Are you missing a tax refund?

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The IRS announced that an estimated 1 million taxpayers who failed to file a 2013 income tax return may be entitled to unclaimed federal tax refunds totaling more than $1 billion. If you’re one of them, you must file a 2013 return by April 18 if you want to claim refund money. In cases where a tax return wasn’t filed, the law provides most taxpayers with a 3-year window of opportunity for claiming a refund. Failure to file a return within 3 years means the money becomes the property of the U.S. Treasury. Contact us if you didn’t file.

Republicans unveil bill to replace the Affordable Care Act (ACA)

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The “American Health Care Act” would: 1) repeal the individual and employer mandates; 2) abolish income-based subsidies for buying health coverage; 3) provide tax credits for buying insurance, which would be based on age and capped at high incomes; 4) allow insurers to impose a 30% charge for those with a gap between coverage; and 5) continue protecting those with pre-existing conditions and allowing those up to age 26 to remain on their parents’ plans. We’ll provide more details in future posts.

How much can I give to my children without having to pay tax?

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This question gets asked a lot and is often misunderstood by the individual when asking the question. The real question should be “How much can I give to my children without having to file a gift tax return?”

A gift tax return must be filed if an individual gifts an amount over $14,000 per year to another person. However, unless your lifetime gifts exceed the federal estate exclusion, currently 5.49 million, you aren’t likely to pay any tax anyhow. Still, filing a gift tax return can be avoided by spreading the gift out, or by gifting from two individuals to multiple people.

For example, if parents of a married couple want to gift $50,000 to their married daughter for a down payment on a house, the taxpayer can gift the daughter 14,000, the son-in-law 14,000, and the spouse can gift the daughter 14,000 and the son-in-law $8,000 for a $50,000 total non-taxable, non-reportable gift.

All of this may change shortly as a major overhaul of the estate tax, potential elimination, is part of the Trump and Republican tax plans that are likely to be in front of Congress shortly.

Our office will keep you informed on developments, but please consult us if you have additional questions regarding taxation of gifts and your estate plan.

Filing deadline rapidly approaching for flow-through entities

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The federal income tax filing deadline for calendar-year partnerships, S corporations and limited liability companies (LLCs) treated as partnerships or S corporations for tax purposes is March 15. While this deadline is nothing new for S corporation returns, it’s earlier than previous years for partnership returns.

In addition to providing continued funding for federal transportation projects, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 changed the due dates for several types of tax and information returns, including partnership income tax returns. The revised due dates are generally effective for tax years beginning after December 31, 2015. In other words, they apply to the tax returns for 2016 that are due in 2017.

The new deadlines

The new due date for partnerships with tax years ending on December 31 to file federal income tax returns is March 15. For partnerships with fiscal year ends, tax returns are due the 15th day of the third month after the close of the tax year.

Under prior law, returns for calendar-year partnerships were due April 15. And returns for fiscal-year partnerships were due the 15th day of the fourth month after the close of the fiscal tax year.

One of the primary reasons for moving up the partnership filing deadline was to make it easier for owners to file their personal returns by the April 15 deadline (April 18 in 2017 because of a weekend and a Washington, D.C., holiday). After all, partnership (and S corporation) income flows through to the owners. The new date should allow owners to use the information contained in the partnership forms to file their personal returns.

Extension deadlines

If you haven’t filed your partnership or S corporation return yet, you may be thinking about an extension. Under the new law, the maximum extension for calendar-year partnerships is six months (until September 15). This is up from five months under prior law. So the extension deadline doesn’t change — only the length of the extension. The extension deadline for calendar-year S corporations also remains at September 15. But you must file for the extension by March 15.

Keep in mind that, to avoid potential interest and penalties, you still must (with a few exceptions) pay any tax due by the unextended deadline. There may not be any tax liability from the partnership or S corporation return. But if filing for an extension for the entity return causes you to also have to file an extension for your personal return, you need to keep this in mind related to the individual tax return April 18 deadline.

Filing for an extension can be tax-smart if you’re missing critical documents or you face unexpected life events that prevent you from devoting sufficient time to your return right now. Please contact us if you need help or have questions about the filing deadlines that apply to you or avoiding interest and penalties.