Parents: Don’t Miss Out on These Tax Savers

If you have children, you may be able to reduce the amount of taxes owed for the year using tax credits and deductions. Here are several tax benefits you might be able to take advantage of 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.
• 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.
• 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.
• 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 for the EITC with or without children.
• Adoption Credit. You may be able to claim a tax credit for certain costs you paid to adopt a child.
• 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–and they 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; however, you must complete Form 8863, Education Credits, and file a return to claim these credits.
• 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.
• 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. Please call the office for additional details.

Do not hesitate to contact the office if you have any questions about these and any other tax credits and deductions that you are entitled to under federal and state tax codes.

Ten Facts About Capital Gains and Losses

Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings, and stocks and bonds held in a personal account.

When you sell a capital asset, the difference between the amount you paid for the asset and its sales price is known as a capital gain or capital loss. Here are ten facts you should know about how gains and losses can affect your federal income tax return. Read more

What Income is Taxable?

Are you wondering if there’s a hard and fast rule about what income is taxable and what income is not taxable? The quick answer is that all income is taxable unless the law specifically excludes it. But as you might have guessed, there’s more to it than that.

Taxable income includes any money you receive, such as wages and tips, but it can also include non-cash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return. Read more

Estimated Tax Payments: Q&A

Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough. If you do not pay enough by the due date of each payment period you may be charged a penalty even if you are due a refund when you file your tax return.

How do I know if I need to file quarterly individual estimated tax payments?

If you owed additional tax for the prior tax year, you may have to make estimated tax payments for the current tax year. The first estimated payment for 2016 is due April 18, 2016.

If you are filing as a sole proprietor, partner, S corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.

If you are filing as a corporation you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return.

If you had a tax liability for the prior year, you may have to pay estimated tax for the current year; however, if you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings.

Note: There are special rules for farmers, fishermen, certain household employers, and certain higher taxpayers.

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ACA Tax Facts for Individuals and Families

The Affordable Care Act contains two provisions that may affect your tax return this year: the individual shared responsibility provision and the premium tax credit. Here’s what you should know:

Information Forms: 1095-A, 1095-B, and 1095-C

This year marks the first time that certain taxpayers will receive new health-care related information forms that they can use to complete their tax return and then keep with their tax records.

These forms are used to report health coverage information for you, your spouse and any dependents when you file your 2015 individual income tax return in 2016. These forms are also filed with the IRS. Depending upon your specific circumstances, (i.e. whether you receive health insurance from the Health Insurance Marketplace, health coverage providers, or certain employers), you should have received one or more of these forms in early 2016. There are three types of information forms:

Form 1095-A, Health Insurance Marketplace Statement. The Health Insurance Marketplace sends this form to individuals who enrolled in coverage there, with information about the coverage, who was covered, and when. This is the second year in which the Marketplace is issuing Form 1095-A to enrollees. The deadline for the Marketplace to provide Form 1095-A is February 1, 2016.

Form 1095-B, Health Coverage. Health insurance providers (e.g. health insurance companies) send this form to individuals they cover, with information about who was covered and when.

Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. Employers that offer health coverage referred to as “self-insured coverage” send this form to individuals they cover, with information about who was covered and when. The deadline for coverage providers to provide Forms 1095-B and employers to provide Form 1095-C is March 31, 2016.

Some taxpayers may not have received a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return. It is not necessary to wait for Forms 1095-B or 1095-C in order to file. Taxpayers may instead rely on other information about their health coverage and employer offer to prepare their returns.

Note: These new forms should not be attached to your income tax return.

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