Category Archives: Tax

IRS to Parents: Don’t Miss Out on These Tax Savers

The following is IRS Tax Tip 2016-17:

Children may help reduce the amount of taxes owed for the year. If you’re a parent, here are several tax benefits you should look for when you file your federal tax return:

  • Dependents.  In most cases, you can claim your child as a dependent. You can deduct $4,000 for each dependent you are entitled to claim. You must reduce this amount if your income is above certain limits. For more on these rules, see Publication 501, Exemptions, Standard Deduction and Filing Information.
  • Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more information, see Schedule 8812 and Publication 972, Child Tax Credit.
  • Child and Dependent Care Credit.  You may be able to claim this credit if you paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. You must have paid for care so that you could work or look for work. See Publication 503, Child and Dependent Care Expenses, for more on this credit.
  • Earned Income Tax Credit.  You may qualify for EITC if you worked but earned less than $53,267 last year. You can get up to $6,242 in EITC. You may qualify with or without children. Use the 2015 EITC Assistant tool at IRS.gov to find out if you qualify. See Publication 596, Earned Income Tax Credit, to learn more.
  • Adoption Credit.  You may be able to claim a tax credit for certain costs you paid to adopt a child. For details see Form 8839, Qualified Adoption Expenses.
  • Education Tax Credits.  An education credit can help you with the cost of higher education.  Two credits are available. The American Opportunity Tax Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the credit reduces your tax to less than zero, you may get a refund. Even if you don’t owe any taxes, you still may qualify. You must complete Form 8863, Education Credits, and file a return to claim these credits. Use the Interactive Tax Assistant tool on IRS.gov to see if you can claim them. Visit the IRS’s Education Credits Web page to learn more on this topic. Also, see Publication 970, Tax Benefits for Education.
  • Student Loan Interest.  You may be able to deduct interest you paid on a qualified student loan. You can claim this benefit even if you do not itemize your deductions. For more information, see Publication 970.
  • Self-employed Health Insurance Deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid during the year. This may include the cost to cover your children under age 27, even if they are not your dependent. See Publication 535, Business Expenses, for details.

You can get related forms and publications on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

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Ways to Pay Your Tax Bill

The following is IRS Tax Tip 2016-14:

If you owe federal tax, the IRS offers many easy ways to pay. Make sure you pay by the April 18 deadline, even if you get an extension of time to file your 2015 tax return. You can get an automatic extension of time to file when you make an electronic payment by April 18. Here are some of the ways to pay your tax:

  • Use Direct Pay.  IRS Direct Pay offers taxpayers a free, secure and easy way to pay. You can schedule a payment in advance to pay your tax directly from your checking or savings account. You don’t need to register, write a check or find a mailbox. Direct Pay gives you instant confirmation after you make a payment.
  • Pay by Debit or Credit Card.  Choose a payment processor  to make a tax payment online, by phone or by mobile device. It’s safe and secure. The payment processor will charge a processing fee. The fees vary by service provider and may be tax deductible. No part of the fee goes to the IRS.
  • Use IRS2Go. IRS2Go is a free app that you can use to make a payment with Direct Pay and by debit or credit card. Simply download IRS2Go from Google Play, the Apple App Store or Amazon.
  • Pay When You E-file. If you file your federal tax return electronically, you can schedule a payment at the time that you file. You can pay directly from your bank account using Electronic Funds Withdrawal.  You choose the date and amount of the payment, and as long as it is on or before April 18, it will be on time. Some software that you use to e-file also allows you to pay by debit or credit card with a processing fee.
  • Choose Other Options to Pay. The IRS offers other ways to pay:
    • Use the Electronic Federal Tax Payment System to pay your taxes online or by phone. This free system provides security, ease and accuracy. To enroll or for more information, call 888-555-4477 or visit EFTPS.gov.
    • Pay by Check or Money Order. Make the check, money order or cashier’s check payable to the U.S. Treasury. Do not staple, clip or attach your payment to the tax form. Include your name, address, daytime phone number and Social Security number or Employer Identification Number on the front of the payment. Use the SSN shown first if it’s a joint return. Also include the tax year and related tax form or notice number. Do not send cash through the mail.
  • Can’t Pay Now?  If you are unable to pay in full, you have options:
    • Apply for an online payment agreement to pay your tax liability over time. Use the IRS.gov tool to set up a direct debit installment agreement. With a direct debit plan there is no need to write a check and mail it each month.
    • Owe more than you can afford? An offer in compromise may allow you to settle for less than the full amount you owe. It may be an option for you if you can’t pay your full tax liability. It may also be an option if paying in full creates a financial hardship. Not everyone qualifies. Use the Offer in Compromise Pre-Qualifier tool to see if you are eligible for an OIC.

In short, remember to pay your tax bill on time. If you are suffering a financial hardship, the IRS is willing to work with you.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

IRS YouTube Video:

IRS Tax Payment Options[View]

Good eats, tax breaks: Deducting employee meal costs

One thing about human resources — they need to eat. Just about every employer encounters situations in which it needs to provide meals to its employees. No matter how often you do so, be sure you’re aware of the tax rules for deducting these costs.

Claim half or all1

Generally, a business may deduct only 50% of the cost of business meals for federal tax purposes. But food provided to employees may be fully deductible in circumstances such as when meals:

  • Are provided as additional compensation (and thus included in employee taxable income), or
  • Qualify as tax-free de minimis fringe benefits.

You may also write off food, and exclude it from employees’ income, if it’s furnished for your convenience and on your premises.

Furnish with a purpose

Under IRS regulations, the “convenience of the employer test” is met only if meals are furnished for a “substantial noncompensatory business purpose.” Although whether meals pass this test depends on the facts and circumstances of each case, the IRS has given examples of a number of acceptable circumstances.

For instance, food provided to keep employees available for emergency calls during the meal period generally qualifies for the full deduction. But such calls must actually occur or be reasonably expected to occur.

Another example is when the nature of the employer’s business tends to shorten a meal to, say, 30 to 45 minutes. The furnishing of meals, however, isn’t considered to be for a substantial noncompensatory business purpose if a meal period is shortened in order to allow employees to leave early.

A third instance is when employees cannot otherwise secure proper meals within a reasonable period. The regulations state that meals are fully deductible under this test if there aren’t enough eateries near the workplace.

Important note: Under the current tax rules, if more than 50% of the employees fed on premises are furnished meals for the employer’s convenience, then all meals furnished on premises are treated as furnished for the employer’s convenience. Therefore, these meals are excludable from employees’ income, regardless of whether every employee meets the convenience test.

Enjoy your meals

From a tax perspective, providing meals to employees can be deceptively simple. On their face, the rules seem straightforward, but many exceptions and caveats apply. Stay apprised of the latest IRS guidance and double-check your company’s meal deductions every year.

Sidebar: Considering a cafeteria?

Years ago, only the largest companies had on-site cafeterias. But some midsize businesses are now establishing them, too. There are a number of potential advantages to doing so. Keeping employees on your premises can cut down on excessively long lunch breaks and foster collaboration among team members. A good cafeteria could also attract better job candidates.

From a tax perspective, an employer-operated eating facility is usually considered a de minimis fringe benefit. So the costs of providing meals there are generally 100% deductible as long as the cafeteria is located on or near your premises.

But there are a number of complex rules involved. For instance, the eating facility’s revenue must normally equal or exceed its direct operating costs. We would be glad to work with you to ensure that the facility qualifies for tax-advantaged treatment when established and on an annual basis.

The Health Care Law – Getting Ready to File Your Tax Return

The following was originally published in the IRS Tax Tips Issue Number HCTT-2015-02:

It’s always a good idea to prepare early to file your federal income tax return.  Certain provisions of the Affordable Care Act – also known as the Health Care Law – will probably affect your federal income tax return when you file this year.

Here are five things you should know about the health care law that will help you get ready to file your tax return.

Coverage requirements

The Affordable Care Act requires that you and each member of your family have qualifying health insurance coverage for each month of the year, qualify for an exemption from the coverage requirement, or make an individual shared responsibility payment when filing your federal income tax return.

Reporting requirements

Most taxpayers will simply check a box on their tax return to indicate that each member of their family had qualifying health coverage for the whole year. No further action is required. Qualifying health insurance coverage includes coverage under most, but not all, types of health care coverage plans. Use the chart on IRS.gov/aca to find out if your insurance counts as qualifying coverage.

For a limited group of taxpayers -those who qualify for, or received advance payments of the premium tax credit – the health care law could affect the amount of tax refund or the amount of money they may owe when they file in 2015. Visit IRS.gov/aca to learn more about the premium tax credit.

Exemptions

You may be eligible to claim an exemption from the requirement to have coverage.  If you qualify for an exemption, you will need to complete the new IRS Form 8965, Health Coverage Exemptions, when you file your tax return.   You must apply for some exemptions through the Health Care Insurance Marketplace.  However, most of the exemptions are easily obtained from the IRS when you file your tax return. Some of the exemptions are available from either the Marketplace or the IRS.

If you receive an exemption through the Marketplace, you’ll receive an Exemption Certificate Number to include when you file your taxes. If you have applied for an exemption through the Marketplace and are still waiting for a response, you can put “pending” on your tax return where you would normally put your Exemption Certificate Number.

Individual Shared Responsibility Payment

If you do not have qualifying coverage or an exemption for each month of the year, you will need to make an individual shared responsibility payment when you file your return for choosing not to purchase coverage. Examples and information about figuring the payment are available on the IRS Calculating the Payment page.

Premium Tax Credits

If you bought coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace by early February. Save this form because it has important information needed to complete your tax return.

If you are expecting to receive Form 1095-A and you do not receive it by early February, contact the Marketplace where you purchased coverage.  Do not contact the IRS because IRS telephone assistors will not have access to this information.

If you benefited from advance payments of the premium tax credit, you must file a federal income tax return. You will need to reconcile those advance payments with the amount of premium tax credit you’re entitled to based on your actual income. As a result, some people may see a smaller or larger tax refund or tax liability than they were expecting.  When you file your return, you will use IRS Form 8962, Premium Tax Credit (PTC), to calculate your premium tax credit and reconcile the credit with any advance payments.

For more information about the Affordable Care Act and your 2014 income tax return, visit IRS.gov/aca.