Mar 2016

Top 10 Tax Tips

By Luke Collova
March 8, 2016



As we navigate tax season, it is important to remind ourselves that tax strategies should not be employed once a year but rather year-round.   Here are some tips to consider from our friends at Accountability Services:

Top 10 Tax Tips


There are many flavors of retirement accounts and there is one that best fits you and your family’s needs. You can fund an account for you, your spouse and even college savings plans for your children and other relatives.

How does this affect you?  If you find yourself unhappy with the amount of your refund, don’t overlook your opportunity to contribute to your a retirement account. Try to fund up to your company match; so you don’t miss out on “free” money! If you contribute to a traditional retirement account (unlike a Roth account), you will defer paying tax until you retire when drawing down the balance.


The US tax system is a “pay-as-you-go” system. This means that you are required to pay income tax as you receive money. The tax return is a reconciliation of the tax year. If you receive a W-2, your company will withhold income tax based on the amount of your pay throughout the year.  Make sure that this is adjusted to reflect your ongoing tax situation.  You can change your withholding at any time throughout the year.  If you are self employed or receiving income that is not subject to income tax withholding, you should make quarterly estimated tax payments throughout the year.

How does this affect you?

If you underpay your taxes or are late on your quarterly tax payments, you could face penalty and interest charges. These can add up quickly!
If you significantly overpay your taxes, the IRS does not pay you interest.  Why let the IRS have use of your money when you could be doing better things with it?


The deadline to file your 2015 tax return is April 18.  You are required to file your tax return or an extension by the due date.  This is an area that Congress is currently looking at changing and increasing the penalties.

How does this affect you?  If you file late and owe tax, you will get hit with penalties and interest.

The failure-to-file penalty is 5 percent for each month your tax return is late, up to a total maximum penalty of 25 percent.
The failure-to-pay penalty is 0.5 percent of the amount of tax you owe for each month the tax is not paid in full.
You will also pay interest (currently 4 percent per year) for every month you don’t pay in full.

There are currently no penalties for a late tax filing if you are due a refund.

NOTE: an extension of time to file is not an extension of time to pay.  If you owe, it is due April 18 and you will still pay the failure to pay penalty and interest.


If you are self-employed, have multiple jobs, or have investment income, there can be a great deal of information required for your tax return.  Provide ALL of your 1099s, W-2s, investment income and so on in one package. This includes information such as mileage data, home office expenses, tax ID (EIN) for the daycare provider, and so on.

How does this affect you?

You could miss out on a deduction! Deductions reduce the taxes you pay. The little things add up.
You also could miss your opportunity to control the cost of preparing your tax return.  The more often we need to reach out to you, the more your fees increase because of the additional time it takes.
If an item is not reported on your tax return, you may be in for a surprise when you receive an IRS letter demanding payment with interest and penalties.


There are gains and there are gains. Gains also come in many flavors. But there is a difference in the tax rate for each type of gain.

How does this affect you?  If you don’t hold your stock purchases for longer than 12 months, you will pay more tax.  When you hold growing assets (stocks and real estate) for longer than 12 months and then sell them, they become long-term gains, which are taxed at a lower rate than short-term gains.


Charitable contributions are a great itemized deduction. They are great for you at tax time and great for the organizations you support.  But you can be smart about how you make your contribution and save tax dollars at the same time.

How does this affect you?  If your stock has appreciated, and you’ve owned it for longer than 12 months, you will get a bigger itemized deduction by donating the stock than by selling it and giving the cash.  Plus you will avoid paying capital gains tax on the sale.


This is a great, free, often over-looked business deduction that reduces your taxes. It’s easy and there are no record-keeping requirements. If you have an area in your home that you use regularly and exclusively for your business, you may qualify for this deduction. This applies whether you own or rent your home.

How does this affect you?  With the $5 per-square-foot allowance, you no longer have to keep records to comply. If you own your home, there is no depreciation of your home. If you don’t go this route, then you have to keep copies of all utility bills and other home-maintenance receipts for 4-7 years. If you claimed depreciation on your home, the amount you claimed is “recaptured” ( i.e. added to your income ) when you sell your home.


If you are over 70 ½ you can transfer up to $100,000 from your IRA to charity.

How does this affect you?  You do not pay any tax on the distribution. The money is never taxed! To top that off, the amount can count as your required minimum distribution. You may not be required to take any funds from the account for the tax year.


Retirement accounts are set up to be used at the time of retirement.  There are stiff penalties for use before this time.  There are several exceptions to the rules, so it is always best to consult your accountant or financial planner before you take any funds out of your retirement accounts. The calculations can be very tricky.

How does this affect you?  In most cases, if you take funds out early from your retirement accounts you will not only pay tax on the distribution, but you will get hit with a 10% penalty.  There are rules around early ROTH distributions as well.

Whether the IRA is your own or inherited, failure to withdraw an RMD by the deadline results in one of the most onerous penalties in the tax code – 50 percent! For example if you were required to take out a minimum of $10,000 and did not, you could be writing the IRS a check for $5,000.


Once again this continues to be a top focus of the IRS as they tighten the reporting rules around foreign asset reporting. A failure to report these assets can also come with the steepest penalties.

Assets include bank accounts, retirement accounts, securities, insurance policies and annuities in a foreign country. And, yes, Canada is a foreign country and the IRS views it that way. If you have a Canadian account, be sure you disclose it.  Likewise, you may have an account or more in another country(ies), You must report all foreign owned accounts.

NOTE: Beginning with tax year 2016, the due date has been moved up to April 15 (from June 30).

How does this affect you? The IRS can fine you up to $10,000 per account, per year.

Please contact your Accountability Services professional to discuss your specific situation for tax planning.

We are a local accounting firm founded on old-fashioned values. We are motivated by entrepreneurial thinking, and — as our name says — are anchored by individual accountability.  If you’re not in our area, we welcome you, too.  In today’s world, your zip code really doesn’t matter.  Hundreds of growing businesses throughout the US and abroad have relied upon us for their accounting, tax, systems, and financial leadership consulting.

Elizabeth Mance






This entry was posted on Tuesday, March 8th, 2016 at 03:00 pm and is filed under Blog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.


rssSubscribe to View 360°
Follow Us!
  • facebook
  • twitter
  • linkedin
bio3Joe Day, CFA is the Founder of Bear Mountain Capital. Joe started the company after spending many years advising high net worth clients with a leading global wealth management firm. Joe earned the right to use the CFA designation from the CFA Institute in 2011. He also holds a degree in Business Administration, with a Major in Finance from Gonzaga University.

Luke Collova is an Investment Advisor Representative for Bear Mountain Capital focusing on planning, investment strategy, client development and operational support. Luke’s prior career included providing commercial insurance coverage for a global insurance firm. Luke maintains his Series 65 license and holds a degree in Business Administration, with an emphasis on Finance and International Business from the University of Puget Sound.