Five Good Reasons Why You Should Choose Direct Deposit

Posted on April 21 2015 by admin

The best way to get your tax refund is by direct deposit. Here are five good reasons to join the 84 million taxpayers who chose direct deposit last year.

IRS Direct Deposit:

  1. Is Fast. The fastest way to get your refund is to electronically file your federal tax return and use direct deposit. Use IRS Free File to prepare and e-file your federal return for free.
  2. Is Convenient. With direct deposit, your refund goes directly into your bank account. You won’t have to wait for your check to come in the mail. There’s no need to make a trip to the bank to deposit a check.
  3. Is Secure. Since your refund goes directly into your account, there’s no risk of having your refund check stolen or lost in the mail.
  4. Is Easy. Choosing direct deposit is easy. When you e-file, you can follow the instructions in the tax software. If you file a paper return, just follow your tax form instructions. Make sure that you enter the correct bank account and routing number.
  5. Has Options. You can split your refund into several financial accounts. These include checking, savings and certain retirement, health and education accounts.

You should deposit your refund directly into accounts in your own name, your spouse’s name or both. Don’t deposit it in accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Check with your bank for their direct deposit requirements.

The IRS has set new limits that allow for no more than three electronic direct deposit refunds into a single financial account or pre-paid debit card. Taxpayers who exceed the limit will receive an IRS notice and a paper refund.

If you have any additional questions, do not hesitate to contact our office for further assistance.

By Danette Hefty, EA

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Reflecting on Tax Day

Posted on April 16 2015 by admin

Tax day, or as some of us like to put it “D-day” (D is for deadline of course), has come and gone for this year. As I reflect on tax season 2015 and contemplate the last few months, I can’t help but think how grateful I am for the opportunity to do what I do for a living. That might sound strange the day after busy season, but it is absolutely true. A friend of mine sent me a text wishing me the best and saying tax day is my Super Bowl, and he is right. It is difficult to convey the hard work and dedication our team at Henry & Horne, LLP has put in this season (70, 80, even 90 hour weeks, sleep deprivation, family time sacrifices, etc.), and that includes everyone, not just the tax professionals. I am so impressed with our administrative team, our interns, all our professionals, and my fellow partners for caring so much about our goal of making sure each and every client is specially cared for and feels it. Sure we aren’t perfect, and mistakes are made along the way, but we own them and learn from them just as any other great team does.

It never stops amazing me how people can be in the heat of looming deadlines, waiting for that last bit of information to arrive, etc., etc. and still be smiling and laughing and treating clients like they are the only client we have. I truly do hope our clients feel that way and know how much we care about them.

Many people think of the CPA profession as boring. Well, I can tell you that if you could see the inner workings of our firm in the months leading up to April 15, you would know it is anything but boring. Yes our work is complex, strenuous, detailed, and full of long hours, but it is also extremely rewarding and positive knowing that we as a firm worked as a great team toward a common goal and won our Super Bowl.

By Chuck Goodmiller, CPA

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The End of Tax Season…

Posted on April 15 2015 by admin

Today is Wednesday, April 15th and it is the end of another tax season! So, our tax team is going to be gathering the last of the Forms 8879 from our clients to complete their electronic filing, and sending out buckets and buckets of certified mail containing extension payments and first quarter vouchers and 2014 voucher payments, all before we head to our annual celebration.

And because we are so deadline driven, it leads us to think about the next tax season and how we can improve on things. There has been some discussion about it ending on a Friday next year, which would indeed make for a wonderfully long weekend after a stretch of time when we have had not only no weekends off, but no days off.

But alas, it is not to be. Next year is 2016, which is a leap year. That means that the actual day of April 15th would indeed be a Friday. However, Emancipation Day is April 16th and it cannot fall on a Saturday or Sunday. So – it falls back to Friday, making it a national holiday on Friday, April 15th. That moves the tax filing deadline to Monday, April 18th.

Therefore, tax season 2016 will have four more days in it than tax season 2015 (February 29, April 16, April 17 and April 18). Now that could be daunting, but there are those professionals out there, me included, that would have done a happy dance with the knowledge of extra days, particularly last week.

But the four days may not make a difference – the procrastinators will still procrastinate, the brokerage accounts will still be mailed out later than we would like (with clients bringing by amended brokerage accounts when they pick up their tax returns), the K-1 arrivals will still be eagerly anticipated, and we still will be working very long and very hard.

But for today, Wednesday, April 15th, we are happy. Because once again, it got done – it always gets done (and, yes, we count extensions as done!). We did it again, and there will be smiles and laughter and a good time tonight. And we have earned it.

By Donna H. Laubscher, CPA

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Vacation Home, Rental Property or Personal Residence?

Posted on April 14 2015 by admin

Okay, so you have a second home. That’s great! Now what? Well, this is a common tax issue since so many people are buying second homes. However, you may not be sure if your second home is considered for tax purposes as a vacation home, a rental property, or a personal residence. According to the IRS, the answer is based on the amount of time that you use your home and the amount of time that you rent your home.

Here are the three timing differences that will determine the type of property you have:

Properties rented 14 days or less a year

If you bought a second home purely for personal enjoyment and rent it out less than 15 days a year, than it is considered a vacation home for tax purposes. You can generally deduct your mortgage interest and real estate taxes, as you would on a primary residence. You will itemize them by filling out a Schedule A, and hope that your itemized deductions end up greater than the standard deduction. As a bonus, the tax law even allows you to rent out your second home for up to 14 days a year without paying taxes on the rental income. (Nice!) Of course, you will not be able to deduct any of the rental-related expenses either.

Properties rented for 15 days or more AND the owner uses it less than 14 days

Whether you bought your second home to rent for a week, a month, or a year at a time – it is treated all the same – as a rental property. Rental property income and expenses are reported on a Schedule E as passive activity (subject to §469 passive activity rules). Typical expenses related to rental properties include insurance, maintenance, mortgage interest, property taxes, utilities, and depreciation. The amount of rental expenses that can be deducted is based on the percentage of days the vacation home was rented out for the year. Owners may be able to deduct up to $25,000 each year in losses, depending on their AGI. In addition, passive losses can be written off if the owner personally manages the property.

Owner uses the property for the greater of: more than 14 days or 10% of the total days the home was rented

If personal days exceed 14 days or 10% of the number of days the home is rented (whichever is greater), the IRS considers the property a personal residence and rental loss cannot be deducted. Rental expenses, up to the level of rental income, as well as property taxes and mortgage interest can still be deducted.

Lastly, there is always more information that needs to be considered when dealing with the complicated tax code. Consult your local tax professional who can easily guide you through this process. For more information, read Publication 527-Residential Rental Property.

By Stacy Redmond

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What You Should Know if You Change Your Name

Posted on April 9 2015 by admin

Did you change your name last year? If you did, it can affect your taxes. All the names on your tax return must match Social Security Administration records. A name mismatch can delay your refund. Here’s what you should know if you changed your name:

  • Report Name Changes. Did you get married and are now using your new spouse’s last name or hyphenated your last name? Did you divorce and go back to using your former last name? In either case, you should notify the SSA of your name change. That way, your new name on your IRS records will match up with your SSA records.
  • Dependent Name Change. Notify the SSA if your dependent had a name change. For example, this could apply if you adopted a child and the child’s last name changed.
  • Get a New Card. File Form SS-5, Application for a Social Security Card, to notify SSA of your name change. You can get the form on SSA.gov or call 800-772-1213 to order it. Your new card will show your new name with the same SSN you had before.
  • Report Changes in Circumstances in 2015. If you purchase health insurance coverage through the Health Insurance Marketplace you may get advance payments of the premium tax credit in 2015. If you do, be sure to report changes in circumstances, such as a name change, a new address and a change in your income or family size to your Marketplace throughout the year. Reporting changes will help make sure that you get the proper type and amount of financial assistance and will help you avoid getting too much or too little in advance.

If you have additional questions do not hesitate to contact our office at 480-839-4900 for further assistance.

By Danette Hefty, EA

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The IRS on Social Media?!

Posted on April 8 2015 by admin

Yes, even the IRS is participating in the world of social media! They developed an app to help give you easy access to the tax help you need. They are on YouTube, Twitter, Facebook, and Tumblr. Also, you can subscribe to receive their Tax Tips email blast.

This is a great tool to help keep you updated on different tax policies and tips so that you can save big on your taxes and avoid surprises!

Here is some additional information on the different social media hubs used by the IRS:

  • IRS2Go With this free mobile app from the IRS you can:
  • Get your refund status.
  • Watch IRS YouTube videos.
  • Get tax news updates.
  • Follow the IRS.
  • YouTube. The IRS offers dozens of video tax tips on a variety of topics. You can view them in English, Spanish or American Sign Language.
  • Twitter. Tweets from @IRSnews provide tax-related announcements and daily tax tips. @IRStaxpros tweets news and guidance for tax professionals. Tweets from @IRSenEspanol have news and information in Spanish and the Taxpayer Advocate Service sends tweets from @YourVoiceAtIRS. @RecruitmentIRS provides updates for job seekers.
  • Podcasts. The Multimedia Center on IRS.gov has a host of short, tax-related audio recordings. The IRS website also has transcripts of the podcasts.
  • Tumblr. Follow the IRS on Tumblr in both English and Spanish to access IRS tax tips, videos and podcasts. You can access Tumblr from your smartphone, tablet or computer.
  • Facebook. The IRS Facebook pages provide news and information for taxpayers and tax return preparers. You can also connect with the Taxpayer Advocate Service.

Make sure to add these to your social media sites so that you can fill your mind with important information besides what Bob ate for lunch!

By Michael Willett

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10 Facts You Should Know about Capital Gains and Losses

Posted on April 7 2015 by admin

When you sell a capital asset, the sale results in a capital gain or loss. A capital asset includes most property you own for personal use or own as an investment. Here are 10 facts that you should know about capital gains and losses:

  1. Capital Assets. Capital assets include property such as your home or car, as well as investment property, such as stocks and bonds.
  2. Gains and Losses. A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.
  3. Net Investment Income Tax. You must include all capital gains in your income and you may be subject to the Net Investment Income Tax. This tax applies to certain net investment income of individuals, estates and trusts that have income above statutory threshold amounts. The rate of this tax is 3.8%. For details visit IRS.gov.
  4. Deductible Losses. You can deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.
  5. Long and Short Term. Capital gains and losses are either long-term or short-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long-term. If you held it one year or less, the gain or loss is short-term. You should be aware that other holding periods apply to certain special classes of assets that are not covered here (i.e. Qualified small business stock, §1256 contracts, cattle/horses, stock options, etc…)
  6. Net Capital Gain. If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a net capital gain.
  7. Tax Rate. The capital gains tax rate usually depends on your income. The maximum net capital gain tax rate is 20%. However, for most taxpayers a zero or 15% rate will apply. A 25 or 28% tax rate can also apply to certain types of net capital gains. Remember the potential for an additional 3.8% tax referred to in #3 above.
  8. Limit on Losses. If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.
  9. Carryover Losses. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they happened in that next year.
  10. Forms to File. You often will need to file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses with your tax return.

Please be aware that the above list does not deal with depreciable property used in a trade/business or rental activity. Gains and losses from those activities may be treated much differently and subject to other limitations.

For more information about this topic, please contact our office at 480-839-4900.

By Danette Hefty, EA

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Basic Tax Tips for New Businesses

Posted on April 2 2015 by admin

So – you are tied of working for someone else, and want to be your own boss? Make all of the decisions? Be in charge? Or maybe you have a great idea that no one else is doing? Or you have a passion for something, and think that it can support you and your family? All of these are valid reasons to start a business.

If you start a business, one key to success is to know about your federal tax obligations. You may need to know not only about income taxes but also about payroll taxes. Here are some basic tax tips that can help get your business off to a good start.

  1. Business Structure. As you start out, you’ll need to choose the structure of your business. Some common types include sole proprietorship, partnership and corporation. You may also choose to be an S corporation or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type. (See What type of entity should I make my new business?)
  2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes your business pays usually depends on which type of business you choose to set up. You may need to pay your taxes by making estimated tax payments.
  3. Employer Identification Number. You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.
  4. Accounting Method. An accounting method is a set of rules that determine when to report income and expenses. Your business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Under the accrual method, you generally report income in the year that you earn it and deduct expenses in the year that you incur them. This is true even if you receive the income or pay the expenses in a future year.

By Donna H. Laubscher, CPA

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Things You Should Know about the Alternative Minimum Tax

Posted on April 1 2015 by admin

Even if you’ve never paid the Alternative Minimum Tax before, you should not ignore this tax. Your taxes may have changed so that this may be the year that you need to pay AMT. You may have to pay this tax if your income is above a certain amount. AMT attempts to ensure that taxpayers who claim certain tax benefits pay a minimum amount of tax.

Here are some things that you should know about the AMT:

  1. When AMT applies. You may have to pay the AMT if your taxable income plus certain adjustments is more than your exemption amount. Your filing status and income determine the amount of your exemption. In most cases, if your income is below this amount, you will not owe AMT.
  2. Exemption amounts. The 2014 AMT exemption amounts are:
  • $52,800 if you are Single or Head of Household.
  • $82,100 if you are Married Filing Joint or a Qualifying Widow(er).
  • $41,050 if you are Married Filing Separate.

You will reduce your AMT exemption if your income is more than certain limits.

Use the right forms. If you owe AMT, you usually must file Form 6251, Alternative Minimum Tax – Individuals. Some taxpayers who owe AMT can file Form 1040A and use the AMT Worksheet in the instructions.

If you have any additional questions you can contact our office at 480-839-4900 and one of our tax professionals would be happy to assist. You can also learn more about the AMT on IRS.gov. Also, see the Form 6251 instructions.

By Danette Hefty, EA

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Do you have a household employee?

Posted on March 31 2015 by admin

Do you have a babysitter, nanny, maid, health care provider, or other domestic worker? If so, they may be your employee. The worker is generally your employee if you can control not only what work is done, but also how the work is done. Whereas, if the worker controls how the work is done, the worker is generally not an employee. For example, a self-employed worker who provides their own tools and offers services to the general public is usually an independent contractor, not an employee. It does not matter whether the work is full-time or part-time, or that you hired them through an agency or from a list provided by an agency. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job. For more information see IRS Publication 926.

So, you have determined you have a household employee. What should you be aware of?

Are they being paid a salary? Household employees are classified in the Fair Labor Standards Act as non-exempt workers. This means their payroll should be set up on an hourly rate for every hour worked. If they will be working a set number of hours each week, you can offer a weekly “salary,” but you should translate the amount into an hourly rate in their employment contract so fluctuations in their hours can easily be calculated and detailed on paystubs. As a non-exempt employee, they also must be paid overtime if they work more than 40 hours in a seven-day workweek. Overtime is paid at least 1.5 times the regular hourly rate and should be spelled out in the employment contract. Be aware of your specific state requirements regarding live-in employees. Federal law exempts household employers from paying overtime to live-in employees, but they must be paid for every hour they work.

Perhaps discuss with your employee the amount that will end up in their bank account during compensation discussions to avoid surprises on the first payday. It’s important the employee understands how tax withholding works. You may want to show them a few payroll scenarios to illustrate the difference between gross wages and net pay.

Think about paid time off. While federal law does not currently require you to provide paid time off for vacations, holidays or sick time, it is an important benefit if you want to attract and retain a high-quality employee. Be aware of any specific paid time off requirements of your state.

This may seem like “tax stuff” that can wait until “tax time”; however, don’t procrastinate. Employers must withhold FICA taxes from the employee or you will become liable for them. Many states also have wage reporting obligations throughout the year. Waiting until tax season to address tax issues and labor law issues may well result in additional expenses that would be cheaper and easier to handle at the time of hire.

By Pamela Wheeler, EA

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Welcome


There is nothing more complex than the world of taxes. We know this and yet we chose careers where we face these issues everyday. We get questions day in and day out about new tax laws, forms and news items and how they affect everyday people and businesses. Well, here at Henry & Horne, LLP we have set out to do what we do best; help everyday people understand what is going on in the world of state, local, federal, estate and international taxation. We will provide these weekly posts and we encourage you to give us feedback on those posts as well as letting us know what else you would like to know more about. Welcome to "Tax Insights." We hope you find this blog informative and worthy of your time.


Before posting a comment on a blog post please be aware that we do not give free tax advice to non-clients by email, comment response, or phone. Thank you!


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