Author: Leon Clinton

More than 155 million individual tax returns are expected to be filed in 2018, according to the IRS, which began accepting electronic and paper tax returns on Monday, January 29, 2018. The January 29 opening date was set to ensure the security and readiness of key tax processing systems in advance of the opening and to assess the potential impact of tax legislation on 2017 tax returns.

Note: Although the IRS began accepting both electronic and paper tax returns January 29, paper returns will not begin processing until mid-February as system updates continue.

April 17 Filing Deadline

The filing deadline to submit 2017 tax returns is Tuesday, April 17, 2018, rather than the traditional April 15 date. In 2018, April 15 falls on a Sunday, and this would usually move the filing deadline to the following Monday (April 16). However, Emancipation Day, which is a legal holiday in the District of Columbia, will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 17, 2018. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.

Refunds in 2018

The IRS anticipates issuing more than nine out of 10 refunds in less than 21 days, but there are some important factors to keep in mind.

The IRS will begin releasing refunds for taxpayers claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) starting February 15. However, these refunds–even the portion not associated with the EITC and ACTC–are not likely to arrive in bank accounts or on debit cards until the week of February 27. This date assumes that there are no processing issues with the tax return and the taxpayer chose direct deposit.

Taxpayers should be aware that many financial institutions do not process payments on weekends or holidays, which can affect when refunds reach taxpayers. For example, the three-day holiday weekend involving Presidents’ Day may affect the timing of refunds for EITC and ACTC filers.

Don’t hesitate to call if you have any questions or need assistance filing your tax return this year.

• By Leon Clinton
• February 17, 2018

Recent tax reform legislation affected many provisions in the tax code. Many were modified, either permanently or temporarily, while some were repealed entirely. Here are five that survived.

1. Mortgage Interest Deduction

While the House bill repealed the mortgage interest deduction, the final version of the act retained it, albeit with modifications. First is that the allowed interest deduction is limited to mortgage principal of $750,000 on new homes (i.e., new ownership). For prior tax years, the limit on acquisition indebtedness was $1 million. Existing mortgages are grandfathered in, however, and taxpayers who enter into binding contracts before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchase such residence before April 1, 2018, are able to use the prior limit of $1 million.

2. Personal Taxes: State and Local Income Tax, Sales Tax and Property Tax

In prior years, taxpayers who itemize were allowed to deduct the amount they pay in state and local taxes (SALT) from their federal tax returns. Slated for repeal (with the sole exception of exception of a state and local property tax deduction capped at $10,000) under both the House and Senate versions of the tax bill, SALT remained in the final tax reform bill in modified form. As such, for taxable years 2018 through 2025, the aggregate deduction for property taxes, state, local, and foreign income taxes, or sales taxes is limited to $10,000 a year ($5,000 married filing separately).

3. Educator Expense Deduction

Primary and secondary school teachers buying school supplies out-of-pocket are still able to take an above-the-line deduction of up to $250 for unreimbursed expenses. Expenses incurred for professional development are also eligible. This deduction was made permanent with the passage of PATH Act of 2015 and survived tax reform legislation that passed in 2017 as well.

4. Plug-In Electric Drive Vehicle Tax Credit

Also slated for elimination in the House bill (but retained in the final tax reform bill) was the tax credit for the purchase of qualified plug-in electric drive motor vehicles including passenger vehicles and light trucks. For vehicles acquired after December 31, 2009, the minimum credit is $2,500. The maximum credit allowed is limited to $7,500. The credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009).

5. Medical Expense Threshold Amounts

The House version proposed a repeal of the itemized deduction related to medical expenses but it was retained (and temporarily lowered) in the final tax reform legislation. For tax years 2017 and 2018, the threshold amount for medical expense deductions is reduced to 7.5 percent of AGI. Under the PATH Act of 2015, the medical expense deduction increased to 10% of AGI (effective for tax years 2013 to 2016).

Don’t miss out!

If you’re wondering whether you should be taking advantage of these and other tax credits and deductions, don’t hesitate to call.

• By Leon Clinton
• February 15, 2018

U.S. citizens and resident aliens use one of three different forms for filing individual federal income tax returns: 1040EZ, 1040A, or 1040. If you’re wondering which form you should use, keep reading.

Form 1040EZ

Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, is the least complicated federal tax form. however, if you file Form 1040EZ, you should be aware that you can’t itemize deductions or claim any adjustments to income or tax credits other than the earned income credit. Use Form 1040EZ if:

• Your filing status is single or married filing jointly, you claim no dependents, and were under age 65 on January 1, 2018, and not blind at the end of 2017
• Your taxable income is less than $100,000 and is derived only from wages, salaries, tips, taxable scholarship and fellowship grants, unemployment compensation, or Alaska Permanent Fund dividends
• Your taxable interest is not over $1,500
• You don’t owe any household employment taxes on wages you paid to a household employee

Note: You can’t use Form 1040EZ to claim the Premium Tax Credit. You also can’t use this form if you received advance payments of this credit in 2017.

Form 1040A

If you cannot use Form 1040EZ, you may be able to use Form 1040A, U.S. Individual Income Tax Return. Keep in mind, however, that you cannot itemize and you can only claim certain tax deductions such as the IRA deduction, the student loan interest deduction, and the educator expenses deduction. You can also use Form 1040A if:

• Your taxable income is below $100,000 and that income is derived only from the following:
  • wages, salaries, tips,
  • Interest or ordinary dividends,
  • capital gain distributions,
  • taxable scholarships and fellowship grants,
  • pensions, annuities, IRAs,
  • unemployment compensation,
  • Alaska Permanent Fund dividends, and
  • taxable social security or railroad retirement benefits
• The only tax credits you can claim are:
  • the credit for child and dependent care expenses,
  • the credit for the elderly or the disabled,
  • education credits,
  • the retirement savings contributions credit,
  • the child tax credit,
  • the additional child tax credit,
  • the earned income credit, and/or the premium tax credit
• You do not have an alternative minimum tax adjustment on stock you acquired from the exercise of an incentive stock option.
• You have distributions from capital gains

Form 1040

You must use Form 1040, U.S. Individual Income Tax Return, if:

• Your taxable income is $100,000 or more.
• You have certain types of income, such as:
  • business or farm self-employment income;
  • unreported tips;
  • dividends on insurance policies that exceed the total of all net premiums you paid for the contract;
  • income received as a partner, a shareholder in an S corporation, or
  • a beneficiary of an estate or trust
• You itemize deductions or claim certain tax credits or adjustments to income.
• You report self-employment income.
• You report income from sale of a property.
• You owe household employment taxes.

Nonresident Aliens

Nonresident aliens married to a U.S. citizen or resident alien may use any one of these three forms, based on your circumstances, but only if you elect to be treated as a resident alien when you file a joint return with your spouse. Nonresident aliens may have to file Form 1040NR-EZ or Form 1040NR.

Questions about federal tax forms?

Call or make an appointment today and get the answers you need right now.

• By Leon Clinton
• February 13, 2018