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529 Plan, Education, Income Tax Deduction, Massachusetts, Tax Planning

Massachusetts Has State Income Tax Deduction for Contributing to MA 529 Plan & Prepaid Tuition Program (Effective 1/1/2017)

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Starting in 2017, residents of Massachusetts can deduct contributions to a Massachusetts 529 college savings plan or a prepaid tuition program, up to $1,000 per individual or $2,000 per married couple filing jointly. This tax benefit will be available to taxpayers through the 2021 tax year, when the deduction is scheduled to expire.

Massachusetts has two college savings plans, a 529 college savings plan and a pre-paid tuition plan. Both plans are eligible for this new income tax deduction.

MEFA U.Fund College Investing 529 Plan

Massachusetts’ U. Fund College Investing Plan, 529 Plan, is managed by Fidelity. The Massachusetts Educational Financing Authority (MEFA) U.Fund plan receives pretty good ratings by both residents & non-residents according to Savingforcollege.com. It features three age-based options; one using Fidelity mutual funds; one using Fidelity index mutual funds; and a third multi-firm option with portfolios that invest in funds offered by several different companies. The plans also offer 11 static options, and one option that invest in an interest-bearing deposit account.

Massachusetts U.Plan Prepaid College Tuition Plan

Massachusetts offers the U.Plan Prepaid College Tuition Plan, which serves the same purpose as a prepaid tuition 529 plan. Participants buy tuition certificates that lock in tuition and mandatory fees at current rates. Earnings on the bonds that back the certificates are tax free. Prepaid tuition 529 plans typically have a limited group of participating schools, and the U.Plan can only be used at one of approximately 80 Massachusetts colleges or universities. Both state and non-state residents can participate. Contributions to the U.Plan are eligible for these new Massachusetts income tax deductions.

529 Plans

Earnings in a 529 plan grow free of tax charges, which is a major tax benefit. When you withdraw earnings for eligible educational expenses, you do not pay state or federal income taxes on the withdrawal. For Massachusetts’ U.Fund plan, eligible expenses include tuition, fees, room and board, books and other necessary expenses. Earnings from 529 accounts are exempt from federal and Massachusetts taxes, as long as the money is used for qualified education expenses, such as tuition, fees, books, as well as room and board. If you withdraw funds for non-qualifying expenses, then you have to pay income taxes on earnings and an additional 10-percent tax penalty.

Massachusetts residents have benefitted from the tax-deferred growth offered by the 529 college savings plans and now can also get an income tax deduction in years when a contribution to a Massachusetts 529 plan is made. Taxpayers who contribute to a MEFA U.Fund 529 college savings plan can deduct up to $1,000 for single tax payers, heads of household and married individuals filing separately and $2,000 for married couples filing a joint return.

Consider Funding or Contributing To a MA 529 Plan

Prior to 2017, MA did not have a deduction or tax benefit for MA residents using the MA plans, so people shopped other states for 529 plans. If you are a Massachusetts resident and currently have a 529 plan from another state, you may want to consider establishing and contributing to a MA 529 plan in 2017 in order to receive this tax deduction.

If you are a Massachusetts resident and currently paying for higher education, you may want to contribute to a MA 529 plan in order to receive the income tax deduction because withdrawals from the 529 plan can be taken at any time, as long as they are used for qualified higher education expenses (such as, tuition, room and board, books, and computer equipment).

However, any non-qualified distributions from a 529 plan, unless due to the beneficiary’s death, disability or receipt of a scholarship, will result in “recapture of the deduction,” in addition to a 10% federal penalty and ordinary income taxes on the earnings, which results when the plan is not used for qualified higher education costs. Make sure you use any 529 plan distributions for qualified educational expenses, so you do not lose the tax benefits.

news update, tax

Reminder: Due Date Changes for Partnerships, Corporations, and Foreign Information Reports

The Surface Transportation Act of 2015 (“the Highway Act”) revised filing deadlines for partnership tax returns, C corporation tax returns, and foreign information reporting (FinCen 114/FBAR) effective for 2016 tax returns.

Partnership

The Highway Act accelerates the due date to March 15 (from April 15) for filing partnership tax returns and issuing Schedules K-1 to partners for calendar year filers.

C Corporations

Calendar year C corporations filing date changes to April 15 (from March 15).  With this extra 30 days, C corporations have additional time for final information gathering and reporting, which may allow more companies to timely file their tax returns.

Foreign Information Reporting

Under the Highway Act, the annual foreign bank account reporting (FBAR) on Form FinCEN 114 will be due on April 15,  the same due date for filing individual income tax returns.  Additionally, taxpayers will be able to request an extension of time to file their Form FinCEN 114 until October 15.  It is important for U.S. taxpayers to properly file and report their foreign bank and financial accounts and any income earned, as large penalties can be assessed for failures to report assets and income.  The U.S. Treasury has increased scrutiny of U.S. taxpayers holding investments in foreign accounts and the reporting of income earned on those accounts.

Individual Implications of the Partnership Deadline Changes
By having partnerships due on March 15th, instead of April 15th, individuals will have more time to include any Schedule(s) K-1 income and/or loss on their personal income tax returns and are more likely to be able to file their individual return by April 15.  It is more convenient to file the FBAR returns at the same time as individual returns, as opposed to the prior June 30th date.

See Original and Extended Tax Return Due Dates for a printable schedule of due dates for the 2016 tax returns prepared during the 2017 tax filing season..

news update, tax

Beware of Phishing and Phone Scams

Leading Tax Scams on IRS Dirty Dozen

Be aware of these phishing and phone scams and do not fall for them!

Phisching Scheme Emails and Websites

Phishing schemes lead the IRS “Dirty Dozen” List of Tax Scams for 2017. The Internal Revenue Service warned taxpayers to watch out for fake emails or websites looking to steal personal information. See IR-2017-15.

It May Not Be Who You Think It Is

In these email schemes, criminals pose as a person or organization the taxpayer trusts or recognizes. They may hack an email account and send mass emails under another person’s name.  They may pose as a bank, credit card company, tax software provider or government agency. Criminals go to great lengths to create websites that appear legitimate but contain phony log-in pages. These criminals hope victims will take the bait and provide money, passwords, Social Security numbers and other information that can lead to identity theft.

The IRS saw a big spike in phishing and malware incidents during the 2016 tax season. New and evolving phishing schemes have already been seen this month as scam artists work to confuse taxpayers during filing season. The IRS has already seen email schemes in recent weeks targeting tax professionals, payroll professionals, human resources personnel, schools as well as average taxpayers.

W-2 Phishing Scam Explained

Form W-2 scam targeting Payroll and Human Resource departments is one of the known phishing scams

This email scam uses a corporate officer’s name to request employee Forms W-2 from company payroll or human resources departments.

The IRS already has received new notifications that the email scam is making its way across the nation for a second time. The IRS urges company payroll officials to double check any executive-level or unusual requests for lists of Forms W-2 or Social Security number.

The W-2 scam first appeared in 2016. Cybercriminals tricked payroll and human resource officials into disclosing employee names, SSNs and income information. The thieves then attempted to file fraudulent tax returns for tax refunds.

For Example

This phishing variation is known as a “spoofing” e-mail. It will contain, for example, the actual name of the company chief executive officer. In this variation, the “CEO” sends an email to a company payroll office or human resource employee and requests a list of employees and information including SSNs.

The following are some of the details that may be contained in the emails:

Kindly send me the individual 2016 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review.
Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary).

I want you to send me the list of W-2 copy of employees wage and tax statement for 2016, I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me asap.

Phone Scammers Impersonate IRS Agents

Phone scams are a serious threat and remain on the IRS “Dirty Dozen” List of Tax Scams for 2017. Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers. See IR-2017-19.

An aggressive and sophisticated phone scam targeting taxpayers, including recent immigrants, has been making the rounds throughout the country. Callers claim to be employees of the IRS, but are not. These con artists can sound convincing when they call. They use fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling.

“You Owe Money” Pay Now!

Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

“You Have a Refund Due” Give Me Your Information!

Or, victims may be told they have a refund due to try to trick them into sharing private information. If the phone isn’t answered, the scammers often leave an “urgent” callback request.

The IRS will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
    Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Ask for credit or debit card numbers over the phone

 

tax

IRS Tax Deadline April 18th for 2016 Returns

Tax Deadline Extended to April 18th For Filing 2016 Tax Returns

The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. See IRS’s Tax Calendar here.

Generally, April 15 of each year is the due date for filing your federal individual income tax return.  If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday, April 17. However, Emancipation Day, a legal holiday in the District of Columbia, will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 18, 2017.

Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.

tax

2017 Tax Filing Season for 2016 Returns

IRS Tax Filing Season Starts January 23

The 2017 Tax Filing Season, for filing 2016 tax returns, begins January 23, 2017.

January 23 calendar dateThe Internal Revenue Service recently announced that the tax season will officially begin Monday, January 23, 2017.  This is the day that the IRS will begin accepting electronic tax returns and processing paper tax returns. 

Prepare Returns Starting Now

Most software companies and tax professionals, including us, will be accepting tax returns before January 23, and then will submit the returns when IRS systems open.

Tax Preparation Hints

To prepare for filing your tax return, as you receive your 2016 tax documents, please collect them and keep them with your tax organizer. These documents include such items as your W-2s, Form 1099s, K-1s, brokerage statements, health insurance tax documents, etc. Your check register may also include pertinent information.

When you have gathered all your tax information, please set-up an appointment or mail/submit the tax organizer, along with your various tax forms to us.

How to Reach Us

Our office is on Cape Cod on Route 28 in West Harwich.  The address is 72 Route 28, Suite 2, West Harwich, MA 02671-1112. We’re on the first floor.

We can be reached by phone at (774) 237-0691 or by FAX at (774) 237-0835. Use our contact form to send us an email.

news update, tax

Mileage Rates for 2017

IRS Lowers Mileage Rates for 2017

The Internal Revenue Service has issued the 2017 optional standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning, January 1, 2017, standard mileage rates for the use of an automobile will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016
  • 17 cents per mile for medical or moving purposes, down from 19 cents for 2016
retirement, tax

Take Required Minimum Distribution by December 31st

Are You 70½ or Older?

Retirement funds cannot be kept in an account indefinitely.  Generally an individual has to start taking withdrawals from an IRA, SIMPLE IRA, SEP IRA, or retirement plan account when he/she reaches age 70½.

Roth IRAs do not require withdrawals until after the death of the owner.

The required minimum distribution is the minimum amount an individual must withdraw from his/her account each year.  The RMD are mandatory, minimum yearly withdrawals that generally must be taken starting in the year the retirement account holder turns 70½.  When an individual turns 70½, they must start taking a required minimum distribution (RMD) or withdrawal from their retirement funds.

Take Distribution by December 31st

Remember to Take RMD (Required Minimum Distribution) by December 31st. An individual generally has until April 1 of the year following the calendar year he/she turns age 70½ to take his/her first MRD.  However, it is recommended that the individual take the first RMD by December 31st of the year that he/she turned 70½, in order to avoid having to take two distributions in the same year.  For each subsequent year after your required beginning date, you must withdraw your RMD by December 31.

Penalty for Not Taking a Scheduled Distribution

Forgetting to take a RMD can result in a significant charge.  If an individual does not take any distributions, or if the distributions are not large enough, he/she may have to pay a 50% excise tax on the amount not distributed as required.

How to Determine Your Distribution Amount

Generally, the amount of the RMD is determined by dividing the adjusted market value of the individual’s account as of December 31 of the prior year by an applicable life expectancy factor. The Uniform Lifetime Table (PDF) can be used to find the individual’s life expectancy factor or the Fidelity Minimum Required Distribution Calculator to help determine what will be required to withdraw.

 

news update, tax

Tax Deadline for 2015 Filing

Tax Deadline Extended This Year

Monday, April 18th, 2016 is the tax deadline for 2015 filings for most people, but it is extended to April 19th for Massachusetts individuals.

Generally, April 15 of each year is the due date for filing your federal individual income tax return if you are a calendar year filer whose tax year ends on December 31.

If you use a fiscal year (which is a year ending on the last day of any month other than December), your return is due on or before the 15th day of the fourth month after the close of your fiscal year.

If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. For example, Friday, April 15, 2016, is Emancipation Day, so tax year 2015 returns are due Monday, April 18, 2016. Taxpayers in Maine and Massachusetts observe Patriots’ Day on Monday, April 18, 2016, so they will have until Tuesday, April 19, 2016 to file.

Your return is considered filed timely if the envelope is properly addressed and postmarked by the due date.

Some Deadline Tips from the IRS website

Monday, April 18, is the tax deadline
File your return and pay taxes by April 18 (19th in MA & ME) to avoid late penalties or interest.

Need more time to file your tax return? Get a 6-month extension of time to file your return (but you still must pay on time).

Here’s what to do if you can’t pay on time
These tips will help if you can’t pay all of your taxes by the due date.

Tax Calendar for 2016

Here’s a handy tax calendar for 2016 supplied by the IRS to help you remember when taxes are due. The General Tax Calendar has important due dates for all businesses and individuals. Anyone who must pay excise taxes may need the Excise Tax Calendar.

news update, tax

IRS Warns of Tax Scams

Phishing & Tax Scams 

Phishing scams are becoming more prevalent and constantly evolving.  Please note that the IRS won’t be calling or emailing you out of the blue asking you to verify your personal tax information or aggressively threatening you to make an immediate payment.  The IRS initiates contact with an official letter that is mailed to your home address, not by telephoning or emailing.  If you have any questions to the authenticity of any communications, please consult your tax advisor.

The IRS will never:

  • Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you several bills.
  • Call or email you to verify your identity by asking for personal and financial information.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone or e-mail.
  • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.

Some Phishing Links from IRS website

ALERT: New tactics by phone scammers
IRS impersonators call claiming they need to verify financial details to process your return.

ALERT: Payroll and HR professionals
An email scheme claims to be from company executives and requests employee W-2 information.

Consumer Alert: Recent phishing schemes
The IRS has seen a 400 percent surge in phishing and malware incidents so far this tax season.

Don’t Be Fooled by Tax Scams