Choosing the Correct Filing Status

When taxpayers file their tax return, it’s important they use the right filing status because it can affect the amount of tax they owe for the year. It may even determine if they must file a tax return at all. Taxpayers should keep in mind that their marital status on Dec. 31 is their status for the whole year.

Sometimes more than one filing status may apply to taxpayers. When that happens, taxpayers should choose the one that allows them to pay the least amount of tax.

When filing their tax return, taxpayers have IRS e-file as the easiest and most accurate way to file. Its tax software helps them choose the right filing status. Most people can use tax software and e-file for free with IRS Free File. This is a free service only available on the IRS website. Visit IRS.gov and click “Free File” on the home page.

Here’s a list of the five filing statuses:

  1. Single. Normally this status is for taxpayers who aren’t married, or who are divorced or legally separated under state law.
  2. Married Filing Jointly. If taxpayers are married, they can file a joint tax return. If a spouse died in 2016, the widowed spouse 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 them if it results in less tax owed than if they file a joint tax return. Taxpayers may want to prepare their taxes both ways before they choose. They can also use this status if each wants to be responsible only for their own tax.
  4. Head of Household. In most cases, this status applies to a taxpayer who is not married, but there are some special rules. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves 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 a taxpayer if their spouse died during 2014 or 2015 and they have a dependent child. Other conditions also apply.

The “Filing” tab on IRS.gov can help with many taxpayers’ federal income tax filing needs. The Interactive Tax Assistant tool can help taxpayers choose the right filing status. More on this topic is in Publication 501, Exemptions, Standard Deduction and Filing Information. On IRS.gov/forms, people can view, download or print the tax products they need.

All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Additional IRS Resources:

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If/Then Chart Explains How the Health Care Law Affects You

As you prepare to file your 2016 tax return, review this chart to see how the health care law affects you.

IF YOU… THEN YOU…
 

Are a U.S. citizen or a non-U.S. citizen living in the United States

 

Must have qualifying health care coverage, qualify for a health coverage exemption, or make a payment when you file your income tax return.

 

Had coverage or an employer offered coverage to you in the previous year

 

Will receive one or more of the following forms;

This information will help you complete your tax return.

Had health coverage through an employer or under a government program – such as Medicare, Medicaid and coverage for veterans – for the entire year Just have to check the full-year coverage box on your Form 1040 series return and do not have to read any further.
Did not have coverage for any month of the year Should check the instructions to Form 8965, Health Coverage Exemptions, to see if you are eligible for an exemption.
Were eligible for an exemption from coverage for a month Must claim the exemption or report an exemption already obtained from the Marketplace by completing Form 8965, Health Coverage Exemptions, and submitting it with your tax return.
Did not have coverage and were not eligible for an exemption from coverage for any month of the year Are responsible for making an individual shared responsibility payment when you file your return.
Are responsible for making an individual shared responsibility payment Will report it on your tax return and make the payment with your income taxes.
Need qualifying health care coverage for the current year Can visit HealthCare.gov to find out about the dates of open and special enrollment periods for purchasing qualified health coverage.
Enroll in health insurance through the Marketplace for yourself or someone else on your tax return. Might be eligible for the premium tax credit.

 

Received the benefit of more advance payments of the premium tax credit than the amount of credit for which you qualify on your tax return Will repay the amount in excess of the credit you are allowed subject to a repayment cap.
Did not enroll in health insurance from the Marketplace for yourself or anyone else on your tax return Cannot claim the premium tax credit.

 

Are eligible for the premium tax credit Can choose when you enroll in coverage to get premium assistance sent to your insurer each month to lower your monthly payments or get all the benefit of the credit when you claim it on your tax return.
Are claiming the premium tax credit and did not benefit from advance payments of the premium tax credit Must file a tax return and IRS Form 8962, Premium Tax Credit (PTC) and claim the credit on the line labeled – Net premium tax credit.
Choose to get premium assistance when you enroll in Marketplace coverage Will have payments sent on your behalf – to your insurance provider. These payments are called advance payments of the premium tax credit.
Get the benefit of advance payments of the premium tax credit and experience a significant life change, such as a change in income or marital status Should report these changes in circumstances to your Marketplace when they happen.
Get the benefit of advance payments of the premium tax credit Will report the payments on your tax return and reconcile the amount of the payments with the amount of credit for which you are eligible.

 

 

2017 Standard Mileage Rates for Business, Medical and Moving Announced

The Internal Revenue Service today issued the 2017 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016
  • 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
  • 14 cents per mile driven in service of charitable organizations

The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged.   The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements are described in Rev. Proc. 2010-51. Notice 2016-79, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

IRS Debunks Myths Surrounding Tax Refunds

As millions of people begin filing their tax returns, the Internal Revenue Service reminds taxpayers about some basic tips to keep in mind about refunds.

During the early parts of the tax season, taxpayers are anxious to get details about their refunds. In some social media, this can lead to misunderstandings and speculation about refunds. The IRS offers these tips to keep in mind.

Myth 1: All Refunds Are Delayed

While the IRS issues more than 90 percent of federal tax refunds in less than 21 days, some refunds take longer. Recent legislation requires the IRS to hold refunds for tax returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) until mid-February. Other returns may require additional review for a variety of reasons and take longer. For example, the IRS, along with its partners in the states and the nation’s tax industry, continue to strengthen security reviews to help protect against identity theft and refund fraud. The IRS encourages taxpayers to file as they normally would.

Myth 2: Calling the IRS or My Tax Professional Will Provide a Better Refund Date

Many people mistakenly think that talking to the IRS or calling their tax professional is the best way to find out when they will get their refund. In reality, the best way to check the status of a refund is online through the “Where’s My Refund?” tool at IRS.gov or via the IRS2Go mobile app.

Taxpayers eager to know when their refund will be arriving should use the “Where’s My Refund?” tool rather than calling and waiting on hold or ordering a tax transcript. The IRS updates the status of refunds once a day, usually overnight, so checking more than once a day will not produce new information. “Where’s My Refund?” has the same information available to IRS telephone assistors so there is no need to call unless requested to do so by the refund tool.

Myth 3: Ordering a Tax Transcript a “Secret Way” to Get a Refund Date

Ordering a tax transcript will not help taxpayers find out when they will get their refund. The IRS notes that the information on a transcript does not necessarily reflect the amount or timing of a refund. While taxpayers can use a transcript to validate past income and tax filing status for mortgage, student and small business loan applications and to help with tax preparation, they should use “Where’s My Refund?” to check the status of their refund.

Myth 4: “Where’s My Refund?” Must be Wrong Because There’s No Deposit Date Yet

The IRS will update “Where’s My Refund?” ‎on both IRS.gov and the IRS2Go mobile app with projected deposit dates for early EITC and ACTC refund filers a few days after Feb. 15. Taxpayers claiming EITC or ACTC will not see a refund date on “Where’s My Refund?” ‎or through their software package until then. The IRS, tax preparers and tax software will not have additional information on refund dates.

The IRS cautions taxpayers that these refunds likely will not start arriving in bank accounts or on debit cards until the week of Feb. 27 – if there are no processing issues with the tax return and the taxpayer chose direct deposit. This additional period is due to several factors, including banking and financial systems needing time to process deposits. Taxpayers who have filed early in the filing season, but are claiming EITC or ACTC, should not expect their refund until the week of Feb. 27. The IRS reminds taxpayers that President’s Day weekend may impact when they get their refund since many financial institutions do not process payments on weekends or holidays.

Myth 5: Delayed Refunds, those Claiming EITC and/or ACTC, will be Delivered on Feb. 15

By law, the IRS cannot issue refunds before Feb. 15 for any tax return claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). The IRS must hold the entire refund, not just the part related to the EITC or ACTC. The IRS will begin to release these refunds starting Feb. 15.

These refunds likely won’t arrive in bank accounts or on debit cards until the week of Feb. 27. This is true as long as there is no additional review of the tax return required and the taxpayer chose direct deposit. Banking and financial systems need time to process deposits, which can take several days.

See the What to Expect for Refunds in 2017 page and the Refunds FAQs page for more information.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Use IRS Free File Software on Smart Phones or Tablets

WASHINGTON – The Internal Revenue Service today announced that taxpayers now may use their smart phones or tablets to electronically prepare and file their federal and state tax returns through IRS Free File.

The IRS and its private-sector partners who offer their brand-name software products for free now support a new design that allows for the use of desktops, laptops, mobile phones and tablets.

Access the products using mobile devices in two ways: (1) Use the IRS app, IRS2Go, which has a link to the Free File Software Lookup Tool or (2) Use the device’s browser to go to www.IRS.gov/freefile and select the “Free File Software Lookup Tool” or “Start Free File Now” to find a software product. The IRS2Go app is available for Android and iOS devices.

Taxpayers with an adjusted gross income of $64,000 or less will find one or more free software options. Each of the 12 software providers set the eligibility requirements for their product, generally based on age, income or state residency. The Free File Software Lookup Tool leads the user through a few questions to determine eligibility.

Some partners offer free federal and free state tax return preparation; some charge a fee for state return preparation. Active duty military personnel whose income was $64,000 or less are exempt from any eligibility requirements and may use any Free File product they choose to file their federal return for free.

The Free File software allows for free electronic tax preparation and filing and direct deposit of refunds. Some taxpayers may need their 2015 adjusted gross income, if they filed a return, to validate their identities and complete the electronic filing process.

Also, taxpayers who are eligible for the Earned Income Tax Credit or the Additional Child Tax Credit are reminded that, by law, the IRS must hold refunds that contain those credits until Feb. 15. The refunds likely won’t arrive into taxpayers’ financial accounts until the week of Feb. 27.

How Exemptions and Dependents Can Reduce Taxable Income

Most taxpayers can claim an exemption for themselves and reduce their taxable income on their tax return. They may also be able to claim an exemption for each of their dependents. Each exemption normally allows them to deduct $4,050 on their 2016 tax return. Here are seven key points to keep in mind on dependents and exemptions:

1. Personal Exemptions.  Taxpayers can usually claim exemptions for themselves and their spouses on a jointly filed tax return. For married taxpayers filing separate returns, an exemption can only be claimed for a spouse if that spouse:

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

2. Exemptions for Dependents.  A dependent is either a child or a relative who meets a set of tests. Taxpayers can normally claim dependents as exemptions. List a Social Security number for each dependent. For more on these rules, see IRS Publication 501, Exemptions, Standard Deduction and Filing Information.

3. No Exemption on Dependent’s Return. If a taxpayer can claim a person as a dependent, then that dependent cannot claim a personal exemption on his or her own tax return. This is true even if no one claims that person on a tax return.

4. Dependents May Have to File. A dependent may have to file a tax return. This depends on certain factors like total income, whether they are married and if they owe certain taxes.

5. Exemption Phase-Out.  Taxpayers earning above a certain amount will lose part or all the $4,050 exemption. See Publication 501 for details.

6. E-file Your Tax Return.  The IRS urges taxpayers to kick the paper habit. IRS E-file options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.

7. Try the IRS Online Tool.  Get questions answered by using  the Interactive Tax Assistant tool on IRS.gov.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

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