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April 2016


by Andrew D. Schwartz, CPA

At some point during each tax season, there is a moment when I notice a recurring trend or theme that is unique and fascinating to that specific tax season. So what is this year's most interesting trend? 

For the 2016 tax season, what I found most fascinating is the number of clients who instructed me to allocate $3 of their tax liability to the Presidential Election Campaign Fund.  With all the election craziness going on this year, more of my clients checked the Yes box in our Tax Organizer to the question about contributing to the Presidential Election Campaign Fund than have done so during all of my prior 25+ years of practice combined.

While most taxpayers aren't even aware that this option exists, there is a box to check on the top right of the first page of the Form 1040 to designate $3 of your federal tax liability to be earmarked for this fund. For joint filers, there is a second box for your spouse to check as well.

Please note that checking this box does not increase your tax liability by $3.  Instead, the federal government simply allocates $3 from your total tax liability to the Presidential Election Campaign Fund.

While your specific vote will probably never be the one vote to determine the outcome of an election, taking time to actually vote is critical to our democracy.  Same goes for the $3 you allocate to this fund that won't be enough on its own to make or break anyone's campaign.  However, having these campaign funds available might make a difference to a candidate who is neither a billionaire nor entrenched as part of the political establishment.  Who knows, maybe one day someone as far removed from the political scene as a former surgeon can go on to become president of the United States thanks in part to these public campaign funds.

According to the instructions to the Form 1040:

Presidential Election Campaign Fund

This fund helps pay for Presidential election campaigns. The fund reduces candidates' dependence on large contributions from individuals and groups and places candidates on an equal financial footing in the general election. The fund also helps pay for pediatric medical research. If you want $3 to go to this fund, check the box. If you are filing a joint return, your spouse can also have $3 go to the fund. If you check a box, your tax or refund won't change.

Prior Years Trends and Observations

Here are the most interesting trends that I observed during the prior 4 tax seasons:

2015: The year of the energy efficient tax credit with lots of my clients purchasing solar panels, electric cars, and even re-charging stations for those electric cars, including my long-time Dr. Jim who purchased all three.

2014: With a variety of tax hikes taking hold in 2013, the trend that tax season was higher taxes on lower income for high-income taxpayers, with many clients getting stuck paying obscenely high balances due.

2013: This was the first tax season that I noticed a sizable uptick in the number of individuals taking advantage of Health Savings Accounts.

2012: Record low interest rates meant that many homeowners refinanced their home mortgages at least once during 2011, including all but one or two of my clients who had a mortgage.



by Andrew D. Schwartz, CPA

Good news for procrastinators.  The IRS is giving everyone a few extra days to complete their 2015 federal income returns.  According to the IRS in their Topic 301 - When, How and Where to File:

Generally, April 15 of each year is the due date for filing your federal individual income tax return. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day (for example, Friday, April 15, 2016, is Emancipation Day, so tax year 2015 returns are due Monday, April 18, 2016. Taxpayers in Maine and Massachusetts observe Patriots' Day on April 18, 2016, so they will have until Tuesday, April 19, 2016 to file). Your return is considered filed timely if the envelope is properly addressed and postmarked by the due date.

Extensions to file - If you cannot file by the due date of your return, then you can request an extension of time to file. To receive an automatic 6-month extension of time to file your return, you can file Form 4868 by the due date of your return. See Topic 304 [see below] for more information. However, an extension of time to file is not an extension of time to pay. You will owe interest on any past-due tax and you may be subject to a late-payment penalty if the payment of tax is not made by the original due date of your return [and the amount of taxes you owe exceeds 10% of your total tax liability] .

Topic 304 - Extensions of Time to File Your Tax Return

There are three ways to request an automatic extension of time to file your U.S. individual income tax return. The request for extension of time to file must be made by the regular due date of your return to avoid the penalty for filing late. An extension of time to file is not an extension of time to pay.

You may file your extension in any one of three ways listed below:

  • E-file Form 4868 (PDF), Application For Automatic Extension of Time To File U.S. Individual Tax Return, using your personal computer or through a tax professional.
  • File a paper Form 4868 and enclose payment of your estimate of tax due. 

If you file the Form 4868 electronically, be sure to have a copy of your prior year's return; you will be asked to provide your prior year's adjusted gross income (AGI) amount for verification purposes. Once you file, you will receive an electronic acknowledgement that the IRS has accepted your filing. Keep this for your records.

Out of the Country – You are allowed two extra months (generally until June 15) to file your return and pay any tax due without requesting an extension if you are a U.S. citizen or resident alien, and on the regular due date of your return you are either living outside of the United States and Puerto Rico, and your main place of business or post of duty is outside of the United States and Puerto Rico, or in military or naval service on duty outside of the United States and Puerto Rico.

Check Out Some Articles About Extensions Written for Prior Years' Newsletters:

Below are some informative articles we posted during April of the prior years  addressing the April 15th deadline:



by Attorney Neil Cohen

Planning for the different gifting strategies that are available to reduce your estate for estate tax purposes can be difficult.  The strategies range from the simple to the complex.  As you might imagine, a simple strategy probably will not reduce the value of your estate as much as a complex strategy; however, the strategy that works best for your neighbor may not work best for you.  You need to be comfortable with the level of complexity that is created by whichever gifting strategy you use.

Part I of this article will discuss the annual exclusion and the federal gift and estate tax exemption amounts.  Part II will discuss the various gifting strategies that work with the annual exclusion and the federal exemption amounts. 

Annual Exclusion

The annual exclusion amount under the Internal Revenue Code limits the amount of the gift that you can give to a recipient each year without any gift tax consequence.  The number of recipients, however, is not limited.  In 2016 the annual exclusion amount limits gifts to $14,000 per recipient, or $28,000 if your spouse agrees to “split” the gift with you.  If you have enough family members, you can remove a large amount of value from your estate without much effort.

There are two exceptions to this limit. The first exception is for either (i) any tuition payments (but not room and board, books or other fees) made directly to a qualified educational institution, or (ii) any medical payments made directly to a healthcare provider on someone else’s behalf.  

The second exception is the qualified tuition or 529 plan account.  While these do not qualify for the unlimited tuition gift tax exclusion, Congress has provided a special rule that allows for front-end loading of contributions. You can elect to treat a gift made in Year One as being spread equally over the ensuing five years.  If you transfer $70,000 to a 529 plan account in 2016 you can elect to treat the contribution as five years’ worth of $14,000 annual exclusion gifts for the beneficiary of that 529 plan account. This will require the filing of a gift tax return to make the election but there is no gift tax due.  You can also double the 529 plan account contribution to $140,000 if you and your spouse agree to split the gift and make the election to spread it over 5 years.

Lifetime Exemption

The Internal Revenue Code also provides for a gift and estate tax exemption amount which in 2016 is $5.45 million.  This exemption works in tandem so that the first $5.45 million of cumulative lifetime gifts (which does not include annual exclusion gifts) or the value of assets at death is exempt from gift and/or estate taxation.  The gift tax exemption amount used during lifetime is subtracted from the estate tax exemption amount available upon death.  Even though this exemption amount may continue to be available at death, you may want to consider using some or all of the exemption amount during your lifetime to remove future appreciation from your estate. And like the annual exclusion amount, each spouse has their own lifetime exemption.

Annual exclusion and lifetime exemption gifts can be made outright or they can be made to a trust for the benefit of family members.  There are several types of trusts that can be used to pass on wealth, all irrevocable and all a variation of what may be referred to as a gifting trust.

Neil L. Cohen is an attorney with Seegel Lipshutz & Lo, LLP located in the Wellesley Office Park, 80 William Street, Suite 200, Wellesley, MA 02481.  You can reach them at: (781) 431-7700, or email Neil Cohan at:  You can learn more about Neil's firm at:




Income Taxes

Saving and Investing




  • Personal income tax returns are due  4/18/16 this year since Friday, 4/15/16 is a federal holiday
  • Request for automatic six month extension, Form 4868, due 4/18/16
  • 1st Quarter estimates due 4/18/16
  • Due date for funding your 2015 Roth or Traditional IRA, or Education Savings Account (ESA) is 4/18/16
  • Due date for self-employed individuals to fund their retirement plans is 4/18/16
  • Self-employed individuals who need additional time to fund a retirement plan should file a Form 4868 with the IRS by 4/18/16


2015 & 2016 TAX FACTS

  • For 2015, the standard deduction for a single individual is $6,300 and for a married couple is $12,600. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes (or sales taxes), real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses.
  • For 2015, the personal exemption is $4,000. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $118,500 for 2015 and 2016, up from $117,000 in 2014.
  • The standard mileage rate is $.54 per business mile as of January 1, 2016, down from $.575 for 2015.
  • The maximum annual salary deferral into a 401(k) plan or a 403(b) plan is $18,000 in 2015 and 2016, up from $17.5k in 2014.  And if you'll be 50 or older by December 31st, you can contribute an extra $6,000 into your 401(k) or 403(b) account this year.
  • The maximum annual contribution to your IRA is $5,500 for 2015 and 2016.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2016 to make your 2015 IRA contributions.


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This Month's Topics

This Year's Most Interesting Tax-Season Observation

File Something With The IRS By April 18th

Cohen's Corner: Gifting Strategies - Part I

The FICA Refund for Medical Residents 

2015 & 2016 Tax Facts

Tax and Financial Planning Calendar for April 2016


Browse our index of previous months' newsletter topics

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In a shocking development, the IRS recently announced that they will be honoring the FICA tax refunds submitted by residency programs and individual doctors.  The catch is that only FICA taxes paid prior to 4/1/05 qualify.

For more information, go to our April 2010 Newsletter, our January 2009 Newsletter, or our February 2001 Newsletter or read through the IRS' Chief Counsel Advice Memorandum on this issue.

Let's work together to keep current on this hugely valuable tax break.  Please post whatever you read or hear regarding this FICA issue on our new Message Board we set up just for this topic.


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