Wednesday, January 27, 2016

What you need to know before you file your taxes

Whether you file your taxes yourself, or have a tax professional do it for you, you may be at risk.

You're giving your social security number, your giving your date of birth, these are the two only things you really need to have your tax identity stolen.

Anyone who gets paid to file taxes must have a PTIN number with the IRS otherwise it's an illegal return.

If you're filing by yourself,  file early in order to prevent thieves from stealing your return.

Tax Law Changes for 2016:

1. Tax Due Date: April 18, 2016

2. Tax penalties related to the Affordable Healthcare Act (Obamacare) have increased. The penalties are $285 per adult or 2% of your income above the filing
     threshold. The penalties will increase again for 2016 to $695 per adult or 2.5% of income.

3. Tax Brackets will be rising slightly by 0.4% in 2016.

4. The Standard Deduction for Head of Household will go up to $9300.00 in 2016.

5. Personal Exemptions will go up in 2016 to $4050.

6. Contribution Limits on Health Savings Accounts are going up. HSA's are a great to save money by using pre-tax dollars to save for medical expenses.
Qualified Medical expenses are out of pockets expenses like co-pays, deductibles or expenses that the insurance company does not reimburse you for. For
2016 the individual contribution limit will remain the same, but for families, the maximum contribution for 2016 will increase $100 to $6750.

7. The maximum allowable Earned Income Credit will go up slightly in 2016.

8. The AMT exemption is higher for 2016 it will go up $300 for individuals to $53,900, while joint filers will see an increase of $500 to $83,800.

9. The Lifetime Estate Exemption is increasing to 5.45 million for individuals and 10.5 million for couples.

Common Tax Filing Mistakes:

1. Input errors with Social Security Numbers. This will cause an e-file reject, so make sure you check the numbers on the return.

2. Misspelled or different names. Names on the return must match what is on the Social Security Card. This also causes the IRS to reject your return.

3. Math miscalculations. This can be minimized by using a tax software program such as H & R Block's. However, you still need to make sure you transfer the
correct numbers from forms such as W-2s, 1099Rs, etc. If the IRS catches a math error, they will change your return and refigure your taxes.

4. Tax Computation errors on taxable Social Security, Earned Income Credit, Child Tax Credit, etc. Make sure you use the proper forms or schedules for
calculating credits, deductions, etc.

5. Filing Status. A lot of people do not understand the tax laws surrounding each filing status. Head of Household is one of the most misunderstood. This
can trigger an audit by the IRS, especially when the income is too low or the names listed on the return do not match the taxpayers.

6. Direct Deposit number was input incorrectly. TRIPLE CHECK THESE NUMBERS. Once your return is filed, you can not change it. If the Deposit is bounced
by the Bank, the IRS will mail a check to the address on the return.

7. Not including all income on your return or including the information from Tax documents. This year, it is imperative that you do not file your return,
if you have insurance from the Marketplace without the FORM 1095A. You must reconcile with the government the tax credit you were given with your
income on the tax return. Other commonly missed forms are the 1099Misc., 1099INT, 1099DIV. You will receive a letter from the IRS as these forms are
reported to them.

8. Charitable contributions. Keep track of the items you donate and you must have a receipt. This is especially true if you give over $250. cash. All
organizations must be qualified as tax exempt from the IRS.