Tax Partners Northwest LLC
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Recent News Updates

Planning for now and for later
12/13/17, 2:41PM

It’s hard to believe that we’re coming to the end of another year!  As we get ready to wrap up 2017, we’re getting lots of questions about the new tax law working its way through Congress, and how it will affect our clients.

 

As I write this, the bill is in a joint committee, which means a group of members of the House and Senate are sitting down to combine the House and Senate versions.  Once they’ve completed their work, the joint bill must be passed by both the House and the Senate, and then signed by the President, before it becomes law.  There are many differences between the two bills being reconciled, but we can guess at some of the things that will emerge.

 

So how can you position yourself to take best advantage of what is likely to become law?  We have a few suggestions.

 

Consider deferring income into 2018

 

It is possible that you will be in a lower tax bracket in 2018 than you were in 2017.  If you can control when you receive income, you might want to wait to receive it until January.  For instance, if you’re in business for yourself, you could send out your invoices late in December, so you wouldn’t receive the income until January.  If you haven’t put money into a tax-deferred retirement account yet this year, or if you haven’t maxed out your contribution, this would be an excellent time to do that.

 

Push deductions into 2017

 

It seems likely that the standard deduction will be raised high enough that many people who currently itemize won’t be able to anymore.  If you are able to itemize your medical deductions, you could make sure to pay all your bills in 2017.  Track your mileage and parking for doctor appointments.  If you donate to charity, you could make your January payment in December.  A donation charged to a credit card in 2017 is deductible in 2017, even if you don’t pay the bill until 2018. 

 

Do you have stock that’s worth less than you paid for it?

 

Consider selling it in 2017.  You’ll be able to use that loss to offset gains, and can take a loss of up to $3000 over the amount of gains for the year, reducing your other income.

 

Are you going to purchase a vehicle or construction materials?

 

You will want to do that in 2017.  The sales tax on both will be deductible on your 2017 tax return, but it’s on the chopping block for 2018.

 

Do you deduct expenses associated with your job?

 

If you have unreimbursed expenses for your job, like union dues, mileage, small tools, uniforms, and so forth, pay for them in 2017 and keep the receipts. 

 

As the process moves forward, I encourage you to contact your representatives to share your opinions on what is important to you.  You can find and email your Senators here:  https://tinyurl.com/7jw9qov  And here is the site to find and email your Congressional Representative:  https://tinyurl.com/y9xgqgkg

 

As we learn more about what is likely to be passed we’ll share that too.  In the meantime, let us know if you have any questions, we’re always happy to help with tax planning.  Enjoy the holidays, and we’ll see you in the spring!

 

 


End of Year Donations
12/4/17, 4:25PM

As we approach the end of the year, our mailbox fills up with requests for money from all the charities we’ve ever supported and some we’ve never even heard of.  As you evaluate your charitable giving for the year and figure out how much you want to donate, keep these tax tips in mind.

 

1. Qualified Charities. You must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible.  Make sure that you are giving to a 501(c)3 organization.  If you’re not sure, ask.

 

2. Itemize Deductions. To deduct your contributions, you must file Form 1040 and itemize deductions. If you don’t itemize, you can still donate to charity, but it won’t affect your tax return.

 

3. Benefit in Return. If you get something in return for your donation, you may have to reduce your deduction. You can only deduct the amount of your gift that is more than the value of what you got in return. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.

 

4. Type of Donation. If you give property instead of cash, your deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market. If you donate used clothing and household items, they generally must be in good condition, or better, to be deductible. Special rules apply to cars, boats and other types of property donations.

 

5. Form to File and Records to Keep. You must file form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year.  If you need help setting a value for your donations of used items, google Donation Value Guide.

 

6. Donations of $250 or More. If you donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether you received any goods or services in exchange for the gift.

 

You must get this acknowledgement on or before the date you file your tax return.  Remember, having a cancelled check isn’t enough proof, you have to have the letter of acknowledgement as well.  If the IRS decides to audit you and you get a letter dated after the date you filed your return, the IRS will disallow your deduction, even if you can prove you made it.

 

Questions?  Call us!  We are always happy to talk taxes!


Do I need a tax planning session?
11/21/17, 3:11PM

As the end of the year approaches, you should consider a tax planning session. By checking now to make sure the right amount of tax is being withheld, you can avoid an unexpected tax bill next year.

 

Here are five examples of taxpayers who would benefit from a tax planning session:

 

• Did you receive a large refund last year?  When you have too much tax withheld from your paycheck, you are letting the government use your money interest free.  You can change your withholding to receive larger paychecks, rather than waiting for a bigger refund.

 

• Did you owe a large amount when you filed your taxes last year?  If you haven’t withhold enough tax from your paycheck, you might owe money again this year.  This can lead to an unexpectedly large bill at tax time, and possible penalties. 
 

• Do you work a second job?  Or drive for Uber or Lyft in your spare time?  You should adjust the withholding on your paycheck(s) to make sure you’re paying in enough money.  Part time jobs frequently don’t withhold enough tax, and people who work in the gig economy aren’t having taxes withheld at all.

 

 • Did you make estimated tax payments?  We estimate your tax payments at the beginning of the year, based on last year’s income.  It’s a good idea to do a check now, when you have a better idea what your income for the year is going to look like.  Your last payment can be adjusted accordingly.

 
• Did you start a new job?  You should make sure that your withholding is enough to cover your new income. 
 

Give us a call today to schedule a tax planning session.  All of our clients are entitled to one half hour of free tax planning every year.  We can estimate how much tax you will owe, see how much money you’ve paid toward that bill and make recommendations for the rest of the year.  We can also help you fill out a new W-4 to give your employer, or show you how to make estimated payments, if you’ve never done it before.  Nobody likes ugly surprises at tax time.  Schedule your planning session today!

 


Protecting Yourself After the Equifax Hack
9/10/17, 9:11PM

Another day, another information breach.  Ho hum, right?  No.  This one is different.  Equifax estimates that identifying information for 143 million people has been hacked from their website.  Chances are, it includes you.  Even if you went to their website and it says it didn’t affect you, it’s time to start taking steps to protect yourself.

 

In the past, we have advised you to freeze your credit if your identity was stolen.  This time, the information that was stolen is enough that a person could unlock your credit without you knowing.  Those of us with frozen credit aren’t in the habit of checking it, so they could do a lot of damage before you find out.

 

You can notify one credit bureau that you want a fraud alert placed on your account, and they will notify the others.  Here is where to go for Transunion.  https://www.transunion.com/fraud-victim-resource/place-fraud-alert  Here is the site for Experian.  https://www.experian.com/fraud/center.html  We’ll just figure Equifax has done enough damage already and leave them off the list.  Put a reminder on your calendar to do new fraud alerts every 90 days. 

 

I still suggest that you get a free credit report here https://www.annualcreditreport.com/index.action.  You can get one from each of the three credit bureaus every year.  So get one today from one, get one in four months from another, and get another from the third four months after that.  You won’t have to pay anything, and you’ll be monitoring your credit on a consistent basis.

 

If you want to pay someone to do this for you, this is what companies like Lifelock are for.

 

Go here https://www.irs.gov/individuals/get-transcript and create an account for yourself.  Make a note in a safe place of the information you used and your password.  This will stop someone from going in to the IRS records, getting your tax returns and doing mischief with them.

 

Finally, I have set up my bank account so that I receive an alert anytime money is taken out of my checking or savings account, or a charge is made on my credit card.  This was very easy to do online.

 

It’s important to note that you need to be vigilant about all this forever.  Equifax is offering credit monitoring for only one year.  My identity was stolen four years ago, and I still get notices every few months that someone is trying to open credit in my name.  Once your information is out there, you can’t get it back.

 

Irritated that you are caught in this web?  Welcome to the club.  If you visited the Equifax site and it says that you weren’t affected, don’t heave too big a sigh of relief, it’s only a matter of time.  Once you’ve taken the steps above, get another coffee and write an email to your Congressperson letting them know your opinion of the current system.  These credit bureaus collect amazing amounts of information about us, we have no control over what they do with it, and now it turns out they didn’t keep it secure.  It’s not like we can go out and get a new social security number.  It’s time for Congress to take a look at this issue and make some rules to protect us.  Here’s where you can go to find an email address for your member of Congress.  https://www.house.gov/representatives/find/  And here’s where you can find contact information for your senators.  https://www.senate.gov/general/contact_information/senators_cfm.cfm?OrderBy=state&Sort=ASC

 

As always, feel free to call us if you have any questions!

 


What do we do after tax season?
5/3/17, 10:50AM

People ask us all the time what we do after tax season.  Everyone’s filed their returns by April 15, right?  So what are we doing the rest of the time?

 

This is an interesting question, and there is no fixed answer.  First of all, no, not everyone has filed their returns by April 15.  A fair number of people go on extension and we work on those returns during the summer.

 

Some people haven’t filed their tax returns for several years, so we help them get caught up.  If necessary, we can advise them on setting up a payment plan to take care of what they owe.

 

Just as tax season is wrapping up, the IRS sends out a flurry of letters requesting more information about the returns that were filed last year.  These are scary letters and imply that you owe a lot of money.  Usually when we have a chance to review them, we can reduce what you owe.  Sometimes we even get a refund for a new client when we make a correction.  I always want to thank the IRS for calling this to our attention!

 

We help taxpayers who are under audit.  Because we are all CPAs or Enrolled Agents, we can represent a taxpayer so they don’t have to deal with the IRS.  We can speak for you in the Examination, Collection and Appeals departments, and help you work out the most favorable settlement possible.

 

We offer tax planning to new and existing clients.  When something is about to happen that may impact your tax situation next year, why not come in and talk to us beforehand?  Often there are different ways you can handle the same transaction, and one of them might save you a lot of tax money.  Even if you know you’re going to have to pay, we can help you estimate how much, and talk to you about making estimated payments to avoid penalties.

 

In a year like this one, we spend a fair amount of time reviewing the new tax regulations that are being proposed to Congress.  We keep up on this, so we can let you know when something might impact your financial situation.

 

And finally, there’s continuing education.  Each of us is required to take a minimum of between 24 and 40 hours of continuing education each year.  Of course we take more than that, there are so many things to learn and our tax code is continuously changing and evolving.  We want to be sure that we provide you with the best and most up to date information available.

 

The best thing about what we do is that it’s always exciting!


Thinking about an IRA?
4/1/17, 9:01PM

Did you contribute to an Individual Retirement Arrangement last year? Are you thinking about contributing to your IRA now?  Have you done your taxes and aren't happy with your bottom line? If so, you may have questions about IRAs and your taxes. Here are some IRS tax tips about saving for retirement using an IRA.  Contributing to an IRA is one of the only things you can still do today that will affect last year's tax return.

 

Age Rules. You must be under age 70½ at the end of the tax year in order to contribute to a traditional IRA. There is no age limit to contribute to a Roth IRA.

 

Compensation Rules. You must have taxable compensation to contribute to an IRA. This includes income from wages and salaries and net self-employment income. It also includes tips, commissions, bonuses and alimony. If you are married and file a joint tax return, only one spouse needs to have compensation in most cases.

 

When to Contribute. You can contribute to an IRA at any time during the year. To count for 2016, you must contribute by the due date of your tax return. This does not include extensions. This means most people must contribute by April 18, 2017. If you contribute between Jan. 1 and April 18, make sure your plan sponsor applies it to the year you choose (2016 or 2017).

 

Contribution Limits. In general, the most you can contribute to your IRA for 2016 is the smaller of either your taxable compensation for the year or $5,500. If you were age 50 or older at the end of 2016, the maximum you can contribute increases to $6,500. If you contribute more than these limits, an additional tax will apply. The additional tax is six percent of the excess amount contributed that is in your account at the end of the year. 

 

Taxability Rules. You normally don’t pay income tax on funds in your traditional IRA until you start taking distributions from it. Qualified distributions from a Roth IRA are tax-free.

 

Deductibility Rules. You may be able to deduct some or all of your contributions to your traditional IRA.

 

Saver’s Credit. If you contribute to an IRA you may also qualify for the Savers Credit.  It can reduce your taxes up to $2,000 if you file a joint return.

 

Unsure whether you can or should contribute to an IRA?  Call us, we're always happy to help with your tax planning!

 

 


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