Thursday, April 20, 2017

Didn't Timely File Your IRS Federal Income Tax Return? Facts About Late Filing And Penalties

April 18 was this year’s general deadline for filing your federal tax return AND for paying any tax owed. 

If you are due a refund, there is no penalty if you file a late tax return.

Taxpayers who owe tax, and failed to file and pay on time, will most likely owe interest and penalties on the tax they pay late.

To keep interest and penalties to a minimum, taxpayers should file their tax return and pay any tax owed as soon as possible.

Here are some facts that taxpayers should know:

  1. Two penalties may apply. One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of penalties
  2. Penalty for late filing. If taxpayers file their 2016 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if they owe less than $205, 100 percent of the unpaid tax. Otherwise, the penalty can be as much as 5 percent of their unpaid taxes each month up to a maximum of 25 percent. 
  3. Penalty for late payment. The penalty is generally 0.5 percent of taxpayers’ unpaid taxes per month. It can build up to as much as 25 percent of their unpaid taxes.
  4. Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent per month.
  5. Taxpayers should file even if they can’t pay. Filing  and paying as soon as possible will keep interest and penalties to a minimum. IRS e-file and Free File programs are available for  returns filed after the deadline. If a taxpayer can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS.  
  6. Payment options. Taxpayers should explore their payment options at IRS.gov/payments. For individuals, IRS Direct Pay is a fast and free way to pay directly from a checking or savings account. The IRS will work with taxpayers to help them resolve their tax debt. Most people can set up a payment plan using the Online Payment Agreement tool on IRS.gov.
  7. Late payment penalty may not apply. If taxpayers requested an extension of time to file their income tax return by the tax due date and paid at least 90 percent of the taxes they owe, they may not face a failure-to-pay penalty. However, they must pay the remaining balance by the extended due date. Taxpayers will owe interest on any taxes they pay after the April 18 due date.
  8. No penalty if reasonable cause.  Taxpayers will not have to pay a failure-to-file or failure-to-pay penalty if they can show reasonable cause for not filing or paying on time.
Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
Additional IRS Resources:
IRS YouTube Videos:

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

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Monday, April 10, 2017

Need An Extension Of Time To File Your Federal Income Taxes Form 1040 ?


This year’s tax-filing deadline is April 18. 


Taxpayers needing more time to file their taxes can get an automatic six-month extension from the IRS.




Below are five things to know about filing an extension:

  1. Use IRS Free File to file an extension. IRS Free File allows taxpayers to prepare and e-file their taxes for free. It can also be used to e-file a free extension to file request. Midnight April 18 is the deadline for receipt of an e-filed extension request. Free File is accessible for tax return preparation and e-filing through Oct. 17. It is only available through IRS.gov.
  2. Use Form 4868. Fill out a request for an extension using Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The deadline for mailing the form to the IRS is April 18. Form 4868 is available on IRS.gov/forms.
  3. More time to file is not more time to pay. Requesting an extension to file provides taxpayers an additional six months (until Oct. 16) to prepare and file taxes. However, it does not provide additional time to pay taxes owed. Taxpayers should estimate and pay any owed taxes by April 18 to avoid a potential late-filing penalty. To avoid penalties and interest, pay the full amount owed by the original due date.
  4. Use electronic payment options to get an automatic extension. An extension of time to file will automatically process when taxpayers pay all or part of their taxes electronically by April 18. There is no need to file a paper or electronic Form 4868 when making a payment with IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS) or by debit or credit card.  Select “Form 4868” as the payment type. Keep the confirmation as proof of payment.
  5. The IRS can help. The IRS offers payment options for taxpayers who can’t pay all the tax they owe. In most cases, they can apply for an installment agreement with the Online Payment Agreement application on IRS.gov. They may also file Form 9465, Installment Agreement Request. If a taxpayer can’t make payments because of financial hardship, the IRS will work with them.
Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return

Additional IRS Resources:
What Is the Due Date of My Federal Tax Return or Am I Eligible to Request an Extension?
IRS YouTube Video:

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Wednesday, April 5, 2017

Save Federal Income Taxes By Deducting Employee Business Expenses

Employees, if you itemize on your federal tax return, remember to deduct your work-related expenses. 


Generally, employee business expenses are deductible if they are more than two percent of adjusted gross income.  In most cases, they go on IRS Schedule A, Itemized Deductions.

Other key points about employee business expenses:

1. They must be Ordinary and Necessary.  Employees can deduct unreimbursed expenses that are ordinary and necessary to their work as an employee.  An ordinary expense is one that is common and accepted in the industry.  A necessary expense is appropriate and helpful to a business.

2. Expense Examples. Some potentially deductible costs include:
  • Required work clothes or uniforms not appropriate for everyday use.
  • Supplies and tools for use on the job.
  • Business use of a car.
  • Business meals and entertainment. 
  • Business travel away from home. 
  • Business use of a home.
  • Work-related education.
This list is not all-inclusive. Special rules apply for reimbursed expenses by an employer. IRS Publication 529, Miscellaneous Deductions, and Publication 463, Travel, Entertainment, Gift and Car Expenses, provide more details.

3. Forms to Use. In most cases, expenses are reported using Form 2106 or Form 2106-EZ. IRS Schedule A may also be used.

4. Educator Expenses. K-12 teachers may be able to deduct up to $250 of certain expenses paid in 2016. These may include books, supplies, equipment and other materials used in the classroom. They are an adjustment to income rather than an itemized deduction. In other words, people do not need to itemize to claim them. IRS Publication 529 has more.

5. Keep Records. The IRS urges people to keep good records for proof of income and expenses and also as a reminder not to overlook anything. IRS Publication 17, Your Federal Income Tax, has more on what to keep.



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Tuesday, April 4, 2017

IRS Federal Income Tax Tips About The Home Office Deduction


Taxpayers who use their home for business may be able to deduct expenses for the business use of it.

Qualified persons can claim the deduction whether they rent or own their home.

One can use the "simplified method" or the "regular method" to calculate the amount of the deduction.



Here are six tips to keep in mind about the home office deduction:


1. Regular and Exclusive Use. Generally, taxpayers must use a part of their home regularly and exclusively for business purposes. The part of a home used for business must also be:
  • A principal place of business, or
  • A place where taxpayers meet clients or customers in the normal course of business, or
  • A separate structure not attached to the home. Examples could include a garage or a studio.
2. Simplified Option. To use the simplified option, multiply the allowable square footage of the office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save time because it simplifies how to figure and claim the deduction. It will also make it easier to keep records. The rules for claiming a home office deduction remain the same.

3. Regular Method. This method includes certain costs paid for a home. For example, part of the rent for rented homes may qualify. For homeowners, part of the mortgage interest, taxes and utilities paid may qualify. The amount deducted usually depends on the percentage of the home used for business.

4. Deduction Limit. If the gross income from the business use of a home is less than expenses, the deduction for some expenses may be limited.

5. Self-Employed. Taxpayers who are self-employed and choose the regular method should use Form 8829, Expenses for Business Use of Your Home, to figure the amount to deduct. Claim the deduction using either method on Schedule C, Profit or Loss from Business. See the Schedule C instructions for how to report the deduction.

6. Employees. Employees must meet additional rules to claim the deduction. For example, business use must also be for the convenience of the employer. If qualified, claim the deduction on Schedule A, Itemized Deductions.

For more on this topic, see Publication 587, Business Use of Your Home. View, download and print IRS tax forms and publications on IRS.gov/forms anytime.

All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Additional IRS Resources:
  • FAQs - Simplified Method for Home Office Deduction
IRS YouTube Videos:
  • Home Office Deduction for Daycare Providers (Simplified Method)English
  • Home Office Deduction for Schedule C Filers (Simplified Method)English
  • Home Office Deduction for Schedule F, Employee, Partnership Filers (Simplified Method)English

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

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Tuesday, March 28, 2017

Ten IRS Tax Return Filing Tips


The Income Tax filing deadline is Tuesday, April 18, 2017.



Here Are 10 Quick Ideas To Help:


1. Gather Records. Good recordkeeping is important. It helps to ensure that nothing gets overlooked. Records such as receipts and cancelled checks also provide expense documentation.

2. Use IRS Online Tools. The IRS has many useful online tools. The Interactive Tax Assistant tool provides answers to many tax questions. It gives the same answers that an IRS representative would give over the phone.

3. File Electronically. Most taxpayers file electronically these days. It offers ease and convenience. The tax software guides people through the entire process. There are no forms to fill out. Electronic filing is also a more accurate way to file.

4. Use IRS Free File. Free File is available only on IRS.gov. Taxpayers earning $64,000 or less last year can use free name-brand tax software to file a federal tax return. Free File Fillable Forms, an electronic version of IRS paper forms, is available for those who earned more than $64,000. People can use Free File to get an automatic six-month extension to file. An extension to file a tax return, however, is not an extension to pay any taxes owed. April 18 is still the deadline for any taxes owed.
Taxpayers can now use their cell phone or tablet to prepare and e-file a federal tax return through IRS Free File. Access Free File two ways: Use the IRS app, IRS2Go, which has a link to the Free File Software Lookup Tool, or use the device’s browser to go to www.IRS.gov/freefile and select the “Free File Software Lookup Tool” or “Start Free File Now” to find the software product desired. The IRS2Go app is available for Android and iOS devices.  

5. Report All Income. Taxpayers must report all of their income from Forms W-2, Wage and Tax Statements, and Forms 1099. Other income may be reportable as well, even if the taxpayer does not receive a statement. 

6. Choose Direct Deposit. The fastest and safest way to a refund is to file electronically and choose Direct Deposit. The IRS issues most refunds in less than 21 days.

7. Visit IRS.gov. IRS.gov is an excellent resource. Taxpayers can click on the "Filing" icon for links to filing tips, answers to frequently asked questions and IRS forms and publications. The IRS Services Guide outlines the many ways to get help on IRS.gov.

8. Explore Filing Options. Taxpayers have many options to file. Self-prepare or use a tax preparer. Millions are eligible for free help from a Volunteer Income Tax Assistance or Tax Counseling for the Elderly site. The IRS Directory of Federal Tax Return Preparers provides information on tax professionals including their qualifications and credentials. IRS tools are available 24/7.

9. Check out IRS Publication 17, Your Federal Income Tax, is a complete tax resource. This 300-page guide is available as an eBook as well.

10. Avoid Errors. Taxpayers should take extra time to review their return to file accurately the first time. Mistakes slow down refunds. IRS e-file is the most accurate way to file as using it eliminates many common errors. Paper return filers should check all names, Social Security numbers and sign the tax return.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Additional IRS Resources:
IRS YouTube Videos:


For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

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Friday, March 17, 2017

IRS - IRA 401k Reminder: April 1 Deadline To Take Required Minimum Distributions


Taxpayers who turned age 70½ during 2016 that, in most cases, must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Saturday, April 1, 2017.

A 50 percent tax normally applies to any required amounts not received by the April 1 deadline.

The April 1 deadline applies to owners of traditional (including SEP and SIMPLE) IRAs but not Roth IRAs. It also typically applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by Dec. 31. A taxpayer who turned 70½ in 2016 (born after June 30, 1945 and before July 1, 1946) and receives the first required distribution (for 2016) on April 1, 2017, for example, must still receive the second RMD by Dec. 31, 2017.

Affected taxpayers who turned 70½ during 2016 must figure the RMD for the first year using the life expectancy as of their birthday in 2016 and their account balance on Dec. 31, 2015. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Worksheets and life expectancy tables for making this computation can be found in the appendices to Publication 590-B.

Most taxpayers use Table III  (Uniform Lifetime) to figure their RMD. For a taxpayer who reached age 70½ in 2016 and turned 71 before the end of the year, for example, the first required distribution would be based on a distribution period of 26.5 years. A separate table, Table II, applies to a taxpayer married to a spouse who is more than 10 years younger and is the taxpayer’s only beneficiary. Both tables can be found in the appendices to Publication 590-B.

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Employees who are still working usually can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulation  in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

The IRS encourages taxpayers to begin planning now for any distributions required during 2017. An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount in Box 12b on Form 5498. For a 2017 RMD, this amount would be on the 2016 Form 5498 that is normally issued in January 2017.

IRA owners can use a qualified charitable distribution (QCD) paid directly from an IRA to an eligible charity to meet part or all of their RMD obligation. Available only to IRA owners age 70½ or older, the maximum annual exclusion for QCDs is $100,000. For details, see the QCD discussion in Publication 590-B.

A 50 percent tax normally applies to any required amounts not received by the April 1 deadline. Report this tax on Form 5329 Part IX. For details, see the instructions for Part IX of this form.

More information on RMDs, including answers to frequently asked questions, can be found on IRS.gov.

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

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Tuesday, March 14, 2017

IRS Offers IRA Tax Tips for the 2016 Tax Year


Taxpayers often have questions about Individual Retirement Arrangements, or IRAs. Common questions include: When can a person contribute, how does an IRA impact taxes, and what are other common rules.

The IRS offers the following tax tips on IRAs:

  • Age Rules. Taxpayers must be under age 70½ at the end of the tax year to contribute to a traditional IRA. There is no age limit to contribute to a Roth IRA.
  • Compensation Rules. A taxpayer must have taxable compensation to contribute to an IRA. This includes income from wages and salaries and net self-employment income. It also includes tips, commissions, bonuses and alimony. If a taxpayer is married and files a joint tax return, only one spouse needs to have compensation in most cases.
  • When to Contribute. Taxpayers may contribute to an IRA at any time during the year. To count for 2016, a person must contribute by the due date of their tax return. This does not include extensions. This means most people must contribute by April 18, 2017. Taxpayers who contribute between Jan. 1 and April 18 need to advise the plan sponsor of year they wish to apply the contribution (2016 or 2017).
  • Contribution Limits. Generally, the most a taxpayer can contribute to their IRA for 2016 is the smaller of either their taxable compensation for the year or $5,500. If the taxpayer is 50 or older at the end of 2016, the maximum amount they may contribute increases to $6,500. If a person contributes more than these limits, an additional tax will apply. The additional tax is six percent of the excess amount contributed that is in their account at the end of the year. 
  • Taxability Rules. Normally taxpayers don’t pay income tax on funds in a traditional IRA until they start taking distributions from it. Qualified distributions from a Roth IRA are tax-free.
  • Deductibility Rules. Taxpayers may be able to deduct some or all of their contributions to their traditional IRA. See IRS Publication 590-A.
  • Saver’s Credit. A taxpayer who contributes to an IRA may also qualify for the Saver’s Credit. It can reduce a person’s taxes up to $2,000 if they file a joint return. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. A taxpayer may file either Form 1040A or 1040 to claim the Saver’s Credit.
  • Rollovers of Retirement Plan and IRA Distributions. When taxpayers roll over a retirement plan distribution, they generally don’t pay tax on it until they withdraw it from the new plan. If they don’t roll over their distribution, it will be taxable (other than qualified Roth distributions and any amounts already taxed). The payment may also be subject to additional tax unless the taxpayer is eligible for one of the exceptions to the 10% additional tax on early distributions.
  • myRA. If a taxpayer’s employer does not offer a retirement plan, they may want to consider a myRA. This is a retirement savings plan offered by the U.S. Department of the Treasury. It's safe and affordable. Taxpayer’s may also direct deposit their entire refund or a portion of it into an existing myRA.
Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Learn more about how to verify your identity and electronically sign your tax return at Validating Your Electronically Filed Tax Return.

Additional IRS Resources:
IRS YouTube Videos:
  • Retirement Plan and IRA RolloversEnglish | ASL

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