New Return Due Dates

Effective for tax years beginning after December 31, 2015, there are new due dates for partnership and corporation income tax returns.

Partnerships

Partnerships are now due the 15th day of the third month after the end of the fiscal year. This translates to March 15th for calendar year partnerships. This is one month earlier than under the previous law.

Partnerships can obtain an automatic six-month extension.

Corporations

Corporations are now due the 15th day of the fourth month after the end of the fiscal year. April 15th for calendar year corporations. This is one month later than under previous law.

Corporations will also be granted a six-month extension.

As usual, Congress does not make anything easy. C corporations whose fiscal year ends on June 30, do not have to follow the new due dates until tax years beginning after Dec. 31, 2025. The six-month extension does not start until 2026. Until then, calendar-year corporations will get a five-month extension while corporations with a June 30 year end will get a seven-month extension.

2016 Mileage Rates

The IRS has issued Notice 2015-137 stating the applicable mileage rates for 2016.

Business Use – 54 cents per mile

Charitable Use – 14 cents per mile

Medical Care Use – 19 cents per mile

The business use and medical use amounts are less than those for 2015.

IRS Direct Pay

Some taxpayers experience a double-whammy on April 15th. In addition to it being the due date for the prior year’s 1040 (or extension), it is also the due date for the first estimate of the 2015 tax.

What happens if you owe money for either the prior year or the estimate, but cannot make it to the post office?

One option is to use the IRS’ Direct Pay system.

Using Direct Pay allows the government to withdraw the money from either your checking or savings account at no cost to you. The system also gives you a instant confirmation that the tax payment has been submitted.

One additional benefit for extension filers: choose ‘Extension’ as the reason for the payment your return will be automatically extended – no need to file Form 4868.

It only takes 5 steps to use Direct Pay.

  1. Provide your tax information
  2. Verify your identity
  3. Enter your payment information
  4. Review and electronically sign the transaction
  5. Print or record your online confirmation number

Disclosure

We inform you that any tax advice provided or implied on this post (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed on the taxpayer.

While the information contained in this post is believed to be reliable, we cannot guarantee its accuracy or completeness.

File on Time Even if You Can’t Pay

Tomorrow is D-Day for your 1040.

Do you owe more tax than you can afford to pay when you file? If so, don’t fail to take action. Make sure to file on time. That way you won’t have a penalty for filing late. Here is what to do if you can’t pay all your taxes by the due date.

  • File on time and pay as much as you can.  You should file on time to avoid a late filing penalty. Pay as much as you can with your tax return. The more you can pay on time, the less interest and late payment penalty charges you will owe.
  • Pay online with IRS Direct Pay.  IRS Direct Pay is the latest electronic payment option available from the IRS. It allows you to schedule payments online from your checking or savings account with no additional fee and with an immediate payment confirmation. It’s, secure, easy, and much quicker than mailing in a check or money order.
  • Pay the rest of your tax as soon as you can.  If it is possible, get a loan or use a credit card to pay the balance. The interest and fees charged by a bank or credit card company may be less than the interest and penalties charged for late payment of tax.
  • Use the Online Payment Agreement tool.  You don’t need to wait for IRS to send you a bill to ask for an installment agreement. The best way is to use the Online Payment Agreement tool on IRS.gov. You can even set up a direct debit installment agreement. When you pay with a direct debit plan, you won’t have to write a check and mail it on time each month. And you won’t miss any payments that could mean more penalties. If you can’t use the IRS.gov tool, you can file Form 9465, Installment Agreement Request instead.
  • Don’t ignore a tax bill.  If you get a bill, don’t ignore it. The IRS may take collection action if you ignore the bill. Contact the IRS right away to talk about your options. If you face a financial hardship, the IRS will work with you.

In short, remember to file on time. Pay as much as you can by the tax deadline. Pay the rest as soon as you can.

Disclosure

We inform you that any tax advice provided or implied on this post (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed on the taxpayer.

While the information contained in this post is believed to be reliable, we cannot guarantee its accuracy or completeness.

Key Tax Tips about Tax Withholding and Estimated Tax

If you are an employee, you usually will have taxes withheld from your pay. If you don’t have taxes withheld, or you don’t have enough tax withheld, then you may need to make estimated tax payments. This is especially true if you work more than one job, since each employer withholds as if that were your only income. If you are self-employed you normally have to pay your taxes this way. Here are some tips about making estimated taxes:

  • When the tax applies.  You should pay estimated taxes in 2015 if you expect to owe $1,000 or more when you file your federal tax return next year. Special rules apply to farmers and fishermen.
  • How to figure the tax. Estimate the amount of income you expect to receive for the year. Also make sure that you take into account any tax deductions and credits that you will be eligible to claim. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax.
  • When to make payments.  You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 15 and Sept. 15 in 2015, and Jan. 15, 2016. If you also have to make state estimates, consider making the last state payment in 2015 rather than January 2016 so that you may claim the deduction this year.
  • When to change tax payments or withholding.  Life changes, such as a change in marital status or the birth of a child can affect your taxes. When these changes happen, you may need to revise your estimated tax payments during the year. If you are an employee, you may need to change the amount of tax withheld from your pay. If so, give your employer a new Form W–4, Employee’s Withholding Allowance Certificate.

Disclosure

We inform you that any tax advice provided or implied on this post (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed on the taxpayer.

While the information contained in this post is believed to be reliable, we cannot guarantee its accuracy or completeness.

Still Time to Make Your IRA Contribution for the 2014 Tax Year

Did you contribute to an Individual Retirement Arrangement last year? Are you thinking about contributing to your IRA now? Here are some IRS tax tips about saving for retirement using an IRA.

Age rules.  You must be under age 70½ at the end of the tax year in order to contribute to a traditional IRA. There is no age limit to contribute to a Roth IRA.

Compensation rules.  You 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 you are married and file a joint tax return, only one spouse needs to have compensation in most cases.

When to contribute.  You can contribute to an IRA at any time during the year. To count for 2014, you must contribute by the due date of your tax return. This does NOT include extensions. That means most people must contribute by April 15, 2015. If you contribute between Jan. 1 and April 15, make sure your plan sponsor applies it to the year you choose (2014 or 2015).

Contribution limits.  In general, the most you can contribute to your IRA for 2014 is the smaller of either your taxable compensation for the year or $5,500. If you were age 50 or older at the end of 2014, the maximum you can contribute increases to $6,500. If you contribute more than these limits, an additional tax will apply. The added tax is 6 percent of the excess amount that you contributed.

Taxability rules.  You normally won’t pay income tax on funds in your traditional IRA until you start taking distributions from it. Qualified distributions from a Roth IRA are tax-free.

Deductibility rules.  You may be able to deduct some or all of your contributions to your traditional IRA. Use the worksheets in the Form 1040A or Form 1040 instructions to figure the amount that you can deduct. You may claim the deduction on either form. You may not deduct contributions to a Roth IRA.

Saver’s Credit.  If you contribute to an IRA you may also qualify for the Saver’s Credit. The credit can reduce your taxes up to $2,000 if you file a joint return. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. You can file Form 1040A or 1040 to claim the Saver’s Credit.

Disclosure

We inform you that any tax advice provided or implied on this post (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed on the taxpayer.

While the information contained in this post is believed to be reliable, we cannot guarantee its accuracy or completeness.

Why Is My Social Security Taxed?

If you receive Social Security benefits, you may have to pay federal income tax on part of your benefits. These IRS tips will help you determine whether or not you need to pay taxes on your benefits.

  • Form SSA-1099.  If you received Social Security in 2014, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits.
  • Only Social Security.  If Social Security was your only income in 2014, your benefits may not be taxable. You also may not need to file a federal income tax return. If you get income from other sources such as part-time jobs, dividends, or interest you may have to pay taxes on some of your benefits.
  • Tax Formula.  Here’s a quick way to find out if you must pay taxes on your Social Security benefits: Add one-half of your Social Security to all your other income, including tax-exempt interest. Then compare the total to the base amount for your filing status. If your total is more than the base amount, some of your benefits may be taxable.
  • Base Amounts.  The three base amounts are:
    • $25,000 – if you are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from your spouse for all of 2014.
    • $32,000 – if you are married filing jointly.
    • $0 – if you are married filing separately and lived with your spouse at any time during the year.

 

Disclosure

We inform you that any tax advice provided or implied on this post (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed on the taxpayer.

While the information contained in this post is believed to be reliable, we cannot guarantee its accuracy or completeness.

2015 Mileage Rates

The IRS has issued Notice 2014-79 stating the applicable mileage rates for 2015.

Business Use – 57.5 cents per mile

Charitable Use – 14 cents per mile

Medical Care Use – 23 cents per mile

For automobiles used for business purposes, the portion of the business standard mileage rate treated as depreciation is 24 cents for 2015.

Top Four Year-End IRA Reminders

Individual Retirement Accounts are an important way to save for retirement. If you have an IRA or may open one soon, there are some key year-end rules that you should know. Here are the top four reminders on IRAs:

  1. Know the limits.  You can contribute up to a maximum of $5,500 ($6,500 if you are age 50 or older) to a traditional or Roth IRA. If you file a joint return, you and your spouse can each contribute to an IRA even if only one of you has taxable compensation. In some cases, you may need to reduce your deduction for traditional IRA contributions. This rule applies if you or your spouse has a retirement plan at work and your income is above a certain level. You have until April 15, 2015, to make an IRA contribution for 2014.
  2. Avoid excess contributions.  If you contribute more than the IRA limits for 2014, you are subject to a six percent tax on the excess amount. The tax applies each year that the excess amounts remain in your account. You can avoid the tax if you withdraw the excess amounts from your account by the due date of your 2014 tax return (including extensions).
  3. Take required distributions.  If you’re at least age 70½, you must take a required minimum distribution, or RMD, from your traditional IRA. You are not required to take a RMD from your Roth IRA. You normally must take your RMD by Dec. 31, 2014. That deadline is April 1, 2015, if you turned 70½ in 2014. If you have more than one traditional IRA, you figure the RMD separately for each IRA. However, you can withdraw the total amount from one or more of them. If you don’t take your RMD on time you face a 50 percent excise tax on the RMD amount you failed to take out.
  4. Claim the saver’s credit.  The formal name of the saver’s credit is the retirement savings contributions credit. You may qualify for this credit if you contribute to an IRA or retirement plan. The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.

Disclosure

We inform you that any tax advice provided or implied on this post (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed on the taxpayer.

While the information contained in this post is believed to be reliable, we cannot guarantee its accuracy or completeness.

Moving Can Affect Your Premium Tax Credit

If you moved recently, you’ve probably notified the U.S. Postal Service, utility companies, financial institutions and employers of your new address.  If you get health insurance coverage through a Health Insurance Marketplace, remember to add the Marketplace to your notification list.

If you are receiving advance payments of the premium tax credit, it is particularly important that you report changes in circumstances, including moving, to the Marketplace. There’s a simple reason. Reporting your move lets the Marketplace update the information used to determine your eligibility for a Marketplace plan, which may affect the appropriate amount of advance payments of the premium tax credit that the government sends to your health insurer on your behalf.

Reporting the changes will help you avoid having too much or not enough premium assistance paid to reduce your monthly health insurance premiums. Getting too much premium assistance means you may owe additional money or get a smaller refund when you file your taxes. On the other hand, getting too little could mean missing out on monthly premium assistance that you deserve.

Changes in circumstances that you should report to the Marketplace include, but are not limited to:

  • an increase or decrease in your income
  • marriage or divorce
  • the birth or adoption of a child
  • starting a job with health insurance
  • gaining or losing your eligibility for other health care coverage

Many of these changes in circumstances – including moving out of the area served by your current Marketplace plan – qualify you for a special enrollment period to change or get insurance through the Marketplace. In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances. You can find information about special enrollment periods at www.healthcare.gov.

Disclosure

We inform you that any tax advice provided or implied on this post (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed on the taxpayer.

While the information contained in this post is believed to be reliable, we cannot guarantee its accuracy or completeness.