If you are like so many people that tend to wait until tax-filing season to worry about your taxes, there’s a chance that you will be missing out on opportunities to reduce your tax and avoid certain penalties.
Events That Create Tax Problems & Opportunities
The following are some events that can affect your tax return and you may need to take steps now to mitigate their impact and avoid unpleasant surprises after it is too late to address them.
Information Regarding Solar Tax Credit
Qualifications
If you’re thinking about solar installation, keep in mind that the federal government has a 30% tax credit for the cost of a qualified solar installation (some states also have solar credits or other incentives). However, the federal credit is non-refundable and can only be used to offset your current tax liability, and any excess carries over to future years as long as the credit still applies in future years. As of now, the credit is allowed through 2021. It’s important to know that you may not get all the credit in the first year as you might have been led to believe or assumed based upon some of the TV ads for home solar power.
Pitfall to Back-Door IRAs
If you are saving for retirement, many individuals favor Roth IRAs over traditional IRAs because the former allows for both accumulation and post-retirement distributions to be tax-free. In comparison, contributions to traditional IRAs may be deductible, earnings are tax-deferred and distributions are generally taxable. Anyone who is under age 70.5 and who has compensation can make a contribution to a traditional IRA (although the deduction may be limited).
File An Amended Tax Return
Did you filed your 2015 tax return and forgot to include some income or failed to claim a deduction or credit? Good news, it is not too late!
An amended return can be filed to correct an already filed tax return. Failing to report an item of income may generate an IRS inquiry, although it may take year or more after the original return was filed, but unfortunately, interest and penalties will have already built up. That’s why it’s a good idea to file an amended return as soon as possible to avoid the headache of IRS correspondence and to minimize the interest and penalties on any additional tax you might owe.
You Might Need to Adjust Your W-4
If you got money back, keep in mind that you are simply receiving your own money that was over-withheld by your employer in the first place. A better solution would be to bank the money and have access to it for the entire year instead of giving the US Government an interest-free loan.
Are You Receiving a Medicaid Waiver Payment? Read This Important Information!
In order to promote home care and reduce the government’s institutional care expenses, Medicaid (through state agencies) pays home caregivers a small wage (usually reported on Form W-2 but sometimes on Form 1099-MISC) referred to as a Medicaid waiver payment to care for an individual in the care provider’s home.
Many taxpayers prefer to care for ill or disabled family members in their homes as opposed to placing them in nursing homes, however, this can be incredibly expensive, time-consuming, and exhausting. The government also recognizes home care as a means of reducing the government’s costs in terms of caring for individuals who otherwise would be institutionalized (because they require the type of care that is normally provided in a hospital, nursing facility, or intermediate care facility).
Do You Need A Six-Month Tax Extension?
If you need more time to file your 2015 individual tax return you may request an automatic six-month extension. The extension is obtained by filing IRS Form 4868 on or before the April 18, 2016 deadline.
This extension will give you until October 17, 2016 to file a return and avoid the late filing penalty. Normally these due dates fall on the 15th day of the month. However, since April 15, 2016 falls on a Friday, which is a holiday, Emancipation Day, in the District of Columbia a holiday in the District of Columbia the date becomes Monday, April 18, even for taxpayers who don’t live in D.C. October 15, 2016 falls on a weekend, so the extended due date is Monday, October 17, 2016.
April 18th, 2016 is The Deadline for 2015 Tax Returns
If you haven’t as yet filed your 2015 tax return remember that April 18, 2016 is the due date to either file your return and pay any taxes owed, or file for the automatic six-month extension and pay the tax you estimate to be due. Usually April 15 is the due date, but because Friday, April 15, is a legal holiday in the District of Columbia (where the IRS is headquartered), the filing date is advanced to the next day that isn’t a weekend or holiday – Monday, April 18 – even for taxpayers not living in DC.
Tax ramifications are different when selling the old vehicle and when trading it in for a new vehicle.
It’s normal that business owners will eventually replace vehicles used in their business. However, keep in mind that when replacing a business vehicle, the tax ramifications are different when selling the old vehicle and when trading it in for a new vehicle. If you sell the vehicle, the result is reported on your taxpayer’s return as an above-the-line gain or loss. Since a trade-in is treated as an exchange, any gain or loss is absorbed into the replacement vehicle’s depreciable basis, thereby avoiding any current taxable gain or reportable loss.
The IRS is now auditing to see if too much home equity debt interest is being deducted from your taxes.
Remember, equity debt is debt not incurred to acquire or improve the home and taxpayers frequently exceed the equity debt limit and fail to adjust their interest deduction accordingly. Normally, you are allowed to deduct the interest on up to $1 million of home acquisition debt which includes subsequent debt incurred to make improvements, but not repairs, and the interest on up to $100,000 of home equity debt.
