SMALL BUSINESSES CAN GET IRS PENALTY RELIEF FOR UNFILED RETIREMENT PLAN RETURNS

WASHINGTON — The Internal Revenue Service today encouraged eligible small businesses that did not file certain retirement plan returns to take advantage of a low-cost penalty relief program enabling them to quickly come back into compliance.
The program is designed to help small businesses that may have been unaware of the reporting requirements that apply to their retirement plans.

Small businesses that fail to file required annual retirement plan returns, usually Form 5500-EZ, can face stiff penalties — up to $15,000 per return. However, by filing late returns under this program, eligible filers can avoid these penalties by paying only $500 for each return submitted, up to a maximum of $1,500 per plan. For that reason, program applicants are encouraged to include multiple late returns in a single submission. Find the details on how to participate in Revenue Procedure 2015-32 by calling Advocate Tax Solutions  at 888-737-0200 

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and speaking with a tax consultant on your eligibility.
The program is generally open to small businesses with plans covering a 100 percent owner or the partners in a business partnership, and the owner’s or partner’s spouse (but no other participants), and certain foreign plans. Those who have already been assessed a penalty for late filings are not eligible.
The Department of Labor offers a similar relief program for businesses with retirement plans that include employees known as the Delinquent Filer Voluntary Compliance Program.
Started as a one-year pilot, the IRS program was made permanent in May 2015. The IRS has received about 12,000 late returns since the pilot program began in June 2014.
The IRS reminds retirement plan sponsors and administrators that in most cases, a return must be filed each year for the plan by the end of the seventh month following the close of the plan year. For plans that operate on a calendar-year basis, as most do, this means the 2014 return is due on July 31, 2015.

Top 10 Worst States for Taxes

Now that tax season has arrived, we are forced to realize how much we pay to our state governments. As April approaches, it’s good to access your overall tax bite and how it’s affected by where you live. The state you live in can significantly change how much money you get to keep at the end of the year and how much you have to hand over to your state.

Beth Braverman of the Fiscal Times compiled a list of the states with the toughest tax climate from the Tax Foundation’s data for 2014. “The Tax Foundation collects data on more than 100 tax provisions for each state and then ranks them to create its annual State Business Tax Climate Index.” The foundation looks at which states have the highest tax rates, and also if they are overly complex or unfair to certain individuals.

“One thing that’s important to remember here is that state and local tax rates are only part of the total sales tax story,” said Tax Foundation spokesperson Richard Borean by email. “Equally important are sales tax bases — what the tax applies to — which can have a palpable impact on how much the tax collects in revenue and how the tax affects the economy.”

Here are the worst ten states for taxes in 2014:

10. Maryland

Top state income tax rate: 5.75 percent

Sales tax rate: 6 percent

Per capita property tax: $1,467

Maryland has relatively high taxes across the board. The state is looking into lowering  its corporate income tax from 8.25% to 6% in the next five years and to increase the estate tax threshold from $1 million to $5.25 million.

9. Connecticut

Top State Income tax Rate: 6.7 percent

Sales tax rate: 6.35 percent

Property tax per capita: $2,522

Connecticut has extremely high property taxes and sales, income and corporate taxes in Connecticut are also worse than average. The state is also the single, only state to have a gift tax.

8. Wisconsin

Top state income tax rate:7.65 percent

State sales tax:5 percent

Per capita property tax:$1,724

Wisconsin ranks among the worst states for taxes due to its relatively high income tax plus alternative minimum tax on individuals. However, the state has passed some favorable property and corporate tax reforms.

7. Ohio

Top state income tax rate: 5.33 percent

State sales tax: 5.75 percent

Per capita property tax: $1,140

While Ohio’s tax rates look low, Ohio is on our top ten list because of a change in the Tax Foundation’s methodology. The group now penalizes states for how they treat LLCs and S corporations. Ohio is on the list for having 10 brackets.

6. Rhode Island

Top State Income Tax Rate: 5.99 percent

Sales tax: 7 percent

Property tax per capita: $2,083

High corporate and property taxes made Rhode Island place poorly. Rhode Island was also named least tax-friendly state in the country for retirees by Kiplinger Magazine, due to taxing Social Security benefits, pension income, and other sources of retirement income. However, next year the state’s ranking will probably improve because the state’s corporate income tax will fall from 9% to 7%.

5. Vermont

Top state income tax rate:8.95 percent

State sales tax:6 percent

Per capita property tax: $2,197

High property and income taxes resulted in Vermont’s poor showing on the Tax Foundation ranking. At 8.95 percent, it is sandwiched between New York and New Jersey with one of the highest marginal income tax rates in the nation. Vermont makes up some lost ground in the overall rankings with its state sales tax, which the Tax Foundation ranks at 16th from the top.

4. Minnesota

Top state income tax rate: 9.85 percent

State sales tax: 6.88 percent

Per capita property tax: $1,535

Minnesota made several changes to its tax code this year including: raising  its top income tax rate by 2%, and installing an individual tax hike on earners making more than $150,000. The state also has high sales, property and corporate income taxes.

3. California

Top State Income Tax Rate: 13.3 percent

Sales tax: 7.5 percent

Property tax per capita: $1,450

California is known for having one of the highest income taxes in the country at 13.3% on $1 million of taxable income. The state also has the highest state-wide sales tax rate and its 7.5% sales tax rate mandates a 1% local tax rate.

2. New Jersey
Top state income tax rate: 8.97 percent

State sales tax:7 percent

Per capita property tax: $2,896

New Jersey taxes score poorly in about every tax category. The state has the highest rates for every type of tax and adds many complexities.

1. New York

Top State Income Tax Rate: 8.82 percent

Sales tax: 4 percent

Property taxes per capita: $2,280

New York wins the worst state for taxes. The state had a high individual tax rate and high sales tax However, Governor Andrew Cuomo has announced the state’s new tax relief commission will be looking for ways to change the state’s tax code.

There it is, the list of the worst states to live in for taxes. If you are struggling your current geography, we hope this list will help you determine if another location has more possibilities for you.

Tax season is not only expensive, it can be long and confusing. In order to help people avoid costly tax prep errors, Advocate Tax Solutions offers a superb tax preparation program starting at as low as $25/month. Our tax experts are also here to be your go to resource for all of your tax preparation, accounting, and back tax questions. Call 888-737-0200 today and talk to a consultant for free. Let’s start solving your tax problems together.

For more information go to advocatetaxsolutions.info

Quick Tax Tips for Single Parents

Being a single parent can bring its own unique challenges and concerns in life, but filing taxes shouldn’t be one of them!

Here are some basic things to consider before filing your taxes this year.

Dependents:

Determining who you claim as dependents affects your ability to receive some credits and deductions. In a separation or divorce, this is usually a stipulated agreement between the two parents. However, the both parents can benefit if the parent who normally claims the child agrees to sign a waiver allowing for the non-custodial parent to make the claim. While you cannot split the deduction for a single year, parents can alternate years making the claim or only claim certain children if there are more than one. Remember that a child can only be a dependent if the child has lived with a parent for at least six months out of the year and was financially supported from that parent.

Head of Households:

You can file as head of household if you were not married on December 31, 2014, your kids live with you for at least 50% of the year, and you earn at least 50% of your household income. Head of household status will allow you a lower tax rate and higher deductions.

Exemptions:

For every dependent child you are allowed to deduct $3,950 for 2014. Head of households earning $275,650 or more are phased out.

Tax Credits:

Single parents earning $75,000 adjusted gross income or less can take $1,000 off their tax bill for each dependent 16 and younger in 2014.

Child Care:

Head of households who have an income or are full-time students can claim up to $3,000 per child for qualifying health care. This includes day care, summer day camps, and after school programs. Phaseout starts at $75,000 for single head of household filers.

Earned Tax Income Credit:

The maximum credit is $6,143. If you have three or more children and earn less that $46,997 as a single parent you can take this credit. If you have two children you can still qualify if you have a smaller income.

We hope this will help you begin to file your taxes! For all your tax preparation and tax debt needs call 888-737-0200. The tax experts at Advocate Tax Solutions are here to be your one stop shop for every tax question and problem. Visit www.advocatetaxsolutions.info for more information today!

Obama’s State of the Union Tax Proposal

Last night, President Obama proposed several tax changes in the State of the Union. The proposals will benefit middle-class taxpayers but will cost the wealthy taxpayers and financial services more. According to White House estimates, the proposals could raise $320 billion over 10 years. President Obama hopes to use that money to give middle class taxpayers $175 billion in tax breaks and to make community college free for two years.

The tax breaks:

• A tax credit of up to $500 for two-earner filers. Tax credits reduce your tax dollar for dollar, unlike deductions that reduce your taxable income. The full credit would be available for two-earner families with incomes up to $120,000. Partial credits would be available for those with incomes up to $210,000.
• The tax breaks would increase the income level at which the credit phases out and expand the earned income tax credit for workers without qualifying children. It would be made available to workers 21 years of age and older.
• Increase the child care tax credit to $3,000, and make the maximum credit available to most families with incomes up to $210,000.
• Simplify the student loan interest tax deduction.
• Make the American Opportunity Tax Credit permanent.
• Give full time college students a tax credit of up to $2,500 a year for five years and part-time students would be eligible for a $1,250 AOTC. In order to pay for some of the students’ tax credits, the proposal would roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions and the proposal would make distributions on 529 plans taxable to students.

Retirement Plans:

• Every employer with 10 employees would have to enroll workers automatically in an individual retirement account. Workers would be able to opt out if they chose.
• Any employer with 100 or fewer employees would get a $3,000 tax credit for offering an auto-enroll IRA. Employers would get a $1,500 start-up credit for setting up a plan.
• Long-term part-time employees would be eligible to enroll in company retirement plans.
• The proposal would target individual retirement accounts with unusually high balances and limit contributions and accruals of IRA benefits higher than about $3.4 million.

The Tax Increases:

• A higher capital gains tax, or the tax on long-term capital gains, for the wealthy. Currently the maximum gain capital is 23.8%. The proposal would set the rate at 28%. In the 2014 tax season, single filers with taxable income above $406,750 and joint filers with taxable income above $457,600 pay the highest capital gains rate.
• Currently, you can pass stocks onto your heirs without paying capital gain tax. When you inherit an asset your basis in the asset is the higher of the fair market value at the time of death or the decedent’s original basis. Usually, the fair market value is higher. The Obama proposal would eliminate that. When you inherit an asset your basis while simply be the decedent’s original basis. Capital gains would be owed at death, and in the case of couples, at the death of the second spouse. Capital gains of $100,000, or $200,000 for joint filers, would be free from tax. Couples would have an exemption of $500,000 on the gains of their personal residences. No taxes would be due on inherited small-family businesses until those businesses were sold.
• The proposal would instate a fee on large financial institutions, 0.07% of liabilities annually, levied on about 100 companies with $50 billion or more in assets in order to discourage excessive borrowing.

We know the proposal will ignite many party differences in Washington, but we want to know what you, the taxpayers, think! Leave a comment below and lets us know what you think is good or bad about the proposal and what tax reforms are important to you.

If you have any tax problems, Advocate Tax Solutions, your tax team is here for you to use as a resource. We can settle your taxes with the tax solutions that make sense. Call 888-737-0200 or visit www.advocatetaxsolutions.com for a free consultation.

The New Tax Laws in 2015 That Could Affect You

Every year the U.S. tax code undergoes changes that can affect the amount we owe the IRS. Knowing and planning for these changes can help you save money and confusion this year.

Here are some key changes to be aware of.

401 (k) Contribution Limits

For the past two years, 2013-2013, the contribution limit for 401 (k) retirement account was fixed at $17,500 plus another $5,500 “catch up”. This year the amount has risen to $18,000 with a $6,000 catch up for those 50 years of age and above.401 (k)s, or employer-based retirement plans can be a powerful savings builder. In order to qualify for the catch up contributions you must be of age or turn 50 any time during 2015.

IRA Deduction Eligibility

While IRA contribution limits will remain the same in 2015 ($5,500 plus a $1,000 catch-up for those 50 and older), the deduction for taxpayers making contributions to a traditional IRA is more generous. Here’s what the IRS states, “The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.”

Roth IRA Eligibility

The Roth IRA’s eligibility is also expanding. The AGI phase out range has risen from being between $181,000-$191,000 in 2014 to $183,000-$193,000 in 2015 for married and filing jointly couples. For taxpayers filing as single and head of households, the range has risen from $114,000-$129,000 to between $116,000-$131,000.

IRA Rollovers

Beginning this year, taxpayers will only be able to execute one IRA rollover per year. A rollover involves removing money out of one IRA and putting it into another IRA after holding it for less than 60 days.

myRA

The myRA, my Retirement Account, is a new retirement account created by the U.S. Department of the Treasury, designed to be offered through employers. The myRA doesn’t have any fees and offers modest, guaranteed growth, ensuring that you won’t lose any money. A myRA account can be started with as little as $25 and you can add a minimum of $5 at a time. The contributions levels for myRA are the same as for IRAs ($5,5000 with a $1,000 catch-up). Once your account reaches $15,000 it has to be transferred into a private sector Roth IRA.

SEP IRA Contribution Limits

For taxpayers who are self-employed, contribution limits rise to $53,000 in 2015 and compensation limits rise to $265,000. These limits apply to solo 401 (k)s as well.

SIMPLE IRA Contribution Limits

In 2015, you will be able to contribute as much as $12,500 plus a $3,000 catch up if you are 50 and older.

Health Savings Account Eligibility

This year you will no longer be eligible for a Health Savings Account if you forward any FSA money. This new rule has confused many people. You can read more here or contact your tax professionals.

Health Insurance Penalty

The penalty for opting out of healthcare coverage has risen this you. In 2014, the penalty for opting out of the “minimum essential coverage” had a penalty of 1% of their income above the tax filing threshold ($95 per adult, $47.50 per child, and a $285 family maximum. For 2015, the penalty has doubled to 2% of your income ($325 per adult, $162.50 per child, and a family maximum of $975). The penalty will continue to rise in 2016.

While these new tax laws are the ones that will most likely affect you, there are many other new tax laws in 2015 that are worth learning about as well. If you have questions concerning the new laws and how they affect you contact your tax team at 888-737-0200 or visit http://www.advocatetaxsolutions.com

Things to Check Before Open Enrollment Ends On February 15

Millions of Americans who receive health insurance through work are benefiting from the Affordable Care Act (ACA), and millions of others have signed up for the Health Insurance Marketplaces to lower their monthly premiums.

As the end of 2015 Health Insurance Marketplace open enrollment period quickly approaches, there are some questions you should ask yourself to make sure you’re complying with the Affordable Care Act (ACA) to avoid being hit with a tax penalty when  you file your 2015 federal income taxes next year.

1. Do I have coverage? If not, do I need it?

The ACA requires most Americans to carry a health insurance plan. If you choose not to, you will be choosing to pay a fine to be uninsured. Call one our tax experts at 888-737-0200 to see if you can qualify for an exemption.

2. Does my current plan comply with the ACA?

Most employment-based plans comply with the law and if you already have a plan from the Health Insurance Marketplace or your state Marketplace you are in compliance. Medicare, Medicaid, the Children’s Health Insurance Program, TRICARE and any other qualified coverage also complies with the health law.

3. Can I get subsidized insurance?

If you are uninsured or buy your own coverage visit Healthcare.gov or your state’s Marketplace to find out if you qualify for subsidized insurance. Depending on your household income you may be eligible for an advanced premium tax credit and cost-sharing assistance. If you have a limited income you can also find out if and how you can qualify for Medicare. If you already have a Marketplace plan, you have until February 15 to purchase different coverage if your plan is no longer right for you. Just remember to cancel your old policy!

4. Did I report my life changes?

If you had any major life events this year such as marriage, divorce, having a child or a change in income, makes sure to update your information on your plan. You could be eligible to receive more financial assistance or you could have to repay money when filing your income taxes.

If you have any more questions about how the ACA could affect your taxes,call 888-737-0200 or visit http://www.advocatetaxsolutions.com. The tax experts at Advocate Tax Solutions are your one stop resource for all of your tax issues.

Planning for the Future: Non-conventional Uses for a 529 Plan

If you have kids you know they can be expensive and planning for their education can be overwhelming.

The cost of college tuition has risen at an average amount of roughly 8% per year over the last few decades. For example, the tuition at the University of Pennsylvania, a private undergraduate school, was $2,770 in 1960. In today’s dollars, that’s $22,219.24 and in a half century it will cost nearly three times that at $61,800!

Luckily, 529 Plans, or Qualified Tuition Programs (QTPs), offer families a way to save for their kids (and their own) future. 529 Plans offer significant tax benefits by allowing for the prepayment of qualified higher education expenses at eligible educational institutions. This allows you to lock in the rate of your kids’ college rate at the current number. So while rates are always increasing, there are no federal taxes on your contributions’ earnings. There are often no state taxes either if you are a local resident and if your child attends an in-state college.

The benefits don’t even end there. Here are some creative ways you can use your 529 plan.

1. Pay for Your Own College Expenses

If your child receives a scholarship or decides not to attend college, you can use any 529 funds toward your own educational expenses. Most plans allow you to change the beneficiary once a year, allowing you to transfer the funds to yourself. If you’ve held off on furthering your own education this is a great way to save on your own college expenses.

2. You don’t have to use the 529 plan on a traditional four year school.

529 plans can be used for two-year Associate Degree programs, technical schools, trade schools, vocational schools, and even for study abroad — as long as it’s with an accredited institution.

3. Benefits for Multiple Beneficiaries

Since you can change beneficiaries yearly, you could technically fund multiple beneficiaries with a single plan. If you have more than one child, and if you want to further your education, you can contribute to all of the beneficiaries’ education with a single plan.

4. Plan for the Distant Future

529 beneficiaries can be anyone you choose. You can help protect your family’s future generations by including your grandchildren and even their children. This way you can ensure your legacy is secure.

5. You can pay for non-qualified expenses with a poorly performing plan.

If you end up in major financial difficulties and need to pay for non-educational expenses , you may withdrawal from a plan if it is in the red without any penalties.

Start planning your little ones’ and your own future now! 529 Plans will help you secure your future and legacy. We know that taxes can be the worst. Planning ahead can help you avoid large tax costs in the future. If you need help with your 529 plan or current back tax debt our reputable tax experts at Advocate Tax Solutions are your qualified tax resource to solve your tax problems.

Call 888-737-0200 for all your tax questions or visit us online at www.advocatetaxsolutions.com