Did you missed the W-2 filing due date?

Jan 31, 2017 was the due date for filing forms W-2s.

The IRS ruling.

The Protecting Americans from Tax Hikes (PATH) Act, enacted last December, now required to file their copies of Form W-2, submitted to the Social Security Administration, by Jan. 31.  The same due date applies for the form 1099-MISC (reporting non-employee compensation) to independent contractors.

Extensions?

Only one 30-day extension to file Form W-2 is available and this extension is not automatic. If an extension is necessary, a Form 8809 Application for Extension of Time to File Information Returns must be completed by no later than January 31.

Reasons:

The new accelerated deadline will help the IRS improve its efforts to spot errors on returns filed by taxpayers. Having these W-2s and 1099s earlier will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them. In many instances, this will enable the IRS to release tax refunds more quickly than in the past.

2016 Filing Season Begins on Jan 19, 2016

By Modesto Matheu, CPA

modesto.matheu@gmail.com

832-498-1012

The Internal Revenue Service announced today that the nation’s tax season will begin as scheduled on Tuesday, Jan. 19, 2016.  However, some tax preparation software packages are ready to process tax returns earlier than the 19th in preparation for the IRS schedule date.  So, there is no advantage for people filing earlier other than being among the first in line when the IRS processing begin.

The 2015 filing due date may differ depending on your state of residence state.

The filing deadline to submit your 2015 tax returns is Monday, April 18, 2016, rather than the traditional April 15 date.  (Washington, D.C., will celebrate Emancipation Day on that Friday, which pushes the deadline to the following Monday for most of the nation.)

Residents of Maine and Massachusetts deadline is Tuesday, April 19. (Due to Patriots Day Holiday on Monday, April 18.) 

On recordkepping

All taxpayers should make sure they have all their year-end statements, such as: Forms W-2 from employers, Forms 1099 from banks and other payers, and Form 1095-A from the Marketplace for those claiming the premium tax credit. Including all other schedules, logs, and other tax documents.

What is the recommended filing option?

Choosing to e-file and direct deposit (e.g., refund) remains the fastest and safest way to file an accurate income tax return and receive a refund.  

When do I get my refund?

The IRS anticipates issuing more than nine out of ten refunds in less than 21 days. Every case is different and some made take longer than others.

For help contact your tax professional or the IRS (IRS.gov). 

Source: IR-2015-139, Dec. 21, 2015

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2016 Standard Mileage Rates 

The 2016 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes, are:

• 54 cents per mile for business miles driven
• 19 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the MACRS or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

They are other requirements (e.g., travel log) for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense.  

Source IRS.gov 

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Beware of Fake Charitable Organizations

Many charitable schemes peak during filing season as people prepare their returns or hire someone to prepare their taxes. Most scammer operating bogus charities may contact people by telephone or email to solicit money or financial information. 

Before you donate to a charity, at a minimum, please ask yourself the following: 

• Do the Charitable Organization name sounds similar to a widely know legitimate organization? Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. 
• Suggestion: Verify the legitimace of the organization by: calling directly the organization main office(s) and ask to speak with an administrator, and/or check the IRS website for a list of legitimate tax exempt organizations register with the IRS.   
• Do the organization is asking for your personal financial information, such as Social Security number?  Scam artists may use this information to steal your identity and money. 
• Suggestion: I cannot think of a reason for asking a taxpayer for a social security number-that is a red flag.
• Are they telling you that they only take credit cards?  People use credit card numbers to make legitimate donations but please be very careful when you are speaking with someone who called you.
• Suggestion: One option is to request to send you a payment slip in the mail.  That will give you time to reflect and investigate who is the organization.
• Are you sending Cash in the contribution envelope? 
• Suggestion: Please, do not send currency. For security and tax record purposes, contribution made by check or credit card provides documentation of the disbursement.  (Of course, you may want to exclude your typical church offerings.)

How can the IRS help?

Visit the IRS.gov website an search for "Exempt Organizations Select Check", and find most qualified charities to which donations may be tax-deductible. Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.  To help disaster victims, the IRS encourages taxpayers to donate to recognized charities.

Donations following after a major Disaster: 

Another long-standing type of abuse or fraud involves scams that occur in the wake of significant natural disasters.  They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

Source: IRS.gov

Tax Facts: How the Child Tax Credit can help you.

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In 1997, the Taxpayer Relief Act (PUBL. 105-34)was passed by congress and signed by the President, given a tax credit of $400 to taxpayers. Today, the tax credit is $1,000 for each qualifying child you claim on your tax return. This tax provision may cut your taxes by that amount and it is very important for you to know if you qualify for this non-refundable tax credit.

What test is required?
1- Age Test. The age of the child has to be 17 or under 17 by the end of the tax year.
2- Relationship test. The child must be related to the taxpayer. The word related is defined by the IRS; so must look at what the IRS included in that relationship.
3- Fifty percent "Support Test" must be made.
4- A Dependent test must be claimed by the taxpayer.
5- A maried child can't file a joint return.
6- A citizenchip test must be made.
7. There is also a residency test to be made.

These test have some exceptions and included other provisions not discussed here. Additionally, This credit phased out for high income families.

What form is required to file?
Taxpayers' must file Form 8812 and attach to your Income Tax form(s) (i.e., 1040s').

Consult your Tax Accountant for more information and clarification.

(Source: http://www.irs.gov type Form 8812 for more info.)

Revised: 1-17-2015

2015 Standard Mileage Rates

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The IRS recently published the standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

It is relevant to point out that taxpayers who uses the mileage rate may not also be allowed to use actual automobile expenditures. Some people calculate both the mileage rate and the actual expendtures to see which one is more beneficial. However, they are rules that needs to be taken into consideration in their application.

These are the 2015 mileage rates by category:

For charity...the mileage rate is 14 cents/mile.
For business...the mileage rate is 57.5 cents/mile.
For medical...the mileage rate is 23 cents/mile.
For moving...the mileage rate is 23 cents/mile.

Limitations to consider:
1-The maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) plan.
2-Reduction on basis of depreciation taken.

Efective date:
January 1, 2015


Source: IRS.gov

Charity Scams Information

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The IRS is warning the public about few charity scams following recent weather disasters.

These are some of the ways these bogus charity scam operate:

*Watch for claims to be with real charities to gain public trust.
*They use names similar to legitimate charities.
*They use email to steer people to bogus websites that often look like real charity sites.
*They may contact you by phone or email to get them to ‘donate’ money or get your financial information.


Some of the tips offered by the IRS to help taxpayers are:

How do you know is a qualify charity?
Use the Exempt Organizations Select Check tool at IRS.gov to find qualified charities. You can also find legitimate charities at the Federal Emergency Management Agency website, fema.gov.

Is it safe to give information to strangers?
Don’t give your Social Security number, credit card and bank account numbers or passwords to anyone. Scam artists use this information to steal your identity and money.

Is is safe to give cash?
For security and tax record purposes, don’t give or send cash. Contribute by check, credit card or another way that provides documentation of the donation.

If you suspect fraud?
If you suspect tax or charity-related fraud, visit IRS.gov and click on ‘Reporting Phishing’ at the bottom of the home page.

For more information about tax scams and schemes at IRS.gov. Click on ‘Tax Fraud & Abuse’ at the bottom of the home page. You can also get Publication 526 at IRS.gov or call 800-TAX-FORM (800-829-3676).

Source: http://www.irs.gov

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How to afford college?

College Tax Benefits


Do you qualify for either of two college education tax credits or any of several other education-related tax benefits?


Credits available:
The American Opportunity Tax credit and the Lifetime Learning credit and tuition and fees deduction are available to taxpayers who pay qualifying expenses for an eligible student.

Who are elegible?
Eligible students include the primary taxpayer, the taxpayer’s spouse or a dependent of the taxpayer.
The American Taxpayer Relief Act, enacted Jan. 2, 2013, extended the American opportunity tax credit for another five years until the end of 2017. The new law also retroactively extended the tuition and fees deduction, which had expired at the end of 2011, through 2013. The lifetime learning credit did not need to be extended because it was already a permanent part of the tax code.

For those eligible, including most undergraduate students, the American opportunity tax credit will yield the greatest tax savings. Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school. For others, especially those who don’t qualify for either credit, the tuition and fees deduction may be the right choice.

Taxpayer can qualifies for more than one of these benefits, but he/she can only claim one of them for a particular student in a particular year. it does not matter if the taxpayers itemize or claim a standard deduction.

What form is required?
The credits are claimed on Form 8863 and the tuition and fees deduction is claimed on Form 8917.

Higher Education Campus:
All three benefits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. None of them can be claimed by a nonresident alien or married person filing a separate return. In most cases, dependents cannot claim these education benefits.

The institution will submit Form 1098-T by the end of January of the following year. This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax benefits.


Other Credits Available?

The American opportunity tax credit explained:

•The credit targets the first four years of post-secondary education, and a student must be enrolled at least half time. This means that expenses paid for a student who, as of the beginning of the tax year, has already completed the first four years of college do not qualify. Any student with a felony drug conviction also does not qualify.

•Tuition, required enrollment fees, books and other required course materials generally qualify. Other expenses, such as room and board, do not.

•The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.

•The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.

The Lifetime Learning Credit explained:
The lifetime learning credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American opportunity tax credit, the limit on the lifetime learning credit applies to each tax return, rather than to each student. Though the half-time student requirement does not apply, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:

•Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.

•The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability.

•Income limits are lower than under the American opportunity tax credit. For 2012, the full credit can be claimed by taxpayers whose MAGI is $52,000 or less. For married couples filing a joint return, the limit is $104,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $124,000 or more and singles, heads of household and some widows and widowers whose MAGI is $62,000 or more.

Like the lifetime learning credit, the tuition and fees deduction is available for all levels of post-secondary education, and the cost of one or more courses can qualify. The annual deduction limit is $4,000 for joint filers whose MAGI is $130,000 or less and other taxpayers whose MAGI is $65,000 or less. The deduction limit drops to $2,000 for couples whose MAGI exceeds $130,000 but is no more than $160,000, and other taxpayers whose MAGI exceeds $65,000 but is no more than $80,000.

Other education-related tax benefits that can help many taxpayers, such as:



•Scholarship and fellowship grants — generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.

•Student loan interest deduction of up to $2,500 per year.

•Savings bonds used to pay for college — though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.

•Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education.

Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the earned income tax credit.


Source: http://www.IRS.gov



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