Organizer Letter & Tax Planning

December 1, 2016

Dear Client:

It’s that time of year again to begin tax planning! Tax planning enables you to control the facts and circumstances of your tax return before it is prepared. Minimum health care coverage is required and must be confirmed on your personal tax returns. For 2017 the penalty for not maintaining minimum health care is $695. Taxpayers that have a financial interest or signature authority in foreign bank and financial accounts which exceed $10,000 at any time during the year are subject to FBAR reporting. Substantial penalties and possible criminal penalties may result for noncompliance. The annual gift tax exclusion remains at $14,000 for 2017. The estate tax exemption increases from $5,450,000 in 2016 to $5,490,000 in 2017. Personal exemption for 2017 remains the same at $4,050. Social security numbers are required. The 30% residential energy efficient property credit has been extended for solar and water property expendituresthrough 2019, although decreases in 2020 and 2021.

Maximum earnings for 2016/2017 without loss of social security benefits increases from $15,720 in 2016 to $16,920in 2017 for individuals below the normal retirement age, and from $41,880 to $44,880 in 2017 for the year the individual reaches normal retirement age, which ranges from age 65-67 depending on your date of birth. No loss of benefits will occur after the individual has reached the normal retirement age. Earnings required to earn a quarter of coverage will increase from $1,260 in 2016 to $1,300 for 2017. There is a 0.3 percent cost of living adjustment for 2017. The following are a few of our suggestions that may reduce your tax liability for 2016: 

1. Prepay State income tax and property tax in 2016. Estimate your State income tax liability for the year and pay this amount by December 31. Prepay your second property tax installment normally due on April 10th before the year end. Pay your January mortgage payment in December. Be sure to pay early in December to allow enough time for your payment to be included on your 1098 sent to IRS. Otherwise, you’ll have to explain to IRS why you deducted more than what is on the 1098.

2. Pay charitable contributions by credit card at year end to deduct donations in 2016, even though they are not paid until 2017. Donations of appreciated property are deductible in full at their fair market value for regular and alternative minimum tax. Asset must have been held more than twelve months.

3. The deduction for meals and entertainment remain the same at 50%.

4. Maximum contributions to 401(k) plans for 2016/2017 remain the same at $18,000 for individuals under age 50, and $24,000 for individuals age 50 and over. For the self-employed, open a Sep Plan by December 31 and you can wait to contribute your money until you timely file your return. With the Roth IRA, there is no current deduction but withdrawals will be tax free. The traditional IRA remains available. Couples now can deduct up to $11,000, even if only one spouse is employed, as long as limits on income, age, etc., are met. The cap per person remains at $5,500 and $6,500 for individuals over 50. We can assist you with deciding which IRA is best for you.

If you mail in your organizer early, it will save money for you and time for us. Please be aware, if you email us any sensitive information, you need to password protect the information for your safety. Our tax organizer is enclosed. If it is completed at the time of the interview we can look for extra deductions instead of getting bogged down determining commonly known items. We can also discuss new and extended credits and deductions, educational incentives available and estate tax planning including living trusts.

One final recommendation, please call early for tax planning at (626)448-2500. The earlier you come in, the more time we will have to be of assistance to you in order to utilize all the tax saving techniques for your individual needs.

Sincerely,

William L. Bingley