Dear Clients and Friends,

"The hardest thing to understand in the world is the income tax.” Albert Einstein.

I heard a well known tax professional at a seminar say many years ago …. “The answer to every tax question in America is…. It Depends!”

Well that is very true, and the answer that I often give when asked a general tax question. Your own unique situation will determine the ultimate answer and we pride ourselves in taking the time to understand your circumstances, being creative in finding solutions, and taking advantage of every benefit that we can get for you within the tax laws. For example:

  • Can I make an IRA contribution? - It depends on your income and your coverage under another plan.
  • Is a regular IRA or a ROTH IRA better for me? - It depends on whether you want to save now or in the future and what your rates will be.
  • Can I deduct this expense? - It depends if it is allowed under the law.

I wrote last year how the US Congress chose to change the tax laws on December 16, 2014, retroactive effective back to January 1, 2014. Well here we go again! This year the US Congress passed the 2015 tax extender act on December 18, 2015 retroactive to January 1, 2015!

Once again most of these changes were to extend provisions and deductions that we had been counting on as being effective and which are beneficial to the taxpayer. While it has complicated tax planning the last few years due to uncertainty, the good news is that some of the most popular of these items have now been made “permanent” (Or as permanent as anything ever is in the tax code!) The following tax benefits for individuals and businesses were extended:

  • Above-the-line deduction for teacher classroom expenses – made permanent
  • Enhanced child tax credit – made permanent
  • Enhanced American Opportunity Tax Credit – made permanent
  • Continued deduction for State and local general sales taxes – made permanent
  • Discharge of indebtedness on principal residence excluded from gross income of individuals – extended through 2016
  • Mortgage insurance premiums treated as qualified residence interest – extended through 2016
  • Above-the-line deduction for qualified tuition and related expenses – extended through 2016
  • Tax-free distributions from IRAs to certain public charities for individuals aged 70-1/2 or older, not to exceed $100,000 per taxpayer per year - made permanent
  • 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements – made permanent
  • Bonus depreciation – modified and extended as follows: 50% through 2017, 40% for 2018, 30% for 2019
  • Increased expense limitations of section 179 property – up to $500,000 made permanent and indexed for inflation

And so hopefully we have at least some tax certainty going into this next year. At least until the presidential elections and then everything will be up for grabs again in 2017!

We will also need information from you regarding your health insurance coverage in order to comply with the reporting requirements under Obamacare that may impact your returns and your subsidy payment if applicable.

We will need form 1095-A Health insurance Marketplace Statement from you if you are a participant in a healthcare exchange. This form will be used to reconcile the advance payment of premium tax credits you received to what you should have been allowed based on your actual 2015 modified adjusted gross income. The difference can result in an additional credit and reduction of your tax, or a balance due and repayment of the credit to the IRS if the amount you received was higher than allowed under the calculation which will be done on form 8962 as part of your return.

We will also need form 1095-B or 1095-C from you if you are covered under a plan and receive this form. IRS has extended the due dates for these forms to be provided to employees to March 31, 2016 so there may be a delay in your receiving this form. However, we can still file your return if you had coverage under a qualified plan for the full year of 2015, and then you can send us a copy of this form for our files when it is received.

If you did not have coverage for 2015 you may be subject to a penalty of up to $325 per person or 2% of your household income. There are exceptions to the penalty as well so we may need to review your circumstances with you in more detail if this situation applies to you.

Many of you have talked to or met Nina Mefford, my Associate since 2014, who has been doing a great job in helping me with various tasks the last two years. Nina is a Certified QuickBooks Pro Advisor and experienced accountant and she will be available as an additional resource for you so that we can continue to meet your needs and continually improve our services.

And so it is that we find another tax filing season upon us. I hope and pray that it was a good year for you and wish you all the best for 2016 and moving forward.

I greatly appreciate your continued business, friendship and your confidence in me. I will always do my best to service your needs.

Taxes can be complex and challenging to deal with but I am confident that with over 27 years of experience we will be able to help you with your needs and work together to determine the best outcome for your own unique circumstances.

Remember to ask for help when you have a question because the answer to every tax question is “It depends!”

Thank you!

George R. Sinnamon, CPA

Member: American Institute of CPAs, Connecticut Society of CPAs

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