ACCOUNTING
APRIL TAX TIPS
Almost 20 to 25 percent of tax payers wait until the last two weeks before the deadline to prepare their returns. Below are some last-minute tax filing tips:
Five Credits to reduce tax liability
- Child and dependent care credit: The Child and Dependent Care Credit can help you offset the cost of daycare or day camp for children under age 13. You may also be able to claim it for costs paid to care for a disabled spouse or dependent.
- Child Tax Credit: The Child Tax Credit can reduce the taxes you pay by as much as $1,000 for each qualified child you claim on your tax return. The child must be under age 17 in 2015 and meet certain other requirements.
- American Opportunity Tax Credit: The American Opportunity Tax Credit can help you offset college costs. The credit is available for four years of post-secondary education. It is worth up to $2,500 per eligible student enrolled at least half time for at least one academic period. Even if you don’t owe any taxes, you still may qualify. The other option is ‘Lifetime Learning Credit’ – AGI and other thresholds may apply.
- Earned Income Tax Credit: You may qualify for this credit if you work, have a Social Security number and have an income below specific thresholds. EITC is a refundable tax credit, which means you may get money back even if you have no tax withheld. Requirements vary for those with or without children.
- Foreign Tax Credit: Foreign tax credits allow U.S. taxpayers to avoid or reduce double taxation. You may choose to take a deduction for foreign taxes paid instead of choosing a credit. In most cases, it is to your advantage to take foreign income taxes as a tax credit.
Special Tax items:
Itemize: Think about itemizing. If you claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. A donation to charity could mean some tax savings. See the instructions for Schedule A, Itemized Deductions, for a list of deductions.
Additional Medicare Tax: Some taxpayers may be liable for an Additional Medicare Tax of .9 percent if the income exceeds certain limits. You must combine your wages and self-employment income to figure the tax.
Net Investment Tax: There may be a 3.8 percent Net Investment Income Tax (NIIT) that applies to individuals, estates and trusts that have net investment income above applicable threshold amounts. In general, net investment income for purpose of this tax, includes but is not limited to: interest, dividends, certain annuities, royalties; income derived in a trade or business (passive activity); net gains from the disposition of property.
Keep records safe: Keep your 2015 tax return and supporting records in a safe place. If you ever need your tax return or records, it will be easy for you to get them. For example, you may need a copy of your tax return if you apply for a home loan or financial aid. You should use your tax return as a guide when you do your taxes next year.
Extension: If you are unable to file the tax returns before April 18, 2016, you may file extension by completing/efile IRS form 4868.
Reporting Specified Foreign Financial Assets (Form 8938)
Unless an exception applies, you must file Form 8938 if you are a specified individual that has an interest in specified foreign financial assets and the value of those assets is more than the applicable reporting threshold.
FBAR (Report of Foreign Bank and financial accounts)
You may have to file FBAR if you had a financial interest in or signature authority over at least one financial account located outside of the United States; and the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
The FBAR is a calendar year report and must be filed on or before June 30 of the year following the calendar year being reported. FBAR must be filed electronically through FinCEN’s BSA E-Filing System.
Filings Deadlines:
- Partnership/LLC – April 18, 2016 (5-month extension – Form 7004)
- Individual - Form 1040 – April 18 (6 months extensions available – Form 4868)
There are various limitations, thresholds and procedures for many of the deduction and filings. Please consult your CPA/Tax attorney/or tax consultant for proper guidance with the above subject matter.
In accordance with IRS Circular 230, the above information is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.
Suresh Kumar, CPA, MBA is the Principal of Kumar Consulting, PA, a CPA & Consulting firm licensed in the states of FL, KS and MO and maybe reached at (813) 421-5068 or [email protected]/www.kumarconsultingcpa.com