Tax

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

If you donated a car to a qualified charitable organization in 2017 and intend to claim a deduction, you should be aware of the special rules that apply to vehicle donations.

Note: You can deduct contributions to a charity only if you itemize deductions using Schedule A of Form 1040.

Charities typically sell donated vehicles. If the vehicle is sold by the charitable organization you donated it to, the deduction claimed by the donor (you) and usually may not exceed the gross proceeds from the sale.

If the donated vehicle sells for less than $500, you can claim the fair market value of your vehicle up to $500 or the amount it is sold for if less than fair market value.

The taxpayer can generally deduct the vehicle’s Fair Market Value (FMV), if:

• The charitable organization makes a significant intervening use of the vehicle, such as using it to deliver meals on wheels.
• The charitable organization donates or sells the vehicle to a needy individual at a significantly below-market price, if the transfer furthers the charitable purpose of helping a poor person in need of a means of transportation.
• The charitable organization makes a material improvement to the vehicle, i.e., major repairs that significantly increase its value and not mere painting or cleaning.

If the donated vehicle sells for more than $500 and your deduction is $500 or more you must obtain written, contemporaneous (timely), acknowledgment of the donation from the charitable organization. You must also attach Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, to your tax return.

The written acknowledgment generally must include your name and taxpayer identification number, the vehicle identification number, the date of the contribution, and one of the following:

• a statement that no goods or services were provided by the charity in return for the donation, if that was the case,
• a description and good faith estimate of the value of goods or services, if any, that the charity provided in return for the donation, or,
• a statement that goods or services provided by the charity consisted entirely of intangible religious benefits, if that was the case.

Note: If the written acknowledgment does not contain all of the required information, the deduction may not exceed $500.

For more information about donating a car to charity please contact the office.

• By Leon Clinton
• February 10, 2018

Earlier is better when it comes to working on your taxes but many people find preparing their tax return to be stressful and frustrating. Fortunately, it doesn’t have to be. Here are six tips for a stress-free tax season.

1. Don’t Procrastinate. Resist the temptation to put off your taxes until the very last minute. Your haste to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error. Getting a head start will not only keep the process calm but also mean you get your return faster by avoiding the last-minute rush.
2. Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don’t forget to save a copy for your files.
3. Double-check your math and verify all Social Security numbers. These are among the most common errors found on tax returns. Taking care will reduce your chance of hearing from the IRS. Submitting an error-free return will also speed up your refund.
4. E-file for a faster refund. Taxpayers who e-file and choose direct deposit for their refunds, for example, will get their refunds in as few as 10 days. That compares to approximately six weeks for people who file a paper return and get a traditional paper check.
5. Don’t Panic if You Can’t Pay. If you can’t immediately pay the taxes you owe, consider some stress-reducing alternatives. You can apply for an IRS installment agreement, suggesting your own monthly payment amount and due date, and getting a reduced late payment penalty rate. You also have various options for charging your balance on a credit card. There is no IRS fee for credit card payments, but the processing companies charge a convenience fee. Electronic filers with a balance due can file early and authorize the government’s financial agent to take the money directly from their checking or savings account on the April due date, with no fee.
6. Request an Extension of Time to File (But Pay on Time). If the clock runs out, you can get an automatic six-month extension bringing the filing date to October 15, 2018. However, the extension itself does not give you more time to pay any taxes due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date.

If you run into any problems, have any questions, or need to file an extension, help is just a phone call away.

• By Leon Clinton
• February 7, 2018