Monday, November 28, 2016

Tax Aspects of Divorce and Separation

When it comes to legal separation or divorce, there are many complex situations to address. A divorcing couple faces many important decisions and issues regarding alimony, child support, and the fair division of property. While most courts and judges will not factor in the impact of taxes on a potential property settlement or cash payments, it is important to realize how the value of assets transferred can be materially affected by the tax implications.

Dependents

One of the most argued points between separating couples regarding taxes is who gets to claim the children as dependents on their tax return, since joint filing is no longer an option. The reason this part of tax law is so important to divorcing parents is that the federal and state exemptions allowed for dependents offer a significant savings to the custodial parent, and there are also substantial child and educational credits that can be taken. The right to claim a child as a dependent from birth through college can be worth over $30,000 in tax savings.

The law states that one parent must be chosen as the head of the household, and that parent may legally claim the dependents on his or her return.

Example: If a couple was divorced or legally separated by December 31 of the last tax year, the law allows the tax exemptions to go to the parent who had physical custody of the children for the greater part of the year (the custodial parent), and that parent would be considered the head of the household. However, if the separation occurs in the last six months of the year and there hasn't yet been a legal divorce or separation by the year's end, the exemptions will go to the parent that has been providing the most financial support to the children, regardless of which parent had custody.

A non-custodial parent can only claim the dependents if the custodial parent releases the right to the exemptions and credits. This needs to be done legally by signing tax Form 8332, Release of Claim to Exemption. However, even if the non-custodial parent is not claiming the children, he or she still has the right to deduct things like medical expenses.

Child support payments are not deductible or taxable. Merely labeling payments as child support is not enough -- various requirements must be met.

Alimony

Thursday, November 24, 2016

Happy Thanksgiving from NFS



From All of us here at

Northeast Financial Strategies, Inc.

WE GIVE THANKS...

... For Our Families
... For Our Friends
... Four Our Clients
... For Our Communitiy
... For You

HAPPY THANKSGIVING!

Wrentham Thanksgiving, Wrentham Outlets, Wrentham Black Friday

Wednesday, November 16, 2016

How to Avoid an IRS Tax Refund Delay; Plan Ahead

WASHINGTON – As tax filing season approaches, the Internal Revenue Service is reminding taxpayers about steps they can take now to ensure smooth processing of their 2016 tax return and avoid a delay in getting their tax refund next year.

The IRS reminds taxpayers to be sure they have all the documents they need, such as W-2s and 1099s, before filing a tax return. You may also need a copy of your 2015 tax return to make it easier to fill out a 2016 tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income amount from a prior tax return to verify their identity. Learn more about how to verify your identity and electronically sign your tax return at Validating Your Electronically Filed Tax Return. The IRS will begin accepting and processing tax returns once the filing season begins.

Under the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), any Individual Taxpayer Identification Numbers (ITIN) issued prior to 2013 or that haven’t been used for tax-years 2013, 2014 and 2015 will no longer be valid for use on a tax return as of Jan. 1, 2017. Individuals with expiring ITINs who need to file a return in 2017 will need to renew their ITIN. This process typically takes 7 weeks to receive an ITIN assignment letter, but the process can take longer - 9 to 11 weeks if taxpayers wait to submit Form W-7 during the peak filing season, or send it from overseas. Taxpayers who do not renew an expired ITIN before filing a tax return next year, could face a delayed refund and may be ineligible for certain tax credits. For more information, visit the ITIN information page on IRS.gov.

If you claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) on your tax return, the IRS must hold your refund until February 15. This new law requires the IRS to hold the entire refund — even the portion not associated with EITC or ACTC. This change helps ensure that you receive the refund you are owed by giving the agency more time to help detect and prevent fraud.

Friday, November 11, 2016

Happy Veterans Day From NFS





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$30 Off Income Tax Preparation Year-Round

Thursday, November 3, 2016

New Law Sets Jan. 31 W-2 Filing Deadline; Some Refunds Delayed Until Feb. 15

A new federal law moves up the W-2 filing deadline for employers and small businesses to Jan. 31.

The new law makes it easier for the IRS to find and stop refund fraud. It also delays some taxpayer refunds. Those taxpayers claiming the Earned Income Tax Credit or the Additional Child Tax Credit won’t see refunds until Feb.15, at the earliest.

Here are some key points to keep in mind:

  • Protecting Americans from Tax Hikes (PATH) Act. Enacted last December, the new law means employers need to file their copies of Forms W-2  by Jan. 31. These forms also go to the Social Security Administration. The new deadline also applies to certain Forms 1099. Those reporting nonemployee compensation such as payments to independent contractors submitted to the IRS are due Jan. 31. Employers have long faced a Jan. 31 deadline in providing copies of these forms to their employees. That date won’t change.
  • Different from past deadline. Employers normally had until the end of February, if filing on paper, or the end of March, if filing electronically, to send in copies of these forms. The IRS is working with the payroll community and other partners to spread the word.  
  • Helps stop fraud or errors. The new Jan. 31 deadline will help the IRS to spot errors on returns filed by taxpayers. Having these W-2s and 1099s sooner will make it easier for the IRS to verify legitimate tax returns and get refunds to taxpayers eligible to receive them. The changes will allow the IRS to send some tax refunds faster.
  • Some refunds delayed. Certain taxpayers will get their refunds a bit later. By law, the IRS must hold refunds for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until Feb. 15. This means the whole refund, not just the part related to the EITC or ACTC.
  • File tax returns normally. Taxpayers should file their returns as they normally do. The IRS issues more than nine out of 10 refunds in less than 21 days. However, some returns may need further review. Whether or not claiming EITC or ACTC, the IRS cautions taxpayers not to count on getting a refund by a certain date. Consider this fact when making major purchases or paying debts.
  • Use IRS.gov online tools. Starting Feb. 15, the best way to check the status of a refund is with the Where's My Refund? tool on IRS.gov or the IRS2Go Mobile App.


Wednesday, November 2, 2016

IRS Announces 2017 Pension Plan Limitations; 401(k) Contribution Limit Remains Unchanged at $18,000 for 2017

WASHINGTON — The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2017. The IRS today issued technical guidance detailing these items in Notice 2016-62.

Highlights of changes for 2017

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the saver’s credit all increased for 2017.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions.  If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.)    Here are the phase-out ranges for 2017:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $62,000 to $72,000, up from $61,000 to $71,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $99,000 to $119,000, up from $98,000 to $118,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $186,000 and $196,000, up from $184,000 and $194,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $118,000 to $133,000 for singles and heads of household, up from $117,000 to $132,000.  For married couples filing jointly, the income phase-out range is $186,000 to $196,000, up from $184,000 to $194,000.  The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Tuesday, November 1, 2016

8 Estate Planning Mistakes to Avoid




















Estate planning can be complicated, and it’s not uncommon for people to make mistakes with their plans. But financial advisors make errors, too, so here are the most common mistakes we have encountered from other financial and estate planners.

1. Improper beneficiary designations

I frequently see advisors improperly completing beneficiary designations. Examples: not changing the beneficiary due to divorce or a death, or listing a special needs child or grandchild directly as a beneficiary, rather than a trust FBO (for benefit of), thereby affecting their eligibility for Social Security disability benefits.

2. Not changing asset titles to trusts

Incorporating revocable living trusts into a client’s estate plan but forgetting to update all the account titling to the name of the trust. Not changing titles creates problems that include having to pay additional probate costs, losing the private nature of settling the estate, etc.

3. Incorrectly assuming clients’ goals

Many advisors assume a client’s main goal is to save estate taxes, for example. However, when really connecting with a client, we might find that taxes are only a small aspect of their objectives. Sometimes, in listening to the client, we realize that their fears are more about their heirs’ ability to manage the inheritance as well as decisions such as trustees, etc.

Monday, October 31, 2016

Halloween Safety Tips from NFS


Halloween Safety Tips to Have a safe and fun Halloween!

KNOW THE RULES

1. Instruct your older children to TAKE FRIENDS when “Trick or Treating.”

2. Make sure a TRUSTED ADULT, an older child, or you accompany your younger children when “Trick or Treating.” A trusted adult is a person parents/guardians have come to rely on and with whom they and their children feel comfortable. Discuss with your child who will accompany him or her and make sure you are both comfortable with the choice.

3. Accompany, or make sure a trusted adult accompanies, your younger children to the door of every home they approach. Become familiar with each home your child visits and the people who are providing Halloween treats to your children.

4. Teach your children to only enter homes with your prior permission and only approach homes that are well-lit both inside and outside.

5. Teach your children to NEVER approach a vehicle unless they are accompanied by you, even if it appears no one is inside the vehicle.

6. Make sure your children wear reflective clothing and carry a flashlight or glow stick when traveling during the evening hours.

7. Make sure your children are able to see and breathe properly and easily when using facial masks.
All costumes and masks should be clearly marked as flame resistant.

8. Teach your children to always stay in well-lit areas, never take shortcuts, and never go into isolated areas.

9. Teach your children to stay alert for any suspicious incidents and report anything unusual to you and/or law enforcement. Teach your children if anyone tries to grab them to draw attention to themselves and loudly yell “This person is trying to take me,” or “This person is not my father/mother.” Instruct your children to make every effort to escape by walking, running, or pulling away; yelling; kicking; attracting attention; and/or otherwise resisting. Consider organizing or attending parties at home, in schools, or in community centers as a good alternative to “Trick or Treating.”

Have a Safe & Fun Halloween!!

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