TAX SEASON, IS HERE, LET’S REVIEW THE MOST IMPORTANT CHANGES

Taxes

1. Do you own or use any virtual currency?

Virtual or digital currency, such as bitcoin, has been around for a few years. What is new is where the IRS states that this convertible currency should be treated as property for tax purposes (rather than as a currency). The notice also provides that “mining” a virtual currency (which is the process for obtaining the virtual currency by solving mathematical problems) produces income upon receipt using the fair market value (FMV) at that time. Treatment of virtual currency as property means that when it is used, such as to buy goods, its basis and FMV must be determined to measure the resulting gain or loss. The holding period of the asset and character of the income (ordinary or capital) must also be determined.

  1. Do you rent out property, such as through an online exchange?

Web-based accommodation businesses, such as Airbnb, make it relatively easy (and enticing) for property owners to become landlords. These new landlords may not understand the tax consequences of short-term rentals. Thus, a conversation about rental rules is warranted. Beyond federal and state income tax considerations, clients may need guidance regarding possible obligations for local taxes, such as business license and transient occupancy taxes.

  1. Did you receive a Form 1095-A?

Health Insurance Marketplace Statement, is a new form for 2014, and is related to the new health care law. Clients who receive this form for the first time might not know to provide it to their tax preparer. Individuals who enrolled in a federal or state exchange to obtain health insurance will receive this form, which provides information for determining the Sec. 36B premium tax credit for the individual and his or her family. Individuals eligible to claim the premium tax credit on their returns or who received it in advance (through reduced monthly premiums) will need to complete a new form Premium Tax Credit (PTC), and attach it to their Form 1040, U.S. Individual Income Tax Return, or 1040A, U.S. Individual Income Tax Return. (The credit cannot be claimed on Form 1040-EZ, Income Tax Return for Single and Joint Filers With No Dependents.) Clients who received Form 1095-A are likely to want an explanation of the credit and its effect on their federal tax liability, as these health care rules are new for 2014.

  1. Did you and everyone in your family have health care coverage for every month of 2014?

Another new health care rule that first applies for 2014 is the individual shared-responsibility payment (Sec. 5000A). This provision, which affects all individuals, requires individuals to have “minimum essential coverage.” To implement this rule, there is a new line on the 2014 tax form (line 61 on Form 1040; line 38 on Form 1040A; and line 11 on Form 1040EZ), which will require the preparer to find out who is in a client’s “shared responsibility family” and whether they had minimal essential coverage for each month of the year.

If anyone did not have coverage for any month, the next question is whether an exemption applies. If an exemption does not apply to all or some of the non-coverage months, the shared-responsibility payment must be computed.

Preparers will also want to determine when they want to obtain documentation, such as a health insurance card, beyond what they may already have (such as Form 1095-A or W-2). For the 2015 tax year, clients are likely to have more documentation about their coverage, such as Form 1095-B, Health Coverage, and/or Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, than they do for 2014.

  1. Do you have foreign assets?

For many years, a standard question for clients has been whether they have a foreign bank account. Today, that question is too narrow. The Foreign Account Tax Compliance Act, added a new reporting requirement, Statement of Specified Foreign Financial Assets. In addition, reporting for FinCEN, Report of Foreign Bank and Financial Accounts (FBAR,) has expanded to require more than information on a directly owned account at a foreign bank. Preparers should review the instructions for these forms to be sure the questions clients are asked are sufficiently comprehensive to fully address these reporting obligations.

Also, a 2014 court case held that an individual’s online gambling accounts held by a foreign casino were required to be reported on the FBAR . The rationale was that the accounts functioned as banks. A similar rationale might hold for other types of accounts. For example, virtual currency an individual holds through an account or “wallet” set up by a foreign entity might be reportable on the FBAR.

Hickey&Hickey is here is to serve as a resource not only for Tax Clients, but for Tax Preparers, we have a wealth of experience and the most up to date information to improve your business and financials.

To set up an appointment, please feel free to reach out to one of our representatives at info@hickeyandhickey.com or give us a call at (516)998-7410

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FBAR DUE TODAY JUNE 30TH

 

THE FINANCIAL CRIMES ENFORCEMENT NETWORK (FinCen) was created to safeguard the financial system from illicit use and combat money laundering.

FinCen created a reporting for Foreign Bank and Financial Accounts (FBAR). This reporting is done on Form 114 and it is due today.

You need to file this report if at any time during the year you held an account with a Foreign Bank or Financial Institution of $10,000 or more.

FBAR covers all US persons, which include US citizens, resident aliens( including resident aliens of US territory and US territory entities), trusts, estates, and domestic entities that have an interest in foreign account and at any time during the year has held $10,000 or more.

Let’s review: a US Citizen, resident alien, trust, estate and or domestic entity will report:

  • Deposits and custodial accounts in foreign financial institutions
  • Ownerships or beneficial interest of 50% or more in an entity
  • Foreign Mutual funds
  • Financial accounts held at a foreign branch of a US financial institution
  • Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantor.

 

 

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International Investment Information : FACTA ( Tax Reporting Tips for Assets Abroad)

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DO YOU HOLD ASSETS IN FOREING COUNTRIES?

ARE YOU A US RESIDENT OR CITIZEN LIVING ABROAD?

YOU NEED TO UNDERSTAND YOUR TAX OBLIGATIONS

 

-Raquel Hickey, Hickey&Hickey Accountant Consultants

 

In this global age that we live in, more and more of us find ourselves, investors in foreign companies or properties or embarking on exciting international ventures of our own.  Oftentimes we do so without considering what the financial implications are or worse assuming that if it’s outside the U.S. it doesn’t factor in our lives or taxes here.  It is important to know what is and what is not the case with regards to foreign assets.

 

Your Accountant or Tax preparer has probably asked you if you had any assets or income from foreign Countries and that is because there is a FATCA compliance obligation.

FATCA is the Foreign Account Tax Compliance Act and it requires:

 

  1. Due to International Agreement it is required for all foreign Banks and Financial Institutions to identify US person’s account holders and disclose this information to the US.
  2. US persons owning these accounts or assets must:

 

    1. Report the following:
      1. Bank Accounts
      2. Investment Accounts
      3. Mutual Funds
      4. Retirement Accounts & Pensions
      5. Securities and other brokerage accounts
      6. Debit Cards & Prepaid Credit Cards
      7. Life Insurances & Annuities having cash value

 

    1. Report accounts greater than $50,000 on form 8938 with their income tax
      1. Non compliance carries 40% Tax penalty
      2. Understatement of assets 25% penalty of the Gross income

 

    1. Report accounts exceeding $10,000 directly to de the Department of Treasury on form 90-22.1

 

It is important to know:

  • That if you paid tax on your Foreign Assets you may qualify for a foreign tax credit using form 1116 with your income tax return.
  • The IRS is currently conducting an “Offshore Voluntary Disclosure Initiative” for people who have not reported previously.

This is just a brief overview regarding international assets, should you have anymore questions regarding your international holdings and what effects they have on your taxes and finances, please feel free to contact Hickey&Hickey Accountant Consultants.  We are here to help by providing financial information for Individuals and Small Business. Email us today at info@hickeyandhickey.com or by phone (516)998-7410

 

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10 tips on Budgeting and Tax Analysis to Whip Your Personal & Business Finances into Shape

Image10 tips on Budgeting & Tax Analysis

-Raquel Hickey, Hickey&Hickey Accountant Consultants

Usually we think about accountants when we are in trouble with the IRS, our State, or in Tax season and what is worse we rate our accountants blindly by the tax reporting we are asking them to do for us, more often than not with what our refund is.

This mainly happens because we do not understand how important is to budget and to analyze our expenditures. Generally after tax season is over we look back into our reporting and begin comparing our payment/ reimbursement with that of our neighbors and the finger pointing begins and ends with our Tax Accountant. We clearly forget that finger pointing is not going to get us into better brackets and that our neighbor’s reimbursement has nothing to do with our rate of return, nor with our family’s economic well being.

Let’s begin with Budgeting. Budgeting is about managing our money and it is very important not only for corporations but also for the smallest entities and for our own families.

We boringly hear about the public sector going to the phases and processes of preparation, negotiation, approval process, spending approval etc. etc., but us boring as it sounds we barely understand that this boring process can prevent our complain at the pot holes left after the winter, at cost hike in the tolls of bridges and tunnels, etc., etc., how can we solve those issues???

Let’s go back to our Personal information. What about setting our own personal budgets:

1)    Get the heads of household involved

2)    Draw a plan with long Term goals

3)    List all the issues that need to be covered to attain these goals

4)    Place figures and bring them to our today income

5)    The insufficiency of funds will trigger regulation on expending and additional modes of income

6)    Share with the rest of the family and make adjustments with collaborative agreements from within your own circle

7)    Share with your accountant and ask for budget and tax review

8)    Meet again with your family to arrive at new covenants

9)    Execute

10)Review on a monthly basis.

Remember these are simple techniques and the foundation for how to view our income both personal and business.  For more tips and for an in depth financial analysis and plan for your personal wealth or business, Contact Hickey&Hickey today

(516)998-7410  or info@hickeyandhickey.com

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Earned Income Tax Credit Basics : What to Know to Claim It ( 1 of 2)

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QUALIFYING FOR EARN INCOME TAX CREDIT

Some taxpayers with lower-paying jobs may be eligible for an earned income tax credit (EITC), based on their income levels. The EITC is a refundable credit; if the credit amount exceeds the taxpayer’s tax liability, the taxpayer may receive a refund for the excess. The number of returns claiming the EITC has grown in recent years: The IRS reports that 27 million taxpayers received $63 billion in EITC in 2012.

First, let’s discuss what Earned Income is:

Earned income

As indicated by its name, this credit is available only to taxpayers who have earned income. If a taxpayer is married and files a joint return, this requirement is met if at least one of the spouses works and has earned income.

Earned income includes:

  • Wages, salaries, tips, and other taxable employee pay (when includible in the taxpayer’s gross income for the tax year);
  • Net earnings from self-employment (if the taxpayer owns a business or is a minister or member of a religious order); and
  • Gross income received as a statutory employee.

It does not include (among other things) interest and dividends; pensions and annuities; alimony and child support; and welfare benefits and unemployment compensation.

Taxable disability benefits received under an employer’s disability retirement plan are earned income until the taxpayer reaches minimum retirement age (generally, the earliest age at which a taxpayer could have received a pension or annuity if he or she were not disabled). Once a taxpayer reaches minimum retirement age, these payments are taxable as a pension and are not earned income. (Note: Payments from a disability insurance policy for which the taxpayer paid the premiums are not earned income, regardless of the taxpayer’s age.)

Foreign earned income. A taxpayer cannot claim the EITC if he or she has foreign earned income.

Investment income. A taxpayer may have only a limited amount of investment income; for 2013, this amount must be $3,300 or less. For 2014, the amount is $3,350 or less. Investment income generally includes interest (including tax-exempt interest), dividends, capital gain net income, net rental income, net royalty income, and net passive activity income. Gain treated as long-term capital gain under Sec. 1231(a)(1) will not be considered investment income.

AGI limits. Only taxpayers with income below certain levels are eligible for the EITC. These amounts differ, depending on whether the taxpayer is married and on how many children (if any) the taxpayer has. As a taxpayer’s AGI increases, the credit is phased out, with taxpayers above certain income levels not eligible for any credit at all.

However, there are many requirements that must be met to qualify:

Citizenship. To qualify for the EITC, the taxpayer (and spouse, if married) must be a U.S. citizen (or a resident alien) for the entire year.

Nonresident alien. If the taxpayer (or spouse) is a nonresident alien for any part of the year, he or she cannot claim the EITC unless the taxpayer files jointly with his or her spouse. This filing status may be used only if one spouse is a U.S. citizen (or resident alien) and the nonresident spouse elects to be treated as a U.S. resident. If they make this election, the couple will be subject to U.S. tax on their worldwide income, not just the amounts earned in the United States.

Social Security numbers. The taxpayer (and spouse, if married and filing jointly) must have a valid Social Security number. This is also a requirement for any qualifying child.

Note: A taxpayer or spouse who has an individual taxpayer identification number (ITIN) (rather than a Social Security number) is not eligible to claim the EITC.

Filing status. If the taxpayer is married, he or she must generally file as “married filing jointly”; a taxpayer filing as “married filing separately” cannot claim the EITC.

More Tips on Claiming the Earned Income Tax Credit (EITC) Click the link below

http://wp.me/p18mlc-9R

As always consult with a Tax Professional, who is always willing to explain your return and answer all your questions.  Hickey&Hickey is a Full Service Tax and Accounting Consulting Firm that is always here to inform and educate the public.  For a Consultation or a Tax Prep appointment Call (800)576-9574 or by email info@hickeyandhickey.com

 

 

 

 

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Earned Income Tax Credit Basics : What to Know to Claim It ( 2 of 2)

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Alert! Increase in the Minimum Wage in NY and the Tri-State Area

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INCREASE IN THE MINIMUM WAGE

for all businesses working in New York, New Jersey and Connecticut

NEW YORK

$8.00 ON 12/31/2013

$8.75 ON 12/31/14

$9.00 ON 12/31/15

Beginning on December 31, 2013, New York Employers must pay exempt employees at least $600.00 per week – $31,200 on an annualized basis – inclusive of board, lodging and other allowances.

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Things for Businesses to Ponder as We Close the Year

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We are at a point where our thoughts, our bodies, our souls and all our efforts are focused on the year end festivities.  Family, friends, gifts, parties and we alll deserve it!

 
After the Holiday season and as we approach the New Year t let’s look back, did we learn any lessons? Let’s review these ones:
  1. Divided houses cannot stand.  Once you make decisions, share it.  Make sure everyone is on the same page.
  2. Appreciate your Colleagues and your clients.  It does not matter how much hot air they make you blow, they are your support.
  3. Part with those who are not helping you.  They may well be partners or clients but  if they can not agree with your policies and procedures, it is time to let go.
  4. Have Plan and expect the unexpected.  This is the most important and crucial part. Make sure you really understand the demographics of your business.  Plan, review, keep in check, make sure you are in compliance, but most importantly know that like natural disasters there are always unexpected circumstances.
ENJOY YOUR HOLIDAYS!
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Special Tax Considerations for Veterans

 

Disabled veterans may be eligible to claim a federal tax refund based on:

 

  • an increase in the veteran’s percentage of disability from the Department of Veterans Affairs (which may include a retroactive determination) or
  • the combat-disabled veteran applying for, and being granted, Combat-Related Special Compensation, after an award for Concurrent Retirement and Disability.

 

To do so, the disabled veteran will need to file the amended return, Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A or 1040EZ. An amended return cannot be e-filed. It must be filed as a paper return.  Disabled veterans should include all documents from the Department of Veterans Affairs and any information received from Defense Finance and Accounting Services explaining proper tax treatment for the current year.

 

Please note: It is only in the year of the Department of Veterans Affairs reassessment of disability percentage (including any impacted retroactive year) or the year that the CRSC is initially granted or adjusted that the veteran may need to file amended returns.

 

Under normal circumstances, the Form 1099-R issued to the veteran by Defense Finance and Accounting Services correctly reflects the taxable portion of compensation received. No amended returns would be required, since it has already been adjusted for any non-taxable awards.

 

If needed, veterans should seek assistance from a competent tax professional before filing amended returns based on a disability determination. Refund claims based on an incorrect interpretation of the tax law could subject the veteran to interest and/or penalty charges.

Hickey&Hickey is always here to provide the most up to date News & Information to help safeguard your financial future for those who give their all for their country and the general public.  Contact us today for Financial Advice, Tax Prep and Business Consultations (516)998-7410 or by email: Info@hickeyandhickey.com

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Small Business Owners and their Workers need UNITY and PASSION

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As a Business owner you need to take the time to do the BIG THINKING.  When you do this on a daily basis you will differentiate in your employees your leaders, and engage them to drive real growth.

Take the following steps:

 

  1. Have a vision committee meeting at least once a month ( your partners, your consultants, your managers).
  2. Allow the group to bring up new possibilities and allow them to question and talk openly.
  3. Review backward. What your company will be in 10 years from now, then 5 years, followed by 3 and 1 and what are the steps taken to develop this vision.
  4. How can you be different from your competition and what can you do to excel at it.
  5. Review who is your current clientele and how you can reach the target figures in your market in your geographical location.
  6. How does your firm stands in terms of revenues, number of partners, number of staff, in reference to the clients you serve.
  7. How diverse is your clientele (Do you have only one source of clients, one big contract, a lot of small ones, diverse contracts????).
  8. Review contingency in case you or top management need to absent for a period of time, who will take charge, who will make decisions, how does continuity is assured?
  9. How is the face of the company being projected?
  10. How is your marketing plan, is the financial and operational programs in complete agreement with the marketing plan in place?

 

As business owners we must continually reformulate our vision, think big, take risks and make tough decisions but most importantly we need to integrate our vision plan into theday-day business and this is only attained by maintaining our Unity and Passion alive.

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