Health Savings Accounts (HSAs)

Tax E Man — Tax Consultation, Preparation, Representation

Health Savings Account

Health Savings Accounts (HSAs)

A health savings account (HSA) is a tax-exempt or custodial account set up with a qualified HSA trustee to pay or reimburse certain medical expenses incurred by an individual, his or her spouse, and qualified dependents. The medical expenses must not be reimbursable by insurance or other sources, and distributions from HSA funds will not give rise to a medical expense deduction on the individual’s tax return.

Click 2016 Health Savings Accounts (HSAs) Here

Qualifying for an HSA
To be eligible, a participant must meet the following requirements.

Must be covered under a high deductible health plan (HDHP).
Cannot have any other health coverage. Exception:
Coverage for specific things, such as disability, dental care, vision care, and long-term care, can be purchased in addition to the HDHP without disqualifying
the HSA.
Cannot be enrolled in Medicare.
Cannot be eligible to be claimed as a dependent on someone else’s tax return

Last-Month Rule
If an individual is an eligible individual on the first day of the last month of his or her tax year (December 1 for most taxpayers), that individual is considered an eligible
individual for the entire year. Special rules apply if the individual does not remain an eligible individual during a full 12-month period. Exceptions apply in case of death or disability.

Click 2016 Health Savings Accounts (HSAs) Here

Spousals HSAs
The HSAs cannot be joint accounts. Each spouse must open a separate account. However, if only one has an account, the funds in that account can be used to pay for expenses incurred by the other spouse, as well as the participant’s other family members.
High Deductible Health Plan (HDHP)
An HDHP can provide for preventive care benefits without a deductible or with a deductible below the minimum limit ($1,300 for 2015 self-only coverage). Family
HDHP coverage covers an eligible individual and at least one other person.

Click 2016 Health Savings Accounts (HSAs) Here

Any accounting, business or tax advice contained in the Tax E Man Blog or www.PatTax.net, including attachments, links and enclosures, are not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax related penalties.

If desired, Pat Tax, Inc. would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired.

The Tax E Man Blog, along with our website www.PatTax.net, are designed to be year round resources for tax consultation, preparation and representation services provided by Pat Tax, Inc. . Please feel free to contact us with any questions or concerns.

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Dependent Support Worksheet

Dependent Support Worksheet

Support and the Dependency Exemption
The support test is one of the factors used to determine whether you may claim the dependency exemption for another person. The person may be a qualifying child or
a qualifying relative. You must consider the support test each tax year for which you wish to claim a dependency exemption.

Support Test
Qualifying Child	The child cannot have provided more than half of his or her own support during the tax year.
Qualifying Relative	You must have provided more than half of the relative’s support during the tax year.

Click Dependent Support Worksheet Here

What is Support?
Total support includes amounts spent to provide food, lodging, clothing, education, medical and dental care, health insurance, recreation, transportation, and similar
necessities.

In general, the amount of an item of support is the expense incurred in providing that item.
The amount of support for lodging is the fair rental value of the lodging, including a reasonable allowance for the use of furniture and appliances and for utilities provided.
Expenses not directly allocable to any one member of
the household, such as the cost of food for the household,
must be divided among the household members.
Property provided as support is measured by its fair market value.

Click Dependent Support Worksheet Here

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Families With Children

The Tax E Man Blog, along with our website www.PatTax.net, are designed to be year round resources for tax consultation, preparation and representation services provided by Baldwin NY Tax Preparation service Pat Tax Inc. and Patrick White, Enrolled Agent . Please feel free to contact us with any questions or concerns.

Family Picture

Child Tax Credit

Maximum credit: $1,000 per qualifying child.
Adjusted Gross Income (AGI) Phaseout
The credit is reduced by $50 for each $1,000 of modified AGI above:

$110,000 Married Filing Jointly.
$75,000 Single, Head of Household, or Qualifying Widow(er).
$55,000 Married Filing Separately.

The regular child tax credit is nonrefundable, but if any part of the credit is disallowed because tax is reduced to zero, the taxpayer may qualify for the additional child tax credit, which is refundable.

Click Families With Children 2016 Here

Additional Child Tax Credit

Taxpayers may be able to claim the additional credit if any portion of the regular child tax credit was disallowed because tax was reduced to zero before the entire credit was used. The portion of the child tax credit phased out because of AGI cannot be used to claim the
additional credit. The additional credit is refundable.

Child and Dependent Care Credit

Credit
The credit is 20% – 35% of the smallest of:

$3,000 ($6,000 for two or more qualifying persons).
Qualified expenses incurred and paid during the year.
Include expenses for care in 2015 that were paid before
2015. Reduce expenses by dependent care benefits excluded
from income.
Taxpayer’s earned income.
Spouse’s earned income.

Click Families With Children 2016 Here

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Why We Appreciate Referrals

Why We Appreciate Referrals

We acquire many of our customers through referrals from satisfied clients. Beyond the benefit of being able to expand our business, there are other reasons why we appreciate referrals. When a client thinks enough of us to recommend our services to a family member, friend, or co-worker, we attain a higher quality clientele than those we acquire from more random marketing efforts.A personal recommendation can help jump start the
business relationship, resulting in a more efficient, effective tax engagement. Please consider sharing this brochure with any individual who you believe might find our services useful.

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Benefits of Using a Paid Preparer

With so many do-it-yourself tax programs available for sale, it’s a legitimate question to ask why you should hire a paid preparer when you can create and file a tax return on a home computer.

Keep in mind that entering tax information into a computer program and making adjustments necessary to clear the program’s diagnostic error messages is no
substitute for understanding tax law. The Internal Revenue Code and related Treasury Regulations contain over 10,000 pages of complicated provisions. Working with a tax professional who understands how the provisions affect your specific situation and how the rules interact can provide you with the best result on your tax return. Obtaining tax benefits is often a complex process involving properly executed and timely-filed elections.
Simply entering amounts into an input program often leads to lost benefits. We find that in many cases we save new clients more than the cost of our services compared to returns they have prepared themselves. Proper reporting and filing can also help keep you off
the IRS radar.

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Estate Planning, Wills, Probate, and Transfer of Assets

Pictures for Estate, Trusts

Wills and Intestacy

A will allows the testator (the person creating the will) to specify:
• Who receives property at the testator’s death.
• Whether beneficiaries receive gifts outright or in trust.
• Who will act as personal representative.
• Who will be the guardian of minor children.

In the absence of a will, these matters are settled by state law.

Read Estate Planning, Wills, Probate, Transfer of Assets 2016 Here

Who Needs a Will?

Include persons who are not heirs. Wills are needed to provide for a person who is not an heir under state law—unmarried partners, stepchildren, friends, charities, in-laws, etc.
Exclude an heir. Heirs are the persons who inherit an estate under state law in the absence of a will. A will is needed to prevent an heir from inheriting probate assets.
Minors and disabled adults. Trust provisions can be included in a will to delay receipt of an inheritance or to allow assets to be used on behalf of an adult who is disabled.
Estate tax planning. Married couples can include trust provisions to reduce estate tax.

Read Estate Planning, Wills, Probate, Transfer of Assets 2016 Here

Dying Intestate—Without a Will

State law determines who receives probate property if a decedent dies without a will.

Most states provide first for the surviving spouse and children. Children of the decedent always inherit a share in some states while in others they inherit only if they are not also children of the surviving spouse. Children also receive a share in some states if the surviving spouse has any children who are not also children of the decedent.
Intestacy laws generally provide for distribution by representation, also known as per stirpes distribution. The share of any heir who dies before the decedent passes in equal shares to that heir’s children.
When there are no descendants, the surviving spouse receives the entire estate in some states but more commonly shares the estate with the decedent’s parents.
When there is no spouse and no descendants, parents and siblings share the estate in some states. In others, parents inherit the entire estate, and siblings inherit only if there is no surviving parent.
If there are no parents or descendants of parents, grandparents generally inherit next, followed by their descendants.
The final beneficiary under intestacy law is the state. Only relations up to a certain degree inherit under each state’s laws. After that point, the decedent’s property “escheats” to the state. State laws vary—a third cousin thrice removed may inherit in one state but a second cousin may be too remotely related to inherit in another.

Example: Nola died at age 103 without a will. Under state law, her property passes to her descendants per stirpes. Nola’s three children, Brian, Kyle, and Lloyd, all died before Nola.
Nola’s six grandchildren inherit her $900,000 estate. Brian’s only child receives $300,000. Kyle’s two children each receive $150,000. Lloyd’s three children each receive $100,000.

Read Estate Planning, Wills, Probate, Transfer of Assets 2016 Here

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Moving Out Worksheet

Moving Out Worksheet

This worksheet is geared toward helping young people determine whether they have the financial means to move out on their own and maintain their desired lifestyle. One-time or yearly costs are listed as lump sums. Periodic costs are computed on a monthly basis.

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Newlyweds Tax Tips

Just Married

Tips for Newlyweds

Updating your status from single to married may bring about some unanticipated changes, including changes relating to your taxes. While wedding planners don’t typically use an IRS checklist, here are a few things to keep in mind when filing your first tax return as a married couple will be required.

As with any tax issue, contact your tax professional to help you navigate your own unique situation.

Read Newlyweds Tax Tips Here

Notify the Social Security Administration (SSA)
If one of you has taken on a new name, report the change to the SSA. File Form SS-5, Application for a Social Security Card.
It is important that your name and Social Security number match on your tax return. The IRS will match your information with records provided by the SSA and, if the records don’t match, any electronically filed return will be rejected and any paper filed return will have the mismatched individual’s personal exemption cancelled until the error is corrected.
Avoid making a name change too close to tax season. While the SSA can process a name change in about two weeks, the delay in data-sharing between the SSA and the IRS can make any change near the end of the year problematic. In such situations, it may be advisable to file the tax return using your maiden name and change your name with the SSA after the return has been filed.
Form SS-5 is available on the SSAs website at http://www.ssa. gov, by calling 800-772-1213, or by visiting a local SSA office. A copy of your marriage certificate and driver’s license or passport will be required.

Read Newlyweds Tax Tips Here

Notify the IRS if You Move
The IRS will automatically update your new address upon filing your next tax return, but any notices the IRS sends in the meantime may not get to you. The U.S. Postal Service does not forward certain types of federal and certified IRS mail. IRS Form 8822, Change of Address, is the official way to update the IRS of your address change. Download Form 8822 from http://www.irs.gov or order it by calling 800-TAX-FORM (800-829-3676).

Read Newlyweds Tax Tips Here

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Pension Income Planning

Pension Income Planning

An employee nearing retirement may face a dilemma when it comes to choosing his or her pension. Pension options from a defined benefit retirement plan generally include a lifetime payment with no survivor benefit, a joint and 50% survivor payment, or a joint and 100% survivor payment. The joint and survivor benefits are reduced amounts from the lifetime payment option.

Read 2016 Pension Income Planning Here

Predicament
If the employee selects the lifetime payment and then dies before the surviving spouse, no monthly pension will be left for the spouse. If the employee selects one of the survivor options, and the spouse dies before the employee dies, the employee will be locked into the lower payout for the rest of his or her life. The amount of potential loss of income can be devastating to the retired employee or spouse. Emotionally, an employee may be inclined to choose one of the pension options that give an ongoing benefit to his or her surviving spouse. However, this may not be the best financial decision.

Example:

Henry, age 65, will be retiring soon. He and his wife, Louise, also age 65, are reviewing his pension options.

Option	Monthly Pension	Survivor’s Monthly Pension
Life	$2,000	$0
50% Survivor Benefit	$1,600	$800
100% Survivor Benefit	$1,200	$1,200

If Henry chooses the life option and subsequently dies, Louise will be left without any portion of his pension. With the 50% survivor benefit, Henry would have $400 less per month than the life option, and Louise would receive a pension of half of Henry’s if Henry were to die. With the 100% survivor benefit, Henry would receive $1,200 per month and if he were to die, Louise would receive $1,200 per month.

Read 2016 Pension Income Planning Here

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Social Security and Medicare

Social Security

Full Retirement Age
If you were born in 1942 or earlier, you are already eligible for full Social Security benefits. The following chart will guide you in determining your full retirement age.

Year of Birth	Full Retirement Age
1943-1954	66
1955	66 and 2 months
1956	66 and 4 months
1957	66 and 6 months
1958	66 and 8 months
1959	66 and 10 months
1960 or later	67

Note: Although the full retirement age is rising, you should still apply for Medicare benefits three months before your 65th birthday. If you wait longer, your Medicare
insurance (Part B) and prescription drug coverage (Part D) may cost you more money.

Read Social Security and Medicare Here

Delayed Retirement
If you choose to delay receiving benefits beyond your full retirement age, your benefits will be increased by a certain percentage, depending on the year you were born. The increase will be added in automatically from the time you reach full retirement age until you start
taking benefits or reach age 70, whichever comes first.
Early Retirement
You may start receiving benefits as early as age 62. However, if you start your benefits early, your benefits are reduced approximately one-half of 1% for each month you
start your Social Security before your full retirement age.

Read Social Security and Medicare Here

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Early Retirement Distributions

Early Retirement

Early Retirement Distributions

A taxpayer may choose, or be forced into choosing, early retirement. A retirement before age 59½ creates income challenges for the retiree. The retiree is not yet eligible to receive retirement benefits from Social Security. The retiree may or may not have a monthly pension to generate income.

In many situations, the retiree will need to generate income from his or her assets. Often, the retiree has most of his or her assets in a retirement plan through a 401(k) plan at his or her employer or in an individual retirement arrangement (IRA). Withdrawals of earnings and pre-tax contributions are subject to ordinary income tax. In addition, taxpayers may be subject to the 10% early withdrawal penalty tax on distributions taken before the taxpayer reaches age 59½.

Read Early Retirement Distributions 2016 Here

Tax Summary

Withdrawals of earnings and pre-tax contributions from an IRA are subject to ordinary income tax.
Unless an exception applies, taxable withdrawals from an IRA prior to age 59½ are subject to a 10% early withdrawal penalty.
Taxpayers who take a series of substantially equal periodic payments from an IRA are not subject to the 10% additional tax.

Tax Planning Strategy

One strategy to generate income from retirement accounts for taxpayers under age 59½ is to take periodic distributions from those accounts. If structured properly, the 10% additional tax will not be assessed on the distributions. Taxpayers can take distributions from various retirement accounts such as 401(k) plans, 403(b) plans, and IRAs.

Read Early Retirement Distributions 2016 Here

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Click Dependent Support Worksheet Here

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Read Estate Planning, Wills, Probate, Transfer of Assets 2016 Here

Read Estate Planning, Wills, Probate, Transfer of Assets 2016 Here

Read Estate Planning, Wills, Probate, Transfer of Assets 2016 Here

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Read Moving Out Worksheet Here

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Read Newlyweds Tax Tips Here

Read Newlyweds Tax Tips Here

Read Newlyweds Tax Tips Here

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Read 2016 Pension Income Planning Here

Read 2016 Pension Income Planning Here

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Read Social Security and Medicare Here

Read Social Security and Medicare Here

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Early Retirement Distributions

Read Early Retirement Distributions 2016 Here

Tax Summary

Read Early Retirement Distributions 2016 Here

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