Author: Leon Clinton

Even if you’ve never paid Alternative Minimum Tax (AMT), before, you should not ignore this tax. Why? Because your tax situation might have changed and this might be the year that you need to pay AMT. AMT attempts to ensure that taxpayers who claim certain tax benefits pay a minimum amount of tax. You may have to pay this tax if your income is above a certain amount.

Here’s what you should know about the AMT:

1. When AMT applies. Your filing status and income determine the amount of your exemption. You may have to pay the AMT if your taxable income, plus certain adjustments, is more than your exemption amount. In most cases, if your income is below this amount, you will not owe AMT.

2. Exemption amounts. The 2016 AMT exemption amounts are:

• $53,900 if you are Single or Head of Household.
• $83,800 if you are Married Filing Joint or Qualifying Widow(er).
• $41,900 if you are Married Filing Separate.

Your AMT exemption is reduced if your income is more than certain limits.

3. Use the right forms. If you owe AMT, you usually must file Form 6251, Alternative Minimum Tax–Individuals. Some taxpayers who owe AMT can file Form 1040A and use the AMT Worksheet in the instructions.

4. AMT rules are complex. The easiest way to prepare and file your tax return is to use a qualified tax preparer who will figure out AMT for you if you owe the tax. Call today for more information or to set up a consultation.

• By Leon Clinton
• March 27, 2017

In late January, the IRS released an updated Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, that helps tax-exempt organizations avoid common mistakes when filing their annual return. One out of three paper filers has an error on their form, according to the IRS and the new option was designed to help tax-exempt organizations navigate the form more easily.

The updated Form 990-EZ includes 29 “help” icons describing key information needed to complete many of the fields within the form. The icons also provide links to additional helpful information available on IRS.gov. These “pop-up” boxes share information to help small and mid-size exempt organizations avoid common mistakes when filling out the form and filing their return.

On the new Form 990-EZ, the help icons are marked in boxes with a blue question mark. The icons and underlying links work on any device with Adobe Acrobat Reader and Internet access. Once completed, filers can print Form 990-EZ and mail it to the IRS.

Although many large exempt organizations are required to file Form 990-series information returns electronically, the IRS encourages all exempt organizations to consider filing electronically.

In 2016, the error rate for electronically-filed 990-EZ returns was only one percent, compared to the 33 percent error rate in paper-filed returns. In 2016, the IRS processed over 263,000 Forms 990-EZ, with the majority of the filings–139,000–on paper.

Exempt organizations should keep in mind that the new help icons do not replace the Form 990-EZ instructions. Filers should review the Form’s instructions when completing a return and use the help icons as an additional tool.

Form 990-series returns are due on the 15th day of the fifth month after an organization’s tax year ends. Many exempt organizations use the calendar year as their tax year, making May 15, 2017, the deadline to file for tax year 2016.

Questions?

Help is just a phone call away.

• By Leon Clinton
• March 24, 2017

Most people can claim an exemption on their tax return. It can lower your taxable income, which in most cases, that reduces the amount of tax you owe for the year. Here are eight tax facts about exemptions to help you file your tax return.

1. Exemptions Cut Income. There are two types of exemptions. The first type is a personal exemption. The second type is an exemption for a dependent. You can usually deduct $4,050 for each exemption you claim on your 2016 tax return.

2. Personal Exemptions. You can usually claim an exemption for yourself. If you’re married and file a joint return, you can claim one for your spouse, too. If you file a separate return, you can claim an exemption for your spouse only if your spouse:

• Had no gross income,
• Is not filing a tax return, and
• Was not the dependent of another taxpayer.

3. Exemptions for Dependents. You can usually claim an exemption for each of your dependents. A dependent is either your child or a relative who meets a set of tests. You can’t claim your spouse as a dependent. You must list the Social Security number of each dependent you claim on your tax return. To learn more about these rules, please call the office.

4. Report Health Care Coverage. The health care law requires you to report certain health insurance information for you and your family. The individual shared responsibility provision requires you and each member of your family to either:

• Have qualifying health insurance, called minimum essential coverage, or
• Have an exemption from this coverage requirement, or
• Make a shared responsibility payment when you file your 2016 tax return.

Please call if you’d like more information about these rules.

5. Some People Don’t Qualify. You normally may not claim married persons as dependents if they file a joint return with their spouse. There are some exceptions to this rule.

6. Dependents May Have to File. A person who you can claim as your dependent may have to file their own tax return. This depends on certain factors, like total income, whether they are married and if they owe certain taxes.

7. No Exemption on Dependent’s Return. If you can claim a person as a dependent, that person can’t claim a personal exemption on his or her own tax return. This is true even if you don’t actually claim that person on your tax return. This rule applies because you can claim that person as your dependent.

8. Exemption Phase-Out. The $4,050 per exemption is subject to income limits. This rule may reduce or eliminate the amount you can claim based on the amount of your income.

Don’t hesitate to call if you have any questions about exemptions and dependents.

• By Leon Clinton
• March 20, 2017