When Freeman & Company prepares your taxes, you get back every dollar you legally deserve! Check below to see how we may save you some money this year!
Tax credits reduce the amount of income tax you may have to pay. Below are some of the credits taxpayers could be eligible to claim:
- Adoption Credit Adoptive parents can take a tax credit for qualifying expenses paid to adopt an eligible child.
- 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 citizens or residents. There are income limitations.
- Child Tax Credit This credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses.
- 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.
- 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.
- Education Credits There are two credits available, the American Opportunity Credit and the Lifetime Learning Credit, for people who pay higher education costs. The American Opportunity Credit is for the payment of the first two years of tuition and related expenses for an eligible student for whom the taxpayer claims an exemption 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.
- 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 to a traditional or Roth IRA or salary reduction contributions to a SEP or SIMPLE plan. To be eligible, you must be at least age 18 at the end of the year and not a student or an individual for whom someone else claims a personal exemption. Also, your adjusted gross income (AGI) must be below a certain amount.
There are other credits available to eligible taxpayers. Please contact us so we may realize your specific situation, and offer advice.
If you discover an error after your tax return has been filed, you may need...
If you discover an error after your tax return has been filed, you may need to amend your return.
If you are filing to claim an additional refund, wait until you have received your original refund before filing your amended return. You may cash your refund check while waiting for any additional refund. If you owe additional tax for the prior year, your amendment must be filed and the tax paid by April 15th, to avoid any penalty and interest.
Your amendment must be filed within three years from the date you filed your original return, or within two years from the date you paid the tax, whichever is later.
When preparing to file your federal tax return, don't forget any contributions made to charitable organizations. Your donations can add up to a nice tax deduction!
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 or 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. IRS.gov has an exempt organization search feature to help you see if an organization is qualified. IRS Publication 78 (Cumulative List of Organizations), lists all charitable organizations except those most recently granted tax exempt status.
If you owed tax last year or received a large refund you may want to adjust your tax withholding. We always say, “Aim for zero!” Refunds are nice, but you’re really just getting your money back – money that you could have had in your pocket every month. Likewise, owing money isn’t smart either, especially if you struggle to pay it.
The IRS withholding calculator on IRS.gov can help compute the proper tax withholding. If the result suggests an adjustment, you can submit a new W-4, Withholding Allowance Certificate, to your employer.
You may be able to take the Credit for the Elderly or the Disabled if you were age 65 or older at the end of last year, or if you are retired on permanent and total disability, according to the IRS. Like any other tax credit, it's a dollar-for-dollar reduction of your tax bill. The maximum amount of this credit is constantly changing.
You can take the credit for the elderly or the disabled if:
- You are a qualified individual,
- Your nontaxable income from Social Security or other nontaxable pension is less than $3,750 to $7,500 (also depending on your filing status).
Generally, you are a qualified individual for this credit if you are a U.S. citizen or resident at the end of the tax year and you are age 65 or older, or you are under 65, retired on permanent and total disability, received taxable disability income, and did not reach mandatory retirement age before the beginning of the tax year.
If you are under age 65, you can qualify for the credit only if you are retired on permanent and total disability. This means that:
- You were permanently and totally disabled when you retired, and
- You retired on disability before the end of the tax year.
Even if you do not retire formally, you are considered retired on disability when you have stopped working because of your disability.
If you itemize deductions on a Schedule A, you may deduct your pay...
If you itemize deductions on a Schedule A, you may deduct your payments of:
- State, local, and foreign income taxes
- State, local, and foreign real property taxes
- State and local personal property taxes.
This year, you may have the option to deduct state and local general sales taxes in lieu of state and local income taxes on your tax return. A state and local tax deduction for either income or sales taxes on their returns.
You can deduct any estimated taxes paid to state or local governments and any 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. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the amount paid to the general sales tax rate.
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 only deduct the amount actually paid during the year to the taxing authorities. Lenders typically send you a Form 1098, Mortgage Interest Statement, at the end of the tax year with this information.
Filing an Extension
If you can't meet the April 15 deadline to file your tax return, you can get...
If you can't meet the April 15 deadline to file your tax return, you can get a six-month extension to file your return from the IRS. The extension will give you extra time to get the paperwork into the IRS, but does not extend the time you have to pay any tax due. You will owe interest on any amounts not paid by the April 15th deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.
You must make an accurate estimate of any tax due when you request an extension. You may also send a payment for the expected balance due, but this is not required to obtain the extension.
Foreign sourced income must be reported on all tax returns, unless it is...
Foreign sourced income must be reported on all tax returns, unless it is exempt under federal law. U.S. citizens are taxed on their worldwide income.
This applies whether a person lives inside or outside the United States. The foreign income rule also applies regardless of whether or not the person receives a Form W-2, Wage and Tax Statement, or a Form 1099.
Foreign source income includes salaries, wages, commissions, professional fees, and bonuses for personal services performed while your tax home is in a foreign country. It also includes allowances from your employer for housing and other expenses, as well as the value of housing or a car provided by the employer. It may also include business profits, royalties and rents, provided this income is tied to the performance of services. Earned income does not include pension or annuity income, payments for nonqualified employee trusts or nonqualified annuities, dividends, interest, capital gains, gambling winnings, alimony, or the value of tax-free meals or lodging. and unearned income, such as interest, dividends, capital gains, pensions, rents and royalties.
Newlyweds and those that are recently divorced should make sure that names on their tax returns match those registered with the Social Security Administration. A discrepancy could cause your tax return to be rejected by the IRS.
It's easy to inform the SSA of a name change by submitting Form SS-5 to the SSA office in person or by mail. It usually takes two weeks to have the change verified.
Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.
Generally, for taxpayers who itemize, the “points” paid to obtain a home mortgage may be deductible as mortgage interest. Points paid to obtain an original home mortgage can be, depending on circumstances, fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.
For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year.
However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off.
Other closing costs — such as appraisal fees and other non-interest fees — generally are not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.
Selling Your Home
If you sell your principal residence at a gain, up to $250,000 of gain...
If you sell your principal residence at a gain, up to $250,000 of gain ($500,000 for married taxpayers filing jointly) may be excluded from income if you owned and occupied it for an aggregate of at least two years in the five-year period ending from on the date of sale and did not claim an exclusion on another sale within the prior two years.
The tax code provides a variety of tax incentives for families who are paying higher education costs or are repaying student loans. You may be able to claim an American Opportunity Credit or Lifetime Learning Credit for the qualified tuition and related expenses of the students in your family (i.e. you, your spouse, or dependent) who are enrolled in eligible educational institutions. Different rules apply to each credit and the ability to claim the credit phases out at higher income levels.
If your tax problem is causing financial difficulties for you, your family, or your business, you face (or your business is facing) an immediate threat of adverse action, or you’ve tried repeatedly to contact the IRS but no one has responded to you, or the IRS hasn’t responded by the date promised, you can seek the assistance of the Taxpayer Advocate Service.
The Taxpayer Advocate Service’s job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. We offer free help to guide you through resolving tax problems that you haven’t been able to solve on your own.
You can gain quick access to the Taxpayer Advocate Service by contacting us, or by calling the IRS at 1-877-777-4778, to see if the Taxpayer Advocate Service can help you.
Tips and Taxes
Do you receive tips at work? Generally, you must report all tips you...
Do you receive tips at work? Generally, you must report all tips you received on your tax return, including both cash tips and noncash tips.
As taxable income, these tips are subject to federal income, Social Security and Medicare taxes, and may be subject to state income tax as well.
You must keep a running daily log of all your tip income and tips paid out. You can use IRS Publication 1244, Employee's Daily Record of Tips and Report of Tips to Employer, to record your tip income.
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.
Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s, donation receipts and bank interest statements.
Looking for ways to avoid the last-minute rush for doing your taxes? The IRS offers these tips:
- Organize Your Tax Records. As you receive year-end statements, develop a system of organization: perhaps a folder with the tax year, for those documents to keep everything consolidated. Add to it any deductions or tax credit items you may have collected throughout the year.
- Visit the IRS Online. Millions of taxpayers visited the IRS website last year, downloading nearly 600 million forms, publications and a variety of topic-oriented tax information. There you can find tax law information and answers to frequently asked tax questions.
- Don't Procrastinate. Resist the temptation to put off your taxes until the last minute.
- If You Are Expecting a Refund, Have it Deposited Directly into Your Bank Account. It’s faster than waiting for a paper check to be mailed, and reduces the chance of theft.
- Don't Panic if You Can't Pay. If you can't write a check to pay the taxes you owe, there are several options: You can apply for an installation agreement, suggesting your own monthly payment amount and due date (thereby receiving a reduced late payment penalty rate), or you can charge the balance on a credit card.
- If You Need More Time - Request an Extension of Time to File. If you don’t think you can make the April 15th deadline, you can get an automatic six-month extension of time to file (bringing you to October 15th). An extension of time to file does not give you an extension of time to pay, however.
- Contact Us!
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. Refund checks can be mailed to you, or you may have your refund electronically deposited into your bank account. Direct deposit into a bank account is usually quicker and more secure than having a refund check issued.
Please note: some financial institutions do not allow joint refunds to be deposited into an individual account. Check with your bank or other financial institution to make sure your direct deposit will be accepted.
To check the status of an expected refund, log on to http://www.IRS.gov and click on the “Where’s My Refund” link.