SUMMER TAX TIPS
In recent years, more people than ever have been filing extensions for an extra six months after April 15, especially with the convenience of filing extensions over internet and other electronic methods. An extension gives additional time to file individual tax return until Oct. 17, 2016 (business tax returns Sept. 15, 2016). Below are some tips that may be helpful:
File your tax returns: Even if you have a large balance due, still go ahead and file the tax returns. There may be significant penalties if you have a balance due and have not filed the returns timely (including extensions). If you get a bill, you should pay it as soon as you can. You should always try to pay in full to avoid any additional charges. If you can’t pay in full, you’ll save if you pay as much as you can. The more you can pay the less interest and penalties you will owe for late payment. The IRS offers several payment options.
Short-term payment plan. If you owe more tax than you can pay, you may qualify for more time, up to 120 days, to pay in full. You do not have to pay a user fee to set up a short-term full payment agreement. However, the IRS will charge interest and penalties until you pay in full. It’s easy to apply online at IRS.gov
Installment agreement. Most people who need even more time to pay can apply for an Online Payment Agreement on IRS.gov. A direct debit payment plan is the hassle-free way to pay. The set-up fee is much less than other plans and you won’t miss a payment. If you can’t apply online, or prefer to do so in writing, use Form 9465, Installment Agreement Request. Individuals can use Direct Pay to make their installment payments. For more about payment plan options, visit IRS.gov
Offer-in-compromise. An offer in compromise, or OIC, may let you settle your tax debt for less than the full amount you owe. An OIC may be an option if you can’t pay your tax in full. It may also apply if full payment will cause a financial hardship. No everyone qualifies, so make sure you explore all other ways to pay your tax before you submit an OIC to the IRS. Use the OIC Pre-Qualifier tool to see if you qualify. It will also tell you what a reasonable offer might be.
Withholding/or estimated tax. If you are an employee, you can avoid a tax bill by having more taxes withheld from your pay. To do this, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. The IRS Withholding Calculator tool on IRS.gov can help you fill out the form. If you are self-employed you may need to make or change your estimated tax payments. See Form 1040-ES, Estimated Tax for Individuals for learn more.
Special Tax items:
Additional Medicare Tax: Some taxpayers may be liable for an Additional Medicare Tax of 0.9% if the income exceeds certain limits. Here are six things that you should know about this tax: 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.
Children Investment Income: You normally must pay income tax on your investment income. That is also true for a child who must file a federal tax return. If a child can’t file his or her own return, their parent or guardian is normally responsible for filing their tax return. Investment income normally includes interest, dividends and capital gains. It also includes other unearned income, such as from a trust. Special rules apply if your child's total investment income is more than $2,000. Your tax rate may apply to part of that income instead of your child's tax rate.
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 (June 30, 2016) being reported. FBAR must be filed electronically through FinCEN’s BSA E-Filing System.
Business - Form 1120/1120 S – 6 months extensions 09/15/2016; Partnership/LLC – 5 months extension – 09/15/2016
Individual - Form 1040 – 6 months extension – 10/17/2016
Non-profit – Form 990 – Filing date 05/16/16 – 3 month extension - 08/15/2016.
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 firstname.lastname@example.org/www.kumarconsultingcpa.com
THE EMPTY NESTERS’ DILEMMA
As tempting as it is to remain in your family home, practical considerations may pose challenges. These insights from Merrill Lynch Wealth Management could help you make a choice that works for you.
For many people, a longtime home connects them to a community and a way of life they cherish. Among retired people who do not plan on moving, 54 percent cite loving their homes as the main reason for staying put, according to “Home in Retirement: More Freedom, New Choices,” a 2015 Merrill Lynch survey conducted in partnership with Age Wave.
It is easy to understand why older Americans might reject the notion of relocating or downsizing as they age. But the decision to stay in a home raises inevitable questions. Could taking care of more house than you need eventually become a burden for you? What about your kids — will they worry about you living alone as you grow older?
These suggestions may help you decide what you really want to do.
Think ahead. Talking openly about the pros and cons of staying in your house may help you think about the implications of your decision for family members outside of your household. Try to be honest with yourself as you consider questions about how you would handle the cost of future modifications to your house or what would happen if you suddenly became ill.
Budget for home improvements. Homes age along with their occupants, and a house that falls into disrepair may be more difficult to live in, or could become downright unsafe. A backlog of repairs and maintenance could also hurt a home’s value.
In addition to upkeep, the house may need to be remodeled to accommodate changing physical needs. If you’re eager to stay in your home despite medical issues, you may need to install a stair lift, for example, and add rails to bathrooms. If someone is in a wheelchair, more will need to be done, with ramps at entrances and doorways widened.
To cover the costs of renovation and home maintenance, you may need to consider bolstering your income from Social Security, retirement accounts and pensions with investments such as bonds and dividend-paying stocks that have the potential to generate income. Planning ahead for home-related expenses could help you avoid selling off long-term assets in an emergency. You might also consider setting up a line of credit, backed by your home or your investments, to help cover the cost of improvements and serve as a financial bridge in an emergency.
Anticipate future health-care needs. Get to know what services are available in your community before you need them. That could include transportation services if you give up driving or part-time help with daily activities.
Current and emerging technologies may also hold possibilities for helping you age safely in your home. According to the Merrill Lynch/Age Wave survey, six in 10 retirees are interested in tools such as cleaning robots, heated driveways and innovations that could allow them to monitor their health at home
Involve the whole family. Ultimately, the decision about whether to stay in your home is not yours alone. Your children will be affected by your choice, so share your desires and concerns with them, and listen to what they have to say.
And periodically run through a checklist of questions covering different aspects of staying put. You might consider whether you are able to keep up with maintaining your home and grounds, who could help in an emergency and whether continuing to be in your home is burdening those who care about you with constant worries. You may eventually find that your situation and your attitude have changed, and that you are ready to think seriously about downsizing to a retirement community or moving closer to your kids.
In the meantime, planning ahead can help prepare you to enjoy retirement to its fullest — in the home you fell in love with years ago.
DISCLAIMER: This material should be regarded as general information on healthcare considerations and is not intended to provide specific healthcare advice. If you have questions regarding your particular situation, please contact your legal or tax advisor. Any opinions expressed herein are given in good faith, are subject to change without notice. Merrill Lynch makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation.
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