Best Wishes for a Happy and Healthy New Year to You and Your Families! It Is That Time

January 12, 2017

Dear Client,

Best wishes for a happy and healthy New Year to you and your families! It is that time of year again, tax season! For the last couple of years, year-end tax planning has been affected by uncertainty over whether Congress would pass year-end tax legislation. Given that 2016 was an election year, there was no passage of any tax legislation. Thus, tax laws in effect for 2015 will not be changing for 2016.

This year, the IRS has increased efforts to prevent and detect fraud. As a result, the IRS is requiring tax preparers tocomplete rigorous questionnaires and document responses to prove taxpayer eligibilityfor any refundable tax credits, with harsh penalties for noncompliance. The refundable credits subject to these due diligence requirements are the earned income tax credit (EITC), the Child Tax Credit (CTC) and the refundable part of the CTC, the Additional Child Tax Credit (ACTC) and the American opportunity tax credit (AOTC). Therefore, our preparers will be asking for additional documents to prove a child’s age, residency, and relationship to the taxpayer. These documents may include such things as social security cards, birth certificates, school or medical records, and proof of support (rent receipts, utility bills, etc.). Taxpayers claiming the refundable education credits will also need to supply the student’s Form 1099-T, a statement of account from the college showing charges and payments, and receipts for books and supplies that will be claimed for the credit. Form 1099-Q is required if funds from a 529 plan were used to pay any of the education expenses.

If a taxpayer is claiming the Earned Income Tax Credit or the Additional Child Tax Credit, they can file their return any time after the filing season begins. However, the PATH Act of 2015 requires the IRS to hold the refund for tax returns that include the EITC or ACTC until Feb. 15. While the IRS will process the return, it cannot issue the refund before Feb. 15. The IRS will begin to release EITC/ACTC refunds starting Feb. 15. However, the IRS cautions taxpayers that these refunds likely will not arrive in bank accounts or debit cards until the week of February 27 -- if there are no processing issues and the taxpayer chose direct deposit.

Health insurance requirements remain the same as previous years. Unless otherwise exempt, all Americans are required to have minimum essential health insurance coverage or pay a penalty. Your health insurance information may be reported on a Form 1095-A, 1095-B or 1095-C. We MUST have one of these forms to prepare your tax return. We strongly urge you to have us prepare your dependent children or college students returns this year. Allowing a child to file their own return, particularly a student, can cost the child and parent literally thousands of dollars in Health Care penalties and/or credits. Regardless, we may need a copy of their return to complete your ACA forms.

In order to facilitate completing an accurate tax return affording all allowable deductions and credits, we are now requesting ALL of your tax documents and information 10 days PRIOR to your appointment. The information can be mailed to PO Box 669, East Brookfield, MA 01515 or dropped off at any of our three locations (Please call before dropping off in the Belchertown office). Please call us if you have any questions about this process at 1-800-649-6491.

We are requesting everyone to have their tax information in to us at least two weeks before the tax deadline, April 4, 2017. Please rest assured that we will utilize our best resources to once again provide you with timely, complete and accurate service while keeping your tax burden to the lowest legal amount. Thank you again for your continued confidence in our services.

A new administration and changes in Congress make predictions about 2017 tax law changes particularly troublesome. We can look to the new President’s platform for guidance on what changes may occur, but the passage and timing of such provisions will make tax laws for 2017 and beyond a guessing game during 2017 tax planning. As always, we remind you that tax planning should be addressed throughout the year and should be an integral part of financial planning.

Sincerely,

The Team at LaMothe & Associates Financial Services, Inc.

Francis A LaMothe, EA, ABA, ATA, RICP®

Jennifer A DeSimone, EA