Tax Breaks Extended Retroactively; Some are Permanent

 

In mid-December, Congress renewed a long list of tax breaks known as “extenders” that have been expiring on an annual basis. This year many of the rules are retroactive to the beginning of 2015. You may be able to benefit from some of them as you prepare your 2015 federal income tax return.

In addition, the Protecting Americans from Tax Hikes Act of 2015, which was signed into law on December 18, 2015, makes some of the rules effective through December 31, 2016. Others are effective through 2019, and some are effective permanently. Provisions in the Act also make changes to existing tax rules that were not part of the extenders. All of these changes will affect your tax planning for 2016 and future years.

Here’s an overview of selected provisions.

  • The rule allowing tax-free distributions from IRAs to charities is now permanent. When you’re age 70½ and over, this break lets you make a qualified distribution of up to $100,000 from your IRA to a charity.
  • If you or a family member is an eligible student, you may be able to claim a tuition and fees above-the-line deduction for qualified higher education expenses for 2015 and 2016.
  • The deduction for up to $250 of out-of-pocket educator expenses is now permanent. It will be indexed for inflation beginning with 2016 tax returns. You claim this deduction “above the line,” meaning it’s available even if you don’t itemize.
  • The optional itemized deduction for state and local sales taxes in lieu of deducting state and local income taxes is now permanent.
  • The maximum Section 179 deduction for qualified business property, including off-the-shelf software, is now permanently set at $500,000 (subject to a taxable income limitation). The deduction is phased out above a $2,000,000 threshold.
  • The additional first-year depreciation deduction, known as “bonus depreciation,” is generally extended through 2019 when you buy qualified business property. You can claim this deduction in conjunction with Section 179.

Please call for additional information about the new law.

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Are You Saving for Retirement?

While retirement plan contribution limits have not increased for 2016, taking full advantage of allowable contributions and any amounts your employer matches is still a good idea. Contributions you make to employer-sponsored retirement plans reduce your taxable income because your employer deducts the amount you specify from your paycheck before taxes.

For 2016, you can contribute $18,000 to your 401(k), plus another $6,000 if you’re celebrating your 50th or older birthday during 2016. You can save up to $12,500 in your SIMPLE account this year, plus another $3,000 if you’re age 50 or over.

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Does Your Business Need to File Form 1099?

Forms 1099 are due to recipients by February 1, 2016. You may be most familiar with Form 1099-MISC, which you use when your business makes miscellaneous payments in excess of $600 for services to nonemployees. What are miscellaneous payments? Reportable payments can include fees for services paid to independent contractors, such as consultants, lawyers, and cleaning services. Generally, you don’t report fees paid to corporations, but there are exceptions (payments to lawyers, for example).

For filing assistance, give us a call.

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How to Add Documents in QuickBooks

Accounting is about more than just numbers. QuickBooks lets you make documents available from within the program itself.

You could call QuickBooks a “green” computer program. It can conserve reams of paper by storing customer and vendor records, for example, emailing transaction forms, and accepting online payments.

Most small businesses are a long way from being “paperless offices,” despite the predictions so many people made when PCs became commonplace. Even though you’re making an effort to be as digital as possible with your accounting files, not everyone else is yet. So you still have to deal with paper.

And you’re probably still consulting paper documents or stored computer files or scanned images that relate to your accounting data. QuickBooks makes it possible to keep this information close at hand, easily accessible from the software itself.

The Doc Center

QuickBooks provides a centralized area for managing the documents you want to keep close at hand. The Doc Center contains tools you’ll need to work with your documents. From here, you can:

  • Add them by locating them in your storage device or scanning them in directly,
  • See their details and add to them,
  • Search for them, and,
  • Either remove or detach them.

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Figure 1: You’ll use the tools in the QuickBooks Doc Center to work with the documents you want to have available from within the program.

There are probably times when you have supporting documentation for invoices or customer and item records, for example. In these cases, you can attach those background documents to the related QuickBooks forms.

Easy Operation

It’s not difficult to work with documents in QuickBooks. But if you don’t have much experience working with file attachments or scanning paper forms, we can walk you through the process.

To get started, click on the Docs tab in the left vertical pane or open the Company menu and select Documents | Doc Center. You’ll see a screen that looks like the one pictured above.

Let’s say you have a special price list you often need to consult. Click the Add icon. A window then opens that contains a directory of all of the folders and files on your PC and any external storage areas. Browse to the pricing document you created earlier and double-click it. QuickBooks will return you to the main Doc Center screen, and you’ll see the name of your file and the time added in the first row of the data table there.

Deeper Descriptions

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Figure 2: Once you’ve added files to the Doc Center, you can view and add details or open the original document.

Click in the box in front of the file name, and buttons in the lower right of the screen will light up. Click on View Details, and a small window opens. You can enter information in fields here to add a Title, Description, Keywords, and Comments. Click Save & Close when you’re done. Other buttons here let you Open the file or Remove it.

Note: To bring in documents, you can also drag and drop them from Outlook, folders, or your desktop. We can help you learn how to do this.

Scan a Document

You can also scan documents directly from your scanner into QuickBooks. Click Scan. The QuickBooks Scan Manager should open and locate your printer or scanner. After you’ve selected it and your other Scan Options, click the Scan button. If you’ve opted to see a preview, that page will appear for your approval.

Click Done, and you’ll have several options for working with the image. When you’ve finished, click Done Scanning and enter any desired descriptive details. Click OK, and the Doc Center will display again with your new scanned document in the list.

Attach to Forms

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Figure 3: Many QuickBooks forms display the Attach File icon.

If you have supporting documentation for an invoice, for example, you can easily make it available from the form itself. Click the Attach File icon and select your file using the Doc Center’s tools. Once you’ve added an attachment to a form, the icon will display the number of documents that are available there.

Your computer’s storage space may be well organized, but you can still waste time trying to hunt down the document you want right when you want it. QuickBooks’ Doc Center can minimize your search time and ensure that important documentation is at hand.

 

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Adjust your mileage reimbursements for 2016

Standard mileage rates for deductible vehicle expenses have decreased from the 2015 rates. Here are the rates to use to calculate 2016 reimbursements and deductions.

Business. Starting January 1, the rate is 54 cents per mile for the use of a vehicle for business purposes. That’s down from 57.5 cents in 2015.

Medical and moving. The rate for medical and moving mileage decreases from last year’s 23 cents a mile to 19 cents a mile.

Charitable. The standard per-mile rate for charitable service remains at 14 cents.

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Customer Complaints can be Opportunities

When a customer complains, think of it as three opportunities in one.

  • An opportunity to get feedback on something that’s not working right in your organization.
  • An opportunity to convert a disgruntled customer into a loyal customer.
  • An opportunity to head off negative publicity.

Here are four steps to take to convert a complaint into a positive outcome.

  1. The initial response. Be respectful and helpful. Avoid becoming defensive or saying “it’s not our fault.”
  2. Understand the complaint. What’s the true complaint? It may not be easy to stay calm when faced with an angry rant, but making sure your customer knows you’re listening can defuse hostility and ill will. Gathering the facts provides valuable feedback to help you pinpoint the problem and find out what went wrong.
  3. Fix the problem. Have established procedures so your employees know who has the responsibility and the authority to correct a problem. Do employees need managerial approval to compensate a customer for inconvenience with an upgrade or refund? What actions can your employee take to remedy the customer’s immediate concern?
  4. Follow up. A phone call or letter within a reasonable time can ensure the problem has been resolved and turn the customer from “disgruntled” to “loyal.”
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Three Tips to Start the Tax Filing Season

  1. Check whether your children need to file a 2015 tax return.
    • They’ll need to file if wages exceeded $6,300, self-employment income was over $400, or investment income exceeded $1,050.
    • When income includes both wages and investment income, other thresholds apply.
  2. Consider whether you’ll contribute to a Roth or traditional IRA.
    • Since you have until April 18 to make a 2015 contribution (April 19 if you live in Maine or Massachusetts), you can schedule an amount to set aside from each paycheck for the next few months.
    • The maximum contribution for 2015 is the lesser of your earned income for the year or $5,500 ($6,500 when you’re age 50 or older).
    • Be sure to tell your bank or other trustee that these 2016 contributions are for 2015 until you reach the 2015 limit.
    • You can then deduct these 2016 amounts on your 2015 tax return for a quicker tax benefit.
  3. Do you need to file a gift tax return?
    • For 2015, you may need to file a return if you gave gifts totaling more than $14,000 to someone other than your spouse.
    • Some gifts, such as direct payments of medical bills or tuition, are not subject to gift tax.
    • Gift tax returns are due at the same time as your federal income tax return.

Call us for more tips on getting ready for filing your 2015 income taxes.

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