Tax

It’s important to use the right filing status when you file your tax return because the filing status you choose can affect the amount of tax you owe for the year. It may even determine if you must file a tax return. Keep in mind that your marital status on Dec. 31 is your status for the whole year. Sometimes 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.

The easiest and most accurate way to file your tax return is to consult a tax professional who is able to choose the right filing status based on your circumstances. Here’s a list of the five filing statuses:

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 2015, 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 2013 or 2014 and you have a dependent child. Other conditions also apply.

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

• By Leon Clinton
• March 20, 2016

If you haven’t contributed funds to an Individual Retirement Arrangement (IRA) for tax year 2015, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 18th due date, not including extensions.

Be sure to tell the IRA trustee that the contribution is for 2015. Otherwise, the trustee may report the contribution as being for 2016 when they get your funds.

Generally, you can contribute up to $5,500 of your earnings for tax year 2015 (up to $6,500 if you are age 50 or older in 2015). You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.

Traditional IRA: You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you or your spouse, if filing jointly, are covered by an employer’s pension plan.

Roth IRA: You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.

Each year, the IRS announces the cost of living adjustments and limitation for retirement savings plans.

Saving for retirement should be part of everyone’s financial plan and it’s important to review your retirement goals every year in order to maximize savings. If you need help with your retirement plans, give the office a call.

• By Leon Clinton
• March 17, 2016

The individual shared responsibility provision requires that you and each member of your family have qualifying health insurance, a health coverage exemption, or make a payment for any months without coverage or an exemption when you file. If you, your spouse and dependents had health insurance coverage all year, you will indicate this by simply checking a box on your tax return.

In most cases, the shared responsibility payment reduces your refund. If you are not claiming a refund, the payment will increase the amount you owe on your tax return. Here are some basic facts about the individual shared responsibility provision.

What is the individual shared responsibility provision?

The individual shared responsibility provision calls for each individual to have qualifying healthcare coverage–known as minimum essential coverage–for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return.

Who is subject to the individual shared responsibility provision?

The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the shared responsibility payment if the dependent does not have coverage or an exemption.

How do I get a health coverage exemption?

You can claim most exemptions when you file your tax return. There are certain exemptions that you can obtain only from the Marketplace in advance. You can obtain some exemptions from the Marketplace or by claiming them on your tax return. You will claim or report coverage exemptions on Form 8965, Health Coverage Exemptions, and attach it to Form 1040, Form 1040A, or Form 1040EZ. You can file any of these forms electronically. For any month that you or your dependents do not have coverage or qualify for an exemption, you will have to make a shared responsibility payment

What do I need to do if I am required to make a payment with my tax return?

If you have to make an individual shared responsibility payment, you will need to use the worksheets found in the instructions to Form 8965,Health Coverage Exemptions, to figure the shared responsibility payment amount due. You only make a payment for the months you did not have coverage or qualify for a coverage exemption. If you need assistance, please call.

What happens if I owe an individual shared responsibility payment, but I cannot afford to make the payment when filing my tax return?

The law prohibits the IRS from using liens or levies to collect any individual shared responsibility payment and they routinely work with taxpayers who owe amounts they cannot afford to pay. However, if you owe a shared responsibility payment, the IRS may offset that liability against any tax refund that may be due to you.

Please call the office if you would like more information about the individual shared responsibility provision.

• By Leon Clinton
• March 14, 2016