Tax Design Challenge: Reimagine The Taxpayer Experience

The IRS has created a tax design challenge for the taxpayers. Taxpayers are encouraged to reimagine the entire taxpayer experience and design the experience of the future. The IRS is offering a $10,000 award for the Best Overall Design and a number of other prizes for those that are most useful and most financially capable. To see the full Challenge outline: CLICK HERE! Submissions must be made by May 10, 2016 at 11:59AM Eastern Time.

Judging Criteria:

The review panel will make selections based upon the following criteria:

  • Overall Appeal
  • Taxpayer Usefulness
  • Financial Capability
  • Visual Hierarchy
  • Information Density
  • Accessibility
Prize Information

A review panel will select winners based on defined criteria and an individual submission can win multiple awards:

  • Overall Design—$10,000 (1st), and $5,000 (2nd).
  • Best Taxpayer Usefulness—$2,000 (1st), and $1,000 (2nd).
  • Best Financial Capability—$2,000 (1st), and $1,000 (2nd)
Think You Have What It Takes?

If you have been frustrated with the tax paying process and experience, then this is your chance to offer a solution. With this opportunity, you have a chance to make the tax paying experience easier, simpler, and better! Throughout the competition, participants will have the chance to engage with policy experts and a network of mentors that include world-class strategists and designers from government and non-government organizations. The team at LBA Haynes Strand will be happy to assist you with this tax design challenge!

Does My HOA Have To File Tax Returns?

Does my association need to file the 1120-H or the 1120 federal income tax forms? What is the difference? Isn’t my association exempt from taxes? Is my association subject to franchise and income tax in North Carolina? These are questions that come up for community association board of directors.

Under North Carolina law, a homeowners or property owners association is exempt from state franchise and income tax as long as the association is comprised solely of residential property Associations organized for commercial property (such as office condominiums). However, they are not exempt under the law. This is a common misconception for board members. We sometimes see commercial property associations having to amend prior years’ tax returns and pay the franchise and income taxes for past years, plus penalties and interest.

If your association is comprised solely of residential property, income from member assessments is exempt from income taxes for both federal and state filings. What is defined as membership income? Essentially, it is income derived from members for the preservation, maintenance and management of the association. Some examples are the dues or assessments paid by members, late fees, interest charges on delinquent dues, and special assessments. Income generated from the clubhouse rentals, amenity rentals, as well as interest income generated from CDs and interest-bearing bank accounts is considered to be outside the purpose of the association.

Which tax form needs to be filed?

The standard form for a homeowners association is the federal form 1120-H. The “H” stands for homeowners association. This is a straightforward one-page form on which both exempt and non-exempt income is listed. The tax rate associated with this form is a flat 30 percent applied to the taxable net income only. Remember, this form is for homeowners associations specifically.

An association has the option to use form 1120, but this will subject the association to being treated as a for-profit corporation for tax purposes. This could expose the association to closer scrutiny by the IRS. The tax rate on the federal form 1120 is only 15 percent on the first $50,000 in taxable income. Many board members view this as a big savings on the association’s tax liability, but the board must weigh the increased risk for an IRS audit before choosing to use form 1120.

The fact that your association’s income may all be tax exempt does not eliminate the requirement to file tax returns. Failing to file can subject the association to additional or higher preparation fees for these unfiled returns, plus penalties and interest. In addition, the North Carolina Secretary of State will often suspend the corporation’s charter until all returns have been filed.

Let us know if you have questions about your association’s tax or audit needs. Reach out to the LBA Haynes Strand team for your no-cost consultation.

The Day After Tax Deadline Day… What To Do?

It’s the day after tax deadline day, months of hard work and stress have come to an end.  Now what should you do? We are sure that you can think of many exciting things, one of which is probably taking a break from worrying about your taxes!  Enjoy having the peace of mind that your taxes are completed and filed, and if you are receiving a refund – you can track it here.  But you can also begin thinking about how to improve the process for next year!

Maybe your tax season didn’t go as smoothly as you hoped….maybe you didn’t receive the type of care and attention you thought you would receive when you hired your CPA.  If that is the case – your next step could be to actively shop for a new CPA.  You should look for one that is proactive in nature, that believes in timely communication, and one that is knowledgeable in all facets of tax and accounting.  You want your accountant to become a yearly resource to you.  If you only spoke to your accountant from January – April this year, that is part of your problem.  If you think the tax preparation was done incorrectly…you can contact our team for a 2nd opinion on your tax situation.  This is something that happens quite frequently and can make a BIG difference in some situations.

How To Improve For Next Year

Tax planning is the #1 way to improve your experience.  You can begin tax planning…NOW.  It is never too early to start to look at next year’s tax season and have a plan laid out.  Also this is a pretty great time to get appointments with CPAs.  As tax season has come to an end – CPAs are now available for face to face meetings and have much more availability.

So if you want to be an active participant in preparing for a better tax year, click the button below.  Our team of CPAs offer no-cost consultations and are excited for the chance to meet you and help you see the results you expect with your personal and business tax situations.

5 Tips To Protect Your Financial Future

With the ever-changing tax laws, our principal members and staff work diligently to stay up-to-date and keep you informed of strategies that can help save and protect your financial future. As you’re gathering your tax documents, consider some of the tips below that can significantly help in protecting your future!

1. Determine which type of IRA is best for you.

If you’re fairly young, expect to be in a similar tax bracket when you retire, or are concerned about cash flow during retirement, the Roth IRA might be best for you. If you’re older and expect to be in a lower tax bracket, you may be a candidate for a deductible IRA.

For a side-by-side comparison of Traditional and Roth IRAs, click here.

2. Think about the best ways to gradually transfer your estate tax-free.

Consider establishing a gifting program under which you and your spouse can transfer a combined $28,000 each year to any number of recipients.

3. Contribute the maximum amount allowable to a tax-deferred retirement plan.

This includes “catch-up” contributions if you are 50 or older.

4. Create a business succession plan.

On average, only one in three closely held businesses successfully passes on to the next generation.

Click here for succession planning ideas and ways that you can help protect your company’s future.

5. Set up a trust to meet your long-term financial goals.

To get started, view these commonly used trusts.

For other tips and ways to protect your financial future, contact us today for your no-cost consultation!