Archive for the ‘Income Taxes’ Category

April 18 Tax Filing Deadline & Filing for an Extension

The tax filing deadline this year is April 18.

If a tax filer is owed a refund, they have up to 3 years to file and get that refund back. Free software will be available until October 16, 2017 for filers with an adjusted gross income of $64,000 or less.  AGI does not include money contributed to tax deductible retirement plans or certain other adjustments. Your 2015 AGI can be found on line 37 of your Form 1040 tax return.

For free file software options visit www.irs.gov and click the “freefile” link.

If you are getting a refund there is no need to file for an extension.

Filing an Extension

If a taxpayer owes money & doesn’t file & pay on time there are penalty fees. Two fees to be aware of are the late payment fee and the filing after the deadline fee.

Late payment fee: Late payment penalty is usually ½ of 1% of any tax not paid by deadline. It is charged for each month or part of a month the tax is unpaid.  Maximum 25%.  You can avoid this penalty if you pay at least 90% of amount owed by deadline (this gives you an extension) and then pay the rest by the extension deadline – October 16, 2017.

Filing Late: Failure to file penalty aka penalty for filing after the deadline is usually 5% of the amount due for each month or part of month your return is late. Maximum penalty is 25%. After 60 days the minimum penalty is $205 or the balance on the return whichever is smaller.

Eliminate or Reduce Fess

If you can pay some or all of your tax liability go to https://www.irs.gov/payments and find out about payment options. They include paying electronically (no fees), installment plans, or paying by credit card.

If you cannot pay any of the amount owed, you can still request to extend the deadline to Oct 16, 2017.  You can either use free file software or complete Form 4868. More information is available at https://www.irs.gov/filing/extension-of-time-to-file-your-tax-return  Filing an extension will eliminate the failure to file penalty, but not necessarily the late payment fees.

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Credit for Your Retirement Savings Contributions

You may be eligible for a tax credit if you make contributions to an employer-sponsored retirement plan or an Individual Retirement Account (IRA).

A tax credit directly reduces the amount of federal income tax that you are required to pay. Example: Federal income tax liability is $600 and you’re eligible for a $200 Savers Credit. Your tax liability is decreased to $400. In this example you could receive a $200 boost in your refund or a $200 deduction in the amount you need to pay when you file your tax return.

Savers Credit Eligibility Requirements
You are eligible for the credit if you’re age 18 or older, not a full-time student, not claimed as someone’s dependent, and within the income limits.

2017 Income Limits:
-Single, married filing separately, or qualifying widow(er), with income up to $31,000.

-Head of Household with income up to $46,500.

– Married Filing Jointly, with incomes up to $62,000.

The amount of the credit is 50%, 20% or 10% of your retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on your adjusted gross income.

Example: Married couple and they file a joint return. Their Adjusted Gross Income (AGI) in 2017 is $55,000. (AGI is less than taxable income and is on the last line of page 1 of your 1040 tax return form).  If they contribute $1,000 to an IRA, the government will give them a $100 credit.

For more information about income limits and credit amounts visit https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit

2017 Free Tax Preparation Resources

There are a variety of options and resources to make completing your tax return easy and inexpensive. Check these options out and spread the word.

MyFreeTaxes: Use an online program funded by United Way and developed by H&R Block. It’s free to filers with Adjusted Gross Incomes (AGI) of $64,000 or less.

AGI does not include money contributed to tax deductible retirement plans or certain other adjustments. Your 2016 AGI can be found on line 37 of your Form 1040 tax return.

For more information or to get started filing go to www.MyFreeTaxes.com

Would you like guided assistance using this software and you live in Hillsborough County Florida?
Make an appointment at the Hillsborough County Extension Office. IRS certified volunteers will provide 1-1 assistance starting February 7, 2017. Returns can be e-filed or printed and mailed. You can even start your return here and finish up at home. For information about appointments visit our web site http://hillsborough.ifas.ufl.edu/#news5

Free File: In addition to H&R Block, many tax preparation vendors will be partnering with the IRS to provide free online tax preparation programs. These services will be available starting January 13. To find out more go to the IRS web site www.irs.gov  and click on the free file link.

Volunteer Income Tax Assistance (VITA) Sites: IRS certified VITA volunteers
will do the return for you. The income limit for these sites is generally $54,000, but some sites are flexible.

Find a VITA site at https://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers

AARP Foundation Tax-Aide: AARP will also have free tax sites throughout the community. Their target audience is low-moderate income residents and they especially want to help folks age 60 or older. Their sites open in late January and early February. Information can be found at http://www.aarp.org/applications/VMISLocator/searchTaxAideLocations.action

IRS Interactive Assistant: This tool is available at the IRS website. It provides customized answers to your questions about dependents, deductions, credits, filing status & much more.

https://www.irs.gov/uac/Interactive-Tax-Assistant-(ITA)-1

The Emotional Boost of a Tax Refund

Everyone likes a windfall and that is what a big tax refund can seem like. Whether a big refund makes sense for you personally, depends on how you weigh the emotions and behavior involved, and the math calculations. From an
emotional and behavioral aspect, for many people paying more taxes than necessary out of each paycheck is a way to force savings. Some folks get an emotional boost knowing that at tax time they will receive a check from the government and may plan in advance how they will use the money.

From a numbers perspective, current interest rates for savings products are very low, so letting the government hold your money instead of a bank may not mean a significant difference in interest earned. However, if you have outstanding debt, especially credit card debt, having more each paycheck to use to pay down debt, instead of letting the government hold it, can make a significant impact. 
  

The other emotion at work may be fear. People do not like to owe the government money at tax time and may be afraid they will not be able to pay. There are penalties for not paying federal taxes on time. Owing too much can also lead to penalties.

Overall, from a numbers standpoint, owing a small amount at tax time may be a sensible way to go. The IRS web site, http://www.irs.gov, has a withholding calculator to help you calculate how much to withhold from your paychecks.