College tuition has become one of the biggest sources of debt for those who choose to further their education at a University. It is the burden that one takes on for improving their knowledge and skill set to further their career. A way to reduce the amount of tuition that you pay is to apply for certain scholarships and/or grants. This is a great way to reduce the amount of student loans to pay off down the road.
However, when it comes to scholarships and grants, they may be reducing the amount of education credits that you are receiving on your tax return. Education credits are based upon the amount of tuition that was actually paid. Thus, tuition that was paid with scholarships and grants does not count. When reporting Form 1098-T (tuition tax form) you will report both the total tuition and total scholarships/grants. The amount that can be used towards education credits is tuition-scholarships/grants. The American Opportunity Credit is the most beneficial education credit out there. This credit can be up to $2,500 for students in their first 4 years of college. The amount of credit that you will receive is based upon the amount of eligible tuition expenses that you have. Many times students with scholarships will not be able to maximize this full credit, because their tuition expenses just aren’t enough to do so.
So, how do we get the full education credits that are available?
Are you a parent that claims your child as a dependent and they have a scholarship or grant?
We have strategies available to maximize that credit for you and get you a larger refund. If you are someone in this situation and have yet to file your tax return, please contact our office before doing so. If you have already filed your tax return, we can look into amending your tax return if we think changing things will benefit you.
Don’t leave an extra refund out there, call 414-545-1890.
When Will I Get My Tax Forms?
As I am writing this post on January 20, 2017, the IRS officially opens the 2016 tax return filing in 3 days. Tax season is here, which means that it is time to gather all of your tax documents that are needed to prepare a tax return. So, when will you be receiving all of these forms? These dates are also important if you are a business owner and need to issue any W-2’s or 1099’s.
|Form||Due to Recipient||E-file to IRS|
|1099-MISC||Feb 1, 2016||Mar 31, 2016|
1099-MISC boxes 8 or 14
|Feb 15, 2016||Mar 31, 2016|
|Other 1099 Forms
|Feb 1, 2016||Mar 31, 2016|
|W-2||Feb 1, 2016||Mar 31, 2016|
- Health Insurance Statements through the Marketplace (Form 1095-A) should be available in your online account by 2/1/17. This year, employers have until 3/2/17 to distribute health insurance statements (Form 1095- B or C) to their employees.
- If you are involved in a Partnership or S-Corporation, when you receive your K-1 will depend on when the Partnership or Corporation decides to file their tax return. The filing due date is 3/15/17, but you may have to wait longer if they decide to file an extension.
- Rule of Thumb: If you receive a document that you think may be pertinent to your tax return, keep it just in case! If you need a guideline to make sure you have all the documents you need, you can download our tax organizer.
Get Your Tax Return Won?
Having a background in marketing, I always pay attention to commercials and all aspects involved in them. Some people may change the channel when commercials are on, but I enjoy analyzing them. Naturally, I am even more interested when I see commercials during tax season. I realize that these large corporations have a massive marketing budget, and in most cases they are trying to repeatedly beat a message into your mind. However, I have found some of these campaign messages laughable. Last year, Turbo Tax is the company that really gave me a chuckle. “You don’t need to be a genius to do your own taxes”. While this statement is true(BREAKING NEWS: I AM NOT A GENIUS), you don’t need to be a genius to do 99% of things in life. There is a difference between being a genius and being an expert in your field. Do you need to be a genius to repair your car? No, but you take it to a mechanic because they are experts in fixing cars. The alternative is trying to fix it on your own, and then you run the risk of creating more damage and wasting your time. You can apply this reasoning to almost everything in life that you opt to have someone professionally do for you. You can try to do your own taxes, but is it worth the time and also the risk of a) dealing with the IRS or b) missing out on a potential extra refund.
This year, H&R Block hands down takes the cake so far. They have cast Jon Hamm to be their spokesman in a bunch of just weird commercials. Their message is “Get Your Tax Return Won”. How does one get their tax return won? I suppose their message is to try and make consumers feel like they became a winner when they got their taxes done at H&R Block? In that case, you get your tax return “won” if it is prepared correctly. I would think that if you are hiring a professional to help you with your taxes, a correct tax return is assumed. Broadcasting that this is a big deal to them just misses the mark in my opinion. The truth is, you can’t win against the tax system when filing your tax return. The outcome is already decided at that time, there isn’t anything you can change besides contributing to an IRA. Winning your tax return takes a game plan, a game plan that must be executed before the end of the year.
Hammernik & Associates motto is “More Than Just A Tax Return”. This means that we aren’t just here to help you file your taxes, we are here throughout the year to help you execute that winning game plan. Your game has already been decided for 2016, do you think you won or loss? Now is the time to begin the game for 2017. Who will win, you or the IRS? The only true way to get your tax return won is to set up a game plan now!
end rant 🙂
Today is the day a new President steps into office.Whether you are in favor or not in favor, it is important to be prepared for what may come. When Donald Trump was elected President, I put together an e-book of what he would like to do with tax law. Some of these ideas may never come to fruition, some may come sooner than you expect, some may come in the future, and some may come in a modified form. As we always stress, it is important to prepare for what may come in the future. Take a look to see if any of these may effect you positively or negatively. Either way, we will be on top of tax law changes for you. Major tax planning may be needed to prepare for some of the changes, that is what we are here for!
Once you think you have all your tax documents, give us a call to schedule your appointment…we’re waiting!
Until next time,
Nicholas Hammernik, EA
With the holiday season upcoming, we thought it would be a great idea to compare your finances to the classic Christmas tale, “A Christmas Carol”. The main plot for this story is the life of one, Ebenezer Scrooge. The ‘Ghost of Christmas Past’ takes Scrooge back in time to remind him of how his life used to be and the way he used to act. The ‘Ghost of Christmas Present’ gives Scrooge a synopsis of his current daily life. Finally, the “Ghost of Christmas Future’ takes Scrooge into the future and shows him how his life will look in the future if he keeps living the same way he is in the present. So, let’s see how this compares to your financial situation…
My Financial Past, Present & Future
Your Financial Past:
- Hammernik & Associates helps taxpayers recover from mistakes that they may have made in their past. If information was accidentally not reported on a prior tax return, or if a tax return was not filed correctly, we are able to file an amended tax return for up to 3 years.
- What if you receive a letter from the IRS saying that they want to make changes to a prior tax return, or they want to audit your tax return? As Enrolled Agents, we are able to address these situations for you. We are able to correspond with the IRS on your behalf so that you don’t need to personally speak to them at all!
- The IRS is on your back for past taxes that you owe them. They have the power to place liens on your accounts and start taking the money that you owe them. Hammernik & Associates is able to represent you and get you back on the right track. We will work with the IRS agent to remove any liens, get a payment plan in place, and get you on the road back to financial freedom.
Your Financial Present:
- The tax code is always changing, and may be in store for another overhaul in the new presidency. Hammernik & Associates is always studying and taking classes to keep up with all tax law changes. Have the peace of mind that you are receiving all the credits and deductions that you deserve and are reducing your tax liability.
- Stay compliant. We will help make sure the tax return that you are submitting is compliant with IRS standards to avoid future problems.
- Set a game plan now for the next year. Maybe you did not take advantage of tax planning this year and it cost you some money, don’t make the same mistake again for the next year. Get a game plan set up now that will help you in the future.
Your Financial Future:
- You cannot change the present (your tax return when it is filed) if you don’t plan for the future. Be proactive with your tax planning. There may be strategies available that can save you money at the end of the year by taking actions throughout the year.
- If you expect changes in your life that may effect your financial situation, plan for them now!
- Definition of Insanity: Doing the same thing over and over and expecting different results. What are you going to change? It’s your future, make it great.
My Financial Past, Present & Future is the basis around our Year End Newsletter which is set to hit our client’s mailboxes next week. If you would like to view an electronic version of the newsletter, it can be viewed on the homepage of hammernikassoc.com. Also available there, you will find our tax organizer if you want to get a head start on gathering up all of your tax documents.
Merry Christmas & Happy Holidays!
…Tax Season Is Coming.
2017 Filing Season Begins January 23rd
The IRS has announced that it will begin accepting electronically filed tax returns on January 23rd, 2017. What does this mean for taxpayers? You can have your tax return prepared earlier than the 23rd if you have all of your documents, however, the tax return cannot be submitted until 1/23/17.
Note: There is no advantage to trying to file a tax return earlier than this by mail, it will not get filed any earlier than the 23rd.
Tax Filing Deadline is April 18th
Typically when you think of the last day to file a tax return, you think April 15th. However, the Tax Gods blessed us with 3 extra days this year! Yay…
This year, April 15th falls on a Saturday. This results in having to move the day to the next business day, which is Monday. However, Monday the 17th is a legal holiday in Washington D.C., Emancipation Day. Therefore, Tuesday the 18th is the last day to file a tax return without an extension to avoid late filing.
Reminder: Refunds To Be Delayed
As I blogged about a couple of months ago, the IRS is delaying certain refunds until February 15th. If you file for certain credits on your tax return, your refund will be delayed to allow extra time to verify the credits that are claimed. The IRS is warning that these refunds may be delayed until February 27th based on workflow. Plan accordingly.
It is always important to plan ahead for your tax return filing. Identity theft is not dead, and a good way to combat it is to file as early as you can. Once you are confident you have all the necessary documents needed to file a tax return, schedule your appointment to come in!
Next Friday is Black Friday. Next Saturday is Small Business Saturday. Instead of waking up at 4 am to wait in line at a big box retailer on Friday, explore the small businesses that help your community thrive on Saturday. As a small business ourselves that specializes in helping small businesses with their accounting, Small Business Saturday is a movement that we are totally behind. A small business not only helps the economy of your community, but it also provides jobs to your community.
While we suggest that you support your small businesses throughout the year, American Express decided to dedicate a specific day to promote small businesses. They started the movement in 2010 and it has grown to the point where last year approximately 95 million people went out to shop at a small business last year. American Express also adds incentive to their credit cars holders by giving extra rewards for purchases at small businesses. You can search for local small businesses in your area here: SBS Locations. Some communities have come together to promote the day. Take for instance, the Third Ward. They have created a website dedicated to Small Business Saturday that displays the local small businesses and some deals that they are offering for the day:Third Ward SBS.
Through my experience working with small business owners, I have learned a lot about what small business is all about. A small business owner really loves what they do. They enjoy providing the services in which they provide, they enjoy helping their customers, and they enjoy being part of their community. There are not any corporate agendas involved, the business is like a family.
We help these owners with their small business accounting in Milwaukee, Waukesha, Brookfield, New Berlin, Wauwatosa, West Allis, Mukwonago, Oconomowoc, and other surrounding cities. Our goal is to provide these business owners with more time to focus on growing their business.
Small Business Saturday this year is on Saturday, November 26th. Please show your support to the small businesses that you frequent often, or try out a new business for the first time. Save your money that you would give to a corporate business on Black Friday and use it to support your community. If you know of any small businesses that you think people should visit next Saturday, please feel free to share on our Facebook Page. You can follow along with the movement by using the hashtag on social media of #shopsmall.
Happy Small Business Saturday!
My fellow American taxpayers,
On Tuesday night, Donald J. Trump was elected as the next President of the United States. Whether you are happy, upset or indifferent with that outcome, one thing is for certain, uncertainty with the tax code lies ahead. ‘Trump Tax’ is here. However, this is nothing new; the tax code is always evolving, it has been for the past 100 years. Just take a look at what a 1040 tax form looked like in the year 1913:
That’s right…one page. Today, some taxpayers have a tax return the size of a High School textbook. Hammernik & Associates wasn’t around in 1913, but we have been staying on top of the tax code for the last 30 years. Over that time span, there have been many overhauls, tweaks, and changes to the way you report your income tax today. No matter the uncertainty that lies ahead with your tax return, rest assured that Hammernik & Associates will use our proactive approach to keep or clients informed and prepared for possible change.
With that being said, Donald Trump wants to change your tax return. Does this scare you, or are you intrigued that his proposals might save you money?
TRUMP TAX PROPOSALS
- Goodbye, Obamacare?
- Tax Bracket Change
- Standard Deductions Rise
- Child Care Credit Increase
- Alternative Minimum Tax (AMT) Removed
- Net Investment Income Tax (NIIT) Removed
- Estate Tax Removed
- Flat Tax Rate For All Businesses
Do you want to find out how Trump might effect YOUR tax bill? We have put together an E-Book, “The 7 Ways Donald Trump Wants To Change Your Taxes”. You can download this E-Book on the homepage of our website, www.hammernikassoc.com.
Hammernik & Associates will stay ahead of the Trump changes, as well as any other change to the tax law. We will help you tax plan for your unique tax situation. With tax uncertainty looming, it is a good idea to ask your tax professional about our tax planning packages when you meet with them in a few months. Make Hammernik & Associates your trusted candidate for the role of tax adviser in 2017 and the future.
P.S. Milwaukee tax accountants Dale Hammernik, Dave Biskup, and Nick Hammernik will be holding a ‘Trump Tax’ round table for a more in depth discussion of the tax proposals from Donald Trump. Stay tuned for the release of that video next week.
Our office is full of leftover Halloween candy. It is hard to walk by it all day an resist grabbing something to snack on. How about you? Did you sneak a stash of your kid’s candy for personal use. Halloween candy is like Thanksgiving dinner…there is always going to be leftovers! So, Milwaukee, can that leftover candy help with your tax preparation this year?
I came across this article from one of my favorite follows, Kelly Phillips Erb, who is a writer for Forbes.
The title of this article can be a little tricky if you take it literally, but what a treat this article is to read. You can use the tax consequences in this article for any exchange of goods that apply.
A lot of this article is tongue and cheek, but #7 is actually a legitimate use for leftover candy. If you can find a qualified charitable organization that accepts candy, you can deduct the fair market value of the candy that you donate to them.
What about that costume that you wore for Halloween this year? Think you will ever use it again? If not, donate it to Goodwill and not only receive a tax deduction, but you might help out somebody looking for an affordable costume next Halloween!
While we are on the topic of charitable donations, Hammernik & Associates is jumping on board with Movember to raise awareness for men’s health. While you may be accustomed to always seeing Dale with a mustache, you might be seeing a few more mustached men around the office this month. Donate Here!
Halloween candy and mustaches…exactly what you thought you would read about in a tax blog, right? 😉
Enjoy this beautiful fall weekend!
Nicholas Hammernik, EA
Halloween circa 2007
The month of November is approaching, which means that there is about 2 months left to write the story of your 2016 income tax return. These moves may not apply to everyone, but it is good to have knowledge of them.
1) Plan Your Itemized Deductions: Will a higher deduction amount benefit you more next year than this year? If you suspect your income may be substantially higher in 2016 vs. 2017, plan to push more deductions to the higher income year. You can do so by utilizing your charitable deductions, mortgage interest, and real estate taxes.
2) Fatten Up Your 401K Or Simple IRA: If you are not reaching the limit of contributions to your employer sponsored retirement plan, start accelerating deposits into it. This strategy will lower the amount of your taxable income for 2016. Of course, only do so if you do not need to utilize the extra take home pay.3) Convert Your IRA To A ROTH: Do you expect to move up tax brackets sometime in the near future? If you convert your traditional IRA to a ROTH IRA now, you will pay the tax at your current tax bracket instead of your higher tax rate in the future.
4) Sell Stock: First of all, you should never base your investment strategies around tax. However, if you were planning on selling a stock sometime soon, now may be the time to do so. You can sell a stock at a loss to offset some of your income, or sell a stock at a gain if you believe you will be jumping to a higher tax bracket in the future. Consult with your financial adviser and tax adviser before doing so.
5) Avoid Penalties: The IRS and State penalize you if you do not pay in enough tax throughout the year. “Enough tax” means that you need to pay in at least 100% of what your 2015 tax liability was or 90% of your 2016 tax liability. To avoid penalty, you can catch up by making an estimated payment or changing your W-4 withholding.
6) Protect your 2016 Tax Refund: The IRS has announced that 2016 refunds will be delayed. If you don’t want to wait for your refund, take some of it now. If you believe you have a refund coming, adjust your W-4 to receive more take home pay and pay less tax for November and December.
7) Review Your Financial Statement: This is for the business owners out there. Check what your financial statement says for the year thus far. Are you going to be showing a large profit? If so, think about making purchases for supplies or equipment that you may need in the near future. Reduce the amount of tax you pay now by purchasing things you will need later.
As mentioned earlier, not all of these apply to every taxpayer. If you are curious to see if one of these strategies may help you, please consult with your tax adviser before making the move.
Winter is coming, make some tax moves.
Nicholas Hammernik, EA
Hammernik and Associates helps individuals in Milwaukee, Waukesha, Brookfield, New Berlin, Wauwatosa, West Allis, and Southeastern Wisconsin with tax preparation and tax planning. Hammernik and Associates helps small businesses in Milwaukee, Waukesha, Brookfield, New Berlin, Wauwatosa, West Allis and Southeastern Wisconsin with accounting, payroll, business coaching, and QuickBooks.
This past Tuesday night, I had the opportunity to help Milwaukee entrepreneurs compile their business plans. I occasionally volunteer my time with the Wisconsin Women’s Business Initiative Corporation. WWBIC is a great organization with this mission:
WWBIC is a leading innovative statewide economic development corporation “Putting Dreams to Work.” We focus on individuals who face barriers in accessing traditional financing or resources in pursuit of their dreams and economic well-being. We provide targeted individuals interested in starting, strengthening or expanding businesses with access to vital resources and tools such as quality financial and business education and responsible financial products. We improve the economic well-being of targeted low income individuals by building assets and advancing economic self-sufficiency. We particularly focus on women, people of color, and low-income individuals, providing direct lending and access to fair and responsible capital, quality business education, one-on-one technical business assistance and education to increase financial capability.
The students of WWBIC are put through classes which teach them all aspects of starting and maintaining a business plan. My duty is to review their business plans with them and inform them of important aspects of tax and accounting that they should know.
This past session, I met with an aspiring gym owner, in-home care specialist, beauty salon owner, record label owner, and clothing line designer. It is great to see individuals with a vision and goals to become their own boss and do what they love to do.
Here were the main questions that were asked by these entrepreneurs, and the topics I really tried to emphasize to them:
- The difference between being a sole proprietor, corporation, and partnership.
- How to decide if people that do work for me should be employees on payroll or should be subcontractors.
- The importance of having a profit margin that is sustainable.
- What kind of taxes am I subject to as a business owner and when should they be paid.
- Keeping track of business related mileage.
- How to improve cash flow.
- Projecting profit and loss for 3 years. What kind of goals do you have in mind.
- How to file a tax return as a sole proprietor.
WWBIC really pushes their students to come up with a complete game plan to prepare for the world of being self employed. It is a tough task for an entrepreneur to handle all the aspects of owning a business. That is where Hammernik & Associates comes in to help. Our main focus when dealing with business owners is to relieve the stress of dealing with the financial aspects of their business. By giving a business owner peace of mind that their financial paperwork is being taken care of, it allows them to do what they do best…produce sales.
We work with businesses of all sizes and business owners with different needs. We have packages available for the business owner that wants all hands on deck, and also packages for the owner that just needs some occasional advice.
I encourage any aspiring entrepreneur to contact us so that we can get you off to the right start in reaching your goals. I also encourage any business owner that is stuck in neutral to contact us so that we can analyze how we can develop a strategy to get you back over the hump. If you need accounting help in Milwaukee, Waukesha, and everywhere in between, we have been helping business owners for 30+ years.
My Dad, Dale, has written a book which should be a hand book for every small business owner in Wisconsin. It covers all the aspects of running your own business and is a good resource whenever a question may arise. That book, Straight Talk About Small Business Success In Wisconsin, can be purchased on Amazon or contact our office if interested.
Any time you volunteer, you get that feeling that you are helping out someone that needs your help. The truth is, we get that feeling of satisfaction every time that we help our clients out. As I mentioned, our services focus on providing our clients the free time to work on their business, make money, spend time with family and enjoy life to the fullest. We help Milwaukee, Waukesha, Brookfield, New Berlin, Wauwatosa with small business tax preparation, small business accounting and small business tax planning.
I have been with WWBIC for about 2 years now and will continue working with them. If you are interested in using your skills to volunteer for them OR if you are an aspiring entrepreneur that needs some help, visit them at http://www.wwbic.com.
Dream big, entrepreneurs, dream big.
Nicholas Hammernik, EA
Last week, I blogged about a new IRS scam out there. Since that time, there was a major development in combating the IRS scams. A call center in India was raided by police and 70 workers were arrested for involvement in IRS phone scams. Check out the Forbes article here : Dozens Arrested In IRS Phone Scam
Now, let us proceed with this week’s topic: Buying A House!
The leaves are falling, the temperature is dropping, and the weekends are full of football…fall is here. I’ve always thought, especially in Wisconsin, that fall is one of the best time to buy a house. Locally, you want to get everything moved in/out before there is snow and ice on the ground. In fact, I moved into my house almost 2 years to the date. I did some research, and fall is indeed the best time to buy a home. October is the best month, and October 8th is the best date. (h/t Business Insider) Perfect timing for this blog post!
With all that being said, there are tax factors involved with buying a house.
If you are a first time homeowner, welcome to the life of itemized deductions. If you are not new to being a homeowner, you are probably been in a relationship with itemized deductions for awhile. The interest that you pay for on your mortgage and the real estate taxes that you pay on your house are two main components of your itemized deductions.
Tax Strategy To Maximize Deductions
When you close on your house, there is a lot of paperwork involved(and signatures). The closing statement is a very important component of the sale. It shows all of the expenses involved with the sale. In most cases, it will designate the real estate taxes to the buyer and the seller based on the time of the sale. For instance, if the house is sold 10/1/16, 75% of the 2016 real estate taxes will be allocated as an expense to the seller, and 25% to the buyer. When you go to pay your real estate taxes, you will be paying the full 2016 amount. However, keep in mind that you have already been reimbursed for the months you did not live there on your closing statement.
Wait until January 2017 to pay the real estate taxes. This is very important to remember. Often times mortgage companies will automatically pay your current year real estate taxes on 12/31 of that year. This tax strategy will not be able to be implemented if this happens. We have already implemented this tax strategy with clients this year. If you or someone you know bought a house this year, please have them call one of our consultants so that we can help them save hundreds of dollars in taxes. This is just one tax planning strategy that we use to help Milwaukee, Waukesha, Brookfield, New Berlin, Wauwatosa with tax preparation.
P.S. Now that you have a new home, make sure you’ll stay there for awhile. When I say awhile I mean 2 years…that is the amount of time you need to spend in a principal residence to have the sale of your home excluded from being taxed.
Enjoy this fall weather this weekend!
Nicholas Hammernik, EA