Monthly Archive: November 2014

PSA: That’s probably not the IRS on the phone…

Unfortunately, scammers are simply a fact of life.  If you receive a phone call from someone claiming to be from the Internal Revenue Service or the Franchise Tax Board, it is most likely a scam.  Remember, the IRS and FTB will never call you without first sending a notice and they will never demand payment over the phone via credit card.

The IRS has recently posted a video which covers ways to protect yourself:

The FTB will make automated collection calls (see:, but anyone from the FTB demanding immediate payment over the phone is a scammer.

If you are ever unsure if the alleged tax collector on the other end of the line is legitimate, simply ask for their contact information where you can call them back and ask for a notice to be mailed.  If you are uncertain whether you owe taxes, please do not hesitate to contact us.  Remember: do not give anyone your personal information over the phone!


California Tax Planning Part 1 – Turn your Charitable Deductions into Charitable Credits

Although most tax planning contemplates minimization of your IRS tax bill, there are other strategies for reducing your ever-increasing California income tax bill too.

Part 1: Make a donation to the California College Access Tax Credit Fund, which funds the Cal Grant Program.

Donations to the California College Access Tax Credit Fund are deductible on your federal return and 60% of your donation is a credit on your California tax return.  As will be explained below, the transformation of a deduction into a credit provides more bang for your charitable buck and provides an opportunity for those who have already reached their limit on deductible charitable contributions in 2014 to continue giving to charity while receiving valuable tax benefits in return.

Normally, deductions reduce your tax bill by your marginal rate while credits provide a one-for-one reduction of your tax bill. For example, assume $100 of income, $50 of deduction, and a 25% tax rate.  In this scenario, your tax bill is $18.75.

100 Income

(25) Deduction


75  Net Income

x 25%


18.75 Tax bill

Assume instead that your $25 of deduction is actually $25 of credit.  In this scenario, your tax bill is zero.

100 Income

(0)   Deduction


100 Net Income

x 25%


25 Pre-Credit Tax Bill

(25) Credit


0 Tax Bill

With this tax credit, the credit is only worth 60% of the donation amount, so instead of a zero tax bill, the tax bill would instead be $10, which is still less than the $18.75 tax bill from the first scenario.

As you can see, credits are much more valuable than deductions, which reduce your tax bill at a lower rate and which can be phased out depending upon your income level.  This tax credit is being phased out over 3 years (the credit about is 55% in 2015, 50% in 2016, and disappears in 2017) and cannot be used to reduce Alternative Minimum Tax, although unused credits carryover for 6 years.

If you have any questions about how a donation to this Tax Credit Fund will affect your individual tax situation, please contact us to set up a consultation.

The individual health insurance mandate begins in 2014.

Due to Obamacare/the Affordable Care Act, tax preparation for tax year 2014 is going to be even more complex and time-consuming than ever.  The “individual mandate” to have health insurance began in 2014 and starting this upcoming tax season, I and other tax preparers are going to need to collect additional paperwork from our clients.

First, the following is a recap of the relevant tax provisions:

  • All individuals are required to have insurance for at least one day in a month, qualify for an exemption, or pay the individual mandate penalty (officially, the “shared responsibility payment”).
  • All individuals who are required to file a tax return must report their insurance on that tax return and report themselves as one of four categories:
    • Individuals who have qualifying insurance through the exchange;
    • Individuals who have qualifying insurance through an employer or Medicare;
    • Individuals who did not get qualifying insurance and do not have an exemption (and who will pay the penalty); or
    • Individuals who did not get qualifying insurance but an exemption to the penalty exists.

Please note that not all members of your family will necessarily have the same category as each other.  Furthermore, each individual may have multiple categories during the year, since the insurance mandate is tested on a month-by-month basis.

Once we have determined the proper categorization for each individual, it will be necessary to collect the information required to be reported on your tax return.  Those who have insurance through an exchange will receive Form 1095-A, Health Insurance Marketplace Statement.  Those who have insurance from Medicare will receive a statement from Medicare.  Those who receive insurance through an employer will receive Form 1095-B or 1095-C, however, if neither of these forms are available, a copy of the insurance policy will provide us with the necessary information.  If you are unable to provide any documentation to us but know that you had qualifying coverage, we will prepare a statement for your signature certifying that you have qualifying coverage.

Lastly, those who are exempt from the individual mandate will not have to pay the shared responsibility payment.  However, some exemptions require a certificate from an exchange and we will be unable to claim an exemption without a copy of the certificate.  Examples include those who are members of certain religious sects, those who are unable to afford “affordable coverage”, those whose health insurance plan was not renewed and other plans were not affordable, and those who had other issues, such as foreclosures, bankruptcy, illness or death in the family, etc. that prevented them from getting insurance.

As with all new tax laws, correctly reporting your tax liability is getting more complicated, not less so.  If you think that you may qualify for an exemption or if you would like to discuss the individual health insurance mandate as it applies to your individual tax situation, please contact us to schedule a consultation.