When it comes to saving for retirement, you have different options.  Traditional IRA, Roth IRA, SEP Plan, Simple Plan, 401(k) a few retirement options.  But in this episode, I want to focus on the Traditional IRA and some of the requirements.   1.   Age Rule - If you’re under the age of 70 ½, you can contribute to a Traditional IRA.  If you’re over the age of 70 ½, you are required to begin taking required minimum distributions (RMD).    2. Compensation Requirement - Contributors must have wages, salary, 1099-Misc (Self Employed) to contribute to a Traditional IRA.  If you’re married filing jointly, only one of the taxpayers is required to meet the compensation requirement.   3.  Time to Contribute - You have until April 15 (April 18 for 2017) to contribute to an IRA for the previous year.  If you are making a contribution between January 1 and April 15, you will need to advice your plan sponsor which tax year the IRA contribution is being made to take the tax deduction on your tax return.  Is the contribution being made for the previous year or the current year?   4.  Contribution maximum limits - If you’re under the age of 50 the maximum you can contribute is $5,550 per individual taxpayer (MFJ - $11,100).  If you’re over the age of 50 the maximum you contribution is $6,500 per individual taxpayers.   2017 Adjusted Gross Income (AGI) limits begin phasing out for the Traditional IRA contribution deduction between $118.000 to $133,000 for single taxpayers.  Married filing jointly taxpayers AGI begin phasing out for the Traditional IRA contribution deduction between $186,000 to $196,000.   5. Taxpayers may qualify for the saver’s credit. Contributions to your retirement plan can reduce your tax credit from 10% to 50% depending on your AGI.  To qualify for the saver’s credits adjusted gross income for filers filing as married filing jointly must be less than $62,000, Head of Household must be less than $46,500, and others (single, married filing separately, and qualifying widow) less than $31,500.   6.  Rollover Information - You have 60 days to rollover any distributions that receive from your traditional IRA into another qualify traditional IRA plan if you’re under the age of 59 ½ without being accessed the 10% early distribution penalty and taxed at your tax rate on your early withdrawal from your IRA plan.

You’re considering taking a new position or have already taking a new position that required you to relocate from where currently you’re working and living.    The question, “Can I deduct my moving expenses?”.  As always in taxes, the answer is “It depends”.   The question I am going to ask is “Tell me about this new job and where you moved from?”.   When it comes to deducting moving expenses, there are several requirements to qualify for the moving expense deduction.  There is a time test, distant test, and the type of expenses you can deduct.   1.  If you qualify for the moving expense deduction, you will need to deduct the moving expenses within one year of your relocation to your job.  There are some exceptions to the rule. If your child is in their last year of high school and would like to graduate with their classmates may qualify you for an exception..   2.  Distant test - The new job location has to be more than fifty (50) miles from your other job.  If your previous job was five miles from your residence, your new job has to more than fifty-five (55) miles further from where you residence.. Armed force personnel are exempt from the distant test requirement if they are transferred from one base to another base.   Your main job is defined as where you do most of the your work.  If you work more than one job, you must consider the amount of work you do at each job, how much time do you spend at each job, and how much do you get paid at each job will determine the distant test.
  3.  Time test - you must be in your new position at least thirty-nine out of fifty-two weeks.  The thirty-nine weeks don't have to consecutive.    4.  If you qualify, you can deduct expenses associated with moving and transporting your property, mileage, and lodging.  Mileage is .17 per mile.  Food and meals can not be deducted for the moving expense deduction.

In this episode, I discuss tax credits, adjustments, and deductions taxpayers may not know about. These tax credits, adjustments, and deduction can be used to reduce your taxable income or your tax liability.

1. Saver’s Credit - Contributions to your retirement plan can reduce your tax credit from 10 to 50%. To qualify for the saver’s credits Adjusted gross income for married filing jointly must be less than $62,000, Head of Household must be less than $46,500, and others (single, married filing separately, and qualifying widow) less than $31,500.

2. Sales Tax Deduction - Sales tax deduction is a line on the itemized deduction under income tax deduction. If you itemize your deductions, you can take the larger of the sales tax deduction or the income tax deduction. The sales tax deduction is based on the adjusted gross income tables the IRS has created.

If you purchase an large item that has sales tax applied to the purchase price (Automobile, furniture, furnishings, etc) you can take that sales tax deduction in addition to the IRS sales tax tables.

3. Medical Mileage - In addition to medical expenses (Prescriptions, doctor, dentist, eye checkups and glasses, hospital, insurance, etc), taxpayers can deduct .17 per mile to drive to (doctors, prescriptions, etc) for medical expenses..

4. Charitable and Moving Expense Mileage - In additions, taxpayer can deduct .14 per mile for charitable mileage driven for charitable purposes.

Taxpayers can deduct .17 for moving expenses which must meet a time, distant, and work test to qualify for moving expenses. In episode 193, I will discuss moving expenses qualification.

5. Non-cash Contributions - Taxpayers can deduct non-cash contribution to charitable organization. Non-cash contributions over $500 must use Form 8283 which must include the taxpayer’s cost and fair market value. Some assets (real property, paintings, vehicles, conservation easements, etc...) must include an appraisal.

6. Long-term Care Insurance - Taxpayers can deduct qualified long-term care insurance expense under medical expense deduction on Schedule A that exceed 10% of the taxpayer’s adjusted gross income. The amount of Long-term care insurance premiums is limited.

Taxpayers can deduct qualified long-term care premiums up to the following amounts for each person covered under the long-term insurance..

Age 40 or under – $390.
Age 41 to 50 – $730.
Age 51 to 60 – $1,460.
Age 61 to 70 – $3,900.

Age 71 or over – $4,870.

7. Education Deduction - Teachers can deduct up to $250 for items and supplies they purchase for their classrooms on page one of the Form 1040 line 23.

April 18, 2017 is the deadline for extensions or tax returns to filed.  Have you filed your return(s) yet?

 

In this week’s episode, I discuss the $1B in refunds that the IRS is holding from the 2013 tax year.  If the 2013 tax return isn’t filed before April 18, 2017, the $1B will be turned over to the U.S. Treasury Department.

  The IRS has calculated this amount based on the tax documentation (W2s, 1099s, K1s, etc..) they have received from companies and individuals. If for some reason the taxpayer didn’t file a 2013 tax return there is still time to do so.   When taxpayers file a tax return and there is no tax fraud involved, the look back period for audits is three years plus the current year.  If you don’t file a tax return or if fraud has been committed, then the look back then any years is an open year.   When tax don’t file a tax return you miss out on tax credits (tuition, child care, earned income tax credit, energy credits, etc.   If you don’t have the tax documents from a prior year, you can request the information from the company issuing the information.   Additionally, you can request an IRS transcript by calling 1-800-829-3676.   Click here for the IRS news release.   The IRS Tax forms can be found on the IRS website under Forms and Publications.   Additionally, you can contact my office, your tax preparer, or a tax professional for assistant.   The top five states for the 2013 tax return refunds that the IRS is holding are: Texas
California
Florida
New York
Illinois
Pennsylvania

When it comes to refunds, not everyone is willing to wait until the IRS issues refunds.  For 2017, the refund have been issued on average of twenty-one (21) days depending if you any refundable credits and if you are receiving a paper check.   For taxpayers who can’t wait, they turn to Rapid Tax Refund Loans.  A rapid refund loan is a loan from a financial institution or cash advance business against your expected federal or state tax refund.   Some things to not about rapid refund loans are   1.  The loan company is not associated with the IRS.
2.  The loan amount is against your expected tax refund.
3.  The loan is with a financial institution or cash advance business.
4.  There are interest rates which can be similar to pay day loan rates.
5.  The loan does not take into account that you tax refund may be garnished for back taxes, child support, or other debt.
6.  There are usually application, credit check, and other fees associated with the loans.
7.  The financial institution will pull your credit score(s) when approving the loan.
8.  You may not get approved for the loan   Other companies like auto dealerships will sometimes double refund to a limit. I have seen a car dealership with an ad here in Nashville that will double your refund up to $1,500 if you purchase a vehicle from them.    Gift card companies and retail pre-paid debit card will sometimes add 5% to your refund if you cash your refund check or have your refund check directly deposited onto the pre-paid debit card.   My advice is to wait until the IRS issues the refund to get your refund skipping the high interest rates, fees, and credit score checks.

deductions and tax credits - Which is better?

Income Deductions reduce income.

Tax Credits reduce tax liability

Between the income and tax credits, tax credits are better.

Here’s why:

$500 deduction will only reduce your income by $500, it may not reduce your tax liability.

$500 tax credit will reduce your tax liability by $500

Form 1040 Deductions and Itemized deductions phase out at higher income levels.

Itemized deductions are tied to your Adjusted Gross Income

Charitable contributions - Deduct up to 50%
Medical Deduction - 7.5% and 10% of AGI requirement before yuo can deduct
Miscellaneous Deduction - 2% AGI limitations before you can deduct

Some credits are limited - energy credits, foreign tax credit alternative energy credit. They are limited in the amount of the tax credit or the amount of units produced (alternative energy vehicles)

Some itemized deductions require an appraisals like art, vehicles and properties.

Whether it’s itemized deductions, income deductions, or tax credits, you can reduce your taxable income or tax liability.

You've filed your tax returns; but, you haven't received that tax refund when you expected it deposited be in your bank account.

In this episode, I discuss the reasons why your tax refund may be delayed.

1. Incorrect Bank Routing and Account Information for Direct Deposit
2. Filed a paper return
3. Someone else claimed your or someone else on your tax return dependent(s)
4. Tax Fraud Victim
5. Errors on the tax return form(s)
6. Waiting on additional information to process your tax return
7. Names didn’t match social security numbers with the Social Security Administration
8. Amending Your Current Year Tax Return
9. Filing your tax return too early or too late
10. Incomplete Tax Return was filed with missing information.

This year there seems to be more o a delay in receiving tax refunds because of the tax fraud of identity theft occurring in the states and with the IRS. 

In this episode, I discuss when should you file a federal tax return.

You should file a federal tax return when ...

1. You had tax withheld?
Wages, Miscellaneous Income, Retirement Income, K-1s

2. You qualify for the earned income tax credit.

3. You qualify for the additional child tax credit.

4. You qualify for the premium tax credit.

5. You qualify for the health coverage tax credit.

6. You qualify for the American Opportunity Credit.

7. You qualify for the federal tax on fuels.

Items 2-7 are refundable tax credits.

If your filing status is and your gross income at the end of 2016 was

Single under 65 - $10,350 65
Mingle 65 and over - $11,900
Married filing jointly under 65 (both spouses) - $20,700 65
Married filing jointly 65 and over (one spouse) - $21,950 65
Married filing jointly 65 and over (both spouses) - $23,200
Married filing separately any age - $4,050
Head of household under 65 - $13,350 65
Head of household 65 and over - $14,900
Qualifying widow(er) with dependent child under 65 - $16,650 65
Qualifying window with dependent child 65 and over - $17,900

You have prepared and filed your tax return. You are now waiting...waiting....on your tax refund. “When should I receive my refund?” is the topic for this week’s episode.

Federal Tax Refunds

Within ten days unless you’re filing paper. The exception is if you receive the EIC (Earned Income Credit) and advanced child credit. Processing for the EIC and advanced child credit will not start until February 15, 2017.

Processing  State Tax Returns Refunds

AL - Refunds will start on March 1, 2017. *Confirmation letter may be sent out to confirm identity or to request additional information.

GA - Refunds will start on February 1, 2017. *It will take 90 days to process a return. First time taxpayers or taxpayers who have not filed in five years will receive a physical paper check.

OH - Expect your refund fifteen days after the return hasa been filed. Eight to ten weeks if fling on a paper.

RI - Is requesting taxpayer’s license to be listed on the return to combat tax fraud.

NJ - March 1, 2017

VT - Fact sheet for taxpayers

AK - Tax returns must be filed electronically. You must request a waiver at least thirty days before the return is day if you can’t file the tax return electronically or face penalties and interest.
KY - February 15, 2017

These states reported when you should expect a refund after the podcast was produced and released.

MA - The tax return will be processed within two to three days. Taxpayers should be receive their refund within two weeks after filing unless you are filing a paper return which will take around eight to ten weeks for the refund to issued.

MI - Taxpayers should be receive their refund within two weeks after filing unless you are filing a paper return which will take around six to eight weeks for the refund to issued.

Names, Addresses, and Social Security Numbers on a tax return are important.

Your name has to match the social number and name on file with the Social Security Administration. Sometimes the names and social security numbers don’t match because of

Marriage
Divorce
Spelling
Transposed Social Security Number

Marriage / Divorce Taxpayer’s last name doesn’t match the name on file with the Social Security Administration - Don’t Forget to change your last name with the Social Security Administration

Address - If you don’t have the correct address or you move you may not receive a check if there is an issue with your tax filing or refund (if you don’t request a electronic deposit) because the U.S. Postal Service will return the check to the IRS.

Areas on the tax return where the Dependent’s social security number is used

Exemption
Child care credit
Additional Child Credit
Tuition and other educational expenses

Alimony - Deduction / Income

Mortgage Interest Deduction
Seller-Finance Installment Sale and Interest Income