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2016 Tax Law Changes

2016 Tax Law Changes

Social Security wage ceiling
The maximum amount of your earned income on which you pay Social Security tax is now $118,500. When you reach that amount with one employer, they should stop withholding Social Security tax from your pay until the following year. If you work for more than one employer, and your total earnings are more than $118,500, we calculates a credit for any overpayment of Social Security taxes.

Foreign earned income exclusion
If you qualify, you can exclude up to $101,300 of your foreign earned income from your taxable income for 2016. If you and your spouse both work in a foreign country and meet the qualifications, you may each be able to exclude up to $101,300.

Adoption Credit
You may qualify for a credit equal to up to $13,460 of your adoption expenses. If your employer provides adoption benefits, you may also be able to exclude up to the same amount from your income. Both a credit and exclusion may be claimed for the same adoption, but not for the same expense. The credit is now permanent and indexed to inflation.

Child Tax Credit
Starting in 2015, if you claim a foreign earned income or housing exclusion, you cannot claim the refundable portion of the child tax credit, also known as the additional child tax credit.

Canceled debt exclusion
The canceled debit exclusion provides tax relief on canceled debt for many homeowners involved in the mortgage foreclosure crisis. You may exclude up to $2,000,000 ($1,000,000 if married filing separately) of canceled qualified principal residence indebtedness from taxable income.

Standard deduction
The standard amount you can deduct from income if you don't itemize your deductions is $6,300 ($12,600 for married couples filing jointly, or $9,300 if you file as head of household).

Personal exemptions
The personal exemption for 2016 is $4,050, up from $4,000.

Marriage penalty relief
This provision increases the standard deduction for married taxpayers filing jointly, and expands the 15% tax bracket.

Alternative Minimum Tax
The Alternative Minimum Tax (AMT) exemption amount rises in 2016 to $53,900 ($83,800, for married couples filing jointly).

Earned Income Credit
If you have no children, your maximum Earned Income Credit for 2016 is $506. With two children, the maximum amount is $5,572, and with one child, it is $3,373. If you have three or more qualifying children, the maximum Credit you can receive for 2016 is $6,269 (up from $6,242 in 2015).

Education savings bond income limits
You may be able to exclude all or part of the interest from qualifying Series EE or Series I bonds if you use the income for qualified educational expenses. You cannot take this benefit if your modified adjusted gross income is $92,550 or more ($146,300 if you file jointly, or if you file as Qualifying Widow(er) with Dependent Child).

American Opportunity Tax Credit
The American Opportunity Tax Credit expanded on the Hope Credit. The income limits are higher, the credit is available for more qualified expenses, and you can use the credit for four years of post-secondary education instead of just two. In addition, you can even get a refund if you don't owe any tax for up to 40% of the credit ($1,000).

The Affordable Care Act (ACA)
The majority of taxpayers will see minimal impact on their 2016 federal taxes. We offer tools and information to help you understand the impact of the Affordable Care Act on your taxes. Resources include year-by-year guidance and calculators to estimate your eligibility for the premium tax credit or your tax penalty for being uninsured.

Health Insurance Premium Tax Credit
If individuals or families purchase health insurance through the Health Insurance Marketplace, they may qualify for the new Health Insurance Premium Tax Credit. To qualify for the credit, your household income must fall between 100 percent and 400 percent of the federal poverty line, you may not be claimed as a dependent on any other taxpayer's return, and (if married), you must file jointly. In the case of spousal abuse or abandonment, this requirement may be waived.

Individual Shared Responsibility Provision
In 2016, each individual taxpayer must carry the required "minimum essential coverage" each month, qualify for an exemption, or pay mandatory taxes. For those facing this new penalty, relief provisions have been written into the tax laws to help taxpayers transition into these new requirements. The minimum amount of insurance coverage you must carry is calculated per family member and then added together.

Limitation on itemized deductions
If you have a high adjusted gross income, you may not be able to take all your itemized deductions, thanks to the Pease provision. Itemized deductions start to phase out at $155,650 if you are married filing separately ($259,400 for individuals, $285,350 if head of household, or $311,300 if filing jointly). Your itemized deductions are reduced by 3% of your adjusted gross income over these amounts, but they are never reduced by more than 80% of your otherwise allowable deductions.

Personal exemption phaseout (PEP)
Your personal exemptions for yourself, your spouse, and your dependents reduce your taxable income by $4,050 each. If your adjusted gross income is over $259,400 ($155,650 if married filing separately, $311,300 if filing jointly, or $285,350 if filing as head of household), your personal exemptions are reduced by 2% for each $2,500 or portion over these amounts. The exemption phases out completely at $381,900 ($433,800 if filing jointly, $216,900 if filing separately, $407,850 if filing as head of household).

Death tax rate
For persons who died in 2016, the federal estate tax rate remains at 40%. This tax only applies to estates larger than $5,450,000 - up from $5,430,000 in 2015.

Standard mileage
The standard mileage rate for the use of your car or other vehicle is up to 54 cents per mile for business (down from 57.5 cents for 2015) and down to 19 cents per mile driven for medical or moving purposes (down from 23 cents for 2015). The rate for charitable travel remained the same at 14 cents per mile.

Contribution limits for flexible spending accounts
The most you can contribute to one of these plans remains at $2,550. Your spouse can also contribute $2,550 if he or she meets the qualifications. For certain FSAs, up to $500 can now be carried over to the next year.

Medical Savings Accounts
(1) Self-only coverage. For taxable years beginning in 2014, the term "high deductible health plan" as defined in Sec. 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,250 and not more than $3,350, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,450.
(2) Family coverage. For taxable years beginning in 2015, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $4,450 and not more than $6,700, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,150.

2015 Tax Law Changes

2015 Tax Law Changes and IRS Tax Brackets

Tax rateSingle filersMarried filing jointly or qualifying widow(er)Married filing separatelyHead of household
10%Up to $9,225Up to $18,450Up to $9,225Up to $13,150
15%$9,226 - $37,450$18,451 - $74,900$9,226 - $37,450$13,151 - $50,200
25%$37,451 - $90,750$74,901 - $151,200$37,451 - $75,600$50,201 - $129,600
28%$90,751 - $189,300$151,201 - $230,450$75,601 - $115,225$129,601 - $209,850
33%$189,301 - $411,500$230,451 - $411,500$115,226 - $205,750$209,851 - $411,500
35%$411,501 - $413,200$411,501 - $464,850$205,751 - $232,425$411,501 - $439,000
39.6%$413,201 or more$464,851 or more$232,426 or more$439,001 or more

Social Security wage ceiling
The maximum amount of your earned income on which you pay Social Security tax is now $118,500. When you reach that amount with one employer, they should stop withholding Social Security tax from your pay until the following year. If you work for more than one employer, and your total earnings are more than $118,500, Wecalculates a credit for any overpayment of Social Security taxes.

Foreign earned income exclusion
If you qualify, you can exclude up to $100,800 of your foreign earned income from your taxable income for 2015. If you and your spouse both work in a foreign country and meet the qualifications, you may each be able to exclude up to $100,800.

Adoption Credit
You may qualify for a credit equal to up to $13,400 of your adoption expenses. If your employer provides adoption benefits, you may also be able to exclude up to the same amount from your income. Both a credit and exclusion may be claimed for the same adoption, but not for the same expense. The credit is now permanent and indexed to inflation.

Child Tax Credit
Starting in 2015, if you claim a foreign earned income or housing exclusion, you cannot claim the refundable portion of the child tax credit, also known as the additional child tax credit.

Canceled debt exclusion
The canceled debit exclusion provides tax relief on canceled debt for many homeowners involved in the mortgage foreclosure crisis. You may exclude up to $2,000,000 ($1,000,000 if married filing separately) of canceled qualified principal residence indebtedness from taxable income.

Standard deduction
The standard amount you can deduct from income if you don't itemize your deductions is $6,300 ($12,600 for married couples filing jointly, or $9,100 if you file as head of household).

Personal exemptions
The personal exemption for 2015 is $4,000, up from $3,950.

Marriage penalty relief
This provision increases the standard deduction for married taxpayers filing jointly, and expands the 15% tax bracket.

Alternative Minimum Tax
The Alternative Minimum Tax (AMT) exemption amount rises in 2015 to $53,600 ($83,400, for married couples filing jointly).

Earned Income Credit
If you have no children, your maximum Earned Income Credit for 2015 is $503. With two children, the maximum amount is $5,548, and with one child, it is $3,359. If you have three or more qualifying children, the maximum Credit you can receive for 2015 is $6,242 (up from $6,143 in 2014).

American Opportunity Tax Credit
The American Opportunity Tax Credit expanded on the Hope Credit. The income limits are higher, the credit is available for more qualified expenses, and you can use the credit for four years of post-secondary education instead of just two. In addition, you can even get a refund if you don't owe any tax for up to 40% of the credit ($1,000).

Limitation on itemized deductions
If you have a high adjusted gross income, you may not be able to take all your itemized deductions, thanks to the Pease provision. Itemized deductions start to phase out at $154,950 if you are married filing separately ($258,250 for individuals, $284,050 if head of household, or $309,900 if filing jointly). Your itemized deductions are reduced by 3% of your adjusted gross income over these amounts, but they are never reduced by more than 80% of your otherwise allowable deductions.

Personal exemption phaseout (PEP)
Your personal exemptions for yourself, your spouse, and your dependents reduce your taxable income by $4,000 each. If your adjusted gross income is over $258,250 ($154,950 if married filing separately, $309,900 if filing jointly, or $284,050 if filing as head of household), your personal exemptions are reduced by 2% for each $2,500 or portion over these amounts. The exemption phases out completely at $380,750 ($432,400 if filing jointly, $216,200 if filing separately, $406,550 if filing as head of household).

Standard mileage
The standard mileage rate for the use of your car or other vehicle is up to 57.5 cents per mile for business and down to 23 cents per mile driven for medical or moving purposes. The rate for charitable travel remained the same at 14 cents per mile.

IRS Publications

Need help with a specific tax issue? A good resource for answers are the official IRS Publications. The IRS publications provide easy-to-follow explanations of common tax questions and tax issues that are faced by American taxpayers.

IRS Publication # IRS Publication Name
Publication 1

Your Rights as a Taxpayer

Derechos del Contribuyente

Publication 3

Armed Forces' Tax Guide

Publication 5

Your Appeal Rights and How To Prepare a Protest If You Don't Agree

Publication 17

Your Federal Income Tax

El Impuesto Federal sobre los Ingresos

Publication 54

Tax Guide for U.S. Citizens and Resident Aliens Abroad

Publication 225

Farmer's Tax Guide

Publication 334

Tax Guide for Small Business

Publication 463

Travel, Entertainment, Gift, and Car Expenses

Publication 501

Exemptions, Standard Deduction and Filing Information

Publication 502

Medical and Dental Expenses

Publication 503

Child and Dependent Care Expenses

Publication 504

Divorced or Separated Individuals

Publication 505

Tax Withholding and Estimated Tax

Publication 510

Excise Taxes

Publication 514

Foreign Tax Credit for Individuals

Publication 515

Withholding of Tax on Nonresident Aliens and Foreign Entities

Publication 516

U.S. Government Civilian Employees Stationed Abroad

Publication 517

Social Security and Other Information for Members of the Clergy and Religious Workers

Publication 519

U.S. Tax Guide for Aliens

Publication 521

Moving Expenses

Publication 523

Selling Your Home

Publication 524

Credit for the Elderly or Disabled

Publication 525

Taxable and Nontaxable Income

Publication 526

Charitable Contributions

Publication 527

Residential Rental Property

Publication 529

Miscellaneous Deductions

Publication 530

Tax Information for First-time Homeowners

Publication 531

Reporting Tip Income

Publication 534

Depreciating Property Placed in Service Before 1987

Publication 535

Business Expenses

Publication 536

Net Operating Losses

Publication 537

Installment Sales

Publication 538

Accounting Periods and Methods

Publication 541

Tax Information on Partnerships

Publication 542

Tax Information on Corporations

Publication 544

Sales and Other Dispositions of Assets

Publication 547

Casualties, Disasters, and Thefts

Publication 550

Investment Income and Expenses

Publication 551

Basis of Assets

Publication 554

Older Americans' Tax Guide

Publication 555

Community Property

Publication 556

Examination of Returns, Appeal Rights, and Claims for Refund

Publication 557

Tax-Exempt Status for Your Organization

Publication 559

Survivors, Executors and Administrators

Publication 560

Retirement Plans for Small Business

Publication 561

Determining the Value of Donated Property

Publication 570

Tax Guide for Individuals with Income from U.S. Possessions

Publication 571

Tax-Sheltered Annuity Plans - 403(b) plans

Publication 575

Pension and Annuity Income

Publication 583

Starting a Business and Keeping Records

Registro de Pérdidas Por Hechos Fortuitos (Imprevistos), Desastres y Robos (Propiedad de Uso Personal)

Publication 584

Casualty, Disaster and Theft Loss Workbook (Personal-Use Property)

Publication 584-B

Business Casualty, Disaster and Theft Loss Workbook

Publication 587

Business Use of Your Home

Publication 594

The IRS Collection Process

Publication 596

Earned Income Credit (EIC)

Crédito por Ingreso del Trabajo

Publication 597

Information on the U.S.-Canada Income Tax Treaty

Publication 721

Tax Guide to U.S. Civil Service Retirement Benefits

Publication 901

U.S. Tax Treaties

Publication 907

Tax Highlights for Persons with Disabilities

Publication 908

Bankruptcy Tax Guide

Publication 915

Social Security and Equivalent Railroad Retirement Benefits

Publication 925

Passive Activity and At-Risk Rules

Publication 926

Household Employer's Tax Guide

Publication 929

Tax Rules for Children and Dependents

Publication 936

Home Mortgage Interest Deduction

Publication 938

Real Estate Mortgage Investment Conduits (REMICs) Reporting Information

Publication 939

General Rule for Pensions and Annuities

Publication 946

How To Depreciate Property

Publication 969

Health Savings Accounts & Tax-Favored Health Plans

Publication 970

Tax Benefits for Education

Publication 971

Innocent Spouse Relief

Publication 972

Child Tax Credit

Publication 1212

Guide to Original Issue Discount (OID) Instruments

Publication 1546

The Taxpayer Advocate Service of the IRS

Publication 1635

Understanding Your EIN Employer Identification Number

Publication 1660

Collection Appeal Rights (for Liens, Levies, and Seizures)

Publication 1779

Independent Contractor or Employee...

Publication 1915

Understanding Your Individual Taxpayer Identification Number ITIN

Entendiendo su Número de Identificación Personal del Contribuyente (ITIN)

Publication 2105

Why Do I Have to Pay Taxes?

Publication 3148

Tips on Tips (A Guide to Tip Income Reporting) for Employees

Publication 3402

Tax Issues for Limited Liability Companies

Publication 3598

The Audit Reconsideration Process

Publication 3605

Fast Track Mediation - A Process for Prompt Resolution of Tax Issues

Publication 4128

Tax Impact of Job Loss

Publication 4221-PC

Compliance Guide for 501(c)(3) Public Charities

Publication 4221-PF

Compliance Guide for 501(c)(3) Private Foundations

Publication 4681

Canceled Debts, Foreclosures, Repossessions, and Abandonments

Publication 5120

Facts of the Premium Tax Credit

Hechos sobre el Crédito Tributario de Prima

Publication 5152

Report Changes to the Marketplace As They Happen

Publication 5156

Facts about the Individual Shared Responsibility Provision

Publication 5172

Facts about Health Coverage Exemptions

Publication 5187

Health Care Law: What’s New for Individuals & Families


2014 Tax Law Changes

2014 Tax Law Changes

Social security wage ceiling, The maximum amount of your earned income on which you pay Social Security tax is now $117,000. When you reach that amount with one employer, they should stop withholding Social Security tax from your pay until the following year. If you work for more than one employer, and your total earnings are more than $117,000, We will calculates a credit for any overpayment of Social Security taxes.

Foregn earned income exclusion, If you qualify, you can exclude up to $99,200 of your foreign earned income from your taxable income for 2014. If you and your spouse both work in a foreign country and meet the qualifications, you may each be able to exclude up to $99,200.

Adoption credit, You may qualify for a credit equal to up to $13,190 of your adoption expenses. If your employer provides adoption benefits, you may also be able to exclude up to the same amount from your income. Both a credit and exclusion may be claimed for the same adoption, but not for the same expense. The credit is now permanent and indexed to inflation.

Homeowners cancelled debt exclusion, The canceled debit exclusion provides tax relief on canceled debt for many homeowners involved in the mortgage foreclosure crisis. You may exclude up to $2,000,000 ($1,000,000 if married filing separately) of canceled qualified principal residence indebtness from taxable income.

Mortgage insurance premium, You may be able to deduct qualified mortgage insurance premiums, also known as private mortgage insurance (PMI), you paid on a home as an itemized deduction. This amount may be reported in Box 4 of Form 1098.

Standard deduction, The standard amount you can deduct from income if you don't itemize your deductions is $6,200 ($12,400 for married couples filing jointly, or $9,100 if you file as head of household).

Personal exemptions, The personal exemption for 2014 is $3,950, up from $3,900.

Alternative minimum tax, The Alternative Minimum Tax (AMT) exemption amount rises in 2014 to $52,800 ($82,100, for married couples filing jointly).

Earned income credit, If you have no children, your maximum Earned Income Credit for 2014 is $496. With two children, the maximum amount is $5,460, and with one child, it is $3,305. If you have three or more qualifying children, the maximum Credit you can receive for 2014 is $6,143 (up from $6,044 in 2013).

American opportunity tax credit, The American Opportunity Tax Credit expanded on the Hope Credit. The income limits are higher, the credit is available for more qualified expenses, and you can use the credit for four years of post-secondary education instead of just two. In addition, you can even get a refund if you don't owe any tax for up to 40% of the credit ($1,000).

Tuition expense deduction, You can still deduct tuition expenses as an adjustment to income, even if you don't itemize your deductions. You generally take the tuition expense deduction if you don't qualify for an education credit or other tax break for the same expenses.

The affordable care act- obama care, Changes for 2014 include the addition of the Health Insurance Premium Tax Credit (see below) and the Individual Shared Responsibility Provision. The majority of taxpayers will see minimal impact on their 2014 federal taxes. For more information, www.coveredca.com .

Health insurance premium credit, If individuals or families purchase health insurance through the Health Insurance Marketplace, they may qualify for the new Health Insurance Premium Tax Credit. To qualify for the credit, your household income must fall between 100 percent and 400 percent of the federal poverty line, you may not be claimed as a dependent on any other taxpayer's return, and (if married), you must file jointly. In the case of spousal abuse or abandonment, this requirement may be waived.

Standard mileage rates, The standard mileage rate for the use of your car or other vehicle dropped half a cent to 56 cents per mile for business and 23.5 cents per mile driven for medical or moving purposes. The rate for charitable travel remained the same at 14 cents per mile

Taxable or Non-Taxable Income

Taxable or Non-Taxable Income?

Although most income you receive is taxable and must be reported onyour federal income tax return, there are some instances when incomemay not be taxable.The IRS offers the following list of items that do not have to beincluded as taxable income:

  • Adoption expense reimbursements for qualifying expenses
  • Child support payments
  • Gifts, bequests and inheritances
  • Workers' compensation benefits (some exceptions may apply; see Publication 525, Taxable and Nontaxable Income)
  • Meals and lodging for the convenience of your employer
  • Compensatory damages awarded for physical injury or physical sickness
  • Welfare benefits
  • Cash rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but nottaxable in other situations. Examples of items that may or may not beincluded in your taxable income are:

  • Life insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than thecost of the life insurance policy. Life insurance proceeds, whichwere paid to you because of the insured person’s death, aregenerally not taxable unless the policy was turned over to youfor a price.

? Scholarship or fellowship grant If you are a candidate for adegree, you can exclude from income amounts you receive as aqualified scholarship or fellowship. Amounts used for room andboard do not qualify for the exclusion.? Non-cash income Taxable income may be in a form other thancash. One example of this is bartering, which is an exchange ofproperty or services. The fair market value of goods and servicesexchanged is fully taxable and must be included as income onForm 1040 of both parties.

All other items—including income such as wages, salaries, tips andunemployment compensation —are fully taxable and must beincluded in your income unless it is specifically excluded by law.These examples are not all-inclusive. For more information, seePublication 525, Taxable and Nontaxable Income, which can be obtained at the IRS.gov website.

Top Five Reasons

Top Five Reasons to E-file your Taxes

Are you still using the old school method of doing your taxes? Do you still mail paper forms to the IRS? If so, make this the year you switch to a much faster and safer way of filing your taxes. Join the nearly 126 million taxpayers who used IRS e-file to file their taxes last year. Here are the top five reasons why you should file electronically too:

1. Accurate and easy. IRS e-file is the best way to file an accurate tax return. The tax software that you use to e-file helps avoid mistakes by doing the math for you. It guides you every step of the way as you do your taxes. IRS e-file can also help with the new health care law tax provisions. The bottom line is that e-file is much easier than doing your taxes by hand and mailing paper tax forms.

2. Convenient options. You can buy commercial tax software to e-file or ask your tax preparer to e-file your tax return. You can also e-file through IRS Free File, the free tax preparation and e-file program available only on IRS.gov. You may qualify to have your taxes filed through the IRS Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. In general, VITA offers free tax preparation and e-file if you earned $53,000 or less. TCE offers help primarily to people who are age 60 or older.

3. Safe and secure. IRS e-file meets strict security guidelines. It uses secure encryption technology to protect your tax return. The IRS has safely and securely processed more than 1.3 billion e-filed tax returns from individuals since the program began.

4. Faster refunds. In most cases you get your refund faster when you e-file. That’s because there is nothing to mail and your return is virtually free of mistakes. The fastest way to get your refund is to combine e-file with direct deposit into your bank account. The IRS issues most refunds in less than 21 days.

5. Payment flexibility. If you owe taxes, you can e-file early and set up an automatic payment on any day until the April 15 due date. You can pay electronically from your bank account. You can also pay by check, money order, debit or credit card. Visit IRS.gov/payments for more information.

IRS Can Help if W-2s Are Missing

IRS Can Help if W-2s Are Missing

In most cases you get your W-2 forms by the end of January. Form W-2, Wage and Tax Statement, shows your income and the taxes withheld from your pay for the year. You need your W-2 form to file an accurate tax return.

If you haven’t received your form by mid-February, here’s what you should do:

  • Contact your employer. Ask your employer (or former employer) for a copy. Be sure that they have your correct address.
  • After Feb. 23. If you can’t get a copy from your employer, call the IRS at 800-829-1040 after Feb. 23. The IRS will send a letter to your employer on your behalf. You’ll need the following when you call:

Your name, address, Social Security number and phone number;

The dates you worked for the employer; and

An estimate of your wages and federal income tax withheld in that year. You can use your final pay stub for these amounts.

  • File on time. Your tax return is normally due on or before April 15. Use Form 4852, Substitute for Form W-2, Wage and Tax Statement, if you don’t get your W-2 in time to file. Estimate your wages and taxes withheld as best as you can. The IRS may need more time to process your return while it verifies your information. If you can’t finish your tax return by the due date, you can ask for more time to file. Get an extra six months by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You can also e-file a request for more time. You can do this for free with IRS Free File.
  • Correct if necessary. You may need to correct your tax return if you get your missing W-2 after you file. If the tax information on the W-2 is different from what you originally reported, you may need to file an amended tax return. Use Form 1040X, Amended U.S. Individual Income Tax Return to make the change.

How to Get a Copy of Your Prior Year Tax Information

How to Get a Copy of Your Prior Year Tax Information

There are many reasons you may need a copy of your tax return information from a prior year. You may need it when applying for a student loan, home mortgage or for a VISA. If you don’t have your copy, the IRS can help. It’s easy to get a free transcript from the IRS. Here are several ways for you to get what you need:

  • Tax Return Transcript. A return transcript shows most line items from your tax return just as you filed it. It also includes forms and schedules you filed. However, it does not reflect changes made to the return after you filed it. In most cases, your tax return transcript will have all the information a lender or other agency needs.
  • Tax Account Transcript. This transcript shows any adjustments made by you or the IRS after you filed your return. It shows basic data, like marital status, type of return, adjusted gross income and taxable income.

How to Get a Transcript. You can request transcripts online, by phone or by mail. Both types of transcripts are free of charge. They are available for the most current tax year after the IRS has processed the return. You can also get them for the past three tax years.

Order online. Use the ‘Get Transcript’ tool available on IRS.gov. You can use this tool to confirm your identity and to immediately view and print copies of your transcript in a single session for free. The tool is available for five types of tax records: tax account transcript, tax return transcript, record of account, wage and income and verification of non-filing.

Order by phone. Call 800-908-9946. A recorded message will guide you through the process.

Order by mail. The easy way to order your transcript by mail is to use the “Get Transcript by Mail” online option on IRS.gov. On the other hand, you can complete and mail Form 4506T-EZ to get your tax return transcript. Use Form 4506-T to request your tax account transcript by mail.

  • How to Get a Tax Return Copy. Actual copies of your tax returns are generally available for the current tax year and as far back as six years. The fee per copy is $50. Complete and mail Form 4506 to request a copy of your tax return. Mail your request to the IRS office listed on the form for your area.

Delivery times for online and phone orders typically take 5 to 10 days from the time the IRS receives the request. You should allow 30 days to receive a transcript ordered by mail and 75 days for copies of your tax return. You can print tax forms online at IRS.gov/forms. To get forms in the mail go to IRS.gov/orderforms to place an order.

Taxable Income or Not Taxable Income – What You Need to Know about Income

Taxable Income or Not Taxable Income – What You Need to Know about Income

All income is taxable unless the law excludes it. Here are some basic rules you should know to help you file an accurate tax return:

  • Taxed income. Taxable income includes money you earn, like wages and tips. It also includes bartering, an exchange of property or services. The fair market value of property or services received is taxable.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance. Proceeds paid to you because of the death of the insured person are usually not taxable. However, if you redeem a life insurance policy for cash, any amount that you get that is more than the cost of the policy is taxable.
  • Qualified scholarship. In most cases, income from this type of scholarship is not taxable. This means that amounts you use for certain costs, such as tuition and required books, are not taxable. On the other hand, amounts you use for room and board are taxable.
  • State income tax refund. If you got a state or local income tax refund, the amount may be taxable. You should have received a Form 1099-G from the agency that made the payment to you. If you didn’t get it by mail, the agency may have provided the form electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some types of income that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

Facts That You Should Know about Capital Gains and Losses

Facts That You Should Know about Capital Gains and Losses

When you sell a capital asset the sale results in a capital gain or loss. A capital asset includes most property you own for personal use or own as an investment. Here are 10 facts that you should know about capital gains and losses:

1. Capital Assets. Capital assets include property such as your home or car, as well as investment property, such as stocks and bonds.

2. Gains and Losses. A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.

3. Net Investment Income Tax. You must include all capital gains in your income and you may be subject to the Net Investment Income Tax. This tax applies to certain net investment income of individuals, estates and trusts that have income above statutory threshold amounts

4. Deductible Losses. You can deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.

5. Long and Short Term. Capital gains and losses are either long-term or short-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long-term. If you held it one year or less, the gain or loss is short-term.

6. Net Capital Gain. If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a net capital gain.

7. Limit on Losses. If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.

8. Carryover Losses. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they happened in that next year.

9. Forms to File. You often will need to file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses with your tax return.

10. Tax rates varies depending on your gain/income, please see IRS website for current rates.

Child Tax Credit

Child Tax Credit

The Child Tax Credit may save you money at tax-time if you have a qualified child. Here are six things you should know about the credit.

1. Amount. The Child Tax Credit may help reduce your federal income tax for each qualifying child that you are eligible to claim on your tax return.

2. Additional Child Tax Credit. If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the Additional Child Tax Credit.

3. Qualifications. For this credit, a qualifying child must pass several tests:

  • Age test. The child must have been under age 17 at the end of year for which Taxes needs to be filed.
  • Relationship test. The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. The child may be a descendant of any of these individuals. A qualifying child could also include your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
  • Support test. The child must not have provided more than half of their own support for the year.
  • Dependent test. The child must be a dependent that you claim on your federal tax return.
  • Joint return test. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
  • Citizenship test. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
  • Residence test. In most cases, the child must have lived with you for more than half of the Year.

4. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate your credit depending on your filing status and income.

Early Retirement Distributions

Key Points to Know about Early Retirement Distributions

Some people take an early withdrawal from their IRA or retirement plan. Doing so in many cases triggers an added tax on top of the income tax you may have to pay. Here are some key points you should know about taking an early distribution:

1. Early Withdrawals. An early withdrawal normally means taking the money out of your retirement plan before you reach age 59½

2. Additional Tax. If you took an early withdrawal from a plan last year, you must report it to the IRS. You may have to pay income tax on the amount you took out. If it was an early withdrawal, you may have to pay an added 10 percent tax.

3. Nontaxable Withdrawals. The added 10 percent tax does not apply to nontaxable withdrawals. They include withdrawals of your cost to participate in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

A rollover is a type of nontaxable withdrawal. A rollover occurs when you take cash or other assets from one plan and contribute the amount to another plan. You normally have 60 days to complete a rollover to make it tax-free.

4. Check Exceptions. There are many exceptions to the additional 10 percent tax. Some of the rules for retirement plans are different from the rules for IRAs. See IRS.gov for details about these rules.

5. File Form 5329. If you made an early withdrawal last year, you may need to file a form with your federal tax return. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, for details.

Five Key Facts about Unemployment Benefits

Five Key Facts about Unemployment Benefits

If you lose your job, you may qualify for unemployment benefits. The payments may serve as much needed relief. But did you know unemployment benefits are taxable? Here are five key facts about unemployment compensation:

1. Unemployment is taxable. You must include all unemployment compensation as income for the year. You should receive a Form 1099-G, Certain Government Payments by Jan. 31 of the following year. This form will show the amount paid to you and the amount of any federal income tax withheld.

2. Paid under U.S. or state law. There are various types of unemployment compensation. Unemployment includes amounts paid under U.S. or state unemployment compensation laws. For more information, see Publication 525, Taxable and Nontaxable Income.

3. Union benefits may be taxable. You must include benefits paid to you from regular union dues in your income. Other rules may apply if you contributed to a special union fund and those contributions are not deductible. In that case, you only include as income any amount that you got that was more than the contributions you made.

4. You may have tax withheld. You can choose to have federal income tax withheld from your unemployment. You can have this done using Form W-4V, Voluntary Withholding Request. If you choose not to have tax withheld, you may need to make estimated tax payments during the year.

5. Visit IRS.gov for help. If you’re facing financial difficulties, you should visit the IRS.gov page: “What Ifs” for Struggling Taxpayers. This page explains the tax effect of events such as job loss. For example, if your income decreased, you may be eligible for certain tax credits, like the Earned Income Tax Credit. If you owe federal taxes and can’t pay your bill, contact the IRS. In many cases, the IRS can take steps to help ease your financial burden.

Home Mortgage Debt Cancellation

Home Mortgage Debt Cancellation

If your lender cancels part or all of your debt, you normally must pay tax on that amount. However, the law provides for an exclusion that may apply to homeowners who had their mortgage debt cancelled in 2014. In most cases where the exclusion applies, the amount of the cancelled debt is not taxable. Here are the top 10 tax tips about mortgage debt cancellation:

1. Main Home. If the cancelled debt was a loan on your main home, you may be able to exclude the cancelled amount from your income. You must have used the loan to buy, build or substantially improve your main home to qualify. Your main home must also secure the mortgage.

2. Loan Modification. If your lender cancelled part of your mortgage through a loan modification or ‘workout,’ you may be able to exclude that amount from your income. You may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or HAMP. The exclusion may also apply to the amount of debt cancelled in a foreclosure.

3. Refinanced Mortgage. The exclusion may apply to amounts cancelled on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. Amounts used for other purposes don’t qualify.

4. Other Cancelled Debt. Other types of cancelled debt such as second homes, rental and business property, credit card debt or car loans do not qualify for this special exclusion. On the other hand, there are other rules that may allow those types of cancelled debts to be nontaxable.

5. Form 1099-C. If your lender reduced or cancelled at least $600 of your debt, you should receive Form 1099-C, Cancellation of Debt, in January of the next year. This form shows the amount of cancelled debt and other information.

6. Form 982. If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. File the form with your federal income tax return.

Ways to Pay Your Federal Income Tax Liability

Ways to Pay Your Federal Income Tax Liability

If you owe federal tax, the IRS offers many convenient ways to pay. Make sure you pay by the April 15 deadline, even if you get an extension of time to file your 2014 tax return. Here are some of the ways to pay your tax:

  • Use Direct Pay. IRS Direct Pay offers individuals a free, secure and easy way to pay. You can schedule a payment in advance to pay your tax directly from your checking or savings account. You don’t need to register, write a check or find a mailbox. Direct Pay gives you instant confirmation after you make a payment.
  • Pay by Debit or Credit Card. Choose an approved payment processor to make a tax payment online, by phone or by mobile device. It’s safe and secure. The payment processor will charge a processing fee. The fees vary by service provider and may be tax deductible. No part of the fee goes to the IRS.
  • Pay When You E-file. If you file your federal tax return electronically you can schedule a payment at the time that you file. You can pay directly from your bank account using Electronic Funds Withdrawal. You choose the date and amount of the payment, and as long as it is before your due date, it will be on time. Some software that you use to e-file also allows you to pay by debit or credit card with a processing fee.
  • Other Options to Pay. The IRS offers other ways to pay, including:
  • Use the Electronic Federal Tax Payment System to pay your taxes online or by phone. This free system provides security, convenience and accuracy.
  • Pay by Check or Money Order. Make the check, money order or cashier’s check payable to the U.S. Treasury. Do not staple, clip or attach your payment to the tax form. Include your name, address, daytime phone number and Social Security number on the front of the payment. Use the SSN shown first if it's a joint return. Also include the tax year and related tax form or notice number. Do not send cash through the mail.
  • Can’t Pay Now? If you are unable to pay in full you have options:
  • Apply for an online payment agreement to pay your tax liability over time. Use the IRS.gov tool to set up a direct debit installment agreement. With a direct debit plan there is no need to write a check and mail it each month.
  • Owe more than you can afford? An offer in compromise, or OIC, may allow you to settle for less than the full amount you owe. It may be an option for you if you can't pay your full tax liability. It may also be an option if paying in full creates a financial hardship. Not everyone qualifies, so you should explore all other ways to pay before submitting an OIC. Use the Offer in Compromise Pre-Qualifier tool to see if you are eligible for an OIC.

In short, remember to pay your tax liability on time. If you are suffering a financial hardship, the IRS is willing to work with you.


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