the kids while they're at work. But suppose one spouse plans to go back to school this fall. Can you still claim the credit? It depends. Generally, the credit is equal to 20 percent of the first $3,000 of qualified expenses related to caring for one child under age 13, or $6,000 for two or more children underage 13. Therefore, your maximum credit is typically $600 for one child and $1,200 for two or more children. A higher percentage is available for certain low-income taxpayers. What expenses qualify for the child care credit? The credit can be claimed for: Babysitters Day care centers Nursery schools Summer day camps (but not overnight camps) How do you qualify for the child care credit? To qualify, the expenses will need to have been incurred for you and your spouse to be "gainfully employed." A married couple is gainfully employed if one spouse works full time and the other works full time, part time or is a full-time student. A full-time student attends classes for at least five months (not necessarily consecutive) out of the year. Say your spouse took a four-week course earlier this year and now has enrolled full time at college, beginning in September. You'll end up with child care costs because your spouse will be at school and you work full time. That means you might claim the child care credit, subject to the usual limits. One more thing to remember — the qualified expenses are further limited to the earned income of the lower-earning spouse. This could affect couples where one spouse attends school. During the months a spouse is a full-time student, the tax law presumes an earned income of $250 for one child and $500 for two or more children. Please call us if you have any questions. 2016 Tax Extension Deadlines are approaching. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000.

Get Paid to Hire your Kids

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Get Paid: Hire Your Child I’ll give you $3,003 if you will pay your child $6,350 to work for you. Would you be interested in this proposition? That’s what federal and state governments paid Sara Jackson when she paid her 13-year-old child $6,350 to work in her Schedule C business. Had Sara operated her business as a corporation, state and local governments would have paid her corporation $1,650. The $3,003 that Sara received and the $1,650 that the corporation would have received came from the built-in hiring-your-child tax breaks that we discuss in this article. And depending on you and your family, you can generate numbers vastly exceeding the $3,003 and $1,650. Zero Taxes for the Child First, let’s examine Sara’s child. The child pays zero federal taxes on the $6,350 of earned income. Wow! That’s nice. Sara gets the tax deduction and pockets $3,003, and her child has $6,350 in tax-free dollars. What makes the child’s taxes zero? The standard deduction—this is the deduction in lieu of itemizing deductions for mortgage interest, property taxes, charitable contributions, etc. The 2017 standard deduction for a single taxpayer is $6,350. Note This All the money remains in the family. Sara paid her child $6,350 in wages. The child has that money. The federal and state governments paid Sara $3,003 in tax cash (refunds or reductions in taxes). The family has all the money: $9,353 ($6,350 + $3,003). Why Hire Your Child? Hiring your child gives you the opportunity to work with someone you know, love, and trust. If you give money to your child and/or plan to help your child pay for college, the hire-your-child strategy is a big assist. First, you get a tax deduction for the wages, whereas just giving money to your child has to come from aftertax dollars. Second, your child can put earned income into either a traditional or a Roth IRA. That money grows tax-free. If the child wants to use the money for college, he or she can take the money from the IRA, penalty-free. This is a huge break. Pay More, Say $11,850 Say Sara wants to pay her child $11,850 and keep it tax-free for her child. Is this possible? Yes. Here is how the child gets to zero federal taxes: · The child puts $5,500 in a tax-deductible traditional IRA. · The $6,350 standard deduction eliminates the remaining $6,350. There’s nothing left to tax. And here’s how Sara benefits. The federal and state governments pay Sara $5,132 in after-tax cash for hiring her child. Pay Even More—Say, $21,175 If Sara pays her child $21,175, and he puts $5,500 in a tax-deductible traditional IRA, the child’s federal tax is $933 and state tax is $220.3 After taxes, the child has $20,022 ($5,500 of which he has in the separate IRA account). With this W-2 payroll, the federal and state governments pay Sara $10,016 in after-tax cash (14 percent in selfemployment tax savings, 28 percent in federal income tax savings, and 5.3 percent in state income tax savings). Big Picture—Mechanics Let’s look at what happens with Sara and her son: 1. Sara writes W-2 payroll checks to her son totaling $21,175. She is out this cash. The child now has $20,022 of this cash, and the governments have the remaining $1,153, which they collected in taxes from the child. 2. Sara’s federal and state tax benefits from her $21,175 W-2 wage to her son create after-tax cash money of $10,016. She puts this money in her bank account. 3. Sara’s son has taxable income after the IRA and standard deductions creating a total tax of $1,153, leaving him with $20,022, $5,500 of which is in the IRA. Note that the family has $30,038 at this point ($20,022 + $10,016). What Happened to the Payroll Taxes? Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to Social Security and Medicare taxes if the trade or business is taxed as a sole proprietorship or a partnership in which each partner is a parent of the child. The parental proprietorship and partnership hiring rules also exempt wages paid to a child under the age of 21 from unemployment taxes. If you operate your business as a single-member LLC taxed as a proprietorship or as a spouse-only LLC taxed as a partnership, the IRS allows the beneficial parental treatment of payroll taxes. For more on how this works, see IRS Now Says No Payroll Taxes on Family Employment in a Single-Member LLC. Corporate Treatment Is Different Corporations do not qualify as mothers or fathers of the children, and therefore the payroll breaks do not apply to wages paid by the owner’s corporation to the owner’s children. In the introductory part of this article, we mentioned that had Sara operated as a corporation, the net tax benefit of the corporate hire would have been $1,650, compared with a tax benefit from the proprietorship’s hire of $3,003. That difference in benefits reflects the Social Security and Medicare taxes inflicted on both the corporation and the child, as well as the unemployment taxes inflicted on the corporation. Choice of Entity Consideration The difference in tax benefits when you hire one or more of your children is one of the differences that you need to consider when choosing an entity for your business. Depending on your choice of operating entity, here are three things to know: 1. Putting your under-age-18 children to work in your proprietorship or a spouse-only partnership pays off for both the owners and the children. 2. Putting your under-age-18 children to work in your S corporation or C corporation also pays off, but to a lesser extent because of the payroll taxes. 3. The difference in benefits can tilt the scale in your choice of business entity from corporation to proprietor or vice versa. You may have to put pencil to paper here. Also, the children will get older each year, and thus you have to again look at the choice-of-entity scale as that happens. What about the Kiddie Tax? The kiddie tax does not apply to earned income. It applies to unearned income. How Young Can the Child Be? Tax law has no minimum age. The IRS approved the hiring of a seven-year-old in its acquiescence to the Eller case. Mr. and Mrs. Eller owned and operated mobile home parks. They hired their three children, who were 7, 11, and 12 years old. In its acquiescence, the IRS noted the following: · Compensation is deductible only if it is reasonable in amount, actually paid, and based on services actually rendered. The fact that payments are made to minor children by their parents does not preclude deducting the payments. The acquiescence in this case means that the IRS accepts the holding of the court and that the IRS will follow the court’s decision in disposing of cases with the same controlling facts. It does not indicate approval or disapproval of the reasons assigned by the court for its conclusions. For you, this means that you need proof that the amount you are paying your child is a reasonable amount for the services actually rendered. Child Labor Laws Parents employing their children are mostly exempt from the labor laws. The Fair Labor Standards Act provides that youth younger than 16 years of age working in a business solely owned by their parents or by persons standing in place of their parents can work at any time of day and for any number of hours. But parents are prohibited from employing their child in manufacturing or mining or in occupations that involve the following activities declared hazardous by the Department of Labor: · · · · · · · · · · · · · · · Manufacturing and storing of explosives Driving a motor vehicle and being an outside helper on a motor vehicle (other than the delivery of newspapers to consumers where youth are exempt from the labor laws15) Logging and sawmilling Working with power-driven woodworking machines Being exposed to radioactive substances Working with a power-driven hoisting apparatus Working with power-driven metal-forming, punching, and shearing machines Meatpacking or meat processing (including the use of power-driven meat-slicing machines) Working with power-driven bakery machines Working with power-driven paper product machines, including scrap-paper balers and paper-box compactors Manufacturing brick, tile, and related products Working with power-driven circular saws, band saws, and guillotine shears Wrecking, demolition, and ship-breaking operations Roofing operations and all work on or about a roof Excavation operations If want to employ your child in one of the above hazardous occupations, check the exemptions that might apply, by going to http://www.dol.gov/elaws/esa/flsa/cl/exemptions.asp. Count on Extra Scrutiny The courts note that wage and salary payments from a father or mother to one or more of his or her children require careful scrutiny. It’s a family relationship. The court needs to take a close look to make sure there is both · a bona fide employer-employee relationship, and · a performance of services for the business. Planning tip. Make sure that you pay a reasonable wage based on a time sheet submitted in a timely manner. Forget Food and Lodging In the right circumstances, it is possible to build tax deductions for food and lodging furnished to an employee. That’s not going to happen with your minor-age children, because as the parent you are legally liable for support and maintenance of your minor-age children. Build Audit-Proof Support 1. Get an employer ID. When you become an employer, you need an employer ID number. You can apply for your employer ID number online, by fax, or by snail mail (no telephone applications for United States applicants). When you apply online, the IRS will assign a number immediately. · To apply online, click this link: https://www.irs.gov/businesses/small-businesses-selfemployed/apply-for-an-employer-identification-number-ein-online. To apply by fax or snail mail, see the instructions at this link: https://www.irs.gov/businesses/smallbusinesses-self-employed/how-to-apply-for-an-ein. · You may not apply for an EIN by telephone if you are a United States applicant. 2. Require a time sheet. The handwritten time sheet is excellent proof. Your child should complete the time sheet daily and turn it in weekly. We have a time sheet that you can use. To get the time sheet, click either PDF or Excel format. You should have your child complete a time sheet to help prove that he or she did the work. Vernon E. Martens hired his two sons and two daughters, but he lost about 80 percent of the payroll deductions he claimed for hiring his four children, because he did not require time sheets. 3. Document the pay scale. If you are paying your child minimum wage, you don’t have to worry about documentation of the pay rate. But you probably want to pay at a higher rate. This requires proof that the rate you are paying is a reasonable rate for this employment. Let’s say you used to pay a website developer $75 an hour to set up your web pages. Let’s say your son can do this work, but it takes him about twice as long to get the work in place. You have to think that an hourly rate of less than $37.50 is reasonable for the son. The key here is documentation of how you arrived at your reasonable rate of pay. 4. Pay with a W-2 payroll check. Always pay wages by W-2 payroll check. The W-2 wage is what exempts the under-age-18 child working for a parent from payroll taxes. Also, you need to establish a clear audit trail from your business checkbook to your child’s bank account. Remember, when you pay your child, this is now your child’s money. If you use a payroll service, make sure to explain to the service that your child is exempt from payroll taxes, and then make sure to check the payroll. Often, payroll services mistakenly take out FICA and Medicare on the child when they should not. (Note: In a few states, the state does not exempt the parent’s proprietorship or partnership business from unemployment taxes on the child.) 5. Complete the federal and state payroll forms. Your federal paperwork includes the forms below. To obtain one of the forms, enter this address in your browser or click this link: http://www.irs.gov/app/picklist/list/formsInstructions.html. · IRS Form W-4. Your employee-child uses this form to tell you, the employer-parent, how many exemptions and allowances he or she claims and whether he or she is exempt from withholding taxes. IRS Form W-2. If you paid your child more than $600 in wages, you must provide your child with a copy of IRS Form W-2. You also must file IRS Form W-3 and copies of the W-2s with the Social Security Administration. IRS Form 941. You report withholding, FICA, and Medicare on this form. Remember, wages paid by the mother or father to the child are exempt from FICA and Medicare. That’s nice, but even when no taxes are due, this form is due. Your dealings with the IRS are easiest if you file each quarter, even if you are eligible for seasonal filing. The IRS computers like to see Form 941 every quarter. IRS Form 940. The wages you pay your under-age-21 child are exempt from unemployment taxes. Even so, you must file IRS Form 940. If your child is your only employee, you enter the amounts paid to your child as both (1) gross pay and (2) exempt pay, making a net payment of zero subject to federal unemployment tax. Do the Paperwork or End Up Like This Lawyer Mom Failing to take the documentation steps can blow up on a parent. Lisa Fisher learned this the hard way. Lisa practiced law as a sole proprietor and sometimes brought her three children (all under age nine) into her office. The kids usually worked at the office two or three days a week for about two hours each day. They shredded confidential and other paper, sent out mail, answered phones, and performed other services connected to their mom’s law practice. Lisa claimed deductions in the three years before the court of $10,435, $10,313, and $8,022 for the wages she paid to her children. The IRS disallowed the deductions, and Lisa, lawyer that she was, took her case to court.20 Bad call on her part—not only did Lisa lose out on the wage deductions, but she also got dinged with negligence penalties. Lisa made three big mistakes that cost her the claimed deductions: 1. She didn’t issue her children W-2 forms. 2. She didn’t keep payroll records of any payments to her children. 3. She didn’t have any documentary evidence (for example, canceled checks for payments to the children, time sheets showing hours worked, or the rate of pay per hour). Without such evidence, the court came up with its own amount for the deductions—a meager $250 for each child for each year. Not quite the generous deductions Lisa had hoped for. Worse, she ended up on the hook for penalties because her resulting understatement of taxes exceeded $5,000 for each year. Even if the understatement was less, the court said, she had to pay the penalties because her failure to keep adequate books and records related to the kids’ pay was negligent. Takeaways If your children do not pay income taxes as you read this, they are excellent candidates as employees for your business regardless of business form: 1. The children pay zero taxes on earnings up to the $6,350 standard deduction amount. 2. They can use the traditional IRA to avoid taxes on $5,500, giving them a total of $11,850 on which they can avoid taxes. 3. They can use the 10 percent tax bracket, standard deduction, and traditional IRA so as to pay ittybitty taxes on earnings up to $21,175. To get this right, you need to pay the child on a W-2, have the child keep a time sheet, and create proof of a reasonable wage. The IRS has approved employing children as young as seven years old. If the children working for a parent are under age 18, both the children and the parent or parents are exempt from payroll taxes. In these cases, the parent operates a Schedule C business or both parents are the sole owners of a partnership. Corporations are not parents. They do not qualify for this exemption from payroll taxes. Even so, corporate hires of the owner’s children usually produce good tax benefits. All business owners can achieve tax benefits by hiring their children, regardless of the type of business entity. But parents who are Schedule C owners or in spousal partnerships achieve more benefit because neither they nor their under-age-18 children are subject to payroll taxes. Please call us if you have any questions. 2016 Tax Extension Deadlines are approaching. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. •

0% Capital gains

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Could you benefit from the 0% capital gains rate? Most investors face a 15 percent tax rate on long-term capital gains. This increases to 20 percent for people at the top of the ordinary income bracket (39.6 percent). That's not too bad, considering the higher tax rates on regular income. But did you know that long-term capital rates are reduced to 0 percent in certain situations? This means you might be able to benefit from a reduced tax rate on your profits on the sales of assets. How to qualify for 0% capital gains rate Capital gains from transactions such as securities sales are taxed at ordinary income rates under a graduated rate structure. This structure ranges from 10 to 39.6 percent. However, if you've owned assets like securities for longer than a year, the maximum tax rate on a gain is 15 to 20 percent if you're at the top of the ordinary income tax bracket. Capital gains may be offset by capital losses and vice versa, so this rule applies to your net gains. On the other hand, short-term capital gains from sales of securities held a year or less are still taxed at ordinary income rates. If your capital gains fall within the parameters of the 10 to 15 percent ordinary income brackets — the two lowest brackets — the maximum tax rate on a long-term gain is 0 percent. This often benefits low-income investors (ex. young investors), but it can also favor adults during a year when their other income is low. Here's an example of how it could work: you file jointly and an S corporation loss reduces your taxable income to $65,900 this year. The upper dollar threshold for the 15 percent tax bracket for joint filers is $75,900. So, if you realize a $10,000 long-term capital gain in 2017, the entire gain is taxed at the 0 percent rate. Keep this helpful tax break in mind when planning year-end securities transactions. The 0 percent tax rate might just help you hold on to more of your profits. Give us a call if you have questions about your year-end planning. Please call us if you have any questions. 2016 Tax Extension Deadlines are approaching. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or

IRS GIVES HURRICANE HARVEY VICTIMS TAX EXTENSION

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Hurricane Harvey From IRS WASHINGTON –– Hurricane Harvey victims in parts of Texas have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments, the Internal Revenue Service announced today. This includes an additional filing extension for taxpayers with valid extensions that run out on Oct. 16, and businesses with extensions that run out on Sept. 15. "This has been a devastating storm, and the IRS will move quickly to provide tax relief to hurricane victims," said IRS Commissioner John Koskinen. "The IRS will continue to closely monitor the storm's aftermath, and we anticipate providing additional relief for other affected areas in the near future." The IRS is now offering this expanded relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, 18 counties are eligible, but taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief. The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 23, 2017. As a result, affected individuals and businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were originally due during this period. This includes the Sept. 15, 2017 and Jan. 16, 2018 deadlines for making quarterly estimated tax payments. For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until Oct. 16, 2017. The IRS noted, however, that because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief. A variety of business tax deadlines are also affected including the Oct. 31 deadline for quarterly payroll and excise tax returns. In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after Aug. 23 and before Sept. 7, if the deposits are made by Sept. 7, 2017. Details on available relief can be found on the disaster relief page on IRS.gov. The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated. In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization. Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016). See Publication 547 for details. Currently, the following Texas counties are eligible for relief: Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria and Wharton. The tax relief is part of a coordinated federal response to the damage caused by severe storms and flooding and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov. For information on government-wide efforts related to Hurricane Harvey, please visit: https://www.usa.gov/hurricane-harvey. Please call us if you have any questions. 2016 Tax Extension Deadlines are approaching. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or p

Annual Gift Tax Exclusion

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tip Annual Gift Tax Exclusion Take advantage of the annual gift tax exclusion As the end-of-year holidays approach, you may decide to be extra generous to your loved ones. Specifically, by giving your family members gifts that are usually sheltered by the annual gift tax exclusion. Not only does this reduce the size of your taxable estate, it can minimize the overall income tax bite for your family. How does the annual gift tax exclusion work? Under the annual gift tax exclusion, you can give each recipient cash or property valued up to $14,000 free of gift tax without eroding any of your unified estate and gift tax exemption. This exclusion is adjusted every year for inflation in increments of $1,000, but hasn't budged in recent years. The exclusion is doubled for joint gifts made by married couples. For example, suppose you have three adult children and seven grandchildren. You and your spouse could each give every child and grandchild a gift of $14,000 in December to celebrate the holidays. Then you both could give each family member another $14,000 in January. In just two months, you and your spouse could reduce your taxable estate by a total of $560,000 ($28,000 x 10 recipients x 2 years)! Normally, you don't have to file a gift tax return to benefit from the annual gift tax exclusion, but your spouse must consent to joint gifts on a return. How does the family save? Assuming you're in a high tax bracket and the recipients are in a lower tax bracket, any subsequent earnings from the cash or property you gift will result in reduced tax. Special rules come into play if you give gifts of property that have appreciated or depreciated in value. Call today if you'd like to discuss your situation. Please call us if need a noncash charitable contribution form or if you have any questions. 2016 Tax Extension Deadlines are approaching. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.

Be Careful of IRS SCAMS

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 The Following Tax Tip comes courtesy of the IRS. Tax Tips Is it really the IRS calling? Many taxpayers have encountered individuals impersonating IRS officials – in person, over the telephone and via email. Don’t get scammed. We want you to understand how and when the IRS contacts taxpayers and help you determine whether a contact you may have received is truly from an IRS employee. The IRS initiates most contacts through regular mail delivered by the United States Postal Service. However, there are special circumstances in which the IRS will call or come to a home or business, such as when a taxpayer has an overdue tax bill, to secure a delinquent tax return or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations. To understand how and when the IRS contacts taxpayers and determine if it’s truly the IRS Read the following: Many taxpayers have encountered individuals impersonating IRS officials – in person, over the telephone and via email. Don’t get scammed. We want you to understand how and when the IRS contacts taxpayers and help you determine whether a contact you may have received is truly from an IRS employee. The IRS initiates most contacts through regular mail delivered by the United States Postal Service. However, there are special circumstances in which the IRS will call or come to a home or business, such as when a taxpayer has an overdue tax bill, to secure a delinquent tax return or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations. Even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail. Note that the IRS does not: Demand that you use a specific payment method, such as a prepaid debit card, gift card or wire transfer. The IRS will not ask for your debit or credit card numbers over the phone. Demand that you pay taxes without the opportunity to question or appeal the amount they say you owe. Generally, the IRS will first mail you a bill if you owe any taxes. You should also be advised of your rights as a taxpayer. Threaten to bring in local police, immigration officers or other law-enforcement to have you arrested for not paying. The IRS also cannot revoke your driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes. If you owe taxes: The IRS instructs taxpayers to make payments to the “United States Treasury.” The IRS provides specific guidelines on how you can make a tax payment at irs.gov/payments. Here is what the IRS will do: If an IRS representative visits you, he or she will always provide two forms of official credentials called a pocket commission and a HSPD-12 card. HSPD-12 is a government-wide standard for secure and reliable forms of identification for Federal employees and contractors. You have the right to see these credentials. Collection IRS collection employees may call or come to a home or business unannounced to collect a tax debt. They will not demand that you make an immediate payment to a source other than the U.S. Treasury. Learn more about the IRS revenue officers’ collection work. The IRS can assign certain cases to private debt collectors but only after giving the taxpayer and his or her representative, if one is appointed, written notice. Private collection agencies will not ask for payment on a prepaid debit card or gift card. Taxpayers can learn about the IRS payment options on irs.gov/payments. Payment by check should be payable to the U.S. Treasury and sent directly to the IRS, not the private collection agency. Learn more about Private Debt Collectors. Audits IRS employees conducting audits may call taxpayers to set up appointments, but not without having first notified them by mail. After mailing an official notification of an audit, an auditor/tax examiner may call to discuss items pertaining to the audit. Learn more about the IRS audit process. Criminal Investigations IRS criminal investigators may visit a taxpayer’s home or business unannounced while conducting an investigation. However, these are federal law enforcement agents and they will not demand any sort of payment. Learn more about the What Criminal Investigation Does and How Criminal Investigations are Initiated. Beware of Impersonations Scams take many shapes and forms, such as phone calls, letters and emails. Many IRS impersonators use threats to intimidate and bully people into paying a fabricated tax bill. They may even threaten to arrest or deport their would-be victim if the victim doesn’t comply. For a comprehensive listing of recent tax scams and consumer alerts, visit Tax Scams/Consumer Alerts. Know Who to Contact Contact the Treasury Inspector General for Tax Administration to report a phone scam. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484. Report phone scams to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" in the notes. Report an unsolicited email claiming to be from the IRS, or an IRS-related component like the Electronic Federal Tax Payment System, to the IRS at phishing@irs.gov. Please call us if you have any questions. 2016 Tax Extension Deadlines are approaching. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.

Non Cash Charitable Contributions

Ten Forty + Quality Tax Preparation & Financial Services 281-397-7777 Fax 281-397-7443 Tax Tips Non Cash Charitable Contributions Article Highlights: Substantiation and Documentation Requirements Deductions of less than $250 Deductions of $250 to $500 Deductions over $500 but not over $5,000 Deductions over $5,000 Qualified Appraisal Appraisal Timing A commonly overlooked requirement of taking a tax deduction for donating clothing and household goods to charity is the substantiation requirement, for both what is donated and the value placed on the donation. Because the IRS has encountered so much abuse in this area, it has increased the donation verification requirements over the years, and taxpayers risk losing the deduction if their donations are not correctly documented and reasonably valued. Fair Market Value – Generally, it is up to you, the donor, to reasonably determine the fair market value (FMV) of the items you donate. If your return is reviewed, the values you claimed can be challenged. A deduction for household goods or clothing is not allowed unless they are in good used condition or better. The FMV of used household goods, furniture, appliances, linens, used clothing and other personal items are usually worth far less than the price they sold for new. Valuing these items as an arbitrary percentage of the original cost or by using another fixed formula is not appropriate – the condition of each item, whether it is still in style and other factors need to be considered. The value of the donated item(s) will determine the type of verification needed. The documentation and verification requirements are broken down into four categories: Deductions of less than $250 – These donations require a receipt from the charity that includes the date and location of the contribution and a reasonably detailed description of the donated property. CAUTION – Don't always rely on door hangers as a valid acknowledgment, since they generally do not include all of the required information (especially the reasonably detailed description of the donated item), and their use as documentation has been denied in tax court. Deductions of $250 to $500 – Such deductions require a written acknowledgement from the charity that includes the date and location of the contribution and a reasonably detailed description of the donated property, whether the qualified organization gave you any goods or services as a result of the contribution, and if goods and/or services were provided to you, a description of the goods/services and an estimate of their value. Deductions of over $500 but not over $5,000 – You must have the same acknowledgement and written records as for contributions of at least $250 but not more than $500, as described above. In determining whether your deduction is worth $500 or more, combine your claimed deductions for all similar property items donated to any charitable organization during the year. In addition, the records must also include: o How the property was obtained – for example, by purchase, gift, bequest, inheritance, or exchange. o The approximate date when the property was obtained or, if you created, produced, or manufactured it, the approximate date when the property was substantially completed. o The cost or other basis, and any adjustments to the basis, of property held for less than 12 months and, if available, the cost or other basis of property held for 12 months or more. However, this requirement does not apply to publicly traded securities. If you are unable to provide either the date the property was obtained or the cost basis of the property and there is reasonable cause for not being able to do so, you need to attach a statement to your return with an explanation. When your total deduction for all noncash contributions for the year is over $500, Form 8283 must be completed and attached to your Form 1040. Deductions over $5,000 – You must have the same acknowledgement and written records as for contributions of at least $250 but not more than $500, as described above. In addition, if the contribution exceeds $5,000 for a single property item or group of similar items, then a qualified appraisal is required, and IRS Form 8283 must be completed, signed by the qualified appraiser and attached to the return. The exception to this rule is publicly traded securities. Example: Jay and Emily made three donations of used clothing during the year: $2,500 worth to the Salvation Army, $1,500 worth to the Vietnam Veterans of America and $2,000 to Goodwill, for a total of $6,000. Because the items were all similar in nature (clothing) and because the total exceeded $5,000, Jay and Emily will need to obtain a qualified appraisal. Qualified Appraisal – A qualified appraisal of any property is an appraisal that's treated as qualified under IRS regulations. This means that the person doing the appraisal is generally someone who earned an appraisal designation from a recognized professional appraiser organization, has met certain education or experience requirements relative to the type of property being appraised, regularly prepares appraisals for a fee and has not been prohibited from practicing before the IRS. Appraisal Timing– You must obtain the appraisal no earlier than 60 days before the appraisal property's contribution date and no later than the extended due date of your tax return. CAUTION – If you don’t bother to obtain an appraisal and the IRS later challenges your deduction, it will be too late to get the appraisal, and the deduction will most likely be denied. Donations of vehicles, boats and airplanes have a special set of rules not covered in this article if the claimed deduction exceeds $500. Please give this office a call about the documentation requirements for vehicle donations and any questions you might have related to any charitable contribution. Please call us if need a noncash charitable contribution form or if you have any questions. 2016 Tax Extension Deadlines are approaching. Go to www.tenfortyplus.com and complete your online organizer (under forms and documents). Make your appointment using our online appointment system. Call 281-397-7777 and get a user id with password set up so you can send us all your information through our online secure portal and do your taxes from the comfort of your home or office or come see us at our office. 1040 + Quality Tax Preparation & Financial Services Joseph C Becker EA www.tenfortyplus.com 281-397-7777, Fax 281-397-7443 joeb@tenfortyplus.com Contact Us There are many events that occur during the year that can affect your tax situation. Preparation of your tax return involves summarizing transactions and events that occurred during the prior year. In most situations, treatment is firmly established at the time the transaction occurs. However, negative tax effects can be avoided by proper planning. Please contact us in advance if you have questions about the tax effects of a transaction or event, including the following: • Pension or IRA distributions. • Retirement. • Significant change in income or • Notice from IRS or other deductions. Revenue department. • Job change. • Divorce or separation. • Marriage. • Self-employment. • Attainment of age 59½ or 70½. • Charitable contributions • Sale or purchase of a business property in excess of $5,000. • Sale or purchase of a residence or other real estate.