Welcome to McDonnell Accounting

News Letter NOVEMBER 8, 2017

 

MCDONNELL ACCOUNTING (PH 228 374-2374) IS LOCATED ON THE CORNER OF PASS ROAD AND HILLER DRIVE IN BILOXI, MISSISSIPPI. RANDY MCDONNELL  DARLENE EGGERT, AND LYNDA FAIRLY WILL BE PREPARING 2017 INCOME TAX RETURNS. WE WILL BE OPEN MON-SAT 9AM TO 7PM.  PAYMENT FOR SERVICES RENDERED IS DUE UPON COMPLETION OF THE RETURN AND MAY BE BY CHECK, CASH, CREDIT CARD, OR DEBIT CARD. CLIENTS ARE ASKED NOT TO BRING CHILDREN WHO REQUIRE OUR EMPLOYEES TO BABYSIT.

PATTY LANKFORD IS NO LONGER PREPARING RETURNS IN THIS OFFICE, DUE TO THE INCREASE IN HER OWN  ACCOUNTING BUSINESS.  SHE WILL BE PREPARING RETURNS AT HER OFFICE IN GULFPORT; FOR MORE INFORMATION, PLEASE FEEL FREE TO CONTACT PATTY (228) 860--1114.

 

  IN AN EFFORT TO PROVIDE GREATER SERVCE TO THE PEOPLE OF THE MISSISSIPPI GULF COAST, MCDONNELL ACCOUNTING ENCOURAGES ITS CLIENTS TO DROP OFF THEIR TAX PAPERS INSTEAD OF MAKING AN APPOINTMENT.  OF COURSE WE WILL SCHEDULE AN APPOINTMENT IF YOU PREFER.  WE DO, HOWEVER, INSIST THAT ALL CLIENTS GO THROUGH THE INTERVIEW PROCESS TO GET THE LOWEST TAX POSSIBLE.  WE ALSO RECOMMEND THAT OUR CLIENTS WAIT UNTIL ALL PAPERWORK IS IN HAND   BEFORE PROCEEDING WITH THE TAX PREPARATION.  BUT DO NOT HESITATE TO BEND THESE GUIDELINES IN ACCORDANCE WITH YOUR WISHES.

  THE ONLY SIGNIFICANT CHANGE FOR 2016 RETURNS IS THE LARGER OBAMACARE PENALTIES TO BE ASSESSED AGAINST ANYONE WHO WAS NOT COVERED BY MEDICAL INSURANCE.  PLEASE BRING ANY FEDERAL FORMS PERTAINING TO OBAMACARE  (1095, 8962, 8965).

 

 

A TIP TO AVOID RUNNING UP THE FEE WE CHARGE YOU:  IF WE CANNOT COMPLETE YOUR RETURN BECAUSE SOME ITEM IS MISSING, DO NOT WAIT WEEKS BEFORE PROVIDING THE MISSING INFORMATION BECAUSE WE WILL HAVE TO REVIEW THE RETURN A SECOND TIME.

NEW CLIENTS ARE URGED TO BRING A COPY OF THEIR 2015 TAX RETURNS AND BIRTH DATES OF DEPENDENTS. EVERYONE SHOULD BRING FORMS W-2, K-1, 1099 (INCL. SOCIAL SECURITY BENEFITS), COST AND SELLING PRICE OF REAL ESTATE (TWO-PAGE SETTLEMENT SHEETS ARE NEEDED) OR STOCKS AND BONDS SOLD. SELF-EMPLOYED PEOPLE NEED TO BRING TOTAL REVENUES / SALES FIGURES, EXPENSES BY CATEGORY, BUSINESS MILEAGE, AND ENDING INVENTORY IF APPLICABLE. LOOK OVER LAST YEAR'S RETURN TO HELP YOU PREPARE FOR THIS YEAR.

IN RESPONSE TO FREQUENT QUESTIONS ABOUT GIFT AND INHERITANCE TAXES--THE RECIPIENTS OF GIFTS OR INHERITANCES PAY NO INCOME TAX ON THESE TWO ITEMS. THERE WOULD BE INCOME TAX ON ANY INCOME GENERATED BY THE ASSETS OF THE ESTATE BEFORE THE ESTATE IS CLOSED, ALTHOUGH THE AMOUNT IS USUALLY SMALL IN THE CASE OF OUR CLIENTS. INHERITANCE TAX ON THE VALUE OF AN ESTATE IS ONLY POSSIBLE FOR MILLION-DOLLAR ESTATES, AND THE FACT THAT A GIVER'S LIFETIME GIFTS WOULD HAVE TO EXCEED A MILLION DOLLARS OR MORE TO INCUR ANY GIFT TAX MAKES THE $14000 ANNUAL GIFT TAX EXCLUSION A MOOT POINT FOR OUR CLIENTS. ONE MORE TIP TO ADDRESS A FREQUENT QUESTION--IF YOU INHERIT PROPERTY SUCH AS REAL ESTATE OR CORPORATE STOCK AND THEN SELL IT IN THE NEXT YEAR OR TWO, YOU PROBABLY WILL NOT OWE ANY INCOME TAX ON THE SALE BECAUSE OF THE STEPPED- UP BASIS RULE.

GOOD ADVICE WITH REGARD TO POSSIBLE TAX AUDITS BY IRS OR THE STATE: TAXPAYERS, ESPECIALLY THOSE WITH BUSINESSES, SHOULD BE ABLE TO ACCOUNT FOR ALL DEPOSITS MADE TO OUR PERSONAL AND BUSINESS BANK ACCOUNTS. OTHERWISE THE TAX AGENTS MAY CLAIM THAT UNEXPLAINED BANK DEPOSITS CONSTITUTE UNREPORTED INCOME. MAKE NOTES ON YOUR CHECK REGISTERS AND RETAIN DOCUMENTATION ON LOANS, INSURANCE PROCEEDS, GIFTS, OR OTHER FUNDS BEING DEPOSITED.

EVERY YEAR, SOME OF OUR CLIENTS TAKE TAX BEATINGS BY TAKING LARGE WITHDRAWALS FROM THEIR PENSION PLANS. EVEN ASIDE FROM POSSIBLE 10% PENALTIES ASSESSED BY IRS FOR EARLY WITHDRAWALS, THE MARGINAL TAX RATE CAN BE VERY COSTLY FOR THESE TAXPAYERS. USING A SIMPLIFIED EXAMPLE, A TAXPAYER WITH INCOME OF $50,000 WILL PAY NO INCOME TAX ON THE FIRST $10,000 OF HIS INCOME BECAUSE OF THE PERSONAL EXEMPTION AND STANDARD DEDUCTION. HE MAY PAY A TAX RATE OF 15% ON THE NEXT $30,000, THEN 25% ON THE FINAL $10,000. THE $7,000 OF TAX PRODUCES AN OVERALL RATE OF 14%. HOWEVER, IF HE DRAWS OUT $10,000 FROM HIS PENSION PLAN AND NOW HAS A TOTAL OF $60,000 INCOME, HE WILL BE PAYING A MARGINAL TAX RATE ON THE $10,000 PENSION MONEY OF 25% OR $2,500. WE RECOMMEND GRADUALLY WITHDRAWING RETIREMENT FUNDS AFTER YOU RETIRE WHEN YOU ARE USUALLY IN A LOWER BRACKET. IF YOU NEED MONEY, GET A LOW-INTEREST HOME EQUITY LOAN OR A LOAN ON YOUR PENSION PLAN.

LIST OF TAX CREDITS AND DEDUCTIONS AVAILABLE WITHOUT ITEMIZING

1.  INTEREST PAID ON COLLEGE LOANS. ELIGIBLE LOANS COVER TUITION, FEES, AND ROOM AND BOARD FOR TAXPAYERS, OR DEPENDENTS OR FORMER DEPENDENTS.

2.  HIGHER EDUCATION CREDITS AND DEDUCTION FOR COLLEGE TUITION AND REQUIRED FEES, BOOKS, COMPUTERS, AND OTHER COURSE MATERIALS (NOT ROOM AND BOARD) FOR TAXPAYERS AND DEPENDENTS. THE AMERICAN OPPORTUNITY CREDIT APPLIES TO THE FIRST FOUR YEARS OF COLLEGE AND THE STUDENT MUST BE AT LEAST HALF-TIME. THE LIFETIME LEARNING CREDIT IS ALLOWED FOR ANY COLLEGE COURSE, INCLUDING THOSE TAKEN TO IMPROVE JOB SKILLS. ELIGIBLE AMOUNTS FOR THESE CREDITS DO NOT INCLUDE EXPENSES PAID BY GRANTS OR SCHOLARSHIPS, BUT DO INCLUDE AMOUNTS PAID WITH LOANS. WE NEED THE NAME OF THE COLLEGE, ITS ADDRESS, AND ITS TAX ID NUMBER. YOU MUST BRING FORM 1098-T.

3. CHILD TAX CREDIT FOR DEPENDENT UNDER 17 ($1000 PER CHILD).

4.  IRA CONTRIBUTIONS (WITH INCOME LIMITS ON DEDUCTIBILITY FOR A PERSON COVERED BY A PENSION PLAN). NON-WORKING SPOUSE CAN CONTRIBUTE TO AN IRA. MAXIMUM CONTRIBUTION IS $5500 ($6500 FOR THOSE 50 OR OVER). FOR 2016 RETURNS, YOU CAN CONTRIBUTE AS LATE AS APRIL 18, 2017.

5.  INTEREST PENALTY OR FORFEITURE DUE TO EARLY WITHDRAWAL OF A CERTIFICATE OF DEPOSIT (CD).

6. ALIMONY.  NAME AND SOCIAL SECURITY NUMBER OF EX-SPOUSE MUST BE LISTED.

7.  MOVING AND TRAVEL EXPENSES TO TAKE A JOB IN ANOTHER LOCALITY (INCLUDES  CENTS PER TRAVEL MILE).

8.  CHILD-CARE CREDIT FOR EXPENSES INCURRED WHILE WORKING, LOOKING FOR WORK, OR TAKING CLASSES.  YOU MUST LIST NAME, ADDRESS, AND TAX ID NUMBER OF BABY-SITTER.  CARE FOR DISABLED ADULTS IS ALSO ELIGIBLE FOR CREDIT.

9. MEDICAL INSURANCE DEDUCTION FOR THE SELF-EMPLOYED. TO SAFEGUARD THIS DEDUCTION, ESTABLISH THE INSURANCE PLAN IN THE NAME OF YOUR BUSINESS.

10. HAVE YOU REMEMBERED ALL POSSIBLE DEPENDENTS? ARE YOU 65 OR OLDER OR BLIND?

 

11. DID YOU PAY ANY ESTIMATED TAX TO IRS OR YOUR STATE DURING THE YEAR, OR DO YOU HAVE A CREDIT FROM OVERPAYMENT OF LAST YEAR'S TAX?


12. DID YOU PREPAY COLLEGE TUITION UNDER MISSISSIPPI PROGRAMS IMPACT OR MACS?


13. RETIREMENT SAVINGS CONTRIBUTIONS CREDIT FOR IRA , ROTH, 401-K IF INCOME UNDER 61500  MFJ,  30750 S  OR $46125 HH.

14. SCHOOL TEACHERS  CAN DEDUCT UP TO $250 OF SCHOOL SUPPLIES.


15. RESIDENTIAL ENERGY CREDIT FOR INSULATION, EXTERIOR DOORS AND WINDOWS, HIGH-EFFICIENCY CENTRAL AIR CONDITIONERS, WATER HEATERS, HEAT PUMPS, AND FURNACES.


ITEMIZED DEDUCTIONS


MINIMUM NEEDED $12600 MFJ, $6300 S, OR $9300 HH. BE AWARE THAT ONLY THE AMOUNTS EXCEEDING THESE STANDARD DEDUCTION FIGURES WILL REDUCE TAXABLE INCOME AND THUS THE TAX BECAUSE YOU GET THE STANDARD DEDUCTION REGARDLESS.


1. AD VALOREM PART OF VEHICLE LICENSE PLATE FEES.


2. REAL ESTATE TAXES (PROPERTY TAXES).


3. STATE AND LOCAL INCOME TAXES PAID BY CHECK OR WITHHELD FROM PAYCHECK IN 2016. IF YOU MADE A MAJOR PURCHASE SUCH AS A VEHICLE OR A BOAT, TELL US WHAT THE SALES TAX WAS--AS THIS MAY RESULT IN A BIGGER DEDUCTION.


4. MEDICAL EXPENSES NOT REIMBURSED BY INSURANCE--HOSPITAL, DOCTOR, DENTIST, NURSE, CHIROPRACTOR, PHYSICAL THERAPIST, PSYCHOLOGIST, LAB FEES, PRESCRIPTION DRUGS, INSULIN, EYEGLASSES, CONTACT LENS AND SOLUTIONS, HEARING AID, DENTURES, CRUTCHES, WHEELCHAIR, AMBULANCE, TRANSPORTATION (ESTIMATE ROUND-TRIP MILEAGE--19 CENTS PER MILE), LODGING, HEALTH / DENTAL / CANCER / LONG-TERM CARE INSURANCE PREMIUMS, NURSING HOME (IF A PRINCIPAL REASON FOR RESIDENCE IS THE AVAILABILITY OF MEDICAL CARE), ETC. A PORTION OF THE PAY OF A HOUSEKEEPER HELPING AN INVALID AT THE INVALID''S HOME IS DEDUCTIBLE IF IT INVOLVES BATHING AND DRESSING WOUNDS, CHANGING PADS, ADMINISTERING MEDICINE, AND SEEING AS TO PROPER NUTRITION.


5. INTEREST ON DEBT--MORTGAGE OR HOME EQUITY LOANS, INVESTMENT LOANS, AND LOAN ORIGINATION FEES OR "POINTS" (POINTS PAID ON A SIMPLE REFINANCING MUST BE DEDUCTED OVER LIFE OF THE NEW LOAN). INTEREST PAID ON SECOND HOMES IS ALSO DEDUCTIBLE. A BOAT MAY QUALIFY AS A SECOND HOME IF IT HAS COOKING, SLEEPING, AND TOILET FACILITIES. FOR HOUSES BOUGHT OR REFINANCED AFTER 2006, MORTGAGE INSURANCE PREMIUMS ARE DEDUCTIBLE AS MORTGAGE INTEREST.


6. CASUALTY LOSSES--STORM, FIRE, THEFT, COLLISION, FLOOD, VANDALISM, ETC. LOSS MUST EXCEED 10% OF INCOME.


7. CHARITABLE DONATIONS IN MONEY OR GOODS--CHURCH, UNITED WAY, SALVATION ARMY, GOODWILL, HOMES OF GRACE, OUT OF POCKET EXPENSES AND 14 CENTS PER MILE FOR VOLUNTEER WORK (CHURCH CHOIR, SCOUTS, RED CROSS). NON-MONETARY DONATIONS LIKE OLD CLOTHES MUST BE IN GOOD CONDITION.


8. UNREIMBURSED EMPLOYEE EXPENSES WHILE OUT OF TOWN INCLUDING TRAVEL, LOCAL TRANSPORTATION, MEALS ($57-$68 PER DIEM) AND LODGING, LAUNDRY, AND TELEPHONE. AN OUT-OF-TOWN TEMPORARY JOB SITE IS CONSIDERED INDEFINITE, AND THUS NONDEDUCTIBLE, IF THE JOB LASTS ONE YEAR OR MORE.


9. UNREIMBURSED EMPLOYEE TRANSPORTATION EXPENSES IN HOME AREA INCLUDING WORK AT TEMPORARY JOB SITES (IF YOU HAVE A REGULAR WORKPLACE). YOU MAY COUNT COMMUTING FROM HOME TO TEMPORARY JOB SITES BUT NOT TO REGULAR WORKPLACE. TAKE BUSINESS PERCENTAGE OF ACTUAL VEHICLE EXPENSES OR 54 CENTS PER MILE.


10. JOB-HUNTING EXPENSES (IF IN SAME TRADE OR BUSINESS). LOCAL MILEAGE AND TRAVEL AWAY FROM HOME. PLEASE ESTIMATE MILEAGE. EMPLOYMENT AGENCY, RESUME TYPING, POSTAGE, TELEPHONE EXPENSES.


11. UNION AND PROFESSIONAL DUES AND TRADE MAGAZINES, UNIFORMS, SAFETY EQUIPMENT, TOOLS AND SUPPLIES USED ON A JOB, LICENSES, MALPRACTICE INSURANCE, REQUIRED PHYSICAL EXAMS, BUSINESS ENTERTAINMENT.


12. EXPENSES FOR EDUCATION OR TRAINING TO MAINTAIN OR IMPROVE SKILLS IN YOUR PRESENT OCCUPATION OR WHICH IS REQUIRED BY YOUR EMPLOYER. COMMUTING TO THE EDUCATION SITE IS DEDUCTIBLE IF THE TRAINING IS SHORT-TERM.


13. LEGAL AND OTHER PROFESSIONAL FEES FOR INVESTMENTS OR FOR PROTECTION OF INCOME. TAX PREPARATION FEE, CASUALTY LOSS APPRAISAL, SAFE DEPOSIT BOX, IRA CUSTODIAL FEES, OTHER INVESTOR EXPENSES.


14. BUSINESS/EMPLOYEE TELEPHONE CALLS--LONG DISTANCE, WORK-RELATED PORTION OF CELLULAR PHONE. BASIC HOME SERVICE IS NOT DEDUCTIBLE.


15.GAMBLING LOSSES, BUT ONLY TO EXTENT OF WINNINGS.


TAX TIPS AND ADVICE


TAXPAYERS DO NOT HAVE TO BUY A NEW RESIDENCE TO AVOID INCOME TAX ON THE SALE OF THEIR OLD RESIDENCE. IF THEY LIVED IN THE OLD HOUSE FOR TWO OF THE PREVIOUS FIVE YEARS, IN MOST CASES THE SALE NEED NOT BE REPORTED WHETHER A GAIN OR A LOSS.


ALWAYS MAIL IN A TAX RETURN OR EXTENSION BY APRIL 15 EVEN IF YOU CANNOT PAY THE TAX DUE


IF YOU GAMBLE, KEEP RECORDS OF ALL WINNINGS AND LOSSES. IF YOU RECEIVE A W-2G ON YOUR WINNINGS, YOU WILL WANT TO HAVE PROOF OF YOUR LOSSES IN CASE OF  AN IRS AUDIT.


DO NOT PAY A BALANCE DUE NOTICE FROM IRS OR CASH A REFUND CHECK FROM IRS IF YOU DON''T UNDERSTAND THE REASON IT WAS SENT. CALL MCDONNELL ACCOUNTING.


KEEP TAX RETURNS FOREVER; KEEP SUPPORTING DOCUMENTS 7 YEARS.


ALWAYS STRIVE TO MAKE YOUR VOLUNTARY PRETAX CONTRIBUTION TO YOUR PENSION PLAN AT WORK, AT LEAST TO THE POINT TO WHICH YOUR EMPLOYER MATCHES YOUR CONTRIBUTION. ON THE OTHER HAND, IF YOU LEAVE YOUR JOB AND MUST DRAW OUT YOUR PENSION FUNDS, ROLL THEM INTO AN IRA WITHIN 60 DAYS TO AVOID 10% PENALTY AND BEING IN YOUR HIGHEST BRACKET (SEE FIRST PAGE). AVOID INCOME TAX WITHHOLDING ON THE ROLLOVER BY HAVING A TRUSTEE TO TRUSTEE TRANSFER. DO NOT HANDLE THE MONEY YOURSELF.


IF YOU DEDUCT VEHICLE EXPENSES FOR YOUR BUSINESS OR AS AN EMPLOYEE, KEEP RECEIPTS VERIFYING THESE EXPENSES AND KEEP A LOG OF EACH LOCAL AND OUT-OF-TOWN BUSINESS TRIP (MILEAGE, DATES, DESTINATIONS, BUSINESS PURPOSE). MANY OF OUR CLIENTS HAVE VERY LARGE DEDUCTIONS IN THIS CATEGORY, AND THEY''RE TAKING A BIG RISK IN NOT KEEPING TRACK OF THEIR MILEAGE (IN THE EVENT OF AN IRS AUDIT).


IF YOU HAVE LOST RECEIPTS FOR DEDUCTIONS OR CREDITS, CAREFULLY RECONSTRUCT FIGURES AND OTHER DETAILS FROM MEMORY AND WRITE THEM DOWN.


THE ABOVE LISTS OF DEDUCTIONS AND CREDITS ARE NOT ALL-INCLUSIVE. DO NOT HESITATE TO CALL US ABOUT ANY OTHER EXPENSES THAT YOU THINK MAY BE DEDUCTIBLE.


THIS NEWSLETTER IS  AVAILABLE ONLINE AT WWW.RANDYMCDONNELL.COM.