Tax Tips for Individuals
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5 Tax Tips For Early Preparation
Tax Tips for Individuals
When it comes to working on your taxes, it’s always a good idea to get started early. In fact, the Internal Revenue Service recommends a solid head start – you’ll be ahead of the end of tax season rush and see your refund sooner.
Here are five simple and effective ways to get an early start on your taxes well before April 15 appears on your calendar:
Including forms like your W-2s and 1099s. Remember to make copies and save them in your records.
All the tax forms you’ll need can be obtained anytime at IRS.gov in their Forms and Publications section.
Try not to rush while filling out your paperwork – mistakes can result in more time and avoidable expenses.
Verify that your calculations and other information like your Social Security number are correct. Caution while doing your taxes the first time through makes it less likely that you’ll hear back from the IRS.
Get the fastest refund. By filing early, you’ll probably see that refund sooner. Filing electronically with direct deposit usually results in a refund faster than paper filing.
More Tax Tips For Individuals
Whether you received a substantial tax refund last year or if you owed taxes instead, you might want to consider making some adjustments to your tax withholding. Penalties could result if you owed taxes at the end of 2015, for example, while if you received a significant refund you may have missed out on maximizing those funds throughout the entire year.
Factors like getting married or divorced, a job change or a home purchase can mean changes to how taxes are calculated. Simply use the convenient withholding calculator at IRS.gov to find the correct tax withholding amount. Also, the worksheets included in Tax Publication 505, Tax Withholding and Estimated Tax can be used to make these calculations.
If the results indicate you need to make adjustments, you may submit a W-4 Withholding Allowance Certificate, to your employer.
Service Benefit
If you turned 65 or older at the end of last year you might be able to take credits specifically available to this age group. Additionally, if you are a retired person receiving permanent and total disability the IRS allows a reduction of your tax bill. The maximum amount of this credit is continually changing. You are eligible for this credit if you meet the following requirements:
*You receive nontaxable income through Social Security or another nontaxable pension that comes to less than $3,750 to $7,500. This also depends on your filing status.
*In general, you could qualify for this credit if you’re a U.S. citizen or a legal U.S. resident at the conclusion of the tax year and you’re age 65 or older. Eligibility is also possible for those under 65 who are receiving total, permanent, or taxable disability income, and who have not turned the minimum retirement age before the start of the tax year.
If you are under 65, you can qualify for the credit if you’re receiving permanent and total disability benefits. This means:
*At the time of your retirement you were disabled.
*Your retirement on disability began prior to the end of the tax year.
Even though you may not retire “formally,” you’ll still be viewed as retired on disability if you have stopped working due to your disability. If you believe you might be eligible for this credit, please call us for assistance.
As a rising number of citizens have income from foreign sources, the IRS requires that all such income is reported unless exempted by federal law. American citizens pay taxes on foreign income regardless if their main residence is in the U.S. Foreign income rules also apply whether or not the individual receives a 1099, a W-2 or a Wage and Tax Statement.
Sources of foreign income includes wages, tips, or unearned income like dividends, interest, capital gains, rents, pensions or royalties.
It’s worth noting that citizens living outside the U.S. might be able to exclude as much as $100,800 for the 2015 tax year of their foreign income if applicable requirements are met. This does not pertain to payments from the U.S. government to employees or military employees who reside outside of the U.S.
Call Chicagoland CPAs for answers to all your questions on foreign income.
The sale of your home may qualify you for as much as $250,000 of gain from your federal tax return. That figure is doubled for married taxpayers filing jointly. Allowed every time you sell your primary home, the exclusion is usually applied no more often than once every two years.
To be qualified, you must have owned the home and used it as your main residence for at least two of the five years before selling it. In addition, you cannot have excluded fiscal gains from the sale of another home sold in the two years prior to the current sale.
Should you and your spouse file a joint tax return for the year that your main residence sells, you’ll be able to exclude that gain if either one of you are qualified for it. To do so, each of you must meet the use test to claim the maximum of $500,000.
Taxpayers must own and use the home as a main residence for at least two out of the five years before the sale. Periods of 24 months, 730 days and short term absences can be considered as “use.”
If you don’t fulfill the ownership and use tests, it’s possible to exclude a lesser amount of the gains attained on a home sale if the sale is prompted by health problems or a job change. Divorce, separation or natural disasters to your home may also fall into this category. Call Chicagoland CPAs for more assistance today.
In the event you find an error after you’ve already sent in your tax returns, you might consider making an amendment. In some cases the IRS will correct mathematical errors or request missing forms or schedules. In these cases, don’t amend or alter your return. Amended returns are permissible if any of the following were reported incorrectly:
*Filing status
*Total income
*Credits or deductions
Use Form 1040X, Amended U.S. Individual Income Tax Return to make corrections to Form 1040, 1040A, or 1040EZ returns. Be certain to enter the year of the return you are amending at the top of Form 1040X. If you’re correcting more than one tax return, use a separate 1040X for each year and mail each in a separate envelope to the IRS processing center in your state. For the address of your processing center, see the instructions on the 1040X form.
There are three columns on Form 1040X. Column A lists the original or adjusted calculations from your original return. The corrected figures go in Column C, and the difference between Columns A and C is listed in Column B. Include explanations for the items you have amended on the back side of the form.
If the amendments involve additional schedules or forms, attach them to the 1040X. If you’re filing a 1040X because you have a qualifying child and wish to claim the Earned Income Tax Credit, complete and attach a Schedule EIC to the amended return.
If you’re filing for an additional refund, do not do so until you have received your original refund. You may cash that original refund check in the meantime before receiving your additional refund. In the event you still owe taxes for the prior year, they must be paid and Form 1040X must be filed by April 15 of the current tax year. By making the deadline you’ll steer clear of penalties and interest.
You typically must file Form 1040X to get a refund within three years from when you submitted your original return or within two years from the date when you paid the tax, whichever is later. Please contact Chicagoland CPAs for more information on amended returns.