Planning on Using Turbo-Tax This Year? Think Again.

http://www.marketwatch.com/story/when-you-should-hire-a-tax-pro-2016-03-09

 

Due to the anticipated tax reductions from a Trump Administration  and Republican Congress, year end planning and 2016 tax return preparation  will provide significant tax savings opportunities.  Therefore self-preparing your 2016 returns may end up costing you more than you think.        

http://www.hcvt.com/insights-articles-44.html

www.hcvt.com

 

              

         When should you hire a tax pro?

    By                

Published: Apr 18, 2016 8:02 a.m. ET

More than 50 million Americans prepare their own taxes, but that doesn’t mean you should

                                
Bill Pugliano
You probably won’t find this guy entering numbers into Turbo Tax.

                                         By

                                        DanielGoldstein

Personal finance reporter

Of the nearly 151 million individual U.S. income tax returns filed in 2015 for the 2014 tax year, more than 50 million were prepared by individuals — and not tax professionals — a jump of more than 5% over 2014, the IRS says

And that trend appears to be continuing in 2016. So far through April 1 of this year, the IRS says that self-prepared returns are up 3.5% over the same period in 2015, with returns filed by tax professionals falling 3.7%. And many people filing on their own use online tax-prep software.

If you go with a certified public accountant (CPA) or other tax professional, the cost of the return could jump to over $1,000. (A registered tax preparer can do your return but only has limited ability to represent a taxpayer if complications come up, and while CPAs can represent you before the IRS, only the highest tax experts, Enrolled Agents, can actually represent you in tax court. EA’s that aren’t lawyers though have to pass a test administered by the court before they can do so.)

With that in mind, here’s a list of the scenarios when you might be better off seeking a professional:

1. You’re rich: If you’re single and making more than $250,000 — or married and making more than $300,000 jointly — it’s probably time to bring in a tax pro. “Many deductions, credits and exemptions begin phasing out near these levels and tax planning can yield significant results,” says Blake Christian, partner and CPA with the accounting firm of Holthouse, Carlin & Van Trigt LLP in Long Beach, Calif. In addition, beginning in the 2014 tax year, high-income taxpayers may also have to pay a 0.9% additional Medicare tax on wages over $200,000 ($250,000 for joint filers), says Perlman of H&R Block’s Tax Institute.

2. You’re retired: If you’re within a few years of retirement, it’s worth consulting a CPA or a tax professional to maximize retirement funding and evaluate how long your retirement and other funds will last. Retirement to another state or to a foreign country needs to be looked at carefully since there are often numerous state and federal issues, such as mandatory minimum distributions taxability of pensions and other qualified plans, taxability of a home sale, and cost of living and medical issues, says Christian.

3. You’re Elon Musk: Checking with a tax pro when you plan to buy or sell a business often ensures that the company being sold is tidied up and the business can be sold in a tax-efficient manner. A CPA or other tax guru can recommend the most efficient tax structure for the sale of a business or the formation of a business, when assets may need to be removed, when it’s necessary to cut costs, and when employee contracts should be reviewed and updated. If you manufacture or process items in the U.S. — The Domestic Production Activity Deduction can offer significant federal tax savings, Christian said.

4. You’re moving: Whether it involves an intra-state or inter-state move, you’ll probably need the help of an accountant to take advantage of every tax break. “Hundreds of special tax incentive zones, local and federal tax incentives for hiring and investing in specific regions can be secured with proper planning,” says Christian. In addition to filing other states’ returns, you may have to file some type of annual report on business ownership and activities and pay a fee, says Perlman. “Most states have income-allocation rules based on factors such as receipts, payroll, and real estate,” she says. Taxpayers can also generally claim credits in their state of residence for taxes paid in other states, Christian adds.

5. You do business in foreign countries: “Foreign business structures may be taxed differently in the U.S. than you might expect,” says Perlman. “For instance, a foreign corporation may be taxed as a partnership in the U.S.,” she says. In addition, if you are a U.S. citizen or resident, you must report all of your foreign income, even if you’re allowed to exclude all or most of your foreign earned income or you would qualify for a foreign tax credit, she says. Earned income, as well as investment income, have many complex federal and state treatments and planning opportunities, says Christian, including deducting or claiming a credit for taxes paid in other countries.

Even if you only operate in the U.S., but export U.S. manufactured products, you can reap valuable benefits by establishing an Interest-Charge Domestic International Sales Corporation, says Christian.

6. You bought a yacht — or a plane: Big ticket item purchases such as your personal residence, a vacation home, a boat, a high-end car, or a plane should involve a CPA as there are methods for minimizing costs, including sales and use tax, says Christian. Check with a CPA too if life insurance, annuities, or investments are going to be purchased or sold off.

7. You’re planning your estate: Even if you’re under the federal $5.45 million exemption (2016) for estate taxes, it’s worth talking to a tax professional to help with asset protection, since many states have different thresholds and other fees of settling the estate. (probate fees)

“Reviewing how assets will be distributed and may be revalued for tax purposes upon the death of the decedents is critically important with estate taxes lower than combined income tax rates to beneficiaries in certain states,” Christian said in an e-mail. Also, Christian notes that there are annual gift tax exclusions of $14,000 per donor or beneficiary which can allow tax-free transfers without using up your lifetime estate exemption.

8. You’re an Internet millionaire (or on paper): Can you explain the Black-Scholes method of determining the value of your stock options, if you’re lucky enough to get them? If not, check with a tax professional. “Whenever a taxpayer exercises or even holds any company stock options or is getting compensated from an employer with equity or assets other than cash, a CPA should be consulted,” says Christian. “They will never get this right on their own.”

9. You’re Lord of the Manor: Even a simple residential rental property requires extensive record keeping and proper reporting of income and expenses, says H&R Block’s Perlman. “You need to be mindful of special rules involving passive losses, renting of your personal residence or vacation home, and new depreciation rules,” she says. Other issues, such as bonus depreciation, repairs and maintenance rules could also trip you up, says Christian. In addition, if you’re a homeowner, there are dozens of tax breaks available that a tax professional may know about that you don’t.

10. You don’t know the new laws: Did you get an invite to the NIIT? A new (2014) assessment called the net investment income tax (NIIT) of 3.8% may apply to income from dividends, interest, capital gains, and even rental activities. “It’s important to understand when the tax applies (and when it doesn’t) and what strategies may be appropriate to minimize it,” says Perlman. And as the Supreme Court has recognized same-sex marriage and as states comply, couples may file federal tax returns using a married filing status.

 

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