This isn’t your typical list of tax tips for 2017. Whatever your financial circumstances and particular lifestyle, some of these nuggets of wisdom will help you save some green, maximize your refund, and avoid hassle and potential fraud.
Higher education comes at a cost, and the IRS dishes some deductibles to alleviate that. The American Opportunity Credit can be worth up to $2,500 per student, while the Lifetime Learning Credit can be worth $2,000 per tax return, regardless of the number of students. Even if these credits do not apply, you can still deduct up to $4,000 of tuition and fees on Form 8917, even if you don’t itemize. Don’t forget that starting in 2016, the IRS requires a tuition statement (Form 1098-T).
You may be eligible for a filing extension. Professionals in this program specialize in military tax issues and deductions.
Contribute to a regular IRA? You have until April 18th to make tax deductible payments – this is the time to make as many as you can afford in order the reap the ultimate benefits, that is until you hit your $5,500 max, or $6,500 if you’re 50+. As an added bonus, if you’re a low to middle income earner, you may qualify for saver’s credit. If you have a higher income, beware of phase-outs for workplace retirement plans, and consult your tax professional regardless of income.
…and paid for their care. If you received earned income in 2016 and paid for the care of children of 13 or disabled adults, make sure you take the Child and Dependent Care Credit. The credit depends on income and worth 20 to 35 percent of qualifying expenses, which maxes out at $3,000 for one qualifying dependent, or $6,000 if you have two or more.
Scammers are targeting seniors over the phone, so if you are over 65 and receive a call from the ‘IRS,’ be sure to report it. These fraudsters are going as far as providing fake IRS badge numbers and calling with altered phone numbers in order to convince seniors to give in to their demands for wire transfers. Remember, the IRS will never call you.
On that note, if you turned 70 ½ at any point in 2016, you must start receiving minimum distributions from your IRA by April 1st. This applies for all but Roth IRAs. After your first distribution, your second must be made by the last day of 2017 and this will be the requirement for the years moving forward.
Donating to charity isn’t as easy as dropping things off at your local donation center and taking a deduction. However, if you haven’t donated for 2016’s tax year, now is a great time to give and get back. In order to qualify, make sure it’s a recognized charity by the IRS and that the value of the item(s) are properly determined. Likewise, donated property deductions must be fair market value, and cars and boats have their own set of rules. If your cash donation is more than $250, you must get a written statement from the charity. For qualifying charities, goods, value amounts, and rules for the above circumstances, check the IRS’s Select Tool and Publication 526.
The IRS tries to make it easy by accepting pretty much any form of payment, as well as providing programs for those who cannot pay. There are short and long term payment plans, both types designated for those with particular debt amounts, and up to $50,000. For those who owe more, consider an offer in compromise which allows you to settle for less than your tax bill. Whatever you do, consult a professional and do not ignore your debt or the IRS! Remember, if you have unpaid taxes (or in some cases, other federal agency debts, like student loans) and you happen to get a refund this year, it will be put towards your debt.
Ready for April 18th? Even though you have a few extra days this year, make sure you take advantage of the tax perks available to your specific circumstances.
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