June Newsletter

Every year the IRS publishes the statistics of the number of tax returns they are examining. Provided here are the last three years of published information and a look back to 2008 to see any trends:

Observations:

	Overall, you have less than a 1 out of 100 chance of being selected for an audit. The .86% audit rate is down .10% versus 2013.
	Audit rates are down for all income levels versus 2013 due to resource constraints per the IRS. The IRS claims this translates into the potential loss of $2 billion in tax revenue. However, the audit rates for those with incomes over $500,000 is still up dramatically when compared to 2008.
	The IRS is continuing its focus on returns with no AGI or negative income. This group’s 5.26% audit rate is significantly over the 2.15% audit rate in 2008.

Having good records

Always retain your tax records and support documents for as long as they may be needed to substantiate your tax return. This is usually three years after the filing due date or when the tax return was actually filed (whichever is later). Include any state record retention requirements as you review when it is safe to destroy old records. Remember some records need to be retained indefinitely. This includes, at minimum, copies of original tax returns, legal documents, confirmation of asset purchases, asset sales, and real estate transactions.

Summer is a popular time to tie the knot. Planning for the event takes hundreds of hours and thousands of dollars. Often overlooked in the craziness of the event are important tax and financial topics. If you are planning to get married in the near future or know of someone who is, here are some things to consider.

Notify Social Security. Notify the Social Security Administration (SSA) with any name changes. The IRS has a name match program with the SSA and will potentially reject deductions and joint filing status if the name change is not made timely. You do this by filing Form SS-5. Selling a home? If selling one or two residences, review the impact of capital gain tax laws and how they apply to your situation. This is important if one of you has only been in a home for a short time or if the home has appreciated in value.

Update your address. Update your address with the IRS if either of you is moving. You do this with IRS form 8822. Also change your address at the postal service. Notify your employers. Also change your name and addresses with your employer to ensure your W-2s are correctly stated. Recalculate your payroll withholdings and file a new Form W-4. Beware the marriage penalty. If both newlyweds work, your combined income could put you into a higher tax bracket. This phenomenon is referred to as “the marriage penalty”. On the other hand, marriage could also reduce your tax burden. Because of this, now is a good time to conduct a tax forecast. Review legal documents. Ensure legal titles are as you wish them after you are married. This includes bank accounts, titles on property, credit cards, insurance, and wills. Beneficiary statement update. Also check any retirement savings plans like 401(k)s and IRAs. The beneficiaries on these accounts must also be updated. Review employee benefits. Review your employee benefits and make the necessary changes in health care, insurance, employee retirement accounts, pensions, and tax-preferred spending accounts. Marriage is a qualified event for most employers to allow you to make mid-year changes. Talk about it. If you have not already done so, spend some time talking about how you will be managing your financial affairs. Who will be paying the bills? Who will be managing retirement accounts and investments? How will spending be managed? What bills and debt exist? Developing a plan and understanding how this will be handled can help reduce misunderstandings and future disagreements.

As fathers head out for a day of golf, fishing, and general relaxation why not explore the roots of this popular holiday? Here is a fun quiz around the origins of Father’s Day.

Which came first, Father’s Day or Mother’s Day? Mother’s Day. It was more than 55 years after the establishment of Mother’s Day before Father’s Day became an official day to honor dads. When was the first Father’s Day? In 1908, Fathers’ Day was celebrated as a one-time event during a sermon at a church congregation in Fairmont, West Virginia to honor the lives of miners killed in a mining accident. In 1910, a more widespread celebration was conducted in Spokane, WA. It would be many years later before the event became a nationally recognized day honoring fathers. Why was establishing a Father’s Day controversial?

Many tried and failed to gain acceptance for the event. Most complained that the event was being promoted solely as a means to sell merchandise that appealed to fathers. Because of this, many presidents and congressional actions failed to gain traction to formally establish the holiday. When was Father’s Day an officially recognized event? In 1966, President Lyndon B. Johnson signed a presidential decree to honor fathers on the third Sunday in June. In 1972, President Richard Nixon signed the national holiday into law. This was 58 years after the formal recognition of Mother’s Day.