As we approach another tax season, we would like to help ensure that you are best prepared for it by giving you some information you should find quite helpful. Of course, there will always be areas unique to your situation, but here are a few items that we see year after year that may affect you:

Health Insurance:

You are required to carry health insurance coverage for each member of your family for the entire year. If you did not have coverage for any month for any member during the year, we need to know this. We need the family member(s) who did not have coverage and which month(s) they did not have coverage. If you purchased health insurance from the marketplace, we need a copy of the 1095-A you receive for the year. On a related note, let us know if you made any contributions to or received any distributions from a health savings account during the year.

Charitable Contributions:

Your own records (bank statement, check copy, credit card statement, etc.) will suffice for cash contributions less than $250, but any cash contributions over $250 require a receipt from the donee organization. Also, if any goods or services were received (i.e. charity dinner), you should have a receipt from the organization stating the value of that good or service. You need a receipt for all non-cash donations such as clothing, household goods, etc. Remember, it is up to you, not the donee (and not your tax preparer), to determine the value of the goods you donated. If you need assistance in the valuation, many tools are available like the valuation guide on Goodwill’s website: http://www.goodwill.org/wp-content/uploads/2010/12/Donation_Valuation_Guide.pdf . We also have this guide available on our website at www.heritageaccounting.net . While we don’t need the receipts in order to prepare your return, we do need to know, at minimum, what was donated, the donation date, the donee and the value of the goods donated. We need this information for each donation throughout the year.

Employee Business Expenses:

If you have business expenses you paid for personally, and you are not reimbursed for these expenses under an accountable plan, there are some important things to consider. The most important of these is to keep some sort of record for all business expenses. This record does not necessarily need to be extensively detailed, but it does need to document the what, who, when and business purpose of your un-reimbursed expenses.

We have noticed that the IRS is increasingly performing audits as Correspondence Audits. This means that they will send a letter requesting documentation or substantiation of certain deductions or expenses. If you cannot produce sufficient evidence, they may take further action to deny those deductions and incur tax, penalty and interest to you and your business. There are couple of areas that can end up becoming those traps for businesses.

Make sure you have a business and not a hobby:

In order to take business expenses, you must have an activity that the IRS recognizes as a business. One indicator the IRS looks for in identifying a business is consistent and continuing losses. If you do not show a profit year after year, the IRS is more likely to limit or disallow the losses. On a related note, if you have not received any income from sales, you most likely do not yet have a business. Please refer to Code Section 183 for further guidance.

Dependency exemptions:

You can claim an exemption for your child if he/she is under age 19, or a full-time student under age 24, if you provide more than half of his/her support during the year. You may also be able to claim an exemption for other dependents in your home or in certain care facilities. If you have children, parents or other dependents you would like to claim your tax return, we will need to know the name, SSN, birth date, and how many months they lived with you during the year, for each dependent. If you have a joint custody agreement, you may also need to provide a copy of your Form 8332. If you or your dependent(s) paid tuition for higher education during the year, you will need to provide both the 1098-T from the institution and receipts substantiating your payments and/or loans.

The IRS is also placing increased responsibility on tax preparers, and we know of some firms who have been closed down for improper return preparation and filing. However, please remember that ultimately, the responsibility rests on you, the taxpayer, to keep these records and present the accurate information to us for preparation.

If you have any questions about any of these items, please call us and we will be happy to discuss them with you.

Happy Thanksgiving and Merry Christmas from all of us here at

-Heritage Accounting and Tax Services

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