tax returns

US 2016 Tax Season To Open On January 19

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Tax-News

Following a review of the recently passed tax extenders legislation, the Internal Revenue Service (IRS) has announced that the US tax season for individual tax returns will begin as scheduled on January 19, 2016.

The IRS will begin accepting e-filed returns that day. The IRS expects to receive more than 150m individual returns in 2016, with more than four out of five being prepared and e-filed using tax return preparation software.

The IRS will begin processing paper tax returns at the same time. The IRS pointed out that while many tax software companies will begin accepting tax returns earlier in January and submit them to the IRS when processing systems open, there is no advantage for taxpayers filing paper tax returns in early January, instead of waiting for e-file to begin.

“We look forward to opening the 2016 tax season on time,” IRS Commissioner John Koskinen said. He noted that the new legislation makes permanent many provisions and extends many others for several years. “This provides certainty for planning purposes, which will help taxpayers and the tax community, as well as the IRS,” he said.

“We encourage taxpayers to take full advantage of the expanding array of tools and information on the IRS website to make their tax preparation easier,” he added.

The IRS also confirmed that, as part of the Security Summit initiative, it has been working closely with the tax industry and state revenue departments to provide stronger protections against identity theft for taxpayers during the coming filing season.

The filing deadline to submit 2015 tax returns will be April 18, 2016.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

College Students: The Gray Area of Exemptions

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!  

There’s still time to take advantage of last-minute, tax-saving moves for dependency exemptions. For 2014, there are bigger dependency exemptions, as well as rules that, in some cases, are dauntingly complex. Read the below article by Julian Block from Accounting Web!

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The 2014 exemption is worth $3,950, up from the 2013 figure of $3,900. But you can’t take an exemption for an individual who is eligible to be claimed as a dependent on someone else’s return. An example: No exemption for a child on the child’s return when he or she can be claimed on the parent’s return.

The basic rules haven’t changed: To claim a 2014 exemption for a dependent, you must furnish more than half of the dependent’s total support for the year or, under a multiple support agreement, more than 10 percent. Generally, the exemption is lost if a dependent’s reportable income for 2014 surpasses $3,950. However, only income from taxable sources counts. Funds received by a dependent from tax-exempt sources like Social Security benefits, inheritances and gifts don’t count.

But there’s a break: Assuming you meet the support test, the tax code sets no limit on the amount of a dependent’s reportable income when your child is either (1) under age 19 at the close of 2014 or (2) a full-time college student who spends at least five months of the year in school and won’t reach the age of 24 by the close of 2014. Note, though, that the income cap does apply when your college-attending child has income above $3,950 and will be 24 by 2014′s close.

Some strategies. Are you supporting a son or daughter in college? In some cases, you need to remind your child to bank part of his or her earnings or to spend some money on nonsupport items; meanwhile, you take care of support items like food, lodgings, clothing, education, medical and dental care, recreation, transportation and similar necessities. Why? Because that maneuver might enable you to pass the support test and get the exemption for 2014.

Count as support the “fair rental value” of the lodgings you provide for a child living with you; add a reasonable allowance for use of telephone, electricity, furnishings, appliances and the like. “Fair rental value,” says the IRS, is the amount you could reasonably expect to receive from a stranger for the same kind of lodgings, not the rent or real estate taxes, mortgage interest, an so on, paid by you that’s attributable to the space involved. Also include the value of a year-round room you maintain for an away-at-college child and the food you provide while he or she is at home during a school recess.

Don’t count a scholarship in calculating total support. It makes no difference that your child actually uses the award for education and other support items. As for GI Bill benefits and the proceeds from college loans secured by the student, they are support the child provides. But any loan for a child’s education secured by you is support you furnish.

The IRS strictly defines “student.” Your son or daughter must be enrolled on a full-time basis for a minimum of five months in the calendar year in an educational institution with a regular faculty, an established curriculum, and an organized student body.

The IRS authorizes no exceptions to the five-month rule. But your child doesn’t have to be enrolled for five consecutive months or even five full months.

An example: Clarice Lecter registers for a full-time course load in January, with classes to run from February through May. With that time span, Clarice satisfies the time requirement, provided she completes the semester.

The IRS allows her to include some night attendance as part of a full-time course of study. But the agency cautions that if Clarice attends exclusively at night, she must enroll for the number of hours or classes that’s considered full-time attendance.

Just how inflexible the agency is on the time stipulation is underscored by an IRS ruling that was sought by the parents of a 19-year-old student who dropped out of school after four months following hospitalization for a nervous breakdown. He was unable to return to school for the remainder of the year. The verdict: No exception from the five-month requirement, regardless of the son’s reason for leaving school. Consequently, the parents couldn’t claim an exemption for him.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

 

Marriage or Divorce

Marriage or divorce tax tips from a westchester CPA

It’s important to make sure your name matches your social security number and tax returns to avoid problems at tax time.

Westchester tax preparation experts at Herman & Company CPA’s have all the answers to your personal finance questions!

Newlyweds and the recently divorced should make sure that names on their tax returns match those registered with the Social Security Administration (SSA). A mismatch between a name on the tax return and a Social Security number (SSN) could cause your tax return to be rejected by the IRS.

For newlyweds, the tax scenario can begin when the bride says “I do” and takes her husband’s surname, but doesn’t tell the SSA about the name change. If the couple files a joint tax return with her new name, the IRS computers will not be able to match the new name with the SSN.

Similarly, after a divorce, a woman who had taken her husband?s name and had made that change known to the SSA should contact the SSA if she reassumes a previous name.

It’s easy to inform the SSA of a name change by filing Form SS-5 at a local SSA office. It usually takes two weeks to have the change verified. The form is available on the agency’s Web site, www.ssa.gov, by calling toll free 1-800-772-1213 and at local offices. The SSA Web site provides the addresses of local offices.  Alternatively, please contact our Westchester tax preparation firm as we can be of even greater assistance with your spousal situation.

Westchester tax preparers at Herman & Company can help you with:

  • 2013 Financial Planning for your Westchester-based business
  • Retirement planning, business valuation and bookkeeping for your small or medium-sized firm
  • Proudly serving all the towns of Westchester County, including White Plains NY, Mamaroneck NY, New Rochelle NY, Mt. Kisco NY, Scarsdale  NY and beyond.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.