DICKLER & MATUSOW, LLC
Your Taxmen
Tax Outline

Dickler & Matusow, aka Your Taxmen, are proud to present their new and improved, not quite as boring 2016 tax packet. Take off your shoes and loosen your collars! This is a different kind of packet because we are a different kind of firm.

Let’s be honest. Most people think doing their tax return is on par with root canal, usually painful but always necessary. The single most important factor in lessening the pain is YOU. We’ve all seen the commercials promising to get you the biggest refund. No preparer can legally do that without you doing and submitting your homework. HOMEWORK – Something most of us have disliked since the second grade.

To make the process a little bit easier, we are providing you with a sort of rubric to guide you. It may meander here and there but read it all the way through. If something doesn’t apply to you today read it anyway. It might apply to you tomorrow.

Speaking of tomorrow, we are inserting a little self-serving commercial right here. We are a full service accounting firm and when you are starting your own business you should consider our services first. Art and Drew do the work themselves and never pawn you off to a junior accountant. When you are happy with our services, please tell your friends. Word of mouth is the best form of advertising.

Now back to business. In most instances tax returns are required to be filed electronically.We’ve been doing this for years and do not add an extra fee for the service!

First step: Read this carefully and completely. Cross off the items that do not apply to you to shorten the amount of reading next time. It’s important, on many levels, for you to organize and summarize your information. The less prepared you are the longer it takes to do your return. Time IS money for all of us. In the event of an audit, your data will already be organized! And you will have a better grasp of your empire.

This outline flows in a certain “common sense” manner: Income first, expenses next then deductions and credits. Your tax appointment will not necessarily follow in the same order.

Next step: Gather the items and information in parentheses that follow each category so you can check things off on the rubric line by line. Sort and total your information using only items dated 2016. January credit card statements always contain information from the prior year. Don’t forget to look at your prior year return as an additional checklist.

A few other tidbits first. The IRS does not make the threatening phone calls many of us have been receiving. THEY JUST DON’T DO THAT!!! They don’t send emails or texts either. The IRS is very concerned about your security. When they send you mail via the postal service, open it right away. It’s not junk mail. The biggest issue we saw last tax season was inaccurate or incomplete health insurance information. We cannot finalize your return without it. Refunds will be held up!!!!

HERE IS YOUR CHEAT SHEET

Let’s start with most categories of income:

    1. Wages/Payroll (W-2’s)
    2. Self-Employment Income (1099’s and summary. Total of bank deposits for calendar year)
    3. Interest (1099’s. Rarely issued if under $10. Include tax exempt interest).
    4. Dividends (1099’s. Include tax exempt income)
    5. Capital Gains :) (and Losses :() (1099's. 2439's. Broker's schedule of realized gains and losses. This can be a royal pain but the IRS must have. Provide all information that the broker is missing.) (Sale of your residence goes here. Bring Settlement Sheets)
      • When you sell something you need to report the cost and the date acquired. The cost of selling – like commissions – belongs in this section.
    6. Rental income (1099. Management Statement Summary. Let’s discuss security deposits) (Personal days used/Total days rented)
      • Summarize by property (settlement sheets for new acquisitions)
      • Rental expenses should be summarized by category – interest, taxes, insurance, utilities, advertising, travel, etc.
      • Improvements should be segregated from repairs and maintenance.
      • List new furniture, fixtures, appliances, etc.
    7. Refunds of state and local taxes (1099-G)
    8. Alimony Received (Should jive with the “X”)
    9. Distributions and Rollovers from IRA’s (Regular and Roth) Pension and Profit Sharing plans, 401(k) plans and Annuities (1099R’)
    10. Royalties (1099’s)
    11. Partnership and S Corporation Information (Schedule K-1’s. Waiting for k-1’s is the single biggest holdup in completing tax returns. It’s out of your control and ours.)
    12. Estate and Trust Income (Schedule K-1’s. Please make sure you have an up to date will!
    13. Unemployment compensation (1099-G. Give us an updated copy of your resume. You never know…..)
    14. Social Security Benefits (SSA-1099. We won’t just use last year’s numbe Bring the form!)
    15. Gambling and Lottery Winnings (W-2G’s. Keep your losing tickets to deduct to the extent of your winnings)
    16. Stock Options (Bring the information – there might be tax consequences)
    17. HSA Distributions (1099- Omission of this will hold up your refund. 

***** When Cinderella sells the coach that had once been a pumpkin does she get capital gains treatment? ***** 

Expenses and deductions are not the same thing. Expenses relate to income; employment, self-employment, rental and investment. Expenses should be separated, by category, for each venture. All Meals and Entertainment expenses and reimbursements must be shown separately. As you know, business expenses must be ordinary and necessary to be deductible. Employees should obtain a copy of the employer’s policy regarding reimbursements.

Please read the following sentence slowly since many people mess up in this regard. ALWAYS TRY TO GET REIMBURSED FOR YOUR EXPENSES! If you are entitled to reimbursement those expenses are NOT deductible. You are better off having an expense report turned down.

In the event of an audit (they are doing plenty of them) you will need a letter from your employer that describes your position with the company, your duties, the need for you to incur these expenses and the reimbursement policy of the company. Auditors do have the option of contacting the employer to verify the validity of the letter. When it comes to an audit the words ‘trust me’ carry no weight. 

Business Expenses:

    1. Automobile (Summary of Auto Mileage log by vehicle) (You must provide a written log in the event of an audit)
      • Odometer Readings (Helpful but not mandatory)
      • Business Mileage (Commuting is not business miles)
      • Commuting Mileage (Home to first business stop of the day and last business stop of the day back to home)
      • Totals for gas, oil, repairs, insurance, wash and wax, auto club etc. (Self- employed people should include interest exp)
      • Registration Expense/Property Tax
      • Parking and Tolls
      • Purchase or Lease Information
    2. Travel
      • Your diary or calendar must show where you went, the date and the business purpose of the trip
      • Separate Totals by category: Lodging, airfare, car rental, taxis/limos/uber, tips, valet, etc.
      • Meals and Entertainment must not be included!
    3. Meals and Entertainment
      • Diary should contain who was entertained, the business relationship, the business discussed and the amount including tip.
      • Unreimbursed travel meals belong here
      • Expenditures of $75 or more require a receipt
    4. Dues – Club dues are not deductible
    5. Telephone – Business lines, Cellular lines and Answering services
      • Basic service for your primary line is NOT deductible. If your only phone is your cell – NO DEDUCTION FOR YOU
    6. Newspapers, Magazines and Books – Business related
    7. Commissions, Talent Fees, Professional Fees (Did you send out the required 1099’s?)
    8. Business gifts and flowers – Still limited to $25 per person per year – hasn’t changed in 50 years!
    9. Office supplies, computer supplies, recording supplies, postage, etc.
    10. Equipment – Electronic, Technical, Office (include furniture) etc.
    11. Home Office Deduction (square footage of residence and office)
      • Interest, Taxes, Rent, Utilities, Insurance, Repairs, Cleaning, etc.
    12. Moving Expenses (Mileage from old residence to old job and new job. Must be more than 50 miles.
      • Actual cost of move (movers, supplies, etc.)
      • Travel and transportation exclusive of meals
      • Reimbursements (Form 4872 or Employer schedule) 

***** A fine is a tax for doing something wrong. A tax is a fine for doing something right. *****

Deductions:

This section covers deductions in a number of areas. The first part is the itemized deduction section.

    1. Medical Expenses (Must exceed 10% of AGI)
    2. Taxes
      • Real Estate (mortgage statement)
      • State and Local
      • Personal Property
      • Sales Tax Paid
    3. Interest
      • Mortgage (Form 1098 – include 2nd mortgage and equity lines. Deduction is limited to $1 million in principal plus $100,000 for improvements etc.)
      • Business Interest (Potential credit card interest deduction)
      • Investment Interest (Broker statement)
      • Charitable Contributions – Cash and Non-cash
    4. Written documentation required
      • Receipts from charity – Required for contributions in excess of $250 (cancelled check is not a receipt!)
      • Appraisal required for non-cash contributions of $5000 or more
      • Make a list and take photos of non-cash donations
    5. Miscellaneous
      • Accounting fees and Financial Advice
      • Union dues, uniforms, small tools, etc.
      • Safe deposit box, Required education, Job Search 

Other Deductions and Miscellaneous:

    1. IRA, Keogh, SEP and other retirement contributions
    2. Alimony Paid – This should agree with your EX
    3. Self-employed Health Insurance
    4. Student Loan Interest
    5. Social Security Numbers are required for all dependents regardless of age.
    6. Dependents – If they have income it must be reported somewhe Their returns should be coordinated with yours for the best overall tax savings.
    7. State and Local Income Tax Returns – The laws are not always the same as the Federal.
      • Part-year and non-resident returns have different rules.
      • Dates in and out of each state are helpful.
    8. Casualty and Theft Losses
      • Usually must exceed 10% of AGI plus $100.
      • Date and nature of loss (police report)
      • Description and Original Cost
      • Pre and post loss appraisal
      • Insurance report and reimbursement

Tax Credits:
Credits tend to change from year to year.

    1. Child Care
      • Amount spent per provider and by dependent 
      • Provider’s name, address and SSN or EIN
      • In-home care – You MUST issue a W-2
    2. Higher Education –(1099-T) If you don’t have the form your dependent probably does.
    3. Solar Energy Credit – Bring the contract
    4. Home Energy Credits – Bring the information and we will talk.

 Estimated Tax Payments (date and amount paid)

There is already WAY too much to digest and there’s still more that we are required to tell you. With so much being done electronically (banking, bill paying, etc.) it is easy to forget about paperwork. We strongly recommend that you download and save every monthly bank statement and credit card statements. You will need these in the event of an audit of your tax return.

ENGAGEMENT LETTER

We require a signed (both spouses) engagement letter prior to the completion of your tax return. The questions about automobile records and health insurance must be answered. This is for our protection as well as yours.

FORM 8879

Once a return has been completed and reviewed it will be securely emailed to you with instructions. In order to release your tax return to the taxing authorities we must have your authorization. After carefully looking over your returns you (and your spouse) must sign the 8879 and return it to us. 

FEES

We enjoy what we do and the special relationships we develop with our clients. However, this is our livelihood. We have never and will never nickel and dime our clients and we expect that to be a two-way street. Our MINIMUM fee, with certain exceptions, is $550. Our fees are based on the complexity of the return and the amount of time needed to complete it. You will NOT be billed for asking reasonable questions or for our responses to basic tax related correspondence.

You will be told upfront when you request something that is billable, like tax projections. We send you copies of your tax returns for your records. Additional copies, FOR ANY REASON AND REGARLESS OF FORMAT, will cost $35 per return plus overnight charges if necessary.

Tax preparation fees DO NOT include representation at tax audits or any other services. We do offer an audit fee protection program for an additional fee of $300 – see separate paperwork.

As a full service accounting firm we provide a wide variety of services billed at reasonable hourly rates. We look forward to discussing these services and how they may benefit your business needs.

SCHEDULING 

We do everything in our power to give all of our clients the opportunity to file their returns without getting an extension. When an extension is necessary you must keep in mind that it does NOT extend the due date for money owed.

Prior to scheduling your appointment we require a non-refundable retainer of $300 that will be applied toward your tax preparation fee. We understand that sometimes an appointment needs to be rescheduled. We do continue to do our best to be flexible and request the same of our clients.

  • Your referrals are extremely important and we show our appreciation when we meet with you. Help us to schedule efficiently by having your referrals contact us early enough in the season to get on the schedule.

Art, Drew and Cindy
Your Taxmen and the Diva