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On the ballot in November will be a tax rate adjustment that’s worth taking a look at: Sales Tax. The proposed sales tax hike would increase Washoe County sales tax from 7.725% to 8.265%, which would make Washoe County the highest tax rate in Nevada. The current high is in Clark County at 8.15%. To put this into perspective – if you bought an iPhone and it cost $400 pre-tax, the cost would go from $430.90 to $433.06 after tax under the new sales tax rate. 
The committee overseeing the proposal had several different options to choose from including sales tax, property tax, car registration, hotel room tax, and real-estate transfers before settling on sales tax for the final proposal.
The money received from the tax increase is to go to Washoe County schools, which currently are overcrowded and underfunded. However, the sales tax increase would be effective indefinitely. The intent is to allow the school district to use $781 million in bonds to fund school projects over the next 20 years to be used along with the $315 million in rollover bonds granted from state lawmakers stemming from the 2002 ballot election for Washoe County Schools that expired in 2012. 
According to the Reno Gazette Journal, the proposed fixes to the schools are: additions to Damonte Ranch High School, existing school repairs, three new middle schools, three new high schools, repurpose Hug High School, nine new elementary schools, expand Sparks High School, invest in older schools, expand nutrition services, and expand the transportation yard.
Currently, Nevada ranks lasts in education ranking in the nation; according to a report in the Reno Gazette Journal. Nevada also ranks 48th for school funding, only paying about $8,200 per student, when the national average is $11,700 per student.
There are a number of beneficial tax provisions that have been implemented to help military members who have been deployed to combat zones and their families. Two substantial benefits are extensions of filing deadlines and military pay exclusions. To be able to take advantage of these special tax treatments, however, specific requirements need to be met. The following takes a brief look at some of the regulations affecting military members when serving in combat zones. More information can be found on the IRS website or in IRS Publication 3 – Armed Forces’ Tax Guide.
Per IRS Publication 3, the U.S. Armed Forces comprise officers and enlisted personnel in all regular and reserve units subject to control by the Secretaries of Defense, Army, Navy, Air Force, and Coast Guard. The U.S. Merchant Marine and the American Red Cross are not included.
Per the IRS website, combat zones are specified by executive orders from the President. They are regions (including the airspace above them) in which the U.S. Armed Forces currently are or previously were engaged in combat. At this time, there are three combat zones:
In addition to these designated combat zones, the Department of Defense has ordered several other areas to qualify for combat zone tax benefits. These regions have played crucial roles in supporting military operations under either Operation Enduring Freedom or Operation Iraqi Freedom. A few examples are Pakistan, Tajikistan, Jordan, Yemen, and Somalia.
When serving in combat zones, military members and their spouses are allowed an extension to file their Forms 1040. 
The deadline is extended for 180 days after the service member’s last day in a combat zone. Additionally, any period of time before the regular filing deadline that the service member spent in a combat zone is added to the 180 days. For instance, if a service member deployed to a combat zone on January 15, 2016 and returned November 15, 2016, the deadline for filing his 2015 Form 1040 would be extended for 274 days (180 days plus the 94 days he was deployed prior to April 18, 2016) after he returned on November 15, 2016, making his filing deadline August 16, 2017. The IRS has listed many examples on its website and in its Publication 3 for guidance.
Enlisted members, warrant officers, and commissioned warrant officers, who serve in combat zones during any part of a month, can exclude all of their military pay for that month from their gross income. This rule applies to commissioned officers as well, but with one limitation. The amount of the income tax exclusion is limited to the highest rate of enlisted pay, plus any hostile fire or imminent danger pay received. For 2015, the exclusion amount is $8,119.50 per month ($7,894.50 for the highest enlisted pay plus $225 for imminent danger pay).
There are many other tax regulations that affect individuals serving in the military. As mentioned, the foregoing is intended to take a glimpse at some of the tax benefits received by service members deployed to combat zones. The IRS has a section on its website dedicated to giving military members tax information and, more specifically, rules regarding combat zone service. IRS Publication 3 is also a useful resource.
When I think of 7-Eleven I think of Slurpees. When I think of the IRS, well, I don’t think of Slurpees. Now, thanks to a partnership between the IRS, ACI WorldWide’s OfficialPayments.com and the PayNearMe Company, we can all pay our taxes at over 7,000 7-Eleven stores throughout the USA and pick up that Slurpee while we’re there. 
The bonus here is no bank account or credit cards are needed as you can now pay in cash. The IRS can now literally nickel and dime us (though I’m not sure the 7-Eleven will be so happy with all that change).
“We continue to look for new ways to provide services for our taxpayers. Taxpayers have many options to pay their tax bills by direct debit, a check or a credit card, but this provides a new way for people who can only pay their taxes in cash without having to travel to an IRS Taxpayer Assistance Center,” IRS Commissioner John Koskinen said in statement released on Wednesday.
Individuals who want to use this payment option should head to IRS.gov payments page and click on the “Cash” hyperlink in the “Other Ways You Can Pay” section. There are a few things to be aware of to make sure you can pay your entire tax bill and that you pay on time. First, the payment limit per day is $1,000 and there is a $3.99 fee per payment. 
Second, the payment may take a few days to post to your account, so make sure you pay before the tax deadline in order to ensure the payment is received timely. Also, make sure you’ve initiated this payment online as you can’t just walk into a 7-Eleven without a payment code. Other than that, there doesn’t seem to be too much to this process and remember – don’t drink that Slurpee to fast or you’ll get a brain freeze.
Fundraising has gone digital. Millions of individuals are now utilizing social media sites such as kickstarter.com and gofundme.com to attract contributors or donations to support their cause. Few, though, are thinking about the income tax ramifications that are created by the crowdfunding environment.
Congress and the IRS have not yet addressed the crowdfunding income specifically, which leaves little guidance for CPAs and tax advisors preparing returns in the coming season. Applying common tax principles, along with some common sense, will help taxpayers and preparers alike to decide the appropriate reporting of funds received.
There are three types of crowd-funding:
Reward and donation-based funding use third party payment processing, such as PayPal. Any campaign creator who collects over $20,000.00 will receive a 1099-K reporting the funds received during the campaign. Pledges for donation-based funding are likely going to qualify as a non-taxable gift, unless an individual gifts more than the annual gift exclusion ($14,000 in 2015 and 2016). Funds received for reward-based funding for creative new ventures are likely to be treated as income to the recipients.
Kickstarter states that it cannot give tax advice, but does indicate that in the US, funds raised through campaigns on kickstarter.com will generally be considered income (see “Kickstarter and Taxes: A Guide for Your Accountant”). They suggest that expenses can offset the income, or that some may be considered gifts, but does not distinguish between the two.
Amounts received for reward-based funding are likely to be treated as income under Section 61 and should be reported by the creator of the campaign in the year of receipt. If it is an active trade or business, business expenses would likely be deductible against the income under Section 62. If this is a hobby, hobby loss rules would apply and limit expenses to the extent of income. Start-up business will also have additional requirements for expensing or capitalizing the organizational costs related to the start-up of the business.
As you can see, there are many different scenarios that will need to be considered when reporting crowd-funding during this period of limbo until the IRS addresses the topic. That makes it even more important as tax preparers and taxpayers alike to ask the right questions, document your position, and substantiate your reporting to the best of your ability.
National Taxpayer Advocate Nina E. Olson released her 2015 annual report to the Congress on January 6, 2016. Olson expressed her concerns that the IRS is scaling back telephone and face-to-face services to assist the nation’s individual taxpayers and business entities in complying with their tax obligations.
In addition, other key issues were addressed in the report. Of particular interest is the growing rate of false positives in a key tax fraud filter used by the IRS in processing returns. The rate of false positive in 2015 was about 36 percent, affecting nearly 180,000 taxpayers. The “Anti-Fraud Filters” are used to filter out improper refund claims.
Olson’s report states that The Pre-Refund Wage Verification Program, “income wage verification,” allows the IRS to temporarily freeze a taxpayer’s refund when possible false wages and withholding are detected. The IRS sends out notices to taxpayers whose returns were flagged by the filters and instructs them to authenticate their identities online, by phone or by mail.
Following is an actual case of a legitimate refund that is still being withheld by the IRS. The 2014 tax return of the taxpayer was electronically filed and accepted by the IRS on October 11, 2015. A notice to verify the income and withholding was received on November 1, 2015. A copy of the taxpayer’s form W-2 was sent to the IRS on November 2, 2015. By January 7, 2016, the refund still had not been received. A telephone call was placed to the IRS and found out they still had not processed the return (the taxpayer was lucky to have gotten through without being hung up on). It’s been 16 weeks since the return was accepted, still no refund. Time to call the Taxpayer Advocate.
The intention of the Anti-Fraud Filters is to protect the taxpayers. However, it is very frustrating when legitimate refunds are delayed for excess amounts of time and contacting the IRS is nearly impossible.
In December of 2015, I wrote about many tax provisions benefiting taxpayers for 2015 and beyond that had expired. 
Most CPAs were anticipating these to be retroactively approved by Congress. After much anticipation, Congress ended up extending and in many cases making the provisions permanent. Below is a summary of the main legislation:
On Tuesday, tax season officially began, and the IRS started accepting electronic returns, and processing paper returns. However, many of you may be waiting for your tax documents. The IRS urges taxpayers to wait until they have received all tax documents before filing. Here is a list of some common IRS forms you may be waiting for to file your return. I have included the due dates that are listed on the back of the tax documents. The form is considered on time if they have been mailed to the recipient on or before that date. Generally, many of these forms are required to be mailed by January 31st, but since this date falls on a weekend the due date is the next business day.
Check the IRS website under Current Forms & Publications Search to look at any additional tax forms that you have questions about.
Be sure to look out for any mention of possible amendments on any of these forms. It is common for brokerages to provide 1099 forms by the deadline, but then have a note on them that there may be changes that could cause an amended 1099.
If you are waiting on a K-1 from a separate entity, you may be waiting awhile longer. The date you receive this will depend on when the entity files their return. Be sure to check the due date of the entity’s return, and be aware of possible extensions.
Two years ago the Treasury Department implemented new Tangible Property Regulations through the passing of TD 9636. The new regulations contained a “Safe Harbor” election to expense any piece of tangible property purchased under $500. Many felt this was too low and increased the administrative burden on small businesses along with the IRS.
After receiving hundreds of comments from tax payers and professionals suggesting an increase to the “Safe Harbor” threshold amount, and the Treasury Department reviewing the goals of the new regulations, common sense prevailed and the Department agreed to increase the election amount to $2,500 per invoiced piece of tangible property. This election does not require you to expense all items under this threshold. You may choose any amount up to $2,500 that fits your business. Just make sure that your capitalization policy states your dollar threshold.
The effective date of the new safe harbor de minimis is for tax years beginning on or after January 1, 2016. Although, the IRS has allowed for those individuals and businesses that had a capitalization policy in place at the beginning of 2015 to use the $2,500 limit. IRS Notice 2015-82 states:
“AUDIT PROTECTION
For taxable years beginning before January 1, 2016, the IRS will not raise upon examination the issue of whether a taxpayer without an AFS can utilize the de minimis safe harbor provided in 1.263(a)-1(f)(1)(ii) for an amount not to exceed $2,500 per invoice (or per item as substantiated by invoice) if the taxpayer otherwise satisfies the requirements of 1.263(a) – 1(f)(1)(ii). Moreover, if the taxpayer’s use of the de minimis safe harbor provided in 1.263(a) – 1(f)(1)(ii) is an issue under consideration in examination, appeals, or before the U.S. Tax Court in a taxable year that begins after December 31, 2011, and ends before January 1, 2016, the issue relates to the qualification under the safe harbor of an amount (or amounts) that does not exceed $2,500 per invoice (or per item as substantiated by invoice), and the taxpayer otherwise satisfies the requirements of 1.263(a) – 1(f)(1)(ii), then the IRS will not further pursue the issue. “
Taxpayers should review their capitalization policy for 2016 in order to implement the new safe harbor limit. If you have been using the new limit for the 2015 tax year or before, you should review IRS Notice 2015-82 to be sure that your business qualifies for audit protection.
It is never too early to start thinking about the upcoming tax season. The closer to the filing deadline it gets, the more pressure you will feel when getting your documents together and the possibility that something could be missed may increase. The other side of that is your tax preparer will get busier and busier as the tax deadline nears, which may prolong the time it takes for you to get your return completed. 
There is no harm in trying to get your return done before the deadline. You always have the option to wait to file the completed return until closer to the deadline.
Here are some tips to help you get ready for tax season, and avoid silly errors that could delay the filing process.
Will you prepare yourself, use computer software, or use a tax preparer?
Did you get married? Divorced? Have a child? Move?
This may include employment W-2s, 1099s, K-1s, mortgage interest statements, student loan interest forms, etc.
A good place to start with this is by looking at your prior year’s tax return and at the documents used to prepare this return. Then determine what has changed, i.e. new house, changed jobs, new investments, etc.
This includes all dependents’ ID numbers and names.
Now is the time to think about year-end tax planning strategies. 
While no significant change in tax rates is expected for 2016, there are still year-shifting maneuvers that could be employed if you expect to be in either a higher or lower tax bracket for 2016.
For instance, if you anticipate being in a lower tax bracket next year, you should consider delaying sale of assets producing gains, deferring any year-end bonuses and pushing out collection of outstanding accounts receivable. At the same time you should look at accelerating deductions into the current year by prepaying property taxes or January’s mortgage. You might also try to bunch medical and dental expenses into the current year if you expect them to exceed the adjusted gross income floor limitation for both years. Moving future charitable contributions into the current year as well as converting stock losses by selling before year-end should be considered.
On the other hand, if you expect to be in a higher bracket in 2016, the above strategies should be employed in reverse. Accelerate those income items over which you have control into the current year while pushing out deductible expenses until next year.
Again this year, one must keep an eye on the impact of the net investment income tax, which applies if the taxpayer’s modified adjusted gross income (MAGI) exceeds threshold amounts. 
Those threshold amounts are $250,000 for married filing jointly (and surviving spouses), $125,000 for married filing separately, and $200,000 for all others. The tax is 3.8% on the lesser of net investment income or the amount by which your MAGI exceeds the threshold amounts. To mitigate the impact of this tax one might consider moving income producing investments into tax-exempt bonds, thus lowering MAGI. Since the investment income tax applies to income from passive activities, you should explore whether any steps could be taken to reclassify such income as non-passive.
And, as always, you should make the maximum contributions allowable to retirement plans, especially if your employer makes a matching contribution.
