A Name Change Could Affect your Taxes

Did you know that a name change could impact your taxes? Here’s what you need to know:

1. Report Name Changes. Did you get married and are now using your new spouse’s last name or hyphenate your last name? Did you divorce and go back to using your former last name? In either case, you should notify the SSA of your name change. That way, your new name on your IRS records will match up with your SSA records. A mismatch could unexpectedly increase a tax bill or reduce the size of any refund.

2. Make Dependent’s Name Change. Notify the SSA if your dependent had a name change. For example, this could apply if you adopted a child and the child’s last name changed. If you adopted a child who does not have a Social Security number, you may use an Adoption Taxpayer Identification Number on your tax return. An ATIN is a temporary number. You can apply for an ATIN by filing Form W-7A,Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS.

3. Get a New Card. File Form SS-5, Application for a Social Security Card, to notify SSA of your name change. You can get the form onSSA.gov or call 800-772-1213 to order it. Your new card will show your new name with the same SSN you had before.

4. Report Changes in Circumstances when they happen. If you enrolled in health insurance coverage through the Health Insurance Marketplace you may receive the benefit of advance payments of the premium tax credit. These are paid directly to your insurance company to lower your monthly premium. Report changes in circumstances, such as a name change, a new address and a change in your income or family size to your Marketplace when they happen throughout the year. Reporting the changes will help you avoid getting too much or too little advance payment of the premium tax credit.

If you have any questions related to IRS requirements regarding a name change, please call.

What is the Additional Medicare Tax

Some taxpayers may be required to pay an Additional Medicare Tax if their income exceeds certain limits. Here are some things that you should know about this tax:

1. Tax Rate. The Additional Medicare Tax rate is 0.9 percent.

2. Income Subject to Tax. The tax applies to the amount of certain income that is more than a threshold amount. The types of income include your Medicare wages, self-employment income, and railroad retirement (RRTA) compensation. If you’re not sure if you have income subject to these rules, please call the office.

3. Threshold Amount. You base your threshold amount on your filing status. If you are married and file a joint return, you must combine your spouse’s wages, compensation or self-employment income with yours. Use the combined total to determine if your income exceeds your threshold. The threshold amounts are:

• Married filing jointly: $250,000
• Married filing separately: $125,000
• Single: $200,000
• Head of household: $200,000

3. Withholding/Estimated Tax. Employers must withhold this tax from your wages or compensation when they pay you more than $200,000 in a calendar year. If you are self-employed you should include this tax when you figure your estimated tax liability.

4. Underpayment of Estimated Tax. If you had too little tax withheld, or did not pay enough estimated tax, you may owe an estimated tax penalty. For more on this, please call.

5. Form 8959. If you owe this tax, file Form 8959, Additional Medicare Tax, with your tax return. You also report any Additional Medicare Tax withheld by your employer on Form 8959.

Questions?

If you have any questions about the Additional Medicare Tax, help is just a phone call away.

Tax Breaks for Hiring New Employees

f you’re thinking about hiring new employees this year, you won’t want to miss out on these tax breaks.

1. Work Opportunity Credit

The Work Opportunity Tax Credit (WOTC) is a federal tax credit for employers that hire employees from the following targeted groups of individuals:

• A member of a family that is a Qualified Food Stamp Recipient
• A member of a family that is a Qualified Aid to Families with Dependent Children (AFDC) Recipient
• Qualified Veterans
• Qualified Ex-Felons, Pardoned, Paroled or Work Release Individuals
• Vocational Rehabilitation Referrals
• Qualified Summer Youths
• Qualified Supplemental Security Income (SSI) Recipients
• Qualified Individuals living within an Empowerment Zone or Rural Renewal Community
• Long Term Family Assistance Recipient (TANF) (formerly known as Welfare to Work)

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Qualified Small Business Stock Exclusion

As the driving force in today’s economy, small businesses benefit from numerous tax breaks in the tax code. One of these, the Qualified Small Business Stock (QSBS), was just made permanent, thanks to the passage of the PATH Act (Protecting Americans from Tax Hikes Act of 2015). If you’re a small business investor, here’s what you need to know about this often overlooked tax break.

What is the Qualified Small Business Stock (QSBS) Exclusion?

Sometimes referred to as Section 1202 (after Section 1202 of the Internal Revenue Code, PATH made permanent for taxpayers (excluding corporations) the exclusion of 100 percent of the gain on the sale or exchange of qualified small business stock (QSBS) acquired after September 27, 2010, that is held longer than five years.

Further, QSBS gain excluded from income is not subject to 3.8 percent Obamacare tax on “Net Investment Income” from capital gains (and other investment income) on high-income taxpayers.

The definition of a qualified small business under the IRS varies; however, examples of businesses that do NOT qualify include, but are not limited to:

• A regulated investment company,
• A real estate investment trust (REIT)
• One involving services performed in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services;
• Any business of operating a hotel, motel, restaurant, or similar business.
• Any farming business (including the business of raising or harvesting trees).

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Tips for Taxpayers with Foreign Income

If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship.

In addition, U.S. taxpayers with foreign accounts exceeding certain thresholds may be required to file Form 114, known as the “FBAR” as well as Form 8938, also referred to as “FATCA.”

Note: FBAR is not a tax form, but is due to the Treasury Department by June 30, 2016, and must be filed electronically through the BSA E-Filing System website. Starting in tax years after December 31, 2015, the FBAR will be due on April 15 and may be extended to October 15.FATCA (Form 8938) is submitted on the tax due date (including extensions, if any,) of your income tax return.

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