ACCOUNTING
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. 16, 2017 (business tax returns September/October 2017). Below are some tips that may be helpful:
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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.
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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
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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.
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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.
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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 April 18, 2017 with six months automatic extension. FBAR must be filed electronically through FinCEN’s BSA E-Filing System.
Filings deadlines:
- Business - Form 1120 (C-Corporation) April 18, 2017(6 months extensions available – Form 7004)
- S-Corporation/Partnership/LLC – March 15, 2017 (6 months extensions available – Form 7004)
- Individual - Form 1040 – April 18, 2017 (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
