If you reported more business expenses than income on your 2014 tax return, you may have a net operating loss. That means you have the opportunity to apply your loss to past and future tax years to generate a refund or reduce your tax liability.
Unless you elected to carry the entire loss to future years, the general rule is you can use it to offset income in the two prior years, then carry the remainder, if any, forward for the next 20 years. Here’s how it works. Your 2014 operating loss will first reduce the income you reported on your 2012 and 2013 federal income tax returns, potentially generating refunds for those years. Any remaining 2014 operating loss can be used to offset income on future tax returns, beginning with the one you’ll file next April for 2015.
You claim the carryback on “Form 1045, Application for Tentative Refund,” or “Form 1040X, Amended U.S. Individual Income Tax Return.” Using Form 1045 will result in a faster refund, but you must file the return within a year of the “loss year” — that is, by December 2015 for an operating loss reported on your calendar year 2014 tax return. If you choose to file Form 1040X, you have up to three years from the due date of your 2014 return to amend prior-year forms. Either way, the IRS will pay interest after 45 days if the return is not processed in that time.
You’ll report any operating loss remaining after the carryback on Form 1040 in future years as a negative number on the line for “other income.” You will need to attach a statement showing how you calculated the amount.
Give us a call to discuss other rules and tax planning moves for net operating losses. We’re here to help.
Do you need to file a gift tax return this year? “Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return,” is due April 15. Gift tax returns are filed separately from income tax returns, though you can request a six-month extension of time to file both on the same form.
The general filing requirement for Form 709 is based on the amount of gifts, such as money or property, that you make during a calendar year. You’ll typically have to file a gift tax return by April 15, 2015, if you gave someone more than $14,000 during 2014.
Keep in mind that exceptions to the general rule exist. For example, you’ll need to file a tax return if you chose to “split” gifts with your spouse, no matter the amount of the gift. Gift splitting means you and your spouse consent to treating a gift as if each of you made one-half of the gift. This allows you to give up to $28,000 to a single donee annually without owing gift tax.
Remember, too, that some gifts are not counted for purposes of filing gift tax returns. Payments you make directly to a school to pay for someone’s tuition fit into this category.
One more thing to know: Having to file Form 709 doesn’t necessarily mean you’re required to pay gift tax.
Not sure whether you need to file a gift tax return this year? Please give us a call. We’ll be happy to help you deal with the rules.
You’ve probably heard about the tax benefits that were renewed last December and that you can claim on your 2014 federal income tax return. But do you know about other new beneficial tax rules that are effective for 2015? Here are two.
- ABLE accounts. These accounts are part of a new program that state governments can set up during 2015. ABLE (Achieving a Better Life Experience) accounts are designed to help you build savings to care for yourself or a loved one with disabilities while maintaining eligibility for benefit programs such as Medicaid. Generally you’ll qualify for an ABLE account if your disability occurred before age 26.
Once state rules are established, you’ll be able to contribute a non-deductible annual amount equal to the federal gift tax exclusion. For 2015, that’s $14,000. Earnings on the money in the account are not taxable when you use withdrawals to pay for qualified expenses related to your disability. Qualified expenses include costs for housing, education, transportation, and medical services.
There is a limit on the total amount you can contribute to an ABLE account, and the accounts include a Medicaid payback requirement. In addition, withdrawals for nonqualified expenses are subject to penalties.
- 529 plan investment changes. In the past, you could change the investment strategy of your 529 qualified tuition plan once per year, or when you changed the designated beneficiary of the account. The new rules allow investment strategy changes twice per year.
Have questions about the new rules? Please call. We’ll keep you up-to-date.
Tax season, when you’re already gathering records to support your income tax returns, is a great time to reduce financial clutter. If you’re ever audited or need records in a hurry, having a clear idea of which documents are still available and where they’re located can be a lifesaver. Getting rid of unneeded confidential information also can help mitigate the risk of identity theft. If a thief breaks into your house, you don’t want your social security numbers and bank account information ending up in the wrong hands. So taking time to decide which documents to keep and which to destroy is time well spent. Here are a few guidelines.
- Keep for a year or less; then shred. ATM printouts, credit card bills, paycheck stubs, purchase receipts, investment and banking statements — these can be shredded or otherwise destroyed within a year. Unless needed to support tax returns (records of home office expenses, for example) or to ensure that purchases can be returned or warranties honored, only keep such records long enough to reconcile your monthly or year-end financial records.
- Keep for at least three years. Any documents needed to support income tax returns should be retained for a minimum of three years. These might include charitable contributions statements, medical invoices, records of real estate or individual investment sales, or home office expense invoices. Keep in mind that individual taxpayers can be randomly audited by the IRS for up to three years after federal tax returns are filed. For those who fail to report more than 25% of their gross income, that number climbs to six years. Those who don’t file at all — a terrible idea! — should plan to keep their documents forever (there’s no statute of limitations for nonfilers).
- Don’t toss. Tuck away certain documents — permanently and securely — in a safe deposit box. These might include wills, birth and death certificates, adoption papers, marriage licenses, military discharge papers, divorce decrees, and powers of attorney records. In a filing cabinet or notebook at home, keep an inventory of the contents of your safe deposit box, including photocopies of important documents and notes on the location of the box and its keys. Scanning vital records and storing them on an encrypted CD or DVD is also a good idea.
If you’d like additional tips for organizing your financial records, give us a call.
Providing excellent customer service is crucial for any business, whether that service is provided across the counter in a local brick-and-mortar store or over the Internet. Online customers can be impatient, and dealing with customer complaints over the Internet can be especially challenging. In most cases, your tone of voice and body language can’t be used to communicate online, so it’s even more important to choose your words carefully. When responding to customer complaints via e-mail, chat rooms, or other online venues, keep these four tips in mind:
- Be honest. Today’s customers are both savvy and skeptical. For better or for worse, online anonymity makes it easier for them to dispense with social graces that would temper otherwise polite behavior. So don’t try to bamboozle them. Be straightforward and transparent. If your company made a mistake, say so. If you don’t know the answer to customers’ questions, tell them you’ll research the issue and get back to them.
- Ask questions. A stock response to a specific question is sure to irritate. It’s like putting customers on hold for half an hour with canned recordings repeatedly telling them that “your call is important to us.” So gain a comprehensive understanding of their issue before responding. Identify the basic problem, give them an opportunity to vent their feelings, and evaluate the issue to determine how best to help. That doesn’t mean you need to agree with their complaint, but showing that you’re actively listening — whether by e-mail or in person — can defuse emotions and help you get to the root of the problem.
- Be polite. It’s easy for e-mail responses to be misinterpreted, so take care with your words. In some cases, you may want to ask a co-worker to review your response before it’s sent. Reread e-mails to make sure the message won’t be perceived as rude. Use the person’s name and let him or her know that you’re personally handling the problem. If possible, end conversations on a positive note.
- Follow through. Deliver what you promise. If the item was defective, make it right. If the customer wants a discount and it fits within your policy to provide it, don’t hesitate. Whether you’re dealing with customers online or in person, go the extra mile.
Make sure your good customer service standards translate to online situations as well.