KMC Year End Review

2016 YEAR END LETTER

To Our Individual Clients

Thank you for your business during 2016.  The loyalty and support of you, our clients, is greatly appreciated by everyone at Keefe McCullough.

 

 

The year-end brings thoughts of impending income tax filing and, for many of you; the treatment of transactions during the remainder of the year may affect your income tax liability.  Proper timing of transactions through the postponement or acceleration of income or expenses may alter your tax liability.  Hopefully, our traditional annual letter is a prompt to call us about tax transactions that are anticipated or have occurred during the year which you have questions about.  This letter also is a reminder to consider setting-up a tax projection conference so that together we can better plan for your future tax liability.  The year-end certainly is not the only time you should think about taxable transactions.  We hope that throughout the year, as questions arise, you will call us for advice or consultation.

We have enclosed a copy of our "2016 Annual Tax Planning Letter".  Please review the tax planning letter and contact us regarding any item that you would like to discuss further.

In early January, we will mail you a 2016 Individual Income Tax Guide and Organizer which assists you in accumulating information for the preparation of your 2016 tax return and reminds you of items that otherwise could be overlooked.  We recommend that you use this organizer; however, you may simply care to use it as a reference to assemble your tax data.

This guide and organizer is not intended to replace a personal appointment.  As soon as you are ready, and as early as possible, please call our office and set up an appointment so that we may complete the preparation of your 2016 income tax return in advance of the due date.


RETIREMENT PLAN CONSIDERATIONS

Now is an excellent time to review your retirement needs.  The establishment of a "SIMPLE," or "SEP" plan for the self-employed or an "IRA" or "Roth IRA" for others should be given consideration.  A "SIMPLE" plan normally must have been set-up by October 1, so it may only be a year 2017 alternative.  "SEP" and "IRA" plans and contributions do not have to be established and/or made until April 15th.  Tax laws severely restrict those that can make "Tax Deductible IRA" contributions or "Non-deductible Roth IRA" contributions, so please do not make your current year contributions before consulting with us.

As a reminder, some advantages of the "Roth IRA" are a) earnings accumulate tax free; b) tax-free distributions after the account has been in place five years and the distribution is for one of the following qualifying purposes (over age 59 ½, disability, death, used for first time home ownership with $ 10,000 lifetime limit); and c) contributions permitted indefinitely, no minimum distributions, no mandatory age for required withdrawals.  However, the maximum yearly contribution ($ 5,500 per individual up to age 50 and $ 6,500 per individual 50 and over for 2016) that can be made to a "Roth IRA" is phased out for a single individual with adjusted gross income (AGI) between $ 117,000 and $ 132,000, for joint filers with AGI between $ 184,000 and $ 194,000, and for married filing separately with AGI between $ 0 and $ 10,000.


INTERNAL REVENUE SERVICE AUDITS AND INQUIRIES

Tax information notices (1099's , W-2's, etc. reporting interest, dividends, commissions, wages, stock sales, real estate sales, mortgage interest expense, etc.) which are filed with the government, together with the use of taxpayers' identification numbers and computers, give the Internal Revenue Service an ever increasing effective means of independent verification.  As a result, I.R.S. audits and inquiries remain frequent, detailed, and technical.  Failure to maintain proper supporting records for all income and expenses may be costly in terms of additional taxes, interest, professional fees, and penalties.  I.R.S. examination and inquiry response services handled by our firm are billed to our clients as our efforts are incurred.  I.R.S. examinations usually take substantially more time than the annual preparation of your tax return.

Deductions on your personal return for business use of a vehicle, business travel and lodging, and business promotion and entertainment are areas of continued attack by Internal Revenue Service examiners.  Logs should be maintained for each business vehicle indicating total vehicle mileage, business mileage, commuting mileage, and other personal mileage.

Travel, meals, lodging, promotion, and entertainment expenses must have the following information recorded in order to properly support them as business deductions:  1) amount;  2) date, time, and place;  3) business purpose; and4) name and business relationship of entertained people.  (Note: During an audit, I.R.S. may ask for proof of business transactions resulting from the entertainment activity.)  We suggest the recording of this information on an expense report or in a diary or account book.  In addition, canceled checks, credit card receipts, hotel bills, and other documents should be kept as corroborating data, but such documents by themselves, without the recorded information detailed above, will not be sufficient to support deductions.  Tax laws limit the deductions for business meals (including meals while traveling) and entertainment to 50% of the otherwise deductible amount.  Therefore, these expenses must be separately accounted for.

ESTATE AND GIFT TAX CONSIDERATIONS

Constant changes in personal situations and the continued uncertainty of the future Estate and Gift tax laws present a continual need for all people to review and/or establish their financial plans, wills and trusts.  We provide assistance in financial planning for our clients and hope that you will give us the opportunity to help you in this endeavor.  Tools being used to avoid probate costs include revocable living trusts, joint or properly titled bank accounts and the Transfer on Death (TOD) service provided by most security brokerage houses.  Your attorney should be consulted about updating your wills and trusts.  We welcome the opportunity to discuss these needs with your attorney and you.

The filing of an annual gift tax return is required for gifts of a present interest in excess of $ 14,000 for 2016 and 2017 per donee (other than your spouse) per year.  Special considerations are necessary regarding gifts to a spouse, gift splitting with your spouse, gifts of future interest, and gifts to or by non-citizens of the U.S.  Please inform us if you have made gifts during the year so that we may assist you in meeting your gift tax return filing requirements.

In addition to the annual gift exemption, there is a lifetime exemption of cumulative taxable gifts of $ 5,450,000 for 2016 and $ 5,490,000 for 2017. 

Our normal office hours, from April 16th through December 31st, are 9 a.m. to 5 p.m. However, for your convenience, office hours are extended to 8 a.m. to 6 p.m. from January 1st through April 15th, during the busy tax season.  Saturday appointments are also available by appointment.