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When it comes to deducting charitable gifts, all donations are not created equal. As you file your 2015 return and plan your charitable giving for 2016, it’s important to keep in mind the available deduction:

Cash. This includes not just actual cash but gifts made by check, credit card or payroll deduction. You may deduct 100%.

Ordinary-income property. Examples include stocks and bonds held one year or less, inventory, and property subject to depreciation recapture. You generally may deduct only the lesser of fair market value or your tax basis.

Long-term capital gains property. You may deduct the current fair market value of appreciated stocks and bonds held more than one year.

Tangible personal property. Your deduction depends on the situation:

• If the property isn’t related to the charity’s tax-exempt function (such as an antique donated for a charity auction), your deduction is limited to your basis.
• If the property is related to the charity’s tax-exempt function (such as an antique donated to a museum for its collection), you can deduct the fair market value.

Vehicle. Unless it’s being used by the charity, you generally may deduct only the amount the charity receives when it sells the vehicle.

Use of property. Examples include use of a vacation home and a loan of artwork. Generally, you receive no deduction because it isn’t considered a completed gift.

Services. You may deduct only your out-of-pocket expenses, not the fair market value of your services. You can deduct 14 cents per charitable mile driven.

Finally, be aware that your annual charitable donation deductions may be reduced if they exceed certain income-based limits. If you receive some benefit from the charity, your deduction must be reduced by the benefit’s value. Various substantiation requirements also apply. If you have questions about how much you can deduct, let us know.

If there was a college student in your family last year, you may be eligible for some valuable tax breaks on your 2015 return. To max out your education-related breaks, you need to see which ones you’re eligible for and then claim the one(s) that will provide the greatest benefit. In most cases you can take only one break per student, and, for some breaks, only one per tax return.

Credits vs. deductions

Tax credits can be especially valuable because they reduce taxes dollar-for-dollar; deductions reduce only the amount of income that’s taxed. A couple of credits are available for higher education expenses:

1. The American Opportunity credit — up to $2,500 per year per student for qualifying expenses for the first four years of postsecondary education.
2. The Lifetime Learning credit — up to $2,000 per tax return for postsecondary education expenses, even beyond the first four years.

But income-based phaseouts apply to these credits.

If you’re eligible for the American Opportunity credit, it will likely provide the most tax savings. If you’re not, the Lifetime Learning credit isn’t necessarily the best alternative.

Despite the dollar-for-dollar tax savings credits offer, you might be better off deducting up to $4,000 of qualified higher education tuition and fees. Because it’s an above-the-line deduction, it reduces your adjusted gross income, which could provide additional tax benefits. But income-based limits also apply to the tuition and fees deduction.

How much can your family save?

Keep in mind that, if you don’t qualify for breaks for your child’s higher education expenses because your income is too high, your child might. Many additional rules and limits apply to the credits and deduction, however. To learn which breaks your family might be eligible for on your 2015 tax returns — and which will provide the greatest tax savings — please contact us.

Today it’s becoming more common to work from home. But just because you have a home office space doesn’t mean you can deduct expenses associated with it.

Eligibility requirements

If you’re an employee, your use of your home office must be for your employer’s convenience, not just your own. If you’re self-employed, generally your home office must be your principal place of business, though there are exceptions.

Whether you’re an employee or self-employed, the space must be used regularly (not just occasionally) and exclusively for business purposes. If, for example, your home office is also a guest bedroom or your children do their homework there, you can’t deduct the expenses associated with that space.

A valuable break

If you are eligible, the home office deduction can be a valuable tax break. You may be able to deduct a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, as well as the depreciation allocable to the office space.

Or you can take the simpler “safe harbor” deduction in lieu of calculating, allocating and substantiating actual expenses. The safe harbor deduction is capped at $1,500 per year, based on $5 per square foot up to a maximum of 300 square feet.

More considerations

For employees, home office expenses are a miscellaneous itemized deduction. This means you’ll enjoy a tax benefit only if these expenses plus your other miscellaneous itemized expenses exceed 2% of your adjusted gross income (AGI).

If, however, you’re self-employed, you can deduct eligible home office expenses against your self-employment income.

Finally, be aware that we’ve covered only a few of the rules and limits here. If you think you may be eligible for the home office deduction, contact us for more information.

Every tax season, taxpayers have to be on the lookout for con artists looking to run tax scams. With a variety of tactics at their disposal, these criminals find ways to get your personal information and look to turn it into cash. Let's take a look at five of the most common tax scams that the IRS has highlighted in recent warnings to taxpayers.

1. Identity theft
The most insidious tax scam involves thieves stealing your personal information and using it to file false tax returns on your behalf.  Often, the scam goes unnoticed until you later file your legitimate tax return and the IRS informs you that a return has already been filed. The IRS has issued about 1.5 million personal identification numbers aimed at helping victims of identity theft, and it has also started a pilot program in some states that allows people to get PINs even if they haven't been victimized. For most taxpayers, though, the best defense is to protect your personal information as well as you can.

2. IRS impersonation
Some scams involve threatening emails or phone calls from people purporting to work for the IRS, saying that you could be arrested, have your license revoked, or even get deported if you don't agree to comply with their demands. The IRS reminds taxpayers that it will never call to demand immediate payment, ask for credit or debit card numbers over the phone, or threaten to bring in law enforcement officials.

3. Caller ID spoofing
One tool that many criminals have in their arsenal of tricks is the ability to have your caller ID system display what appears to be a legitimate IRS toll-free customer service number. These scams often involve robo-calling systems and can include a combination of tactics, including related emails and phone calls purporting to be from other organizations like police or DMV. The IRS advises that if you're ever uncertain, hang up and then call the IRS back at 1-800-829-1040 FREE. That way, a real IRS representative can confirm whether there's a legitimate issue.

4. Bogus charitable organizations
The end of the year brings a big uptick in charities asking for donations, and criminals have discovered that many people are willing to part with their money for what they think is a good cause. Earlier this year, four charities claiming to raise money for cancer victims were accused of fraud, with the FTC alleging that donors were taken for $187 million over a five-year period. Often, such charities have convincing names, but it's important to go further to check that these organizations are legitimately registered with the IRS as tax-exempt non-profit organizations. This IRS website will let you enter the name of a charity to verify whether it's legitimate and is still eligible to receive tax-deductible contributions.

5. Tax preparer phishing
Not all scammers target individual taxpayers. In one scam, criminals send out emails to accountants and other tax preparation professionals, telling them that they need to update their information in order to keep using the IRS e-services portal. In the process, the con artists hope that unsuspecting accounts will provide their usernames, passwords, and electronic filing identification numbers. That information in turn can help the criminals impersonate tax preparers and seek to get personal information from clients and other individual taxpayers.

Doing your taxes is hard enough without having to worry about tax scams. With plenty of crooks out there, you can't afford to let up your guard. Knowing the tactics they use can help you avoid getting scammed. Filing your taxes early, with a reputable preparer can also help avoid these scams. 

 

To help protect consumers from telemarketing fraud and educate the public about the differences between legitimate and fraudulent telemarketing practices, in 1995 the Federal Trade Commission (FTC) issued the Telemarketing Sales Rule (TSR). The TSR essentially spells out who and when telemarketers can call and certain things they must say. The rule has been amended several times. And now it's been amended again. Here are the details, including some important background information to help you comply with the FTC's latest requirements.

How Does the TSR Currently Restrict Telemarketers?

The TSR contains several provisions to combat telemarketing fraud. Specifically, the rule:

• Requires disclosures of specific material information, such as details about cost, quantity, offer restrictions and refund policies,
• Prohibits misrepresentations to induce consumers to buy goods or services or make donations,
• Limits when telemarketers may call consumers,
• Requires transmission of Caller ID information,
• Prohibits abandoned outbound calls (subject to a safe harbor),
• Bans unauthorized billing,
• Sets payment restrictions for the sale of certain goods and services, and
• Requires that specific business records be kept for two years.

The TSR has been updated several times. For example, in 2003, the FTC amended the TSR to prohibit telemarketers from calling consumers who have put their phone numbers on the National Do Not Call (DNC) Registry. In another significant amendment, the TSR was expanded to cover solicitations of charitable contributions by for-profit telemarketers. In 2008, the FTC changed the rule to restrict the use of prerecorded messages in telemarketing calls. In 2010, the rule was further amended to address deceptive and abusive debt relief services.

Telemarketing activities may also be regulated by state laws. The FTC and Federal Communications Commission have collaborated with local governments to create a unified national system enabling "one-stop" service for consumers and businesses seeking to comply with the requirements.

Important note: Compliance is serious business. Any business that violates the TSR is subject to civil penalties of up to $16,000 per violation. In addition, violators may be subject to nationwide injunctions that prohibit certain conduct. They also may be required to pay redress to injured consumers.

Are Your Promotional Campaigns Covered by the TSR?

If your telephone marketing campaigns involve any calls across state lines, you may be subject to the TSR's provisions. These campaigns may include outbound telemarketing calls your sales reps make or calls you receive in response to advertisements.

The TSR defines telemarketing as, "A plan, program, or campaign . . . to induce the purchase of goods or services or a charitable contribution" involving more than one interstate telephone call. The TSR also covers calls made from outside the United States if they're made to consumers in the United States.

Some types of businesses aren't covered by the TSR — even though they often engage in telemarketing activities — because they're not regulated by the FTC. Specific exempt entities include:

• Banks, federal credit unions, and federal savings and loans,
• Common carriers, such as long-distance telephone companies and airlines, and
• Not-for-profit organizations.

Businesses that contract with an exempt entity to provide telemarketing services generally must comply with the TSR, however.

Some types of calls also aren't covered by the TSR, regardless of whether the entity making or receiving the call is covered. Examples generally include unsolicited calls from consumers or calls placed by consumers in response to a catalog or direct mail campaign. But upselling — when a telemarketer tries to sell additional goods or services during a single phone call, after an initial transaction — are typically covered by the TSR, even if the initial transaction is exempt.

What Changes Has the FTC Recently Made?

In 2013, the FTC proposed a new set of amendments to the TSR. After a public comment period, the agency has approved final amendments that ban four types of payment methods:

1. Remotely created checks,

2. Remotely created payment orders,

3. Cash reload mechanisms, and

4. Cash-to-cash money transfers.

These methods are favored by fraudsters because they aren't subject to federal laws that protect consumers who use credit or debit cards. In addition, these transactions may be difficult to reverse. For example, once a fraudster anonymously picks up cash from a cash-to-cash money transfer, it's usually irretrievable.

"Con artists like payments that are tough to trace and hard for people to reverse," said Jessica Rich, Director of the FTC's Bureau of Consumer Protection. "The FTC's new telemarketing rules ban payment methods that scammers like, but honest telemarketers don't use."

Some people mistakenly believe that the TSR amendment restricts newer technology-based payment methods, such as authorized online payments from a consumer's bank account or the use of digital checks created with smartphones. That's untrue. The FTC took care to draft its amendments to specifically target the ways scammers exploit novel payment methods that reputable telemarketing companies don't use.

In addition to banning these fraud-prone payment methods, the amended TSR expands the existing restrictions on charging advance fees for recovery services to cover losses both in prior telemarketing and non-telemarketing transactions. Often these advanced fees are associated with deceptive telemarketing practices. And the amended rule clarifies that you must include a description of the goods or services purchased when you tape-record a consumer's "express verifiable authorization" of the charges.

The amendments also make it harder to contact consumers on the National DNC Registry. Here's a summary of the major changes:

• If a consumer's number is on the DNC Registry, the revised rule expressly states that sellers or telemarketers have to demonstrate they have an existing business relationship with the person or have the person's express written agreement to get calls.
• The amended TSR illustrates the kind of burdens that would illegally interfere with a consumer's right to be placed on a seller's or telemarketer's entity-specific do not call list. Examples of impermissible burdens include harassing consumers who make such a request, hanging up on them, requiring the consumer to listen to a sales pitch before accepting the request or requiring the consumer to call a different number to submit the request.
• The revised rule specifies that if a seller or telemarketer doesn't get the information needed to place a consumer's number on their entity-specific do not call list, the business is disqualified from the safe harbor for isolated or accidental violations.
• The amended TSR emphasizes that it's illegal for multiple entities to split the cost of accessing the National DNC Registry.

How Can You Remain TSR-Compliant?

To keep your sales and marketing operations TSR-compliant, you may need to review your current policies and procedures, as well as conduct additional training for your employees. Consult with your professional advisers for more detailed information on the TSR. The latest round of changes will generally go into effect 60 days after the amended rule is published in the Federal Register. However, the payment method prohibitions become effective 120 days later.

 

Like business executives, you may have expertise in marketing, production and sales. Yet the short and long-term profitability of your company relies on strategic planning that looks at marketing, production and sales from several different angles.

Successful companies rely on outside business expertise to help with these issues and more. You want to work with a veteran business consultant who knows taxes, capital planning, and other aspects of business operations -- an expert who can give you:

•  CFO-level business advice.
• Interim CFO/Controller/Treasurer services .
• Profit improvement and turnaround services.
• M&A and investment banking services.
• Strategic business plans, forecasts and budgets.
• Balance sheet, debt and capital planning.
• Solutions to complex business problems.

Contact us. We can provide the knowledge of our industry consultants -- as well as the resources of the rest of our staff -- to help your company grow and prosper.

 

The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) extended a wide variety of tax breaks, in some cases making them permanent. Extended breaks include many tax credits — which are particularly valuable because they reduce taxes dollar-for-dollar (compared to deductions, for example, which reduce only the amount of income that’s taxed).

Here are two extended credits that can save businesses taxes on their 2015 returns:

1. The research credit. This credit (also commonly referred to as the “research and development” or “research and experimentation” credit) has been made permanent. It rewards businesses that increase their investments in research. The credit, generally equal to a portion of qualified research expenses, is complicated to calculate, but the tax savings can be substantial.

2. The Work Opportunity credit. This credit has been extended through 2019. It’s available for hiring from certain disadvantaged groups, such as food stamp recipients, ex-felons and veterans who’ve been unemployed for four weeks or more. The maximum credit ranges from $2,400 for most groups to $9,600 for disabled veterans who’ve been unemployed for six months or more.

Want to know if you might qualify for either of these credits? Or what other breaks extended by the PATH Act could save taxes on your 2015 return? Contact us!

The year is quickly drawing to a close, but there’s still time to take steps to reduce your 2015 tax liability — you just must act by December 31:

1. Pay your 2015 property tax bill that’s due in early 2016.
2. Make your January 1 mortgage payment.
3. Incur deductible medical expenses (if your deductible medical expenses for the year already exceed the applicable floor).
4. Pay tuition for academic periods that will begin in January, February or March of 2016 (if it will make you eligible for a tax credit).
5. Donate to your favorite charities.
6. Sell investments at a loss to offset capital gains you’ve recognized this year.
7. Ask your employer if your bonus can be deferred until January.

Keep in mind, however, that in certain situations these strategies might not make sense. For example, if you’ll be subject to the alternative minimum tax this year or be in a higher tax bracket next year, taking some of these steps could have undesirable results.

If you’re unsure whether these steps are right for you, consult us before taking action.

Many valuable tax breaks expired December 31, 2014. For them to be available for 2015, Congress had to pass legislation extending them — which it now has done, with the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), signed into law by the President on December 18. The PATH Act not only revives expired breaks for 2015 but also makes many breaks permanent, generally extends the rest through either 2016 or 2019, and enhances some breaks.

Here is a sampling of extended breaks that may benefit you or your business:

• The deduction for state and local sales taxes in lieu of state and local income taxes (extended permanently),
• Tax-free IRA distributions to charities (extended permanently),
• Bonus depreciation (extended through 2019, but with reduced benefits for 2018 and 2019),
• Enhanced Section 179 expensing (extended permanently and further enhanced beginning in 2016),
• Accelerated depreciation for qualified leasehold-improvement, restaurant and retail improvement property (extended permanently),
• The research tax credit (extended permanently and enhanced beginning in 2016),
• The Work Opportunity credit (extended through 2019 and enhanced beginning in 2016), and
• Various energy-related tax incentives (extended through 2016).

Please contact us for more information on these and other breaks under the PATH Act. Keep in mind that, for you to take maximum advantage of certain extended breaks on your 2015 tax return, quick action may be required.

Action to Consider Taking by Year-End	Potential Benefit
Income Taxes
Realize losses by selling investments that have losses to offset any realized gains.	Use net losses to offset up to a maximum of $3,000 of ordinary income.
Increase itemized deductions (e.g., prepaying property taxes, making charitable contributions, deducting eligible health care expenses) and maximize any flexible spending accounts.	Lower your tax liability.
Defer income to next year.	Postpone resulting tax bill for another year.
Pay federal estimated taxes before Jan. 15, 2016.	Avoid tax penalties.
Portfolio Management
Rebalance your portfolio.	Your investment mix remains in line with your goals, time horizon and risk tolerance.
Consolidate assets.	Update your portfolios more easily.
Hold dividend-paying stocks in your taxable accounts while keeping taxable bonds and CDs in your retirement accounts.	Qualified stock dividends continue to be taxed at the long-term capital gains rate, which means dividends will typically be taxed less than interest from taxable bonds and CDs.
Retirement Planning
Increase pretax contributions to employer retirement plan(s) (e.g., 401(k), 403(b)) up to $18,000 if you’re under 50 and an additional $6,000 if 50 or older. (More options are available for self-employed income.)	Reduce your taxable income in 2015 and grow earnings on a tax-deferred basis.
Contribute up to $5,500 to a Roth or traditional IRA if you’re under 50; $6,500 if you’re 50 or older.	Potential tax deduction for traditional IRA and tax-deferred growth for both IRAs.
Convert a traditional IRA or retirement plan to a Roth.	Pay taxes on converted earnings, but then make tax-free withdrawals after age 59½ or five years, whichever is longer.
Take required minimum distributions for 2015 from traditional IRA and other affected accounts if you’re age 70½ or older. If you reached that age this year, you must make your first withdrawal by April 1, 2016.	Avoid major penalties on IRA earnings.
Set up a defined benefit plan.	Reduce income taxes for high income earners, and grow earnings on a tax-deferred basis.
Estate Planning
Shrink the size of your taxable estate by making separate gifts of up to $14,000 ($28,000 as a married couple who are U.S. citizens) to as many people as you want.	Avoid estate taxes at the state level, which can be applicable at much lower asset levels than federal estate taxes.

Should you have any questions regardng your 2015 year end tax planning, please contact us. Our tax specialists are here to help.