Seward Location: 402-643-4557 | Osceola Location: 402-747-3381 ryan@gbecpa.com

Tax Tips

Tax Law Changes for Business and Farm

The new tax law has several provisions with multiple changes.

One area of significant change is for businesses and farms. There is a new 20 percent deduction for these pass-through entities.

As always, this message is a general education tool. For specific instances of how the tax law change may affect you and how to maximize your deduction, please schedule a meeting with your GBE advisor.

Terminology
Our accountants have been preparing for these tax law changes for some time now. Which means we are already using acronyms and descriptions in our day-to-day language. To catch you up to speed, here are a few terms to know:

  • The Tax Cuts and Jobs Act (TCJA) – this is a reference to the new tax law package passed in December of 2017 which went into effect on January 1, 2018
  • 199A – this is a reference to the new 20 percent deduction for businesses and farms (as allowed by Section 199A of the Internal Revenue Code)
  • QBI – stands for Qualified Business Income
  • QBID – this is also a reference to the new 20 percent deduction for businesses and farms based on profits (stands for QBI Deduction)

Who is Eligible for the QBI Deduction?
NOT employees. NOT C corporations. However, if you own a qualified trade or business operated directly or through a pass-through entity you may qualify for the deduction. Eligible taxpayers may be entitled to a deduction of up to 20 percent of QBI from a domestic business operated as a sole proprietorship, farm, partnership, S corporation, trust or estate.

Limitations
Deduction is limited to profit – thus showing a business or farm loss will not qualify you for a QBI deduction.

Additionally, for taxpayers with taxable income that exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers, the deduction is subject to limitations such as the type of trade or business, the taxpayer’s taxable income, the amount of W-2 wages paid by the trade or business, and the acquisition of qualified property held by the trade or business.

The QBI deduction is set to expire in 2026.

QBID is a Federal deduction only and is not recognized by most state tax laws. (top of page 5 of the report)

I’m Still Confused. Can You Summarize?
Generally speaking, if your business or farm has a profit in tax years 2018 through 2025 you will likely receive a new, favorable, Federal tax deduction. This deduction is extremely complex and time consuming to compute. There may be changes you need to make before the year is over to maximize your deduction.

Tax changes have arrived. The time to begin planning is now.

October 2018 | Tax Law Changes for Itemizing

GBE Clients,

The Tax Cuts and Jobs Act (TCJA) has several provisions with multiple changes. For example, the standard deduction has increased while at the same time the deduction for exemptions (dependents) has been eliminated entirely.

One area of significant change is within itemized deductions.

As always, this email is a general education tool. For specific instances of how the tax law change may affect you, please schedule a meeting with your GBE advisor.

Itemize No More
With the standard deduction essentially double the previous amount, many of you may no longer be itemizing deductions. Continue to send us ALL of your tax information, as in the past, and we will utilize the strategy to save you the most tax dollars.

Medical Expenses
Still allowed if over 7.5% of AGI (10.0% of AGI starting in 2019).

State and Local Taxes
Deduction limited to $10,000. Previously no limit. This is a significant change! However, great news for farmers, landlords, and business owners – business property and real estate taxes can continue to be deducted without limitation.

Home Equity Loan Interest
HELOC deductions still allowed but only if used for existing home remodel or improvement. Deduction no longer allowed if HELOC used to purchase a car, for example.

Charitable Deductions
Increased allowable amount from 50% to 60% of AGI. A great change for some of our extremely charitable clients! But as a reminder, for those over 70 ½ it is still more beneficial to donate from your IRA through qualified charitable distributions. Contact your advisor for details.

Miscellaneous Deductions
Eliminated. This is a significant change! We are no longer allowed to deduct unreimbursed employee expenses, investment management fees, safe deposit box charges, or tax preparation costs. This may cause major negative tax effects for church workers, transportation industry employees, and anyone else with a large amount of unreimbursed or partially reimbursed mileage.

Tax changes have arrived. The time to begin planning is now.

September 2018 | Changing Employers

Dear Clients,

As a part of our ongoing relationship, we find it important to keep our files up-to-date with your most recent employer information. Job changes often create income and tax withholding changes. These adjustments could have a significant impact on your tax liability.

Let your GBE advisor know about employment changes and help us identify any concerns you might have.

Employer Information
If you or your spouse changed FULL-TIME jobs since January 1st, please help us update your file with the following information:

  • Previous employer’s name.
    • Did you participate in the retirement plan? (Yes, No, Not applicable)
  • New employer’s name and address
    • What did you enter on the new W-4? (Single/Married; Number of exemptions)
    • Are you participating in the retirement plan? (Yes, No, Not applicable)
    • Are there any financial questions or concerns you have regarding your new employment?

If we have additional questions someone from our office will contact you directly.

Thank you for your time!

August 2018 | Important Papers After a Death

Valued Clients,

When a death occurs in the family it is important to realize your attorney AND your accountant will play a vital role in administering and eventually closing the decedent’s financial affairs. The first step is to contact these professionals.

The next step is to locate paperwork. Below is a list of document copies often needed to settle an estate or trust.

Assets/Debts

  • Account statements – Including bank, investment, retirement, and annuity accounts. Attempt to obtain the most recent copy possible.
  • Life insurance policies
  • Beneficiary designations (particularly for retirement and IRA accounts)
  • Deeds for real estate and titles for automobiles
  • Bond certificates
  • Loan balances

Contracts/Will/Trusts

  • Loans, leases, and any applicable nuptial agreements
  • Last will and testament with any applicable codicils
  • Revocable living trust with any applicable amendments

Bills
Copies of bills are necessary for multiple reasons including tax purposes and identifying how they are to be paid going forward. You may need to open an estate or trust checking account to begin handling these expenses (consult advisor/attorney).

  • Utilities
  • Phone
  • Credit card
  • Mortgage
  • Insurance
  • Real estate tax
  • Medical
  • Funeral
  • Legal/Accounting

Other Documents

  • Personal income tax returns (three most recent years)
  • Death certificates – These should be originals and we recommend ordering at least ten.

Business Documents
If the decedent owned or partnered in any business ventures or rental properties, documents needed may include:

  • Corporate, LLC, or partnership documents
  • Account statements
  • Contracts, titles, licenses
  • Tax returns (for one to three years when applicable)

This message did not cover when probate may be required, who is responsible for a decedent’s debts, and tax ramifications of receiving an inheritance. For these and other questions please contact your GBE advisor!

July 2018 | Housing Allowance Clients

Housing Allowance in Court
A brief reminder the US Court of Appeals for the Seventh Circuit will listen to oral arguments from various Christian groups in appeal of the circuit’s original ruling of housing as unconstitutional. For now we ask you proceed as usual. We’ll keep you updated on any changes that come to our attention.

Receipts/Bills
Keep all of your bills and receipts in a tax folder…call it 2018 Housing Expenses. Your tax preparer does not need to see these receipts (that’s what the spreadsheet is for). Hold onto them in case the IRS asks for further documentation.

Housing Allowance Spreadsheet
We suggest you track all of your housing expenses in four categories. You might want to download the Excel spreadsheet below, if you’re comfortable doing so. The categories are Mortgage/Rent, Housing Items, Utilities, Phone/Internet.
Download Excel spreadsheet

Enter checks, cash, and credit card transactions. Credit cards are considered same as cash for tax purposes, no matter when you actually pay off the card. So a credit card swipe for furniture bought on December 31st counts in the current tax year, even though the bill won’t be paid until January.

Housing %
As a reminder, you should be claiming at least 80% housing allowance with the school/church that hired you. Most schools/churches have a default of 50%
(NOTE: Parsonage clients ignore housing % as this does not apply to you).

Unreimbursed Expenses
This item was removed under current tax law. Will be applicable again in the year 2025.

Summary

  • Change housing allowance to at least 80% (parsonage ignore)
  • Track housing expenses
    • Save housing receipts and bills in a tax folder (save for 7 years)
    • Use spreadsheet to provide to your tax preparer (or similar document if you prefer your own method)
  • Ask questions anytime

Required tax information

June 2018 | Financial Pitfalls

Putting kids above self
If you choose to make financial sacrifices in order to help college or even adult children, you may be doing so at the end of your working life and the beginning of theirs. That does not make sense since the kids have more time to make up lost ground than you. The correct choice is to save money towards a secure retirement. An emotionally and financially stable parent will mean more to a grown child than one working beyond age or health limitations.

Buying insurance when investing would have been wiser
Purchasing whole life insurance or long-term care insurance as an investment tool can be flawed and even dangerous. The premiums may come at a high cost and the benefits are only ‘successful’ if you are unable to care for yourself or are deceased. An alternative plan is to invest in yourself and your future. The investment belongs to you (not a company) and the long-term growth can often outpace the payout of insurance.

Not caring for your health
Nothing is as important as health. This truth seems to only come to us when we are sick. While we believe in hard work, it is also true that any recurring task requiring you to sacrifice physical well-being is not worth it. Attempt frequent exercise even if only in short increments. Make better decisions, more often.

Utilize appropriate health, disability, and term-life insurance, but remember to consult your GBE advisor to assist with these and other decisions to ensure you’re making wise choices for your family!

May 2018 | Notice to Pay Letter

IRS Demanding Payment? Discuss with Your Accountant First
This time of year many of you, our valued clients, receive notice letters from the IRS or the State Department of Revenue. The notice letters encourage you to write a check for unpaid tax, penalty, and interest from a previous tax year.

In some cases, we’ve found these letters to be unclear or incorrect. With a simple response message or phone call from our office, the notice to pay could be reduced or forgiven entirely.

Please Let Us Know
There have been a number of occasions where a client paid the notice without consulting our office. This may have been done out of fear that the IRS will start hunting them down if the notice is not paid on time. We’ve found over the years it may make sense for us to respond to the notice before it has been paid.

We ask our clients to send us a copy of the letter or bring it to our attention before making any payment. After a brief examination, we should be able to assess whether the tax and penalty are reasonable or unwarranted. Please do not pay these notices without a review from our office first!

Common IRS Notices – Be Not Afraid!

IRS notices cover specific issues about an account or tax return. Here is a list of some common IRS notices (there are more than 100) and the reasons they are issued.

CP Number Reason
CP12 The IRS made changes to correct a miscalculation on a return.
CP14 First notice that a balance is due.
CP23 Estimated tax payment discrepancy.
CP31 A refund check was returned to the IRS. Need to update address.
CP42 The amount of a refund has changed because the IRS used it to pay a spouse’s past due tax debt.
CP49 All or part of a refund was used to pay a tax debt.
CP-90/ CP-297 Final notice — notice of intent to levy and notice of the taxpayer’s right to a hearing.
CP 161 Request for payment or notice of unpaid balance.
CP 501 First reminder notice that there is a balance due.
CP 503 Second reminder notice that there is a balance due.
CP 504 Final balance due notice. If amount is not paid immediately, the IRS will seize (levy) a state tax refund and search for other assets to levy.
CP 523 Notice of default on installment agreement and imminent seizure (levy) of assets.
CP 2000 Notice of proposed adjustment for underpayment or overpayment.

April 2018 | Form 5498

If you have money invested in an Individual Retirement Account you will be receiving a Form 5498 from TD Ameritrade or your stock brokerage firm in the mail the next 2-4 weeks.

What is it?
Form 5498 is information sent to the IRS by the trustees of Traditional, Roth, SEP, and SIMPLE IRAs.

What information does it provide?
Generally, it is used to document the year’s IRA contributions, rollover contributions, IRA conversions, and the fair market value of IRA accounts.

Does this affect my previous year’s tax return?
Usually it does not. If contribution information provided on the 5498 accurately reflects amounts provided on your tax return, there are no changes needed to last year’s taxes.

Why am I receiving it so late?
As you may know, IRA contributions can be made through the April 15th tax filing deadline each year. It takes time for the trustee to gather this information and report it to the IRS and IRA account holders. Therefore, Form 5498 cannot be sent until May or June.

What should I do with the form?
If the contribution information does not match your tax return then notify your tax preparer immediately! If the information matches, simply keep the document with your tax return and other supporting documents.

Please Note: You may also receive Form 5498-SA which reports similar information to the IRS regarding your H.S.A. account. Make sure the information matches your tax return and keep the form with your other tax documents.

March 2018 | Clients Who Are Under A Siege Of Student Loan Debt

PSLF
If you are employed by a government or not-for-profit organization, you may be able to receive student loan forgiveness under the
Public Service Loan Forgiveness Program.

Employment Certification Form
Many of you are already enrolled in the PSLF program under FedLoan Servicing. In order to ensure you’re on track to receive forgiveness, you should continue to submit the Employment Certification form both annually and every time you switch employers.

This is your annual reminder to submit the form! If you have any questions contact your GBE advisor.

Thank you and we look forward to having a great tax season.

February 2018 | Gathering Tax Documents

If we could give one piece of advice to our clients before heading into tax season it would be – REVIEW YOUR TAX ORGANIZER IN DETAIL.

Organizers have been previously mailed and emailed. By using the organizer (or by using last year’s tax return) you can identify most of the documents we’ll need to prepare your taxes this year.

Problem Areas

  • Student loan interest. Most lenders no longer mail this document to you. Instead, they make you login online to find the 1098-E document that we need in order to complete your taxes.
  • Tuition and books. If someone in your family is taking college credit classes at a post-secondary institution there is a 1098-T issued for their tuition expenses. We must see a copy of the 1098-T this year in order to calculate your college tax deductions. Don’t forget to add up those expensive books purchased during the year (our clients’ most frequent missing item of last tax season!).
  • Charitable donations. If you donate to multiple causes it may be best to tally all of your donations for the year so your accountant doesn’t spend extra time adding up a shoebox of receipts.
  • Car taxes. This itemized deduction is often forgot. In Nebraska, these taxes are found on your vehicle registration ‘pink sheet’ under MTR VEH TAX or Motor Vehicle Tax.
  • Real estate taxes. NEW THIS YEAR: As part of 2017 year-end tax planning several of you paid real estate taxes ahead of December 31st. This will not show up on your Form 1098 or escrow statement. Remember to tell your GBE advisor about this payment…or the deduction may be lost forever.

Try Your Best the First Time
Not having all documents to us the first time can increase your accounting fee. Plan ahead, review the organizer, and identify all of those documents necessary at tax time.

Thanks for your business! We’ll see you soon.

January 2018 | What the Tax Cuts and Jobs Act means for you.

Congress is enacting the biggest tax reform law in thirty years, one that will make fundamental changes in the way you, your family and your business calculate your federal income tax bill, and the amount of federal tax you will pay. Since most of the changes will go into effect next year, there’s still a narrow window of time before year-end to soften or avoid the impact of crackdowns and to best position yourself for the tax breaks that may be heading your way. Here’s a quick rundown of last-minute moves you should think about making.

Lower tax rates coming
The Tax Cuts and Jobs Act will reduce tax rates for many taxpayers, effective for the 2018 tax year. Additionally, many businesses, including those operated as pass-throughs, such as partnerships, may see their tax bills cut. The general plan of action to take advantage of lower tax rates next year is to defer income into next year.

Disappearing or reduced deductions/larger standard deduction
Beginning next year, the Tax Cuts and Jobs Act suspends or reduces many popular tax deductions in exchange for a larger standard deduction. Here’s what you can do about this right now:

  • Individuals starting in 2018 will only be able to claim an itemized deduction of up to $10,000 for the total of state & local property and income taxes. To avoid this limitation, you may consider paying your real estate taxes on your personal residence for 2017 no later than Dec. 31, 2017, rather than on the 2018 due date. Also, you may consider paying your 4th quarter state estimate payments and any anticipated state tax liability related to your 2017 state tax return by Dec. 31, 2017.
  • The itemized deduction for charitable contributions won’t be chopped. But because most other itemized deductions will be eliminated in exchange for a larger standard deduction (e.g., $24,000 for joint filers and $12,000 for single), charitable contributions after 2017 may not yield a tax benefit for many because they won’t be able to itemize deductions. If you think you will fall in this category, consider accelerating some charitable giving by Dec. 31, 2017.
  • If you won’t be able to itemize deductions after this year, but will be able to do so this year, consider accelerating “discretionary” medical expenses into this year (vision, dental, etc.).
  • Other itemized deductions to consider paying by Dec. 31, 2017:
    • Make an end-of-year payment on your home mortgage to pay off any accrued interest.

Please keep in mind that we’ve described only some of the year-end moves that should be considered in light of the new tax law. If you would like more details about any aspect of how the new law may affect you, please do not hesitate to contact your GBE advisor.

December 2017 | Donation Deduction

Based on pending tax reform this may be the last chance for some of you to itemize your deductions…maybe ever! The time for tax-effective charitable giving is now. Consult your GBE advisor for more details.

Donation Facts

  • If you donate using credit card in December, but payoff the statement in January, you still receive the deduction for December
  • If you mail a donation in December, but the check isn’t received until January, you still receive the deduction for December
  • You may not deduct hours of labor
    • Example: Mowing for 10 hours at the local church is certainly a worthy deed, but is not tax deductible
  • You may not deduct if a benefit was received
    • Example: You bought a $100 gift basket at a school charity auction. If the goods inside the basket are valued at $80 then a $20 deduction is allowed. You may only deduct to the extent the amount exceeds the value received.

Documentation for Monetary Donations
For donations under $250 you must have a copy of the cancelled check or a receipt from the charity. For donations of $250 or more you must receive a written receipt from the charity, with name, date, amount, and a statement that no goods or services were provided by the charity in return for the donation.

Donation Ideas
We appreciate and support many non-profit entities. Some of our favorites include:

Concordia University, Nebraska brings a Christ-centered learning environment to higher education.
https://www.cune.edu/giving/

Mental Health Association of Nebraska is a completely peer operated, participant driven organization that provides a variety of different programs available to individuals with mental health and/or substance use issues.
https://mha-ne.org

The Seward Library Foundation is dedicated to enhancing the facilities, services and programs of the Seward Memorial Library beyond what is currently provided by City tax dollars.
https://www.sewardlibraryfoundation.org/donate/

Non-Cash
Located at 504 Seward St in Seward, Nebraska, the Et Cetera Thrift Shop provides a local option for your non-cash and goodwill donation items.

Remember
The last month of the year is often a good time to plan final charitable contributions. The timing is helpful because you’re able to have a better estimate of income for the year compared to your donations/goals. It’s also helpful because the deduction, should you itemize, will be realized on your tax return just a few months from now.

Thanks for your time and have a great holiday season. We’ll see you soon.

November 2017 | H.S.A. Accounts Information

We received an overwhelming amount of questions regarding H.S.A. accounts this year. Though we can’t answer all of them in one message, we have provided basic information for you below.

Is an H.S.A. the right move for me?

Every taxpayer’s situation is different. Generically speaking, if you qualify, the answer is likely yes. Especially if your employer is offering this type of benefit; then your H.S.A. is treated as a pre-tax deduction which may save you on federal income taxes, state income taxes, and FICA payroll taxes.

What are the benefits of an H.S.A.?

You may enjoy several benefits from having an HSA.

  • You can claim a tax deduction for contributions you make to your HSA even if you don’t itemize your deductions on Schedule A
  • Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income
  • The contributions remain in your account until you use them
  • The interest or other earnings on the assets in the account are tax free
  • Distributions may be tax free if you pay for qualified medical expenses (see Qualified medical expenses later)
  • An HSA is “portable” meaning it stays with you if you change employers or leave the work force and does not have the “use it or lose it” time restrictions applicable to an FSA (Flex Spending Account)

How do I qualify for an H.S.A.?

To be an eligible individual and qualify for an HSA, you must meet the following requirements.

  • You are covered under a high deductible health plan (HDHP); ask a GBE advisor for details
  • You are not enrolled in Medicare
  • You can’t be claimed as a dependent on someone else’s tax return

Tax-free distributions from an HSA

You generally will pay medical expenses during the year without being reimbursed by your HDHP until you reach the annual deductible.

  • You may pay these medical expenses directly via H.S.A. check or H.S.A. debit card.
  • You may also pay these expenses personally and then draft a reimbursement check, to yourself, from your HSA.
  • You may only receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA.
  • If you receive distributions for reasons other than medical, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax.
  • You don’t have to make distributions from your HSA each year.

Qualified medical expenses

Qualified medical expenses are those expenses that generally would qualify for the medical and dental expenses deduction. These are explained in Pub. 502, Medical and Dental Expenses.

  • Non-prescription medicines (other than insulin) aren’t considered qualified medical expenses for HSA purposes.
  • A medicine or drug will be a qualified medical expense for HSA purposes only if the medicine or drug:
    • Requires a prescription
    • Is available without a prescription (an over-the-counter medicine or drug) AND you get a prescription for it
    • Insulin
  • Again, for HSA purposes, expenses incurred before you establish your HSA aren’t qualified medical expenses.
  • Qualified medical expenses are those incurred by the following persons
    • You and your spouse
    • All dependents you claim on your tax return
  • You cannot treat insurance premiums (health insurance) as qualified medical expenses unless the premiums are for:
    • Long-term care insurance
    • Health care continuation coverage (such as COBRA)
    • Medicare and other health care coverage if you are 65 or older (other than premiums for a Medicare supplemental policy, such as Medigap)

This may not answer all of your questions regarding HSA, FSA, or Dependent Care (daycare) accounts. For other detailed inquiries please contact your GBE advisor.

October 2017 | Business and Farm Expenses

At tax time we like to see receipts for vehicles, large assets, or items financed through a loan for your business or farm.

We rarely request any other receipts; for the sake of time and efficiency we generally focus on your summarized numbers. But we feel it is important for you to know how to substantiate your business write-offs in the case of an IRS audit.

Mileage
This issue has been taken to Tax Court many times and the IRS has been successful in disallowing travel deductions which do not have complete and proper substantiation. The IRS requires taxpayers to retain specific documentation to substantiate the business use of a personal vehicle under Code Section 274(d)(4). A deduction is not allowed unless the taxpayer properly documents:

  1. The amount of the expense (the number of miles driven)
  2. The time and place of travel
  3. The business purpose of the travel

We have also found odometer readings which correspond to the mileage listed on oil change invoices to be helpful in providing substantiation support.

Business and Farm Deductions
The chart below, from IRS Publication 463, describes how to prove certain business expenses by category:

Business Expenses

In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct including advertising, dues, training costs, internet, phone, legal and professional fees, tax preparation fees, supplies, rent, interest, taxes, licenses, utilities and more. You must be able to document the amount, time, place, and business purpose of each of these items in order to prove the deduction. So remember to save those receipts!

For more information see Publication 535 or contact your professional advisor.

September 2017 | Making Your CPA More Valuable to You

GBE Clients,

Previously, we found an interesting article online. The suggestions are still valid today. The author describes five ways to make a CPA more valuable to you. They are:

• Build a relationship
• Be organized
• Don’t make assumptions
• Consult your CPA in making decisions (throughout the year)
• Don’t lie

Information and details can be found by reading the article (here). If this email triggers any questions, please let us know! Thanks for your time.

August 2017 | Estate Planning

We often hear questions about estate planning. Namely, does GBE offer this service? The answer is yes! While the bulk of estate documents are completed by an attorney, many estate and other tax planning considerations should be discussed with your accountant. Below is a brief overview of some estate and inheritance concepts. You can view more information at https://gbecpa.com/estate-planning and, as always, please contact us for more information regarding specific questions.

Overview
Estate planning is the process by which you manage and preserve your assets while you are alive, and conserve and control where they go after your death.

Estate planning can be as simple as making a will, determining how to invest your assets, purchasing insurance, or it can be quite complicated—it all depends on a number of factors including age, health, wealth, lifestyle, life stage and goals.

Estate Planning Tools To Consider

  • DURABLE POWER OF ATTORNEY
    A durable power of attorney allows you to name someone to manage your property in case you become incapacitated
  • ADVANCED MEDICAL DIRECTIVE
    An advanced medical directive includes living wills, durable power of attorney for health care, and a Do Not Resuscitate order.
  • WILL
    A will is a legal document that designates how you want your money and property (your estate) to be distributed after your death. It also can contain your wishes regarding funeral or burial. And it also allows you to name a guardian for your minor children in the event you and your spouse die simultaneously.
  • TRUST
    A trust is a written agreement that specifies who will manage the assets placed in the trust during your lifetime and in the event of your death. It allows you to transfer legal title of assets. In some cases this can be more cost-effective than a will.

Terminology

  • ESTATE
    Your estate is made up of your: 1) taxable estate, which is the sum total of your financial interests, minus your debts; and 2) probate estate, which includes those assets covered in your will.
  • ESTATE TAX
    Federal taxes that are owed nine months after death on the net value of the taxable estate, if your estate is worth more than a specified amount (currently over $5 million per person).
  • EXECUTOR
    The person you appoint in your will to settle your estate—including paying bills and taxes, supervising your assets and making sure your wishes are carried out.
  • TRUSTEE
    A trustee is the person or group who controls the assets in a trust, signs for and approves all financial transactions, etc. Before you die, the trustee can be you.
  • PRINCIPAL
    The principal is made up of the assets of the trust. Income, on the other hand, is money derived from some of the principal assets.
  • BENEFICIARY
    A person or organization designated to receive some or all of your assets upon your death. You can name as many beneficiaries as you want.
  • PROBATE
    A court procedure that passes assets from a deceased person to his or her beneficiaries. Without a court order signed by a judge, beneficiaries cannot take ownership of these assets, even if they are named in a will.

July 2017 | Buying and Selling Property

We see many complicated tax transactions every year. One group of transactions that are particularly complex are property transactions. The buying and selling of land, buildings, and all other real estate has several tax implications for both the buyer and seller.

Closing Disclosure
Whether it’s for a personal home, farm land, or a business building – real estate transactions require a settlement statement, often called a Closing Disclosure. Refinancing your mortgage also requires a Closing Disclosure.

This document is important. It shares a lot of information your tax preparer will likely need in order to find proper tax deductions and file an accurate return. We’ll share an example of this document on our website next week.

Please Note: Some property transactions are documented on an American Land Title Association (ALTA) statement or similar settlement statement.

File or Copy
Keep this document in a safe place where you can easily access it at tax time. Don’t trust your organization skills? Bring the disclosure to our office or mail us a copy. We would be glad to store it for you until tax season arrives.

Have You Moved Since Tax Season?
Reply to this email with your new address so we may update our records.

If you have questions, please let us know.

Closing Disclosure

June 2017 | Financial Mistakes

We see a LOT of financial mistakes each and every year. We have the knowledge to help you avoid these pitfalls. Often the issue is not known to us until tax time…when it is too late.

So to help you stay out of big problems this year, here is a list of tax and financial lessons to consider now:

Changing Jobs/Old 401k
Did you know our firm is licensed to handle your retirement investments? Our depth of service and expertise in retirement income planning is unmatched. An advisor who understands your investments, goals, and taxes…it just makes sense!

Whether you are 30 years old or age 70, do NOT cash in your retirement in a lump sum payout. The financial and tax consequences are enormous. A common example we see is cashing in retirement funds to purchase or payoff a home or car. This can cost clients up to 40% in lump-sum taxes when, currently, interest rates are below 4%. Please, please, please consult your GBE advisor first.

Missing Tax Document
“I forgot to give you a 1099-INT from the bank, but it was only $11. No big deal.”

No big deal can become a huge deal. When missing a document, many times the IRS will also automatically disallow items such as education credits, earned income credits, and adoption credits. The missing $11 will now cost you a $5,000 tax due notice from the government. Which means you’ll have to pay your accountant to help fight it. This takes time and energy. It is a big deal. Don’t forget to provide us with all of your tax documents the first time.

Failure to Communicate
If you bring an issue to our attention, we might be able to help with a solution. Before making a big decision it may be wise to ask us first. Items include:

  • IRS and state tax letters: You may not owe what the letter says!
  • Selling farmland or rental property: What are the tax consequences? Any estate or inheritance taxes to consider?
  • Buying equipment: Let’s find the right time for a purchase.
  • Saving for children’s college: How much? What kind of account makes the most sense?
  • Gifting to charity: Finding a common sense approach to maximize tax benefits.

Let’s avoid the big mistakes this year!

May 2017 | Thank You!

Whether you have been with us for over twenty years or just started working with our firm this year – we want to take a moment and say thank you.

Thank you so much for the opportunity to serve you. Thank you for trusting us with your taxes, investments, bookkeeping, payroll, planning, and other financial needs. It has been our pleasure to assist you this tax season and we look forward to many more.

Working with you has been a true blessing and we simply cannot thank you enough!! Have a great summer and we hope to see you again soon.

April 2017 | Retirement Contributions

The deadline for contributions to your Traditional IRA, Roth IRA, SEP IRA and 401k contributions is April 18th. It takes time to process these funds, so it is recommended to complete your individual retirement contributions during the first week of April. If you have any questions, please contact the associates at Gabriel, Burger & Else, CPA.

February 2017 | Identity Theft

Identity theft is a big problem, especially during tax filing season.  Thieves use a technique called “phishing” to try and capture your personal information.  Phishing is the use of fake emails or phone calls to confuse taxpayers into sharing vital information with the thief.

Remember, the IRS does NOT send information to taxpayers through email and does not initiate audits or lawsuits through the phone.  These emails and phone calls seem very real, but they are fake.  Any email “from the IRS” is fake and should be deleted immediately. Any phone call “from the IRS” stating you are being sued for tax penalties is a scam.

Some email scams look like they were sent by a real person from a real school/university and simply ask you to open a pdf file. Delete these emails immediately.

Complaints may be filed with your state’s attorney general (Nebraska’s contact information can be found here – https://ago.nebraska.gov/).

Be wary of anything suspicious. If you have any concerns please let our office know. Thanks and let’s have a great tax season!

IDENTITY THEFT IN THE MAKING: HOW ID IS STOLEN

Common ways to obtain personal information include email or telephone phishing and Dumpster diving. Thieves are looking for “discarded tax returns, bank records, credit card receipts or other records containing personal and financial information” (FS-2008-9 (January 2008)). For example, some taxpayers receive email messages allegedly from the IRS advising them that they are under investigation or have a refund pending. To get the victim to respond, the email may threaten a dire consequence (see Exhibit 1 for a typical phishing message). Often, the recipient is asked to click on a link to access what appears to be—but is not—the legitimate IRS website.

The IRS does not send unsolicited, tax-account related emails to taxpayers and never asks for personal and financial information, including PINs and passwords, via email. The IRS advises that “[s]ince the IRS rarely contacts taxpayers via e-mail, and never about their tax accounts, taxpayers should be cautious about any e-mails that claim to come from the IRS” (FS-2008-9). (People receiving a suspicious email from the IRS are encouraged to report the email by calling the IRS at 800-829-1040 or forwarding the email to phishing@irs.gov; note in Exhibit 1 how the email uses “irs.org” not “irs.gov.”)

Exhibit 1: Sample of Phishing Email

Title/Subject of email: Your Tax Refund Payment Update
[attachment to email is “Refund Form.html”= link to webform]
From:
taxupdates@irs.org

After the last annual calculations of your fiscal activity we have determined that you are eligible to receive a tax refund of $ 826.28

Submit the tax refund request and allow us 3–5 business days in order to process it.

A refund can be delayed for a number of reasons. For example submitting invalid details which we don’t have on record or applying after the deadline.

Download, fill and submit your Tax Refund Form in order to complete the process.

© Copyright 2014. IRS.gov | Internal Revenue Service | United States Department of the Treasury

 

***********************************

January 2017

We appreciate your continued personal referrals of friends, family, co-workers, and neighbors. Because of your trust and faith in us we have been able to meet new people, help many in need of our services, and hire more employees. With your direct word-of-mouth referrals our small business in a small community can continue to thrive.

We Are Still Asking
We’ve found the top reason some clients have not referred our services is because we’ve never asked! So ahead of this coming tax season we are asking for your support. Will you keep us in mind?

You’re Too Busy for More Clients, Right?
We have also discovered a number of clients did not refer our services because they believed we were too busy to help. That’s not the case! We’ve hired more staff and continue to find room to grow.

What Type of Client?
We desire clients who value working directly with a professional group; ranging from complex business owners to small drop off tax returns. We appreciate any client who wants to invest in their future.

What Services?
GBE provides full-scale services from taxes to investments, bookkeeping to payroll, estate planning to retirement preparation. We are independent and objective. We are owned by key team members which makes us stable and interested in your lifelong success. It also means the same team will be working closely with you for a long time.

The Introduction
Mention our name, share our contact info, link our website (www.gbecpa.com), or request a business card. All fine ways to refer us. But we’ve found, if you’re comfortable doing so, receiving the name and contact information of the potential client is the best way to move forward. It ensures an introduction will be made and takes the awkward burden of contact off your shoulders!

Final Note
Referrals can be scary. We get it. There is risk involved on your end. But remember our goal at GBE is to help more people make informed decisions with their taxes and finances.

Thank you! Thank you! We’ll see you soon…

Year End Charitable Giving – Timing Is Everything! | December 2016

Many people procrastinate to the end of December in making charitable gifts. As midnight on December 31st looms, your GBE advisors have been known to receive calls from anxious clients questioning how to make year-end gifts to their favorite charities and be assured of receiving their income tax charitable deduction in the current year. Here are some frequently asked questions we’ve received:

Q. I’m mailing a check to a charity. Does the charity have to receive my check this year to get my charitable deduction?

A. That depends. Mailing via US Postal Service – Under the “mailbox rule,” if you are mailing the check via the US Postal Service the postmark date will be the gift date. The same is true if you are using the US Postal Service for overnight delivery.

Private delivery service – If you are using a private delivery service such as FedEx or UPS, the date the check arrives at the charity is the gift date.

Client Tip – A gift made late in the year should be mailed through the post office, certified or registered mail, return receipt may be requested to establish the delivery date. Merely depositing the envelope in a mailbox or dropping off after post office closing hours on December 31st will result in a gift that cannot be deducted until the new tax year.

Q. There’s no time to mail my check, so I’m going to deliver the check at the charity’s office. Can I take my charitable deduction this year?

A. If you deliver the check to the charity on or before December 31st, you can take your charitable deduction this year.

Client Tip – If you are delivering a check to the charity on or before December 31st, do it during business hours and have someone sign and date when the check was received.

Q. I’m making a gift online to charity using my credit card. If I make the gift on or before December 31st, do I get my charitable deduction this year?

A. Not necessarily. Gifts to charity using a credit card are complete on the transaction posting date. That is the date on the statement showing the name of the charity and when the charge was posted to the cardholder’s account. That could be a day or a few days after the donor initiates the gift, which could extend into the new tax year.

Client Tip – If you are gifting online via credit card give yourself at least three days of leeway and make the gift by December 28th.

Q. It’s December 30th and I’ve instructed my brokerage company to transfer stock (or mutual funds) to charity. Will I get my charitable deduction this year?

A. It depends. When stock or mutual funds are transferred electronically, the gift is complete on the date the shares arrive in the charity’s account. That becomes the gift date. At year-end many brokerage companies are overwhelmed with transactions. Transfers can be delayed such that the shares arrive in the charity’s account in the new tax year.

Q. I’m making a significant gift to a favorite charity this year. Can I use the entire charitable deduction this year, or are there limits to how much I can use? If I can’t use the entire deduction, will I forfeit my deduction?

A. Deductibility is governed by what is commonly referred to as the “30/50 rule.” If you are making gifts of cash to a public charity, you can use the charitable deduction up to 50% of your adjusted gross income in the year of the gift. If you are giving appreciated securities that qualify for long-term capital gain treatment, you can use the charitable deduction up to 30% of your adjusted gross income in the year of the gift. In both cases, if you have any unused charitable deduction you can carry the unused deduction forward for up to the next five tax years, subject to the same 30% or 50% limitation of adjusted gross income each year.

Dependent Care Credit | November 2016

Many parents utilize day care so they can work or look for work. If this applies to you, your costs may qualify for a federal tax credit or may be utilized in a dependent care flex spending account through your employer.

Here are some things to know about the Child and Dependent Care Credit:

About the Credit

1. Care for Qualifying Persons – Your expenses must be for the care of one or more qualifying persons. Your dependent child(ren) under age 13 generally qualify.

2. Work-related Expenses – Your expenses for care must be work-related. In other words, you must pay for the care so you can work or look for work. This rule also applies to your spouse if you file a joint return (see next step for exceptions).

3. Earned Income Required – You must have earned income. Earned income includes wages, salaries and tips. It also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care.

4. Joint Return if Married – Generally, married couples must file a joint return. You can still take the credit, however, if you are legally separated or living apart from your spouse.

5. Type of Care – You may qualify for the credit whether you pay for care at home, at a daycare facility or at a day camp.

6. Credit Amount – The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on your income.

7. Expense Limits – The total expense that you can use in a year is limited. The current limit is $3,000 for one qualifying person or $6,000 for two or more.

8. Certain Care Does Not Qualify – You may not include the cost of certain types of care for the tax credit, including:

  • Overnight camps or summer school tutoring costs.
  • Care provided by your spouse or your child who is under age 19 at the end of the year.
  • Care given by a person you can claim as your dependent.

Recordkeeping

Keep all your receipts and records for when you file taxes next year. You will need the name, address and taxpayer identification number of the care provider. You must report this information when you claim the credit on Form 2441, Child and Dependent Care Expenses.

Flex Spending Account at Work

Special rules apply if you enroll in dependent care benefits from your employer. The limit on this type of account through work is currently $5,000 per family and is often a more tax-efficient way to pay for child care. Be cautious – these plans are designed as a “use it or lose it” account. If your daycare costs might be below $5,000 per year; budgeting account contributions is critical.

Consult your tax advisor for the plan that makes the most sense to your situation.

New FAFSA Filing Date | October 2016

We mentioned in our March Tax Tip that the deadline for FAFSA filing can be as early as March 1st each year. This is no longer true.

FAFSA Deadline – New

Students are now able to submit the FAFSA earlier. Under the current rules you may complete and submit a FAFSA as early as October 1st. For example: Students have been able to file a 2017-18 school year FAFSA since October 1, 2016 using income tax information from 2015.

For other changes and frequently asked questions please visit:

https://studentaid.ed.gov/sa/about/announcements/fafsa-changes

This is a significant and welcomed change from the previous cumbersome FAFSA requirements which often closed the reporting period by March 1st each year.

For more examples use this table as a guide:

 

gbe-cpa-pc

Saving for College | October 2016

Our firm hears this statement A LOT: We want to start saving for our children’s college education. But there are so many options. Where do we start? What a great question. There are many things to consider when saving for college.

Investment Strategy

Our firm considers the use of three primary vehicles when designing a family college savings plan. They are listed in order of priority.

1. Roth Individual Retirement Account (Roth IRA)

When saving for college, Roth IRAs are often the best option.

How can a retirement account be used as a college savings plan? Here’s how:

You may use Roth funds for your dependent child’s education without penalty. For lucky parents whose kids receive full scholarships and other support – you simply continue using it as your tax-free retirement savings! Making Roth IRA a win, win strategy.

Principal balances may be withdrawn anytime for any reason. Earnings may be withdrawn for dependent child’s education (no tax penalty) or at retirement (tax free).

2016 Contribution Limit: $5,500 annually for each person who has a job or is married to a worker; $6,500 annually if 50 or older (some income limitations may apply)

Under the current rules, a married couple may save up to $11,000 per year… more than enough to pitch in for future college expenses.

2. Uniform Transfers to Minors Act (UTMA)

Once you have reached the contribution limit for Roth IRA, the next option is a UTMA. Income from this account is attached to the child’s social security number for tax purposes, but control of the account remains with the parents. Currently, a child is allowed $1,050 of annual investment income tax-free.

When it is time for college, you can use it for kid’s education. If they receive scholarships and don’t need the money, you may withdraw it from their account for any reason and keep what you’ve saved or leave it with the child to take ownership when they reach the age of majority in your state.

2016 Contribution Limit: $14k annually each parent to each child

Under the current rules, a married couple may save up to $28,000 into each child’s UTMA per year.

3. 529 College Savings Plan

Use this after the Roth IRAs and UTMAs have been filled each year. Or use it as a short-term state income tax savings vehicle.

The investment options for these accounts can be limited.

The major downfall of 529’s – they are a “use it or lose it” plan. You pay tax on any amounts not used for dependent child’s education (pay tax on the gains).

2016 Contribution Limit: Unlimited and several states allow up to a $10,000 state income tax deduction annually

Summary

Roth

  • Tax free growth
  • Wide array of investment options
  • Use for dependent child’s higher education
  • Use for retirement

UTMA

  • Currently – $1,050 annual tax free growth
  • Wide array of investment options
  • Use for education
  • Use for anything

529 Plan

  • Tax free growth if 100% of funds used for higher education
  • State income tax savings on contributions (up to $10,000 deduction annually)
  • Limited investment options
  • Must use for education

If your two goals are saving for kid’s college AND your own retirement, the Roth IRA should be your first option since it tackles both of those objectives at the same time!

For detailed discussion on your best option for saving, please contact one of our financial professionals.

Document Retention Guide | September 2016

We often hear the question “How long should I hold onto this document?” To find the answer we enlisted the help of personal financial assistant Suze Orman. Click here

Record Keeping

Keep till warranty expires or can no longer return or exchange

  • Sales Receipts (Unless needed for tax purposes and then keep for 3 years)

What to keep for 1 month

  • ATM Printouts (When you balance your checkbook each month throw out the ATM receipts)

What to keep for 1 year

  • Paycheck Stubs (You can get rid of once you have compared to your W2 & annual social security statement)
  • Utility Bills (You can throw out after one year, unless you’re using these as a deduction like a home office –then you need to keep them for 3 years after you’ve filed that tax return)
  • Cancelled Checks (Unless needed for tax purposes and then you need to keep for 3 years)
  • Credit Card Receipts (Unless needed for tax purposes and then you need to keep for 3 years)
  • Bank Statements (Unless needed for tax purposes and then you need to keep for 3 years)
  • Quarterly Investment Statements (Hold on to until you get your annual statement)

What to keep for 3 years

  • Medical Bills and Cancelled Insurance Policies

What to keep for 7 years

  • Income Tax Returns (Please keep in mind that you can be audited by the IRS for no reason up to three years after you filed a tax return. If you omit 25% of your gross income that goes up to 6 years and if you don’t file a tax return at all, there is no statute of limitations.)
  • Records of Selling a House (Documentation for Capital Gains Tax)
  • Records of Selling a Stock (Documentation for Capital Gains Tax)
  • Receipts, Cancelled Checks and other Documents that Support Income or a Deduction on your Tax Return (Keep 7 years from the date the return was filed or 6 years from the date the tax was paid — whichever is later)
  • Annual Investment Statement (Hold onto 7 years after you sell your investment)
  • Medical Bills (For tax purposes)
  • Records of Satisfied Loans

What to hold while active

  • Contracts
  • Insurance Documents
  • Stock Certificates
  • Property Records
  • Stock Records
  • Records of Pensions and Retirement Plans
  • Property Tax Records
  • Disputed Bills (Keep the bill until the dispute is resolved)
  • Home Improvement Records (Hold for at least 3 years after the due date for the tax return that includes the income or loss on the asset when it’s sold)

Keep Forever*

  • Marriage Licenses
  • Birth Certificates
  • Wills
  • Adoption Papers
  • Death Certificates
  • Records of Paid Mortgages* These documents should be kept in a very safe place, like a safety deposit box.

Non-Cash Donations | August 2016

Every tax season we hear the question: “I took some clothes and kitchen items to Goodwill, can I write that off?”

If you itemize your deductions, that answer is yes.

Valuing Goods

By the time we meet for taxes it may be difficult to remember how many items you donated, the description of the items, and the total value donated for the entire year.  So, we created a spreadsheet to help you track donated goods all year long.

Required Documentation

Non-Cash Donations Not More Than $500
You must keep written acknowledgment for each contribution which should include a description of the property and a statement that “no goods or services were received as a result of your contribution.”

Non-Cash Donations Over $500 But Not Over $5,000
Written acknowledgment PLUS the approximate date and cost of the property (different rules apply if the property was gifted to you).

Non-Cash Donations Over $5,000
Written acknowledgment PLUS a qualified written appraisal is generally required.

Remember to save the Goodwill or thrift store receipts recognizing the date of your donation. This spreadsheet, combined with your donation receipts, should make it easy to record and value your donations.

HUD 1 Refinance — July 2016

We see many complicated tax transactions every year. One group of transactions that are particularly complex are property transactions. The buying and selling of land, buildings, and all other real estate has several tax implications for both the buyer and seller.

Settlement Statement (HUD-1)

Whether it’s for a personal home, farm land, or a business building – real estate transactions require a Settlement Statement, often called a HUD-1. Refinancing your mortgage also requires a HUD-1. This document is important. It shares a lot of information your tax preparer will likely need in order to find proper tax deductions and file an accurate return. You can view an example here (link to the attached document)

File or Copy

Keep this document in a safe place where you can easily access it at tax time. Don’t trust your organizational skills? Bring the HUD-1 to our office or mail us a copy. We would be glad to store it for you until tax season arrives.

Have You Moved Since Tax Season?

Please email or call us with your new address information, so that we can update our records.

Click here to view document.

Form 5498 — June 2016

If you have money invested in an Individual Retirement Account you will be receiving a Form 5498 from TD Ameritrade
or your stock brokerage firm in the mail this week.

What is it?

Form 5498 is information sent to the IRS by the trustees of Traditional, Roth, SEP, and SIMPLE IRAs.

What information does it provide?

Generally, it is used to document the year’s IRA contributions, rollover contributions, IRA conversions, and the fair market value of IRA accounts.

Does this affect my previous year’s tax return?

Usually it does not. If contribution information provided on the 5498 accurately reflects amounts provided on your tax return, there are no changes needed to last year’s taxes.

Why am I receiving it so late?

As you may know, IRA contributions can be made through the April 15th tax filing deadline each year. It takes time for the trustee to gather this information and report it to the IRS and IRA account holders. Therefore, Form 5498 cannot be sent until May or June.

What should I do with the form?

If the contribution information does not match your tax return then notify your tax preparer immediately! If the information matches, simply keep the document with your tax return and other supporting documents.

Please Note: You may also receive Form 5498-SA which reports similar information to the IRS regarding your H.S.A. account. Make sure the information matches your tax return and keep the form with your other tax documents.

Notice to Pay Letter – May 2016

IRS Demanding Payment? Discuss with Your Accountant First

This time of year many of our clients receive notice letters from the IRS or the State Department of Revenue. The notice letters encourage you to write a check for unpaid tax, penalty, and interest from a previous tax year.

In some cases, these letters to be unclear or incorrect. With a simple response message or phone call from our office, the notice to pay could be reduced or forgiven entirely.

Please Let Us Know

There have been a number of occasions where a client paid the notice without consulting our office. This may have been done out of fear that the IRS will start hunting them down if the notice is not paid on time. We’ve found over the years it may make sense for us to respond to the notice before it has been paid.

We ask our clients to send us a copy of the letter or bring it to our attention before making any payment. After a brief examination, we should be able to assess whether the tax and penalty are reasonable or unwarranted. Please do not pay these notices without a review from our office first!

Common IRS Notices – Be Not Afraid!
IRS notices cover specific issues about an account or tax return. Here is a list of some common IRS notices (there are more than 100) and the reasons they are issued.

CP Number Reason
CP12 The IRS made changes to correct a miscalculation on a return.
CP14 First notice that a balance is due.
CP31 A refund check was returned to the IRS. Need to update address.
CP42 The amount of a refund has changed because the IRS used it to pay a spouse’s past due tax debt.
CP49 All or part of a refund was used to pay a tax debt.
CP-90/ CP-297 Final notice — notice of intent to levy and notice of the taxpayer’s right to a hearing.
CP-91/ CP-298 Final notice before levy on Social Security benefits.
CP 161 Request for payment or notice of unpaid balance.
CP 501 First reminder notice that there is a balance due.
CP 503 Second reminder notice that there is a balance due.
CP 504 Final balance due notice. If amount is not paid immediately, the IRS will seize (levy) a state tax refund and search for other assets to levy.
CP 523 Notice of default on installment agreement and imminent seizure (levy) of assets.
CP 2000 Notice of proposed adjustment for underpayment or overpayment.

Contributions – April 2016

Don’t forget that you have until April 15th to make your final Traditional IRA, Roth IRA, SEP IRA, and 401k contributions for this tax year. It usually takes time to process these funds so please make your individual retirement contributions right away!

FAFSA Filers – March 2016

Are you, your spouse, or your dependent child attending a post-secondary college or university? If so, it is likely you’ll have to complete a Free Application for Federal Student Aid (FAFSA) to be submitted to the school.

One requirement to have your FAFSA filed timely is to have your tax return completed. If you have a FAFSA form looming, do not hesitate. Submit your tax information to Gabriel, Burger & Else, CPA, PC right away.

You want to make sure that you file your taxes and FAFSA form before the financial aid deadline. Since institutions set their own deadline, there is no set date. Many institutions have a deadline as early as March 1. Make sure you check with your financial aid administrator to be sure of your deadline.

If you have questions about FAFSA and your tax return, call Gabriel, Burger & Else, CPA, PC today.

1099-G Tax Letters — February 2016

February’s tax tip of the month is all about those pesky 1099-G tax letters you might have received in the mail. If you’ve received this letter from the Nebraska Department of Revenue (or the state tax department where you live), you’re not alone. This tip should help explain what it is and what you should do with it.

Why did I receive this letter?

You likely received this letter because you received a state income tax refund last year.

What should I do with it?

Keep this letter with your other tax documents and bring it with you to your tax appointment. If you have worked with us, you should also know that our office is already tracking this information for you.

Why does the letter say I’m going to pay a penalty?

We really have no idea. You’re not going to pay a penalty, receive a fine, or go to jail. (Not for receiving this reason, anyway!)

If you itemized your federal tax deductions last year, using the state income tax method, you will claim last year’s tax refund as income on your tax return this year. This is normal and expected. As always, don’t hesitate to reach out to the tax experts at Gabriel, Burger & Else, CPA, PC with your tax questions!

Gathering Tax Documents — January 2016

The most important piece of advice you should remember before tax season is review your tax organizer in detail. By using an organizer, or by using last year’s tax return, you can identify most of the tax documents we’ll need to prepare your taxes.

Problem Areas

  • Student loan interest.
    Most lenders no longer mail this document to you. Instead, they make you login online to find the 1098-E document that we need in order to complete your taxes.
  • Tuition and books.
    If someone in your family is taking college credit classes at a post-secondary institution there is a 1098-T issued for their tuition expenses. Don’t forget to add up those expensive books purchased during the year. This was our clients’ most frequently missed item of last tax season!
  • Charitable donations.
    If you donate to multiple causes, it may be best to tally all of your donations for the year so your accountant doesn’t spend extra time adding up a shoebox of receipts.
  • Car taxes.
    This is a nice itemized deduction that is often forgot. In Nebraska, these taxes are found on your vehicle registration ‘pink sheet.’

Try Your Best the First Time

Not having all documents to us the first time can increase your accounting fee. Plan ahead, review the organizer, and identify all of those documents necessary at tax time.

Charitable Donations—December 2015

The last month of the year is often a good time to plan final charitable contributions. The timing is helpful because you’re able to have a better estimate of income for the year compared to your donations/goals. It’s also helpful because the deduction, should you itemize, will be realized on your tax return just a few months from now.

Donation Facts

If you donate using credit card in December, but payoff the statement in January, you still receive the deduction for December

If you mail a donation in December, but the check isn’t received until January, you still receive the deduction for December

You may not deduct hours of labor
Example: Mowing for 10 hours at the local church is certainly a worthy deed, but is not tax deductible

You may not deduct if a benefit was received
Example: You bought a $100 gift basket at a school charity auction. If the goods inside the basket are valued at $80 then a $20 deduction is allowed. You may only deduct to the extent the amount exceeds the value received.

Documentation for Monetary Donations

For donations under $250 you must have a copy of the cancelled check or a receipt from the charity. For donations of $250 or more you must receive a written receipt from the charity, with name, date, amount, and a statement that no goods or services were provided by the charity in return for the donation.

Donation Ideas

We appreciate and support many non-profit entities. Some of our favorites include:

Concordia University, Nebraska brings a Christ-centered learning environment to higher education.
https://www.cune.edu/giving/

Heartfelt Connections is a non-denominational grief support group for parents who have experienced the death of a child. This group is facilitated by qualified volunteers and professionals. They offer support, confidentiality, and promote healthy grieving and recovery. It is a place for parents to share experience, seek information and offer support to each other.
https://heartfeltseward.org/

Memorial Health Care Systems has a charitable foundation. Contributions made to the foundation help ensure medical services are available by providing the resources needed to obtain and maintain state-of-the-art medical equipment and facilities. The foundation’s vision is to ensure excellent health care services remain available in our community.
https://www.mhcs.us/about-us/foundation

Non-Cash

Located at 504 Seward St in Seward, Nebraska, the Et Cetera Thrift Shop provides a local option for your non-cash and goodwill donation items.

Income Tax Review—November 2015

With less than two months left in 2015, we’re in the home-stretch of the year. Now is the time to make sure there are no major surprises come tax time.

Withholdings

Review your pay stub for income and withholdings. Make sure you have made the proper changes to your withholdings that we discussed last tax season. (We’re looking at you, church workers!) If you had a large tax bill last year, this is your reminder to review and ensure that there are no shockers this year.

Business Owners

Are you concerned about major changes to your net income compared to last year? Contact your accountant with a rough idea of year-to-date profits. We can discuss ideas and strategies that can be implemented before the end of the year—and before it’s too late!

Documents

Most tax documents arrive in the mail in early January or February. But you can start to gather other important documents before December 31st. Books for college, donations, business mileage, and other tax receipts can be gathered now instead of waiting for the busyness of the new year.

Charitable Donations

Remember to make your end-of-the-year donations now before time runs out on this tax year. Don’t wait for the holidays when time and money are both thin.

Retirement Saving

Many people wait until the April deadline to make Roth IRA, Traditional IRA and SEP/SIMPLE IRA contributions. Don’t follow the herd. Invest some of your annual contribution now before billions of new dollars flood the market in the spring. Contributing now may give your annual investment a little boost before tax time.

If you have questions about the end of this year and upcoming tax season, we always welcome your calls. Please reach out to our financial advisors at Gabriel, Burger & Else, CPA for help with your unique tax situation.

Residential Energy Tax Credits — October 2015

Last tax year (2014), the federal government extended certain residential energy tax credits. They have not yet extended these credits for 2015, but we believe there is a chance Congress may do so. Thus, we’ve included some educational material to prepare you for potential energy and home improvement credits for the current year. This information can be found in greater detail in IRS Publication 17, Your Federal Income Tax.

Non-business Energy Credit

  • Limited to 10% of amounts paid for certain qualified energy efficiency improvements during the year
  • Lifetime tax credit limit of $500
  • If you claimed the full credit in the past, you are ineligible
  • If you claimed partial credit in the past, you are eligible to fill the rest of your $500 limit
  • If you have not claimed the credit in the past, you are eligible for a tax credit up to $500

Qualified Energy Efficiency Improvements

Please note that each item must meet certain energy specifications (consult your tax preparer) and each item must be new (not used) or improved.

  • Insulation
  • Exterior windows (including skylights)
  • Exterior doors
  • Metal or asphalt roof coatings
  • Electric heat pumps
  • Electric, natural gas, or propane water heaters
  • Energy efficient central air conditioners
  • Furnaces – fueled by natural gas, propane, or oil

Residential Energy Efficient Property

You may also be eligible to take a tax credit of 30% of your costs of qualified solar electric property, solar water heaters, fuel cell property, small wind energy property, or geothermal heat pumps.

For additional information visit https://www.resnet.us/library/home-energy-tax-credits-2015/

Top Five Reasons to Hire a CPA — September 2015

Previously, we found an interesting article online about the benefits of hiring a CPA. These suggestions are still valid today! The author describes five ways to make a CPA more valuable to you. They are:

1) Build a Relationship | Stick with your CPA if you feel comfortable with him or her. By working with the same CPA year after year, they become familiar with your situation and can quickly spot discrepancies or big changes.

2) Be Organized | CPAs are usually paid by the hour. If you have a lot of deductions, consider organizing your information into a spreadsheet with documentation. This could save time and lower your bill.

3) Don’t Make Assumptions | Don’t make assumptions based on your previous year. Incorrect assumptions can often cost you. Trust your CPA to prepare your tax returns.

4) Consult your CPA in Making Decisions (throughout the year) | Consult your CPA when you make big decisions, especially those you think qualify for tax credits or exemptions. Your CPA can advise you on the latest tax laws and help you make a purchase that would qualify.

5) Don’t Lie | Lying to your CPA only hurts you. It might seem embarrassing, but your information is private and your CPA can determine the best way to report your earnings, expenses, and more.

See some examples and more information on why you should hire a CPA by visiting the article here. Please let us know if you have any questions.

Changing Employers — August 2015

The tax tip for August is all about what to do when you’ve changed employers in the middle of the tax year. Gabriel, Burger & Else, CPA, PC makes it a priority to keep up-to-date employer information for all of our clients. It’s important to keep your tax advisor or financial planner updated since a change in employer can sometimes mean a change in income or tax-withholding changes. These adjustments could have a significant impact on your tax liability.

Let us know about your employment changes and help us identify any concerns you might have about your withholdings or your taxes. Fill out our contact form with the following information:

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Previous Employer’s Name

  • Did you participate in a retirement plan? (Yes, No, or Not Applicable)

New Employer’s Name

  • What did you enter on your new W-4? (Single/Married; number of exemptions)
  • Are you participating in a retirement plan? (Yes, No, Not Applicable)
  • Are there any financial questions or concerns you have about your new employment?
  • You can also reach out to us with any other questions you might have about changing employers and your income taxes.