If you are a taxpayer in the homestretch of preparing to file your income tax return, keep in mind these ten points that could affect your tax bill.
...if you are saving for retirement...
Contributions to a regular IRA are still deductible for 2016, as long as they are made by April 18, 2017. Low and moderate-income taxpayers may also qualify for the saver's credit. The IRS says that eligible taxpayers can generally contribute up to $5,500 to an IRA and those who turned 50 before the end of 2016 may be able to contribute even more, up to $6,500.
...if you paid for care for a child, dependent, or spouse...
Taxpayers with earned income who paid for care for a qualifying dependent (mostly children under 13 or adults who can't care for themselves) so that the taxpayer could work or look for work may be eligible for the Child and Dependent Care Tax Credit. The credit is worth between 20 and 35 percent of the allowable expenses and depends on the taxpayers income level; it can be worth $3,000 for one dependent, or $6,000 if there are two or more.
...if you are paying for higher education...
Whether you are a taxpayer paying for your own education, or that of a child or other dependent, you may qualify for credits and deductions. Your CPA can advise if you qualify for either the American Opportunity Credit or the Lifetime Learning Credit.
...if you made a charitable donation...
If you made a contribution to one of the IRS list of eligible organizations, you may be able to receive a deduction. For donations valued at more than $250, whether in cash or property, taxpayers must produce a written statement from the charity. Record-keeping rules can be complex. IRS publication 526 can help guide you.
...if you can't pay what you owe...
While no one wants to pay taxes due, especially when the bill is out of the budget, know that the IRS has both short- and long-term payment plans for those who owe $50,000 or less that can provide taxpayers up to 72 months to pay a debt. The IRS also will accept several forms of payment for your tax bill, including electronic transfers, credit or debit cards, and even cash through their PayNearMe cash option.
...if you already owe past-due taxes...
Taxpayers should be aware of the Treasury Offset Program that allows the IRS to pull all or part of any current year refund to pay the debt of prior years. The Treasury Bureau of Fiscal Service can also take money out for federal agency debts such as student loans, state income tax due, unpaid child support or spousal support, to name a few. Your CPA can advise you as to the best course of action to satisfy tax repayment.
...if you are a senior citizen...
Unfortunately, fraudsters are targeting seniors through phone scams and fake IRS badge numbers. They usually say something to scare the victim into paying a fictional debt by using a debit card or money/wire transfer. Their tactics are intimidating and aggressive. A reminder, the IRS never initiate action through phone calls and will never ask for payment through a debit card, gift card or money transfer.
...if you are over 70.5 years of age...
Taxpayers who turned 70.5 at any time during 2016 must start receiving any required minimum distributions from IRAs by April 1. The deadline applies to owners of SEP and traditional IRAs, as well as a variety of workplace retirement plans such as 401(k)s and 403(b)s but not Roth IRAs. After the first year of turning 70.5, RMDs must be taken by December 31. Meet with your CPA to ensure you remain compliant.
Related read: You Mean I Have to Take the Money?
...if you are in the military...
Members of the armed services in combat zones can be eligible for special extensions for tax filing, up to as much as 180 days after the end of your service in a combat zone. Service members can also get free tax help through the IRS's VITA program both on U.S. bases and overseas.
...if you adopted or tried to adopt a child...
Those who sought adoption in 2016 may be eligible for a nonrefundable credit for some expenses, up to $13,460 per child. Any unused credit can be carried over for up to five years. Qualifying expenses include adoption fees, court costs, and attorney fees and travel. The credit applies to both foreign and domestic adoptions. Income limits do apply; consult with your CPA to understand yours.
Determining income tax credits and deductions can be confusing. If you would like to discuss your tax situation in further detail or have questions on income tax or tax planning, contact us at info@zinnerco.com or by phone at 216.831.0733. We happy to help and ready to start the conversation.
