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Tax Newsletter

May 2016
Tax Newsletter

June 2016, Issue 54

In this issue:


June 15 is the deadline for your second estimated tax payment

June 15, 2016, is the due date for making your second installment of 2016 individual estimated tax. You can pay online, by phone, with a credit or debit card, or by check. June 15 is also the due date for calendar-year corporations to make second quarter 2016 estimated tax payments.

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Make June business tax planning time

Looking for suggestions to reduce your 2016 business tax liability? Here are three tips to consider as summer gets underway.

  1. Business trips. When you travel on business this summer, you can write off your expenses – including airfare, lodging, and 50% of the cost of meals – if the primary motive of the trip is business-related. Costs attributable to personal side trips are nondeductible. If you travel by car, deduct actual business-related auto costs or a flat rate of 54 cents per mile (plus tolls and parking fees).
  2. Hire your child. Does your teenaged child need a summer job? If you hire your child, the wages paid for actual services rendered are deductible, the same as wages of other employees. The wages will be taxable to your child at your child's tax rate, which may be lower than your rate or that of your business.
  3. Job credits. When your business hires workers from certain "target groups," such as veterans and food stamp recipients, you may be able to claim the Work Opportunity Tax Credit. The maximum credit is generally $2,400 per qualified worker. A special summertime credit is available for hiring youths residing in empowerment zones or enterprise communities who work for you between May 1 and September 15.

We have more summertime tax planning suggestions for your business. Contact us today.

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Did you get your new "chip" card?

The latest credit cards have a new feature: a half-inch square on the card's face that looks like a mini circuit board. The square is a small computer chip called an EMV. The acronym stands for Europay, MasterCard, and VISA, the developers of the technology. Over the next several years, these chip-embedded cards are expected to replace the familiar magnetic strip technology on cards that you now swipe at point-of-sale devices. When you use your EMV card, you'll need to "dip," or insert, it into a new type of reader.

Why the change? The new chips are expected to improve credit and debit card security. Data on cards with the older technology is much easier for crooks to steal because the information on the magnetic strip is static and can be copied. As a result, a thief can use your card for multiple fraudulent transactions. Cards with the new chip are different. Every time you use an EMV card, the chip creates a unique transaction code. As a result, the newer cards aren't as useful to counterfeiters and card thieves.

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Report your foreign financial accounts by June 30

Did you know that a recent law made changes to the section 179 expensing election for 2016? These modifications took effect as of January 1. Here's what to consider as you make asset purchasing decisions this year.

  • Change #1. Beginning in 2016, section 179 is indexed for inflation. This year, the basic section 179 expensing limit will be $500,000. That limit is reduced dollar-for-dollar once your purchases exceed $2,010,000.
  • Change #2. The definition of "section 179 property" now permanently includes computer software and real property such as qualified leasehold and retail improvements and restaurant property. That means you can elect to use section 179 expensing when you purchase those assets.
  • Change #3. You may be able to deduct more of qualified leasehold and retail improvements and restaurant property in 2016. Beginning this year, the law eliminated the $250,000 cap on the amount of section 179 you could claim for this property.
  • Change #4. Beginning in 2016, air conditioning and heating units are eligible for section 179 expensing.

Contact us for help in maximizing the section 179 deduction for your business asset purchases.

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How to respond to an IRS notice

If you find yourself on the IRS mailing list, here's what to do.

  • Scan the heading. The first line, generally printed in bold type and centered beneath your name and address, will tell you why the IRS is contacting you. Questions about missing information, additional taxes owed, or payments due mean you'll want to take prompt action to avoid more notices or assessments of interest and penalties.
  • Review the discrepancy. You'll find the tax form and the year to which the notice applies printed in the upper right corner. Pull out your copy of the corresponding tax return, along with the supporting documents, and compare what you filed with what the IRS is questioning.
  • Prepare your explanation. Are the proposed changes correct? Did the IRS misapply a payment? Whatever the issue, there's usually no need to file an amended return. However, the IRS typically wants a response, either by phone or mail, in order to clear the notice from your account.
  • Do not delay. Ignoring IRS correspondence will not make it go away. Reply to the IRS in a timely manner even if you don't have all the information being requested.

Please contact us if you receive a notice from the IRS, or your state or local taxing authority. We're here to set your mind at ease by helping you resolve the matter as quickly as possible.

Contact us for assistance.

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Your business may qualify for this extended tax break

The Work Opportunity Tax Credit gives employers a tax credit for hiring veterans and others who are members of "target" groups. Normally, you have 28 days after an eligible worker's first day to complete the necessary paperwork for the credit.

But the 28-day rule has been extended for some new workers that you hired between January 1, 2015, and May 31, 2016. For certain employees hired within that time period, the deadline for filing the required form is June 29, 2016. If you're a business owner, the extended date provides an opportunity to review last year's personnel files for credit-eligible employees. Contact us for details.

For more information about accounting for bad debts, contact us.

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This newsletter provides business, financial, and tax information to clients and friends of our firm. This general information should not be acted upon without first determining its application to your specific situation. For further details on any article, please contact us at 734.971.3900.

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