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INCOME TAX BASICS FOR YOUNG PROFESSIONALS

After you’ve graduated from college and taken up your first job only recently, income tax can give you a tough time. Young professionals find it troublesome to get the hang of income tax and the finances that come along.

Sometimes you can get this information from websites or social media profiles of renowned business consultants in Dubai, UAE and USA, however mostly you’re left to figure out your own way through income taxes.

It is for young professionals like you that we have created this comprehensive guide to income tax basics and explained everything… in Plain English. Read on.

What do the terms ‘Tax Year’ mean?

Tax Year is also known as Previous Year or Financial Year. It refers to the 12-month period that starts on April 1st and ends on March 31st of the next year. Tax Year starts and ends on these exact dates irrespective of when you start your job. Tax Year is the duration for which income taxes are withheld for earnings or the year for which income tax return is being filed.

What is the amount of income on which tax is paid?

Income tax has to be paid on all of your sources of income. Your total income is the sum total of all the following major income sources:

  • Income from Salary
  • Income from House Property
  • Income from Gain or Loss obtained from selling a capital asset
  • Income from Business
  • Income from saving bank accounts, fixed deposits, family pensions, cash gifts, etc.

The amount of tax to be paid also depends on your age and gender as there are different income slabs for men, women, and senior citizens.

What are the documents required for filing income tax?

Filing income tax can be a daunting tax for first-timers. We recommend taking the help of an experienced chartered accountant. However, you will need to provide/submit the following documents:

  • Form 16 – provided by the company you’re employed at. This gives the details of the deductions made from your salary marking that you have paid the income tax on your salary
  • Form 16A – given by the bank or a financial institution where you have invested in term deposits. This form contains the details of deductions made on your term deposits
  • Bank Statement Summary – a detailed preview of the transactions made by you all through the financial year
  • Property details – details of any property bought or sold by you in the previous financial year have to be clearly shown during the filing
  • Interest Certificate – this document can help you save on taxes by showing that you’re paying back your house loan through monthly installments

Income taxes may seem daunting but they are an essential duty of all earning citizens also obliged upon them by the law. The collected amount helps in further development of the nation, and in an indirect way, is invested back on the citizens themselves.

Author Bio: Brenda Cagara

Brenda has been writing for websites, articles and blogs for five years now. She has written for a variety of niches but her main focus is business, tax, and finance. Currently, She is working with Riz & Mona Consultancy which offers company formation and branch office Dubai services. Other services are products registration, visa processing, bank account opening, trade license, trade mark, local sponsors and many more.

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

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

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.

Tax, Business Resources, Financial Strategies & Tips

Check the Harvey & Caldwell Resource Page

Updated weekly with tips for business owners, taxes and financial strategies to help you make money and keep it. If you have questions please contact us @ (913) 451-4400.

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Online Advisor Taxes, Business & Financial Strategies

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Tax Tip Of The Week

Tax Planning Letter

Tax Planning Letter

2016 Tax Guide

2016 Tax Guide

Tax Refund Tracker

Tax Refund Tracker

Freelance? Temporary projects? Contract-based work? Congratulations on becoming self-employed!

Your side gig may mean you’re self-employed

Are you a first-time freelancer? Have you taken on temporary project- or contract-based work? Congratulations on becoming self-employed! If you didn’t know this type of work is considered self-employment, you have lots of company. The Small Business Committee of the U.S. House of Representatives recently held hearings that indicated many new entrepreneurs are unaware of some or all tax filing responsibilities. Here are issues to know about.

  • Recordkeeping. Tracking your income and the hours you spend working in your business makes filing your tax return easier. You can also use good records to help prove that your business is not a hobby. That’s important because expenses from hobbies are limited, unlike the costs of running a business. Other uses for your records include support for valuable credits and deductions, and the ability to reconcile the income you make against what is reported to the IRS. You should also note that all the income you earn is taxable, whether or not you receive a form such as a 1099.
  • Estimated tax rules. When you’re self-employed, you’re responsible for paying federal and state withholding as well as self-employment tax. In general, you have to prepay these taxes on a quarterly basis when you expect to owe $1,000 or more with your return. There are exceptions, but the best way to know if you qualify is to calculate your expected income. Failing to make estimated tax payments can lead to penalties.

From whatever source you earn income, keeping up with filing requirements can save you money. Contact us for help.

What’s New – Get Transcript

You can use this free IRS service to get your tax information

Do you need a transcript of your federal income tax return, tax account, wages and income, or record of account? These transcripts, as well as a verification of non-filing, are once again available for no charge online at the IRS website. The online service, known as “Get Transcript,” was shut down for more than a year due to fraudsters using it to gain access to taxpayer information.

The IRS has reopened Get Transcript with increased security and authentication procedures, including verification with a credit reporting agency of your mobile phone number as well as a financial account number that you provide from a credit card, auto loan, mortgage, home equity loan or home equity line of credit.

Once you’re signed up, you can view, print, or download your transcript, or request that a transcript be mailed to you.

Transcripts only provide line-by-line information. If you need a copy of your original return, use Form 4506, Request for Copy of Tax Return, instead. Contact us if you have questions.

2016 Tax Planning Letter Mid Year

Dear Clients and Friends,

So far, 2016 has been a quiet year in terms of new tax legislation. The most recent major change took place last December, with the passage of the Protecting Americans from Tax Hikes Act of 2015 (PATH). Many of the provisions in that law remain in effect until the end of 2016 and beyond.

Practically speaking, while tax reform continues to be a talking point in Congress and in presidential election campaigns, the probability of achieving meaningful changes in the near-term is unlikely. The longer-term outlook is more difficult to predict, with proposals and discussions ranging from a comprehensive overhaul to less sweeping revisions involving specific sections of the Internal Revenue Code, such as modifications to the way businesses are taxed.

Though a simpler tax code would be a welcome development, this interlude of relative stability does have benefits from a midyear planning standpoint. Because the rules haven't changed much, you have an opportunity to look over last year's tax return and implement planning ideas for 2016. In addition, you can review your current tax situation and select strategies to put in place during the remainder of this year. We encourage you to read through the suggestions in this Letter, then contact us for additional options. We're ready to help with effective tax-saving advice suited to your needs.

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Major Tax Deadlines

For July 2016

Aug 1 Retirement or employee benefit plan returns (5500 series) for plans on a calendar year.
Aug 1 Form 941, Employer’s Quarterly Federal Tax Return.
Aug 1 Form 720, Quarterly Federal Excise Tax Return.

Note: Because July 31, 2016, is a Sunday, the due date for the above returns is August 1, 2016.

Note: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.

Payroll tax deposits: Employers generally must deposit Form 941 payroll taxes (income tax withheld from employees’ pay and both the employer’s and employees’ share of FICA taxes) on either a monthly or semiweekly deposit schedule. There are exceptions if you owe $100,000 or more on any day during a deposit period, if you owe $2,500 or less for the calendar quarter, or if your estimated annual liability is $1,000 or less.

  • Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.
  • Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.

For more information on tax deadlines that apply to you or your business, contact our office.