March 2016 Tax Newsletter

What’s Inside:

Dear Subscriber

Do you have tax return questions? Please call us! We encourage our clients who are putting off submitting their tax organizers to contact us with any questions or concerns. We are happy to meet with you; sometimes that is the most efficient solution for all. Contact Erin (via email) and she will set you up with a face-to-face or phone appointment right away.

Beyond ongoing tax preparation, we are watching and navigating the U.S.’s attempt to crack Singapore’s secrecy laws with respect to obtaining names and information on U.S. Citizens who have bank accounts and dealings in Singapore. This is the next step for the U.S. to take now that European banks have folded. It is also a place where European banks and Hong Kong banks have related accounts for their account holders.

As always, do not hesitate to reach out should you have questions.

Sincerely,

Steve Moskowitz, Esq.
Founding Partner

Major tax deadlines for March

  • March 1 – Due date for farmers and fishermen who chose not to make 2015 estimated tax payments to file 2015 tax returns and pay taxes in full to avoid underpayment penalties.
  • March 15 – 2015 calendar-year corporation income tax returns are due.
  • March 15 – Deadline for calendar-year corporations to elect S corporation status for 2016.
  • March 31 – Payers who file electronically must submit 2015 information returns (such as 1099s) to the IRS.
  • March 31 – Employers who file electronically must submit 2015 W-2 copies to the Social Security Administration.

Tax Bill You Cannot Pay?

This is the time of year where we get a lot of panicked phone calls from individuals that are just now realizing that they will owe a tax bill on April 18th that they cannot pay. The important thing to note is avoid failure to timely file penalty, which is 5% a month up to 25% a year. Therefore, it is prudent to file your return by the deadline.

We can negotiate a monthly payment plan for you.

If you have other balances due to the taxing authorities or are on probation (pursuant to a closing agreement or accepted offer in compromise), this new balance will likely complicate your tax situation and you can lose your tax deal, so it is very important for us to attend to this for you.

Plan for changes to social security

The Bipartisan Budget Act of 2015 made two changes to social security benefit strategies. “File and suspend” was a way for married couples to allow the higher earning spouse to claim benefits at full retirement age but suspend the benefits until a later date. Under the Act, this strategy will no longer be available after April 30, 2016.

“Restricted application” applied to married couples who had reached full retirement age and who were eligible for both a spousal benefit and a personal retirement benefit. These couples could file a restricted application for spousal benefits only, then delay applying for personal retirement benefits. If you’ll turn 62 after 2015, the Act eliminated the ability to file a restricted application for only spousal benefits. However, if you were already 62 or older in 2015, you can continue to use the restricted application method for spousal benefits, but only upon reaching full retirement age.

Update your tangible property expensing policy

In 2013, the IRS issued regulations clarifying when tangible real and personal business property can be expensed. The regulations provided safe harbors that let you deduct certain costs you’d otherwise have to capitalize. For example, using a de minimis safe harbor, you could elect to deduct individual capital expenditures of $500 or less if your business did not have an “applicable financial statement.” (In general, an applicable financial statement is a financial statement based on a certified audit by an accounting firm.) Effective beginning with 2016 taxable years, this safe harbor has increased to $2,500 per invoice or item. In addition, the IRS says it will not contest similar treatment in audits of earlier years.

Will rising interest rates affect you?

For almost the entire past decade, interest rates held steady at near-zero levels. Then, in mid-December 2015, the Federal Reserve raised rates by one-quarter of a percentage point. Market watchers and economists expect further rate increases in the coming months. How will you be affected?

Technically speaking, only the federal funds rate was adjusted in December. That’s the short-term rate that credit-worthy banks and credit unions use to lend each other money. But any interest rate revisions can cause a ripple effect throughout the economy. Accordingly, the Federal Reserve’s actions probably will exert at least a moderate influence over financial choices you make at home and in your business in 2016 and beyond.

For example, as a consumer, you stand to gain from rising interest rates because you’ll likely earn a better return on your deposits. Over the last ten years, placing your money in a certificate of deposit or passbook savings account has been hardly more profitable than stuffing it under a mattress. On the other hand, the cost of borrowing money will likely increase. As a result, mortgages, car loans, and credit cards will demand higher interest rates. That’s not a big deal if you’re already locked into low-interest fixed-rate loans. But if you have a variable rate loan or carry balances on your credit cards, you may find your monthly payments climbing upward.

On the investment front, market volatility may increase because rate increases are not completely predictable. Market sectors will likely exhibit varied responses to changes in interest rates. Those sectors that are less dependent on discretionary income may be less affected. After all, you need to buy gas, clothes, and groceries regardless of changes in interest rates.

As you adjust your financial plan, you might only need to make minor changes. Staying the course with a well-diversified portfolio is still a prudent strategy. However, you may want to review your investment allocations.

Rising interest rates can also affect your business. If your company’s balance sheet is loaded with variable-rate debt, rising interest rates can affect your bottom line and your plans for growth. So planning is even more important.

Have questions? Contact Moskowitz LLP. We’ll help you to decide the most beneficial response to your current and potential tax situations.

Hot Topic: Captive Insurance

Steve Moskowitz was quoted in Tax Notes discussing Donald Trump’s potential use of Captive Insurance companies. (read more here)

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