Personal Tax Clients and Friends:

 Please find attached your “Tax Organizer for the Tax Year 2013″ which is designed to allow us to more efficiently review and process your individual income tax data.  The enclosed “Organizer” is designed to help you accumulate information and remind you of items you could otherwise overlook.  Your completion of this Organizer allows us to better serve your tax filing requirements in a more timely and cost-effective manner.  If we prepared your income tax returns for 2012, the Organizer includes your 2012 tax data for comparison purposes.

 

APPOINTMENTS

 

If there have been no significant changes and you do not need an appointment, you can mail, e-mail, fax or drop off your completed organizer.  We will call you when we receive it to discuss any questions or issues that arise.

 

If you have significant changes that you would like to discuss in person, please call and set up an appointment.

 

TAX HIGHLIGHTS FOR 2013

 

The following tax breaks will expire at the end of 2013:

 

Educator deduction – $250 tax deduction for educators is extended through 2013.

Itemized deduction for mortgage insurance premiums is extended through 2013.

Itemized deduction for state and local sales tax is extended through 2013.

Above-the-line deduction for tuition to qualified taxpayers is extended through 2013.

Non-business energy property credit on energy efficient improvements with a lifetime limit of $500 is extended through 2013.

Exclusion of Cancellation of Indebtedness on Principal Residence is extended through 2013.

Tax free distributions from individual retirement plans for charitable purposes is extended through 2013.

 

 Although these tax breaks are scheduled to expire, there is a possibility of them being reinstated by Congress retroactive to 01/01/14.

 

Depreciation

Bonus depreciation of 50% will apply to property placed in service in 2013. The Section 179 expensing limit of $500,000 has been extended through 2013.  In 2014, the Section 179 is scheduled to reduce to $25,000, although there is a possibility of Congress changing this in the future.

 

Federal Estate Gift and GST Taxes

The Federal estate tax exclusion increased from $5.25 million in 2013 to $5.34 million in 2014. The maximum federal estate tax rate is 40%.  The annual gift tax exclusion remains at $14,000 for 2014.

 

Higher Income Taxpayers

For those taxpayers with income exceeding $200,000 (single) or $250,000 (married) in 2013, there are additional tax consequences.  The highest tax brackets have increased for taxpayers over $400,000/$450,000, there are additional medicare taxes (.9%) and unearned income tax on investment income (3.8%) for taxpayers over $200,000/$250,000, and itemized deductions and personal exemptions are phased out for taxpayers over $250,000/$300,000.  The following is a summary of the additional taxes for single and married taxpayers whose AGI exceeds the threshold (the thresholds differ for other filing statuses):

 

                                      .9%               3.8%           3% Reduction     Phaseout            Top tax rate 39%

                                  Medicare    Unearned Inc    Itemized Ded    Pers exemption    cap gain 20%

Married Filing Joint  $250,000      $250,000            $300,000            $300,000            $450,000

Single                         $200,000      $200,000            $250,000            $250,000            $400,000

 

Standard Mileage Rates

The standard mileage rate has decreased to 56.0 cents for 2014 from 56.5 cents in 2013.

 

Home office Safe Harbor

The IRS has authorized a new simplified option for deduction certain home office expenses, effectively eliminating the substantiation of these expenses.  Please contact our office if you would like to discuss this further.

 

Limitation of Medical Expense Deduction

The threshold for deduction medical expenses increases to 10% of adjusted gross income in 2013.  For taxpayers and spouses age 65 and over, the threshold remains at 7.5% of adjusted gross income. 

 

Charitable Contributions

The IRS has strict record keeping requirements for cash contributions. Taxpayers are required to have a record of all cash contributions in order to take a deduction. Substantiation can include cancelled checks, bank statements containing the name of the charity, or written communication from the charity which includes the date and amount of the contribution.

 

Foreign Transactions Reporting

The IRS requires reporting of many foreign transactions meeting certain dollar amount thresholds. These transactions include but are not limited to ownership in foreign bank accounts, interests in foreign entities, receipts of gifts from foreign persons, transfers of property to foreign entities, and signature authority over foreign accounts. If you are involved in any foreign transactions or have authority over foreign accounts please contact us to determine if you are subject to any additional reporting.

Social Security wage base

The social security wage base has increased in 2014 to $117,000.

 

DEADLINE

The federal filing deadline for 2013 is April 15, 2014.  It is essential that you submit your tax information to us as soon as possible in order to have your return processed before the deadline.  Because of workload considerations and the many complexities of income tax return preparation, tax return information received April 1 or later may not be processed before the deadline, and probably will go on extension.

 

MASSACHUSETTS NON-RESIDENT EMPLOYEES

For individuals who work in Massachusetts and live in another state such as New Hampshire, please complete the following:                      

                                                                           Taxpayer         Spouse

Total days                                                              365                365

  Less:

    Vacation days                                                  (      )              (      )

    Holidays                                                           (      )              (      )

    Sick days                                                          (      )              (      )     

    Weekends                                                        (      )              (      )

                                                            ________                  ________

     Total work days                                                                                        

Allocate total workdays as follows:

    Work days in Mass.                                                                                 .

 

    Work days out of Mass.                                                                          .

 

ELECTRONIC FILING

The IRS requires that all tax preparers file returns electronically unless the return is not eligible. With electronic filing, it generally takes two weeks for a Direct Deposit refund to register in your bank account, and three weeks for a paper check refund to be mailed to you.  Without electronic filing, refunds generally take six to eight weeks.  Some returns may not be eligible for electronic filing due to the form and content of the return.  There will be no additional charge for electronic filing.

 

If you prefer that your return NOT be filed electronically, please contact our office to complete the appropriate waiver.

 

All refunds and payments will be handled through direct transfer from/to your bank account unless you request otherwise.  Refunds will be directly deposited into your bank account and payments will be electronically withdrawn from your account on the due date.  Please provide a copy of a cancelled check so that we can process these transactions accurately.

 

Please indicate on your organizer if the bank account is:  Checking______         Savings_______

 

If you would prefer to not have refunds or payments handled electronically, please indicate on your tax organizer.

 

TAX ENGAGEMENT LETTER

Please read and sign the attached “Tax Engagement Letter” and return it to our office with your “Tax Organizer.”

 

Sincerely,

 

COMOLLI & COMPANY, P.C.