All Posts by Suzanne Shively

Six Reasons to E-file your Taxes in 2016

Are you one of the few tax filers who still file a paper return? If so, now may be the best time to switch to e-file. Last year almost 129 million taxpayers filed their taxes electronically. They chose to e-file because it’s the fastest and safest way to file.

Here are the top six reasons why you should file electronically in 2016:

Accurate and Easy. IRS e-file is the best way to file an accurate tax return. The tax software helps you avoid mistakes by doing the math for you. It guides you through each section of your tax return. It is much easier than doing your taxes by hand and mailing paper tax forms.
Safe and Secure. IRS e-file meets strict security guidelines. It uses modern encryption technology toprotect tax returns. The IRS has processed more than 1.5 billion e-filed tax returns to date. This year, the IRS is working with states and tax industry leaders to protect your tax return from identity theft refund fraud. This new efforthas put strong new safeguards in place to make tax filing safer than ever before.
Convenient and Often Free. You can e-file for free through IRS Free File. Free File is only available You may qualify to have your taxes e-filed for free through IRS volunteer programs. Volunteer Income Tax Assistance, or VITA, offers free tax preparation if you earned $54,000 or less. Tax Counseling for the Elderly, orTCE, generally helps people who are age 60 or older. You can buy commercial tax software to e-file or ask your tax preparer to e-file your tax return. Most paid preparers are required to file their clients’ returns electronically.
Faster Refunds. In most cases, e-file helps get your refund faster. That’s because there is nothing to mail and your tax return is virtually mistake-free. The fastest way to get your refund is to combine e-file with direct deposit into your bank account. The IRS issues more than nine out of 10 refunds in less than 21 days.
Health Care Tax Reporting. IRS e-file can help with tax provisions of the health care law. The software will walk you through the lines on the tax forms that relate to the Affordable Care Act.
Payment Options. If you owe taxes, you can e-file early and set up an automatic payment on any day until the April 18 deadline. You can pay electronically from your bank account with IRS Direct Pay. You also have many other options to pay, including electronic funds withdrawal or payment by debit or credit card. Visit details.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are yourTaxpayer Bill of Rights. Explore your rights and our obligations to protect them on

IRS YouTube Videos:

Welcome to Free File – English
IRS Tax Payment Options – English

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The Best Year-End Tax Moves to Make Right Now

To keep your tax bill in line next year, you need to get your ducks in a row before the end of 2015.
You may think you have months to go before you have to get serious about your 2015 taxes. Congress often doesn’t nail down the final tax rules until December. Your W-2 and 1099s won’t show up in the mail until January. But once the calendar flips to 2016, you have few ways to trim your tax bill. So to avoid unnecessary pain next April, use the rest of 2015 wisely. That could mean checking up on your investment portfolio, stepping up your charitable giving, adding up what you made this year, and more. You’ll be glad you did next year.
• Profit from your losses. The fall stock rally may have wiped out any investment losses you were sitting on. Still, check for holdings that haven’t yet recovered from the summer selloff (energy stocks, anyone?). You can use losses to offset capital gains, write off up to $3,000 of what’s left against ordinary income, and save the remainder for future years.
• See if your winnings are free. When your income drops—say you’ve retired—you have a chance at tax-free profits. The long-term capital gains tax rate is zero if you have less than $74,900 in taxable income for married couples filing jointly, or $37,450 for singles.
• Know when selling will sting. With a high income, you need to be careful about realizing any more gains than necessary in one year. Once your income tops $250,000 for couples filing jointly, $200,000 for singles, you’ll pay an extra 3.8% Medicare tax on net investment income, including taxable interest, dividends, and capital gains.
• Don’t let a banner year hurt you. If a juicy bonus or home sale pushed you up the income ladder in 2015, you could face a larger-than-expected tax bill next spring due to the alternative minimum tax, a parallel tax system that curtails certain write-offs, such as mortgage interest and taxes. And with an adjusted gross income of $309,900 for married couples filing jointly ($258,250 for singles), your deductions could be phased out.
To see if you’re at risk, pull out your pay stubs and brokerage statements and use last year’s tax software to get a preview of your 2015 taxes. If AMT or phaseouts will be a one-time thing, delay some deductible payments, such as property taxes, until January, says Mark Luscombe, principal federal tax analyst for Wolters Kluwer. That way you’ll get the full benefit of those write-offs when your income falls next year. Or look for ways to reduce your AGI, such as seeing if your boss will delay a bonus.
• Shrink your paycheck. You have until next April to top off an IRA or health savings account, but Dec. 31 is the deadline to shelter the max in your 401(k): $18,000, or $24,000 if you’re 50 or older. But you’ll have to up your contribution rate quickly to squeeze more out of your last paycheck or two.
• Collect your IRA income now. Once you turn 70½, you must start taking retirement plan withdrawals—or face a 50% penalty on the amount you should have taken out. There are exceptions: You can put off required minimum distributions from your current 401(k) if you’re still working, and you never have to tap a Roth IRA.
You have until April 1 of the year after you turn 70½ to take your first RMD. Then the deadline is Dec. 31. But if you just turned 70½, waiting until next April would mean two distributions in a year, which could push you into a higher bracket. Instead, make your first withdrawal in 2015.
• Lock in health coverage early. If you need to buy your own health insurance, the penalty for going without rises next year to up to 2.5% of income. You can enroll in a plan as late as Jan. 31, 2016, to avoid that charge on your 2015 tax bill. But to have coverage on Jan. 1, you need to enroll by Dec. 15.
• Relax about your FSA (up to a point). Health care flexible spending accounts traditionally had a Dec. 31 “use it or lose it” deadline. The rules have changed, notes Lisa Greene-Lewis, a CPA at TurboTax. Now 60% of companies let you roll over up to $500 of unused FSA cash into next year’s plan, a survey by WageWorks found; nearly a quarter offer a 2½ month grace period. No extension or too big a balance? Schedule overdue doctor and dentist appointments for before you ring in the new year.

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The Individual Shared Responsibility Provision and Your 2015 Income Tax Return

The Affordable Care Act requires you, your spouse and your dependents to have qualifying health care coverage for each month of the year, qualify for a health coverage exemption, or make an Individual Shared Responsibility Payment when filing your federal income tax return. If you had coverage for all of 2015, you will simply check a box on your tax return to report that coverage.

However, if you don’t have qualifying health care coverage and you meet certain criteria, you might be eligible for an exemption from coverage. Most exemptions are can be claimed when you file your tax return, but some must be claimed through the Marketplace.

If you or any of your dependents are exempt from the requirement to have health coverage, you will complete IRS Form 8965, Health Coverage Exemptions and submit it with your tax return. If, however, you are not required to file a tax return, you do not need to file a return solely to report your coverage or to claim an exemption.
For any months you or anyone on your return do not have coverage or qualify for a coverage exemption, you must make a payment called the individual shared responsibility payment. If you could have afforded coverage for yourself or any of your dependents, but chose not to get it and you do not qualify for an exemption, you must make a payment. You calculate the shared responsibility payment using a worksheet included in the instructions for Form 8965 and enter your payment amount on your tax return.

Whether you are simply checking the box on your tax return to indicate that you had coverage in 2015, claiming a health coverage exemption, or making an individual shared responsibility payment, you or your tax professional can prepare and file your tax return electronically.

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Claim the Premium Tax Credit & Reconcile Advance Credit Payments on Your 2015 Income Tax Return

You may be eligible to claim the premium tax credit on your 2015 income tax return. The premium tax credit helps eligible individuals and families with low or moderate income afford health insurance. Millions of people who purchased their coverage through a health insurance Marketplace are eligible for premium assistance through the premium tax credit, which individuals chose to either have paid upfront to their insurers as advance payments to lower their monthly premiums or receive when they file their taxes.
If you received the benefit of advance credit payments, you must file a federal tax return and reconcile the advance credit payments with the actual premium tax credit you are eligible to claim on your return. Failing to file your tax return to reconcile advance payments will prevent you from receiving advance credit payments in future years.

You will use IRS Form 8962, Premium Tax Credit (PTC) to make this comparison and to claim the credit. If your advance credit payments are in excess of the amount of the premium tax credit you are eligible for, based on your actual income, you must repay some or all of the excess when you file your return, subject to certain caps.

If you or anyone on your tax return enrolled in health coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace form by early February. Use the information from Form 1095-A to file your taxes accurately. This information includes the name of your insurance company, dates of coverage, amount of monthly insurance premiums for the plan you and other members of your family enrolled in, amount of any advance payments of the premium tax credit for the year, and other information needed need to compute the premium tax credit.

Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math.

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Tax Relief for Families and Individuals

On December 18, 2015, the President signed into law the Protecting Americans From Tax Hikes Bill of 2015 (PATH Act), which retroactively extends several deductions, credits and other tax provisions to the beginning of 2015, extends others, and also makes some provisions permanent. The permanent extensions affecting Individuals and families include the following:
Enhanced child tax credit. The child tax credit (CTC) is a $1,000 credit. To the extent the CTC exceeds the taxpayer’s tax liability, the taxpayer is eligible for a refundable credit (the additional child tax credit) equal to 15 percent of earned income in excess of a threshold dollar amount (the “earned income” formula). Until 2009, the threshold dollar amount was $10,000 indexed for inflation from 2001 (which would be roughly $14,000 in 2015). Since 2009, however, this threshold amount has been set at an unindexed $3,000 and is scheduled to expire at the end of 2017, returning to the $10,000 (indexed for inflation) amount. The provision permanently sets the threshold amount at an unindexed $3,000.
Enhanced American opportunity tax credit. The Hope Scholarship Credit is a credit of $1,800 (indexed for inflation) for various tuition and related expenses for the first two years of post-secondary education. It phases out for AGI starting at $48,000 (if single) and $96,000 (if married filing jointly) – these amounts are also indexed for inflation. The American Opportunity Tax Credit (AOTC) increases the credit to $2,500 for four years of post-secondary education, and increases the beginning of the phase-out amounts to $80,000 (single) and $160,000 (married filing jointly) for 2009 to 2017.
Enhanced earned income tax credit. Low- and moderate income workers may be eligible for the earned income tax credit (EITC). For 2009 through 2017, the EITC amount has been temporarily increased for those with three (or more) children and the EITC marriage penalty has been reduced by increasing the income phase-out range by $5,000 (indexed for inflation) for those who are married and filing jointly.

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Claiming Work Opportunity Credit

In order to claim the Work Opportunity Credit, employers must request and be issued a certification for each employee from the State Employment Security Agency (SESA).  The certification proves that the employee is a member of a targeted group.  You must receive certification Form 8850 Pre-Screening Notice and Certification Request for the Work Opportunity Credit, […]

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