Author: Leon Clinton

If you haven’t filed your taxes yet, it’s time to stop procrastinating. If you’re not sure what to do first, the fastest way to get started is to figure out which filing status applies to you. In addition, if your name or that of a dependent changed during the tax year for which you are filing, then you will also need to report the name changes to the Social Security Administration.

Choosing the Correct Filing Status

Choosing the correct filing status is important because it can affect the amount of tax you owe for the year. It may even determine if you must file a tax return. Here are the five filing statuses you can choose from:

1. Single. This status normally applies if you aren’t married. It applies if you are divorced or legally separated under state law.

2. Married Filing Jointly. If you’re married, you and your spouse can file a joint tax return. If your spouse died in 2017, you can often file a joint return for that year.

3. Married Filing Separately. A married couple can choose to file two separate tax returns. This may benefit you if it results in less tax owed than if you file a joint tax return. You may want to prepare your taxes both ways before you choose. You can also use it if you want to be responsible only for your own tax.

4. Head of Household. In most cases, this status applies if you are not married, but there are some special rules. For example, you must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Don’t choose this status by mistake. Be sure to check all the rules.

5. Qualifying Widow(er) with Dependent Child. This status may apply to you if your spouse died during 2015 or 2016 and you have a dependent child. Other conditions also apply.

Taxpayers are reminded that your marital status on December 31 determines your status for the whole year. Sometimes, however, more than one filing status may apply to you. If that happens, choose the one that allows you to pay the least amount of tax.

Reporting Name Changes

All of the names on a taxpayer’s tax return must match Social Security Administration records and a name mismatch can delay a tax refund. Here’s what you should do if anyone listed on their tax return changed their name:

1. Reporting Taxpayer’s Name Change. Taxpayers who should notify the SSA of a name change include the following:

• Taxpayers who got married and use their spouse’s last name.
• Recently married taxpayers who now use a hyphenated name.
• Divorced taxpayers who now use their former last name.

2. Reporting Dependent’s Name Change. Taxpayers should notify the SSA if a dependent’s name changed. This includes an adopted child who now has a new last name. If the child doesn’t have a Social Security number, the taxpayer may use a temporary Adoption Taxpayer Identification Number (ATIN) on the tax return. Taxpayers can apply for an ATIN by filing a Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions.

3. Getting a New Social Security Card. Taxpayers who have a name change should get a new card that reflects a name change. File Form SS-5, Application for a Social Security Card. Taxpayers can get the form on SSA.gov or by calling 800-772-1213.

If you have any questions about these or any other aspects of filing your tax return, don’t hesitate to call the office immediately.

• By Leon Clinton
• April 28, 2018

Withholding issues can be complicated, and with the passage of the recent tax reform legislation–most of which takes effect starting in 2018–, it’s important to make sure the right amount of tax is withheld for your personal tax situation. As a first step to reflect the tax law changes, the IRS released new withholding tables in January 2018. A revised Form W-4 was released on February 28, 2018. These updated tables were designed to produce the correct amount of tax withholding.

For taxpayers with simple tax situations, the easiest way to do check whether their withholding is correct is to use the IRS Withholding Calculator on IRS.gov, which is designed to help employees make changes based on their individual financial situation.

Using the Withholding Calculator to perform a quick “paycheck checkup” protects employees from having too little tax withheld and facing an unexpected tax bill or penalty at tax time in 2019. It can also prevent employees from having too much tax withheld. With the average refund topping $2,800, some taxpayers, of course, might prefer to have less tax withheld up front and receive more in their paychecks.

Taxpayers should keep in mind, however, that the IRS Withholding Calculator results are only as accurate as the information entered. If your circumstances change during the year, come back to the calculator to make sure your withholding is still correct.

With the new tax law changes, people with more complex tax situations such as married couples who both work, higher income earners, and who take certain tax credits or itemize might need to revise their Form W-4 completely to ensure they have the right amount of withholding taken out of their pay.

Small business owners or sole proprietors who owe self-employment tax, or individual taxpayers who need to pay the alternative minimum tax, or owe tax on unearned income from dependents, as well as people who have capital gains and dividends should contact the office and speak to a tax professional.

Using the Withholding Calculator

The Withholding Calculator asks taxpayers to estimate their 2018 income and other items that affect their taxes, including the number of children claimed for the Child Tax Credit, Earned Income Tax Credit and other items. It does not request personally-identifiable information such as name, Social Security number, address or bank account numbers, nor does the IRS save or record the information entered on the calculator. Here are the steps you need to take:

• • Gather your most recent pay stub from work. Check to make sure it reflects the amount of Federal income tax that you have had withheld so far in 2018.

• • Have a completed copy of your 2017 tax return handy. Information on your return can help you estimate income and other items for 2018. If you haven’t filed your 2017 tax return yet you can use a 2016 tax return; however, please remember that the new tax law made significant changes to itemized deductions.

• • Use the results from the Withholding Calculator to determine if you should complete a new Form W-4 and, if so, what information to put on a new Form W-4. There is no need to complete the worksheets that accompany Form W-4 if the calculator is used.

• • As a general rule, the fewer withholding allowances you enter on the Form W-4 the higher your tax withholding will be. Entering “0” or “1” on line 5 of the W-4 means more tax will be withheld. Entering a bigger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.

If you complete a new Form W-4, you should submit it to your employer as soon as possible. With withholding occurring throughout the year, it’s better to take this step early on. If you have any questions, please call.

• By Leon Clinton
• April 26, 2018

Everyone wants to save money on their taxes, and older Americans are no exception. If you’re age 50 or older, here are five tax tips that could help you do just that.

1. Standard Deduction for Seniors. If you and/or your spouse are 65 years old or older and you do not itemize your deductions, you can take advantage of a higher standard deduction amount. There is an additional increase in the standard deduction if either you or your spouse is blind.

2. Credit for the Elderly or Disabled. If you and/or your spouse are either 65 years or older–or under age 65 years old and are permanently and totally disabled–you may be able to take the Credit for Elderly or Disabled. If you are under age 65, you must have your physician complete a statement certifying that you had a permanent and total disability on the date you retired. You must also have taxable disability income that meets certain requirements.

The Credit is based on your age, filing status, and income and you must file using Form 1040 or Form 1040A to receive the Credit for the Elderly or Disabled. You cannot get the Credit for the Elderly or Disabled if you file using Form 1040EZ.

You may only take the credit if you meet the following:

In 2017 your income on Form 1040 line 38 must be less than $17,500 ($20,000 if married filing jointly and only one spouse qualifies), $25,000 (married filing jointly and both qualify), or $12,500 (married filing separately and lived apart from your spouse for the entire year).

and

The non-taxable part of your Social Security or other nontaxable pensions, annuities or disability income is less than $5,000 (single, head of household, or qualifying widow/er with dependent child); $5,000 (married filing jointly and only one spouse qualifies); $7,500 (married filing jointly and both qualify); or $3,750 (married filing separately and lived apart from your spouse the entire year).

3. Retirement Account Limits Increase. Once you reach age 50, you are eligible to contribute (and defer paying tax on) up to $24,500 in 2018 (up $500 from 2017). The amount includes the additional $6,000 “catch up” contribution for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan.

4. Early Withdrawal Penalty Eliminated. If you withdraw money from an IRA account before age 59 1/2 you generally must pay a 10 percent penalty (there are exceptions–call for details); however, once you reach age 59 1/2, there is no longer a penalty for early withdrawal. Furthermore, if you leave or are terminated from your job at age 55 or older (age 50 for public safety employees), you may withdraw money from a 401(k) without penalty–but you still have to pay tax on the additional income. To complicate matters, money withdrawn from an IRA is not exempt from the penalty.

5. Higher Income Tax Filing Threshold. Taxpayers who are 65 and older are allowed an income of $1,550 more ($2,500 married filing jointly) in 2017 before they need to file an income tax return. In other words, older taxpayers age 65 and older with income of $11,950 ($23,300 married filing jointly)in 2017 or less may not need to file a tax return.

Don’t hesitate to call if you have any questions about these and other tax deductions and credits available for older Americans.

• By Leon Clinton
• April 23, 2018