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 Tax Map

IRS YouTube Videos:

• Welcome to Free File – English
• Free Help Preparing your Tax Return  –  English | Spanish | ASL
• Get Tax Help in Spanish – English | Spanish | ASL
• Interactive Tax Assistant – English | ASL
• Choose a Tax Preparer Wisely – English | Spanish | ASL

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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.

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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:

• Do I Qualify for the Retirement Savings Contributions Credit?
• Do I Need to Report the Transfer or Rollover of an IRA or Retirement Plan on My Tax Return?
• Rollover Chart

IRS YouTube Videos:

• Retirement Plan and IRA Rollovers – English | ASL

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IRS Electronic Payment And Payment Agreement Options

This is the seventh in a series of 10 IRS tips called the Tax Time Guide. Taxpayers can use these tips to find solutions to common tax issues as the April 18 tax deadline approaches. 

Taxpayers who owe taxes can now choose among several quick and easy electronic payment options, including the following:

• Electronic Funds Withdrawal allows taxpayers to e-file and pay from their bank account when using tax preparation software or a tax professional. EFW is only available when electronically filing a tax return.
• Direct Pay. Available at IRS.gov/directpay, this free online tool allows taxpayers to securely pay their taxes directly from checking or savings accounts without any fees or preregistration. Taxpayers can schedule payments up to 30 days in advance. Those using the tool will receive instant confirmation when they submit their payment.
• Credit or Debit Card. Taxpayers can pay online, by phone or with their mobile device through any of the authorized debit and credit card processors. The processor charges a fee. The IRS doesn’t receive or charge any fees for payments made with a debit or credit card. Go to https://www.irs.gov/payments for authorized card processors and phone numbers.
• IRS2Go. The IRS2Go mobile app is free and offers taxpayers the option to make a payment with Direct Pay for free or by debit or credit card through an approved payment processor for a fee. Download IRS2Go free from Google Play, the Apple App Store or the Amazon App Store.
• Electronic Federal Tax Payment System. This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll or for more information, call 800-555-4477, or visit eftps.gov.
• Cash. Taxpayers paying with cash can use the PayNearMe option. Payments are limited to $1,000 per day, and a $3.99 fee applies to each payment. The IRS urges taxpayers choosing this option to start early, because PayNearMe involves a four-step process. Initiating a payment well ahead of the tax deadline will help taxpayers avoid interest and penalty charges. The IRS offers this option in cooperation with OfficialPayments.com/fed and participating 7-Eleven stores in 34 states. Details, including answers to frequently asked questions, are at IRS.gov/paywithcash.   

Taxpayers can electronically request an extension of time to file. An extension of time to file is not an extension to pay. Taxes are still due by the original due date. Taxpayers can get an automatic extension when making a payment with Direct Pay, Electronic Federal Tax Payment System or by debit or credit card. Select “Form 4868” as the payment type to receive the automatic extension.

Taxpayers who choose to pay by check or money order should make the payment out to the “United States Treasury.” To help ensure that the payment gets credited promptly, also enclose a Form 1040-V payment voucher. Also, print on the front of the check or money order: “2016 Form 1040”; name; address; daytime phone number; and Social Security number.

Taxpayers can view their federal tax account balances online. It’s safe, secure and available on the "Finding out How Much You Owe" page on IRS.gov. They can also access payment options or apply for an installment agreement on this page.
The IRS advises taxpayers to file either an income tax return or a request for a tax-filing extension by this year’s April 18 deadline to avoid late-filing penalties. This penalty can be ten times as costly as the penalty for paying late.

Taxpayers who owe, but can’t pay the balance in full, do have options. Often they qualify for one of several relief programs, including:

• Payment Plans, Installment Agreements -- Most people can set up a payment plan with the IRS online in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement application to set up a short-term payment plan of 120-days or less, or a monthly payment agreement for up to 72 months. With the Online Payment Agreement, no paperwork is required, there is no need to call, write or visit the IRS and qualified taxpayers can avoid the IRS filing a Notice of Federal Tax Lien unless it previously filed one. Alternatively, taxpayers can request a payment agreement by filing Form 9465. This form can be downloaded from IRS.gov and mailed along with a tax return, IRS bill or notice.

• Offer In Compromise -- Some struggling taxpayers may qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to make a determination on their ability to pay. To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.

Other tips in the Tax Time Guide series are available on IRS.gov.


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