503-289-2885 / 503-285-5074 shirleywarner@msn.com

      Preparing for tax day

      Use these tips to help you prepare for your appointment

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      Call First for Appointment?

      Call or Schedule here.

      Electronic Filing Offered?

      Yes.

      Drop-off Service Available?

      Yes, strongly encouraged.

      Required documents to keep on file:

      • Copies of Drivers License or State IDs
      • Social Security Cards
      • Proof of Residence for dependents claiming EIC

      Income documents:

      • W-2s
      • 1099s
      • Proof of jury duty pay
      • Proof of alimony you received
      • Social Security statement (1099-SSA)
      • Dividend and interest statements (1099-DIV and 1099-INT)
      • Retirement distributions (1099-R)
      • Brokerage statements (1099-B), along with statements showing when you bought and sold your investments.
      • K-1 statements reporting profits from partnerships, trusts, and small businesses
      • Record of income and expenses for your rental property
      • Record of income and expenses for your self-employment

      (Use our handy IRS document search tool for your documents)

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      Other tax documents:

      • HUD-1 Escrow statement for property you bought or sold
      • Summary of moving expenses
      • Summary of educational expenses (college tuition)
      • Summary of your child care, day care, or adult day care expenses
      • IRA contributions (traditional, SEP, or rollovers)
      • Student loan interest paid (1098-E)

      Tax deduction documents:

      • Health care expenses (doctors, dentists, health insurance, eye care, medicine)
      • Real estate taxes
      • Motor vehicle registration
      • Mortgage interest paid (1098)
      • Gifts to charity
      • Last year’s tax preparation fees
      • Job-related expenses (union dues, job education, uniforms
      • Loss of property due to casualty or theft
      • Gambling losses

      How can I check on my tax refunds?

      Tax Related Web-sites/phone numbers:
      IRS www.irs.gov
      IRS Get Refund Status
      IRS Inquiry Phone: (800) 829-1040

      Current Tax rates

      Current rates information provided by Tax Foundation

      2017 Tax Rates

      Estimated Income Tax Brackets and Rates

      In 2017, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Table 1). The top marginal income tax rate of 39.6 percent will hit taxpayers with taxable income of $418,400 and higher for single filers and $470,700 and higher for married couples filing jointly.

      Table 1. Single Taxable Income Tax Brackets and Rates, 2017

      Rate
      Taxable Income Bracket
      Tax Owed

      10%

      $0 to $9,325
      10% of Taxable Income

      15%

      $9,325 to $37,950
      $932.50 plus 15% of the excess over $9325

      25%

      $37,950 to $91,900
      $5,226.25 plus 25% of the excess over $37,950

      28%

      $91,900 to $191,650
      $18,713.75 plus 28% of the excess over $91,900

      33%

      $191,650 to $416,700
      $46,643.75 plus 33% of the excess over $191,650

      35%

      $416,700 to $418,400
      $120,910.25 plus 35% of the excess over $416,700

      39.60%

      $418,400+
      $121,505.25 plus 39.6% of the excess over $418,400

      Table 2. Married Filing Joint Taxable Income Tax Brackets and Rates, 2017

      Rate
      Taxable Income Bracket
      Tax Owed

      10%

      $0 to $18,650
      10% of taxable income

      15%

      $18,650 to $75,900
      $1,865 plus 15% of the excess over $18,650

      25%

      $75,900 to $153,100
      $10,452.50 plus 25% of the excess over $75,900

      28%

      $153,100 to $233,350
      $29,752.50 plus 28% of the excess over $153,100

      33%

      $233,350 to $416,700
      $52,222.50 plus 33% of the excess over $233,350

      35%

      $416,700 to $470,700
      $112,728 plus 35% of the excess over $416,700

      39.60%

      $470,700+
      $131,628 plus 39.6% of the excess over $470,700

      Table 3. Head of Household Taxable Income Tax Brackets and Rates, 2017

      Rate
      Taxable Income Bracket
      Tax Owed

      10%

      $0 to $13,350
      10% of taxable income

      15%

      $13,350 to $50,800
      $1,335 plus 15% of the excess over $13,350

      25%

      $50,800 to $131,200
      $6,952.50 plus 25% of the excess over $50,800

      28%

      $131,200 to $212,500
      $27,052.50 plus 28% of the excess over $131,200

      33%

      $212,500 to $416,700
      $49,816.50 plus 33% of the excess over $212,500

      35%

      $416,700 to $444,500
      $117,202.50 plus 35% of the excess over $416,701

      39.60%

      $444,550+
      $126,950 plus 39.6% of the excess over $444,550
      Source: IRS.

      Standard Deduction and Personal Exemption

      The standard deduction for single filers will increase by $50 and $100 for married couples filing jointly (Table 4). The personal exemption for 2017 remains the same at $4,050.

      Table 4. 2017 Standard Deduction and Personal Exemption

      Filing Status
      Deduction Amount
      Single
      $6,350
      Married Filing Jointly
      $12,700
      Head of Household
      $9,350
      Personal Exemption
      $4,050
      Source: IRS.

      PEP and Pease

      PEP and Pease are two provisions in the tax code that increase taxable income for high-income earners. PEP is the phaseout of the personal exemption and Pease (named after former Senator Donald Pease) phases out the value of most itemized deductions once a taxpayer’s adjusted gross income reaches a certain amount. The income threshold for both PEP and Pease will increase from last year to $261,500 for single filers and $318,800 for married couples filing jointly (Tables 5 and 6). PEP will end at $384,000 for singles and $436,300 for married couples filing jointly (both will increase from 2016), meaning that taxpayers with AGI above these limits will no longer benefit from personal exemptions.

      Table 5. 2017 Pease Limitations on Itemized Deductions

      Filing Status
      Income
      Single
      $261,500
      Married Filing Jointly
      $313,800
      Head of Household
      $287,650
      Married Filing Separately
      $156,900
      Source: IRS.

      Table 6. 2017 Personal Exemption Phaseout

      Filing Status
      Phaseout Begins
      Phaseout Complete
      Single
      $261,500
      $384,000
      Married Filing Jointly
      $313,800
      $436,300
      Head of Household
      $287,650
      $410,150
      Married Filing Separately
      $156,900
      $218,150
      Source: IRS.

      Alternative Minimum Tax

      The Alternative Minimum Tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel tax income system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two. The AMT uses an alternative definition of taxable income called Alternative Minimum Taxable Income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, this exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent. The AMT exemption amount for 2017 is $54,300 for singles and $84,500 for married couples filing jointly (Table 7).

      Table 7. 2017 Alternative Minimum Tax Exemptions

      Filing Status
      Exemption Amount
      Single
      $54,300
      Married Filing Jointly
      $84,500
      Married Filing Separately
      $42,250
      Trusts & Estates
      $24,100
      Source: IRS.

      In 2017, the 28 percent AMT rate applies to excess AMTI of $187,800 for all taxpayers ($93,900 for married couples filing joint returns). Under current law, AMT exemptions phase out at 25 cents per dollar earned once taxpayer AMTI hits a certain threshold. In 2017, the exemption will start phasing out at $120,700 in AMTI for single filers and $160,900 for married taxpayers filing jointly (Table 8.

      Table 8. 2017 Alternative Minimum Tax Exemption Phaseout Thresholds

      Filing Status
      Threshold
      Single
      $120,700
      Married Filing Jointly
      $160,900
      Married Filing Separately, Estates and Trusts
      $80,450

      Earned Income Tax Credit

      2017’s maximum Earned Income Tax Credit for singles, heads of households, and joint filers is $510, if the filer has no children (Table 9). The credit is $3,400 for one child, $5,616 for two children, and $6,318 for three or more children. All of the aforementioned are relatively small increases from 2016.

      Table 9. 2017 Earned Income Tax Credit Parameters

      Filing Status
      No Children
      One Child
      Two Children
      Three or More Children
      Single or Head of Household
      Income at Max Credit

      $6,670

      $10,000

      $14,040

      $14,040

      Maximum Credit

      $510

      $3,400

      $5,616

      $6,318

      Phaseout Begins

      $8,340

      $18,340

      $18,340

      $18,340

      Phaseout Ends (Credit Equals Zero)

      $15,010

      $39,617

      $45,007

      $48,340

      Married Filing Jointly
      Income at Max Credit

      $6,670

      $10,000

      $14,040

      $14,040

      Maximum Credit

      $510

      $3,400

      $5,616

      $6,318

      Phaseout Begins

      $13,930

      $23,930

      $23,930

      $23,930

      Phaseout Ends (Credit Equals Zero)

      $20,600

      $45,207

      $50,597

      $53,930

      Source: IRS.

      2016 Tax Rates

      Estimated Income Tax Brackets and Rates

      In 2016, the income limits for all tax brackets and all filers will be adjusted for inflation and will be as follows (Table 1). The top marginal income tax rate of 39.6 percent will hit taxpayers with taxable income of $415,050 and higher for single filers
      and $466,950 and higher for married filers.

      Table 1. 2016 Taxable Income Tax Brackets and Rates (Estimate)

      Rate
      Single Filers
      Married Joint Filers
      Head of Household Filers
      Source: Author’s Calculations.
      10%
      $0 to $9,275
      $0 to $18,550
      $0 to $13,250
      15%
      $9,275 to $37,650
      $18,550 to $75,300
      $13,250 to $50,400
      25%
      $37,650 to $91,150
      $75,300 to $151,900
      $50,400 to $130,150
      28%
      $91,150 to $190,150
      $151,900 to $231,450
      $130,150 to $210,800
      33%
      $190,150 to $413,350
      $231,450 to $413,350
      $210,800 to $413,350
      35%
      $413,350 to $415,050
      $413,350 to $466,950
      $413,350 to $441,000
      39.6%
      $415,050+
      $466,950+
      $441,000+

      Standard Deduction and Personal Exemption

      The standard deduction for single and married couples filing jointly will not increase in 2016 (Table 2). For taxpayers filing as head of household, it will increase by $50 from $9,250 to $9,300. The personal exemption for 2016 will be $4,050.

      Table 2. 2016 Standard Deduction and Personal Exemption (Estimate)

      Filing Status
      Deduction Amount
      Source: Author’s Calculations.
      Single
      $6,300.00
      Married Filing Jointly
      $12,600.00
      Head of Household
      $9,300.00
      Personal Exemption
      $4,050.00

      PEP and Pease

      PEP and Pease are two provisions in the tax code that increase taxable income for high-income earners. PEP is the phase-out of the personal exemption and Pease (named after former Senator Donald Pease) reduces the value of most itemized deductions once a taxpayer’s adjusted gross income reaches a certain amount. The income threshold for both PEP and Pease will be $259,400 for single filers and $311,300 for married filers (Tables 3 and 4). PEP will end at $381,900 for singles and $433,800 for married couples filing jointly, meaning these taxpayers will no longer have a personal exemption.

      Table 3. 2016 Pease Limitations on Itemized Deductions (Estimate)

      Filing Status
      Income
      Source: Author’s Calculations.
      Single
      $259,400.00
      Married Filing Jointly
      $311,300.00
      Head of Household
      $285,350.00

      Table 4. 2016 Personal Exemption Phase-Out (Estimate)

      Filing Status
      Phase-Out Begin
      Phase-Out Complete
      Source: Author’s Calculations.
      Single
      $259,400.00
      $381,900.00
      Married Filing Jointly
      $311,300.00
      $433,800.00
      Head of Household
      $285,350.00
      $407,850.00

      Alternative Minimum Tax

      Since its creation in the 1960s, the Alternative Minimum Tax (AMT) has not been adjusted for inflation. Thus, Congress was forced to “patch” the AMT by raising the exemption amount to prevent middle class taxpayers from being hit by the tax as a result of inflation. On January 2, 2013, the American Taxpayer Relief Act of 2012 indexed the income thresholds to inflation, preventing the necessity for an annual “patch.” The AMT exemption amount for 2016 is $53,900 for singles and $83,800 for married couples filing jointly (Table 5).

      Table 5. 2016 Alternative Minimum Tax Exemptions (Estimate)

      Filing Status
      Exemption Amount
      Source: Author’s Calculations.
      Single
      $ 53,900.00
      Married Filing Jointly
      $ 83,800.00
      Married Filing Separately
      $ 41,900.00

      Earned Income Tax Credit

      2016’s maximum Earned Income Tax Credit for singles, heads of households, and joint filers is $506, if the filer has no children (Table 6). The credit is $3,373 for one child, $5,572 for two children, and $6,268 for three or more children.

      Table 6. 2016 Earned Income Tax Credit Parameters (Estimate)

      Filing Status
      No Children
      One Child
      Two Children
      Three or More Children
      Source: Author’s Calculations.
      Single or Head of Household
      Income at Max Credit
      $6,610
      $9,920
      $13,930
      $13,930
      Maximum Credit
      $506
      $3,373
      $5,572
      $6,268
      Phase out Begins
      $8,270
      $18,190
      $18,190
      $18,190
      Phase out Ends (Credit Equals Zero)
      $14,880
      $39,296
      $44,648
      $47,955
      Married Filing Jointly
      Income at Max Credit
      $6,610
      $9,920
      $13,930
      $13,930
      Maximum Credit
      $506
      $3,373
      $5,572
      $6,268
      Phase out Begins
      $13,810
      $23,730
      $23,730
      $23,730
      Phase out Ends (Credit Equals Zero)
      $20,420
      $44,836
      $50,188
      $53,495

      Methodology

      Each tax parameter is adjusted for inflation by taking its base value (from legislation) and multiplying it by the current fiscal year’s average Consumer Price Index (CPI) and then dividing that by the base fiscal year’s CPI. Each parameter is rounded to either the nearest $10, $25, or $100 (depending on the specified rounding method in the legislation, see Table 7). For example, the base value for the top of the 10 percent tax bracket for singles is $7,000. This number is multiplied by the average CPI for fiscal year 2016 (236.749) and then divided by the average CPI for fiscal year 2002 (178.675): $7,000 x (236.749/178.674) = $9,275.18. This value is then rounded down to the nearest $25 to yield 2016’s 10 percent tax bracket of $9,275.

      Table 7. Tax Parameters, Base Years, and Base Values

      Base Year
      Parameter
      Base Value (Single; HoH; Married)
      Rounding Convention
      Source: Author’s Calculations.
      Note: Bracket values are the tops of each bracket.
      1987
      Standard Deduction
      $3,000; $4,400; $6,000
      Down to nearest $50
      1988
      Personal Exemption
      $2,000
      Down to nearest $50
      1992
      15% Bracket
      $22,100; $29,600; $44,200
      Down to nearest $50
      25% Bracket
      $53,500; $76,400; $89,150
      Down to nearest $50
      1993
      28% Bracket
      $115,000; $127,500; $140,000
      Down to nearest $50
      33% Bracket
      $250,000; $250,000; $250,000
      Down to nearest $50
      1995
      EITC
      See Table 8, below
      Nearest $10, for thresholds. Nearest $1, for credit amount.
      2002
      10% Bracket
      $7,000; $10,000; $14,000
      Down to nearest $25
      2008
      EITC Marriage Penalty Fix
      $5,000
      Nearest $10
      2011
      AMT
      $50,600, N/A, $78,750
      Nearest $100
      2012
      35% Bracket
      $400,000; $425,000; $450,000
      Down to nearest $50
      PEP
      $250,000; $275,000; $300,000
      Down to nearest $50
      Pease
      $250,000; $275,000; $300,000
      Down to nearest $50

      Table 8. EITC Base Parameters

      No Children
      One Child
      Two Children
      Three or More Children
      Source: Author’s Calculations.

      Tax Records Retention

      Tax record retention times

      Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the “three-year law” and leads many people to believe they’re safe provided they retain their documents for this period of time.

      Even if the original records are provided only on paper, they can be scanned and converted to a digital format. Once the documents are in electronic form, taxpayers can download them to a backup storage device, such as an external hard drive, or burn them onto a CD or DVD (don’t forget to label it).

      Create a Backup Set of Records and Store Them Electronically. Keeping a backup set of records — including, for example, bank statements, tax returns, insurance policies, etc. — is easier than ever now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet.

      You might also consider online backup, which is the only way to ensure that data is fully protected. With online backup, files are stored in another region of the country, so that if a hurricane or other natural disaster occurs, documents remain safe.

      Caution: Identity theft is a serious threat in today’s world, and it is important to take every precaution to avoid it. After it is no longer necessary to retain your tax records, financial statements, or any other documents with your personal information, you should dispose of these records by shredding them and not disposing of them by merely throwing them away in the trash.

      However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe, use the following guidelines.

      Business Documents To Keep For One Year

      • Correspondence with Customers and Vendors
      • Duplicate Deposit Slips
      • Purchase Orders (other than Purchasing Department copy)
      • Receiving Sheets
      • Requisitions
      • Stenographer’s Notebooks
      • Stockroom Withdrawal Forms

      Business Documents To Keep For Three Years

      • Employee Personnel Records (after termination)
      • Employment Applications
      • Expired Insurance Policies
      • General Correspondence
      • Internal Audit Reports
      • Internal Reports
      • Petty Cash Vouchers
      • Physical Inventory Tags
      • Savings Bond Registration Records of Employees
      • Time Cards For Hourly Employees

      Business Documents To Keep For Six Years

      • Accident Reports, Claims
      • Accounts Payable Ledgers and Schedules
      • Accounts Receivable Ledgers and Schedules
      • Bank Statements and Reconciliations
      • Cancelled Checks
      • Cancelled Stock and Bond Certificates
      • Employment Tax Records
      • Expense Analysis and Expense Distribution Schedules
      • Expired Contracts, Leases
      • Expired Option Records
      • Inventories of Products, Materials, Supplies
      • Invoices to Customers
      • Notes Receivable Ledgers, Schedules
      • Payroll Records and Summaries, including payment to pensioners
      • Plant Cost Ledgers
      • Purchasing Department Copies of Purchase Orders
      • Sales Records
      • Subsidiary Ledgers
      • Time Books
      • Travel and Entertainment Records
      • Vouchers for Payments to Vendors, Employees, etc.
      • Voucher Register, Schedules

      Special Circumstances

      • Car Records (keep until the car is sold)
      • Credit Card Receipts (keep with your credit card statement)
      • Insurance Policies (keep for the life of the policy)
      • Mortgages / Deeds / Leases (keep 6 years beyond the agreement)
      • Pay Stubs (keep until reconciled with your W-2)
      • Property Records / improvement receipts (keep until property sold)
      • Sales Receipts (keep for life of the warranty)
      • Stock and Bond Records (keep for 6 years beyond selling)
      • Warranties and Instructions (keep for the life of the product)
      • Other Bills (keep until payment is verified on the next bill)
      • Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)

      Personal Documents To Keep For One Year

      • Bank Statements
      • Paycheck Stubs (reconcile with W-2)
      • Canceled checks
      • Monthly and quarterly mutual fund and retirement contribution statements (reconcile with year end statement)

      Personal Documents To Keep For Three Years

      • Credit Card Statements
      • Medical Bills (in case of insurance disputes) 
      • Utility Records
      • Expired Insurance Policies 

      Personal Documents To Keep For Six Years

      • Supporting Documents For Tax Returns
      • Accident Reports and Claims
      • Medical Bills (if tax-related)
      • Property Records / Improvement Receipts
      • Sales Receipts
      • Wage Garnishments
      • Other Tax-Related Bills

      Personal Records To Keep Forever

      • CPA Audit Reports
      • Legal Records
      • Important Correspondence
      • Income Tax Returns
      • Income Tax Payment Checks
      • Investment Trade Confirmations
      • Retirement and Pension Records

      Business Records To Keep Forever

      While federal guidelines do not require you to keep tax records “forever,” in many cases there will be other reasons you’ll want to retain these documents indefinitely.

      • Audit Reports from CPAs/Accountants
      • Cancelled Checks for Important Payments (especially tax payments)
      • Cash Books, Charts of Accounts
      • Contracts, Leases Currently in Effect
      • Corporate Documents (incorporation, charter, by-laws, etc.)
      • Documents substantiating fixed asset additions
      • Deeds
      • Depreciation Schedules
      • Financial Statements (Year End)
      • General and Private Ledgers, Year End Trial Balances
      • Insurance Records, Current Accident Reports, Claims, Policies
      • Investment Trade Confirmations
      • IRS Revenue Agents’ Reports
      • Journals
      • Legal Records, Correspondence and Other Important Matters
      • Minute Books of Directors and Stockholders
      • Mortgages, Bills of Sale
      • Property Appraisals by Outside Appraisers
      • Property Records
      • Retirement and Pension Records
      • Tax Returns and Worksheets
      • Trademark and Patent Registrations

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      Phone: 503-289-2885
      Phone: 503-285-5074
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      E-MAIL: shirleywarner@msn.com

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