10 Things You Always Wanted to Know About Late Tax Season Filing

On April 1, the American Institute of CPAs (AICPA) issued a press release, “10 Important Things for Tax Procrastinators to Know,” that provides answers to 10 critical questions relating to the upcoming tax return deadline. You can pass along this timely information to habitually late clients and April walk-ins.

1. What’s the best way to send a tax return to the IRS? The IRS strongly encourages taxpayers to file online at www.irs.gov/Filing or through a professional tax return preparer, like a CPA. If the taxpayer prefers to submit a return through the mail, some post offices will stay open later on April 15. You can also use one of the IRS-designated private delivery services...

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Source: Ken Berry (www.accountingweb.com)

Three Tips to Cross-Selling More Services to Your Tax Clients

It goes without saying that tax season is an incredibly busy and stressful time for accountants—the lowlights of which may include working on Saturdays and dreaming about Form 1040s. (Follow the trending #busyseasonproblems on Twitter to commiserate and have a laugh). But, in all seriousness, even when you're at your busiest, tax season is prime time to strengthen client relationships and set yourself and your firm up for success during the rest of the year...

...The ability to cross-sell services to your clients is a sustainable way to increase your profits without taking on more clients. With as many as two-thirds of clients unaware of the range of services their accountant offers outside of tax prep and bookkeeping, simply opening the lines of communication with your client can have a big impact. The season provides an excellent opportunity to show your clients that you can help them make sense of their financial information and can help them use it to make better business decisions.

There are three easy ways to offer additional value to your clients either during your tax season meeting, or immediately following, when you have time to discuss tax strategies for the future.

1. “The KISS principle—Keep it simple, stupid.” The U.S Navy is correct: simple is often the best. While you may enjoy crunching numbers, your client likely doesn’t want to focus on any more than basic math. Think of it as data overload. If a client leaves your office with a lot of figures but no context, they may have a hard time coming up with a plan of action to improve their business performance. But the solution to this issue is easy—keep the data simple and focused. Offering narrative summaries, graphs, and tables will help to ensure that your client sees a connection between the numerical information and the assertion or insight you’re providing to them...

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Source: Natasha Closs (www.accountingweb.com)

Americans Get a Low Grade on Their Knowledge of Income Taxes

By academic standards, Americans would receive an “F” on their knowledge of basic income tax information, according to the results of a survey by personal finance website NerdWallet.

NerdWallet asked 1,015 US adults in early February to take a 10-question quiz on tax basics related to personal finance issues, such as retirement, college savings, and health care. The average score of the test-takers: 51 percent.

Most respondents, for example, did not know the tax implications of popular financial products, such as Roth individual retirement accounts (IRAs), flexible spending accounts, and 529 college plans.

The key takeaway of the survey results, according to the folks at NerdWallet, is that the US tax code is confusing to the average American...

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Source: Jason Bramwell (www.accountingweb.com)

Faster Small-Business Equipment Tax Break Passed by House

The U.S. House of Representatives voted to revive a lapsed tax break for small businesses that encourages them to purchase equipment.

The 272-142 vote was short of the two-thirds majority needed to override a threatened veto by President Barack Obama. One Republican voted against the bill and 33 Democrats joined Republicans in supporting it.

The measure, which includes two narrower provisions for S corporations, would cost the government $79 billion over a decade in forgone revenue, according to the nonpartisan Joint Committee on Taxation

Until Dec. 31, 2014, small businesses were able to immediately write off as much as $500,000 instead of spreading the deductions over multiple years; that level dropped to $25,000 this year. The bill passed Friday would permanently reinstate the higher limit and index it to inflation...

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Source: Richard Rubin (www.accountingtoday.com)

Top Six Tax Issues of 2015

The new calendar year is upon us, and there are numerous changes and new regulations expected that companies should be closely monitoring. As you look at your tax-planning activities for 2015, keep your eye on the following six issues.

The Affordable Care Act

The Affordable Care Act (ACA) is both a health care law and a tax with far-reaching ramifications. The Obama administration’s release of final guidance on Employer Shared Responsibility and information reporting requirements gave employers little time to ensure their systems are ready to comply. The ACA requires employers to track and report to the IRS a significant amount of employee data. Employers who took a “wait and see” approach to the law, particularly those with calendar-year benefit plans, might need to start gathering required reporting data immediately. This data often resides in multiple functions within the organization (HR, benefits, payroll, operations, etc.) or with vendors.

In addition to system readiness described above, companies must also evaluate excise tax implications that might result from not offering minimum essential coverage to a sufficient percentage of full-time employees on an entity basis. Missing more than 30% of employees that should be covered can result in millions of dollars in excise taxes and penalties. Companies must check and document their internal controls to ensure their systems properly track employee hours and contingent workers...

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Source: Don Calvin (www.ohiocpa.com)

IRS: Tax season to start on time

The IRS announced that tax season will start on time this year and it will begin accepting e-filed and paper returns on Jan. 20, as originally planned (IR-2014-119).

Last year, the agency warned that late passage of legislation extending expired tax provisions could delay the start of filing season (see coverage here). But, in announcing the Service’s ability to start tax season on time, IRS Commissioner John Koskinen said, “We have reviewed the late tax law changes and determined there was nothing preventing us from continuing our updating and testing of our systems.” The on-time start will mark a change from recent filing seasons; practitioners have faced delayed starts the past two years, making those tax seasons even busier than usual.

The IRS also reiterated that, as in earlier years, filing a paper return before Jan. 20 will not accelerate the refund process and reminded taxpayers that e-filing is more accurate than paper filing and results in faster refunds.

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Source: Sally P. Schreiber (www.journalofaccountancy.com)

Small Business Tax Considerations for Year-End 2014

And so it begins, the time of year when you’re likely to get inundated with appointment requests and phone calls from your small business clients, looking for advice to help them save money and protect them from potential IRS penalties as they close out the books for 2014.

It’s natural they turn to you, their most trusted advisor, for this support. And how you respond says a lot about your firm and the value you place on developing long-term relationships with your small business clients.

Communication, knowledge and education are the keys to offering your clients unparalleled service and value. Take this opportunity to inform your clients about items of increasing regulatory importance, and be sure they have a solid understanding of some of the fundamentals. 

Here are three tax considerations to share with your small business clients as we approach year-end 2014:

Be Aware of State Tax Nexus Laws 

As most accountants know, a nexus in tax law applies to businesses that have a physical location within a state, and consequently impose taxes on out-of-state businesses that operate within their borders. Not all businesses are liable for sales tax under a nexus, but if a business falls under one of the following categories they may be liable: resident employees working within the state where the business is located; the business’s physical location is within the state; the business has tangible or intangible property in the state; or employees solicit business within the state. Each state has nexus laws to govern sales taxes, so it’s important for businesses to have an expert available to educate them on tax laws that impact the specific areas where they do business....

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Source: Mike Trabold (www.accountingtoday.com)

5 Year-End Tax Tips for Investors

On top of holiday preparations and celebrations in December, there are some year-end financial tasks that require attention. Many of those tasks on the financial to-do list have a tax component - specifically, avoiding unnecessary taxes on your investments, or worse, incurring a penalty.

Here are some reminders of tax consequences to consider before the new year rolls around:

1. Watch taxes on mutual funds. Mutual fund managers regularly sell securities to rebalance or accommodate shareholder redemptions. That creates capital gains for shareholders, even those with an unrealized loss on their mutual fund investment. This is particularly true for actively managed mutual funds, which have greater turnover than index funds.

But even if you are the owner of a mutual fund with overall gains, you may have a tax consequence for gains that occurred before you purchased it.

“If you are invested in a mutual fund, and each year, whenever there are gains in that fund, as there have been for the last few years, the fund distributes those gains on an annual basis to whoever is the holder of the mutual fund at the time of distribution,” says Steven Wallman, CEO of Folio Investing and a former commissioner on the Securities and Exchange Commission. “You end up with a very large potential tax liability, even though a good amount of that return might not have been yours." 

A worst-case scenario can occur when a person buys a mutual fund just before the tax distribution is made, then sells shortly thereafter, Wallman explains. “You have incurred the taxes but haven't gotten much of the return. That’s something people need to understand and think about. If you are investing in a mutual fund, it frequently does not provide an optimal tax result,” he says...

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Source: Kate Stalter (www.money.usnews.com)