Helpful Tips
Tax Tips for Individuals
Earlier is better when it comes to working on your taxes. The IRS encourages everyone to get a head start on tax preparation. Not only do you avoid the last-minute rush, early filers also get a faster refund. Here are a few easy ways to get a good jump on your taxes long before the April 15 deadline rolls around:
- Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don’t forget to save a copy for your files.
- Get us your tax documents by drop off- email- or our favorite uploading them into your pcloud folder and letting us know they are there and you are ready!
- Get the fastest refund. When you file early, you get your refund faster. Using e-filing with direct deposit gets you a refund in half the time as paper filing.
- When preparing to file your federal tax return, don’t forget your contributions to charitable organizations. Your donations can add up to a nice tax deduction for your corporation (if you are a member of a flow-through business entity) or your personal taxes if you itemize deductions on IRS Form 1040, Schedule A. Here are a few tips to help make sure your contributions pay off on your tax return:
- You cannot deduct contributions made to specific individuals, political organizations and candidates, the value of your time or services and the cost of raffles, bingo, or other games of chance.
- To be deductible, contributions must be made to qualified organizations.
- Organizations can tell you if they are qualified and if donations to them are deductible. Taxpayers can also search the Tax-Exempt Organization Search (TEOS) online tool, to check that an organization is qualified. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization’s correct name and its headquarters location, if possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified.
Earned Income Tax Credit for Certain Workers
Millions of Americans forgo critical tax relief each year by failing to claim the Earned Income Tax Credit (EITC), a federal tax credit for individuals who work but do not earn high incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.
The IRS estimates that 25 percent of people who qualify don’t claim the credit and at the same time, there are millions of Americans who have claimed the credit in error, many of whom simply don’t understand the criteria.
EITC is based on the amount of your earned income and the number of qualifying children in your household. If you have children, they must meet the relationship, age and residency requirements. And, you must file a tax return to claim the credit.
Are you eligible for any of these tax credits?
Taxpayers should consider claiming tax credits for which they might be eligible when completing their federal income tax returns, advises the IRS. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are refundable – taxes could be reduced to the point that a taxpayer would receive a refund rather than owing any taxes. Below are some of the credit’s taxpayers could be eligible to claim:
- Earned Income Tax Credit This is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the EITC. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. For more information, see IRS Publication 596, Earned Income Credit (EIC).
- Child Tax Credit This credit is for people who have a qualifying child under age 17. The maximum amount of the credit is $1,400 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see Pub. 972, Child Tax Credit.
- Child and Dependent Care Credit This is for expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work. There is a limit to the amount of qualifying expenses. The credit is a percentage of those qualifying expenses. For more information, see Pub. 503, Child and Dependent Care Expenses.
- Adoption Credit Adoptive parents can take a tax credit of up to $13,570 for 2017 and $13,810 for 2018 for qualifying expenses paid to adopt an eligible child. For more information, see Form 8839, Qualified Adoption Expenses.
- Credit for the Elderly and Disabled This credit is available to individuals who are either age 65 or older or are under age 65 and retired on permanent and total disability, and who are U.S. citizens or residents. There are income limitations. For more information, see Pub.524, Credit for the Elderly or the Disabled.
- Education Credits There are two credits available, the American Opportunity Credit (formerly called the Hope Credit) and the Lifetime Learning Credit, for people who pay higher education costs. The American Opportunity Credit is for the payment of the first four years of tuition and related expenses for an eligible student for whom the taxpayer claims as a dependent on the tax return. The Lifetime Learning Credit is available for all post-secondary education for an unlimited number of years. A taxpayer cannot claim both credits for the same student in one year. For more information, see Publication 970, Tax Benefits for Education.
- Retirement Savings Contribution Credit Eligible individuals may be able to claim a credit for a percentage of their qualified retirement savings contributions, such as contributions SIMPLE plan. To be eligible, you must be at least age 18 at the end of the year and not a full-time student or an individual for whom someone else claims a personal exemption. Also, your adjusted gross income (AGI) must be below a certain amount. For more information, see chapter three in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).
Did you know that you may be able to deduct certain taxes on your federal income tax return? The IRS says you can if you file Form 1040 and itemize deductions on Schedule A. Deductions decrease the amount of income subject to taxation. Here are the types of deductible non-business taxes:
- State and local income taxes, or general sales taxes
- Real estate taxes; and
- Personal property taxes
The Tax Cuts and Jobs Act (TCJA) limit the cumulative amount of the above taxes an individual can deduct in a calendar year to $10,000. You can deduct estimated taxes paid to state or local governments and prior year’s state or local income tax as long as they were paid during the tax year. If deducting sales taxes instead, you may deduct actual expenses or use optional tables provided by the IRS to determine your deduction amount, relieving you of the need to save receipts. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate. Taxpayers will check a box on Schedule A, Itemized Deductions, to indicate whether their deduction is for income or sales tax.
Deductible real estate taxes are usually any state, local, or foreign taxes on real property. If a portion of your monthly mortgage payment goes into an escrow account and your lender periodically pays your real estate taxes to local governments out of this account, you can deduct only the amount actually paid during the year to the taxing authorities. Your lender will normally send you a Form 1098, Mortgage Interest Statement, at the end of the tax year with this information.
To claim a deduction for personal property tax you paid, the tax must be based on value alone and imposed on a yearly basis. For example, the annual fee for the registration of your car would be a deductible tax, but only the portion of the fee that was based on the car’s value.
The individual shared responsibility provision requires that you and each member of your family have qualifying health insurance, a health coverage exemption, or make a payment when you file. If you, your spouse and dependents had health insurance coverage all year, you will indicate this by simply checking a box on your tax return.
Starting in 2014 the individual shared responsibility provision calls for each individual to have qualifying health care coverage, known as minimum essential coverage, for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return.
The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption.
If you have to make an individual shared responsibility payment, you will use the worksheets located in the instructions to Form 8965, Health Coverage Exemptions, to figure the shared responsibility payment amount due. The amount due is reported on line 61 of Form 1040, Schedule 4. You only make a payment for the months you did not have coverage or qualify for a coverage exemption.
Are you expecting a tax refund from the Internal Revenue Service this year? If you file a complete and accurate paper tax return, your refund should be issued in about six to eight weeks from the date IRS receives your return. If you file your return electronically, your refund should be issued in about half the time it would take if you filed a paper return — even faster when you choose direct deposit.
You can have a refund check mailed to you, buy up to $5,000 in U.S. Series I Savings Bonds with your refund, or you may be able to have your refund electronically deposited directly into your bank account (either in one account, or in multiple accounts). Direct deposit into a bank account is more secure because there is no check to get lost. And it takes the U.S. Treasury less time than issuing a paper check. If you prepare a paper return, fill in the direct deposit information in the “Refund” section of the tax form, making sure that the routing and account numbers are accurate. Incorrect numbers can cause your refund to be misdirected or delayed. Direct deposit is also available if you electronically file your return.
- A few words of caution — some financial institutions do not allow a joint refund to be deposited into an individual account. Check with your bank or other financial institution to make sure your direct deposit will be accepted.
You may not receive your refund as quickly as you expected. A refund can be delayed for a variety of reasons. For example, a name and Social Security number listed on the tax return may not match the IRS records. You may have failed to sign the return or to include a necessary attachment, such as Form W-2, Wage and Tax Statement. Or you may have made math errors that require extra time for the IRS to correct.
To check the status of an expected refund, use “Check your Federal Refund” by clicking this link:
Simple online instructions guide you through a process that checks the status of your refund after you provide identifying information from your tax return. Once the information is processed, results could be one of several responses.
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