New England Tax

If your entire family is moving to the same address and each member has the same last name, you need to fill out only one Change of Address Order form. For all other cases, each individual moving must fill out a separate form. Click here to enter the USPS Website online Change of Address Order Form where you can fill-in and submit your change of address through the Internet.

When To Submit Change of Address Form - Submit the change of address at least 30 days before you move, or as soon as you know your new address and the date of your move. The post office will forward your mail to the new address beginning on the "Start Date" you specified on the Change of Address Order form. Once the Change of Address is submitted, the Postal Service will send a confirmation letter to your old address, regardless of the date of your move.

If you file your change of address form timely, you should begin receiving forwarded mail at your new address within three to five days from the indicated "Start Date".

Duration of Forwarding Order - All mail including First-Class, Priority, and Express Mail will be forwarded for 12 months at no charge, except for mail marked "Do Not Forward." Periodicals (second-class) will be forwarded for 60 days at no charge. This includes newspapers and magazines. Generally third-class mail such as circulars, books, catalogs, and advertising mail will not be forwarded. Parcel Post Packages will be forwarded locally for 12 months at no charge. Forwarding charges will be assessed if forwarded outside the local area. This includes packages weighing 16 ounces or more not mailed as Priority Mail.

Magazine & Publisher Notification - You should let all publishers and other business mailers know at least four to six weeks before you move. Follow the publisher's change of address instructions and those noted on billing statements you receive.

Notification Postcards - At least 30 days before you move, notify everyone of your new address and the date of your move. Many bills and statements have an area for making an address change notification. You can obtain free Notification Postcards (Form 3576) from your post office.

Mail with an Endorsement "Do Not Forward" - For permanent moves, mail marked "Do Not Forward" is returned to the sender along with your new address information. However, if your move is only "temporary" (you'll be returning home in less than 12 months), this mail is returned to the sender without your new address information. Therefore, temporary movers need to notify their mailers directly to inform them of their new address.

USPS Movers Assistance - For additional information, such as finding your new post office or contacting the U.S. Postal Service, click here to access the USPS Online Help for Movers.

You may qualify to exclude from your income all or part of any gain from the sale of your main home if you meet certain qualifications. The following are highlights of tax rules pertaining to the sale of a home (primary personal residence). These rules are complex and anyone contemplating selling a home or residential rental property should consult with this office in advance of initiating the transaction. This is one area of the tax law where preplanning can save literally thousands of dollars in taxes.

Maximum Amount of Exclusion - You can exclude the entire gain on the sale of your main home up to:

1) $250,000, or

2) $500,000 if ALL of the following are true.

a) You are married and file a joint return for the year.

b) Either you or your spouse meets the ownership test.

c) Both you and your spouse meet the use test.

d) During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home (not counting any sales before May 7, 1997).

Reduced Maximum Exclusion - You can claim exclusion, but the maximum amount of gain you can exclude will be reduced, if either of the following is true.

1) You did not meet the ownership and use tests for a home you sold due to a change in health or place of employment.

2) Your exclusion would have been disallowed because of the rule described in More Than One Home Sold During 2-Year Period, except that you sold the home due to a change in health or place of employment.

More Than One Home Sold During 2-Year Period - You cannot exclude gain on the sale of your home if, during the 2-year period ending on the date of the sale, you sold another home at a gain and excluded all or part of that gain. Exception: if you sold the home due to a change in health or place of employment, you can still claim exclusion, but the maximum amount you can exclude may be reduced. 

Ownership and Use Tests - To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

1) Ownership Test: Owned the home for at least 2 years, and

2) Use Test: Lived in the home as your main home for at least 2 years.

Period of Ownership and Use - The required 2 years of ownership and use (during the 5-year period ending on the date of the sale) do not have to be continuous. You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period. Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. 

Married Persons - If you and your spouse file a joint return for the year of sale, you can exclude gain if either spouse meets the ownership and use tests.

Death of Spouse Before Sale - If your spouse died before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home.

Home Transferred from Spouse - If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it.

Use of Home after Divorce - You are considered to have used property as your main home during any period when:

1) You owned it, and

2) Your spouse or former spouse is allowed to live in it under a divorce or separation instrument.

Business Use or Rental of Home - You may be able to exclude your gain from the sale of a home that you have used for business or to produce rental income. However, you must meet the ownership and use tests.

Depreciation for Business Use - If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. If you can show by adequate records or other evidence that the depreciation deduction allowed was less than the amount allowable, the amount you cannot exclude is the smaller figure.

Property Used Partly as Your Home and Partly for Business or Rental During the Year of Sale - In the year of sale you may have used part of your property as your home and part of it for business or to produce income.

Examples are:

• A working farm on which your house was located,
• An apartment building in which you lived in one unit and rented out the others,
• A store building with an upstairs apartment in which you lived, or
• A home with a room used for business or to produce income.

If you sell the entire property, you should consider the transaction as the sale of two properties. The sale of the part of your property used for business or rental is reported as the sale of business property and is generally a taxable event (but see next paragraph). The sale of the part used as a home is treated as the sale of your home subject the exclusion of gain provisions, if otherwise qualified.

Note: The IRS has made it quite clear that the business portion that the exchange of a home can qualify for both the §121 home sale exclusion and §1031 like-kind exchange deferral treatment. This can occur where the property was used as a principal residence and a business consecutively (e.g., use as a principal residence followed by rental of the property) or concurrently (a portion of the home used as a principal residence and a portion used as a home office). Please call this office for addition information regarding how to qualify for the tax deferral of the business portion gain.

If you are just like most of us, after years of living in the same place, you will have collected a variety of items that you never use. Getting rid of those unneeded items before you move can save you money in three ways!

1. Hold a garage sale prior to your move and sell everything you don't need or use. This will put extra cash in your pocket and reduce your moving costs.

2. You can also contribute those unneeded items to a local charity. If you itemize your deductions, this charitable contribution will reduce your taxes or provide a larger refund. At the same time, you will be saving money on moving costs. For more information, see the article on noncash charitable contributions included in the website.

3. Another alternative is to simply discard those items you no longer need and reduce you effort preparing to move and unpacking. As with the other tips, you will save on your moving costs.

In general, moving deductions are deductible if you meet certain qualifying tests. However, like other parts of the tax law, there are exceptions and special cases. The following is an abbreviated overview of the qualifications for domestic moves. Foreign and military moves require certain special qualifications. Click here for a worksheet to record your Moving Deductions.

Qualifications

1. Distance Test - A move will meet the distance test if the new main job location is at least 50 miles farther from your former home than your old main job location was from your former home. For example, if your old main job was 3 miles from your former home, your new main job must be at least 53 miles from that former home. The distance between a job location and your home is the shortest of the more commonly traveled routes between them. The distance test considers only the location of your former home. It does not take into account the location of your new home.

2. Related to Start of Work Test - Your move must be closely related, both in time and in place, to the start of work at your new job location. You can generally consider moving expenses incurred within one year from the date you first reported to work at the new location as closely related in time to the start of work. It is not necessary that you arrange to work before moving to a new location, as long as you actually do go to work.

3. Time Test - To deduct your moving expenses, you also must meet one of the following time tests.

• Time test for employees - If you are an employee, you must work full-time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location. For this time test, count only your full-time work as an employee; do not count any work you do as a self-employed person. You do not have to work for the same employer for the 39 weeks. You do not have to work 39 weeks in a row. However, you must work full-time within the same general commuting area.
  
• Time test for self-employed persons - If you are self-employed, you must work full time for at least 39 weeks during the first 12 months AND for a total of at least 78 weeks during the first 24 months after you arrive in your new job location. For this time test, count any full-time work you do as an employee or as a self-employed person. You do not have to work for the same employer or be self-employed in the same trade or business for the 78 weeks.

Deductible Moving Expenses - You can deduct only those expenses that are reasonable for the circumstances of your move. For example, the cost of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. If during your trip to your new home, you make side trips for sightseeing, the additional expenses for your side trips are not deductible as moving expenses.

1) Household goods and personal effects - You can deduct the cost of packing, crating, and transporting your household goods and personal effects and those of the members of your household from your former home to your new home.

2) Storing and Insuring Household Goods - You can include the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home.

3) Connecting & Disconnecting Utilities - You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or personal effects. You can deduct the cost of shipping your car and your household pets to your new home.

4) Travel expenses - You can deduct the cost of transportation and lodging for yourself and members of your household while traveling from your former home to your new home. This includes expenses for the day you arrive. You can include any lodging expenses you had in the area of your former home within one day after you could not live in your former home because your furniture had been moved. You can deduct expenses for only one trip to your new home for yourself and members of your household. However, all of you do not have to travel together.

5) Meals - Meals are NOT a deductible moving expense!

6) Travel by car - If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting either:

• Your actual expenses, such as gas and oil for your car, if you keep an accurate record of each expense (Do not include general maintenance, repairs. Insurance, etc., are not allowed), or
  
• 24 cents a mile. (Year 2009)

7) Parking Fees & Tolls - You can deduct parking fees and tolls you pay in moving.

Special Rules for Military Personnel

To deduct moving expenses, the military taxpayer usually must meet general time and distance tests. However, if the member of the Armed Forces is on active duty and moves because of a permanent change of station, they do not need to meet those tests.

Permanent change of station - A permanent change of station includes:

• A move from the military member’s home to his or her first post of active duty,
  
• A move from one permanent post of duty to another, and
  
• A move from the last post of duty to the member’s home or to a nearer point in the United States. The move must occur within one year of ending active duty service or within the period allowed under the Joint Travel Regulations.

When you give away household items like clothing, appliances and other goods to a qualified charity, your generosity can add up to a tax write-off if you itemize your deductions. The amount of your deduction is generally the donated property's "fair market value" (i.e., the price similar property would sell for in the open market).

Unfortunately, one of the most difficult problems connected with noncash donations is determining their FMV. In fact, when you give away property of high value, the job of determining worth is best left in the hands of a professional appraiser. Or, when you donate property that has increased in value, special tax rules apply and you should consult with this office before you make your donation.

The guidelines offered below are provided as aids for setting value on the most common type of noncash donations (miscellaneous personal items) that have decreased in value since the time they were first acquired:

• Used Clothing: The IRS provides no set formula for valuing clothing items. However, keep in mind that the fair market value of used clothing and other personal items is usually much less than what you paid for them. A visit to a local thrift shop may help give you an idea of current selling prices for items like yours.
  
  
• Household Goods: The value of used household goods (e.g., furniture and appliances) is also much less than their original cost. If the property is worn, inoperable or out of style, it may have little or no market value. However, photographs, purchase receipts, and newspaper ads describing similar property should help support a valuation.
  
  
• Cars and Other Vehicles: Beginning in 2005, Congress imposed some tough new rules that substantially limit the deduction for this popular charitable donation.

RECORDKEEPING AND REPORTING OF NONCASH DONATIONS: Your recordkeeping of noncash donations depends on the dollar amount of your gift. That value also determines the manner in which donations get reported on your tax return.

• Gifts valued at less than $250: You will need a receipt from the charity showing the date of your contribution, the organization's address, and a reasonably detailed description of the property. The receipt doesn't have to state the value of the property you gave away. Keep in mind that you aren't required to have a receipt when it's impractical to get one, for example, if you deposit your donation at an unattended bin site. But whether or not a receipt is required, you still need to keep a written record of each item you give away.
  
  
• Gifts of $250 but not over $500: For goods valued in this category, you must obtain a timely written acknowledgment of your gift from the charity. Without the written acknowledgment, you get no charitable deduction. The acknowledgment needs to contain the following information: (a) a description of the property you gave away, and (b) whether you received any goods or services from the charity in return for your gift (if so, the value of the goods or services needs to be stated).
  
  
• Gifts over $500 but not over $5,000: For donations of this amount, you must have a receipt from the charitable organization in the same format described under "Gifts of $250 but not over $500"; otherwise, you'll get no deduction. However, the information required to be included in the written record must also include details about your acquisition of the property donated. In addition, deductions for these larger gifts require attaching a special IRS form to your tax return for the year of your contribution.
  
  
• Gifts over $5,000: You are required to obtain a qualified appraisal and attach an "appraisal summary" to your tax return. The values of all items donated during the year that are similar in nature are added together to determine whether this rule applies. Since many complicated rules can apply to contributions in this category, it's best to contact this office before you make your contribution. Recordkeeping for gifts valued over $5,000 are the same as those listed previously for "Gifts over $500 but not more than $5,000." In addition, you are required to get an authorized signature from an official of the charitable organization. Page 2 of IRS Form 8283 accommodates the required information and provides the required signature areas to meet the above requirements. Use Section B; Part I to describe the gift, Part III for the appraiser and part IV for the Donee acknowledgement.

Noncash Contribution Record: A useful Noncash Charitable Recordkeeping Form can be downloaded for your personal use. Use the form to record property given, condition, cost, your estimate of fair market value, etc.

CAUTION: This is a brief summary of the regulations for valuing and keeping records for property donations. For additional specific details, please consult with our office.

You might say to yourself, "Why would I want to inform the IRS of my change of address, since they will find out when I file my next year's income tax?" The following are important reasons for promptly notifying the IRS of your address change.

You may have a refund coming and failure to file the change of address could delay that refund from reaching you.

The IRS may send you correspondence which requires a timely response. By mailing that correspondence to your last known address, the IRS fulfills their legal notification requirements and any repercussions as a result of your lack of response becomes your responsibility, even if you never received the notice. Therefore, it is always good practice to promptly notify the IRS of an address change by filing Form 8822. Click here to access an online form fill and print version of IRS Form 8822.

If this change also affects the mailing address for your children who filed income tax returns, complete and file a separate Form 8822 for each child.

Prior Name(s) - If you or your spouse changed your name because of marriage, divorce, etc., complete line 5. Also, be sure to notify the Social Security Administration of your new name, so that it has the same name in its records as what you have on your tax return. This prevents delays in processing your return and issuing refunds. It also safeguards your future social security benefits.

P.O. Box - If your post office does not deliver mail to your street address, show your P.O. box number instead of your street address.

Foreign Address - If your address is outside the United States or its possessions/territories, enter the information in the following order: city, province or state, and country. Follow the country's practice for entering the postal code. Please do not abbreviate the country name.

This office can prepare the IRS Form 8822 for you, or if you complete and file it yourself, please forward a copy to our office so that we may update our records and put the copy of the 8822 in your tax file.

Strong personal and professional relationships are established over time through mutual trust and understanding. Replacing such relationships, when they have such a profound impact on your financial well-being, can be both difficult and risky. This is especially true of your tax return preparation needs, where continuity is so very important.

Fortunately, this firm provides tax return preparation by correspondence, phone and other modern means of communications, making it an easy process to continue our relationship long-distance. We can and will continue to provide you with the quality service you have come to expect and the continuity of services you need from a firm you know and trust.

Please call us with your new contact information so we can forward you a do-by-mail kit before the next tax season. Relocation can be stressful. If we can help in any way, please give us a call.

Taxpayers often question how long records must be kept and how long the IRS has to audit a return after it is filed. It all depends on the circumstances! In many cases, the federal statute of limitations can be used to help you determine how long to keep records. With certain exceptions, the statute for assessing additional tax is 3 years from the return due date or the date the return was filed, whichever is later. However, the statute of limitations for many states is one year longer than the federal. The reason for this is that the IRS provides state taxing authorities with federal audit results. The extra time on the state statute gives states adequate time to assess tax based on any federal tax adjustments.

In addition to lengthened state statutes clouding the recordkeeping issue, the federal 3-year rule has a number of exceptions:

• The assessment period is extended to 6 years instead of 3 years if a taxpayer omits from gross income an amount that is more than 25 percent of the income reported on a tax return.
  
  
• The IRS can assess additional tax with no time limit if a taxpayer: (a) doesn't file a return; (b) files a false or fraudulent return in order to evade tax, or (c) deliberately tries to evade tax in any other manner.
  
  
• The IRS gets an unlimited time to assess additional tax when a taxpayer files on an unsigned return.

If no exception applies to you, for federal purposes, you can probably discard most of your tax records that are more than 3 years old; add a year or so to that if you live in a state with a longer statute.

Example: Sue filed her 1997 tax return before the due date of April 15, 1998. She will be able to safely dispose of most of her records after April 15, 2001. On the other hand, Don filed his 1997 return on June 1, 1998. He needs to keep his records at least until June 1, 2001. In both cases, the taxpayers may opt to keep their records a year or two longer if their states have a statute of limitations longer than 3 years.

Important note: Even if you discard backup records, never throw away your file copy of any tax return (including W-2s). Often the return itself provides data that can be used in future tax return calculations or to prove amounts related to property transactions, social security benefits, etc. You should keep certain records for longer than 3 years. These records include:

• Stock acquisition data. If you own stock in a corporation, keep the purchase records for at least 4 years after the year you sell the stock. This data will be needed in order to prove the amount of profit (or loss) you had on the sale.
  
  
• Stock and mutual fund statements where you reinvest dividends. Many taxpayers use the dividends they receive from a stock or mutual fund to buy more shares of the same stock or fund. The reinvested amounts add to basis in the property and reduce gain when it is finally sold. Keep statements at least 4 years after final sale.
  
  
• Tangible property purchase and improvement records. Keep records of home, investment, rental property, or business property acquisitions AND related capital improvements for at least 4 years after the underlying property is sold.