All posts by Nancy McClelland

IRS

IRS Announces Start Date To 2014 Business Tax Season

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After announcing recently that the individual return filing season would begin January 31, the IRS followed it up with a statement that business returns (non-Schedule C or E) will begin being accepted January 13.

(However, I usually recommend waiting a week after filing season opens to file returns, just to make sure any bugs have been worked out on the first line of fire.)

Corporate returns are generally due on March 15, but since that falls on a Saturday this year, the due date for forms 1120, 1120S and 1120-C will be March 17, 2014.  Partnership returns are due April 15, as usual.

IRS Announces Start Date To 2014 Business Tax Season.

Illinois

Illinois Introduces Automatic Retirement Savings Program

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Starting in 2017, Illinois will require businesses with at least 25 employees to offer a retirement plan at work.  Employees will be automatically enrolled in individual retirement accounts, funded through a 3 percent deduction from their paychecks (although they can opt out).

The employers’ administrative burden will be limited to making the payroll deduction, similar to the ones they already take for taxes — employers will not have to help fund the plans themselves.  Costs will be paid by savers, who will be charged up to 0.75% of their balances (a pretty average expense ratio — and not as low as Vanguard’s, who I tend to recommend to clients trying to save for retirement).

Apparently, access to a plan that operates by payroll deduction enormously changes participation, from almost zero to over 50% — even though IRAs are widely available to individuals, easy to set up, and can be simple to fund with automatic bank direct debits.

However, as the article puts it perfectly, “it’s not enough to have a retirement account; you need to get enough money into the account to live on in retirement, and for most Americans, Social Security plus a retirement account funded by 3 percent of wages won’t produce enough savings.”  Still, it’s a step.

Illinois Introduces Automatic Retirement Savings Program, a First for the Nation – NYTimes.com.

Illinois

2015 Illinois income tax rate down 25%

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(Note: there is much speculation about how long this tax cut will last, as the new governor has been vague about short-term tax policy; do not necessarily count on this cut lasting throughout 2015.)

The same 2011 law that hiked state income tax rates by 67 percent kicked into its built-in second phase Thursday with a partial rollback.  Beginning January 1, the tax rate for individuals dropped from 5 percent to 3.75 percent, while for corporations it declined from 7 percent to 5.25 percent.

via Illinois income tax rate falls by 25 percent Jan. 1 – Chicago Tribune.

IRS

Tax Season Opens January 20th

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The IRS just announced that even with the Extenders legislation passing so last-minute, they’ll be able to open the season on-time, as planned, on January 20th.

This means that if you file a paper return before then, it will get held until the 20th, and if you attempt to e-file before then, it will either be held or rejected.

Of course, this won’t affect most of you reading my post, as small business clients usually have to wait until at least February, to make sure they have received all of their info: W-2, 1099 and 1098 forms are not required to be mailed to recipients until January 31st.

Personally, I hold off on e-filing any client returns until February 1st anyway, except in very unusual circumstances, since there are often bugs in the IRS processing software and tax preparation software, and waiting a week or two for these issues to be discovered and resolved is a good practice.

Here’s the IRS announcement: Tax Season Opens As Planned Following Extenders Legislation.

IRS, Tips

Volunteering & Charitable Contributions — what’s deductible, and how?

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I was chatting with wonderful old friend tonight and helping her with some year-end tax advice, when I found out that she had some misconceptions and missing knowledge about how charitable contributions and volunteer deductions work.  I realized she might not be the only one, so here I find myself inspired to spread the word during this time of holiday cheer and giving.

Volunteering — did you know you can deduct 14-cents-per-mile when driving on behalf of a charitable organization during your volunteer work?  For example, if you pick up meals from a soup kitchen and deliver them to folks around your city, you can deduct that mileage as a charitable contribution.  Or if you drive to visit an elderly person for a regular visit as part of a non-profit Eldercare program.  Or if you drive to pick up organic plant seedlings to be sold by a non-profit community garden or a group like Slow Food.  The list goes on!  Just make sure to log the date, location, number of miles, and purpose (same info as for business mile tracking for the standard mileage deduction).

Non-Cash Charitable Contributions — my friend got the wrong idea from her accountant that it’s somehow difficult or inadvisable to deduct $250 or more when giving away old clothing, household items, or other Goodwill/ Salvation Army/ Brown Elephant-type stuff.  Not true!  All it means is that you have to fill out an extra form on your tax return that lists the following: what types of items were donated; the fair market value (how much would the usual consumer buy it for at a thrift store); the date of contribution; the name & address of the donee.  Thing is, you should be keeping this information anyway, even if the donation was under $250.  Only difference is that the IRS requires it to be noted on the tax return for $250 or above.

People often underestimate the value of these used items.  I just use a spreadsheet with columns: ITEM; VALUE; QUANTITY; TOTAL (quantity times value).  Then I add up the TOTAL column.  Easy peasy.  However, I’ve also worked with clients who use the tool “It’s Deductible”, by Intuit which has a free version they use to try to entice you into buying their Turbo Tax product.  But it’s a good tool, worth trying —  https://turbotax.intuit.com/personal-taxes/itsdeductible

Charitable Contributions via cash, check or credit card — Lastly, here’s a nice little list of tips from the IRS on deducting Charitable Contributions.  It’s such a great way to lower your tax bill, and give back to the causes that move you, or to “invest” in your own community.  Don’t forget to check out your charities on http://www.charitynavigator.org to make sure they’re using your dollars efficiently.  Happy Giving!

Eight Tips for Deducting Charitable Contributions.

IRS

Congress Slashes IRS Budget Another 3 Percent

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Because the IRS wasn’t underfunded and overburdened enough.  I personally find it unfair that Congress keeps increasing the IRS’s responsibilities, forcing them to oversee programs that were never part of the deal in the past, but decreases their budget every year.  Who suffers?  Accountants and taxpayers dealing with overworked and undertrained IRS staffers.

Congress Slashes IRS Budget Another 3 Percent.