Tax Season Update
January 30, 2015
January 26, 2015
As we prepare for the upcoming tax season, we would like to share some thoughts about your tax packages, highlight some issues that most commonly require follow-up, and to inform you of changes we are making in our continued effort to increase efficiency and to reduce our carbon footprint.
As we have communicated to you late last year, we will provide you with soft copies of your income tax returns and any other documents wherever possible, unless you specifically request paper copies. All such soft documents will be password protected with the last four digits of the primary taxpayer’s social security number.
E-file signature authorization forms will be sent electronically to allow you to digitally sign the authorization forms. This option would allow you to sign the forms from your computer or smart phone by typing your name, using the mouse to sign, or uploading a preset signature. You will be asked a few authentication questions to ensure security and integrity of your confidential information.
You should have started to or will soon receive tax information from your employers, brokers, customers, and banks. Many of you will also need K-1s from partnerships, limited liability companies, S corporations and trusts. While your tax package may not be complete, we encourage you to send us your tax information after you have completed the compilation of your personal income and deductions and not wait to send us the information until you have received the K-1s. This will provide us ample time to review the information you submit and follow up with any questions that we can resolve sooner and better enable us to complete your returns and allow you to have more time to review them and discuss questions with us prior to the filing deadline.
We ask that you provide us all of the pages of the 1099s from your brokers and financial advisors as the detail often times includes information we need to properly report the income. Along with the 1099s, please provide the realized gain and loss reports. Please ask your financial advisor to send this information to us in an Excel file format which helps save considerable time reflecting these transactions on your tax returns. If you have paid margin interest during the year, please indicate how the debt proceeds were used, so that we can determine the proper treatment for the interest expense.
While many of the K-1s may not be available until later in the summer, if there are any partnerships and/or S-corporation from which you exited in 2014 (or plan to in 2015), please let us know at the time you send your initial tax return documents to us as there may be tax consequences of such divestures. Please also advise us about any new investments in these entities or if you will be receiving a K-1 from a new trust for the 2014 tax year. When you send your K-1s, please include all pages.
If you have foreign bank accounts or other foreign assets, please let us know as there is quite a bit of information we would have to obtain from you to properly disclose it on the return.
Information on investments made in a foreign corporation or partnership via a flow-through entity (such as a partnership) is typically provided by that flow-through entity. We will rely on the information provided on the Schedule K-1. However, if you made any direct investments in a foreign corporation or partnership, please let us know as there may be information required to be disclosed on the return.
If you are self-employed and have not contributed to a SEP IRA in prior years, we suggest you consider establishing a SEP IRA and making a contribution toward your retirement. If you have a SEP IRA and have made contributions in the past, please let us know if you would like to continue to make a contribution for 2014.
Your mortgage interest is deductible up to $1million of acquisition debt and line of equity interest is deductible up to $100,000 of debt. If the 1098 does not include the beginning and ending balances of the loans, please note these figures on the 1098 or in your organizer. If you have used any of the proceeds from the refinancing of your home or from the line of equity for expenses other than home improvement/remodeling, the deductible amount may need to be adjusted. If you made such use of the funds, please indicate the dollar amount and describe the usage, so we can properly report the expense. If you used some of the funds for investments, for example, that portion of the interest attributable to investments may be deductible investment interest. Please certain to include the closing statement for your refinance to us also.
Please provide us with copies of your property tax bills with date of payment indicated on the form. This is especially helpful if you have multiple properties.
If you have made charitable contributions of property, such as stock, please provide the cost basis and the date of acquisition.
There is a section in the organizer to indicate the estimated tax payments made for the 2014 tax year. If you have made estimated tax payments, we ask that you indicate the amount and date of each payment. We are able to confirm estimated tax payments to California, but we don’t have the same digital access with the Internal Revenue Service or other states. Therefore, even though you would have received instructions from us to make such payments, it serves as a good checks and balances to have the confirmation from you that you have made these payments.
As we prepare your returns or extension application by April 15th, we are also reviewing any estimated tax payment requirements for the first quarter in 2015. Please provide us with information that would help us with the first quarter calculations, such as a recent paystub, expected bonus, projected business income for 2015, any planned sale of property or significant investments, or any other significant transaction that you are aware of.
Should you have any questions, please let us know.
Scott B. Price