The 10 Most Commonly Googled Tax Questions — Answered

Taxes can be confusing. We’re here to help. To find out what people’s most burning questions about taxes are, MONEY asked Google for a list of its top tax-related queries—and assembled the information you need.

1. When are taxes due?

It’s April 18 this year. Usually, it’s the 15th — you can read why you get an extra three days here. (If you file for an extension, you get until Oct. 16 to file your return, because Oct. 15 is a Sunday. You must still pay what you estimate you owe by April 18, though.)

2. How to file taxes

This IRS page has links to online forms you can print as well as a locator tool where you can find an office if you prefer to pick up forms in person or don’t have access to a printer. You might also find tax forms at your local library or post office.

If you make less than $64,000, the IRS has a page where you can file your taxes electronically at no charge under the Free File program. If you plan to file with a simple form like a 1040A or 1040EZ, some tax preparation companies like TurboTax, H&R Block, Jackson Hewitt and TaxAct have their own platforms you can use to do your taxes online for free.

If you’re not sure which form you should use, the IRS spells out the differences here. Not sure how to file state taxes? This IRS page has links to all of the state governments, including tax departments.

3. When can you file taxes?

The IRS began accepting electronic returns for 2016 on Jan. 23, 2017.
You technically have until 11:59:59 p.m. on April 18 to file your taxes if you’re filing online, according to TurboTax, but waiting until the last second is a bad idea: A pokey computer could cost you big in penalties. If you’re using U.S. mail, you have to have your return and payment postmarked by April 18. Some post offices stay open late for Tax Day; you can find out which ones have extended hours here.

If you (or your accountant) file your taxes electronically, you have the option of paying online using the IRS’s Electronic Funds Withdrawal function (which is free). You can also pay via credit or debit card (which will cost you a convenience fee of a bit under $3 if you use a debit card, or around 2% of the charge if you use a credit card).

4. How to file a tax extension

If you procrastinated and April 18 is looking like a long shot, experts say you should file for an extension. This doesn’t get you out of paying any taxes you owe by the deadline, but it gives you an extra six months to file. An extension will keep you from getting hit with a late-filing penalty of 5% of the unpaid taxes for each month or part of a month you’re late, up to 25%.

That’s in addition to a late-payment penalty of 0.5% of the unpaid taxes for each month or part of a month—plus interest at a rate of the federal short-term interest rate plus 3%.
If you expect a refund, you obviously have an incentive to get your return in as soon as possible to get those dollars in your pocket. If you file for an extension thinking you’ll get a refund and instead find that you owe, you’ll have to tack on the late-payment charges.

Don’t forget about state taxes. A handful of states will automatically give you an extension if you request one through the IRS, while others require a separate request to that state’s tax department. In some cases, the rules are different depending on whether you owe money or are due a refund.

5. How much do you have to make to file taxes?

There are various thresholds, depending on your filing status, age, and the type of income you receive. For instance, if you’re single, under 65 and your income was below $10,350 last year, you generally don’t need to file federal taxes. This IRS tool can help you figure out if you need to file a tax return.

Even if appears you don’t have to file, experts say it’s generally a good idea to fill in the blanks on a return and see what your bottom line would be. About 70% of Americans are expected to qualify for refunds this year, according to the IRS, but many people never file to collect. The average unclaimed refund is nearly $700. Especially for lower-income Americans, a number of credits and deductions could make you eligible for a refund.

6. How long to keep tax records

The IRS says you should hang onto your tax documents for three years; if you get audited, that’s generally the look-back period they’re allowed to cover. However, if they suspect fraud or underpayment of income tax, or if you’ve written off worthless securities, they can request up to seven years’ worth of tax records. Hang onto documents like receipts that justify deductions like business expenses, charitable donations and so on.

7. When is the last day to do taxes?

Yeah, there are clearly a lot of procrastinators out there. As explained above in No. 1, the filing deadline is pushed back a few days from the usual April 15 this year to the 18th. You have until midnight local time—but if you’re going to put it off that long you should consider just filing for an extension.

8. Is Social Security taxed?

It’s possible. Depending on your income, up to 85% of Social Security benefits may be taxable. If you’re a single filer and your combined income—that is, adjusted gross income, nontaxable interest from municipal bonds and half of your Social Security benefits—is more than $25,000, you will have to pay taxes. If you’re married and file jointly, the threshold is $32,000.

9. How long does it take to get taxes back?

The answer this year might be “longer than usual.” To combat tax fraud, the IRS is taking extra time checking filers’ tax information if they claimed either the Earned Income Tax Credit or the Additional Child Tax Credit. Under a new law, the agency is holding back refunds claiming those credits until at least Feb. 15, and people aren’t likely to see those refunds until the end of February at the earliest. On top of that, “New identity theft and refund fraud safeguards put in place by the IRS and the states may mean some tax returns and refunds face additional review,” the agency warns. For everybody else, the IRS says refunds should be issued in its standard window of 21 days from the time it get your return.

10. Why do I owe taxes?

The first income tax in the U.S. was authorized by Congress in 1861 and levied the following year, to help pay for the Civil War, according to the Civil War Trust, but taxes have been around nearly as long as civilization itself. Historians have found tax records that go back to 6,000 B.C. in what is now Iraq, and the ancient Greek, Egyptian and Chinese cultures all had their own versions. In Biblical times, Roman emperor Caesar Augustus established rules around some personal and inheritance taxes that the English later used to create similar taxes centuries later, according to the Handbook on Tax Administration. Ironically, modern-day Italy has the lowest rate of income-tax compliance out of 10 major developed nations, with less than two-thirds of citizens giving the tax man his due.

And although plenty of Americans have argued in court that they shouldn’t have to pay taxes, the IRS has a helpful 71-page paper that methodically debunks these claims, The Truth About Frivolous Tax Arguments, (which might be equally helpful as a cure for tax-season-induced insomnia.)

 

 

Written By: Martha C. White
Source: MONEY

Tax Changes for 2017: A Checklist

Welcome, 2017! As the New Year rolls around, it’s always a sure bet that there will be changes to current tax law and 2017 is no different. From health savings accounts to tax rate schedules and standard deductions, here’s a checklist of tax changes to help you plan the year ahead.

Individuals

For 2017, more than 50 tax provisions are affected by inflation adjustments, including personal exemptions, AMT exemption amounts, and foreign earned income exclusion.

While the tax rate structure, which ranges from 10 to 39.6 percent, remains the same as in 2016, tax-bracket thresholds increase for each filing status. Standard deductions and the personal exemption have also been adjusted upward to reflect inflation. For details see the article, “Tax Brackets, Deductions, and Exemptions for 2017,” below.

Alternative Minimum Tax (AMT)

Exemption amounts for the AMT, which was made permanent by the American Taxpayer Relief Act (ATRA) are indexed for inflation and allow the use of nonrefundable personal credits against the AMT. For 2017, the exemption amounts are $54,300 for individuals ($53,900 in 2016) and $84,500 for married couples filing jointly ($83,800 in 2016).

“Kiddie Tax”

For taxable years beginning in 2017, the amount that can be used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,050 (same as 2016). The same $1,050 amount is used to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax.” For example, one of the requirements for the parental election is that a child’s gross income for 2017 must be more than $1,050 but less than $10,500.

For 2017, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not subject to “kiddie tax” is $2,100.

Health Savings Accounts (HSAs)

Contributions to a Health Savings Account (HSA) are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Medical expenses must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return.

A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care.

For calendar year 2017, a qualifying HDHP must have a deductible of at least $1,300 for self-only coverage or $2,600 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,550 for self-only coverage and $13,100 for family coverage.

Medical Savings Accounts (MSAs)

There are two types of Medical Savings Accounts (MSAs): the Archer MSA created to help self-employed individuals and employees of certain small employers, and the Medicare Advantage MSA, which is also an Archer MSA, and is designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare. Both MSAs require that you are enrolled in a high-deductible health plan (HDHP).

  • Self-only coverage. For taxable years beginning in 2017, the term “high deductible health plan” means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,250 and not more than $3,350 (same as 2016), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,500 (up $50 from 2016).
  • Family coverage. For taxable years beginning in 2017, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $4,500 and not more than $6,750 (up $50 from 2016), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,250 (up $100 from 2016).

Penalty for not Maintaining Minimum Essential Health Coverage

For calendar year 2017, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is $695.

AGI Limit for Deductible Medical Expenses

In 2017, the deduction threshold for deductible medical expenses remains at 10 percent (same as 2016) of adjusted gross income (AGI). Prior to January 1, 2017, if either you or your spouse were age 65 or older as of December 31, 2016, the 7.5 percent threshold that was in place in earlier tax years continued to apply. That provision expired at the end of 2016, however, and starting in 2017, the 10 percent of AGI threshold applies to everyone.

Eligible Long-Term Care Premiums

Premiums for long-term care are treated the same as health care premiums and are deductible on your taxes subject to certain limitations. For individuals age 40 or younger at the end of 2017, the limitation is $410. Persons more than 40 but not more than 50 can deduct $770. Those more than 50 but not more than 60 can deduct $1,530 while individuals more than 60 but not more than 70 can deduct $4,090. The maximum deduction is $5,110 and applies to anyone more than 70 years of age.

Medicare Taxes

The additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly), which went into effect in 2013, remains in effect for 2017, as does the Medicare tax of 3.8 percent on investment (unearned) income for single taxpayers with modified adjusted gross income (AGI) more than $200,000 ($250,000 joint filers). Investment income includes dividends, interest, rents, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts, and self-employed individuals are all liable for the new tax.

Foreign Earned Income Exclusion

For 2017, the foreign earned income exclusion amount is $102,100, up from $101,300 in 2016.

Long-Term Capital Gains and Dividends

In 2017 tax rates on capital gains and dividends remain the same as 2016 rates; however threshold amounts are indexed for inflation. As such, for taxpayers in the lower tax brackets (10 and 15 percent), the rate remains 0 percent. For taxpayers in the four middle tax brackets, 25, 28, 33, and 35 percent, the rate is 15 percent. For an individual taxpayer in the highest tax bracket, 39.6 percent, whose income is at or above $418,400 ($470,700 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent.

Pease and PEP (Personal Exemption Phaseout)

Both Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) have been permanently extended (and indexed to inflation) for taxable years beginning after December 31, 2012, and in 2017, affect taxpayers with income at or above $261,500 for single filers and $313,800 for married filing jointly.

Estate and Gift Taxes

For an estate of any decedent during calendar year 2017, the basic exclusion amount is $5,490,000, indexed for inflation (up from $5,450,000 in 2016). The maximum tax rate remains at 40 percent. The annual exclusion for gifts remains at $14,000.

Individuals – Tax Credits

Adoption Credit

In 2017, a non-refundable (only those individuals with tax liability will benefit) credit of up to $13,570 is available for qualified adoption expenses for each eligible child.

Earned Income Tax Credit

For tax year 2017, the maximum earned income tax credit (EITC) for low and moderate income workers and working families rises to $6,318, up from $6,269 in 2016. The credit varies by family size, filing status, and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Child Tax Credits

For tax year 2017, the child tax credit is $1,000 per child. The enhanced child tax credit was made permanent this year by the Protecting Americans from Tax Hikes Act of 2016 (PATH). In addition to a $1,000 credit per qualifying child, an additional refundable credit equal to 15 percent of earned income in excess of $3,000 has been available since 2009.

Child and Dependent Care Credit

If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses in 2017.For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.

Individuals – Education

American Opportunity Tax Credit and Lifetime Learning Credits

The American Opportunity Tax Credit (formerly Hope Scholarship Credit) was extended to the end of 2017 by ATRA but was made permanent by PATH in 2016. The maximum credit is $2,500 per student. The Lifetime Learning Credit remains at $2,000 per return; however, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $112,000, up from $111,000 for tax year 2016.

Interest on Educational Loans

In 2017 (as in 2016), the $2,500 maximum deduction for interest paid on student loans is no longer limited to interest paid during the first 60 months of repayment. The deduction is phased out for higher-income taxpayers with modified AGI of more than $65,000 ($135,000 joint filers).

Individuals – Retirement

Contribution Limits

The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains at $18,000. Contribution limits for SIMPLE plans remain at $12,500. The maximum compensation used to determine contributions increases to $270,000 (up from $265,000 in 2016).

Income Phase-out Ranges

The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by an employer-sponsored retirement plan and have modified AGI between $62,000 and $72,000, up from $61,000 to $71,000.

For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by an employer-sponsored retirement plan, the phase-out range increases to $99,000 to $119,000, up from $98,000 to $118,000. For an IRA contributor who is not covered by an employer-sponsored retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s modified AGI is between $186,000 and $196,000, up from $184,000 and $194,000.

The modified AGI phase-out range for taxpayers making contributions to a Roth IRA is $118,000 to $133,000 for singles and heads of household, up from $117,000 to $132,000. For married couples filing jointly, the income phase-out range is $186,000 to $196,000, up from $184,000 to $194,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Saver’s Credit

In 2017, the AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low and moderate income workers is $62,000 for married couples filing jointly, up from $61,500 in 2016; $46,500 for heads of household, up from $46,125; and $31,000 for married individuals filing separately and for singles, up from $30,750.

Businesses

Standard Mileage Rates

The rate for business miles driven is 53.5 cents per mile for 2017, down from 54 cents per mile in 2016.

Section 179 Expensing

The Section 179 expense deduction was made permanent at $500,000 by the Protecting Americans from Tax Hikes Act of 2016 (PATH). For equipment purchases, the maximum deduction is $510,000 of the first $2,030,000 million of qualifying equipment placed in service during the current tax year. The deduction is phased out dollar for dollar on amounts exceeding the $2 million threshold (adjusted for inflation beginning in tax year 2017) amount and eliminated above amounts exceeding $2.5 million. In addition, Section 179 is now indexed to inflation in increments of $10,000 for future tax years.

The 50 percent bonus depreciation has been extended through 2019. Businesses are able to depreciate 50 percent of the cost of equipment acquired and placed in service during 2015, 2016, and 2017. However, the bonus depreciation is reduced to 40 percent in 2018 and 30 percent in 2019.

Work Opportunity Tax Credit (WOTC)

Extended through 2019, the Work Opportunity Tax Credit has been modified and enhanced for employers who hire long-term unemployed individuals (unemployed for 27 weeks or more) and is generally equal to 40 percent of the first $6,000 of wages paid to a new hire.

Research & Development Tax Credit

Starting in 2017, businesses with less than $50 million in gross receipts are able to use this credit to offset alternative minimum tax. Certain start-up businesses that might not have any income tax liability will be able to offset payroll taxes with the credit as well.

Employee Health Insurance Expenses

For taxable years beginning in 2017, the dollar amount is $26,200. This amount is used for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit.

Employer-provided Transportation Fringe Benefits

If you provide transportation fringe benefits to your employees, in 2017 the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $255 and the monthly limitation for qualified parking is $255. Parity for employer-provided mass transit and parking benefits was made permanent by PATH.

While this checklist outlines important tax changes for 2017, additional changes in tax law are more than likely to arise during the year ahead.

 

 

 

Source: Abedian & Totlian

Companies To Feel Pinch Of Tightened Tax Loopholes

money-tax-loopholes
Provided by IBT US
The upcoming U.S. tax filing deadline — Monday, April 18 — doesn’t just have regular Joes on edge. Massive corporate entities based in the U.S. are getting a little nervous, too, according to a report from the Financial Times.

The number of companies warning their investors about increased impact from taxes in 2015 has doubled from last year, the FT says.

The warnings come from the potential closing of myriad international tax loopholes, courtesy of the Organisation for Economic Co-operation and Development (OECD), a consortium of 34 countries, including the Germany, the U.K. and the U.S.

Some of those loopholes include accounting tricks like shifting profits from Ireland, where tax rates are already relatively low, to Bermuda, where the company doesn’t pay any taxes. Companies are able to do this because the definitions of “residence” are different in U.S. and Irish tax law, allowing money made from sales in Ireland to wind up being “based” in Bermuda or another country considered a tax shelter.

The OECD estimates that various companies’ tax avoidance costs governments around $240 billion.

The companies that are likely to be hit hardest are those in the tech sector, like Apple, already-beleaguered Yahoo and Google. Travel site Priceline is already fighting a French tax penalty of 356 million euros ($397 million), and the U.K. is looking to take back 1 billion pounds ($1.4 billion) from corporations after eliminating a tax break on interest costs.

Google, the report notes, has included language about tax concerns for 10 years now. Other companies have also been proactive about warning investors that the tax hammer could fall at any moment.

But investors have been slow on the uptake. “I still think that investors are not asking the right questions. They are in early stages of understanding the issues,” Fiona Reynolds, the managing director of a network of fund managers, told the FT.

Written by Oriana Schwindt of International Business Times

(Source: MSN)

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