Happy 2017!

We hope that 2016 has been a happy and prosperous year for you and your family.  It's been an interesting year with a few important tax changes that might impact you.  Here are some of the changes and issues you need to know about.  

Tax Return Due Date Changes:

Beginning with the 2017 filing season, for Federal and California tax purposes, the due dates for PARTNERSHIP and C CORPORATION returns have changed.  Be aware that PARTNERSHIP returns are now due a month earlier.

The due dates for returns are as follows:

• Partnerships must file returns by the 15th day of the third month following the close of the taxable year (March 15 for calendar-year taxpayers).  Previously, these were due by the 15th day of the fourth month following the close of the taxable year;
• C Corporation returns are generally due by the 15th day of the fourth month following the close of the taxable year (April 15 for calendar-year taxpayers).  Previously, these were due by the 15th day of third month of the taxable year;
• S Corporation returns will remain due by the 15th day of the third month of the taxable year (March 15 for calendar-year taxpayers); and
• W-2s and 1099s must be filed by January 31, 2017, for the 2016 year.  This is one month earlier than in the past.  There are penalties for filing these forms late.

The April 15 due date for 2016 returns will be extended to April 18, 2017, because of a holiday celebrated in Washington DC.

Identity Theft:

Tax Refund fraud and identity theft are an increasing problem.  Thieves are coming up with new ways to steal your identity, your refund, and your money.  Here are a couple of recent tricks used to steal from you.

• The threatening phone call: Scammers call and tell you they are the IRS and that if you don't make a payment, you will be sued, subject to a lien or even be convicted of a criminal offence.  The IRS DOES NOT CALL you about collection or balance due.  In fact, the IRS will generally only call if you are working with an employee on an audit or other issue.  If you get one of these calls, hang up immediately.
• The letter with a bill: You receive an official looking bill for a small amount - maybe $200 or so.  You decide it's easier to just pay the bill than to contact our office about it.  Please let us know any time you receive correspondence from the IRS or the State of California.  In the most recent fraudulent letters, you are told to make out a check to "I.R.S" rather than to "United States Treasury;" and the return address does not match the processing center address posted on the IRS website.

Foreign Accounts:

Beginning this year, we must report overseas assets owned by businesses as well as individuals.  The reporting requirements are increasing and the penalties for failure to report continue to be harsh.  Not all foreign holdings must be reported.  If, for example, you hold stock in a foreign company through a US Broker, those holdings do not have to be separately reported.  However, if you hold any other types of foreign assets, including bank accounts and securities accounts.  If you have any doubt as to whether any of your assets are foreign, please discuss those assets with us.  

Solar Energy Credits:

Solar energy is growing, and California is leading the way.  Solar panels can offer substantial tax savings as you may get a tax credit of up to 30% of the cost of buying and installing the panels.

If you are considering putting solar panels on your home, make sure you understand who qualifies for the credit:

• If you lease the panels, you do not get the tax credit;
• If you must install a new roof in connection with installing solar panels, you may not get a tax credit for all or part of the cost of the roof; and
• If you finance the purchase of the solar panels through any of the programs that allow you to make your finance payments through your property taxes, that portion of your property taxes is not deductible as property tax.

As always, please take extra care in preparing your tax documentation so that we can do the best job to find new tax benefits and protect you from more aggressive audit programs and larger penalties.

Thank you!

Paid Sick Leave

Legislation entitled Healthy Workplaces, Healthy Families Act of 2014,  which became effective July 1, 2015 requires employers to provide paid sick leave benefits to their employees.  

Program Requirements
Employers must provide up to three days or 24 hours of paid sick leave to employees for use if the employee:

• Is ill;
• Must tend to an ill child, spouse/registered domestic partner, parent/guardian, grandparent, grandchild, or sibling; or
• Has a medical appointment for themselves or their family members

It may also be used by victims of domestic violence, sexual assault, or stalking to obtain legal assistance, counseling, shelter, or other services.

The mandate applies to part-time as well as to full-time employees and to all employees, regardless of whether they are paid a set wage, hourly, by commission, or on a piece-rate basis.  The only employees not included in the mandate are in-home supportive service workers, employees covered by certain collective bargaining agreements, and certain airline employees.

Under the original act, an employee accrued benefits at the rate of one hour per every 30 hours worked.  Now, employers may use a different accrual method, as long as the accrual is on a regular basis so that an employee has no less than 24 hours of accrued sick leave or paid time off by the 120th calendar day of employment or each calendar year or 12-month period.

Alternatively, an employer may provide the benefits up front at the beginning of a 12-month period (calendar year or other designated 12-month basis).

Employees may use the benefits once they have worked at least 90 days.  Seasonal and temporary employees are covered as long as they work for the employer for 90 days, whether consecutive or not.  Benefits may be used in hourly increments, although the employer may require that an employee take a minimum of two hours.

Employers who have a paid time off (PTO) program or that already provide at least three days of sick day benefits may not have to change their policies as long as their current plan meets the accrual requirements and sick days are available after 90 days of employment.  Additionally, the employer will have to meet the record keeping and notice requirements outlined below.

Unused sick days must be carried over (although the carryover can be capped at six days), but an employer is not required to pay more than three sick days per calendar year.  By carrying unused sick days over, employees can use sick days at the beginning of the year. 

Actions Required
To comply with the new mandate, employers must:

• Display a poster on paid sick leave where employees can read it easily;
• Provide written notice to employees with sick leave rights at the time of hire;
• Allow eligible employees to use accrued paid sick leave upon reasonable request, although an employer can limit the available paid sick leave benefits to three days;
• Pay the benefit no later than the payday for the next regular payroll period after the sick leave was taken;
• Show how many days of sick leave an employee has available on an employee's pay stub or a document issued the same day as a paycheck; and
• Keep records showing how many hours have been earned and used for three years.

Penalties
Although the law does not allow an employee to sue directly for violations of the Act, the California Labor Commission may impose penalties.  These include a penalty equal to three (3) times the amount of paid sick pay withheld and additional administrative penalties varying from $50 to $4,000 per violation per employee, depending on the nature of the violation.

Additional information and resources are available on the State of California website under the Division of Labor Standards Enforcement at: http://www.dir.ca.gov/dlse/

Client Letter: January 2016

Dear Clients,

We hope that 2015 has been a happy and prosperous year for you and your family!  Streitfeld Accounting and HR Tax Prep had a busy 2015.  We have continued to unpack and organize our new offices in Woodland Hills and we have expanded our staff to include more talented and hard working individuals.  You will also see some new forms of communication from us.  We are thrilled to have implemented a paperless 'signature' system as well as a new way to upload tax documents to us via the cloud.

This year, both the IRS and the California Franchise Tax Board have new requirements.  This means that we'll need documents and information that we have never needed in the past. 

Please see a list below of new information we will need from you when we prepare your taxes.

Health Insurance
Everyone must have had health insurance in 2015 and everyone required to file a tax return must report their health insurance. This was true last year, but there are changes in how this is done for 2015..

You will need proof of your health insurance.  In 2015, everyone covered by insurance should receive a Form 1095, either: 1095-A, 1095-B, or 1095-C.  It's possible you and your family members will receive more than one Form 1095.  If you did not receive one of these forms, then please forward to us any proof of insurance that you do have for 2015.

If you were not covered at any time during the year, then you may have to pay a penalty, unless you're entitled to an exemption.  Some exemptions are claimed on the tax return and others require a certificate from the Exchange Marketplace (Covered California or other State Exchange).  We cannot claim an Exchange exemption without that certificate.

To obtain the exemption, individuals must first submit an application to the Exchange along with the necessary documentation.  The process takes at least two weeks, and may take considerably longer if you wait and the process gets crowded.

Foreign Accounts
The reporting requirements for assets held overseas are increasing and the penalties for failure to report said assets are becoming increasingly harsh.  Not all foreign holdings must be reported.  If, for example, you hold stock in a foreign company through a U.S. broker, then those holdings do not have to be separately reported.  However, if you hold any other types of foreign assets, including bank accounts and/or securities accounts, then please let us know.  

Repair Regulations
Due to IRS changes in what can be deducted and what must be capitalized, we will need additional information from you if you have a business or a rental property.  For any time that you expense as "repairs" or "materials and supplies" we will need an itemized list of those items.  The list should include:

• Date purchased
• Cost
• Description of work done or item purchased

Please take extra care in preparing your Tax Organizer (sent to you upon request) and documentation so that we can do the best possible job for you.

We look forward to working with you this Tax Season!

Sincerely,

Heather Retsky
HR Tax Prep, Inc.

How the Affordable Care Act Impacts Your Taxes

Beginning this tax season, you may notice some changes on your tax return related to the Affordable Care Act.  

Below is a guide to help inform you of potential changes.  Find the description that best represents your current situation.

• I enrolled in a health plan through my employer, private insurance, Medicare or Medicaid
  • You're all set! All you will need to do is indicate that you have minimum essential coverage, a term that includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE and certain other coverage.  For a full list of qualifying plan types, click here
  • New Tax Forms to Expect:
    • Form 1095-C: Your employer may provide a separate Form 1095-C to you and to the IRS, which provides information about your plan and who was covered
    • Form 1095-B: Private insurers and self-funded plans may provide each policyholder and the IRS with information summarizing the coverage provided on Form 1095-B
    • Note: This year is a transition period for Forms 1095-B and 1095-C, so these forms are not a requirement for Tax Year 2014
  • What I need from you:
    • All of the documentation you typically provide
    • Form 1095-C or 1095-B, if you received it from your employer or private insurer
• I purchased a health plan through a Health Insurance Marketplace
  • Let us know that you purchased your plan through a Health Insurance Marketplace/Health Exchange
  • Did you receive a government subsidy in the form of a tax credit to purchase health insurance through the Health Insurance Marketplace?
  • This tax credit or subsidy could be applied to insurance premiums throughout 2014 when your coverage began.  Whether or not you choose to receive this subsidy during the tax year, you must reconcile your credit on your tax return
  • If you overestimated your 2014 household income when you applied for the tax subsidy, then you will receive the remainder of the subsidy in the form of a refundable credit, which will increase the refund amount or decrease the amount owned on your tax return.  But if you earn more than you projected, you will have to pay a portion or all of the subsidy back, which will decrease the refund amount or increase the amount owed on your tax return
  • In addition to a change in income, make sure to report all life changes (getting married or having a child) through your Marketplace to ensure your subsidy is correct
  • New Tax Forms to Expect:
    • Form 1095-A: If you purchased insurance through the Health Insurance Marketplace, then you will receive a new form, Form 1095-A, which will show details of your insurance coverage including the effective date, amount of premium and the advance premium tax credit
    • Form 8962: If you are eligible to receive a premium tax credit in 2014, information about your advance premium tax credit will be reported and the actual premium tax credit will be determined on Form 8962
  • What I need from you:
    • All of the usual documentation you provide
    • Form 1095-A, if you purchased health insurance through the Health Insurance Marketplace
• I don't have health insurance
  • Under the ACA, individuals who did not have health insurance for more than three months in 2014 must pay a tax penalty.  However, you may qualify to waive the penalty
  • How do I know if I qualify for an exemption? The ACA recognizes there are legitimate reasons people may be exempt from paying a tax penalty for not having health insurance:
    • Can't afford health insurance; the lowest-priced coverage available would cost more than 8 percent of your household income
    • Had medical expenses you couldn't pay in the last 24 months that resulted in substantial debt
    • Had an individual insurance plan cancelled, and believe other marketplace plans are unaffordable
    • Received a shut-off notice from a utility company
  • For the full list of exemptions, click here
  • If you have been uninsured for fewer than three consecutive months of the year, then you don't need to apply for an exemption
  • If you are not required to file a tax return because your income is too low, then you don't need to apply for an exemption
  • Different exemptions require different forms, so be sure to apply with the correct document
  • You can find and print all of the forms, click here
  • For those exemptions that should be filed through the Health Insurance Marketplace, the approval process can take a couple of weeks, so don't wait until we file your taxes to apply for an exemption.  Submit your application as soon as possible
  • What I need from you:
    • All of the usual documentation you provide
    • If you are getting an exemption through the Health Insurance Marketplace/Exchange and not claiming the exemption directly on the tax return, then you will also need to provide the exemption certificate number.
  • What if I'm not exempt?
    • If you don't have health insurance and you don't qualify for an exemption, then you will have to pay a penalty when you file your 2014 tax return
    • The penalty (individual shared responsibility payment), is based on your family size and income.  The penalty will be prorated based on the number of months you are uninsured and will increase each year
    • For Tax Year 2014, the annual one-time tax penalty will be $95 per adult or 1% of your total income, whichever is greater.  For uninsured children in your family, the penalty is $47.50 per child, with a family maximum of $285 for the year.  The tax penalty is assessed on your 2014 tax return
    • In 2015 the penalty is $325 per adult, $162,50 per child or 2% of your income, whichever is greater
    • In 2016, the penalty is $695 per adult and $347.50/per child or 2.5% of your household income, whichever is greater

Client Letter: December 2014

We hope that 2014 has been a happy and prosperous one for you and your family. Both the IRS and the California Franchise Tax Board have new requirements, and this means we’ll need documents and information we have never needed in the past. Here is a list of new information we will need from you when we prepare your taxes.

Health insurance: Everyone must have health insurance in 2014 and everyone required to file a tax return must report their health insurance.

You will need proof of your insurance.  You may receive a government form such as Form 1095-A, Health Insurance Marketplace Statement, or you may receive a certificate from your health insurance company.  If you don't, you may need to show us a copy of your policy.

If you purchased or will purchase health insurance through the exchange (or "marketplace"), you may receive tax credits.  If you received advance credits you must file a tax return to report them.  To property claim your credits, you must provide us with Form 1095-A.

If you were not covered at any time during the year, you may have to pay a penalty unless you're entitled to an exemption.  Some exemptions are claimed on the tax return and others require a certificate from the exchange.  We cannot claim an exchange exemption without that certificate.

o obtain the exemption, individuals must first submit an application to the exchange along with the necessary documentation.  The process takes at least two weeks, and may take considerably longer if you wait and the process gets crowded.

To avoid delay of your refunds and to avoid complications in preparing your returns, we encourage you to obtain your exemption now.

The full list of exemptions can be found by clicking this link.

The application for exemption can be found by clicking this link.

Foreign accounts: The reporting requirements for assets held overseas are increasing and the penalties for failure to report them are becoming increasingly harsh. Not all foreign holdings must be reported. If, for example, you hold stock in a foreign company through a U.S. broker, those holdings do not have to be separately reported. However, if you hold any other types of foreign assets, including bank accounts and securities accounts, please let us know. If you have any doubt as to whether any of your assets are foreign, please discuss those assets with us.

Please take extra care in preparing your organizer and documentation so we can do the best possible job to find new tax benefits that are hidden in the law and protect you from more aggressive audit programs and larger penalties.

IRS Adds Direct Pay Option_New for Year 2014

The IRS's new Direct Pay system allows taxpayers to pay their tax bills and make estimated tax payments online directly from checking and savings accounts, without fees.

It currently only accepts 1040 (Individuals) return series payments.  Additional payment types will likely be added in the future.

IRS Direct Pay offers 30-day advance payment scheduling, payment rescheduling or cancellations, and a payment status search.

Click here to access Direct Pay