Being a Parent Can Lower Taxes

If you are a parent, you can lower your tax burden significantly. Eight different tax credits and deductions are out there that can help you dramatically reduce your tax burden:

  • Dependents

    In most instances, a child can be claimed as a dependent in the year they were born. Be sure as a parent to state if your family size has increased this year. If so, you may be able to claim the child as a dependent.

  • Child Tax Credit

    You could take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you could be eligible for the Additional Child Tax Credit. The Additional Child Tax Credit is a refundable credit and could provide you with a refund even if you don’t owe tax.

  • Child and Dependent Care Credit

    You may be able to claim this credit if you pay someone to care for your child under age 13 while you’re busy at work. Be sure to note your child care expenses so we can claim this credit.

  • Earned Income Tax Credit

    The EITC is a benefit for those who work and have earned income from wages, self-employment, or farming. EITC reduces the amount of tax you owe and may also give you a refund.

  • Adoption Credit

    You could also take a tax credit for qualifying expenses paid to adopt a child.

  • Coverdell Education Savings Account

    This is a savings account used to pay qualified expenses at an eligible educational institution. Contributions are not deductible, but qualified distributions are usually tax-free.

  • Higher Education Credits

    Education tax credits can help with the cost of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax.

  • Student Loan Interest

    You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income, so you do not need to itemize your deductions.

If you’re interested in learning about ways to save on your taxes, please call Harvey and Caldwell today in Overland Park, KS to schedule an appointment and have a chat.

Two New Tax Filing Resources

Two 2016 Tax Filing Resources to Help You  Now

As CPAs and tax professionals, we know you can get all the help you need when managing your expenses and deductibles. As part of our service to tax-payers, we want to provide two helpful 2016 tax filing resources.

The first item is a Charitable Donation Value Guide. This guide is a list of the average prices of items held at the Salvation Army thrift stores, if the items are in good condition. New or expensive items would be higher and damaged materials less. Please use the list for your guidance only. Items can vary greatly in value depending on conditions such as condition, age, antique value, cleanliness, repair needed and value when new.

Our second resource to help you in the coming months with your 2016 tax filing is the Blank Tax Organizer. Thankfully, this organizer will help you put all those bank statements and receipts into one tidy place so your filing will be much easier.

Of course, both these resources are no substitute for the expertise of a professional CPA.  If you’re looking for more helpful advice to make this tax season less stressful, please call Harvey and Caldwell today in Overland Park, KS to schedule an appointment and have a chat.

 

IRS Changes for 2017

If you’re a business owner, don’t forget about the date January 31, 2017, the new due date for filing form W-2. Read below about info regarding this change and other IRS changes. 

Under a new law, the Protecting Americans from Tax Hikes (PATH) Act, enacted last December, the new filing deadline for employers to submit forms W-2 to the Social Security Administration is January 31. The new January 31 filing deadline also applies to certain forms 1099-MISC reporting non-employee compensation such as payments to independent contractors.

The January 31 deadline for employers to furnish copies of tax forms to employees is still the same. 

W-2 Changes

The new law will also modify the rules for extending time to file form W-2. As of now, you can only request a one 30-day extension to file form W-2, and it is not automatic. If you, as an employer, need an extension, you must file form 8809, Application for Extension of Time to File Information Returns (downloads as a pdf). The form should be completed as soon as you know an extension is necessary, but no later than January 31.

Before, employers had until the end of February (paper filing), or the end of March (electronic filing), to submit these forms. However, the gap between that due date and the beginning of the filing season made it difficult for the IRS to match up forms W-2 with tax returns requesting refunds, which increased fraud. The new deadline, something the IRS wanted to do for a long time, makes it simpler to verify the legitimacy of tax returns and give refunds.

Having PATH Patience

Other taxpayers could have a different experience. The PATH Act also requires the IRS to delay refunds involving two key refundable tax credits, the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC), until at least February 15. This new law requires the IRS to hold the entire refund for any taxpayer claiming either of these credits until February 15, and not just the portion related to the EITC or ACTC.

The IRS states that taxpayers should still file their returns as they always do. However, it advises you to practice some patience. With these changes, a few delays are sure to follow. Normally, the IRS issues more than nine out of ten refunds in less than 21 days. Expect delays as returns are held for further review.

Have more questions about IRS filing dates or other tax questions? Please call Harvey and Caldwell today in Overland Park, KS to schedule an appointment and let us help you make filing taxes easier.

Source: Forbes

New IRS Taxpayer Tool

New IRS Taxpayer Tool

The IRS has announced the introduction of a new online tool to help taxpayers. This new IRS.gov  feature allows taxpayers to view their tax account balance online. The balance includes any amount owed for tax in addition to penalties and interest for each tax year. Once you look at your balance, you can take advantage of online payment options. These include direct pay, pay by debit or credit card and Online Payment Agreement.

But you don’t have to rush. The service won’t disappear overnight. The tool is available Monday through Friday, 6 a.m. to 12:30 a.m. ET; Saturday, 6 a.m. to 10 p.m. ET; and Sunday, 6 p.m. to midnight ET. The balance will update no more than once every 24 hours, usually overnight.

Safety Steps

However, remember, before using this tool, you must authenticate your identity through the Secure Access process. This is a two-step authentication process, which means that returning users must have their info (username and password) plus a security code sent as a text to their mobile phones. Good news: taxpayers who have previously registered using Secure Access for Get Transcript Online or Get an IP PIN can use the same username and password as before.

For taxpayers who are brand new to the system, you will need the following to get started with Secure Access:

  • A readily available (and valid) email address
  • Social Security number
  • Your filing status and address from your last filed tax return
  • Your personal account number from a credit card, home mortgage loan, home equity (second mortgage) loan, home equity line of credit (HELOC), or car loan
  • A readily available mobile phone

As part of the security process to authenticate taxpayers, the IRS will send verification, activation or security codes via both email and text. Remember that the IRS will not (and very rarely does) initiate contact via text or email asking for log-in information or personal data. You won’t be asked to click through links or input additional information with authentication contacts. Those IRS texts and emails will only contain one-time codes.

Please call Harvey and Caldwell today in Overland Park, KS to schedule an appointment and learn about more ways to save money on your taxes.

Source: Forbes

Year-end is a good time for gift planning

Are you ready for the gift-giving season? The time may already have arrived, at least from a tax perspective. Between now and December 31, you can take advantage of this year’s gift tax rules as part of your year-end planning.

Here are two ways to transfer assets.

The annual exclusion. The annual exclusion is the amount you can give to anyone, free of gift tax, each year. For 2016, the annual exclusion is $14,000. You and your spouse can combine your individual annual exclusions and make gifts of up to $28,000 to a single recipient.

Some gifts have special rules. For instance, education and medical expenses that you pay directly to the respective providers do not reduce your annual exclusion.

As the name suggests, the annual exclusion is a use-or-lose tax break that expires on December 31 of each year. For 2017, the annual exclusion remains $14,000.

The lifetime exemption. The lifetime exemption is the total amount you can give away during your lifetime without paying gift tax. For 2016, the lifetime exemption is $5,450,000. When you’re married, you can double the exemption, to a maximum of $10,900,000. Note that the lifetime exemption is “unified” with the estate tax exemption. That means the amount you use for gifting will reduce your estate tax exemption.

Gift-giving is a valuable estate planning tool. Please call to schedule an appointment for discussing these or other types of giving, including charitable gifts and gifts made in

What’s New: Avoid phony charities this holiday season

Are you planning to make donations to charitable organizations as part of your holiday celebrations? Be aware of fake charities set up by scam artists. This type of fraud routinely lands on the “Dirty Dozen” list of tax scams prepared each year by the IRS.

Here are two simple tips to protect yourself.

Don’t be fooled by names that sound like established charities but really aren’t. The IRS maintains a searchable list of qualified charities on the official irs.gov website.

Make donations by check and spell out the full name of the payee instead of using initials. In addition to providing documentation for deducting your contribution, writing a check avoids the need to supply your credit card data, favored information for thieves who want steal your identity.

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Tax Planner Update Dec 2016

As 2016 winds down, a lame-duck Congress is unlikely to take action on tax legislation. The pace of activity may change next year, with a new Administration and ongoing talk of tax reform, and 2017 could bring welcome and needed improvements. Whatever happens, we’re here to keep you updated as events unfold in the tax world.

Until political clarity emerges, however, you’re smart to make the most of established rules in your year-end tax planning. Evaluate your financial situation, select what moves will provide the most savings, and execute your plan in a timely manner. Currently available deductions, credits, and other tax benefits will reduce your 2016 tax burden and put you on track to accommodate new planning opportunities as they arise in the future.

This Letter offers suggestions and strategies to help you achieve your tax-saving plans. Contact us for answers to questions you may have, and to arrange a year-end tax review. As always, feel free to share this Letter with friends or associates who are interested in minimizing taxes.

6 Things Small Business Owners Should Do Now to Reduce Headaches at Tax Time

6 Things Small Business Owners Should Do Now to Reduce Headaches at Tax Time

Guest Post Julie Morris – www.JulieMorris.org

A mention of taxes results in a groan from most adults, but few groan louder than small business owners. Often working without the benefit of an in-house accounting department, many small business owners are left to sort out the complexities of tax prep alone. Of course, smart business owners at least outsource the preparation of their actual tax returns, but there’s much work that goes into preparing for tax season long before the looming April 15th deadline.

  1. If you don’t have an accountant, get one.

Professional accounting help costs money, but you’ll save hours of time and possibly hundreds to thousands of dollars in taxes. An accountant or tax prep professional can help you maximize your tax deductions and take advantage of all the credits you qualify for.

  1. Go digital.

Stop letting receipts accumulate in piles, folders, and shoeboxes. It may seem easier to simply save your receipts throughout the year, but using an accounting software solution such as FreshBooks or QuickBooks will make it easy to monitor your cash flow over time and quickly generate profit and loss statements and other reports when you need them. Plus, you don’t have to worry about losing receipts and missing out on deductions when you store everything digitally. Consider tools that streamline the filing process such as W-2 and 1099 software.

  1. Document everything, immediately after it happens.

Once you’ve decided on a software solution for tracking your income and expenses, get into the habit of entering all expenses, payments, and other transactions immediately as they occur. Again, this habit will save you many hours – and many headaches – next tax season when you don’t have to look up your transactions, sort through piles of receipts, and enter everything at one time.

  1. Maximize retirement savings contributions.

Reducing your taxable income is one of the best ways to reduce your tax bill and start building a nest egg for your future at the same time. In most cases, you can contribute thousands of dollars to a retirement savings account such as a 401(k) or an IRA, deferring the payment of taxes on this income until you remove those funds. The contribution limits are subject to change each year and begin to be phased out at higher income levels, so check the IRS website to find out where you stand.

  1. Take advantage of other savings options and donations to charitable causes.

Other options for reducing taxable income include contributions to a qualified college tuition savings plan (such as a state-sponsored 529 college savings plan) or a health savings account (HSA). Finally, keep track of all the contributions you make to charitable causes, including the expenses you incur while doing these good deeds. If you bake cookies for a bake sale raising funds for a qualified charity, for instance, you can deduct the cost of the ingredients as a charitable contribution.

  1. Take a second look at last year’s tax returns.

Looking over your past years’ tax returns will help you remember questions from previous years that you didn’t have time to ask prior to filing those returns, which can help you make better decisions when it’s time to file again. If you’re questioning whether you missed out on deductions or paid too much in taxes, you can always have an accounting professional review prior returns for a second opinion, as well. You can file amendments to tax returns for up to three years.

Tax season isn’t something most people look forward to – even accountants, who often find themselves pulling all-nighters to help clients file last-minute returns – but it’s a necessary evil. By starting to plan today (and all year long) for next tax season, you can take the stress out of filing.

New Partnership Rules

Gear up for new partnership rulesnew-partnership-rules

No one likes to hear “audit” and “IRS” in the same sentence. But when the rules change, you need to be prepared — and change is definitely what has happened to IRS partnership audit rules. Here’s an overview.

Under the old rules, the IRS audited partnerships using three sets of procedures based primarily on the number of partners. Those procedures have been replaced with a single set of rules that apply to all partnerships. The major change: Under this new approach, adjustments made by the IRS during an audit of a partnership will be applied to the partnership instead of the individual partners. That means your partnership will have to pay any amount due related to the adjustment. Since the tax will be payable in the year the audit is completed, the current partners will bear the burden.

If your partnership is made up of 100 or fewer partners, you can elect out of the new rules when you meet certain requirements. Once you opt out, your partnership and partners will be audited under the rules that apply to individual taxpayers.

The new rules take effect for returns you file for your partnership beginning after 2017, though you can choose to apply many of them for tax years beginning after November 2, 2015.

What do you need to do now? One smart move is to update your partnership agreement to reflect the changes.

Contact us for information. We’ll work with your attorney to make sure you’re in compliance with the new rules.

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